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Home My WebLink AboutSeptember 10, 2007 Executive (Audit) Committee Meeting Agenda Monday, Septem ber 10, 2007 4:00 pm Main Committee Room Chair: Councillor Mclean (I) ADOPTION OF MINUTES PAGES Minutes of the Audit Committee Meeting held on Monday, February 12, 2007 (II) MATTERS FOR CONSIDERATION 1-4 1. Director, Corporate Services & Treasurer, Confidential Report CS 29-07 Auditors' Report on Audit Results "In Camera" Under Separate Cover 2. Director, Corporate Services & Treasurer, Report CS 33-07 2006 Year End Audit 5-46 1. That Report CS 33-07 of the Director, Corporate Services & Treasurer be received; and, 2. That the 2006 draft Audited Consolidated Financial Statements for the City of Pickering be received and forwarded to Council for approval. (III) OTHER BUSINESS (IV) ADJOURNMENT Audit Committee Meeting Minutes Monday, February 12, 2007 Main Committee Room 4:30 PM 01 PRESENT: Mayor David Ryan Councillor Dickerson Councillor McLean Councillor O'Connell ALSO PRESENT: G. Paterson J. Halsall K. Senior D. Shields A. Payne - Director, Corporate Services & Treasurer - Manager, Internal Audit & Control - Manager, Accounting Services - Deputy Clerk - Audit Analyst GUESTS: P. Jesty, Deloitte & Touche P. Colavecchio, Deloitte & Touche (I) ELECTION OF CHAIR Moved by Councillor Dickerson That Councillor McLean be appointed as Chair of the Audit Committee. CARRIED (II) ADOPTION OF MINUTES Moved by Mayor Ryan That the minutes of the meeting held on Tuesday, October 3,2006 be adopted. CARRIED - 1 - Audit Committee Meeting Minutes Monday, February 12,2007 Main Committee Room o 2 4:30 PM (III) PRESENTATIONS 1. Audit Plan for Year Endinq December 31.2006 An overview of the Audit Plan for the Year Ending December 31,2006 was given by Paula Colavecchio of Deloitte & Touche. Ms. Colavecchio indicated that the financial reporting responsibilities of Deloitte & Touche are as follows: Perform a cost-effective audit in accordance with Canadian generally accepted auditing standards Assess accounting principles and financial statement disclosures Review key management control systems and processes and assess audit risk Report opportunities for improvements in control processes Express an opinion on the fairness of presentation of the financial statements Provide industry expertise to support the risk-basked audit approach Ms. Jesty noted that reviewing various reports and making opinions from those reports complete these actions. She also noted that if, during the course of an audit, observations are made with regard to the following they would bring it to the City's attention: Significant weaknesses in internal control relating to the preparation of the financial statements. Illegal acts Non-compliance with regulatory requirements Significant transactions inconsistent with the ordinary course of business, including fraud or possible fraud New significant accounting principles or policies and other related items Ms. Jesty noted that the rules of professional conduct requires that Deloitte and Touche maintain an Independent relationship with the City of Pickering and confirm that they continue to be independent under the Rules of Professional Conduct of the Institute of Chartered Accountants of Ontario. Discussion ensued with respect to the role and need of an Audit Committee. Based on the discussion, the Director, Corporate Services & Treasurer was Requested to provide information on how the Audit Committee was formed. - 2 - Audit Committee Meeting Minutes Monday, February 12, 2007 Main Committee Room 4:30 PM 03 Moved by Mayor Ryan That the presentation from with respect to the Audit Plan for Year Ending December 31, 2006 be received. CARRIED 2. Role of Internal Audit James Halsall, Manager, Internal Audit & Control provided a powerpoint presentation on the role of the Internal Auditor. Mr. Halsall noted that like the External Auditor the Internal Auditor also needed to be independent. He stated that the objective of the internal audit function was to work co-operatively with management and staff to improve the economy, efficiency, and effectiveness of risk management, control and governance processes. He stated that he reports directly to the Director, Corporate Services & Treasurer and where necessary reports directly to the Audit Committee and/or Chief Administrative Officer. Mr. Halsall noted that the Internal Audit function would follow the Standards for the Professional Practice of Internal Audit and the Code of Ethics adopted by the Institute of Internal Auditors. Questions ensued with respect to the internal audit and corresponding workplan. The Director, Corporate Services & Treasurer stated that Internal Audits have been noted on a three-year work plan and once the exercise was completed it would be presented to the Audit Committee. Based on the discussion, it was requested that the Audit Committee see updates on the work plan, specifically where we are in the plan and what we've done to date. Mr. Paterson stated that he could supply that information for the next meeting. Moved by Councillor O'Connell That the presentation of the Role of Internal Audit be received. CARRIED - 3 - Audit Committee Meeting Minutes Monday, February 12, 2007 Main Committee Room 4:30 PM 04 3. Discussion re Audit Committee This matter was discussed earlier in the meeting. (IV) OTHER BUSINESS 1. Letter from Ministry of Municipal Affairs and Housing AdvisinQ Mav 31. 2006 FilinQ Requirements Moved by Mayor Ryan That the letter from Ministry of Municipal Affairs and Housing advising of the May 31,2006 filing requirements be received. CARRIED 2. Discussion ensued with Audit Committee members and the Auditors with respect to the reporting relationship of the Internal Auditor, specifically If the Internal Auditor should report directly to the Chief Administrative Officer instead of the Director, Corporate Servicesrrreasurer when completing audits on the Corporate Services Department - Finance Division. Moved by Mayor Ryan That a letter of direction regarding the reporting process for audits within the Finance Department be sent to the Chief Administrative Officer. CARRIED (V) ADJOURNMENT The meeting adjourned at 6:40 pm. - 4 - CiUI o~ REPORT TO EXECUTIVE COMMITTEE Report Number: CS 33-07 Date: September 10, .2007 05 From: Gillis A. Paterson Director, Corporate Services & Treasurer Subject: 2006 Year End Audit Recommendation: 1. That Report CS 33-07 of the Director, Corporate Services & Treasurer be received; and, 2. That the 2006 draft Audited Consolidated Financial Statements for the City of Pickering be received and forwarded to Council for approval. Executive Summary: Not applicable Financial Implications: None. This report provides the draft Audited Consolidated Financial Statements for the year ended December 31 , 2006. Sustainability Implications: implications. This report does not contain any sustainability Background: The Audit of the consolidated financial statements for the year ended December 31, 2006 has been completed. Attached is the draft Audited Consolidated Financial Statements. The draft Consolidated Financial Statements are the responsibility of management and have been prepared by City accounting staff under the direction of the Director, Corporate Services & Treasurer. Deloitte & Touche LLP are responsible to express an opinion on these Consolidated Financial Statements based on their audit. An unqualified opinion has been provided. I am pleased to advise the Committee there were no problems or questionable items I have to report to you at this time. However I would like to summarize some financial highlights. Report CS 33-07 Date: September 10, 2007 2006 Year-End Audit Page 2 -------- 06 The Consolidated Financial Statements also includes the activities of the City of Pickering Public Library Board and the proportional consolidation of Ajax Pickering Transit Authority. Even though transit operations were transferred to the Region effective January 1, 2006 the final accounting and formal dissolution of APT A was not completed at December 31, 2006. Therefore for reporting purposes any transactions, remaining assets and liabilities pertaining to APT A have been consolidated in the City's financial statements for the reporting year. Overall net assets marginally increased over prior year as a result of an increase in financial assets of approximately $10.6 million offset by an increase in liabilities of approximately $9.6 million. Financial Assets The increase in financial assets is primarily due to an increase in the temporary investments balance ($7.6M) which arose due to the timing of supplementary taxes billed and collected at the end of 2006, the overall increase in the obligatory Reserve Fund balances, primarily Development Charges Reserve Fund and Federal Gas Tax Reserve Fund and a dividend received from Veridian in late December. The taxes receivable increase of approximately $1.0 million over the prior year is reasonable since total taxes billed increased over the prior year. The outstanding receivable balance at December 31, 2006 represents 8.2% (2005 - 7.8%) of total taxes billed which is comparable to the prior year. The increase in the investment in Veridian Corporation arises due to the City's share of Veridian's net income offset by the dividends received from Veridian during the course of the year. Liabilities The increase in liabilities is primarily due to an increase in the accounts payable and accrued liabilities balance ($6.3M) that arose due to an expenditure accrual for an expected settlement of an assessment appeal that has been outstanding for a number of years. A report summarizing the settlement is currently being prepared for presentation to Council in September. The increase in deferred revenue arises from the increase in the obligatory Reserve Funds which are made up of the following: Development Charges, Parkland, Third Party/Developer's Contribution, Ontario Transit Renewal, Provincial Gas Tax and Federal Gas Tax. In compliance with generally accepted accounting principles, these restricted funds are to be reported as deferred revenue. The Development Charges Reserve Fund and Federal Gas Tax fund balance increased because of the timing of receipt of funds and occurrence of related capital expenditures. Report CS 33-07 Date: September 10, 2007 2006 Year-End Audit Page 3 07 The increase in long-term liabilities is the net effect of the issue of $2.792 million in debentures in July 2006 and the annual debt payment. Revenues & Expenditures Consolidated revenues and expenditures are comparable with the budget with the exception of government grants and fees, investment Income and general government expenditures which are discussed below. The budget for government grants and fees includes provincial and federal grant monies, such as COMRIF and federal gas tax, identified in the 2006 capital budget to fund various capital projects. Because of the timing of capital expenditures, revenue can only be recognized for those expenditures incurred. Since the identified projects were not fully completed, the revenue is not fully recognized in that year and thus provides this difference from budget. The budget for investment income is usually a conservative estimate as it is difficult to predict interest rates and timing of cash on hand. The variance from budget of approximately $800K arose due to the unexpected interest rate increase over the course of the year and excess cash on hand from timing of receipts. The budget estimate, although remaining somewhat conservative, was increased to $1,000,000 for 2007 to reflect the increased interest rates and higher investment balance. The higher than expected general government expenditures results from the City's share of the accrual for the expected assessment appeal settlement as noted above. As you are aware capital expenditures for projects may be incurred over multiple years and often are not comparable to budget. As a result capital expenditures incurred were significantly lower than those budgeted. This is a direct result in timing of approval in the budget and completion of the project. For example, approximately $3.8 million was budgeted in 2006 for external subdivision works of which approximately 10% of this amount was incurred in 2006. Attachments: 1. 2006 Draft Audited Consolidated Financial Statements Report CS 33-07 Date: September 10, 2007 o ~006 Year-End Audit Page 4 Prepared By: Approved I Endorsed By: ~-b.<j1 ~; JA rist ne Senior - Manager, Accounting Services c..,!~ ~" ::> Gillis A. Paterson Director, Corporate Services & Treasurer GAP/vw Attachment Copy: Chief Administrative Officer Recommended for the consideration of Pickering City Cou iI ,1 .. j \ / , r~ I i;::. 0( (~ ," "<) Consolidated Financial Statements of // <(/; ,,-' / ," THECORPORATI OFTH NG December 31, 2006 ~?~~, / (~"- ), '<~,j / V / MC Document In 2211 City of PiCkering Notes {.' 7/10/07; 3.17 PM FOR DISCUSSION PURPOSES ONLY 09/ Deloitte & To he LLP 5140 Yonge treet Suite 170 Toronto N M2N 6L7 Canad ,ei' 416-601-6150 F : 416-601-6151 wW.deloitte.ca I / / / 1 0 Auditors' Report To the Members of Council, Inhabitants and Ratepayers of the Corporation of the City of Pickering / We have audited the consolidated statement of financial p siti9n of the C poration of the City of Pickering as at December 31,2006 and the consolidated sta ments9f financ' I activities and of changes in financial position for the year then ended. These financ' I statements are e responsibility of the City's management. Our responsibility is to express an opinio on these finanCi statements based on our audit. We conducted our audit in accordance with Can tHan generally cepted auditing standards. Those standards require that we plan and perform an au It to obtain reas able assurance whether the financial statements are free of material misstatement. An audit includ s examining, on a test basis, evidence supporting the amounts and disclosures in th finatiClaJ statem nts. An audit also includes assessing the accounting principles used and significan estimat~smade y management, as well as evaluating the overall financial statement presentation. In our opinion, these consolidated fi ncial statements resent fairly, in all material respects, the financial position of the Corporation of th City of Picker' g as at December 31, 2006 and the results of its operations and the changes in it financial positio for the year then ended in accordance with Canadian generally accepted accounting rinciples. Chartered Accoun nts Licensed Public ccountants FOR DISCUSSION PURPOSES ONLY / / / / Consolidated Schedule ofOpemting Fund Financ;al ActiVi~Fund Balanc Consolidated Schedule of Capital Fund Financial Activi 'es and Fund Bal ce THE CORPORATION OF THE CITY OF PICKERING Table of Contents December 31, 2006 Consolidated Statement of Financial Position Consolidated Statement of Financial Activities Consolidated Statement of Changes in Financial Position Notes to the Consolidated Financial Statements 1 1 / Page 2 ,., J 4-18 19 20 Consolidated Schedule of Reserves and Reserve F nds Financial A Ivities and Fund Balance 21 / / L."" a".'_""'~_' M~' ""~ / / FOR DISCUSSION PURPOSES ONLY / THE CORPORATION OF THE CITY OF PICKERING , 2 Consolidated Statement of Financial Position December 31, 2006 FINANCIAL ASSETS Cash Temporary investments Taxes receivable Accounts receivable Other current assets Investment in Veridian Corporation (Note 4) Promissory notes receivable (Note 5) LIABILITIES Accounts payable and accrued liabilities Other current liabilities Deferred revenue (Note 6) Long-term liabilities (Note 9) Post-employment benefit liability (Note 8(a)) WSIB benefit liabilities (Note 8(b)) NET FINANCIAL ASSETS NON-FINANCIAL ASSET Inventory NET ASSETS 2006 $ 2,969,181 50,867,722 11,367,98 4,892, 4 53 ,363 34, 8,015 2 ,069,000 30,464,291 70,407,284 209,760 $ 70,617,044 2,711,1 (5 43,287 87 10,3 5,099 4 32,772 422,075 33,558,427 25,069,000 119,906,416 11,334,288 254,032 27,658,305 7,984,000 2,306,250 952,898 50,489,773 69,416,643 438,987 $ 69,855,630 $ (50,232) $ 1,271 5,209,345 4,079,053 ote II(c)) 20,148,226 20,725,437 nON (Note 4(c)) 62,880,035 61,670,447 88,187,374 86,476,208 (17,570,330) ( 16,620,578) $ 70,617,044 $ 69,855,630 ..........1.......................... Worksh et In 2210 City of Pickering FS (#102739)- 7/10/2007- 3:14 PM FOR DISCUSSION PURPOSES ONLY Page 1 of21 / THE CORPORATION OF THE CITY OF PICKERING / Consolidated Statement of Financial Activities Year ended December 31,2006 2006 2005 Budget Actual Actual REVENUES Residential and farm taxation $ 26,111,967 $ $ 26,52 ,006 Commercial and industrial taxation 6,545,118 6, 9,020 Taxation from other governments 6,887,159 ,623,333 User charges 7,984,589 8,951,432 Government grants and fees 4,643,835 710,432 Developer contributions and donations 79,000 680,442 Development charges and developer contributions earned 1,063,284 Investment income 945,532 Penalties and interests on taxes 1,534,795 Fines 550,611 Interest on promissory notes 1,905,244 Other 4,691,574 Total revenues 62,773,705 EXPENDITURES (Note 14) Current General government 15,302,981 9,377,042 Protection to persons and property 13,513,808 12,977,758 Transportation services 5,308,877 12,165,029 Environmental services 46,718 42,682 Social and family services 333,056 348,748 Recreational and cultural services 16,047,858 15,068,380 Plannin and develo ment 1,928,424 1,749,085 52,481,722 51,728,724 Capital General government 1,351,880 1,280,176 1,161,949 Protection to persons and prop 1,701,308 1,739,315 253,167 Transportation services 6,755,500 3,570,541 6,644,547 Environmental services 125,000 91,493 Social and Family Servic s 211,000 14,945 15,314 Recreation and cultura ervices 2,672,665 1,993,404 3,207,192 Plannin and develo ent 6,750 782 4,411 12,824,103 8,690,656 11,286,580 64,985,689 61,172,378 63,015,304 3,669,588 3,227,016 990,641 2,985,417 (1,808,039) (847,000) (807,000) (1,095,381) (1,110,725) 3,013,757 2,792,000 10,700 686,000 352,000 262,567 1,891,718 949,752 (229,227 $ $ 1,711,166 $ Page 2 of21 FOR DISCUSSION PURPOSES ONLY / THE CORPORATION OF THE CITY OF PICKERING 1'-4 (onsolidated Statement of Changes in Financial Position . Year ended December 31, 2006 NET INFLOW (OUTFLOW) IN CASH RELATED TO THE FOLLOWING ACTIVITIES OPERA TING Net revenue Change in equity in Veridian Corporation Uses Increase in taxes receivable Increase in accounts receivable Increase in other current assets Decrease in other current liabilities Decrease in WSIB benefit liabilities Sources Increase in accounts payable and accrued Ii Increase in deferred revenue Increase in post-employment benefit Ii Increase in WSIB benefit liabilities / ~o@y of Mo''''' FS (#""739) 7h0/2V07. 3" PM / FOR DISCUSSION PURPOSES ONLY 2006 2005 / $ (834,292) (1,277,270) (141,626) (159,372) (2,412,560) 6,290,978 309,651 1,775,987 3,544,473 10,700 8,400 321,112 8,077 ,665 4,183,636 3,432,860 1,529,477 (7,579,835) (8,568,563) 2,460,000 1,968,000 (5,119,835) (6,600,563) 2,792,000 (847,000) (807,000) 1,945,000 (807,000) 258,025 (5,878,086) 2,711,156 8,589,242 $ 2,969,181 $ 2,711,156 Page 3 of21 / The consolidated financial statements of The Corporation of the City of Picke 'ng (the "City") e the representations of management prepared in accordance with generally accepted accou ing principles for local governments as established by the Public Sector Accou mg Board ("PS ") of the Canadian Institute of Chartered Accountants. Significant accounti policies adopte by the City are as follows: THE CORPORATION OF THE CITY OF PICKERING Notes to the Consolidated Financial Statements December 31, 2006 1. SIGNIFICANT ACCOUNTING POLICIES (a) Reporting entity (i) Consolidated statements The consolidated financial statements reflect he assets, liab' Ities, revenues and expenditures of the operating fund, capital nd, reserve fu s and reserves. The reporting entity is comprised of the activitie of.alI committee of Council and the City of Pickering Public Library Board which is ontt611~dby the ity. All material inter-fund transactions and The consolidated financial state ents reflect the liabilities, revenues and expe itures of the Aj (see Note 2), ty's proportionate share of the assets, Pickering Transit Authority (APT A), (ii) Proportionate consolidation All inter-entity transa ions and bala ces are eliminated when proportionately consolidated. (iii) The City's inv stment in Verid' n Corporation is accounted for on a modified equity basis, consis nt.\\iith genera accepted accounting principles as recommended by PSAB for i ve,stI'l1~hk in. go rnment business partnerships, Under the modified equity basis, Ve dian totporatfo s accounting policies are not adjusted to conform to those of the Ci and inter-organi ational transactions and balances are not eliminated. The City reco izes its equity i erest in the annual income or loss of Veridian Corporation in its sta ment of financ' I activities with a corresponding increase or decrease in its i estment asset ccount. Dividends that the City may receive from Veridian orporation and ther capital transactions are reflected as adjustments in the investment / asset account. / /~v) Oper~tions fschool boards and the Region of Durham The t tion, other revenues, expenditures, assets and liabilities with respect to the opera ons of the school boards and the Region of Durham are not reflected in these con olidated financial statements. ( v ) rust funds / Trust funds and their related operations administered by the municipality are not consolidated, but are reported separately on the Trust Funds Statement of Financial / Activities and Statement of Financial Position. Page 4 of21 FOR DISCUSSION PURPOSES ONLY (ii) Tangible capital assets THE CORPORATION OF THE CITY OF PICKERING Notes to the Consolidated Financial Statements 1., ecember 31, 2006 1. SIGNIFICANT ACCOUNTING POLICIES (continued) (b) Basis of accounting (i) Temporary investments Temporary investments are recorded at the lower of cos p~accrued market value. Any premium or discount of purchase of a mv t is a the life of the investment. Tangible capital asset expenditures incurred ding the year ar recorded as capital expenditures in the consolidated statement of fi ancial activities. (iii) Accounting for Property ov~)resulti g from the Ontario Fair Assessment System ~ The net impact in property taxes as result of the app . cation of the capping provisions does not affect the Consolidated St ement of Financ'al Activities as the full amounts of the property taxes were levied. owever, the cag ing adjustments are reported on the Consolidated Statement ofFina cial Position as receivable from the Region. Deferred revenue (~~ Deferred revenues repr sent user cl$-gt1 and fees which have been collected but for which the related sen( ces have yet to performed. These amounts will be recognized as revenues in the fi cal year the se . ces are performed. In addition, any contributions received with ext al restrictions a e deferred until the related expenditures are made. (iv) (v) Post employ ~nt b~n":.efits The prese t va .{y c t of providing employees with future benefits programs is recogni d as em ees am these entitlements through service. Actuarial gains and losses re amortized ov, r the average remaining service period (ARSP). The actuary dete ined ARSP to 16 years. Cost is determined on a Gov ment transfers are recognized in the financial statements in the period in which th events giving rise to the transfer occur, eligibility criteria are met, and reasonable timates of the amount can be made. The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results could differ from these estimates. M Document in 2211 City of Pickering Notes ( 7/10/07: 3:17 PM Page 5 of21 FOR DISCUSSION PURPOSES ONLY THE CORPORATION OF THE CITY OF PICKERING Notes to the Consolidated Financial Statements December 31, 2006 / {7 2~ AJAX PICKERING TRANSIT AUTHORITY Effective September 4, 200 I, a joint Board of Management was established by e City of Picke . ng and the Town of Ajax by way of a Merger Agreement for operating transit system ross Pickering and Ajax. Operations, under the control of the joint boar , commenced fective January I, 2002. In January 2005, the Councils of the City of Pickering and the To n of Ajax passe a resolution agreeing to the transfer of the responsibilities for transit service to the Regional unicipality of Durham (the "Region"). On January I, 2006 the Ajax Pic ring Transit Au ority ("APT A") transferred its operations to the Region as part of the Dur am Region Tra sit Commission in accordance with Regional By-law #85-2004. Negotiations between the City of Pickering, Town of . axa,ndthe Regi are still underway as to the ultimate realization of assets and assumption liabilities by t e Durham Region Transit Commission. During 2006, APT A finalized transactions in outstanding at December 31, 2005. Any re with the Region are completed. ogress, collecte receivables and settled liabilities ining fund bala e will be settled once negotiations The following table provides conde ed financial information for the Transit Authority for the year ended Decemb 2006 2005 Financial position: Financial assets $ 266,884 $ 1,004,441 Non-financial assets 536,894 536,894 Liabilities (1,350,612) (1,985,097) Net liabilities $ (546,834) $ (443,762) Fund balance $ (336,134) $ (233,062) Amounts to be r overed (210,700) (210,700) Transit Autho ty Position $ (546,834) $ (443,762) Financial ctivities: Rev ue $ 358,417 $ 13,3 I 8,943 Og rating expenditu es (113,165) ( 12,026,290) apital expel1,d)itur s (348,324) (1,518,568) t expenditures $ (103,072) $ (225,915) Fund balance, eginning of year $ (233,062) $ (57,524) Net expe itures (103,072) (225,915) / Increas in amounts to be recovered 3,600 / Incre e in non-financial assets 46,777 Fund alance, end of year $ (336,134) $ (233,062) M Document '" 2211 City of Pickering Notes (- 7/10/07; 3..17 PM Page 6 of21 FOR DISCUSSION PURPOSES ONLY / / THE CORPORATION OF THE CITY OF PICKERING Notes to the Consolidated Financial Statements 1 ecember 31, 2006 3. OPERATIONS OF SCHOOL BOARDS AND THE REGION OF DURHAM Further to Note 1 (a) (iv) requisitions are made by the Region of Durham and School Bo ds requiring the City to collect property taxes and payments in lieu of prope taxes on their b alf. The amounts collected and remitted are summarizes as follows: Taxation Payments in lieu of taxes $ 4. INVESTMENT VERIDIAN CORPORATION 41,081,783 520,039 41,601,822 (a) Veridian Corporation is owned by the City 0 Pickerii)g, Tow of Ajax, Municipality of Clarington and the City of Belleville. Ve .dian Corporatio , as a government business partnership, is accounted for on the mod. led equity basi in these financial statements. Veridian Corporation serves as the electri I distribution ut" ity for a number of communities including the four noted above and con cts non-regulate utility service ventures through its subsidiaries. The following table provides con nsed~upplemen ry consolidated financial information for the corporation and its subsidiari s for the y,ear/en ed December 31 : Financial Position: Assets Current Capital and inta Other Total assets quity Share caRital Contribute capital Retained arnings Total equ. y Total Ii ilities and equity Fin cial Activities: / evenue Other income / Expenses Net income for the year M Document in i?i?1J City of Pickering Notes (.- 7/10/07; 3,17 PM 2006 $ 68,864,051 138,225,079 946,571 $ 208,035,701 $ 42,312,425 60,794,000 20,129,238 123,235,663 67,285,173 24,910 17,489,955 84,800,038 $ 208,035,701 $ 223,302,423 6,823,343 221,175,551 $ 8,950,215 FOR DISCUSSION PURPOSES ONLY 2005 $ 92,281,194 132,918,454 2,201,700 $ 227,401,348 $ 130,029,467 15,522,058 145,551,525 67,285,173 24,910 14,539,740 81,849,823 $ 227,401,348 $ 207,388,764 4,894,868 204,412,861 $ 7,870,771 Page 7 of21 THE CORPORATION OF THE CITY OF PICKERING Notes to the Consolidated Financial Statements Decem ber 31, 2006 / / I I ,. . / 4. INVESTMENT VERIDlAN CORPORATION (continued) 2006 (b) City of Pickering's equity represented by: Promissory notes receivable (Note 5) Investments in Veridian Corporation Initial investment in shares of the Corporation Accumulated income Accumulated dividends received Increase in value of investments Total investment ,496,196 8,256,018 (5,093,020) 1,108,821 34,768,0 30,496,196 4,586,430 (2,633,020) 1,108,821 $ 33,558,427 (c) Equity in Veridian Corporation 2006 2005 $ 58,443,431 3,227,016 Balance, beginning of year Equity share of net income for the ear Dividend received from Veridia Cor~onl~ion Balance, end of year 61,670,447 3,669,588 (2,460,000) $ 62,880,035 $ 61,670,447 Corporation as disclosed in their financial (d) Contingencies and guar ntees statements are as follow : (i) ration IS amber of the Municipal Electric Association Reciprocal Insuran Exchange ("M ARlE") which was created on January 1, 1987. A reciprocal insur ce exchange m be defined as a group of persons formed for the purpose of exc anging reciproc contracts of indemnity or inter-insurance with each other. ARlE provides eneralliability insurance to member electric utilities. Insurance pre urns charged to each member utility consist of a levy per $1,000 of service reve e subject to a credit or surcharge based on each electric utility's claims exper~~nce Insurance limits of up to $30 million per occurrence are covered by MEARI . Page 8 of21 M Document in 2211 City of Pickering Notes c- 7/10/07; 3:17 PM FOR DISCUSSION PURPOSES ONLY / THE CORPORATION OF THE CITY OF PICKERING Notes to the Consolidated Financial Statements 2 '0 Decem ber 31, 2006 / / 4. INVESTMENT VERIDIAN CORPORATION (continued) (d) (continued) (ii) Other claims ,/ An action has been brought under the Class Proceedings seeks $500 million in restitution for amounts paid to Tor to Hydro and to ther Ontario municipal electric utilities ("LDCs") who received late payment constitute interest at an effective rate in excess of 600 0 per year, contr to Section 347 of the Criminal Code. Pleadings have closed in thO action. The act" n has not yet been certified as a class action and no discoveries hav een held, as the arties were awaiting the outcome of a similar proceeding brough against Enbridg Gas Distribution Inc. (formerly Consumers Gas). . On April 22,2004, the Supreme Court 0 Canada release a decision in the Consumers Gas case rejecting all of the defences hich had been r sed by Enbridge, although the Court did not permit the plaintiff cI ss to recover da ages for any period prior to the issuance of the statement of c1ai in 1994 challe ging the validity of late payment penalties. The Supreme Court r itted the matter ack to the Ontario Superior Court of Justice for determination of t e damages. At he end of 2006, a mediation process resulted in the settlement of e dl;images paya e by Enbridge. After the release by the preme C01Jrt of anada of its 2004 decision in the Consumers Gas case, the plaintiff: in the LDClllt payment penalties class action indicated their intention to proceed ith the litigatio against the LDCs. To date, no formal steps have been taken to mo the action for rd. The electric utilities intend to respond to the action if and en it proceed on the basis that the LDCs' situation may be distinguishabl from that of Co umers Gas. The Corp ation e,stirnates' collected late payment penalties of $5,339,593 from and after 19 4. No determi ation of the portion of these payments which may have consti ted interest at a mpermissible rate has been made. (iii) he Corporatio s regulated subsidiary participates in the competItIve supply of electricity ma et to procure a supply of electricity for its customers. Based upon the market part' ipant's credit rating, the market participants are required to post security prudential with the Independent Electricity System Operations ("IESO"). At De ember 31, 2006, this requirement was satisfied by the posting of letters of credit in t amount of$5,565,530. / / / J...u" .,.,.~~~~, "_'.M" / FOR DISCUSSION PURPOSES ONLY Page 9 of21 THE CORPORATION OF THE CITY OF PICKERING Notes to the Consolidated Financial Statements December 31, 2006 21/ 4. INVESTMENT VERIDIAN CORPORATION (continued) ( e) Lease commitments Future minimum lease payment obligations under operating leases a~ follows: 2007 2008 2009 2010 2011 Thereafter $ 678,0 0 63 , 00 6 1,000 621,000 602,000 1,148,000 $. 4,302,000 5. PROMISSORY NOTES RECEIVABLE Promissory notes are payable by Veridian Corp, ration and Verid' n Connections Inc. in the amount of $7,095,000 and $17,974,000 respectively with an interest ate of 7.6% and maturity dates of November 1, 2009. These promissory note are convertible' to common shares at the option of the holder at the rate of 1 common share for very $1,000 of p ncipal then outstanding on or before the maturity date. 6. DEFERRED REVENUE 2006 2005 Obligatory Reserve Fund Development charg $ 22,341,331 $ 21,135,306 Parkland 1,993,928 2, 103,060 Ontario Transit enewal Funds 19,166 19,166 Provincial G Tax 771,076 722,039 Federal Ga ax 1,455,769 850,684 Third Pa /Developer's Co tributions Reserve Fund 1 868 148 1,819,264 28,449,418 26,649,519 984,874 1,008,786 $ 29,434,292 $ 27,658,305 / Page 10 of21 FOR DISCUSSION PURPOSES ONLY / 201 / $ $ 3,821,953 335,053 778,524 4,935,530 (327,773) (1,063,284) (1,391,057) $ 27,658,305 THE CORPORATION OF THE CITY OF PICKERING Notes to the Consolidated Financial Statements 2 2 December 31, 2006 6. DEFERRED REVENUE (continued) Continuity of deferred revenue is as follows: Balance, beginning of year Restricted funds received General funds received Interest earned Revenue recognized in current operations Revenue recognized in capital operations General deferred revenues Balance, end of year 7. INTERFUND LOANS As a means of funding various ca tal acquisitiQns, unds are borrowed by the Capital Fund from Development Charges and Parkl d deferred reve ue (obligatory reserve funds). These funds are secured by ten year promisso notes with inte st rates of 4.37%, 5 year promissory notes with interest rates of 4.5%, 3.73o/i and 3.67%, and year promissory notes with interest rates of 4.25%. The financing arrangemen and ultimate r ayment are approved by Council through the current budget process. For the urpQse of these nancial statements, the loans are included in amounts to be recovered (Note 10 . Thtfoll)Qwing. a summary of the related loans negotiated, by function: 2006 $ 2,470,785 1,867,264 392,318 82,681 $ 4,813,048 /' M Document in 2211 City of Pickering Notes (- 7/10/07: 3,17 PM FOR DISCUSSION PURPOSES ONLY 2005 $ 3,122,129 2,002,544 334,009 97,748 $ 5,556,430 Page II of21 (a) Post employment benefit liability I THE CORPORATION OF THE CITY OF PICKERING Notes to the Consolidated Financial Statements December 31, 2006 23 / 8. POST EMPLOYMENT BENEFIT LIABILITY The City makes available to qualifying employees who retire b ore the age of 5, the opportunity to continue their coverage for such benefits as e enqed health a d drugs. Coverage ceases at the age of 65. Dependent on eligibility, hea h coverage may e a shared financial responsibility between the City and the retired emp yees. The City Iso provides full time and permanent part-time employees a sick ti e entitlement d any unused entitlement is accumulated year to year. This accumu ted entitlement' not vested and therefore does not get paid out at the time of retirem nt or terminatio. The most recent actuarial valuation of the post-employment benefits w performed at J uary], 2004. Information about the City's benefits liability is as ollows: 2005 Accrued benefits liability, beginning ofy r 2,306,250 $ 2,297,850 Current service costs 134,700 14],500 Interest on accrued benefits 112,800 1] 7,450 Amortization of actuarial losses (25,000) (24,300) Benefits paid during the year (211,800) (226,250) Accrued benefits liability, end $ 2,316,950 $ 2,306,250 Accrued benefit obligatio $ 1,999,100 $ 1,963,400 Unamortized actuarial sses 317,850 342,850 Accrued benefits lia . ity, end of year $ 2,316,950 $ 2,306,250 0/ / / // / ployed in the actuarial valuations are as follows: (i) T present value a at December 31, 2006 of the future benefits was determined using a lscount rate of 6. %. The c.urre trend cost at January 1,2004, the date of the most recent actuarial valuation, was 4.500 per annum. (iii) ealth costs were assumed to increase at 10% in 2005 and decrease by 1 % increments per year to an ultimate rate of 5% per year in 2010 and thereafter. / Page 12 of21 M Document in 2211 City of PIckering Notes (- 7/10/07; 3..17 PM FOR DISCUSSION PURPOSES ONLY THE CORPORATION OF THE CITY OF PICKERING Notes to the Consolidated Financial Statements n cember 31, 2006 POST EMPLOYMENT BENEFITS LIABILITY (continued) / (b) Workplace safety and insurance liability (WSIB) Effective January I, 2001, the City became a Schedule II emplo); r under the W~lace Safety & Insurance Act and follows a policy of self insurance for a itsemployees/ Information about the City's WSIB liability is as follows: / 8. 2006 2005 $ $ 631,786 382,512 (61,400) $ 952,898 Accrued WSIB liability, beginning of year (Recovery)/Expense for the year Benefits aid durin the year Accrued WSIB liability, end of year Management, using best estimates, identifi 0 that the amou provided in the liability account at year-end of $690,331 (2005 - $952,8 ) is sufficient t cover the potential liability of all existing claims granted by WSIB and tstanding as at cember 31, 2006. The outcome of any claims filed w. A WSIB Reserve Fund was es blished hi( 2001 The Reserve Fund balance at December 31, 2006 was $ 834,922 (2005 - 589,575). In'!td tion, the City purchased two insurance policies that protect the City again significant clai s to the Corporation. The occupational accident insurance pays loss clai s up to $350,0 per work related accident. The excess workers compensation indemn. y insurance has $350,000 deductible and will pay for claims up to and including $25,0 ,000 per work rated accident. 9. (a) The balanc oflong-term lia . ities is made up of the following: ~h municipality is r sponsible for the payment of principal and. nterest charges on long-term liabilities. issu 0 by the Region of Durham on the municip;tlit s behalf. At the end of the year, the / outstandi prindpal amount of this Ii.bi! ity is 2006 2005 $ 9,929,000 $ 7,984,000 / ,i'"NH.""~~~~' ,,~'u,_ / FOR DISCUSSION PURPOSES ONLY Page 13 of21 THE CORPORATION OF THE CITY OF PICKERING Notes to the Consolidated Financial Statements December 31, 2006 9. LONG-TERM LIABILITIES (continued) (b) The above long-term liabilities have maturity dates of July ] 2, November ],2012, July ]5, 20]4 and December 23,20]4 with varia from 3.3% to 5.6%. Principal repayments are summarized as follow. 2007 2008 2009 20]0 20] 1 Thereafter $ ],132,9 9 ],]90 48 ],2 8,393 ] 26,228 ],077,]59 4,253,583 $9,929,000 I 25/ (c) Long-term liabilities include a principal sum 0 $],057,000 ~s' efundable Debentures' which may be raised by the issuance of debentures ver a further per' d not to exceed 10 years. (d) The above long-term liabilities have be approved by C ncil by-law. The annual principal and interest payments required to servo e these liabilitie are within the annual debt repayment limit prescribed by the Ministry of unicipal Affairs Jhd Housing. (e) Interest expense recorded in the ear relating to t se long-term liabilities is $440,8] 3 (2005 - $404,958). 10. AMOUNTS TO BE RECOV 2006 Fromfuture revenues: .. , . Post -employment enefits liability WSIB benefit Ii ilities ]ntemalloans rom Obligatory Net long-te liabilities $ 2,137,950 4,813,049 9,929,000 690,331 $ 17,570,330 II. D BALANCES AT THE END OF THE YEAR balances are comprised of the following: II (a) 2006 $ (50,232) For general reduction of taxation M Document in .?.?JJ City of Pickering Notes (; 7/10/07; 3:17 PM FOR DISCUSSION PURPOSES ONLY / 2005 $ 2,127,250 363,323 5,556,430 7,984,000 589,575 $ ] 6,620,578 2005 $ ],27] Page 14 of21 THE CORPORATION OF THE CITY OF PICKERING 2 6 Notes to the Consolidated Financial Statements Decem ber 31, 2006 11. MUNICIPAL FUND BALANCES AT THE END OF THE YEAR (continued) (b) Capital Fund Balance 200( Funds available for acquisition of / tangible capital assets $ 714 $ Acquisition of tangible capital assets expected to be Financed by long-term liabilities / (848,273) (2, II 0,939) Financed by taxation or user charges (131,084) (199,752) Financed by grants (15,822) Financed by donations (24,490 (298,375) $ 5,209,3 5 $ 4,079,053 (c) Reserves and Reserve Funds 2006 2005 Reserves set aside for special purposes Working capital 400,000 $ 400,000 Self insurance 951,391 915,514 Replacement of capital equip 685,715 722,843 Contingencies 6,356,615 10,774,911 Rate stabilization 6,910,981 3,388,965 City's share for develo 809,654 484,204 Transit 120,999 237,106 Continuing studie 474,484 342,533 Vehicle replace ent 72,547 75,000 Easement sett mentrelierve 1,095,129 I; Eastern Bra ch 30,000 20,000 Move On rio 833,243 17,645,629 18,456,205 Reserv Funds set aside b Council Recreation pro rams and facilities 194,175 265,492 Acquisition [tangible capital assets 1,394,511 1,348,078 Squa$f) co rts 78,989 66,087 WSlB 834,922 589,575 2,502,597 2,269,232 $ 20,148,226 $ 20,725,437 I-"',"m'a~,,^~~_, M~",",. / FOR DISCUSSION PURPOSES ONLY Page 15 of21 12. PENSION AGREEMENTS / / THE CORPORATION OF THE CITY OF PICKERING Notes to the Consolidated Financial Statements Decem ber 31, 2006 The municipality makes contributions to the Ontario Municipal Employ s Retirement F nd (OMERS), which is a multi-employer plan, on behalf of the members of. staff. The pI is a defined benefit plan which specifies the amount of the retirement bene t to be received y the employees based on the length of service and rates of pay. Contributions on account of current service for 2006 were $1,705,90 13. TRUST FUNDS Trust funds administered by the municipality amounting t 268,567 (2005 $260,785) have not been included in the Consolidated Statement of Financia Position nor ha their operations been included in the Consolidated Statement of Financial Act" itie~. The Consolidated Statement of Financial Ac. ities presents t e expenditures by function; the following classifies those same expenditures object: 2006 2005 14. CLASSIFICATION OF EXPENDITURES BY Salaries, wages and employee benefit Operating materials, supplies and ot er expenses Contracted Services Rents and financial expenses External transfers to others Tangible ca ital assets Total ex enditures by ob. ct $ 32,114,799 17,386,515 1,721,394 1,097,144 161,870 8,690,656 $ 61,172,378 $ 34,725,091 13,475,404 2,284,134 1,032,190 211,905 11,286,580 $ 63,015,304 15. RANSACll0 S The City of ickering receiv s electricity and services from Veridian Corporation (Note 4), a corporatio in which the C" is a principal shareholder. Veridian also provides streetlight and power Ii maintenance se ices on a contract basis. 2006 2005 Tr nsactions Revenues Interest 0 romissory notes $ 1,905,294 $ 1,905,294 Property, axes levied $ 40,366 $ 40,616 Expense / Ele rical energy and services $ 1,931,707 $ 1,727,633 Balan s A counts payable $ 175,508 $ 156,947 romissory notes receivable $ 25,069,000 $ 25,069,000 Page 16 of21 FOR DISCUSSION PURPOSES ONLY THE CORPORATION OF THE CITY OF PICKERING ,~ptes to the Consolidated Financial Statements 2 8 ' etember 31, 2006 16. GUARANTEES 17. / / / In the normal course of business, the City enters into agreements which con City's primary guarantees are as follows: (i) The City has provided indemnities under lease agreements for thtj s<; O.f various fa Ilities or land. Under the terms of these agreements the City agrees to indemnify tbe count arties for various items including, but not limited to, all liabilities, 10 , suits, and d ages arising during, on or after the term of the agreement. The maximu amount of any otential future payment cannot be reasonably estimated. (ii) The City indemnifies employees and elected official for various ite including, but not limited to, all costs to settle suits or actions due to as ciation with the ity, subject to certain restrictions. The City has purchased liability insu nCt; to mitigate e cost of any potential future suits or actions. The term of the indemnifi atiouis/)lot expJ" itly defined, but is limited to the period over which the indemnified party erved as an empl yee or elected official of the City. The maximum amount of any potential uture payment c not be reasonably estimated. (iii) The City has entered into agreements th may include in mnities in favour of third parties, such as purchase and sale agreements confidentiality reements, engagement letters with advisors and consultants, outsourcin agreements, lea ng contracts, information technology agreements and service agreement These indemni cation agreements may require the City to compensate counterparties for ossestncurred b the counterparties as a result of breaches in representation and regulatio or asar~slnt 0 litigation claims or statutory sanctions that may be suffered by the coun rparty as a~9ns uence of the transaction. The terms of these indemnities are not exp .citly defined d the maximum amount of any potential reimbursement cannot be easonably estim ed. The nature of these inde nification agree ents prevents the City from making a reasonable estimate of the maximu exppsure due to e difficulties in assessing the amount of liability which stems from the unp di9tab~ljty of ture events and the unlimited coverage offered to counterparties. Hist lcal(y, the City not made any significant payments under such or similar indemnification ag ements and the fore no amount has been accrued in the balance sheet with respect to these a reements. ity has be~p n ed as a defendant in certain legal actions in which damages have been so ht. The oUfc e of these actions is not determinable as at the date of reporting and cordingly, no pr vision has been made in these financial statements for any liabilities which may result. Page 17 of21 FOR DISCUSSION PURPOSES ONLY THE CORPORATION OF THE CITY OF PICKERING Notes to the Consolidated Financial Statements December 31, 2006 18. BUDGET FIGURES 24 The approved operating and capital budgets for 2006 are reflected on the Con lidated Schedul of Operating Fund Financial Activities and Fund Balance, Consolidated Sc dule of Capital und Financial Activities and Fund Balance, and the Consolidated Statement of inancial Activiti s. The budgets established for the capital fund operations are on a project-orient d basis, the cost of which may be carried out over one or more years and, therefore, may not be compatable wit he current year actual amounts. As well, the municipality does not have a bud et for activity. w. in Reserves and Reserve Funds, with the exception being those transaction which flow thr gh either the operating or capital fund budgets. Budget figures have been re assified for the urposes of these statements to comply with PSAB reporting principles. / FOR DISCUSSION PURPOSES ONLY Page 1 8 of 21 THE CORPORATION OF THE CITY OF PICKERING Consolidated Schedule of Operating Fund Financial Activities and Fund Balance 30 Year ended December 31,2006 Budget REVENUES Residential and farm taxation Commercial and industrial taxation Taxation from other governments User charges Government grants and fees Developer contributions and donations Investment income Penalties and interest on taxes Fines Interest on promissory notes Other Total revenues FINANCING AND TRANSFERS Dividend from Veridian Corp ation Transfers to Capital Fund Transfers from (to) Rese es and Reserve Fu CIs Increase (decrease) in a ounts to be recov ed Principal repayme t of debentures Principal repay ent of internal loa WSIB benefi iabilities Post-emplo ment benefit liabil" y Decrease in on financial asset EXPENDITURES General government Protection to persons and property Transportation services Environmental services Social and family services Recreational and cultural services Plannin and develo ment Total ex enditures NET REVENUES $ 26,111,967 6,545,118 6,887,159 7,984,589 360,717 2,000 605,0 1,380 00 5 ,000 1 52,2,20 ,1~~92,2 53,387,&~2 12,117,231 14,677,0 5,635 32 ,619 58,552 ,708,378 2,724,862 52,161,586 1,226,106 820,000 (2,469,128) 2,121,061 (1,808,039) 15,302,981 13,513,808 5,308,877 46,718 333,056 16,047,858 1,928,424 52,481,722 1,449,233 2,460,000 (2,668,858) 1,131,597 2005 Actual $ 26,5 ,006 6 89,020 ,623,333 8,95 I ,432 568,040 113,775 874,684 1,534,795 550,611 1,905,244 4,639,315 60,878,255 9,377,042 12,977,758 12,165,029 42,682 348,748 15,068,380 1,749,085 51,728,724 9,149,531 (5,968,131) (1,671,640) (807,000) (1,110,725) 321,112 8,400 9,220 9,237,204) (87,673) CHANG IN OPERATING UND BALANCE / (110,000) 11 0,000 $ Worksh et In 2210 City of Pickering FS (#102739). 7/10/2()()7. 3:18 PM FOR DISCUSSION PURPOSES ONLY (51,503) 1,271 $ 88,944 $ 1,271 Page 19 of21 THE CORPORATION OF THE CITY OF PICKERING Consolidated Schedule of Capital Fund Financial Activities and Fund Balance Year ended December 31, 2006 REVENUES Grants Developer contributions and donations Development charges and developer contributions earned Other Total revenues EXPENDITURES General government Protection to persons and property Transportation services Environmental services Social and family services Recreation and cultural services Plannin and develo ment Total ex enditures NET EXPENDITURES FINANCING AND TRANSFERS Transfers from Operating Fund Transfers from (to) Reserves and Rese Proceeds from debentures Proceeds from internal loans Net financin and transfers CHANGE IN CAPITAL FUN CAPITAL FUND, BEGI ING OF YEAR CAPITAL FUND, EN OF YEAR / Worksh et In 2210 City of Pickering FS {#1027391' 7/10/2007' 3:18 PM $ $ j 2006 Bud~et Actual 4,283,118 77,000 $ 1,646,550 1,063,284 52,259 1,786,154 1,351 80 1,7 ,39~ 6 55,500 125,000 211,000 2,672,665 6,750 12,824,10 1,280 76 1,7 ,315 3 70,541 91,493 14,945 1,993,404 782 8,690,656 1,161,949 253,167 6,644,547 15,314 3,207,192 4,411 11,286,580 (4,248,929 (9,500,426 2,469,128 648,550 3,013,757 686,000 6,817,435 2,668,858 (433,637) 2,792,000 352,000 5,379,221 287,000 6,535,538 5,968,131 280,407 1,130,292 (2,964,888) 4,079,053 $ 5,209,345 7,043,941 $ 4,079,053 FOR DISCUSSION PURPOSES ONLY Page 20 of21 / THE CORPORATION OF THE CITY OF PICKERING Consolidated Schedule of Reserves and Reserve Funds 3 2 Financial Activities and Fund Balance Year ended December 31, 2006 REVENUES Developer contributions and donations Investment income NET TRANSFERS FROM (TO) OTHER FUNDS Operating Fund Ca ita I Fund Total net transfers CHANGE IN RESERVES AND RESERVE FUND BALANCE RESERVES AND RESERVE FUNDS, BEGINNING OF YEAR RESERVES AND RESERVE FUNDS, END OF YEAR / / / / Worksh et in 2210 City of Pickering FS (#102739)- 7/10/2007.3:18 PM FOR DISCUSSION PURPOSES ONLY 2006 Actual $ 1,671,640 (280,407) 1,391,233 (577,211) 1,500,529 20,725,437 19,224,908 $ 20,148,226 $ 20,725,437 Page 21 of21 / /~ Flnandal Statement.' of ~ ~~~i~ [.~~~[ B~ARD;/ December 31,2006 / / MC Document In 2211 City of Pickering Public Library Board (- 7/10/07 12,34 PM FOR DISCUSSION PURPOSES ONLY / 34 Auditors' Report Deloitte & To he LLP 5140 Yonge treet Suite 170 Toronto N M2N 6L7 Canad / / To the Members of The City of Pickering Public Library Board, Members of Council, Inhabitants and Ratepayers of the City of Pickering We have audited the statement of finaodal positioo of t City ~ keri g Public Library Board as at December 31, 2006 and the statement of financial acti ities ando~ b ance for the year then ended. These financial statements are the responsibility of e Board's man ement. Our responsibility is to express an opinion on these financial statements bas a on our audit. We conducted our audit in accordance th Canadian nerally accepted auditing standards. Those standards require that we plan and p for~udit t obtain reasonable assurance whether the financial statements are free of material Isstate . A audit includes examining, on a test basis, evidence supporting the amounts and d' closures i he mancial statements. An audit also includes assessing the accounting principles u d and signific t estimates made by management, as well as evaluating the overall financial state nt presentation. In our opinion, these financial s tements present airly, in all material respects, the financial position of the City of Pickering Public L" ra Board as a )ecember 31, 2006 and the results of its operations and the changes in its financial os' ~ r the y, ar then ended in accordance with the Canadian generally accepted accounting princi es. M Document in 2211 City of Pickering Public Librory Boord (,- 7/10/07; 12:34 PM / / FOR DISCUSSION PURPOSES ONLY CITY OF PICKERING PUBLIC LIBRARY BOARD Table of Contents December 31, 2006 Statement of Financial Position Statement of Financial Activities and Fund Balance Notes to the Financial Statements M Document in 2211 City of Pickerlflg Public Library Board { 7/10/07; /2;34 PM / ~/ / / ~ / FOR DISCUSSION PURPOSES ONLY / / 35 / 2 3-5 i.', . CITY OF PICKERING PUBLIC LIBRARY BOARD 3 6Statement of Financial Position December 31, 2006 FINANCIAL ASSETS Cash Accounts receivable LIABILITIES CURRENT Accounts payable and accrued liabilities Due to the Government of Canada Due to City of Pickering Post-employment benefits obligation (Note 3) NET FINANCIAL LIABILITIES NON-FINANCIAL ASSET Prepaid expense NET LIABILITIES BOARD POSITION AMOUNTS TO BE RECO / Workshe tIn 2211 City of Pickering Public Library Board (#106457)' 7/10/2007-.12:30 PM / FOR DISCUSSION PURPOSES ONLY 8,97 9 6 ,554 3,000 198,940 (196,364) 73,364 $ (123,000) $ (123,000) 17,668 243 74,918 128,800 221,629 (219,338) 90,538 $ (128,800) $ (128,800) Page 1 of 5 / CITY OF PICKERING / PUBLIC LIBRARY BOARD 37 Statement of Financial Activities and Fund Balance Year ended December 31, 2006 2006 2005 Budget Actual REVENUES City of Pickering grants - operating $ 4,009,777 $ 3,95 ,325 $ 3,78 , 76 City of Pickering grants - capital 118,465 ~ 2 4,472 Federal grants 4 10,399 Province of Ontario grants 106,425 / 1 9,7 130,425 Fines and other receipts 195,622 196,910 196,852 4,430,289 4,421,004 4,401,024 EXPENDITURES Operating Salaries Salaries and wages 2,510,323 Fringe benefits 520,522 3,030,845 Material, supplies and utilities Books 526,327 540,204 Utilities 205,422 177,551 Other supplies 49,125 41,298 780,874 759,053 Services Repairs and maintenance 220,082 189,704 264,224 Insurance 41,092 40,131 32,622 Travel 10,872 11,817 10,699 Consulting & Profession / 16,600 10,103 10,520 Advertising ~, 7,275 11,885 7,102 Conventions 8,045 4,183 4,093 Postage 4,706 5,509 5,113 Telephone 54,327 58,509 51,941 Seminars and e ucation 9,050 14,806 9,033 Miscellaneo 15,663 15,228 9,609 387,712 361,875 404,956 4,311,824 4,257,100 4,194,854 118,465 140,930 274,472 4,430,289 4,398,030 4,469,326 22,974 (68,302) (5,800) 600 (17,174) 67,702 FUND ALANCE, BEGINNING OF YEAR FU BALANCE, END OF YEAR $ $ $ Page 2 of 5 FOR DISCUSSION PURPOSES ONLY / CITY OF PICKERING PUBLIC LIBRARY BOARD 3 8N otes to the Financial Statements ~ December 31, 2006 / 1. SIGNIFICANT ACCOUNTING POLICIES The financial statements of the City of Pickering Public Library Board (the' ibrary Board") re the representations of management prepared in accordance with Can d~. generally ccepted accounting principles for local government established by the Public S Accou ng Board (PSAB) of the Canadian Institute of Chartered Accountants. / Signiticant accounting policies adopted by the Libra!)' Board are ~llOWS: , Basis of accounting / / (a) Accrual basis of accounting ~ / Revenues and expenditures are reported on the ccrua is of aycounting. The accrual basis of accounting recognize revenues as they re earned d measurable; expenditures are recognized, as they are incurred and measu ble as a result 0 he receipt of goods and services and the creation of a legal obligation to p (b) Tangible capital assets / The historical cost and accumul ed ~ation r tangible capital assets are not recorded for Library Board purposes. T ngible . a as ets acquired during the year are reported on the statement of financial ac Ivities and d alance as capital expenditures in the year of acquisition. (c) The present value of recognized as e 10 amortized on employees. (d) The reparation of fi ancial statements in conformity with Canadian generally accepted ac unting principle requires management to make estimates and assumptions that affect the r pgount assets, liabilities and the disclosure of contingent assets and liabilities at the 0 e nancial statements and the reported amounts of revenues and expenditures during t er. d. Actual results could differ from those estimates. 2. / Capital ex nditures were incurred to acquire furniture and equipment in the amount of $140,930 (2005 - $ 74,472). M Document In 2211 City of Pickering Public Librory Boord ( 7/10/07' 12:34 PM FOR DISCUSSION PURPOSES ONLY Page 3 of5 CITY OF PICKERING PUBLIC LIBRARY BOARD Notes to the Financial Statements December 31, 2006 I II 39 3. POST EMPLOYMENT BENEFITS OBLIGATION The Library Board makes available to qualifying employees who retire b fore the age of , the opportunity to continue their coverage for such benefits as extended he ~h nd drugs. overage ceases at the age of 65. Dependent on eligibility, health coverage e a share financial responsibility between the Library Board and the retired employe s. he 'bra!); Board also provides full time and permanent part-time employees a sick ti e entitlement a any unused entitlement is accumulated year to year. This accumulated entit ment is not ves d and therefore does not get paid out at the time of retirement or termination. T e most recent ac arial valuation of the post-employment benefits was performed at January I, 20 4. Information about the Library Board's post employment b ~e Its liabilities' 2006 ~ 128,800 14,900 800 8,400 (29,900) $ 123,000 2005 $ 128,200 14,100 800 8,500 (22,800) $ 128,800 2006 2005 $ 132,700 (9,700) $ 139,300 (10,500) $ 128,800 The pre ent value as at ecember 3 I, 2006 of the future benetits was determined using a disco t rate of 6.0%. (b) Del t~l sf he ent en cost at January 1, 2004, the date of the most recent actuarial valuation was 4.5% per u. Health osts were assumed to increase at 10% in 2005 and decrease by 1 % increments per year to an Itimate rate of 5% per year in 2010 and thereafter. M Document In 2211 City of Pickering Public Librory &Jord (. 7/10/07-. 12:34 PM Page 4 of5 FOR DISCUSSION PURPOSES ONLY / / / 40 CITY OF PICKERING PUBLIC LIBRARY BOARD Notes to the Financial Statements ..December 31, 2006 / 4. PENSION AGREEMENTS The Library Board makes contributions to the Ontario Municipal Emp yees Retiremen Fund (OMERS), which is a multi-employer plan, on behalf of eligible member ~f' s staff. The Ian is a defined benefit plan that specifies the amount of the retirement be efi be recei ed by the employees based on the length of service and rates of pay. Contributions in the amount 01'$143,143 (2005 - $125,264) wer members during the year. 5. STATEMENT OF CHANGES IN FINANCIAL POSI ON A statement of changes in financial position has not eed~nted, ~e related information is readily determinable from the financial statements p sent~'d~ 6. GUARANTEES In the normal course brary Board e ers into agreements, which contain guarantees. The Library Board's primary uarantees are as ollows: (i) The Library Board indemnifies PIO~O rd members for various items including, but not limited to, all costs to s Ie suit~ ~~tio/ s due to association with the Library Board, subject to certain restrictio . The Library Bard has purchased liability insurance to mitigate the cost of any potentia future suits or ctions. The term of the indemnification is not explicitly defined, but' limited to the 9 riod over which the indemnified party served as an employee or board ember of the Li rary Board. The maximum amount of any potential future payment ca ot reasonably stimated. (ii) The Library B rd ha i 0 agreements that may include indemnities in favour of third parties, such s purchase d Ie agreements, confidentiality agreements, engagement letters with advi rs and consul nts, outsourcing agreements, leasing contracts, information technolo agreements a a service agreements. These indemnification agreements may requir the Library ard to compensate counterparties for losses incurred by the cou erparties as a r ult of breaches in representation and regulations or as a result of lit' ation claims 0 statutory sanctions that may be suffered by the counterparty as a n~ of t transaction. The terms of these indemnities are not explicitly defined and the ~ a ount of any potential reimbursement cannot be reasonably estimated. he nature of t se indemnification agreements prevents the Library Board from making a reasonable esti ate of the maximum exposure due to the difficulties in assessing the amount of liability, whi stems from the unpredictability of future events and the unlimited coverage offered to counterp rties. Historically, the Library Board has not made any significant payments under such or simila mdemnification agreements and therefore no amount has been accrued in the Statement of Financ' I Position with respect to these agreements. .L_,. "" O~.,"'*_ ""'.,,"'"'...., MM" "'" eM 1 m. FOR DISCUSSION PURPOSES ONLY / Page 5 01'5 / / IV Financial Statement.' of / THECORPORATIO O~ I THE CITY OF PIC ERIN; TRUST FUNDS / December 31, 2006 ('Cc~ / Me Document in 22108 Proforma Trust Notes ( 7/10/07; 1,02 PM FOR DISCUSSION PURPOSES ONLY / 41 42 Auditors' Report To the Members of Council, inhabitants and Ratepayers of The Corporation of the City of Pickering Deloitte & To che LLP 5140 Yang Street Suite 170 Toronto N M2N 6L7 Cana v / We have audited the statement of financial position of the Tr st~ds of the orporation of the City of Pickering as at December 31, 2006 and the statement of fin cia . Ities a fund balances of the Trust Funds for the year then ended. These financial statements re the re sib' Ity of the City's management. Our responsibility is to express an opinion on these fina ial statements b ed on our audit. We conducted our audit in accordance with Canadian gene lIy accepted auditing standards. Those standards require that we plan and perfor an audit to ob in reasonable assurance whether the financial statements are free of material miss tement. An au It includes examining, on a test basis, evidence supporting the amounts and disci ur . the fin cial statements. An audit also includes assessing the accounting principles used nd sig' a timates made by management, as well as evaluating the overall financial statement resentation. in our opinion, these financial state ents present fair , in all material respects, the financial position of the Trust Funds of the Corporatio of the City of ckering as at December 31, 2006 and the results of operations and cash flows of t e Trust Funds f I' the year then ended in accordance with Canadian generally accepted accounting ~~( Chartered Accou ants / Licensed Public Accountants Toronto, 0 ar~ April 13, 007 ~ / / MrLment in 2210B Proformo Trust Notes C' 7/10/07; 1,02 PM 1 ----.. FOR DISCUSSION PURPOSES ONLY / OHRP 2006 Dorothy Card Estate 43 THE CORPORATION OF THE CITY OF PICKERING TRUST FUNDS Statement of Financial Position December 31, 2006 FINANCIAL ASSETS Investments Interest receivable Loans receivable TRUST FUND POSITION /~ / / 2005 $ $ 256,674 250,414 8,222 5,077 3,671 5,294 $ 3,671 $ 260,785 $ 3,671 $ 260,785 / ~ ~J Page I of 4 Worksh et In 2210A Proforma Trust - 2006 (#106459J 7/10/2007: 1:01 PM / FOR DISCUSSION PURPOSES ONLY 4 4rHE CORPORATION OF THE CITY OF PICKERING TRUST FUNDS Statement of Financial Activities and Fund Balances Year ended December 31, 2006 REVENUES Interest EXPENDITURES Provincial payments Administration charges NET REVENUES (EXPENDITURES) FUND BALANCES, BEGINNING OF YEAR FUND BALANCES, END OF YEAR /~ / / 2006 2005 Dorothy Card OHRP Estate $ 236 $ 1,766 1,706 93 90 1,859 1,796 (1,623) ~05 II 7,782 5,426 255, 9 260,785 255,359 $ 268,567 $ 260,785 ~~ / Worksh et in 2210A Proforma Trust - 2006 (#106459)" 7/10/2007; 1:01 PM Page 2 of 4 / FOR DISCUSSION PURPOSES ONLY THE CORPORATION OF THE CITY OF PICKERING TRUST FUNDS Notes to the Financial Statements December 31, 2006 45 1. ACCOUNTING POLICY The financial statements of the Trust Funds of the The Corporation of the ity of Pickerin re the representations of management prepared in accordance with Ca d~ generally ccepted accounting principles. (/ ~ Significant accounting policies adopted include: Revenues are recorded in the period in which the transac 'ons or events oc the revenue. ~ Expenditures are reported on the accrual basis of ac unting . ch re gnizes expenditures as they are incurred and measurable as a result of the recei t of goods or er Ices and the creation of a legal obligation to pay. Basis of accounting Use of estimates / Investments Investments are recorded at cost. The co proximates their fair market value. The preparation of periodic fin cial statements' conformity with Canadian generally accepted accounting principles require management to make estimates and assumptions that affect the reported amounts of assets d liabilities an disclosure of contingent assets and liabilities at the date of the financial stat ents and repor d amounts of revenues and expenditures during the period. Actual results co ~~m th se estimates. REN~ P GRAM 2. The Ontario gram ("OHRP") was established by the Ontario Ministry of Housing in I 73 to provide g nts for municipalities to make loans to assist owner occupants to repair, reh tlitate and impro e their homes to local property standards. [ndividualloans are limited to $7,500 of which the ma 'mum forgivable portion is $4,000. Effec ve~y 1 199, the Province of Ontario discontinued this program. Unused funds were re tted to v' ce on March [, 1994. Outstanding balances of loans issued prior to July 16, 1 93 will conti u 0 be administered under the terms of the original program. The City continues to administer t collection of any outstanding loans and remit the proceeds, net of a 5% administration ee to the Ministry of Municipal Affairs and Housing. ans receivable at December 31, 2006 are comprised entirely of repayable loans of 005 - $5,294). [n the event of the sale or lease of the home or in the event of the home ner ceasing to occupy the home, the balances of the repayable loan immediately become due nd payable by the homeowner. / M Document in 22108 Proforma Trust Notes ( 7/10/07; 1..02 PM Page 3 of 4 FOR DISCUSSION PURPOSES ONLY / The City of Pickering has established a trust fund for the Dorothy Card state for the c e and upkeep of the destitute elderly. The fund balance is comprised of in. v s~nts and acc mulated interest amounting to $264,896 (2005 - $255,491). / ST A TEMENT OF CASH FLOWS ,L A statement of cash flows has not been presented as the info ation is readily; determinable from the information provided. , I, 46 THE CORPORATION OF THE CITY OF PICKERING TRUST FUNDS Notes to the Financial Statements December 31, 2006 3. DOROTHY CARD EST A TE 4. ~/ ,~: /~ / / / M Document in 22108 Proforma Trust Notes C. 1/10/01; 1..04 PM / / FOR DISCUSSION PURPOSES ONLY / Page 4 of 4