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HomeMy WebLinkAboutFIN 15-17 c-44 PICKS R1 NG Report to Council Report Number: FIN 15-17 Date: June 12, 2017 From: Stan Karwowski Director, Finance & Treasurer Subject: 2016 Year End Recommendation: 1. That the Report to Council on the 2016 audit as submitted by Deloitte LLP (Deloitte) be received for information; and 2. That the 2016 draft Audited Consolidated Financial Statements for the City of Pickering be approved. Executive Summary: Attached to this report is the auditor's Report to Council on the 2016 audit and the draft Audited Consolidated Financial Statements for the year ended December 31, 2016. 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. Staff are pleased to advise that the auditor did not identify any significant deficiencies during the audit to formally report to Council and therefore has not issued a management letter. Financial Implications: The Balance Sheet continues to improve with net financial assets increasing by approximately $3.4 million which means that the City is more than capable of meeting its financial commitments. The increase in the accumulated surplus is attributable to the tangible capital additions and the net increase in long-term liabilities. 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. 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. FIN 15-17 June 12, 2017 Subject: 2016 Year End Page 2 Discussion: The audit of the consolidated financial statements for the year ended December 31, 2016 has been completed. The auditor's Report to Council is included as Attachment 1. This Report, prepared by Deloitte, summarizes their findings from the December 31, 2016 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. Appendix 3 is the draft management representation letter which is provided by the City to the auditors. This letter indicates that the financial statements are management's responsibility and that management has provided and disclosed all necessary information to ensure that the financial statements are not materially misstated. This letter will be signed by the Chief Administrative Officer and the Treasurer upon approval of the financial statements. 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. No significant matters came to their attention to report and therefore a management letter has not been issued. During the course of any audit, auditors may find misstatements that may or may not be adjusted due to materiality. For 2016, 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 Director, 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. 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 $15.1 million which is primarily from the increase in Cash and cash equivalents due to: FIN 15-17 June 12, 2017 Subject: 2016 Year End Page 3 • timing of receipts near the end of the year such as Veridian 4th quarter dividend and Veridian promissory note interest received in December, supplementary tax due dates on November 30th and December 30th • debenture proceeds of$6.473 million received in middle of October • net increase of$3.5 million of Development Charges (DC) and Parkland Reserve Funds However liabilities also increased by $11.7 million primarily due to the net increase in long-term liabilities from the debt proceeds received and deferred revenue increasing from the DC and Parkland Reserve Fund collections. From an accounting perspective, DC and other obligatory Reserve Funds are viewed as a liability due to the fact there is a legal obligation attached to these funds. The net result is an increase in net financial assets of$3.4 million over the prior year which means the City is able to meet its financial commitments. 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 10 of the Financial Statements provide a summary of the City's tangible capital assets. The December 31, 2016 gross book value of assets is $441.9 million and, after adjusting for amortization, the net book value of the assets is $223.8 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 2016 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. For example, in 2016, Council approved the LED streetlight conversion project that is mainly funded by Federal Gas Tax grant funding, but the large majority of the project's cost will be expended in 2017. FIN 15-17 June 12, 2017 Subject: 2016 Year End Page 4 User Charges, which includes licence and permit revenues, was higher than budget due to building permit revenue being approximately $1.1 million higher than budgeted. It is always difficult to predict the timing of building permit revenue but the City should continue to see higher revenues than in the past as development commences in Seaton. Actual expenses are under budget in all functional areas except Social and family services which is slightly over. This illustrates City staffs 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. 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 18 of the City's consolidated financial statements reflect the changes made to the 2016 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. Accumulated Surplus The components that make up the Accumulated Surplus are disclosed in Note 11 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$342.0 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 $223.8 million and the City's equity in Veridian Corporation of approximately $79.4 million. FIN 15-17 June 12, 2017 Subject: 2016 year End • Page 5 The accumulated surplus is comprised of the following: 2016 2015 Operating fund $ 125,234 $ 125,227 Capital fund 19,827,450 16,328,274 Reserves and reserve funds 46,814,053 46,097,918 Equity in Veridian Corporation 79,419,406 77,114,119 Tangible capital assets 223,836,631 215,670,460 Note Receivable 4,055,276 4,306,294 Post employment benefits liability (4,780,500) (4,484,800) WSIB benefit liabilities (1,806,100) (1,773,100) Internal loans (3,482,113) (4,454,354) Net long-term liabilities (21,455,816) (17,717,530) $342,553.521 $331.212.508 Attachments: 1. Auditor's Report to Council on the 2016 Audit 2. 2016 Draft Audited Consolidated Financial Statements Prepared By: Approved/Endorsed By: 91 ( •Kristine Senior, CPA, CA Stan Karwowski, MBA, CPA, CMA Manager, Accounting Services Director, Finance & Treasurer Recommended for the consideration of Pickering City Council aQiyeede dwAt z., 2417 Tony Prevedel, P.Eng. 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In N aD Q; • O ,-f Hce _-1 ,-•f ,--f .--f .--, . ,-i ,"'f •-f N N a) a) I y a) R C J J a) a (T L a) 4--) V a) C C /W\ C C w -o (W) meoN a) C u Q 11•1 a.a •L F. o X V •� s 4.0o (a 0- CL a ^ C1 L • • De'O' Deloitte LLP tte. 400 Applewood Crescent Suite 500 Vaughan ON L4K 0C3 Canada Tel: (416)601 6150 Fax: (416)601 6151 May 31, 2017 www.deloitte.ca Private and confidential The Members of Council The Corporation of the City of Pickering • 1 The Esplanade Pickering ON L1V 6K7 Dear Council 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, 2016. . 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. We have prepared the following comments to facilitate our discussion with you regarding independence matters arising since May 24, 2016, the date of our last letter. 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 24, 2016 to May 31, 2017. We have provided non-audit services during the period with respect to advising the City in its Enterprise Resource Planning (ERP) selection. This includes the development of financial system specifications and RFP proposal and vendor selection. 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 31, 2017. This report is intended solely for the use of 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 I - v IC C R J J N O 01 0 A� L I a) ^ W, as J-+ v (13 E f6 /i W • as II o od Q cn 4-1 • 0 U / / / i / (City letterhead) June 12, 2017 / Private and confidential Deloitte LLP j 400 Applewood Crescent Suite 500 ' 7 Vaughan ON L4K 0C3 Dear Ms. testy, , Subject: .Consolidated financial statements of The Corporatio 15f the City of 'ickering for the year ended December 31, 2016 This-representation letter is provided in connection witti the audit by Deloitte LLP ("Deloitte"or"you") of the consolidated financial statements of The Corporation of the City of;Pickering (the"City" or"we"or "us") for the year ended December 31, 2016 and a summary of significant accounting policies and other explanatory information (the"Financial Statements") fo t eurpose of expressing an opinion as to whether the Financial Statements present fairly, in all mate -rial respects, the financial position, results of operations, and cash flows of the City in accordance with P{,iblic`Sector Accounting Standards ("PSAS"). / / We confirm that, to the best of our knowied a nd belief, having made such inquiries as we considered necessary for the purpose of appropriatel infooming ourselves: Financial statements ,/ ,/ 1. We have fulfilled our responsibilities as set out to the terms of the Master Services Agreement between the City and Deloitte dated October 28, 2016'for the preparation of the Financial Statements in • accordance with PSAS. In part c-War, the Financial Statements are fairly presented, in all material respects, and present�the ,inancia osition of the City as at December 31, 2016 and the results of its operations and cash flows for he ,ear.then ended in accordance with PSAS. . 2. Significant assumptions used in making estimates, including those measured at fair value, are reasonable. In preparing the Financial Statements in accordance with PSAS, management makes judgments and assumptions about the future and uses estimates. The completeness and appropriateness of the disclosures related to estimates are in accordance with PSAS. The City has appropriately disclosed in the Financial Statements the nature of measurement uncertainties that are material, including all estimates where it is reasonably possible that the estimate will change in the near term and the effect • of'the change could/be material to the Financial Statements. / The measurement methods, including the related assumptions and models, used in determining the estimates, including fair value, were appropriate, reasonable and consistently applied in accordance with PSAS and appropriately reflect management's intent and ability to carry out specific courses of /' action on behalf of the entity. No events have occurred subsequent to December 31, 2016 that require adjustment to the estimates and disclosures included'in the Financial Statements. /i / For discussion iurposes on v • /, / Deloitte LLP June 12, 2017 // Page 2 - / : There are no changes in management's method of determining significant estimates in the current year. / 3. We have determined that the Financial Statements are complete as of the date of this letter as this is . the date when there are no changes to the Financial Statements (including disclosures) planned or expected; all final adjusting journal entries have been reflected in the Financial Statements and the Financial Statements have been approved in accordance with our process to finalize financial/ statements. / l 4. We have completed our review of events after December 31, 2016 andu, to the date of this letter. All events subsequent to the date of the Financial Statements and for,whiZSAS requires adjustment or disclosure have been adjusted or disclosed. Accounting estimates'and'isc`Iosures included in the Financial Statements that are impacted by subsequent events/have been appropriately adjusted. 5. The Financial Statements are free of material errors and omissions. •6. The City has satisfactory title to and control over all assets, and there are no liens or encumbrances on such assets. We have disclosed to you and in the Financial State ents all assets that have been pledged as collateral. Information provided / 7. We have provided you with: a. Access to all information of which we are aware ha txre�vant to the preparation of the Financial Statements, such as records, documentation an other matters. All financial statements and other financial information provided to you accurately re ect'the activities and expenses of the City and do not reflect any activities or expenses of any other person or entity; • b. All relevant information as well/as , dditional information that you have requested from us for the purpose of the audit; and, i/' c. Unrestricted access to persons within t entity from whom you determined it necessary to obtain audit evidence. 8. All transactions have been/p eperly recorded in the accounting records and are reflected in the Financial Statements./ j 9. All transactions and events ave b, en/'arried out in accordance with law, regulation or other authority. // . / / 10. We have disclosed to you the results of our assessment of the risk that the Financial Statements may be materially misstated as a result of fraud. / 11. We have,disclosed to you all/information in relation to fraud or suspected fraud that we are aware of and that affects the entity'and involves: a. ,Management; / b. Employees who.have significant roles in internal control; or i / / c. Others where the fraud could have a material effect on the Financial Statements. / /12. We have disclosed to you all information in relation to allegations of fraud, or suspected fraud, affecting the entity's Financial Statements and all knowledge of concerns or allegations of potential / errors in the selection of accounting policies or the recording of transactions affecting the City that have been communicated by employees, former employees, or others, whether written or oral. / i / . �, / For discussion purposes on y / Deloitte LLP • June 12, 2017 Page 3 13. We have disclosed to you all communications from regulatory agencies and all known instances of non-compliance or suspected non-compliance with laws and regulations whose effects should be considered when preparing the Financial Statements. 14. We have disclosed to you the identity of the entity's related parties and all the related party ,relationships and transactions of which we are aware, including guarantees, non-monetary transactions and transactions for no consideration and participation in a defined-benefit plan that shares risks between group entities. 15. We acknowledge our responsibility for the design, implementation and maintenance of internal control to prevent and detect fraud and error. f' 16. We have disclosed to you all known, actual or possible litigation and claims,avhether or not they have been discussed with our lawyers, whose effects should be considered when p eparing the Financial Statements. As appropriate, these items have been disclosed and accounted for in the Financial Statements in accordance with PSAS. I� 17. We have disclosed to you, and the City has complied with all aspects of contractual agreements that could have a material effect on the Financial Statements in the went of non-compliance, including all covenants, conditions or other requirements of all outstanding debt. 18. We have disclosed to you all the documents that we expect to issue that may comprise other information, in the context of CAS 720, The Auditor's Responsibilities Relating to Other Information in Documents Containing Audited Financial Statements Independence matters For purposes of the following paragraph, "Deloitte"shall mean Deloitte LLP and Deloitte Touche Tohmatsu Limited, including related member firms and affiliates. a 19. Prior to the City having any substantive,employment conversations with a former or current Deloitte engagement team member, the City has`theld discussions with Deloitte and obtained approval from the Executive Committee of the Council. Communications with taxation and regulatory agencies 20. We have disclosed to you al communications from: a. Taxation authorities concerning assessments or reassessments that could have a material effect on the Financial Stateme?sand b. Regulatory agencies concerning noncompliance with or potential deficiencies in, financial reporting requirements. Deficiencies in internal control 21. We have communicated to you all deficiencies in internal control of which we are aware. We have disclosed to you any change in the City's internal control over financial reporting that occurred during the current year that has materially affected, or is reasonably likely to materially affect, the City's internal control over financial reporting. Work of management's experts 22. We agree with the work of management's experts in evaluating the valuation of post-employment benefits liability and WSIB benefits liability and have adequately considered the capabilities of the experts in determining amounts and disclosures used in the Financial Statements and underlying accounting records. We did not give any, nor cause any, instructions to be given to management's experts with respect to values or amounts derived in an attempt to bias their work, and we are not aware of any matters that have impacted the independence or objectivity of the experts. dr � ..r s r f es. or y / I• / . Deloitte LLP % 1 June 12, 2017 i Page 4 /, ;/ Liabilities and contingencies 23. We have disclosed to you all liabilities, provisions, contingent liabilities and contingent assets, including those associated with guarantees, whether written or oral, and they are/appropriately reflected in the Financial Statements. /J Loans and receivables ` 24. The City is responsible for determining and maintaining the adequacy of the allowance for doubtful notes, loans, and accounts receivable, as well as estimates used to determine such amounts. Management believes the allowances are adequate to absorb currently estimated bad debts in the account balances. / / Employee future benefits 25. Employee future benefit costs, assets, and obligations have been properly record4f NI\ ed and adequately disclosed in the Financial Statements including those arising'under defined benefit plans as well as termination arrangements. We believe that the actuarial assu."tptions and methods used to measure defined benefit plan assets, liabilities and costs for financial Sccouating purposes are appropriate in the circumstances. / Government transfers V / / / 26. We have disclosed to you all correspondence relating to government transfers that the City has had with the funding body. / / 27. We have assessed the eligibility criteria and determir‘ea that the City is an eligible recipient for the / / government transfers received. ' / 28. We have assessed the stipulations attached with the funding and have recognized the revenue in accordance with meeting the stipulatio;svrequired. // •29. All government transfers that have been. re Corded as deferred revenue give rise to an obligation that meets the definition of a liability. Those liabilities-nave been properly recorded and presented in the Financial Statements. / r /i Tax Revenues 30. We have appro riatel /recoax assets and revenues enues when they meet the definition of an asset in accordance with Section PbS4000,Financial Statement Concepts, when they are authorized and when the taxable event occurs. Thete counts have been appropriately measured in accordance with PS 3510, Tax Revenue, and have not been grossed up for any amount of tax concessions. Tangible capital assets // 31. Tangible capital assets have been recorded properly and consistently according to the standards in Section PS 3150,Tangible Capital Assets. / / 32. Contributed tangible capital assets have been appropriately recorded at fair value, unless fair value is not reasonably determinable, and in such case, have been recorded at an appropriate nominal value. Ali contributed tangible capital assets have been appropriately disclosed. • 33, We have assessed the useful lives of tangible capital assets and have determined all tangible capital • assets contribute to the City's ability to provide goods and services and therefore do not require a write down. / // / / / / For discussion purposes only • Deloitte LLP / June 12, 2017 Page 5 /// ` i Environmental liabilities/contingencies 34. We have considered the effect of environmental matters on the City and have disclosed to you all liabilities, provisions or contingencies arising from environmental matters. All liabilities, provisions,%/ contingencies and commitments arising from environmental matters, and the effect of environmental matters on the carrying values of the relevant assets are recognized, measured and disclosed, as . appropriate, in the Financial Statements. �-' Government Business Enterprises and Government Partnerships / 35. The City has appropriately classified its investments in Veridian Corporation as a Government Business Partnership. ; With regard to the City's investment in Veridian Corporation, we'have disclosed to,you any events that have occurred and facts that have been discovered with respect to such investment that would affect the investment's value as reported in the financial statements. / Liabilities for contaminated sites /' 36. We have evaluated all of our tangible capital assets that we have direct responsibility for or accept responsibility for, and have not identified any sites in which con amination exceeds an environmental standard. ;' / / / / Nits7)..... // Yours truly, i/ / The Corporation of the City of Pickering //i j - f f / <Z17//// i Stan Karwowski Director of Finance and Treasu er j i / Tony Prevedel / Chief Administrative Officer / / i. / / . / i / , // . • • // For discussion purposes only • • • in c In N m m N N In SaoE m E a • O E _� m i °'` EEya�°iv Virt-J. O Ol E oa Nie y.L E E E ^3 o c p a o E i c y N N E t c O _ 5 V>> ~ N n -O n co U C N mm c v ° Q)c >U o m c a OO ~ m L E 'n to i N N ,O N C R i o m o m m aD a� Q-d OGW ECL v • O�U L u N L .— CC = CC ` O T O O C to • w' N�- i-� O'O U 7 CU W O- u N v ,� 7 E ,, U I NM t'4 � �" E oE '—nEo• ® 0 070.0 0 O C U () y 13 • U m m L c GI �2 O O L L E 3 .O 3 d o O E O O J o X E 12 y y Fm v ov '� g y > Q o o o n u 3 u v C N N Y y 3 O m 0 0 0 47- in o ATTACHMENT#_a_TO REPORT# fl/tAfl / / . . Consolidated financial statements of // The Corporation of the / City of Pickering • / December 31,2016, / // . „ • • • / / , • / • / / ,• • • • / • • / For discussion purposes only The Corporation of the City of Pickering December 31, 2016 Table of contents Independent Auditor's Report 1 , Consolidated statement of financial position / 2 Consolidated statement of operations 3 Consolidated statement of change in net financial assets 4 Consolidated statement of cash flows 5 Notes to the consolidated financial statements 6-25 X r • • / • • • • For discussion urposes on y Del01tte Deloitte LLP 400 Applewood Crescent Suite 500 Vaughan ON L4K 0C3 Canada Tel:416-601-6150 Fax:416-601-6151 www.deloitte.ca 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 statements of the Corporation of the City of Pickering, which comprise the consolidated statement of financial position as at December 31, 2016, and the consolidated statements of operations, change in net financial assets, and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Management's Responsibility for the Consolidated Financial Statements • Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Canadian public sector accounting standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures"to obtain audit evidence about the amounts and disclosures in the consolidated financial statements.The procedures selected depend on the auditor's judgment, including the assessment of risks of material♦misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing aniopinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Corporation of the City of Pickering as at December 31, 2016 and the results of its operations, change in its net financial assets and its cash flows for the year then ended in accordance with Canadian public sector accounting standards. Chartered Professional Accountants Licensed Public Accountants , 2017 �:o d.s: ss c" cd'poses o� The Corporation of the City of Pickering Consolidated statement of financial position as at December 31, 2016 ' 2016 ,/ 2015 $ $ Financial assets Cash and cash equivalents 78,673,206 65,678,786 " Investments (Note 3) 48,857,964/ 49,423,158 / Taxes receivable 15,733,430 15,519,964' Accounts receivable 3,089430 2,651,579 Note receivable (Note 17) 4,055,276 . 4,306;294 Investment in Veridian Corporation(Note 4(b)) 51,;307,386 49,002,099 Promissory notes receivable (Note 5) 25,069,000 25;069,000 • 226,785,892 211,650,880 Liabilities ;.' Accounts payable and accrued liabilities ' !/' 19`683 527,! 16,261,055 / , Other current liabilities / 133;307 123,204 Deferred revenue (Note 6) / 60,501,567 56,267,521 • Long-term liabilities(Note 9) 21,455,816 17,717,530 Post-employment benefit liability(Note 8(a)) 4,959,500 4,663,800 WSIB benefit liabilities (Note 8(b)) 1,806,100 1,773,100 N._ 108,539,817 96,806,210 Net financial assets / 118,246,075 114,844,670 /' Non-financial assets /� / Tangible capital assets(Note 10) / 223,836,631 215,670,460 Prepaid expenses j ;� 248,303 367,382 Inventory / / 222,512 329,996 224,307,446 216,367,838 Accumulated surplus(Note 11) i" ) 342,553,521 331,212,508 , ...,scm, /i / . i • / • / . / . j' / , . • / The accompanying notes to the consolidated financial statements are an integral part / / of this consolidated financial statement. / ' Page 2 ' For discussion purposes only The Corporation of the City of Pickering Consolidated statement of operations year ended December 31, 2016 2016 2015 Budget (Note 18) Actual Actual $ $ $ Revenue • Residential and farm taxation 44,651,411 44,950,264 42,582,407 Commercial and industrial taxation 10,875,551 10,845,299 10,575,696 Taxation from other governments 8,616,692 8,740,388 8,804,707 User charges 8,923,556 10,825,327 9,129,019 Government grants and fees 8,278,790 3,218,352 2,042,540 Other contributions and donations 2,018,740 1,022,571 5,236,171 Development charges and developer contributions earned 5,182,781 /2,099,895 1,821,557 Contributed tangible capital assets - X3,480,656 395,849 Investment income 320,000 565,808 780,042 Penalties and interests on taxes 2,275,000 2,379,422 2,336,147 Fines 852,000 839,035 853,850 Interest on promissory notes 1,2 9,138 1,229,138 1,229,138 Sale of land 75,000 - - Equity share of Veridian Corporation earnings(Note 4(c)) - 4,252,377 3,632,643 Other 318,410 1,206,986 1,218,916 Gain on disposal of tangible capital assets- - - 54,589 ',A' 93,617,069 95,655,518 90,693,271 Expenses (Note 19) General government 16,882,182 15,638,335 14,812,739 Protection to persons and property / ' 23,992,953 22,938,397 22,730,699 Transportation services \`1` 12,660,307 12,032,596 12,446,022 Environmental services \\ 3,586,108 3,441,978 3,453,092 Social and family services v 737,326 793,371 743,667 Recreational and cultural services 27,774,621 26,572,990 25,304,769 Planning and development z. ,` 3,461,714 2,682,724 2,647,345 Loss on disposal of tangiblecapital'assets - 214,114 - Nk_ f 89,095,211 84,314,505 82,138,333 Annual surplus 4,521,858 11,341,013 8,554,938 Accumulated surplus, beginning of year 331,212,508 331,212,508 322,657,570 Accumulated surplus,end of year 335,734,366 342,553,521 331,212,508 The accompanying notes to the consolidated financial statements are an integral part of this consolidated financial statement. d Page 3 -7:- s ss cr o,„-poses 7 , 1 i, • The Corporation of the City of Pickering Consolidated statement of change in net financial assets / year ended December 31, 2016 // // 2016 /2015 / Budget / (Note 18) Actual Actual • $ • $ $ / Annual surplus 4,521,858 11,341,013• 8,554,938 / / Acquisition of tangible capital assets (33,524,650) (21,134,606) (32,811,381)' Amortization of tangible capital assets 9,813,357 '10,169,146 9,932,399 Loss (gain)on disposal of tangible capital assets - 214,114 (54,589) Proceeds on disposal of tangible capital assets - • 36,100 '73,144 • (19,189,435) 625,767 (14,305,489) / /Transfer of assets under construction to / 2, ' / tangible capital assets / 23,484/1 21,391,751 Assets under construction expensed / - 25;591 209,049 / - 2,549,075 21,600,800 Acquisition of inventory of supplies j` - (532,060) • (618,311) Use of inventory of supplies - , 639,544 625,890 . Acquisition of prepaid expenses //! i (248,906) (371,190) Use of prepaid expenses /. - " 367,985 486,395 / -' 226,563 122,784 Change in net financial assets / '43 4.9,189, 5) 3,401,405 7,418,095 Net financial assets, beginning of year / ` 114,844,670 114,844,670 107,426,575 • Net financial assets,end of year / Ni. 95;'655,235 118,246,075 114,844,670 / / . / j / / 4<:::) i / • . i i ///" // / / / // / , / . " �/ j // The accompanying notes to the consolidated financial statements are an integral part / of this consolidated financial statement. • / Page 4 / • For discussion purposes o ! � . j/ The Corporation of the City of Pickering Consolidated statement of cash flows year ended December 31, 2016 2016 /2015 f $ • $ Operating transactions Annual surplus 11,341,013 ' 8,554,938 Non cash items ' Amortization of tangible capital assets 10,169,146 9,932,399 . Gain on disposal of tangible capital assets 214,114 (54,589) Equity share of Veridian Corporation (4,252,377) (3,632,643) Contributed tangible capital assets recorded in revenue (3,480,656) (395,849) Change in non-cash operating items: /,' / Taxes receivable / (213,466) ;(1,024,916) Accounts receivable (438,051) 3,826,066 Accounts payable and accrued liabilities 3,422,472 / (1,778,902) Other current liabilities , 10,103' 24,216 Deferred revenue / 4,234,046 4,417,590 Post-employment benefit liability 295,700 308,500 WSIB benefit liabilities /33,000 31,200 Inventory if <,,, /107,484 7,579 Prepaid expenses f /. 119,079 115,205 • N, 21,561,607 20,330,794 Capital transactions' Acquisition of tangible capital assets // (net of transfers and contributions) / (15,104,875) (10,814,732) Proceeds on disposal of tangible capital assets 1;771:114.1%./-- 36,100 73,144 8. / (15,068,775) (10,741,588) / Investing transactions �% i Decrease(increase)in investments,/ / 565,194 597,516 Dividends received from Veridian,Corporation 1,947,090 2,234,500 `444, , ' 2,512,284 2,832,016 Financing transactions // Proceeds from debentures issued /.' 6,473,000 - Principal repayment of,deb ntures. (2,734,714) (2,758,239) Note receivable ��, / 251,018 (4,306,294) , N„, 3,989,304 (7,064,533) Increase in cash and cash equivalents 12,994,420 5,356,689 Cash and cash'equivalents, beginning of year 65,678,786 60,322,097 Cash and cash equivalents,end of year 78,673,206 65,678,786 / Cash and cash equivalents"consists of Cash 18,182,861 6,951,463 Cash equivalents 60,490,345 58,727,323 78,673,206 65,678,786 i j The accompanying notes to the consolidated financial statements are an integral part of this consolidated financial statement. / • Page 5 For discussion purposes only �' /, II' ' 'The Corporation of the Cityof Pickering / Notes to the consolidated fmancial statements �' ; December 31, 2016 ,, / . . 1. Significant accounting policies The consolidated financial statements("the financial statements")of The Corporation of"the City of Pickering (the"City")are the representations of management prepared in accordance/with/wi tY) Pce th accountin 9 accounting standards established by the Public Sector Accounting Board("PSAB")of Chartered Professional /' Accountants of Canada (CPA Canada). Significant accounting policies adopted by the City are as / follows: / (a) Reporting entity . (i) Consolidated financial statements The consolidated financial statements reflect the assets, liabilities*revenues and expenses of the reporting entity.The reporting entity is comprised of the activities of all committees of Council and the City of Pickering Public Library Board which is controd by,the City. All material inter-fund transactions and balances are eliminated on consolidation. e (ii) Investment in Veridian Corporation / / The City's investment in Veridian Corporation is///accounted for on a modified equity basis, consistent with Canadian public sector accounting standards for investments in government ' business partnerships. Under the modified equity basis,Veridian Corporation's accounting policies are not adjusted to conform to those of the City and inter-organizational transactions • and balances are not eliminated.The City recognizes its equity interest in the annual earnings or loss of Veridian Corporation in its consolidated statement of operations with a corresponding increase or decrease in its investment assetaccount. Dividends that the City may receive from • Veridian Corporation and other capital transactions are reflected as adjustments in the investment asset account. (iii) Operations of School Boards and the Region of/Durham / / • The taxation, other revenues(expenditures,assets and liabilities with respect to the operations of the school boards arid tbtRegion of Durham(the"Region")are not reflected in these consolidated financial statement / (iv) Trust funds / N• . i Trust funds and their related operations administered by the City are not consolidated, but are reported separatelyan the Trust'Funds Statement of Financial Activities and Statement of • Financial Position. / (b) Basis of accounting (i) Accrual basis of accounting Revenue and expenses are reported on the accrual basis of accounting.The accrual basis of /'accounting recognises revenues as they are earned and measurable; expenses are / recognized as they are incurred and measurable as a result of the receipt of goods and services and the creation of a legal obligation to pay. / / (ii) Cash and cash equivalents / Cash and cash equivalents consist of cash on hand,demand deposits and short-term, highly liquid investments that are readily convertible to known amounts of cash. Cash equivalents / have'a short-term maturity of three months or less from the date of acquisition. / / / / . / / . / Page 6 // For discussion purposes only / / / The Corporation of the City of Pickering Notes to the consolidated financial statements . /, / / December 31, 2016 / / 1. Significant accounting policies(continued) (b) Basis of accounting (continued)9( (iii) Investments /� Long-term investments are recorded at cost and any loss in value which:is considered other/ than temporary is recorded as appropriate.Any premium or discount at purchase of an i/ investment is amortized over the.life of the investment. ' / (iv) Tangible capital assets("TCA") / Tangible capital assets are recorded at cost less accumulated.amortization. Cost includes all costs directly related to acquisition or construction of the tangiblepita)asset including transportation costs, installation costs, design and engineering fajta legal fees and site preparation costs.Amortization is recorded on a straight-line basis�over the estimated life of the tangible capital asset commencing once the asset is available foNse as follows: i / Buildings 15 to 45 years Machinery and equipment 2 to 25 years Vehicles 5 to'15years`, / / Infrastructure-Roads 10 to 50'years Infrastructure-Storm sewers :5 to 100 years Infrastructure-Sidewalks / 20 to 40 years / Infrastructure-Parks 10 to 40 years;/ Information technology hardware 4 to 8 years / • Library collection materialsato 7 years' Furniture and fixtures ,14015`50 years One-half of the annual amortization is charged in the year of acquisition and in the year of disposal.Assets under construction are not amortized until the asset is available for productive use. Land is not amortized: Tangible capital assets're ived s contributions are recorded at their fair value at the date contributed, and that amountbcorded as revenue. / (v) Accounting for Property Tax Capping,Provisions resulting from the Ontario Fair Assessment • System /net impact 1property taxes'as a result of the application of the capping provisions does not affect the onso I1'ated Statement of Operations as the full amounts of the property taxes were levied. l Iowever,ie capping adjustments are reported on the consolidated Statement of Financial Positioniass a4eceivable/payable from/to the Region. (vi) Deferred revenue . ;Deferred revenues represent user charges and fees which have been collected but for which the related services have yet to be performed.These amounts will be recognized as revenues in the fiscal yea/rifle services are performed. In addition, any contributions received with • i external restrictions are deferred until the related expenditures are made. (vii) Post-emploment benefits • . / The present value of the cost of providing employees with future benefit programs is recognized as employees earn these entitlements through service.Actuarial gains and losses areamortized over the average remaining service period ("ARSP").The actuary determined / ARSP to be 14 years. / (viii) Inventory / ./ Inventory is valued at the lower of cost and replacement cost. Cost is determined on a / i , i� weighted-average basis. / • /" Page 7 /' For discussion purposes only i The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2016 1i i 1. Significant accounting policies(continued) (b) Basis of accounting(continued) (ix) Government transfers j Government transfers are recognized as revenue by the City in the period in which the transfers are authorized and any eligibility criteria are met, unless they/are restricted through stipulations that require specific actions to be carried out in order to keep the transfer or/ discharge the liability. For such transfers, revenue is recognized when the stipulation has been met. (x) Tax revenue / Tax revenue is recognized on all taxable properties within.the Gityy that are included in the tax roll provided by the Municipal Property Assessment Corporation,using property tax values • included in the tax roll or property tax values that can be reasonably.estimated by the City as it relates to supplementary or omitted assessments,at'tax rates authorized by Council for the City's own purposes in the period for which the tax:is levied. (xi) Intangible assets // Intangible assets are not recognized as assets in the "'dal statements. (xii) Contaminated sites Contaminated sites are the result of contamination being introduced into air, soil,water or sediment of a chemical,organic, orradioaetive material or live organism that exceeds an environmental standard. A liability for renied ationnof contaminated sites is recognized, net of any expected recoveries,when-all of the foll6wing criteria are met: a) an environmental standard exists; ✓ / • b) contamination exceeds the environmental'standard; / c) the City is directlyiresp_nsibl accepts responsibility for the liability; • d) future economic benefits willbe given up;and e) a reasonable estimate of the liability can be made. A liability is recorded only for sites that are not in productive use or if there was an unexpected event that.resu ed in ontamination. Changes in estimates are recorded in the City's statement of operations The/City does not have any liability for contaminated sites recorded in the consolidated„fiinnaticial statements. (xiii) Use'of estimates The preparation of financial statements in conformity with Canadian public sector accounting standards requires'management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes.Accounts involving significant / estimates include allowance for doubtful accounts,certain accrued liabilities, post-employment j benefits liability,WSIB liabilities and estimates relating to the useful lives of tangible capital assets.Actual results could differ from these estimates. %' . �� // / : Page 8 / For discussion purposes only / The Corporation of the City of Pickering / / Notes to the consolidated financial statements / • December 31, 2016 j' / 2. Operations of school boards and the Region of Durham Further to Note 1 (a) (iii) requisitions are made by the Region of Durham and School Boards requiring the City to collect property taxes and payments in lieu of property taxes on their behalf'The amounts ; collected and remitted are summarizes as follows: / / 2016 201'5 Region School board ,'Region School board $ $ $ / $ / • Taxation 102,922,914 44,092,112:100,056,175 43,511,890 Payments in lieu of taxes 6,603,046 389,819 ,A. 6,879,449 389,648 109,525,960 44,481,9314106,935,624 / 43,901,538 i 13. Investments .// / 2016 /I 2015 Cost Markefvalue Cost Market value $ / $ / • $ $ Investments 48,857,964/ 48,824,21 /J/ 49,423,158 49,674,241 , Investments are comprised of deposit notes, bonds and guaranteed investment certificates. // ''ISRP"mietv /' . , / / / j/ , • / 4c) // • 9/// f /"' , / / . .. • ' / j / //' . / Page 9 For discussion purposes only . The Corporation of the City of Pickering / i Notes to the consolidated financial statements December 31, 2016 /' 4. Investment in Veridian Corporation (a) Veridian Corporation is owned by the City of Pickering,Town of Ajax, Municipality of Clarington and the City of Belleville.The City has a 41 per cent interest in Veridian Corporation.Veridian Corporation,as a government business partnership, is accounted for on the modified equity basis in. , these consolidated financial statements.Veridian Corporation serves as the electrical distribution;/ utility for a number of communities including the four noted above and conducts non-regulated utility service ventures through its subsidiaries. The following table provides condensed supplementary consolidated financial information for the corporation and its subsidiaries for the year ended December 31.All amounts in tables are disclosed in thousands of dollars: / • '/ / 2016/ 2015 / (000's).: (000's) / $ $ • Assets Current /89,713 • 84,500 Capital and intangibles / ;'252,736 231,368 Other / / 4,058 6,325 Total assets / N / •346,507 322,193 Regulatory balances 2,530 3,170 Total assets and regulatory balances 349,037 325,363 Liabilities /7 . Current /" / 101,166 - 100,133 Long-term debt 85,532 78,600 / Other /' 26,814 19,460 Total liabilities / / 213,512 198,193 / ..ss‹..„... /f Shareholders'equity / Share capital • / 67,260 67,260 Contributed capital / 25 25 Accumulated otlierc1prehensiv lkiss (340) (264) Retained earnings \ 58,195 52,496 Total equity; ,}r / 125,140 119,517 Regulatory balances N/ 10,385 7,653 Total liabilities,equity and regulatory balances 349,037 325,363 . Comprehensive Income/ Commodity revenue 338,009 283,052 Commodity expenses (331,487) (280,564) Distribution revenue 52,264 51,768 Other income . 3,171 3,779 1 Operating/expenses (40,220) (37,875) Other income(expense) (4,469) (5,873) Other comprehensive loss (77) - / Net movements in regulatory balances,net of tax • (3,372) (1,465) Income tax espense (3,448) (3,272) /Total comprehensive income for the year 10,371 9,550 / �/ Page 10 For discussion Purposes only The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2016 4. Investment in Veridian Corporation(continued) (b) City of Pickering's investment represented by: 2016 2015 $ $ Promissory notes receivable (Note 5) 25,069,000 25,069,000 Investments in Veridian Corporation Initial investment in shares of the Corporation0,496,196 30,496,196 Accumulated earnings46,400,074 42,147,697 Accumulated dividends received (26,404,592) (24,457,502) Adjustment to value of investment 815,708 815,708 Total investment 51,307,386 49,002,099 (c) Equity in Veridian Corporation 2016 2015 $ $ Balance, beginning of year 77,114,119 75,715,976 Equity share of net earnings for the year 4,252,377 3,915,543 Dividend received from Veridian Corporation (1,947,090) (2,234,500) Adjustment to Veridian retained earnings - (282,900) Balance, end of year(Note 11) 79,419,406 77,114,119 (d) Contingencies and guarantees or endCorporation(the"Corporation')as disclosed in their consolidated financial statements-are"asllows: (i) Insurance claims N The Corporation is a member of the Municipal Electric Association Reciprocal Insurance Exchange("MEAF31E)which was created on January 1, 1987.A reciprocal insurance exchange may be defined as a group of persons formed for the purpose of exchanging reciprocal contracts of indemnity or inter-insurance with each other. MEARIE provides general liability insurance to memberelectricutilities. MEARIE also provides vehicle and property insurance to the Corporation. Insurance premiums charged to each member utility consist of a levy per$1,000 of service revenue subject to a credit or surcharge based on each electric utility's claims experience.The maximum coverage is$24,000,000 per occurrence for liability insurance, $15,000,000 for vehicle insurance and$98,685,000 for property insurance, plus$10,000,000 excess coverage on top of the regular liability and vehicle coverage. (ii) Contractual obligation-Hydro One Networks Inc. ("HONI") The Corporation's subsidiary,Veridian Connections Inc. ("VCI"), is party to a connection and cost recovery agreement with HONI related to the construction by HONI of a transformer station designated to meet VCI's anticipated electricity load growth. Construction of the project was completed during 2007 and VCI connected to the transformer station during 2008. • To the extent that the cost of the project is not recoverable from future transformation connection revenues,VCI is obligated to pay a capital contribution equal to the difference between these revenues and the construction costs allocated to VCI.The construction costs allocated to VCI for the project are$9,975,000. Page 11 For disc_ss on curpcses cr y /• The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2016 4. Investment in Veridian Corporation(continued) // (d) Contingencies and guarantees of Veridian Corporation(the"Corporation')as disclosed in their consolidated financial statements are as follows:(continued) /-' (ii) Contractual obligation-Hydro One Networks Inc. ("HONI") (continued)ued) The Corporation has recorded a liability and a corresponding intangible asset for$1,212,000 as at December 31,2016(2015-$1,212,000), based on management's.best estimate of the future transformation connection revenue shortfall. HONI is expected to perform a true-up based on actual load at the end of the tenth and fifteenth anniversaries of the in-service date. (iii) General claims % From time to time;the Corporation is involved in various lawsuitsclaims and regulatory proceedings in the normal course of business. In the opinion of management,'the outcome of such matters will not have a material adverse effect o9-the Corporation's cpnsolidated financial position and results of operations or cash flows. (e) Lease commitments Future minimum lease payment obligations under operating leases areas follows: 'N'IC / $ (000's) / 2017 j 41 2018 /" 1 f. 41 2019 / 33 2020 /' / 32 2021 / 33 Thereafter // 60 ' / ,,/ ) / 240 5. Promissory notes receivable . C / / , ' 2016 2015 % $ $ / / • Promissory notereceivable from Vendian Corporation maturing December 31,20,11tand 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 the Ontario Energy Board deemed long-term debt rate for each successive five year period thereafter / (4.47% effective January 1, 2015) 17,974,000 17,974,000 / / 25,069,000 25,069,000 / / / �/ / Page 12 / For discussion purposes only • / /; / • The Corporation of the City of Pickering Notes to the consolidated fmancial statements ; December 31, 2016 % • 5. Promissory notes receivable(continued) Interest revenue earned from these notes receivable totaled$1,229,138 (2015-$1,229,138).The . promissory note from Veridian Corporation is convertible into common shares at the rate of one common ;' share for every$1,000 of principal amount,at the option of the City.The note from Veridian Connections' Inc. is no longer convertible but the City may demand full or partial repayment withsix months' notice/ with certification that the funds are required for municipal purposes.The City has signed an inter-creditor agreement confirming the subordinated ranking of these promissory notes to the senior debt financing issued by Veridian. On November 20,2014,the Ontario energy Board's deemed long-term rate has been established for the five year period commencing January 1,2015 until December 31,2019 at 4.47%.This rate/will be reset on January 1,2020. . 6. Deferred revenue /' / 2016 2015 • / $ $ Obligatory Resene Funds /' Development charges / 43,318,105 ' 40,941,619 Parkland // 3,994,401 2,858,621 Federal gas tax // 7,999,732 Third party/Developer's Contributions•Reserve Fund // 2,962,791 2,661,982 • / isi:744... / 58,537,273 54,461,954 Other unearned revenues / • / 1,964,294 1,805,567 / ''t / 60,501,567 56,267,521 / Continuity of deferred revenue is as/follows: / 2016 2015 Balance, beginning of year / 56,267,521 51,849,931 Restricted funds rec d / 7,879,649 6,941,777 \ General funds received873,338 729,491 Interest earned(resnc tteri4funds) / • 856,244 689,423 , 9,609,231 8,360,691 Earned restricted revenue transferred to operations 4,660,574 3,184,760 Earned revenue transferred to operations 714,611 758,341 / 5,375,185 3,943,101 Balance, end of year/ • 60,501,567 56,267,521 / // , / / / // . ' / • Page 13 / For discussion Durposes only . The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2016 7. Interfund loans As a means of funding various capital acquisitions,funds are borrowed by the Capital Fund from Development Charges deferred revenue(obligatory reserve funds).These funds are secured by promissory notes with interest rates ranging from 1.83%to 3.96%and various payment terms ranging from 5 years to 10 years.The financing arrangements and ultimate repayment are approved by Council through the current budget process.Although these notes have payment terms as noted above,they are repayable on demand.The following is a summary of the related loans: 2016 2015 $ $ Roads and streetlights / 773,631 895,000 Community facilities, libraries and parks `' 1,700,707 2,039,261 Protection services •N§4,0(34 470,209 Stormwater system 943,771 1,049,884 3,482,113 4,454,354 8. Post-employment benefits liability \fI (a) Post-employment benefits liability The City makes available to qualifying employees who retire before the age of 65,the opportunity to continue their coverage for benefits such as post-retirement extended healthcare benefits. Coverage ceases at the age of 65.The City alsolprovides full time and permanent part-time employees a sick time entitlement and any unused"entitlement is accumulated year to year.This accumulated entitlement is not vested and is forfeited at the time of retirement or termination.The most recent actuarial valuation of the post-employment benefits was performed at January 1,2014. Information about the City's benefits liability is as follows: 2016 2015 Accrued benefits liability, beginning of year 4,663,800 4,355,300 Current service costs 402,200 388,600 Interest on accruep enefits 226,800 222,500 Amortization of actuarial losses 186,200 186,200 Benefits paid during the year (519,500) (488,800) Accrued benefits liabilitjy;-end of year 4,959,500 4,663,800 Accrued benefit obligation 6,446,600 6,337,100 Unamortized actuarial losses (1,487,100) (1,673,300) Accrued benefits liability, end of year 4,959,500 4,663,800 The main actuarial assumptions employed in the actuarial valuations are as follows: (i) Discount rate The present value as at December 31,2016 of the future benefits was determined using a discount rate of 3.5% (2015-3.5%). (ii) Dental costs The dental cost trend rate was 3.75% (2015-3.75%)increase per annum. (iii) Health costs Health costs were assumed to increase at 6.50% (2015-6.75%)and decrease by 0.25%(2015 -0.25%)increments per year to an ultimate rate of 4.75% per year in 2023 and thereafter. Page 14 =or d!s� ss cn ti . osis on ,; • / / . ;. The Corporation of the Cityof Pickering P Notes to the consolidated financial statements December 31, 2016 j / / 8. Post-employment benefits liability(continued) / (b) Workplace Safety and Insurance Board(WSIB)benefit liabilities ;' Effective January 1,2001,the City became a Schedule II employer under the Workplace Safety& / Insurance Act and follows a policy of self-insurance for the risk associated with paying benefits for workplace injuries for all its employees.The WSIB administers the claims related to workplace injuries and is reimbursed by the City.The most recent actuarial valuation,df the WSIB benefitswas performed at December 31,2014. / / /" Information about the City's WSIB liability is as follows: / 2016 2015 Accrued WSIB liability, beginning of year ' 1,7, 3,100 1,741,900 Current service cost 108;600 106,500 Interest on accrued benefits j 63,400 62,300 Benefits paid during the year fe (139,000) (137,600) 4_ / /1,806,100 • 1,773,100 The main actuarial assumptions employed in the actuarial valu "tionsare as follows: (i) Discount rate // The present value as at December 31,2016 .of the future benefits was determined using a discount rate of 3.5% (2015-3.5%). (ii) Inflation rate The rate of inflation was assumed to be 2.0% (2015-2.0%)per annum. (iii) WSIB Administration Rate/ . / Liabilities for WSIB benefits ave een increased 34.3%to reflect the administration rate charged by WSIB./ \ / A WSIB Reserve'Fund was established in 2001.The Reserve Fund balance at December 31, 2016 was$3,001,701 (2015-$2,760,341). In addition,the City purchased two insurance policies that-prcrctheCity against significant claims.The occupational accident insurance pays loss/claims up to$�J00,0P0 per work related°accident.The excess workers compensation • . indemnity insu arnpe hada$500,000 deductible and will pay for claims up to and including $15,000,000 per workrelated accident. 9. Long-term liabilities // (a) The/balance of long-term"liabilities is made up of the following: // 2016 2015 / $ $ The municipality is responsible for the payment of principal and interest charges on long-term • liabilities'issued by the Regional Municipality of • % Durham on the City's behalf. At the end of the year, / the outstanding principal amount of this liability is 21,455,816 17,717,530 / '' ) / i / , • ��/ Page 15 / For discussion purposes only / The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2016 9. Long-term liabilities(continued) (b) The above long-term liabilities have maturity dates of July 12,2017,2021 and 2022, November 21, 2018, October 15,2020, September 29,2021, October 16,2018 and 2023,July 2,2019 and 2029 and October 17,2021,2026 and 2031 with various interest rates ranging from 1.10%to 5.20%. Principal repayments are summarized as follows: $ 2017 2,983,834 2018 4,935,382 2019 2,015,903 2020 IN, 2,029,588 2021 2,178,221 Thereafter 7,312,888 21,455,816 (c) Long-term liabilities include principal sums of$582,000(0 57,1582,000)which may be refinanced by the issuance of debentures over a further period not to exceed 10 years,and$2,415,000(2015- $2,415,000)which may be refinanced by the issuance of debentures over a further period not to exceed 5 years. (d) The above long-term liabilities have been approved by Council by-law.The annual principal and interest payments required to service these liabilities are within the annual debt repayment limit prescribed by the Ministry of Municipal Affairs ands lousing. (e) Interest expense recorded in the year relating toese long-term liabilities is$625,740(2015- $678,882). 10. Tangible capital assets Information relating to tangible capitala assets„ts.as follows: (i) Contributed tangible capital assets The City records tangible capital assets contributed by an external party at fair value on the date contributed.Typical examples are roads, storm sewers and sidewalks installed by a developer as part of a subdivision6 development agreement. Contributions of tangible capital assets in 2016 amounted to$3,486,656(20)5-$395,849). (ii) Tangible capital assetsarpcognized at nominal value Land under roads are assigned a nominal value of one Canadian dollar because this land only supports or is intended to support road infrastructure and the majority of land acquired supporting road allowances was acquired at no cost. (iii) Works of art and historical treasures The City has a museum which holds various historical treasures and historical buildings pertaining to the heritage and history of the City of Pickering.These items are not recognized as tangible capital assets in the financial statements because a reasonable estimate of the future benefits associated with such property cannot be made.Any acquisition or betterment of these assets is recognized as an expense in the financial statements. (iv) Other The net book value of tangible capital assets not being amortized because they are under construction is$11,233,428(2015-$7,170,032). During the year,there were no write-downs of assets(2015-$Nil)and no interest was capitalized during the year(2015-$Nil). 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C CSO N co0 Os 63- V 6M) "CI 0 c0 0 N co 6 .•- 6 = U v N- N- M V co ISI 1 ) p ,� a) C vs CO v (M0 i.▪ 1 •- 0 0 CC) h N N 0 O - m J 0) NN- N- ti . CC) Co CO ee I••c Ow ) CO CO M) MN NirS N N T '5 >, N 0 .2 a Ca) -C1 0 -0 .4`,', aI C. o co d o u -c Io u �/ N CT m CO .)2 a) N N C . m !o 0 N Y a) .y-. /�/ I" ai E o w. 0 �' a) •r ai`c .N m di- o a y 4 U N c a as N CL C 7 c o 0 m O) g N 0 g c c d c co Q C) m � 13 Q Q � 6 o C Q co CO < —I m o m Z m 0 . j • i The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2016 . / 11. Accumulated surplus / The City's accumulated surplus is comprised of the following: /' / • 2016' 2015 ,' $ $• . Capital fund 19,827,450 16,328,274 Operating fund /125,234 125,227 Equity in Veridian Corporation 79,419,406 774'114,119 Tangible capital assets • /223,836,631 21'5,670,460 Post-employment benefits liability 4,780,500) / (4,484,800) Internal loans f 3,482,113) ,.' (4,454,354) Net long-term liabilities / fff(21455,816)'' (17,717,530) Note receivable soccer facility // 4,055;276 4,306,294 WSIB benefit liabilities • / (1,806,100) (1,773,100) Reserves set aside for special purposes by Council. / • Working capital 400,000 400,000 . Self insurance 869,293 892,707 Replacement of capital equipment 1,321,737 1,755,707 Contingencies / 1,616,554 1,546,554 Rate stabilization /' / 15,053,798 15,361,372 City's share for development charge / / 4,018,582 4,962,624 Continuing studies l / 362,088 113,684 ilS771414 Vehicle replacement / 1,247,455 1,058,940 Easement settlement ' ,,/ 390 390 Eastern branch 67,458 10,882 Land Purchase ;' 99,403 99,403 Seaton Development Review/ 1,741,987 1,537,189 Financial Systems / 7" 861,638 661,638 Senior Centre /` ;f/ 375,000 300,000 Accessibility Initiatives' 31,944 34,913 Winter Control // 700,000 700,000 ` Sustainability Initiatives / 43,585 1,665 Duffin Heights ;/ / 3,889,593 4,119,453 , Facilities 203,345 71,547 Accelerated'lnfrastructure P ogram 557,000 - Reserve funds set aside for special purpose by Council Recreation programs and facilities 172,615 170,148 Acquisition of tangible capital assets . 289,583 285,445 WSIB 3,001,701 2,760,341 Animal shelter /' 369,306 330,298 /Men's slow pitch /' 150,262 148,114 Operations Centre. 6,771,136 6,912,674 Roads & bridges 2,039,410 1,365,016 Stormwater.management 559,190 497,214* • / / 342,553,521 331,212,508 i / / / , /i • Page 19 For discussion purposes on y. . . . . , The Corporation of the City of Pickering. �/ Notes to the consolidated fmancial statements December 31, 2016 / / / / 12. Pension agreement / j' 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 benefit plan which / specifies the amount of the retirement benefit to be received by the employees based on the length of / service and rates of pay. /' OMERS provide pension services to over460,000 active and retired members,and about 1,000 // employers. Each year an independent actuary determines the funding status:of OMERS Primary/ • Pension (the"Plan") by comparing the actuarial value of the invested assets to the estimated present value of all pension benefits that members have earned to-date.The most recent actuarial valuation of the Plan was conducted as at December 31,2016.The results of this valuation disclosed total actuarial liabilities as at that date of$87,554 million in respect of benefits accrued f�r service with actuarial assets at that date of$81,834 million indicating an actuarial deficit of$5,720 mil if dry. Because OMERS is a multi-employer plan, any pension plan surpluses or deficits are ajoint esp no sibility of'Ontario municipal organizations and their employers.As a result,the City does not recognize any share of the OMERS pension surplus or deficit. Contributions made by the City to OMERS on account of current service for 2016 were$3,725,946 (2015-$3,719,031). 7 / SK // 13. Trust Funds ' Trust funds administered by the City amounting to$355,149(2015-$348,015)have not been included in the Consolidated Statement of Financial Position nor have their operations been included in the Consolidated Statement of Operations. 14. Related party transactions / Veridian Corporation / /, The City of Pickering is a principal shareholder in Veridian Corporation (Note 4).The City receives electricity and services from Veridian Corporation and;its subsidiary. / 2016 2015 / / $ $ , Transactions i Revenues / • Interest on promissory otes 1,229,138 1,229,138 Property taxes leveed 44,749 58,559 Expenses / / Electrical energy and services 2,723,275 2,656,950 Balances/ / Accounts payable and accrued liabilities 582,917 498,390 Promissory notes receivable 25,069,000 25,069,000 iF , / / ' / �i / / / /`. Page 20 ,// For discussion purposes only / • The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2016 15. Guarantees In the normal course of business,the City enters into agreements which contain guarantees.The City's primary guarantees are as follows: • (i) The City has provided indemnities under lease agreements for the use of various facilities or land. Under the terms of these agreements the City agrees to indemnify the counterparties for various items including, but not limited to,all liabilities, loss, suits, and damages arising during, on or after the term of the agreement.The maximum amount of any potential future payment cannot be reasonably estimated. (ii) The City indemnifies all employees and elected officials including Library employees and board members for various items including, but not limited to, all costs to settle suits or actions due to association with the City, subject to certain restrictions.The City haspurchased liability insurance to mitigate the cost of any potential future suits or actions.The term of the'indemnification is not • explicitly defined, but is limited to the period over which the indemnified party served as an employee or elected official of the City.The maximum amount of any potential future payment cannot be reasonably estimated. (iii) The City has entered into agreements that may include int(mnities in favour of third parties, such as purchase and sale agreements,confidentiality agreements, engagement letters with advisors and consultants, outsourcing agreements, leasing contracts,information technology agreements and service agreements.These indemnification agreements may require the City to compensate counterparties for losses incurred by the counterparties as a result of breaches in representation and regulations or as a result of litigation claims or statutory sanctions that may be suffered by the counterparty as a consequence of the transaction,.The terms of these indemnities are not explicitly defined and the maximum amount of any potennttal i'e mbursement cannot be reasonably estimated. The nature of these indemnification agreements prevents the City from making a reasonable estimate of the maximum exposure due to the difficulties in assessing the amount of liability which stems from the unpredictability of future events and the unlimited coverage offered to counterparties. Historically,the City has not made any significant payments under such or similar indemnification agreements and therefore no amount has been accrued inAhe.balance sheet with respect to these agreements. 16. Contingent liabilities Litigation The City has been named.asa defendant in certain legal actions in which damages have been sought. The outcome of these actions isnot determinable as at the date of reporting and accordingly, no provision has been maide.in these consolidated financial statements for any liabilities which may result. 17. Contractual arrangementN., The City entered into a provisional license agreement with the Pickering Soccer Club(PSC)for the PSC to occupy and operate the Pickering Indoor Soccer Facility(the Facility). The term of the agreement is 15 years from November 5,2014 to November 4,2029. Under the terms of the agreement,the PSC will repay 52.25%of the City's total cost of purchasing the land,constructing the Facility and the related improvements. In 2015,the City recorded a receivable from PSC in the amount of$4,550,000 based on preliminary 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 the agreement is finalized. In 2015 and 2016,the City received all of the required payments based on the preliminary figures. PSC has commenced its soccer program operations and is operating the Facility at its own expense including all repairs and maintenance.Once a final form of agreement is executed the total amount of the PSC's obligation will be re-calculated,as agreed,to reflect any adjustments to the total project construction costs. Page 21 For dlsc_ss cl, cu-poses . , The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2016 • 18. Budget figures :, // The 2016 Budget adopted by Council on March 29,2016 was not prepared on a basis consistent with ;% that used to report actual results.The budget was prepared on a modified accrual basis while Public Sector Accounting Standards require a full accrual basis of accounting.The budget,figures treated all / tangible capital asset acquisitions as expenditures and did not include amortizationexpense on tangible capital assets or post-employment benefits expenses on a full accrual basis.As.a result,the budget / figures presented in the consolidated Statements of Operations and Change in Net Financial Assets represent the budget adopted by Council on March 29,2016 with adjustments as follows: 2016 2016 Council Non TCA Post-employment Budget approved expenditures /presented in budget from capital/ 'amortization statements $ ;S $ $ Revenue • • Taxation 64,143,654 / /J 64,143,654 Capital 14,270,521 / </ 14,270,521 Other 15,202,894 15,202,894 93,617,069/ - 93,617,069 Expenditures • • General government 16,13 575 172,000/ 571,607 16,882,182 • Protection to persons and property 23,177,677 /- • 815,276 23,992,953 Transportation services /9,215,755 25,000 3,419,552 12,660,307 Environmental services 1,525,103 2,061,005 3,586,108 Social and family services 737,326 • - - 737,326 Recreational and cultural services / 23,099,004 1,401,000 3,274,617 27,774,621 • Planning and development / .,./.11‘3,461,714 / - - 3,461,714 77,355,154/ 1,598,000 10,142,057 89,095,211 Annual surplus(deficit) :6,261,915 (1,598,000) (10,142,057) 4,521,858 Capital expenditures /( 35,122,650) . 1,598,000 - (33,524,650) Transfers from reserve and/ / reserve funds — ,/9,357,509 Dividend from Veridian Core oration / 1,927,000 Principal repayment•of debt // (3,890,774) Principal repayment of PSC note 206,000 Debt proceeds,/ 11,136,000 • Prior year operating fund surplus (125,000) // / i • / / . •/ i /' • Page 22 - For discussion purposes only The Corporation of the City of Pickering Notes to the consolidated financial statements December 31, 2016 19. Segmented information The City of Pickering is a diversified municipal government that provides a wide range of services to its residents. Distinguishable functional segments have been separately disclosed in the segmented information.The nature of the segments and the activities they encompass are as follows: General Government This item relates to revenues and expenses of the City itself and cannot be directly attributed to a specific segment. Protection to Persons and Property Protection includes fire services,animal control, bylaw services, building inspection and enforcement of the building code to ensure the safety and protection of all citizens and thiir property. Public Works Services Public works includes construction and maintenance of the City's roadways, including snow removal, sidewalk repairs, street lighting and maintenance of the storm water system. • Social and Family Services <<4. Social services for assistance or services for seniors/ Recreation and Culture Services Recreation and cultural services include recreation programs, maintenance and rental of facilities and parks,operation of the City's museum and library'ser rices. Planning and Development j Planning and development provides a,number of services including municipal planning and review of all property development plans. Segmented information has been•provia`ed in the following pages. • j j' / • i j Page 23 For discussion purposes only • c N C) m CD 'a CO N A M IC) CD 0- CO CO O) et .0 CO et CO IO M m a- 0 10 N I` 0) U) 0- M a- N e- 10 e- eh Co e- d N C1 10 M CO CD M 10 10 N 1. a- CO K) Co CO co in. co Oa M U) ti CD !1 O) N a- • . a- N a- 0) CO 10 CO 10 Co CV CD CD e- M e- et O N CO O1 O t7 N 10 CD CD CD N v- N et M M 0 M Co CD N M el et ID CM 1s a O e- a a- C a- co D) In e- CO a- O C.) 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CD CD 7 CD CD C0 aO '� CO 1.0 1.- CO N CO CO M C) CD C0 CD O O 0 7 \ N- M •-•'N. \ N 0) N- Co O v v 0) N- O Q \ CA I N h to I, N N CO a CCSO N N- N 0) NN C0 ti N Nt O N- C0 = a) U `co co N ,-'BCA C0 M N- 0 CD M U 13 10 tt N C CD M C0 M C 2 ca N - r N v O `, vii . Ibk U) CO CAV. O N ' O d),, ' O O�q� ',OD C0 0 N act Nt V . C a) N 1-- Nt ` 0) 'CO' CO CD CD O O .- C0 l) • 0 imi U C0 M N- CO "•.,� c7'O ,CA C`7` Ma- CO a- a- LE ee"�� CD CAt0 - N c;N- N c Oi.,CA (D CO CA t. i L. U a) CO a0 M 0) CA C0 Co CO Co;co N CA Nt 0 A y 0 CO M „,_\CD CO MNt'-N- N CO O V d co/ ••/�^y� \ • C to >,U) O CD ' O ' ' V N N C'0”Nt Nt Co M CA N- N--� 0 C •C 0 Nt N O N CD co CO O) CO O E 7-3o 0 a) 0) CD a- aD V O LC) O'CO N- CD CD CD N OD O CD 0) O `O N O N_ O a) E co Co N N 7 C0 N CO. C0 CO O a O_ N CD _ CA d C0 CO',— I CD -0 N .- it CO N .CD •• • N fl 0 C cp COCI) �G��y -CCI w C N \ c. 15 li i•, czt c CO o SN .\. :r Ca O L-' c U o 11 a o m o) D > m o) = U CI Or-. E SCC ' CO mu) '2 CA a.l cn N N N Q_ Ct , vUi C u) ^ O O N c a) m 2 -c 'a a) a c�a `°us (I) o c ' �'1 `— y L as a CID C . d w U) m N o 73 try M N u) U o o "rn > N a) ._ 2 �C L_., X r E co3 a) as a) o a ca w- m o f — �./ O .O NODI O0wO O Xtn2000 o c CO E Co I— w Q U hzQ • / • / • / • / /. Financial statements of / <4( / City of Pickering /7/ Public Library Board . December 31,2016 // • 111.1..-/ • • / / • For discussion purDosesonly . . . . . ; / / - . • - City of Pickering Public Library Board ..,,, December 31, 2016 1 , : . , : . . , Table of contents . , . . , , . . . , . . , Independent Auditor's Report " 1-2 ,,/ , Statement of financial position • , • ,- ,-- 3 ' . , , Statement of operations . 4 . , . , Statement of change in net debt / • Ate / 5 . . Statement of cash flows ,- 6 ; . „ ; ,/ .. , . / Notes to the financial statements / / r / ,.. 7-11 , • / / .. , • . . , / 1 . / „ / •/I/ 4(Z.".....-/ // . , . • / . , , . / . , / / • / . / f . . . . / • / / / . . / • / • . / / , . / / / . / /' . . / / / / / / _ / For discussion purposes on y . _ . . /. fi ' IN 4.4 Deloitte LLP / 400 Applewood Crescent,- Suite rescent,Suite 500 Vaughan ON L4K 0C3 Canada / Tel:416-601-61.50 Fax: 416-601-6151 www.deloitte.ca i • • Independent Auditor's Report ,'' / To the Members of The City of Pickering Public Library Board, / Members of Council, Inhabitants and Ratepayers of the City of'Piickering We have audited the accompanying financial statements of thew,Cityf Pickering Public Library Board, which comprise the statement of financial position as at%December.31, 2016, and the statements of operations, change in net debt and cash flows for the/year then ended, and a summary of significant accounting policies and other explanatory information. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fairp~ sentation of these financial statements in accordance with Canadian public sector accounting standards,/and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. . Auditor's Responsibility Our responsibility is to express an'opinion on theseifinancial statements based on our audit. We conducted our audit in accordance with Can dian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about 'wwhether the financial statements are free from material misstatement. An audit involves performing;pr` ocedures to obtain evidence about the amounts and disclosures in the financial statements..The proceduresselected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making,those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation.of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as-evaluating the overall presentation of the financial statements. We'believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. i • f For discussion purposes only • Opinion - In our opinion, the financial statements present fairly, in all material respects, the financial position of the City of Pickering Public Library Board as at December 31, 2016, and the results of its operations, / changes in its net debt and its cash flows for the year then ended in accordance with Canadian public / sector accounting standards. i/ / /i Chartered Professional Accountants ; • Licensed Public Accountants / , 2017 ' . / // / i • / / / _ /; /• ' / / ICS(P41411r/ i'r / .. / / i % <Z,..... i / • / / . j /<::::) / % / /' . is / / . / i / j/ . / / . / /�/ Page 2 // For discussion Durposes only - / . / City of Pickering Public Library Board /' Statement of financial position as at December 31, 2016 / / 2016 / 2015 $ $ Financial assets / Cash 2,225/ 2,250 • Accounts receivable 371' 114,560 ; • Due from the Government of Canada 15,404 7,931. Due from City of Pickering 109;079 - 127,079 124,741 Liabilities Accounts payable and accrued liabilities / 207,274 ; 117,499 Due to City of Pickering / - 84,296 Post-employment benefits liability(Note 2) 382,100 /' 321,800 '' "*-589,374' 523,595 Net debt (462;295) (398,854) Non-financial assets • Tangible capital assets(Note 4) // <� 1,527,727 1,580,974 , Prepaid expense ,/ / 80,195 77,054 1,607,922 1,658,028 Accumulated surplus(Note 5) / • ' i 1,145,627 1,259,174 / i /` j / / / / • / / // c) f / / i i / r' / I/ /The accompanying notes to the financial statements are an integral part of this financial statement. / // Page 3 For discussion purposes only / City of Pickering Public Library Board Statement of operations year ended December 31, 2016 2016 2015 Budget (Note 6) $ $ $ Revenue City of Pickering grants 5,686,029 5,617,847 5,333,203 Federal grants 6,865 6,881 11,133 Province of Ontario grants 207,425 234,827 163,256 Fines and other receipts 176,500 178,658 167,658 Total revenue 6,076,819 6,038,213 • 5,675,250 Expenses Operating Salaries Salaries and wages 3,417,176 3,437,699 3,300,330 Fringe benefits 969,117 950,275 910,912 4,386,293 4,387,974 4,211,242 Material, supplies and utilities Books 180,000 190,654 157,094 Utilities 233,868k 241,830 222,142 Other supplies 49,000 74,174 42,675 462,868 506,658 421,911 Services .z, Repairs and maintenance 293,837 280 030 257,064 P V , Insurance 32,300 30,300 29,975 Travel 4,250 5,394 4,011 Consulting and professional 65,147 64,821 36,423 Advertising NI - 22,000 25,088 21,973 Conference 12,700 11,360 7,522 Postage 3,000 3,231 3,758 Telephone 66,886 64,977 61,990 Seminars and education32,000 34,899 25,858 Software/hardware maintenance 129,415 104,243 103,510 Vehicle repairs and maintenance 4,943 3,326 2,559 Minor capital purchases NI 131,950 121,538 61,878 Miscellaneous 21,530 22,342 20,556 819,958 771,549 637,077 Amortization of tangible capital assets 403,151 485,579 493,434 Total operating expenses 6,072,270 6,151,760 5,763,664 Annual surplus(deficit) 4,549 (113,547) (88,414) Accumulated surplus, beginning of year 1,259,174 1,259,174 1,347,588 Accumulated surplus,end of year 1,263,723 1,145,627 1,259,174 The accompanying notes to the financial statements are an integral part of this financial statement. Page 4 J�-SS en C u 1i'✓S'.J .j.. r' / . / City of Pickering Public Library Board ;/ Statement of change in net debt / year ended December 31, 2016 %/ • 2016 2015 Budget / (Note 6) $ $ ;' $ // / / Annual surplus(deficit) 4,549 (113,547) (88,414); i Acquisition of tangible capital assets (468,000) (432,332) (449,720) Amortization of tangible capital assets 403,151 485,579 493;434 (64,849) / 53,247 43,714 Change in prepaid expense - (3,141) / 20,109 Change in net debt (60,300); (63,441) (24,591) Net debt, beginning of year (398,854) ,,/ (398,854) (374,263) Net debt,end of year (459,154) • 1462,295) (398,854) / /, // /, /, i / / / ICR141 **/ . l / / i / / / • / . ./ / / . ./ // / • /// / / / / /The accompanying notes to the financial statements are an integral part of this financial statement. / Page 5 For discussion purposes only / / . /./ // City of Pickering Public Library Board Statement of cash flows /' year ended December 31, 2016 - i ; 2016 / 2015 %/ $ $ i Operating transactions Annual deficit (113,547)/ (88,414) Non-cash items • / Amortization of tangible capital assets 485,579 493,434/ 372;032 405,020 Change in non-cash operating items Decrease(increase)in accounts receivable 114,189 ('106,559) (Increase)decrease in due from Govemment of Canada / (7,473) 18,657 ' (Increase)decrease in due from City of Pickering /• ` (193,375) 7 398,935 Increase(decrease) in accounts payable and accrued liabilities / 89,775 / (331,142) Increase in.post-employment benefits liability / 60,300` 44,700 (Increase)decrease in prepaid expense / 1,141) 20,109 60;275 44,700 / / ,. ,432,307 449,720 Capital transactions / Net acquisition of tangible capital assets i/ (432,332) (449,720) Net change in cash / // (25) - Cash, beginning of year / p,, / 2,250 2,250 Cash end of year '' ' 2,225 2,250 : / (cLum, / , <Ns) / / / i •/ , / / / / i/ /, // //� / / / /' / . / //' The accompanying notes to the financial statements are an integral part of this financial statement. / Page 6 For discussion purposes only / . • / . City of Pickering Public Library Board // Notes to the financial statements ,/ ; December 31, 2016 '/ ' it 1. Significant accounting policies The financial statements of the City of Pickering Public Library Board (the"Library Board")are the representations of management rePared in accordance with Canadian public sector accounting standards established by the Public Sector Accounting Board("PSAB")of Chartered'Professional i' Accountants of Canada. Significant accounting policies adopted by the Library Board are as follows: // ;i Basis of accounting `/, a) Accrual basis of accounting Revenues and expenses are reported on the accrual basis of accounting.The accrual basis of accounting recognizes revenues as they are earned and measurableexpenses are recognized, as • they are incurred and measurable as a result of the receipt of'goods ant kservices'and the creation of a legal obligation to pay. ii b) Non-financial assets / / / (i) Tangible capital assets j" Tangible capital assets are recorded at cost less/accumulated amortization. Cost includes all amounts that are directly attributable to acquisition,development'or betterment of the asset. The cost of the tangible capital asset is amortized on a straight line basis over the estimated useful life as follows: ' / Machinery and equipment /2u-to_a5 years / . j Information technology hardware/ �kto 57 ears /- Library collection materials / 4 to.,-/years' Furniture and fixtures // 10 to 5' years One-half of the annual amortization is chargen the year of acquisition and in the year of disposal. i 4,-- Other major assets incl d 'brew ingkthe Librabuildings are owned by the City and are not reflected in these financial statements. / (ii) Contribution/donation of tangible capital assets • Tangible capital assets received as/contributions or donations are recorded at their fair value at the date o�receip"1`ad•that fair value is also recorded as revenue. (iii) Intangible asses / Intangible assets are of recognized as assets in the financial statements. c) Post-employment benefits/ The'present value of the'cost of providing employees with future benefits programs is recognized as employees earn these"entitlements through service.Any actuarial gains or losses are amortized on ' /a straight-line basis,over the average remaining service period (ARSP)of employees.The actuary / estimated the ARSP to be 14 years. d) Government transfers Government transfers are recognized as revenue by the Library Board in the period in which the transfer is'authorized and any eligibility criteria are met, unless they are restricted through ' stipulations that require specific actions to be carried out in order to keep the transfer. For such transfers, revenue is recognized as the stipulation has been met. /1 / Page 7 For discussion uurposes only �' City of Pickering Public Library Board Notes to the financial statements December 31, 2016 1. Significant accounting policies (continued) Basis of accounting(continued) e) Use of estimates The preparation of financial statements in conformity with Canadian public sector accounting standards requires management to make estimates and assumptions that affect the reported amount of assets, liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period.Actual results could differ from those estimates. Balances which require significant estimates include tangible capital assets,which are based on estimated useful lives, and post-employment benefits. 2. Post-employment benefits liability The Library Board makes available to qualifying employees who retire before_the age of 65,the opportunity to continue their coverage for benefits such as post-employment extended healthcare benefits. Coverage ceases at the age of 65.The Library Board also provides full time and permanent part-time employees a sick time entitlement and any unused entitlement is accumulated year to year. This accumulated entitlement is not vested and therefore is fofeited at the time of retirement or termination.The post-employment benefits obligation at December'31,2016 and the changes in the accrued benefit obligation for the 2016 fiscal year was determined by actuarial valuation prepared as at January 1,2014. N\ Information about the Library Board's post-employment benefits liability is as follows: c_� 2016 2015 ,i = $ $ Post-employment benefits liability, beginning of year 321,800 277,100 Current service costs 42,700 41,300 Amortization of actuarial losses , .,••• 18,900 Interest expense � 18, 600 17,400 Benefits paid during the year (19,900) (32,900) Post-employment benefits liability '-\ 382,100 321,800 2016 2015 . $ $ Accrued post-employmentbenefits obligation 539,900 498,500 Unamortized actuarial losses, (157,800) (176,700) Post-employment benefits liability 382,100 321,800 The main actuarial assumptions employed in the actuarial valuation are as follows: a) Discount rate The present value as at December 31,2016 of the future benefits was determined using a discount rate of 3.5% (2015-3.5%). b) Dental cost The dental cost trend rate was 3.75% (2015-3.75%) per annum. c) Health costs Health costs were assumed to increase at 6.50% (2015-6.75%).and decrease by 0.25% (2015-0.25%) increments per year to an ultimate rate of 4.75% per year in 2023 and thereafter. Page 8 For dist_ss,cr cu noses or y / City of Pickering Public Library Board it, Notes to the fmancial statements / December 31, 2016 ,' 3. Pension agreement The Library Board makes contributions to the Ontario Municipal Employees Retirement Fund (OMERS), which is a multi-employer plan, on behalf of eligible members of its staff.The Plan is a-defined benefit plan that specifies the amount of the retirement benefit to be received by the employees based on the / length of service and rates of pay. / // OMERS provide pension services to over 460,000 active and retired members,and about 1,000 employers. Each year an independent actuary determines the funding statu of OMERS Primary/ ' Pension ("the Plan") by comparing the actuarial value of the invested assets to the estimated present value of all pension benefits that members have earned to-date.The most recent actuarial valuation of the Plan was conducted as at December 31,2016.The results of this valuation disclosed total actuarial liabilities as at that date of$87,554 million in respect of benefits accrued r�service with actuarial assets at that date of$81,834 million indicating an actuarial deficit of$5,720 million Because,OMERS is a • multi-employer plan, any pension plan surpluses or deficits are aloint responsibility of Ontario municipal organizations and their employers.As a result,the Library Board does not recognize any share of the OMERS pension surplus or deficit. /; Contributions in the amount of$278,674(2015-$292,275)were paid to OMERS on behalf of its members during the year. / <s<4. . // 4. Tangible capital assets (TCA) / Machinery Information Library Furniture • and technology collection and equipment / hardware,,,,, materials fixtures 2016 / Cost / / Balance beginning of year / 9,992 204,157 2,538,389 329,648 3,082,186 Additions during the year / 13,689 •/7 - 418,643 - 432,332 Disposals/transfers to / / TCA during the year - i` - 490,920 - 490,920 Balance,end of year ,/ 23,681 / 204,157 2,466,112 329,648 3,023,598 Accumulated amortization Balance,beginning o$year 6,494 72,622 1,296,189 125,907 1,501,212 Amortization/ ,1,684 26,261 446,994 10,640 485,579 Accumulated amortization // on disposals - - 490,920 - 490,920 Balance,end of year 8,178 98,883 1,252,263 136,547 1,495,871 Net book value 15,503 105,274 1,213,849 193,101 1,527,727 / • /, / / . /, / 7// / / / / / Page 9 //` For discussion Durposes only / / i' City of Pickering Public Library Board Notes to the financial statements December 31, 2016 . 4. Tangible capital assets(TCA)(continued) /' Machinery Information Library Furniture" and technology collection- . and equipment hardware materials fixtures 2015/ $ $ $ $ ,$ Cost / Balance beginning of year 9,992 255,729 2,561,508; 329,648 3,156,877 Additions during the year - - • 449,720 - /449,720 Disposals/transfers to j / TCA during the year - 51,572 472,83 , - 524,411 Balance, end of year 9,992 204,157 2,.538,389 329,648 3,082,186 / `N. -/ Accumulated amortization / - Balance, beginning of year 5,495 97,933 / 1,313,494 ;-115,267 1,532,189 Amortization 999 26,261' 455,534 ;/ 10,640 493,434 • Accumulated amortization on disposals - 5'1; ,9572 472,83 " - 524,411 Balance, end of year 6,494 /72,622 1,296,189 125,907 1,501,212 Net book value 3,498 /131,535 • 1,242,200 203,741 1,580,974 f: j5. Accumulated surplus Accumulated surplus consists of the following: / • / 2016 2015 / $ $ Invested in capital assets / / 1,527,727 1,580,974 Post-employment benefits liability (382,100) (321,800) 1,145,627 1,259,174 / / , /, j "/ / r / / / / // j /" • " / // • / / / - Page 10 For discussionpurposes only • • . / , / / City of Pickering Public Library Board :/ Notes to the financial statements December 31, 2016 / 6. Budget figures The 2016 budget was not prepared on a basis consistent with that used to report actual.results.The / budget was prepared on a modified accrual basis while public sector accounting standards require a full accrual basis of accounting.The budget figures treated all tangible capital asset(TCA)acquisitions as ; expenditures and did not include amortization expense on tangible capital assets or post-employment.' benefits expenses on a full accrual basis.The following provides a reconciliationfrom the approved; budget to the budget numbers presented in the financial statements. 2016 Non TCA Postemployment 2016"budget Council approved expenditures / benefits/ presented in . budget from capital / Amortization 'statements • $ $ i iSN $ % $ Revenue i ' City of Pickering 5,686,029 / - - 5,686,029 Federal andi provincial grants 214,290 / - // - 214,290 / Fines and other receipts 176,500 - • 176,500 6,076,819 / -s / - 6,076,819 Expenditures / / Salaries and benefits 4,325;493 Sz,,...... ,/ 60,300 4,386,293 / Material,supplies i / and utilites • j462,868 / - - 462,868 Services j 819,958 - - 819,958 Amortization - ,' - 403,151 - 403,151 / /5,608,819 / - 463,451 6,072,270 / i Annual surplus(deficit) 46„8,000 - (463,451) 4,549 Capital expenditures/ additions (468;000) - - (468,000) <:::::) , / // /; i / / /' i . i / /' Page 11 / For discussion purposes only /, • , , • / • / / / / //„/ • Financial statements of The Corporation of the City of Pickering/Trust Funds December 31,2016 / / / / • • . / • / ,,/ • // . • For discussion purposes only • C The Corporation of the .• City of Pickering Trust Funds • December 31, 2016 ./ Table of contents ,./ Independent Auditor's Report 1-2 Statement of financial activities and fund balances 3 • Statement of financial position ,••• 4 • /// „„/ Notes to the financial statements 5 • • , / • / • //' . • / / / / // / • / / • /•- For discussion purposes only • DeloitteDeloitte LLP Applewood Crescent,' Q tte0 Suite 500 Vaughan ON L4K 0C3 Canada Tel: 416-601-6150 Fax: 416-601-6151 www.deloitte:ca • i Independent Auditor's Report• , To the Members of Council, / Inhabitants and Ratepayers of /` i • The Corporation of the City of Pickering / We have audited the accompanying financial statements of The-Corporation of the City of Pickering Trust Funds, which comprise the statement of financial position as(at December 31, 2016, the statement of financial activities and fund balance for the year then ended, and a summary of significant accounting policies and other explanatory-information. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian accounting standards for notfor-profit organizations, and for such internal control as management determines is necessary to enable the preparation of financial statements that • are free from material misstatement, whether due to fraud or error. Auditor's Responsibility /" Our responsibility is to express an"o inion oma n these.finan i I P tY P P c a statements based on our audit. We conducted our audit in accordance with Canadian.accounting standards for not-for-profit organizations. Those standards require that we,comply with ethical requirements and plan and perform the audit to obtain'reasonable assurance about whether the financial statements are free from material misstatement. An audit involveserformin p g procedures"to obtain evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's Internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the'audit evidence we have obtained is sufficient and appropriate to provide a basis /for our audit opinion. •/ i, For discussion uurooses only %" • / l /; Opinion /' In our opinion, the financial statements present fairly, in all material respects, the financial position of The Corporation of the City of Pickering Trust Funds as at December 31, 2016, and the results of/its ' operations and its cash flows for the year then ended in accordance with Canadian accounting/ standards for not-for-profit organizations. // /; ✓ / , / / Chartered Professional Accountants Licensed Public Accountants / 2017 / /. • / ,/,//' , ics. „/ /.. i/ / . . . , .. ."‘ /, . . . ." . • / / /-.. /� p.---/// / / // // / .j / / . . . . . . / . . , , /// / i` //s(:::)/ . / , / ./ . / . . / / . . . . . . • .z / . „/ / . . ,/, _ / . " i / i / Page 2 For discussion purposes only . . / / /I The Corporation of the r'/ City of Pickering Trust Funds Statement of financial activities and fund balances // .year ended December 31, 2016 2016 2015 / / $ $ / Revenue i • Interest 7,134 6,991/ ' Fund balance, beginning of year348;015 341,024 Fund balance,end of year 355,149 348,015 /iei / // // `, / • / 1. 1;11441:// . . . / 4(Z........ // . / / . / / // / ' •/ / / / // / / : / //The accompanying notes to the financial statements are an integral part of this financial statement. / /` Page 3 For discussion purposes on,y / . / / / The Corporation of the City of Pickering Trust Funds / Statement of financial position as at December 31, 2016 2016 2015 / . $ / / /; Assets - / Cash and investments 335,633 335,633.• Interest receivable 19;516 12,382 355,149 348,015 /; Trust Fund position ,/ 355,149 :348,015 i % / . / //. . / , . / /! rt / / a / / z <Z".../ • / . / /, . / c:#) / .. / /. / i / / / / / /' . % // // / . / . /The accompanying notes to the financial statements are an integral part of this financial statement. ' / / Page 4 / For discussion purposes only / . The Corporation of the City of Pickering Trust Funds Notes to the financial statements • --' December 31, 2016 1. Significant accounting policies The financial statements of The Corporation of the City of Pickering Trust Funds are the representations of management prepared in accordance with Canadian accounting standards for,-Not-for-Profit / Organizations. / Significant accounting policies adopted include: / //i Revenue recognition /' Interest revenue is recorded as earned. / Investments / Investments are recorded at amortized cost.The cost of investments plus accrued interest approximates their fair value. j 2. Dorothy Card Estate // The City cif Pickering administers a trust fund for the Dorothy Car�Estate for the care and upkeep of the destitute elderly.The fund balance is comprised of investments and accumulated interest amounting to $355,149(2015-$348,015) / j 3. Statement of cash flows / / A statement of cash flows has not been presented astkieirnorp ation is readily determinable from the financial statements presented. / /4<Z...7/ • / . // Q/ i / / ' // / i / •i' • . i r • • /l / •/ Page 5 // For discussion purposes only i