HomeMy WebLinkAboutFIN 10-16 Cluj oo Report to
Executive Committee
PICKERING Report Number: FIN 10-16
Date: June 20, 2016
From: Paul Bigioni
Director, Corporate Services & City Solicitor
Subject: 2015 Year End
Recommendation:
1. That Report FIN 10-16 of the Director, Corporate Services & City Solicitor be
received; •
2. That the Report to the Executive Committee on the 2015 audit as submitted by
Deloitte LLP (Deloitte) be received for information;
3. That the 2015 draft Audited Consolidated Financial Statements for the City of
Pickering be approved; and
4. That Deloitte LLP be reappointed to provide external auditing services to the City
of Pickering for a 3 year term.
Executive Summary: Attached to this report is the auditor's Report to the
Executive Committee on the 2015 audit and the draft Audited Consolidated Financial
Statements for the year ended December 31, 2015. Again this year, the auditor has
provided an unmodified audit report on the financial statements. This means that the
financial statements present fairly, in all material respects, the financial position of the
City and its operations, changes in its net financial assets and its cash flows in
accordance with Canadian public sector accounting standards. The auditor did not
identify any significant deficiencies during the audit to formally report to Council
Under section 296 of the Municipal Act, 2001, Council must appoint an auditor,,licensed
under the Public Accounting Act, 2004, for a period not to exceed 5 years. The current
auditor, Deloitte, was last appointed in 2011 for a 5 year term. As the term ends with
the 2015 year end audit, it is recommended the firm be reappointed for a 3 year term.
Financial Implications: The Balance Sheet continues to improve with net financial
assets increasing by approximately $7.4 million which means that the City is more than
capable of meeting its financial commitments. The slight increase in the accumulated
• surplus is attributable to the addition of the note receivable from the Pickering Soccer
Club for its share of funding of the Soccer Facility, offset by the decrease in long-term
FIN 10-16 June 20, 2016
Subject: 2015 Year End Page 2
liabilities. As there were no debenture proceeds in 2015, long-term liabilities were
reduced by the annual principal repayment.
Expenditures were well within budget. The revenues reported in the Consolidated
Statement of Operations are the combined revenues for operating and capital purposes.
As a result, variances between budget and actual arise due to the timing of approval in
the capital budget as compared to the actual receipt of funds/recognition of revenue.
The large reduction in operating revenue from the prior year is due to the $18.9 million
gain on disposal of tangible capital assets reported last year that primarily arose from
the sale of land in Duffin Heights.
Overall, the City's financial position is healthy. A strong balance sheet provides
assurances to the City's lenders, bankers, ratepayers and businesses that the City is
able to meet its financial commitments.
In regards to the reappointment of the auditors, there will be no additional costs beyond
the budgeted amount included in the 2016 Current Budget as the auditor has indicated
they would be willing to hold their fees at the 2015 level for the 3 year term.
Discussion: The audit of the consolidated financial statements for the year ended
December 31, 2015 has been completed. The auditor's Report to the Executive
Committee is included as Attachment 1. This Report, prepared by Deloitte, summarizes
their findings from the December 31, 2015 audit and comments on significant matters
regarding the audit.
Appendix 1 provides a summary of communication requirements which Deloitte is
required to bring to Council's attention. The independence letter in Appendix 2 confirms
that Deloitte is independent from the City. The scope of the audit does not include an
in-depth evaluation of all systems or internal controls; however, the auditors may report
on matters that come to their attention during the course of their review. Appendix 3
provides management letter comments and recommendations along with
Management's responses.
During the course of any audit, auditors may find misstatements that may or may not be
adjusted due to materiality. For 2015, no significant corrected or uncorrected
misstatements arose from the audit.
The draft Audited Consolidated Financial Statements are included as Attachment 2.
These statements are the responsibility of management and have been prepared by
City accounting staff under the direction of the Division Head, Finance & Treasurer.
The auditors are responsible to express an opinion on these Consolidated Financial
Statements based on their audit. An unmodified audit report has been issued. The
Consolidated Financial Statements include the activities of the City of Pickering Public
Library Board. The City's investment in Veridian Corporation is accounted for on a
modified equity basis, which means the City includes its share of Veridian's income or
loss in the Consolidated Financial Statements.
FIN 10-16 June 20, 2016
Subject: 2015 Year End Page 3
The Consolidated Financial Statements are prepared on the full accrual basis in
accordance with Canadian Public Sector Accounting Standards (PSAS), which includes
reporting tangible capital assets. Tangible capital assets, such as land, building,
infrastructure and equipment are capitalized (recorded) at cost on the Statement of
Financial Position (Balance Sheet) and amortized (depreciated, except for land) over
their estimated useful lives in current operating expenses. The Statement of Financial
Position includes tangible capital assets under the non-financial asset section and
shows in Accumulated Surplus. This is different than the City's budget, which notes
these capital items as expenditures.
Statement of Financial Position (Balance Sheet)
Financial assets are those assets which could provide resources to discharge existing
liabilities or finance future operations. The City's financial assets increased by
approximately $7.7 million. As the increase in liabilities was minimal, this led to an
increase in net financial assets of $7.4 million over the prior.year.
The increase in financial assets is primarily due to the following:
• Increase in Cash and Cash Equivalents
• Decrease in Accounts Receivable
• Addition of Note Receivable for Pickering Soccer Club
The increase in Cash and Cash Equivalents is due to timing of receipts near the end of
the year such as Veridian 4th quarter dividend received mid December and
supplementary tax due dates on November 30th and December 29th
The prior year accounts receivable balance included $1.5 million from York Region for
the semi-annual funding of capital projects per the SEC agreement. Also the Region
and School Boards due to/from account balances were a receivable in the amount of
$1.2 million. For 2015, the semi-annual amount owing from York Region was only
$160,000 due to the timing of capital project costs. The Region and School Boards
balances were liabilities due to the timing of supplementary taxes combined with
minimal write-offs during the year.
Pickering Soccer Club (PSC) is funding a portion of the construction of the Indoor
Soccer Dome. The term for payment is 15 years with 2015 being the first instalment.
Therefore a note receivable was set up for the PSC in 2015 for its share of the land and
construction costs.
Non-financial assets include tangible capital assets which is the net book value (cost
less accumulated amortization) of City-owned assets including land, buildings, roads,
bridges and sidewalks infrastructure, storm sewer infrastructure, furniture and fixtures,
vehicles and equipment. Non-financial assets are not available to discharge existing
liabilities and are held for use in the provision of services. They have useful lives
extending beyond the current year and are not intended for sale in the ordinary course
of operations. Note 11 of the Financial Statements provide a summary of the City's
tangible capital assets. The December 31, 2015 gross book value of assets is $426.7
FIN 10-16 June 20, 2016
Subject: 2015 Year End Page 4
million and, after adjusting for amortization, the net book value of the assets is $215.7
million. In other words, the City has consumed a substantial amount of the life of its
assets. Future capital budgets have taken into consideration the investment into and
the maintenance of the City's infrastructure base as a financial priority.
Statement of Operations (income Statement)
Revenue reported includes both operating and capital. Therefore, variances between
budget and actual may arise due to the timing of approval in the capital budget as
compared to the actual receipt of funds/recognition of revenue. This is clearly illustrated
with the following revenue items:
• Government grants and fees
• Development charges and contributions earned
The budget amounts represent grant funding, including Federal Gas Tax, and
development charge (DC) funding of 2015 capital projects. The actual amounts
reported primarily reflect grant and DC funding for capital projects approved in prior year
budgets because of the timing difference between when a project is approved in the
budget and when it actually commences.
The capital budget expenditures do not show on the Statement of Operations as capital
expenditures. For those expenditures that meet the definition of a tangible capital asset
(TCA), the cost is reported on the Statement of Financial Position (Balance Sheet).
Only a portion of the asset's cost is included as an amortization expense each year over
the life of the asset in the operating expenses reported on the Statement of Operations.
The amortization expense is included in operating expenses for the asset's respective
functional category. For example, amortization on a fire truck is included under the
Protection to Persons and Property category. Capital budget expenditures that do not
meet the TCA definition are included as operating expenses under the appropriate
functional category.
The budget figures reported need to reflect the change in reporting for capital budget
expenditures to be compliant with Public Sector Accounting Standards. Note 19 of the
City's consolidated financial statements reflect the changes made to the 2015 Council
approved budget to put it on a basis consistent with the full accrual basis of accounting.
This means excluding capital expenditures that are deemed tangible capital assets and
including amortization.
Actual expenses are under budget in all functional areas. This illustrates City staff's
commitment to controlling expenditures. There is not one specific area that stands out
as a major contributor to the overall underage. The underage is reflected throughout
the various cost centres. Expenses are also in line with prior year amounts.
FIN 10-16 June 20, 2016
Subject: 2015 Year End Page 5
Accumulated Surplus
The components that make up the Accumulated Surplus are disclosed in Note 12 of the
City's consolidated financial statements and are summarized below. An accumulated
surplus is the amount by which all assets (financial and physical) exceed all liabilities. It
must be emphasized that these amounts are not surplus funds in the traditional sense.
In other words, there is no City bank account that has a balance of $331.0 million. An
accumulated surplus indicates that the City has net resources (financial and physical)
that can be used to provide future services. What primarily contributes to this balance
are the net tangible capital assets of approximately $215.7 million and the City's equity
in Veridian Corporation of approximately $77.1 million.
The accumulated surplus is comprised of the following:
2015 2014
Operating fund $ 125,227 $ 125,219
Capital fund 16,328,274 16,042,591
Reserves and reserve funds 46,097,918 46,772,458
Equity in Veridian Corporation 77,114,119 76,374,399
Tangible capital assets 215,670,460 214,410,833
Note Receivable 4,306,294 -
Post employment benefits liability (4,484,800) (4,176,300)
WSIB benefit liabilities (1,773,100) (1,741,900)
-Internal loans (4,454,354) (4,015,538)
Net long-term liabilities (17,717,530) (20,475,769)
$331,212,508 $323,315.993
Reappointment of Auditors
Deloitte was last appointed to conduct the statutory audits for the 2011 to 2015 fiscal
years. Experience in the public sector, specifically municipalities, range of other
services available and knowledge of the client are important considerations for
appointment of an auditor. Deloitte is one of the largest public accounting firms in
Canada and has vast experience within the municipal sector. They provide a variety of
auditing, accounting and advisory services to a number of municipalities including 6 of
the 8 local municipalities and the Regional Municipality of Durham. The services
provided by Deloitte have clearly demonstrated proficiency in the municipal
environment, particularly Public Sector Accounting Board (PSAB) standards and
guidelines. Their comments and assistance is always relevant and practical. Based on
experience to date, the firm has provided an excellent level of service at a reasonable
cost. Deloitte has agreed to hold their fee at the 2015 level for the full 3 year term.
Staff is recommending that Deloitte be reappointed for a 3 year term.
FIN 10-16 June 20, 2016
Subject: 2015 Year End Page 6
Attachments:
1. Auditor's Report to the Executive Committee on the 2015 Audit
2. 2015 Draft Audited Consolidated Financial Statements
Prepared By: Approved/Endorsed By:
aid&Kris Ene S(een_ior Stan K. owski
Manager, Accounting Services Divisia -ad, Finance & Treasurer
•
Paul Bi•-=
Direct. , �•rp.rate Services & City Solicitor
Recommended for the consideration
of Pickering City Council
i it i . ZDte
Tony Prevedel, P.Eng.
Chief Administrative Officer
_, ................._
• - ATTACHMENT# .
TO ' 4'• ' - #F1N 10-4
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Deloitte
Deloitte LLP
5140 Yonge Street
Suite 1700
Toronto ON M2N 6L7
Canada
Tel 416-601-6150
Fax 416-601-6151
www.deloitte.ca
May 24,2016
The Members of the Executive Committee
The Corporation of the City of Pickering
1 The Esplanade
Pickering ON L1V 6K7
Dear Executive Committee Members:
We have been engaged to audit the consolidated financial statements of Corporation of the City of
Pickering(the"City")for the year ended December 31,2015.
You have requested that we communicate in writing with you regarding our compliance with relevant
ethical requirements regarding independence as well as all relationships and other matters between the
City,our Firm and network firms that, in our professional judgment,may reasonably be thought to bear
on our independence. You have also requested us to communicate the related safeguards that have been
applied to eliminate identified threats to independence or reduce them to an acceptable level.
In determining which relationships to report,we have considered relevant rules and related interpretations
prescribed by the appropriate provincial regulator/ordre and applicable legislation,covering such matters
as:
(a) Holding a financial interest,either directly or indirectly, in a client
(b) Holding a position,either directly or indirectly,that gives the right or responsibility to exert
significant influence over the financial or accounting policies of a client
(c) Personal or business relationships of immediate family,close relatives,partners or retired partners,
either directly or indirectly,with a client
(d) Economic dependence on a client, and
(e) Provision of services in addition to the audit engagement.
We confirm to you that the engagement team and others in the firm as appropriate,the firm and, when
applicable,network firms have complied with relevant ethical requirements regarding independence.
ii
We have prepared the following comments to facilitate our discussion with you regarding independence
matters arising since May 21,2015,the date of our last letter.
The Corporation of the City of Pickering
May 24,2016
Page 2
We are not aware of any relationships between the City and our Firm, including any network firms that,in
our professional judgment,may reasonably be thought to bear on independence,that have occurred from
May 21, 2015 to May 24,2016.
We have provided non-audit services in relation to assisting the City review its needs for a new Finance
system. This included a review of the business and technical requirements as well as developing
implementation and operating cost estimates.
We hereby confirm that we are independent with respect to the City within the meaning of the Rules of
Professional Conduct of the Chartered Professional Accountants of Ontario as of May 24,2016.
This report is intended solely for the use of the executive committee,council,management,and others
within the City and should not be used for any other purposes.
Yours truly,
LLP
Chartered Professional Accountants '
Licensed Public Accountants
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ATTACHMENT# A TO REPO' #F N to-16
Consolidated financial statements of
The Corporatio of the
City of Pickeri - g
December 31,2015
C%1
FOR DISCUSSION PURPOSES ONLY
•
The Corporation of the City of Pickering
December 31, 2015
Table of contents
Independent Auditor's Report 1-2
Consolidated statement of financial position
4#
•
Consolidated statement of operations 4
Consolidated statement of change in net financial assets 5
Consolidated"statement of cash flows 6
Notes to the consolidated financial statements 7-27
FOR DISCUSSION PURPOSES ONLY
•
Deloitte LLP
5140 Yonge reet
Suite 1700
Toronto• M2N 6L7
Caned-
Tel:416-601-6150
F. :416-601-6151
w.deloitte.ca
li
Independent Auditor's Report
To the Members of Council,Inhabitants
and Ratepayers of the Corporation of
the City of Pickering
We have audited the accompanying consolidated financial s .te 4+4•f the •rporation of the City of
Pickering,which comprise the consolidated statement of nancial po *•;on . at December 31,2015,and
the consolidated statements of operations,change in ne inancial assets, • d cash flows for the year then
ended,and a summary of significant accounting polic.-s and other expl.natory information.
Management's Responsibility for the Consolid:ted Financial S .tements
Management is responsible for the preparatio anima►' .resent-. ion of these consolidated financial
statements in accordance with Canadian p •lic sec c .u ing standards, and for such internal control
as management determines is necessary • enable the •j ep. ation of consolidated financial statements that
are free from material misstatement,w ether due to fraud or error.
Auditor's Responsibility
Our responsibility is to expres: a ;•Onion on t •se consolidated financial statements based on our audit.
We conducted our audit in .'co••et: . 'th C..nadian generally accepted auditing standards. Those
standards require that we •omply , 'i et ic. requirements and plan and perform the audit to obtain
reasonable assurance abut whether t' • consolidated financial statements are free from material
misstatement.
An audit involve •erforming proc••ures to obtain audit evidence about the amounts and disclosures in
the consolidate financial statem ts.The procedures selected depend on the auditor's judgment,
including the .ss-._• ent of ris's of material misstatement of the consolidated financial statements,
whether d • to . . jre error n making those risk assessments,the auditor considers internal control
relevant • the en ►.ration and fair presentation of the consolidated financial statements in order
to desi:n audit proce• r- that are appropriate in the circumstances,but not for the purpose of expressing
an o• nion on the effe iveness of the entity's internal control.An audit also includes evaluating the
ap•ropriateness of accounting policies used and the reasonableness of accounting estimates made by
• anagement,as w°11 as evaluating the overall presentation of the consolidated financial statements.
We believe th. the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit op' ion.
FOR DISCUSSION PURPOSES ONLY
•
Opinion
In our opinion,the consolidated financial statements present fairly, in all material respects,the f ancial
position of the Corporation of the City of Pickering as at December 31,2015 and the results o its
operations,change in its net financial assets and its cash flows for the year then ended in ac•ordance with
Canadian public sector accounting standards.
Chartered Professional Accountants
Licensed Public Accountants
June •,2016
j
is
Page 2
FOR DISCUSSION PURPOSES ONLY
•
The Corporation of the City of Pickering
Consolidated statement of financial position
as at December 31, 2015
2015 2014
(Restated-
Note
•
$ $
Financial assets
Cash and cash equivalents 6 ,67 86 6►,322,097
Investments(Note 4) •9,4 , 0,020,674
Taxes receivable 15,519,964 14,495,048
Accounts receivable 2,651,579 6,477,645 •
Note receivable(Note 18) 4,306,294 -
Investment in Veridian Corporation (Note 5(b)) 49,002,09= 47,603,956
Promissory notes receivable(Note 6) 25,069,a 00 25,069,000
211,654,880 203,988,420
Liabilities
Accounts payable and accrued liabilities 6,261,055 18,039,957
Other current liabilities 123,204 98,988
Deferred revenue (Note 7) 56,267,521 51,849,931
Long-term liabilities(Note 10) 17,717,530 20,475,769
Post-employment benefit liability(Note 9(a)) 4,663,800 4,355,300
WSIB benefit liabilities(Note 9(b)) 1,773,100 1,741,900
/ 96,806,210 96,561,845
•
Net financial assets 114,844,670 107,426,575
Non-financial assets
Tangible capital assets(Note 11) 215,670,460 214,410,833
Prepaid expenses 367,382 482,587
Inventory 329,996 337,575
216,367,838 215,230,995
Accumulated surplus(Not- 1211( 331,212,508 322,657,570
•
O
The .ccompanying notes to the consolidated financial statements are an integral part of this financial statement.
Page 3
FOR DISCUSSION PURPOSES ONLY
The Corporation of the City of Pickering
Consolidated statement of operations
year ended December 31, 2015
2015 2014
(Restated-
Note 2)
Budget
(Note 19) Act al Act .1
$ $ $
Revenue
Residential and farm taxation 42,198,090 • ,5 , 7 1,133,531
Commercial and industrial taxation 10,637,722 10,575,6 10,820,782
Taxation from other governments 8,564,347 8,804,707 8,492,109
User charges 8,957,273 9,129,019 9,670,171
Government grants and fees 3,629,86 2,042,541 5,494,095
Other contributions and donations 3,792,:.4 5,236, 1 3,315,095
Development charges and
developer contributions earned 3,1:8,i-.8 1,8'1,557 4,098,555
Contributed tangible capital assets 95,849 582,652
Investment income 380, !` 780,042 614,423
Penalties and interests on taxes 2,300,000 2,336,147 2,349,955
Fines 872,000 853,850 895,077
Interest on promissory notes 1,229,138 1,229,138 1,426,852
Equity share of Veridian Corporation
earnings(Note 5(c)) - 3,632,643 2,338,230
Other 19 ,000 1,218,916 252,978
Gain on disposal of tangible capital assets ` - 54,589 18,890,968
85;844,565 90,693,271 109,375,473
Expenses(Note 20)
General government 17,648,192 14,812,739 15,470,467
Protection to persons and prope 23,355,839 22,730,699 21,776,908
Transportation services 13,018,967 12,446,022 12,509,036
Environmental services 3,934,888 3,453,092 3,579,628
Social and family services 749,197 743,667 745,777
Recreational and cultural :ervi 25,331,120 25,304,769 24,654,870
Planning and develop -nt 3,427,064 2,647,345 2,595,144
/ 87,465,267 82,138,333 81,331,830
Annual(deficit)sure us (1,620,702) 8,554,938 28,043,643
Accumulated sure us, beginning of ar 322,657,570 322,657,570 294,613,927
Accumulated - rplus,end of year 321,036,868 331,212,508 322,657,570
O
•
e accompanying notes to the consolidated financial statements are an integral part of this financial
statement.
Page 4
FOR DISCUSSION PURPOSES ONLY
•
The Corporation of the City of Pickering
Consolidated statement of change in net financial assets
year ended December 31, 2015
2015 2014
(Restated-
Note 2)
Budget
(Note 19) Act :l Act .1
$ $ $
Annual (deficit)surplus (1,620,702) 8 -54 8 28 •43,643
Acquisition of tangible capital assets (22,998,853) ( ,8 , 1) ( 4,425,129)
Amortization of tangible capital assets 10,114,622 9,932,39 9,859,932
Gain on disposal of tangible capital assets - (54,589) (18,890,968)
Proceeds on disposal of tangible capital assets - 73,144 20,358,312
(14,504,933 (14,305,489 ' 14,945,790
Transfer of assets under construction to
tangible capital assets 21,3 1,751 3,894,018
Assets under construction expensed - 09,049 87,285
- 0,600,800 3,981,303
Acquisition of inventory of supplies - (618,311) (1,128,666)
Use of inventory of supplies - 625,890 1,087,024
Acquisition of prepaid expenses - (371,190) (477,252)
Use of prepaid expenses - 486,395 276,354
- 122,784 (242,540)
Change in net financial assets O 4.04,933) 7,418,095 18,684,553
Net financial assets, beginning of year 1' ,426,575 107,426,575 88,742,022
Net financial assets,end of year 92,921,642 114,844,670 107,426,575
O
' e accompanying notes to the consolidated financial statements are an integral part of this financial
statement.
1 Page 5
FOR DISCUSSION PURPOSES ONLY
The Corporation of the City of Pickering
Consolidated statement of cash flows
year ended December 31, 2015
2015 2014
(Restated-
Note 2)
Operating transactions
Annual surplus 8, 4,938 28,0. ,643
Non cash items
Amortization of tangible capital assets 9,1•x.99 •,859,932
Gain on disposal of tangible capital assets (54,5 7:4, 18,890,968)
Equity share of Veridian Corporation (3,632,643) (2,338,230)
Contributed tangible capital assets recorded in revenue (395,849 (582,652)
Change in non-cash operating items:
Taxes receivable (1,024,:16) 1,655,574
Accounts receivable 3,8 :,066 (2,691,449)
Note receivable (4, #6,294) -
Accounts payable and accrued liabilities ,778,902) (690,210)
Other current liabilities 24,216 2,859
Deferred revenue 4,417,590 (2,737,562)
Post-employment benefit liability 308,500 262,500
WSIB benefit liabilities 31,200 750,341
Inventory 7,579 (41,642)
Prepaid expenses 115,205 (200,898)
16,024,500 12,401,238
Capital transactions D
Acquisition of tangible capital assets
(net of transfers and contributions) (10,814,732) (19,861,174)
Proceeds on disposal of tangible capital assets 73,144 20,358,312
(10,741,588) 497,138
Investing transactions
Decrease(increase)in inve: mzifa 597,516 (11,071,112)
Dividends received from eridi-. r• -tio 2,234,500 1,927,000
2,832,016 (9,144,112)
Financing transacti• s
Proceeds from dz.entures issued - 5,303,000
Principal repay, ent of debenture (2,758,239) (2,876,994)
(2,758,239) 2,426,006
Increase in a and h
21/
Ivalents 5,356,689 6,180,270
Cash an. cash e. L a-is eginning of year 60,322,097 54,141,827
Cash • d cash equi :le,r(ts,end of year 65,678,786 60,322,097
C•-h and cash equi alents consists of
Cash 6,951,463 10,967,036
Cash e•uivale s 58,727,323 49,355,061
65,678,786 60,322,097
' e accompanying notes to the consolidated financial statements are an integral part of this financial
statement.
Page 6
FOR DISCUSSION PURPOSES ONLY
The Corporation of the City of Pickering
Notes to the consolidated financial statements
December 31, 2015
1. Significant•accounting policies
The consolidated financial statements("the financial statements")of The Corporal•n of the City of
Pickering (the"City")are the representations of management prepared in accor•:nce with account g
standards established by the Public Sector Accounting Board("PSAB")of Ch.'ered Professiona
Accountants of Canada(CPA Canada). Significant accounting policies adop -d the City are :s
follows:
(a) Reporting entity
(i) Consolidated financial statements
The consolidated financial statements reflect the assets iabilities, revenu-. and expenses of
the reporting entity.The reporting entity is comprised • the activities of. committees of
Council and the City of Pickering Public Library Boa • which is control)=d by the City.
All material inter-fund transactions and balances -re inated on •nsolidation.
(ii) Investment in Veridian Corporation •
The City's investment in Veridian Corporati•n is accounte or on a modified equity basis,
consistent with Canadian public sector a ounting standard. for investments in government
business enterprises. Under the modifi:• equity basis,Ve 'dian Corporation's accounting
policies are not adjusted to conform t• those of the City -nd inter-organizational transactions
and balances are not eliminated.T - City recognizes's equity interest in the annual earnings
or loss of Veridian Corporation in' s consolidated st ement of operations with a corresponding
increase or decrease in its inve m: sset acco . Dividends that the City may receive from
Veridian Corporation and oth- capita•-c. do s are reflected as adjustments in the
investment asset account.
(iii) Operations of School Bo..rds and the Regio of Durham
The taxation,other re enues,expenditur-s, assets and liabilities with respect to the operations
of the school board and the Region o Durham(the"Region")are not reflected in these
consolidated fina ial statements.
(iv) Trust funds
Trust funds -nd t 4P-^r?• o•-rations administered by the City are not consolidated, but are
reported s-parately •• e T st Funds Statement of Financial Activities and Statement of
Financi- Position.
•
(b) Basis of accounting
(i) A rual basis of acc• nting
evenue and exp-nses are reported on the accrual basis of accounting.The accrual basis of
a nting reco:nizes revenues as they are earned and measurable;expenses are
-cog :ed as hey are incurred and measurable as a result of the receipt of goods and
s_ 'ce= an• the creation of a legal obligation to pay.
(ii) Cash -n• cash equivalents
Cash -nd cash equivalents consist of cash on hand, demand deposits and short-term, highly
liqui• investments that are readily convertible to known amounts of cash. Cash equivalents
h.'e a short-term maturity of three months or less from the date of acquisition.
Page 7
FOR DISCUSSION PURPOSES ONLY
The Corporation of the City of Pickering
Notes to the consolidated financial statements
December 31, 2015
1. Significant accounting policies(continued)
(b) Basis of accounting(continued)
(iii) Investments
Long-term investments are recorded at cost and any loss in value w ich is considered other
than temporary is recorded as appropriate.Any premium or disco t urchase of-
investment is amortized over the life of the investment.
(iv) Tangible capital assets("TCA")•
Tangible capital assets are recorded at cost less accumul- ed amortization. •ost includes all
costs directly related to acquisition or construction of th- angible capital a et including
transportation costs, installation costs, design and en.' eering fees, leg- fees and site,
preparation costs.Amortization is recorded on a str.'ght-line basis ove the estimated life of
the tangible capital asset commencing once the a et' available for se as follows:
Buildings 15 . 4
Machinery and equipment 2 o 25 ye
Vehicles • to 15 years
• Infrastructure-Roads 10 to 50 years
Infrastructure-Storm sewers 5 to 100 years
Infrastructure-Sidewalks 20 to 40 yea,
Information technology hardware 4 to 8 year.
Infrastructure-Parks 10 to 40 dears
Library collection materials 4 to 7 -ars
Furniture and fixtures D 1 to 0 years
One-half of the annual am. ization is c':rge. in the year of acquisition and in the year of
disposal.Assets under c. struction are not :mortized until the asset is available for productive
use. Land is not amorti ed.
Tangible capital ass-ts received as co ributions are recorded at their fair value at the date
contributed, and t -t amount is also -corded as revenue.
(v) Accounting for 'r o.- Tax Cap.ing Provisions resulting from the Ontario Fair Assessment
System
•
The net i 'act in pr..4,y to es as a result of the application of the capping provisions does
not affe the Consolida ed tatement of Operations as the full amounts of the property taxes
were I- led. However,the capping adjustments are reported on the consolidated Statement of
Fina•cial Position as a eceivable/payable from/to the Region.
(vi) Deferred revenue
Deferred revenu- represent user charges and fees which have been collected but for which
, ''' -ted services have yet to be performed.These amounts will be recognized as revenues
44, - . al y:ar the services are performed. In addition,any contributions received with
e e rictions are deferred until the related expenditures are made.
(vii) Post-em.oyment benefits
The p esent value of the cost of providing employees with future benefit programs is
recognized as employees earn these entitlements through service.Actuarial gains and losses
ar- amortized over the average remaining service period("ARSP").The actuary determined
•RSP to be 14 years.
(v-i) Inventory
Inventory is valued at the lower of cost and replacement cost. Cost is determined on a
weighted-average basis.
Page 8
FOR DISCUSSION PURPOSES ONLY
The Corporation of the City of Pickering
Notes to the consolidated financial statements
December 31, 2015
1. Significant accounting policies(continued)
(b) Basis of accounting(continued)
(ix) Government transfers
Government transfers are recognized as revenue by the City in the .eriod in which the
transfers are authorized and any eligibility criteria are met, unless e re restricted rough
stipulations that require specific actions to be carried out in orde to •-- e trans -r or
discharge the liability. For such transfers, revenue is recognized when the - ul. ion has been
met.
(x) Tax revenue
Tax revenue is recognized on all taxable properties wi in the City that ar- included in the tax
roll provided by the Municipal Property Assessment 'orporation, using .roperty tax values
included in the tax roll or property tax values that :n e reasonably :stimated by the City as it
relates td supplementary or omitted assessmen :, a x tes authorized by Council for the
City's own purposes in the period for which th- ax i d.
(xi) Intangible assets
Intangible assets are not recognized as -ssets in the finan 'al statements.
(xii) Use of estimates
The preparation of financial state -nts in conformity ith Canadian public sector accounting
standards requires managemen o make estimate and assumptions that affect the reported
amounts in the financial state -nts�'''1'y-,�omp. ying notes.Accounts involving significant
estimates include allowance or doubt :c'•u s, certain accrued liabilities, post-employment
benefits liability,WSIB liab' ties and es Late: relating to the useful lives of tangible capital
assets.Actual results co d differ from thes: estimates.
2. Restatement of comparative •gures
(a) Veridian Corporation fir time adoption of temational Financial Reporting Standards(IFRS)
Veridian Corporation, a g•ver. ent busine , enterprise which is owned 41%by the City of Pickering,
adopted IFRS on Janu. �����•.The as option of IFRS requires retrospective application of the new
accounting framewor to J..`��F.f'� ►01 ,the date of transition.As a result,the amounts reported by
Veridian Corporatio for its De.. ber 1,2014 year end and the opening balance sheets as at the date
of transition have .een restated.
In preparing it opening IFRS co olidated balance sheet Veridian Corporation has adjusted amounts
reported pre ously in its conso dated financial statements prepared in accordance with Canadian
GAAP. IF': 1 requires an e ty to explain how the transition from its previous GAAP to IFRS affected
its reported financial positio',financial performance and cash flows by providing reconciliations of
shareho d- ' -quity,co .rehensive income and cash flows for prior periods.
Acc.rdin. •'an orporation prepared their first annual consolidated financial statements in
a ordancer R: and IFRS 1 First-time Adoption of International Financial Reporting Standards
FRS 1)has b--n :pplied.The adjustments in the City's financial statements due to the conversion to
IFRS are noted •-low:
•
Page 9
FOR DISCUSSION PURPOSES ONLY
The Corporation of the City of Pickering
Notes to the consolidated financial statements
December 31, 2015
2. Restatement of comparative figures(continued)
(a) Veridian Corporation first time adoption of International Financial Reporting Sta dards
(IFRS) (continued)
IFRS
adjustments IFRS
to opening .dju;�ents .
accumulated -lat-4 to
■As at and for the year ended Balance surplus as at year ende. Balance
December 31, 2014, previously January December 31, restated
unless otherwise stated reported 20 4 20 4 (Note 5)
$ $ $ $
Investment in Veridian Corporation 48,262,379 •65,723) 92,700) 47,603,956
Equity share of net earnings
from Veridian Corporation 2,530,930 - (192,700) 2,338,230
Accumulated surplus, .
January 1, 2014 295,079,650 (465,723) - 294,613,927
Accumulated surplus,
December 31, 2014 323,315,••3 (465,7 3) (192,700) 322,657,570
(b) Liability for Contaminated Sites
The Board has implemented Public•ect•) •-.tin tandard("PSAS")section 3260 Liability for
.
Contaminated Sites. Section 326, requires j er nts and government organizations to record a
liability in their financial stateme,ts if they ha' ,a ntaminated site that meets the requirements set
out in the standard.The standard defines conta 'nation as the introduction into air, soil,water, or
sediment of a chemical,org. is or radioactive aterial or live organism that exceeds an
environmental standard.T e standard gener. y applies to sites that are no longer in productive use.
Sites that are in producti - use are only su.'ect to the standard if there was an unexpected event
that resulted in contam••ation.
The adoption of this :te.L. .i
d did not h.ve an impact on the City's financial statements.
3. Operations of schoo bo: e region of Durham
Further to Note 1 (. (iii) requis • s . e made by the Region of Durham and School Boards requiring
the City to collect .roperty taxes an. payments in lieu of property taxes on their behalf.The amounts
collected and r- itted are summa 'zes as follows:
2015 2014
Region School board Region School board
$ $ $ $
li
Ta :tion 100,056,175 43,511,890 98,330,551 43,945,940
P.yments in • ft. es 6,879,449 389,648 6,331,506 402,463
106 935,624 43 901 538 104,662,057 44,348,403
Investment
2015 2014
Cost Market value Cost Market value
$ $ $ $
1 I -stments 49 423 158 49 674 241 50 020 674 50 191 189
Investments are comprised of deposit notes, bonds, and guaranteed investment certificates.
Page 10
FOR DISCUSSION PURPOSES ONLY
The Corporation of the City of Pickering
Notes to the consolidated financial statements
• December 31, 2015
5. Investment in Veridian Corporation
(a) Veridian Corporation is owned by the City of Pickering,Town of Ajax, Municipa'y of Clarington a
the City of Belleville.The City has a 41 per cent interest in Veridian Corporation.Veridian
Corporation, as a government business enterprise, is accounted for on the odified equity ba• s in
these consolidated financial statements.Veridian Corporation serves as e electrical distrib tion
utility for a number of communities including the four noted above and on is non-regul.ted utility
service ventures through its subsidiaries.
The following table provides condensed supplementary consolidat-d.financial in m. ion for the
corporation and its subsidiaries for the year ended December 31 All amounts in tat es are
disclosed in thousands of dollars:
2015 2014
(000's) (000's)
(Restated-Note 2)
$ $
Assets
Current :4,500 89,380
Capital and intangibles 231,368 214,725
Other 6,325 8,278
Total assets 322,193 312,383
Regulatory balances 3,170 6,764
Total assets and regulatory balances 325,363 319,147
Liabilities
Current 100,133 117,719
Long-term debt 78,600 63,225
Other 19,460 12,313
Total liabilities 198,193 193,257
Shareholders'equity
Share capital O 67,260 67,260
Contributed capital 25 25
Accumulate. other co •; hen:iye loss (264) (264)
Retained a=mings 52,496 49,086
Total equit 119,517 116,107
Regulato balances 7,653 9,783
Total liabilities, equity anp regulatory balances 325,363 319,147
Co pr-hensive Inco 'e
C. mom' reve e
283,052 262,211
Co ,�odi� expenses (280,564) (261,966)
Distrib. • r-venue 51,768 49,820
Operating -xpenses (37,875) (37,298)
Other in.•me (expense) (5,366) (8,023)
Accu lated other comprehensiw loss - (264)
Net P ovements in re•ulato balances, net of tax 1,465 1,223
Tota com•rehensive income for the ear 9 550 5 703
•
Page 11
FOR DISCUSSION PURPOSES ONLY
•
The Corporation of the City of Pickering
Notes to the consolidated financial statements
December 31, 2015
5. Investment in Veridian Corporation(continued)
(b) City of Pickering's investment represented by:
115 2e14
(Restated-Ng e 2)
$ $
Promissory notes receivable (Note 6) 25,069,00 5,069,000
rY ( )
Investments in Veridian Corporation
Initial investment in shares of the Corporation 30,496,19 30,496,196
Accumulated earnings 42,147,6 7 38,232,154
Accumulated dividends received (24,457 02) (22,223,002)
Adjustment to value of investment 8 5,708 1,098,608 •
Total investment 49 102,099 47,603,956
(c) Equity in Veridian Corporation
2015 2014
(Restated-Note 2)
$ $
Balance, beginning of year 75,715,976 75,304,746
Equity share of net earnings for t - yea D 3,915,543 2,338,230
Dividend received from Veridian orporatio' (2,234,500) (1,927,000)
Adjustment to Veridian retain=d earnings (282,900) -
Balance, end of year(Note 2) 77,114,119 75,715,976
(d) Contingencies and guar. tees of Veridian V orporation(the "Corporation')as disclosed in their
consolidated financial :'atements are as •flows:
(i) Insurance clai
The Corpor- ion is•-m.-r • the Municipal Electric Association Reciprocal Insurance
Exchange 'MEARIE") i ich as created on January 1, 1987.A reciprocal insurance exchange
may be ►efined as a group •f persons formed for the purpose'of exchanging reciprocal
contra, s of indemnity or• ter-insurance with each other. MEARIE provides general liability
insurance to member e -ctric utilities. MEARIE also provides vehicle and property insurance to
th Corporation.
nsurance premiu ,s charged to each member utility consist of a levy per$1,000 of service
r-Api•t, subject o a credit or surcharge based on each electric utility's claims experience.The
coy: age is$24,000,000 per occurrence for liability insurance, $15,000,000 for
ve.)' ur:nce e and$98,685,000 for property insurance, plus$10,000,000 excess coverage
on top t - regular liability and vehicle coverage.
1.
Page 12
r
FOR DISCUSSION PURPOSES ONLY
li
The Corporation of the City of Pickering
Notes to the consolidated financial statements
December 31, 2015
5. Investment in Veridian Corporation(continued) •
(d)continued
(ii) Contractual obligation-Hydro One Networks Inc. ("HONI")
The Corporation's subsidiary,Veridian Connections Inc. ("VCI"), is p. y to a connectio and
cost recovery agreement with HONI related to the construction by r 0 •f a transfor -er station
designated to meet VCI's anticipated electricity load growth. Con. rum •• - the pro'-ct was
completed during 2007 and VCI connected to the transformer ation dunn• 408 •
To the extent that the cost of the project is not recoverable f •m future transfor, ation
connection revenues,VCI is obligated to pay a capital co ibution equal to t,e difference
between these revenues and the construction costs allocated to VCI.The instruction costs
allocated to VCI for the project are$9,975,000.
The Corporation has recorded a liability and a corr: p• ding intangib - asset for$1,212,000 as
at December 31,2015(2014-$1,212,000), base o c a agement'. best estimate of the future
transformation connection revenue shortfall. H• I is o4 Pa
to •erform a true-up based on
actual load at the end of the tenth and fifteen annivers- of e in-service date.
(iii) General claims
From time to time,the Corporation is in olved in various I. suits, claims and regulatory
proceedings in the normal course of• siness. In the op''ion of management,the outcome of
such matters will not have a materi. adverse effect o he Corporation's financial position,
results of operations or cash flow .
(e) Lease commitments
Future minimum lease payment •bligations vier •perating leases are as follows:
(000's)
2016 34
2017 11
2018 10.
2019 3
2020 2
Thereafter 62
122
•
•
Page 13
•
FOR DISCUSSION PURPOSES ONLY
•
The Corporation of the City of Pickering •
Notes to the consolidated financial statements
December 31, 2015
6. Promissory notes receivable
201; 2014
Promissory note receivable from Veridian Corporation
maturing December 31, 2018 and bearing interest at
the greater of 6% or the Ontario Energy Board
deemed long term debt rate on an annual basis to
maturity 7,095,000 7,095,000
Promissory note receivable from Veridian Connections Inc.
maturing November 1, 2039 and bearing interest at
5.57% from May 1, 2010 to December 31, 2014
and then the Ontario Energy Board deemed
long-term debt rate (4.47% effective
January 1, 2015)for each successive
five year period thereafter 17,974,000 17,974,000
25,069,000 25,069,000
Interest revenue earned from these notes rec-ivable totaled$1, 9,138(2014-$1;426,852).The
promissory note from Veridian Corporation convertible into •mmon shares at the rate of one common
share for every$1,000 of principal amou , a e option of t,e City.The note from Veridian Connections
Inc. is no longer convertible but the City ay .t`v.o = ull • partial repayment with six months' notice
with certification that the funds are re. ired for icipa purposes.The City has signed an inter-creditor.
agreement confirming the subordin. ed ranking e - promissory notes to the senior debt financing
issued by Veridian.
On November 20,2014,the 0 ario energy Boar. s deemed long-term rate has been established for the
five year period commencin. January 1,2015 til December 31,2019 at 4.47%.This rate will be reset
on January 1,2020.
•
•
Page 14
FOR DISCUSSION PURPOSES ONLY
- The Corporation of the City of Pickering
Notes to the consolidated financial statements
December 31, 2015
7. Deferred revenue
201. 2014
•
Obligatory Reserve Funds
Development charges • 4,9 9 39 524,698
Parkland 2,8 8,6 ,696,518
Federal gas tax 7,999,732 6,683,257
Third party/Developer's Contributions Reserve Fund 2,661,982 2,611,041
54,461,954 50,015,514
Other unearned revenues 1,805 67 1,834,417
56,2; ,521 51,849,931
Continuity of deferred revenue is as follows:
2015 2014
$ $
Balance,beginning of year 51,849,931 54,587,493
Restricted funds received 6,941,777 5,567,239
General funds received 729,491 857,249
Interest earned(restricted funds) 689,423 833,856
8,360,691 7,258,344
Earned restricted revenue tra ferred to operations 3,184,760 6,430,648
Earned revenue transferred o operations 758,341 3,565,258
3,943,101 9,995,906
Balance,end of year l ` • 56,267,521 51,849,931
8. Interfund loans
As a means o funding various c-'Rai acquisitions,funds are borrowed by the Capital Fund from
Developme Charges deferrer revenue(obligatory reserve funds).These funds are secured by
promisso , notes with intere rates ranging from 1.83%to 3.96%and various payment terms ranging
from 5 y-ars to 10 years.T e financing arrangements and ultimate repayment are approved by Council
throu•• th- -•ant budg- process.Although these notes have payment terms as noted above,they are
rep.-abl- •n de' .nd. 'he following is a summary of the related loans:
III
2015 2014
$ $
Roads and s eetlights 895,000 457,422
Communi acilities,libraries and parks 2,039,261 1,628,877
Protecti. services 470,209 619,239
Storm atersystem 1,049,884 1,310,000
• 4 454 354 4,015 538
•
•
Page 15
FOR DISCUSSION PURPOSES ONLY •
The Corporation of the City of Pickering
Notes to the consolidated financial statements
December 31, 2015
9. Post-employment benefits liability
(a) Post-employment benefits liability
The City makes available to qualifying employees who retire before the age of 65,the opportu 'y to
continue their coverage for benefits such as post-retirement extended he. hcare benefits.
Coverage ceases at the age of 65.The City also provides full time and •-r ent part-tim:
employees a sick time entitlement and any unused entitlement is accu' uIl -. year to ye-r.This
accumulated entitlement is not vested and is forfeited at the time of -tire en fermi .tion.The
most recent actuarial valuation of the post-employment benefits w.s performed a Ja,uary 1,2014.
Information about the City's benefits liability is as follows:
20 2014
$ $
Accrued benefits liability,beginning of year 55,300 4,092,800
Current service costs 388,600 329,400
Interest on accrued benefits 222,500 254,200
Amortization of actuarial losses 186,200 147,200
Benefits paid during the year (488,800) (468,300)
Accrued benefits liability,end of year 4,663,800 4,355,300
Accrued benefit obligation 6,337,100 6,214,800
Unamortized actuarial losses O (1,673,300) (1,859,500)
Accrued benefits liability,end of year 4,663,800 4,355,300
The main actuarial assumpti• s employed in the actuarial valuations are as follows:
(i) Discount rate
The present value .s at December 31,2015 of the future benefits was determined using a
discount rate of . % 2014-3.5%)
(ii) Dental costs
The dental ost ten. .y wa 3.75%(2014-3.75%) increase per annum.
(iii) Health ests
Heal costs were assup ed to increase at 6.75%(2014-7.0%)and decrease by 0.25% (2014-
0.2:'/o)increments pe•year to an ultimate rate of 4.75% per year in 2023 and thereafter.
•
•
Page 16
FOR DISCUSSION PURPOSES ONLY
The Corporation of the City of Pickering
Notes to the consolidated financial statements
December 31, 2015
9. Post-employment benefits liability(continued)
(b) Workplace Safety and Insurance Board(WSIB)benefit liabilities
Effective January 1,2001,the City became a Schedule I I employer under t - Workplace Safet. &
Insurance Act and follows a policy of self insurance for the risk associated ith paying benef for
workplace injuries for all its employees.The WSIB administers the clai : re ted to workplace
injuries and is reimbursed by the City.The most recent actuarial valua•on a WSIB b: efits was
performed at December 31,2014.
Information about the City's WSIB liability is as follows:
201 2014
$ $
Accrued WSIB liability,beginning of year 1,7,1,900 991,559
Current service cost 106,500 131,600
Interest on accrued benefits 62,300 39,500
Amortization of estimation adjustment gain - 718,141
Benefits paid during the year (137,600) (138,900)
1,773,100 1,741,900
The main actuarial assumptions employ-d in the actuarial aluations are as follows:
(i) Discount rate
The present value as at Dece' ber 31 • t e future benefits was determined using a
discount rate of 3.5%(2014 3.5%).
(ii) Inflation rate
The rate of inflation w..s assumed to be .0%(2014-2.0%) per annum.
(iii) WSIB Administrati• Rate
Liabilities for W. B a -fits have •-en increased 34.3%to reflect the administration rate
charged by W:IBS•
A WSIB R- erve Fun.\,ies e- ablished in 2001.The Reserve Fund balance at December 31,
2015 wa $2,760,341 (201 -$3,047,737). In addition,the City purchased two insurance
policie hat protect the C against significant claims to the City.The occupational accident
insur.. ce pays loss clai- s up to$500,000 per work related accident.The excess workers
co ,pensation indem •y insurance has a$500,000 deductible and will pay for claims up to and
i luding$15,000,001 per work related accident.
10. Long- -r • •ilities
(a) he of to •-term liabilities is made up of the following:
2015 2014
$ $
The mu 'cipality is responsible for the payment of
prin' pal and interest charges on long-term
•ilities issued by the Regional Municipality of
urham on the City's behalf. At the end of the year,
the outstanding principal amount of this liability is 17,717,530 20,475,769
i tl Page 17
FOR DISCUSSION PURPOSES ONLY
ir
The Corporation of the City of Pickering .
Notes to the consolidated financial statements
December 31, 2015
10. Long-term liabilities(continued)
(b) The above long-term liabilities have maturity dates of July 12,2016, 2017, 202 and 2022,
November 21,2018, October 15, 2020, September 29,2016 and 2021 and • tober 16,2018 a •
2023 with various interest rates ranging from 1.10%to 5.20%. Principal repayments are
summarized as follows:
2016 2,734,716
2017 2,415,834
2018 4,361,382
2019 1,433,903
2020 • 1,440,586
Thereafter 5,331,109 •
17,717,530
(c) Long-term liabilities include principal sums of$5:',000(201 58 ,000)which may be refinanced
by the issuance of debentures over a further p- iod not to exceed 0 years, and$2,415,000(2014-
$2,415,000)which may be refinanced by the• suance of deben res over a further period not to
exceed 5 years.
(d) The above long-term liabilities have beef approved by Co cil by-law.The annual principal and
interest payments required to service 'ese liabilities are ithin the annual debt repayment limit •
prescribed by the Ministry of Munici•:I A and Hou-ng.
(e) Interest expense recorded in the ear relat e-e long-term liabilities is$678,882(2014-
$686,554).
11. Tangible capital assets
Information relating to tangibl: capital assets is . follows:
(i) Contributed tangible c.•ital assets
The City records to •ib# •ital asse . contributed by an external party at fair value on the date
contributed.Typi .le t • :*--r-.,,- roads, storm sewers and sidewalks installed by a developer as
part of a subdiv':ion or •- opme•t agreement. Contributions of tangible capital assets in 2015
amounted to •• 95,849(201 $.112,652).
(ii) Tangible c.•ital assets recog'ized at nominal value
Land u •er roads are assigned a nominal value of one Canadian dollar because this land only
suppo• s or is intended t• support road infrastructure and the majority of land acquired supporting
roa• allowances was .'quired at no cost.
. (iii) o • • .nd hi orical treasures
The C : seum which holds various historical treasures and historical buildings pertaining
to the heri :•e :nd history of the City of Pickering.These items are not recognized as tangible
capital asset-in the financial statements because a reasonable estimate of the future benefits
associated ith such property cannot be made.Any acquisition or betterment of these assets is
recogniz:• as an expense in the financial statements.
(iv) Other
.! Th:. net book value of tangible capital assets not being amortized because they are under
construction is$7,170,032(2014-$24,496,734).
During the year,there were no write-downs of assets(2014-$Nil)and no interest was capitalized
during the year(2014-$Nil). .
Page 18
FOR DISCUSSION PURPOSES ONLY
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The Corporation of the City of Pickering
• Notes to the consolidated financial statements
December 31, 2015
12. Accumulated surplus
The City's accumulated surplus is comprised of the following:
• 015 2014
(Rest- ed note 2)
. $ $
Capital fund 16,328,2 16,042,591
Operating fund 125,227 125,219
Equity in Vendian Corporation 77,114,119 75,715,976
Tangible capital assets 215,670,461 214,410,833
Post-employment benefits liability (4,484,:10) (4,176,300)
Internal loans (4,4 •,354) (4,015,538)
Net long-term liabilities k (17,7 7,530) (20,475,769)
Note receivable soccer facility ,306,294 -
WSIB benefit liabilities 1,773,100) (1,741,900)
Reserves set aside for special purposes by Counci
Working capital 400,000 400,000
Self insurance 892,707 892,707
Replacement of capital equipment 1,755,707 1,187,358
Contingencies 1,546,554 1,476,554
Rate stabilization 15,361,372 16,056,925
City's share for development charge 4,962,624 2,176,952
Continuing studies D 113,684 207,619
Vehicle replacement 1,058,940 1,193,121
Easement settlement 390 20,390
Eastern branch 10,882 15,882
Land Purchase 99,403 99,403
Seaton Development Re .ew 1,537,189 1,075,221
i Financial Systems 661,638 486,638
Senior Centre 300,000 225,000
Accessibility Initia . -s O 34,913 15,032
Winter Control 700,000 700,000
Sustainability itiatives 1,665 11,610
Duffin Heigh - 4,119,453 -
Facilities 71,547 -
Reserve fu•ds set aside for •ecial purpose by Council
Recre- ion programs an. facilities 170,148 167,867
Acq sit••• of tangible apital assets 285,445 282,676
W:IB 2,760,341 3,047,737
ni ma 330,298 292,967
Men's slo"• c 148,114 146,244
Operations Centre 6,912,674 15,463,685
Roads & bn.•es 1,365,016 768,020
Stormwat- mana•ement 497,214 362,850
331,212,508 322,657,570
•
, Page 21
FOR DISCUSSION PURPOSES ONLY
•
The Corporation of the City of Pickering
Notes to the consolidated financial statements
December 31, 2015
13. Pension agreement
The City makes contributions to the Ontario Municipal Employees Retirement Fund OMERS),which is
a multi-employer plan,on behalf of the members of its staff.The plan is a defined •enefit plan which
specifies the amount of the retirement benefit to be received by the employees eased on the lengt• of
service and rates of pay.
OMERS provide pension services to over 460,000 active and retired mem.ers`t about 1,066.
employers. Each year an independent actuary determines the funding st. us • 07l--ZS Pr ary
Pension (the"Plan") by comparing the actuarial value of the invested -:sets to the es - ed present
value of all pension benefits that members have earned to-date.The ost recent actua 'al valuation of
• the Plan was conducted as at December 31, 2015.The results of t•is valuation disclosed total actuarial
• y liabilities as at that date of$82,369 million in respect of benefits . crued for service ith actuarial assets
at that date of$75,392 million indicating an actuarial deficit of ',:,977 million. Be se OMERS is a
multi-employer plan, any pension plan surpluses or deficits a - a joint responsi•'ity of Ontario municipal
organizations and their employers.As a result,the City do-- n recognize a • share of the OMERS
pension surplus or deficit.
Contributions made by the City to OMERS on accoun •f current ice •r 2015 were$3,719,031
(2014-$3,428,624).
14. Trust Funds
Trust funds administered by the City amounting to$348,015(20 • -$341,024)have not been included
in the Consolidated Statement of Financial P•sition nor have t -ir operations been included in the
Consolidated Statement of Operations.
15. Related party transactions
Veridian Corporation
The City of Pickering is a princip. shareholder in V- idian Corporation(Note 5).The City receives
electricity and services from Ve 'dian Corporation .nd its subsidiary.
2015 2014
$ $
Transactions O
Revenues
Interest on promissory note- 1,229,138 1,426,852
Property to es levied 58,559 45,116
Expenses
• Electri =I energy and se •ces 2,656,950 2,503,038
Balance
Accoents payable and .ccrued liabilities 498,390 467,682
Pro is tes re -ivable 25,069,000 25,069,000
Page 22
FOR DISCUSSION PURPOSES ONLY
The Corporation of the City of Pickering
Notes to the consolidated financial statements
December 31, 2015
16. Guarantees
In the normal course of business,the City enters into agreements which contain guarantees.The City':
primary guarantees are as follows: .
(i) The City'has provided indemnities under lease agreements for the use of arious facilities or and.
Under the terms of these agreements the City agrees to indemnify the c•un - parties for v- ious
items including, but not limited to, all liabilities, loss, suits, and damag: a • during, o• or after
the term of the agreement.The maximum amount of any potential f re •-ycan it be
reasonably estimated.
(ii) The City indemnifies all employees and elected officials includi • Library employers and board
members for various items including, but not limited to, all co s to settle suits or -ctions due to
association with the City, subject to certain restrictions.The ity has purchases liability insurance to
mitigate the cost of any potential future suits or actions.T'a term of the inde• nification is not
explicitly defined, but is limited to the period over which a'ndemnified p.'y served as an
employee or elected official of the City.The maximu a nt of any po -ntial future payment
cannot be reasonably estimated.
(iii) The City has entered into agreements that may i►clude indem 'es• favour of third parties, such
as purchase and sale agreements, confidential'y agreements, en•agement letters with advisors
and consultants,outsourcing agreements, le.sing contracts, infirmation technology agreements
and service agreements.These indemnifi . ion agreements 'ay require the City to compensate
counterparties for losses incurred by the •ounterparties as - result of breaches in representation
and regulations or as a result of litigatis claims or statuto• sanctions that may be suffered by the
counterparty as a consequence of the tr-• action.The -rms of these indemnities are not explicitly
defined and the maximum amount • any .`p,� rei bursement cannot be reasonably estimated.
The nature of these indemnification -•reements�.• -ve s the City from making a reasonable estimate of
the maximum exposure due to the •ifficulties in as e ing the amount of liability which stems from the
unpredictability of future events - d the unlimited c• erage offered to counterparties. Historically,the
City has not made any signific. t payments unde such or similar indemnification agreements and
therefore no amount has bee accrued in the b. ance sheet with respect to these agreements.
17. Contingent liabilities
Litigation O
The City has been :med as -fend..nt in certain legal actions in which damages have been sought.
The outcome oft -se actions is it •eterminable as at the date of reporting and accordingly, no
provision has b--n made in these •onsolidated financial statements for any liabilities which may result.
18. Contractual :rrangement
The City e tered into a provi-onal license agreement with the Pickering Soccer Club(PSC)for the PSC
to occu• and operate the 'ickering Indoor Soccer Facility(the Facility). The term of the agreement is
15 ye- s f`•r7isi ovember 2014 to November 4, 2029. Under the terms of the agreement, the PSC
shat ep:r °of •e City's total cost of purchasing the land, constructing the Facility and the
related imp -nt . In 2015,the City recorded a receivable from PSC in the amount of$4,550,000
•-sed on preli • a- project cost figures,with a 15 year repayment term at a variable interest rate
ranging from 1.2% to 3.8%. This amount will be adjusted for the total project construction costs,once
they are finaliz:•, in the final agreement. In 2015,the City received all of the required payments based
on the prelim' ary figures.
PSC has •mmenced its soccer program operations and is operating the Facility at its own expense
includin• all repairs and maintenance. Once a final form of agreement is executed the total amount of
the PS''s obligation will be re-calculated, as agreed,to reflect any adjustments to the total project
cons uction costs.
Page 23
FOR DISCUSSION PURPOSES ONLY
• - The Corporation of the City of Pickering
• Notes to the consolidated financial statements
December 31, 2015
19. Budget figures •
The 2015 Budget adopted by Council on March 23,2015 was not prepared on a b.:is consistent with
that used to report actual results.The budget was prepared on a modified accrua •asis while Publi
Sector Accounting Standards require a full accrual basis of accounting.The bu.•et figures treate• all
tangible capital asset acquisitions as expenditures and did not include amorti .tion expense on -ngible
capital assets or post-employment benefits expenses.As a result,the budget fiat es presentee in the
consolidated Statements of Operations and Change in Net Financial Ass- s rtin -nt the b •get
adopted by Council on March 23, 201,5 with adjustments as follows:
2015 2015
Council Non TC: Post-employm nt Budget
approved expenditu -s benefits/ presented in
budget from c.pital am or zation statements
•
$ $ $ $
Revenue
Taxation 61,400,159 61,400,159
Capital 9,471,274 9,471,274
Other 14,973,13 14,973,132
85,844, •5 - - 85,844,565
Expenditures
General government 1.,258,357 1,55,000 824,835 17,648,192
Protection to persons and property 22,• 4 777 30,000 871,062 23,355,839
Transportation services 9, Np j - 3,817,955 13,018,967
Environmental services 1,70 ■7 - 2,229,711 3,934,888
Social and family services 749,1•' - - 749,197
Recreational and cultural services 21,949,361 391,000 2,990,759 25,331,120
Planning and development 3,427,0.4 - - 3,427,064
74,74445 1,986,000 10,734,322 87,465,267
Annual surplus(deficit) 11 99,620 (1,986,000) (10,734,322) (1,620,702)
Capital expenditures ( 4,984,853) 1,986,000 - (22,998,853)
Transfers from reserve . d
reserve funds 9,889,360
Dividend from Veridi-n Corporation 1,927,000
Principal repayme, of debt (3,316,961)
Debt proceeds 5,260,834
Prior year op= sting fund surplus (125,000)
•
Page 24
• FOR DISCUSSION PURPOSES ONLY
•
•
The Corporation of the City of Pickering
Notes to the consolidated financial statements
December 31, 2015
20. Segmented information
The City of Pickering is a diversified municipal government that provides a wide ra •e of services to it:
residents. Distinguishable functional segments have been separately disclosed i he segmented
information.The nature of the segments and the activities they encompass are :s follows:
General Government
This item relates to revenues and expenses of the City itself and cannot •- di ttribute. to a
specific segment.
•
Protection to Persons and Property
Protection includes fire services,animal control, bylaw services, • ilding inspection •-nd enforcement of
the building code to ensure the safety and protection of all citiz- s and their prope-y.
Public Works Services
•
Public works includes construction and maintenance of th- C 'r•adways, • cluding snow removal,
sidewalk repairs, street lighting and maintenance of the .torm •44 r syste •.
Social and Family Services
Social services for assistance or services for seniers.
Recreation and Culture Services
Recreation and cultural services include re eation programs, aintenance and rental of facilities and
parks,operation of the City's museum an• ib ary services.
Planning and Development
Planning and development provide a number of :rvi•es including municipal planning and review of all
property development plans.
Segmented information has be-n provided in the •flowing pages.
•
Page 25
FOR DISCUSSION PURPOSES ONLY
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