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Home My WebLink AboutCS 37-06 REPORT TO AUDIT COMMITTEE Report Number: CS 37-06 Date: June 19,2006 From: Gillis A. Paterson Director, Corporate Services & Treasurer Subject: 2005 Year-End Audit Recommendation: 1. That Report CS 37-06 of the Director, Corporate Services & Treasurer be received and referred to Council for information; 2. That the Auditor's Report to the Audit Committee as submitted by Deloitte & Touche be received for information; 3. That the Management Letter from the Auditor be referred to the Director, Corporate Services & Treasurer for any further action deemed necessary and report back to the Committee; and, 'j~ 4. That the 2005 draft Audited Financial Statements for the City of Pickering be received and forwarded to Council for information. Executive Summary: Not applicable Background: The Audit for the year 2005 has been completed. Attached are the Auditor's Report to the Audit Committee, which includes the Independence Letter and the Management Letter from the Auditor and the draft Audited Financial Statements. The Auditor's report prepared by Deloitte & Touche summarizes the results of the December 31, 2005 audit. Nothing of significance was noted. The draft 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 is responsible to express an opinion on these 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 37-06 Date: June 19, 2006 2005 Year-End Audit Page 2 Overall net assets increased by approximately $3.0 million over prior year as a result of an increase in current assets of approximately $6.2 million offset by an increase in current liabilities of approximately $3.2 million. The increase in current assets is primarily due to an increase in the investment balance. As in past years, the increase in the investment balance results from the timing of supplementary taxes billed and collected, the overall increase in the Reserve Fund balances, primarily Development Charges Reserve Fund, unused funds from the agricultural easement received and lastly the City's share of taxes from OPG for properties that are still under assessment appeal. The prior year's cash balance was unusually high as a result of cash requirements necessary in early 2005. The reduction in the cash balance to $2.7 million at the end 2005 brings the balance more in line with the average cash balance maintained throughout the year for normal operations. Accounts receivable also had a large increase over prior year. This arose due to the accruals necessary for the 2005 instalments of the Federal Gas Tax funds ($850K), Provincial Gas Tax funds ($220K) and sale of land ($149K) of which the cash was not received until early 2006. The increase in current liabilities is primarily due to the increase in deferred revenue and more specifically 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 financial statement reporting guidelines, these restricted funds are to be reported as deferred revenue. The increase in the Development Charges Reserve Fund resulted from a large amount of Development Charges collected versus those required in the year to fund capital expenditures incurred. The Provincial Gas Tax and Federal Gas Tax fund balances contributed to the increase because of timing of receipt of funds and occurrence of related expenditures. Two other Provincial grants, the Ontario Fire Services grant of $178,000 and the balance of the Geosmart grant for approximately $154,000 also contributed to the increase in deferred revenue to allow for the matching of revenue to the related 2006 expenditures. The WSIB benefit liability is higher than prior year as a result of the settlement of an outstanding claim during the course of 2005. This increase in the liability reflects an estimate of the future WSIB liability that is required by PSAB to be recognized for reporting when earned versus when paid. Current revenues and expenditures are comparable with the budget. Taxation from other governments which are more commonly referred to as payments-in-lieu (PIL) of taxes are higher than budget. This arises due to the returned assessment roll providing higher assessment amounts, which must be billed, for the OPG properties currently under appeal. Again this year, a transfer of the City's share of these revenues ($1.6 M) was made to the Contingencies Reserve until such time as the appeal is settled. As you are aware capital expenditures for projects may be incurred over multiple years and often are not comparable to budget. As you can see capital expenditures incurred Report CS 37-06 Date: June 19, 2006 2005 Year-End Audit Page 3 ,~" 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 $3.5 million was budgeted in 2005 for external subdivision works of which approximately 20% of this amount was incurred in 2005. In addition approximately $3.0 million of the capital budget pertained to the City's share of APTA's 2005 budgeted capital expenditures. APTA's capital budget included the purchase of six replacement buses and two expansion buses. In light of the transfer of APT A to the Region of Durham, the Region was asked to participate in the funding since the construction of buses is a two-year cycle. However the Region declined and the buses were not ordered. This timing also impacts on the revenue reported for the capital projects being much lower than compared to budget. Specifically government grants are lower as a result of a large portion of APT A's 2005 capital budget not proceeding. In conclusion, positive financial results in 2005 are once again assisting in maintaining the City's financial position. Attachments: 1. Auditor's Report to the Audit Committee (Confidential) 2. 2005 Draft Audited Financial Statements Prepared By: ; ( / j'--\ ~.~.d~:>//. ' '~ i . ."7 ',;-' fI"":'\_2 "'-'J- ~~{.<tl .d .. -.I (.(...J f.-t l Kr stine Senior Manager, Accounting Services Approved I Endorsed By: df~8Z:3'~";~2./?:~~~..--- -----.~- ..~. /' .-' ~:~~:~~"-..""---" ;0-.-. ~-:: ,_-~,_...~-e:;~~~..::,~, Gillis A. Paterson Director, Corporate Services & Treasurer GAP/vw Attachments Copy: Chief Administrative Officer Recommended for the consideration of Pickering City Council . "'t' c:- ~i%i:f..V ATTACHMENT#L TO REPORT#(l:S' 3'7~ eb . Deloitte The Corporation of the City of Pickering Report to the Audit Committee Year ended December 31, 2005 ,.~ ..~ Table of Contents Letter to Members of the Audit Committee Status of the Audit, Audit Scope and Related Representations Audit Results and Matters to Report to the Audit Committee Audit Findings Areas of Audit Focus Internal Controls and Other Matters Appendix A: Independence Letter Appendix B: Management Letter @ Deloitte & Touche LLP and affiliated entities. The Corporation of the City of Pickering - 2005 Report to the Audit Committee ~- 1 2 3 4 6 7 ~' ~- ,,~ Deloitte Deloitte & Touche LLP 5140 Yonge Street Suite 1700 Toronto, ON M2N 6L7 Canada Tel: (416) 601 6150 Fax: (416) 601 6151 www.deloitte.ca June 13,2006 Members of the Audit Committee The Corporation ofthe City of Pickering Dear Committee Members: We are pleased to submit this report on the results of our audit of the consolidated financial statements of The Corporation of the City of Pickering (the "City") for the year ended December 31,2005. .~" Our audit was completed in accordance with the audit plan presented to you on February 7, 2006. Our professional standards require that we communicate with you celiain matters that may be of interest to you in fulfilling your obligation to oversee the financial reporting and disclosure process for which management of the City is responsible. This repOli is designed to summarize certain aspects of the 2005 audit of the consolidated financial statements, comment on significant matters regarding the audit and other matters which we believe will be of interest to the Committee. This report has been provided to the Audit Committee of the City on a confidential basis. It is intended solely for the use of the Audit Committee and we disclaim any responsibility or obligation to any third party who may rely on this report. The matters addressed in this report are a by-product of the financial statement audit and may not necessarily identify all matters that may be of interest to the Committee in fulfilling its responsibilities. We wish to express our appreciation for the excellent cooperation we received during 2005 from the senior management and Finance staff and the many employees of the City with whom we work in the discharge of our various responsibilities. Yours sincerely, d)~ 0/- (~e.- LLI Chartered Accountants ~ Member of Deloitte Touche Tohmatsu 1 ~ ., Status of the Audit, Audit Scope and Related Representations ~ . The audit of the December 31, 2005 consolidated financial statements is substantially complete. . Our opinion on the 2005 financial statements will: - be signed following approval by council - be dated April 7, 2006 - state that the consolidated financial statements present fairly, in all material respects, the financial position of the City as at December 31, 2005 and the results of its operations and the changes in its financial position for the year then ended in accordance with Canadian generally accepted accounting principles. . The audit approach was consistent with the audit plan we provided to you on February 7, 2006. . Our audit was conducted in accordance with Canadian Generally Accepted Auditing Standards (GAAS) and our firm standards. . We examined, on a test basis, evidence supporting the amounts and disclosures in the financial statements, therefore, we would not necessarily detect all weaknesses, errors or other irregularities that might have occurred. .~.. . We assessed the accounting principles used and significant estimates made by management. . We evaluated the overall financial statement presentation. . Tests and procedures that we considered necessary were used to form an opinion on the consolidated financial statements. . We are independent of the City as is required to provide an independent audit opinion. A copy of our annual independence letter to the Committee is included in Appendix A of this report. @ Deloitte & Touche LLP and affiliated entities. The Corporation of the City of Pickering - 2006 Report to the Audit Committee 2 '~"" ~ Audit Results and Matters to Report to the Audit Committee 4. 5. 6. 7. ~ 8. 9. ~ 1. Significant weaknesses in internal controls. No significant weaknesses in internal controls relating to the financial reporting process were identified. 2. Illegal Acts See Management Letter (Appendix B). None noted. 3. Significant transactions inconsistent with the ordinary course of business, including fraud or possible fraud. Unusual related party transactions. None noted. None noted. New significant accounting principles or None. policies. Disagreements with management. None. Management consultation with other None noted. accountants about any significant auditing or accounting matters. Unusual transactions that significantly None noted. increase risk of loss. Actions that, if they become public, might None noted. cause embarrassment. 10. Non-compliance with regulatory None noted. requirements. 11. Major issues discussed with management None. that influence audit appointment. 12. Management's judgments and accounting Reasonable (see page 4). estimates. 13. Misstatements, including unadjusted audit See Audit findings (page 5). differences. 14. Difficulties encountered during the audit. None. 15. Limitations placed on the scope of our audit. None. @ Deloitte & Touche LLP and affiliated entities. The Corporation of the City of Pickering - 2006 Report to the Audit Committee 3 ~ j"'r 'r'= );"'-"11 f ," Audit Findings ~' Management judgments and accounting estimates The preparation of the financial statements requires management to exercise judgment and utilize assumptions to make estimates. The key areas where management estimates are required are as follows: . Year-end accruals including post employment benefit liability and WSIB benefit liabilities . Environmental liabilities . Property tax appeals . Legal claims . Allowance for doubtful accounts receivable Management uses the assistance of an actuary in determining the post-employment benefits liability. The WSIB liability at year end is calculated by WSIB using management's best estimates. This is consistent with other municipalities and we believe these estimates to be reasonable. Management is also required to make estimates for any environment liabilities, legal claims, property tax appeals and the provision for doubtful accounts receivable. Management makes these estimates based on the information available, at a point in time, when preparing the financial statements. ~- The City is involved in ongoing property assessment appeals. In particular, there is one large appeal outstanding. The outcome of this appeal is not determinable as at the date of reporting as the parties are still in negotiation and accordingly, no provision has been made in these financial statements for any liabilities which may result. Management believes that the Contingency Reserve of $10,774,911 at December 31, 2005 will be sufficient to cover any potential liability that may arise from the settlement of these property assessment appeals. Approximately, $5 Million of this reserve represents amounts which have been transferred to the reserve through the 2003 to 2005 budget process to fund this contingency. Related tax appeals from 1999 to 2002 have been settled. The City has filed a Statement of Issues with the Assessment Review Board for taxation years 2003 through 2005. Overall, we believe the accounting policies selected and the application thereof to be appropriate for the City. Estimates and assumptions used have been assessed against standard practice and appear to be reasonable. @ Deloitte & Touche LLP and affiliated entities. The Corporation of the City of Pickering - 2006 Report to the Audit Committee 4 ~' ~ Audit Findings (continued) Unadjusted differences The following adjustments were discussed with City management but not adjusted: . Understatement of cash and accounts payable due to stale dated cheques of $5,273. . Reclassification from accounts receivable to cash in the amount of $82,721 relating to cash balances held in the Nesbitt Burns investment portfolio. . Overstatement of transfer from the operating fund to capital fund in the amount of $31,026 relating to capital expenditures to be incurred during fiscal 2006. . Overstatement of other revenues in the amount of $32,500 relating to Climate Protection Project as these revenues were invoiced, earned and collected during fiscal 2006. Adjusted differences .~ The following adjustments were discussed with City management and were adjusted: . Accrual for capital fund expenditures in the amount of $167,082 relating to work performed to December 31, 2005. . Reclassification of a provincial capital grant in the amount of $154,531 to deferred revenue, as eligible capital expenditures were not complete at December 31, 2005. . Provision of $306,000 relating to the City's share of APTA inventory and $121,000 relating to the City's share of post employment benefits as negotiations with the Region are ongoing with respect to the ultimate realization of assets and assumption of liabilities by the Durham Region Transit Commission. ~. @ Deloitte & Touche LLP and affiliated entities. The Corporation of the City of Pickering - 2006 Report to the Audit Committee 5 ".-1 jiilirT--'O~ u.. ~- ~,,- Areas of Audit Focus ,,~' On February 7th, 2006, we reported to you our planned key areas of audit focus. The following summarizes our findings in respect of these areas: Liabilities . Completeness of certain . Review of Actuarial Reports . Satisfactory liabilities such as Post- including calculations and employment benefit and assumptions used WSIB . Review the City's calculations and information . Ensure appropriate accounting treatment has been applied . Review related note disclosure in the financial statements . Reliance on the City's actuary with respect to actuarially determined liabilities Reserve and . Various activities were . Review of continuity and material . Satisfactory Reserve Funds approved and incurred transactions (See audit during the year . Review of revenue recognition findings) . Initiatives to improve the criteria for those externally overall recording of these restricted reserve funds classified activities to promote as deferred revenue. '~- accuracy and efficiency Revenue - . Completeness of revenue . Review of systems and procedures · Satisfactory Clerks . Develop expectation for revenue Department accounts and compare to amounts recorded Investment in . Compliance with PS 3060 . Assess implication on financial . Satisfactory Veridian Government Partnerships statements of the City Corporation . Value of Investment . Communicate with Veridian's auditor regarding reliance on audit Management . Requires management . Focused review of calculations . Satisfactory Estimates judgment . Discussion with management (See audit (i.e. allowance for assessment appeals, . Analytic Review of related account findings) contingent liabilities, etc.) Year-end cut- . Accounting for revenue . Focused substantive testing on . Satisfactory off and expenditures in the accounts payable, accruals, (See audit proper period deferred revenue and receivables findings) Public Sector Accounting (PSAB) Standards . Impact of any new accounting standards especially: - Contingent liabilities - Contractual obligations . Work with Finance staff to ensure compliance · Satisfactory @ Deloitte & Touche LLP and affiliated entities. The Corporation of the City of Pickering - 2006 Report to the Audit Committee 6 ~ Internal Controls and Other Matters Our audit was designed to provide a cost-effective basis for formulating our opinion on the financial statements of the City. As part of our examination we reviewed and evaluated certain aspects of the systems of internal control and the accounting systems to the extent we considered necessary to make an evaluation of such systems and procedures in accordance with Canadian generally accepted auditing standards. The main purpose of our systems review was to assist in determining the nature, extent and timing of our audit tests and to establish the degree of reliance, which we could place on selected controls; it was not to determine whether internal controls were adequate for management's purposes. While the audit did not include an in-depth evaluation of all systems or all aspects of any individual system and should not therefore be relied upon to identify all significant internal control weaknesses, or all errors, irregularities or inefficiencies that might occur, we undertake to report such matters to you when they come to our attention. Our management letter is included as Appendix B. In addition to the comments in Appendix B we also provided an interim management letter at the February 7, 2006 audit committee meeting. ,~ '-~ @ Deloitte & Touche LLP and affiliated entities. The Corporation of the City of Pickering - 2006 Report to the Audit Committee 7 Appendix A @ Deloitte & Touche LLP and affiliated entities. .~< Independence Letter ~~ The Corporation of the City of Pickering - 2005 Report to the Audit Committee ''WI,'" ~ Deloitte Deloitte & Touche LLP 5140 Yonge Street Suite 1700 Toronto, ON M5J 2V1 Tel: (416) 601-6150 Fax: (416) 601-6151 www.deloitte.ca June 9, 2006 The Audit Committee The Corporation of the City of Pickering One The Esplanade Pickering Civic Complex Pickering ON L 1 V 6K7 Dear Audit Committee Members: We have been engaged to audit the consolidated financial statements of the Corporation of the City of Pickering, including the Pickering Public Library Board and the City of Pickering Trust Funds (collectively, the "City") for the year ended December 31,2005. Canadian generally accepted auditing standards (GAAS) require that we communicate at least annually with you regarding all relationships between the City and our Firm that, in our professional judgment, may reasonably be thought to bear on our independence. ~' In determining which relationships to report, these standards require us to consider relevant rules and related interpretations prescribed by the appropriate provincial institute / 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 have prepared the following comments to facilitate our discussion with you regarding independence matters arising since May 20, 2005, the date of our last letter. We are not aware of any relationships between the City and our Firm that, in our professional judgment, may reasonably be thought to bear on independence that have occurred from May 20, 2005 to June 9, 2006. .~ J ". ~ ":'1 N', ~"-~).lj.~ - -"''''" The Corporation of the City of Pickering June 9, 2006 Page 2 ~!i The fees billed to the City from May 20,2005 (the date of our last independence letter) to June 9, 2006 are as follows: Citv of Pickering . Additional audit and financial statement work related to the year ended December 31, 2004 $7,500 . Balance of audit fee for the year ended December 31, 2004 $500 . Clerk's Department Miscellaneous Revenue Sources Process and Controls Review - Status update $8,350 . Tax related issues $800 . Clerks Department and Cash Handling procedures review $6,400 . Audit for the year ended December 31, 2005 $50,000 (Audit fee for December 31,2005 per engagement letter $55,000) Citv of Pickering Public Librarv Board . Balance of audit fee relating to the audit for the year ended December 3 1, 2004 . Audit for the year ended December 31,2005 '<~. $750 $3,750 GAAS requires that we confirm our independence to the audit committee in the context of the Rules of Professional Conduct of the Institute of Chartered Accountants of Ontario. Accordingly, we hereby confirm that we are independent with respect to the City within the meaning of the Rules of Professional Conduct of the Institute of Chartered Accountants of Ontario as of June 9,2006. This report is intended solely for the use of the audit committee, the board of directors, management, and others within the City and should not be used for any other purposes. We look forward to discussing with you the matters addressed in this letter at our upcoming meeting. Yours truly, d)~ o/--/~e.- LLI Chartered Accountant Member of Deloitte Touche Tohmatsu '~ ~ >,~. ~ Appendix B @ Deloitte & Touche LLP and affiliated entities. Management Letter The Corporation of the City of Pickering - 2005 Report to the Audit Committee r-- f ~ Deloitte Deloitte & Touche LLP 5140 Yonge Street Suite 1700 Toronto ON M2N 6L7 Canada ~ Tel: 416-601-6150 Fax: 416-601-6151 www.deloitte.ca June 13,2006 Private and confidential Audit Committee Members The Corporation of the City of Pickering One The Esplanade Pickering ON Ll V 6K7 Dear Audit Committee Members: Management Comments In February 2006, we reported interim management comments to you based on the results of our interim audit. We have recently completed our audit related to the examination of the consolidated financial statements of the City of Pickering for the year ended December 31, 2005. Based on the results of our audit, we have provided the attached additional management comments for your consideration. ~: The primary focus of our audit is to enable us to form an opinion on the consolidated financial statements of the City. We review and test the financial systems and related internal controls to the extent required by generally accepted auditing standards. The main purpose of our systems and controls review was to assist us in determining the nature, extent and timing of our audit tests and to establish the degree of reliance, which we could place on selected controls; it was not to determine whether internal controls were adequate for management's purposes. We would like to acknowledge the assistance and co-operation of management and all the staff during the course of our audit. We would be pleased to discuss our recommendations and provide any assistance you may require with respect to implementation. Yours truly, &~ 'f f~e.- LLt Chartered Accountants Enclosure c. C. T. Quinn, Chief Administrative Officer G. Paterson, Director of Corporate Services ~'t ~ THE CORPORATION OF THE CITY OF PICKERING Management Comments December 31, 2005 Page I of 7 1. Payroll Observation: Currently all non union and a select group of union hourly employees are paid up to date. All other city employees are paid one week behind. For employees that are paid up to date, actual processing of the related timesheets lags by one week. The actual amount paid to these employees for the second week of the pay period is estimated based upon the assumption that the employee has worked a standard workweek. If the employee worked other than the standard hours, the payroll section will note this when the timesheets are received (in the following pay period), and adjustments to pay are made accordingly. There is a risk of overpayment given sick time usage, vacation time usage and unpaid leaves. Further, if the payment is made before a period end and the adjustment is made after a period end, the risk of error increases. Recommendation: Consideration could be given to changing this process such that employees are not paid in advance. ~ Management's Response: Management concurs. Currently non-union and some union employees are paid to date while the balance of employees are paid one week behind. Now that timesheets, which are one week behind, are automatically uploaded to the payroll system it makes sense to have all staff paid one week behind in order that they are being paid for the hours submitted on the timesheets. The Manager, Accounting Services and Payroll staff are currently preparing a proposal, for the Chief Administrative Officer's consideration, to provide for the transition of the above-noted group of employees to be paid one week behind as is the balance of the Corporation. rl-'-' ~.. -. - " '[j~: THE CORPORATION OF THE CITY OF PICKERING 1\tlanagement Comments December 31, 2005 Page 2 of 7 .~- 2. Review of L02ical Access Ril!:hts Observation: We observed that there is no regular process to review logical access rights. Without a regular review process, the risk that unauthorized users may access confidential data or that authorized users may have access to data that they no longer are privy to, is increased. Periodic reviews help ensure access rights remain current and are relevant to users' job functions and help to serve as a check that access rights assigned to terminated employees have been revoked on a timely basis. We understand that the Information Technology ("IT") group acts as custodian of information assets on behalf of business owners. Thus, an effective process would entail the IT group working jointly with other groups and data owners to implement an effective review process. Recommendation: We recommend that management reviews, either annually or semi-annually, a user listing detailing users with active access to application systems along with their access rights. During the review, management should verify that proper segregation of duties is being maintained within the City. Management's Response: Agreed. While there is agreement regarding the need, the City currently does not have the software capable of performing such a task, and to complete the task manually would involve far too many of IT's resources. In 2006, IT is investigating the purchase of possible software to automate this task, but has yet to identify a viable solution. .~ ~" J~" THE CORPORATION OF THE CITY OF PICKERING lVIanagement Comments December 31, 2005 Page 3 of7 3. Business Continuity and Disaster Recovery PlanniDl.?: Observation: Currently there is no Business Continuity Plan ("BCP") or Disaster Recovery Plan ("DRP") in place to detail the steps required to recover the City's critical business processes in the event of a disaster or system failure. A business continuity plan is wider than a disaster recovery plan, which tends to focus on the IT environment. The objective of a BCP would be to enable recovery of all of the critical business processes of the City, rather than just the computer systems. There is a risk that in the event of an unexpected outage, the City would not be able to continue normal operations and would be unable to recover their systems and key business activities without significant cost or loss to the City. The recovery of services in the shortest period of time will reduce the cost of the event to the City and minimize the negative public relations aspects of such an event. We are pleased to note that as a first step to a formal Business Continuity/Disaster Recovery Plan, a Business Impact Analysis was conducted for the IT group during fiscal 2004. However, our understanding is that no follow-up action was taken after the initial phase of this project. ~ Recommendation: We recommend that the City Council revisit the Business ContinuitylDisaster Recovery project that was initiated during fiscal 2004 in order to ensure that proper arrangements are in place in the unexpected event of a disaster. Management's Response: Agreed. IT is currently in the process of reviewing its own Business Continuity and Disaster Recovery plans. It is anticipated that this exercise will lead towards more corporate wide reviews of both topics. ~ ',,,d~ n'~ THE CORPORATION OF THE CITY OF PICKERING lVlanagement Comments December 31, 2005 Page 4 of 7 4. Windows 2003 Mi2ration Observation: During our review, we noted that the City is in the process of migrating from the Windows 2000 to Windows 2003 operating system. As a result, this change at the IT infrastructure level may give rise to new risks, security risks and vulnerabilities if the process is not properly managed. Managing the Windows environment requires a disciplined approach to patch application and security fixes so that known vulnerabilities are addressed on a timely basis. Recommendation: We recommend that security hardening standards be developed for the new Windows 2003 environment. This process will ensure the implementation of consistent standards over locking down critical Windows servers including: . The creation of server building and hardening checklists; . Application of vendor patches as required; . Utilizing best practice security settings to mitigate the potential risk of known vulnerabilities being exploited; . System administrator accounts being tightened; and . Password policies being implemented. Hardening standards will also be required to be periodically updated to address newly found vulnerabilities. All critical servers should then be hardened according to the established hardening standard and any exceptions should be reported for those devices that do not meet the standard. Management's Response: Agreed. The 2006 budget contains funds for software that will automatically update the servers with the latest patches and security updates. The City currently has a policy related to passwords, and the system administrator accounts are already secured. The upgrades will occur in a secure and methodological manner. ,~" ~ THE CORPORA. TION OF THE CITY OF PICKERING J\llanagement Comments December 31. 2005 Page 5 of 7 5. IT Documentation Observation: During our audit we noted that the IT Department at the City performs a number of functions/tasks that are not documented. Examples include: . Audit of users access profiles; . Network monitoring activities; and · Review of audit logs. From the audit perspective, documentation is important as it provides reliable evidence of the performance of a task. More importantly, from an operational standpoint, documentation helps ensure consistency, ensure adherence to corporate policies and regulatory requirements and helps ensure knowledge transfer during absence or turnover of key staff. Recommendation: ~ We recommend that City staff review the above list as well as other day-to-day tasks and implement procedures to ensure sufficient and appropriate evidence is retained to verify that the function/task was performed as well as for accountability purposes. Evidence can be retained via email, electronic or hard copy checklists, using help desk tracking software or other appropriate means. Management's Response: Management agrees with the Observation. Some monitoring activities are currently undertaken and software will be reviewed in 2006 to assist in the audit activities. However, resource limitations similar to many municipalities the same size as the City, are not uncommon. ,'~ THE CORPORATION OF THE CITY OF PICKERING Management Comments December 31, 2005 Page 6 of 7 ~; 6. Chane:e Manae:ement Procedures and Documentation (carried forward from 2004 audit) Observation: During our audit, it was observed that the City appears to lack important change management procedures and documentation. There is currently no documentation of changes or testing, and no formalized sign-offs. As part of our procedures, we tried to obtain supporting documentation, including documented approvals prior to any changes being made within the IT environment and to support testing. For the following areas, no documentation was available: · Application changes The Vailtech PO module was implemented at the beginning of 2006. For audit purposes, change related documentation, including a copy of the test plan and results were requested, however, were not available . Therefore, it was not possible to determine whether testing was performed and if it was appropriate based on the risk level of the change. · Database Change In 2005, the Oracle database was upgraded from version 8 to 9i. A sample test plan and test results were requested for audit testing purposes, however we were informed that test plans and test results are not documented. Therefore, it was not possible to determine whether testing was performed and if it was appropriate based on the risk level of the change. The risk of inappropriate or insufficient testing is that the change may not perform as expected in the production environment, hence disrupting the operations of the City. As a consequence, this may financially impact the City. . Network Change We were informed that not all network changes are tested before they are implemented into production. . Operating System patching We requested supporting documentation for a sample patch or system fix that was applied to the Windows 2000 Server. We were informed that not all system software changes are tested or that testing, if completed, is documented. Without formalized procedures for change management, a risk exists that unauthorized or inappropriate modifications could be made to the infoill1ation systems. These changes could result in system conflicts and instability, leading to downtime and financial loss. ~, ~ THE CORPORATION OF THE CITY OF PICKERING Management Comments December 31,2005 Page 7 of7 6. Chan2e Mana2ement Response Procedures and Documentation (continued) Recommendation: The City should consider creating a formal change management policy and procedure for documenting all changes, testing and signoffs from testers, management, and IT personnel. Management's Response: Agreed. A change management process is currently being tested for the servers and the network infrastructure, and will be implemented into production during May. By the end of 2006, the change management process will include application and database changes as well. Not all changes to servers can be tested prior to implementation. To do so would require test servers for almost every production server. The City is implementing a test system for the TSE (Canaveral) servers into which about 150 PCs will connect prior to December, 2006. To document simple database version upgrades when the steps are fully documented by Oracle seems to be an unnecessary effort. The testing and implementation of completely new systems should be documented. However, once again the number of available staff must be considered. ,,.... .~- ~ ~' i." ~ Deloitte @ Deloitte & Touche LLP and affiliated entities. Deloitte, one of Canada's leading professional services firms, provides audit, tax, consulting, and financial advisory services through more than 6,100 people in 47 offices. Deloitte operates in Quebec as Samson BelairjDeloitte & Touche s.e.n.c.r.1. The firm is dedicated to helping its clients and its people excel. Deloitte is the Canadian member firm of Deloitte Touche Tohmatsu. Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, its member firms, and their respective subsidiaries and affiliates. As a Swiss Verein (association), neither Deloitte Touche Tohmatsu nor any of its member firms has any liability for each other's acts or omissions. Each of the member firms is a separate and independent legal entity operating under the names "Deloitte," "Deloitte & Touche," "Deloitte Touche Tohmatsu," or other related names. Services are provided by the member firms or their subsidiaries or affiliates and not by the Deloitte Touche Tohmatsll Verein. Member of Deloitte Touche Tohmatsu 'Wf" ATTACHMENT #-4-. TO REPORT # (~S:,3(-r) ~ ~ ~ December 31, 2005 ~ M W Document in 2211 City of Pickering- December 31, 2005- Job; 6/14/06; 4:18 PM FOR DISCUSSION PURPOSES ONLY r" 1'''1 ~ (" ~' "-":j Auditors' Report To the Members of Council, Inhabitants and Ratepayers of the Corporation of the City of Pickering Deloitte & To he LLP 5140 Yonge treet Suite 170 Toronto N M2N 6L7 Canad We have audited the consolidated statement of fmancial p sit'on of the C oration of the City of Pickering as at December 31,2005 and the consolidated st e ts of financ. 1 activities and of changes in [mancial position for the year then ended. These financ. 1 s a ts are e responsibility of the City's management. Our responsibility is to express an opinio on thes ci statements based on our audit. cepted auditing standards. Those standards require that we plan and perform an a 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 fi;~te nts. An audit also includes assessing the accounting principles used and significan est' a e y management, as well as evaluating the overall financial statement presentation. ~s::; In our opinion, these consolidated fi cial statements resent fairly, in all material respects, the fmancial position of the City as at Decem er 31, 2005 and e results of its operations and the changes in its [mancial position for the year t ~ acc rdance with Canadian generally accepted accounting priociples. ~ / M Document in 2211 City of Pickering- December 31, 2005- Job: 6/14/06; 4:18 PM <~" FOR DISCUSSION PURPOSES ONLY THE CORPORATION OF THE CITY-OF PICKERING Table of Contents December 31, 2005 / ~' Consolidated Statement of Financial Position Consolidated Statement of Financial Activities 2 Consolidated Statement of Changes in Financial Position 3 Notes to the Consolidated Financial Statements 4-18 Consolidated Schedule of Operating Fund Financial Activitie ff/lUlld Balanc Consolidated Schedule of Capital Fund Financial Activi . es an~Bal 19 20 Consolidated Schedule of Reserves and Reserve F ds Financial A 21 ~ M Document in 2211 City of Pickering- December 31. 2005- Job; 6/14/06; 4:18 PM FOR DISCUSSION PURPOSES ONLY ~-- 1 u - . lITi F THE-CORP01~ATTO-N-O-F-THE-CITY-O-F-PTCKERIN-G Consolidated Statement of Financial Position December 31, 2005 2005 FINANCIAL ASSETS Cash Short-term investments Taxes receivable Accounts receivable Other current assets Investment in Veridian Corporation (Note 4) Promissory notes receivable (Note 5) $ 8,589,2 34,719.)24 9,4 ,807 3 55,502 280,449 32,299,411 25,069,000 113,703,735 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)) 11,024,637 413,404 24,113,832 8,791,000 2,297,850 631,786 47,272,509 NET FINANCIAL ASSETS NON-FINANCIAL ASSETS 69,416,643 66,431,226 Inventory NET ASSETS 438,987 $ 69,855,630 448,207 $ 66,879,433 $ 1,271 $ 88,944 4,079,053 7,043,941 20,725,437 19,224,908 61,670,447 58,443,431 86,476,208 84,801,224 (16,620,578) (17,921,791) $ 69,855,630 $ 66,879,433 ~ Worksh et in 2210 City of Pickering- December 31, 2005 Job # 91686; 6/14/2006; 4:18 PM Page 1 of21 FOR DISCUSSION PURPOSES ONLY THE-CORPOKL\TrO~OF-THE-CITY-OF-PICKE-RING Consolidated Statement of Financial Activities -~ Year ended December 31,2005 2005 2004 Budget Actual Actual (Note 18) REVENUES Residential and farm taxation $ 26,281,384 $ 24,4 ,302 Commercial and industrial taxation 6,366,104 6 42,643 Taxation from other governments 7,004,703 ,736,363 User charges 9,438,073 9,260,151 Government grants and fees 3,815,492 537,046 Developer contributions and donations 282,500 607,555 Development charges and developer contributions earned 1,419,973 Investment income 568,060 Penalties and interests on taxes 1,455,787 Fines 379,320 Interest on promissory notes 1,905,294 Other 3,125,791 Total revenues 59,053,285 EXPENDITURES (Note 14) Current General government 9,377,042 10,250,908 Protection to persons and property 12,977,758 12,486,523 Transportation services 12,165,029 10,490,626 Environmental services 42,682 13,745 Social and family services 348,748 358,140 Recreational and cultural services 15,068,380 14,581,546 ,~ Plannino- and develo ment 1,749,085 1,776,151 51,728,724 49,957,639 1,368,255 1,161,949 516,495 968,100 253,167 189,459 11,797,450 6,644,547 2,562,144 190,000 6,244 280,300 15,314 21,472 2,826,290 3,207,192 2,545,732 4,600 4,411 17,434,995 11,286,580 5,841,546 71,023,309 63,015,304 55,799,185 3,227,016 1,861,993 (5,745,737) 2,985,417 5,1l6,093 (1,679,245) (807,000) (266,000) (1,110,725) (870,266) 4,244,800 5,031,000 8,400 (11,631) 287,000 267,000 321,112 (3,187) 2,565,555 (1,301,213) 4,146,916 (9,220) 44,397 $ (3,180,182) $ 1,674,984 $ 9,307,406 ---- -_._~---_._..- __ ______.~_.._.___._ u_ .... ---- ---- .------.-------- Worksh et in 2210 City of Pickering- December 31, 2005 Job # 91686; 6/14/2006; 4:18 PM Page 2 of2l FOR DISCUSSION PURPOSES ONLY '~-_'iQIif;~1' r- ~ THE-CDRPDRATrO~O~-THE-CITY-OF-PTCKERIN G Consolidated Statement of Changes in Financial Position Year ended December 31, 2005 -~,,- 2005 2004 NET (OUTFLOW) INFLOW IN CASH RELATED TO THE FOLLOWING ACTIVITIES OPERATING Net revenue $ Change in equity in Veridian Corporation Uses Increase in taxes receivable (116,730) Increase in accounts receivable Increase in other current assets Decrease in other current liabilities Decrease in WSIB benefit liabilities (3,187) (119,917) 222,510 11,572 309,651 4,073,700 7,682 -~- 3,544,473 4,237,289 8,400 77,869 321,112 4,183,636 8,630,622 1,529,477 11,764,805 (8,568,563) (11,865,752) 5,031,000 (807,000) (266,000) 1,968,000 437,880 (7,407,563) (6,662,872) (5,878,086) 5,101,933 8,589,242 3,487,309 $ 2,711,156 $ 8,589,242 Worksh et in 2210 City of Pickering- December 31, 2005 Job # 91686; 6/14/2006; 4;18 PM FOR DISCUSSION PURPOSES ONLY ~. Page 3 of21 The consolidated financial statements of The Corporation of the City of Picke ng (the "City") the representations of management prepared in accordance with generall accepted acco principles for local governments as established by the Public Sector Accou mg Board ("PS the Canadian Institute of Chartered Accountants. Significant account' policies adopte City are as follows: (a) Reporting entity (i) Consolidated statements THE CORPORATION OF THE CITY OF PICKERING Notes to the Consolidated Financial Statements December 31, 2005 1. SIGNIFICANT ACCOUNTING POLICIES The consolidated fmancial statements reflect he assets, liab' lties, revenues and expendihrres of the operating fund, capital d, reserve s and reserves. The reporting entity is comprised of the activitie of all committee of Council and the City of Pickering Public Library Board which is ~~d by the ity. All material inter-fund transactions and alan~e' . ated on consolidation. (ii) Proportionate consolidation -I The consolidated financial state ents reflect the ty's proportionate share ofthe assets, liabilities, revenues and expe ihrres of the Aj Pickering Transit Authority (APTA). (see Note 2). ~ All inter-entity transa ions an bala ces are eliminated when proportionately consolidated. ~ (iii) s f school boards and the Region of Durham The ta tion, other revenues, expendihrres, assets and liabilities with respect to the opera ons of the school boards and the Region of Durham are not reflected in these co olidated financial statements. Trust funds and their related operations administered by the municipality are not consolidated, but are repOlied separately on the Tmst Funds Statement of Financial Activities and Statement of FiJlancial Position. M Document in 2211 City of Pickering, December 31, 2005- Job: 6/14/06: 4:18 PM Page 4 of21 FOR DISCUSSION PURPOSES ONLY (ii) Short-term investments are comprised ofillghly liquid guar eed investment and are recorded at the lower of cost plus accrued interest jil~arket value. Tangible capital assets ~ Tangible capital asset expenditures incurred d . g the year are as capital expenditures in the consolidated statement offill cial activities. THE CORPORATION OF THE CITY OF PICKERING Notes to the Consolidated Financial Statements December 31, 2005 1. SIGNIFICANT ACCOUNTING POLICIES (continued) (b) Basis of accounting (i) Short-term investments (iii) Tax Capping the Ontario Fair (iv) Deferred revenue ~.. (v) The (vi) Cost is determined on a Gove ent transfers are recognized in the fmaneial statements in the period in willch the ents giving rise to the transfer occur, eligibility criteria are met, and reasonable es . nates 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- December 31,2005- Job; 6/14/06; 4:18 PM Page 5 of21 FOR DISCUSSION PURPOSES ONLY THE CORPORATION OF-THELITY-OF-pn:::'KRRING Notes to the Consolidated Financial Statements December 31, 2005 ~. 2. AJAX PICKERING TRANSIT AUTHORITY Effective September 4,2001, a joint Board of Management was established by e City ofPicke 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 bo ,commenced fective January 1, 2002. In January 2005, the Councils of the City of Pickering and the To n - Ajax passe a resolution agreeing to the transfer of the responsibilities for transit service to Durham (the "Region"). On January 1, 2006 the Ajax Pic ring Trans! u ority ("APT A") transferred its operations to the Region as part of the Du am Region Tr sit Commission in accordance with Regional By-law #85-2004. ~..., 2005 2004 . Financial position: Financial assets $ 1,004,441 $ 1,071 ,969 Non-frnancial assets 536,894 490,117 Liabilities (1,985,097) (1,826,710) Net liabilities $ (443,762) $ (264,624) $ (233,062) $ (57,524) (210,700) (207,100) $ (443,762) $ (264,624) $ 13,318,943 $ 11 ,574,369 (12,026,290) (10,300,066) (1,518,568) (1,309,065) $ (225,915) $ (34,762) $ (57,524) $ (170,849) (225,915) (34,762) 3,600 15,938 46,777 132,149 $ (233,062) $ (57,524) Negotiations between the City of Pickering, Town of ~'ax d the Regi are still underway as to the ultimate realization of assets and assumptions . il" es by e Durham Region Transit Commission During 2006, APTA will collect receivables an settle liabilities tstanding at December 31,2005. Any remaining fund balance will be settled 0 e negotiations w' the Region are completed. information for the Transit M Document in 2211 City of Pickering- December 31. 2005- Job: 6/14/06: 4:18 PM Page 6 of 21 FOR DISCUSSION PURPOSES ONLY 1'1' il,..~ '0 THE-C-ORP-ORATrO~OVTHE-CITY-o~--PrCKERING Notes to the Consolidated Financial Statements December 31, 2005 3. OPERATIONS OF SCHOOL BOARDS AND THE REGION OF DURH.Ai'\1 Further to Note 1 (a) (iv) requisitions are made by the Region of Durh requiring the City to collect property taxes and payments in lieu of prope The amounts collected and remitted are summarizes as follows: Taxation Payments in lieu of taxes $ 39,694,486 526,959 40,221,445 4. INVESTMENT VERIDIAN CORPORATION (a) Veridian Corporation is owned by the City o~' e' g, Tow of Ajax, Municipality of Clarington and the City of Belleville. Ve'ili oratio , as a government business partnership, is accounted for on the mod' led equ' asi in these [mancial statements. Veridian Corporation serves as the electri al distribution ut" . ty 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 nS~lemen ry consolidated [mancial information for the corporation and its subsidi . s for n d December 31 : 2005 2004 Financial Position: Assets Current Capital and inta b'b Other Total assets evenue Other income Expenses Net income for the year M Document in 2211 City of Pickering- December 31. 2005- Job; 6/14/06: 4:18 PM $ 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 FOR DISCUSSION PURPOSES ONLY ~.}' $ 70,709,680 121,166,690 1,979,006 $ 193,855,376 $ 27,726,836 75,294,000 12,055,488 115,076,324 67,285,173 24,910 11,468,969 78,779,052 $ 193,855,376 $ 180,210,703 5,460,962 181,130,219 $ 4,541,446 ~_. Page 7 of21 (i) Insurance clail ~ The Corpo tio Q e er of the Municipal Electric Association Reciprocal Insurance xchang, " "), which was created on January 1,1987. A reciprocal insuran exchange may e defmed as a group of persons formed for the purpose of exch ging reciprocal contracts of indemnity or inter-insurance with each other. M provides g eralliability insurance to member electric utilities. $ "~ THE-C-ORPDRATION-OF-THE-CITYUF-PICKERL.~G Notes to the Consolidated Financial Statements December 31, 2005 4. INVESTlVlENT VERIDIAN CORPORATION (continued) (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 30,496,196 1,359,414 (665,020) 1,108,821 $ 32,299,411 (c) Equity in Veridian Corporation 2005 2004 Balance, beginning of year Equity share of net income for the e Balance, end of year 58,443,431 3,227,016 61,670,447 $ 56,581,438 1,861,993 $ 58,443,431 -~> (d) Contingencies and guar statements are as follows: Corporation as disclosed in their fmancial M Document in 2211 City of Pickering- December 31. 2005- Job.. 6/14/06; 4:18 PM Page 8 of 21 FOR DISCUSSION PURPOSES ONLY ~~~.~ THE-CORPURATIUN-OF-THE-CITY-OF-pn:KERING Notes to the Consolidated Financial Statements December 31,2005 .~. 4. INVESTl\-fENT VERIDlAN CORPORATION (continued) (d) (continued) (ii) Other claims A class action claiming $500 million in restitutionary pa on Toronto Hydro on November 18, 1998. The actio Hydro-Electric Commission as the representative of all municipal electric utilities in Ontario which hav overdue utility bills at anytime after April 1 , 1981. The action has not yet been certified this time, it is not possible to quanti Corporation. '~ ossible to q tity the effect, if any, on the fInancial statements of d ther ore on the fmancial statements of the City for this n potential liability has been recorded in the fmancial (iii) eridian Corporation, under the terms of the shareholder agreement with Enersource Corporation, requires security to meet credit security requirements of First Source Energy Corporation ("First Source") to power suppliers for power purchase agreement for market settlement purposes. As at December 31, 2005, Vcridian Corporation's prop0J1ionate share of guarantees posted on behalf of Fir:st Source~Y~I1ersource Co:rporation.totallcd $2,53~,000. ~, M Document in 22JJ City of Pickering- December 31, 2005- Job: 6/14/06: 4:18 PM Page 9 of 21 FOR DISCUSSION PURPOSES ONLY ( e) Lease commitments , '-----THE-cURPUKt\TION-O~-THE-CITY-OF-PICKERING- Notes to the Consolidated Financial Statements ,- December 31,2005 ,~ 4. INVESTMENT VERIDIAN CORPORATION (continued) Future minimum lease payment obligations under operating leases ar 2006 2007 2008 2009 2010 Thereafter $ 5. PROMISSORY NOTES RECEIVABLE 6. Promissory notes are payable by Veridian Corp, ration and Verid' 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 November1,2006. These promissory note are convertible' to common shares at the option of the holder at the rate of 1 common share for e~l'OOO ofp cipa1 then outstanding on or before the maturity date. ~ DEFERRED REVENUE 2005 2004 $ 21,135,306 $ 19,496,777 2,103,060 2,166,696 19,166 14,035 722,039 161,515 850,684 1 819 264 1,601,076 26,649,519 23,440,099 1,008,786 673,733 $ 27,658,305 $ 24,113,832 M Document in 2211 City of Pickering- December 31, 2005- Job; 6/14/06: 4:18 PM Page 10 of21 FOR DISCUSSION PURPOSES ONLY ',",' ,'" / T. 'I ,- ":"-~"'" 6. DEFERRED REVENUE (continued) THE-CDRPURATrONOF-THE-CITY-O~-PrCKERING Notes to the Consolidated Financial Statements December 31,2005 Continuity of deferred revenue is as follows: Balance, beginning of year $ Restricted funds received General funds received Interest earned 4,656,118 928,925 5,585,043 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 acq~sh&ns0 ds are borrowed by the Capital Fund from Development Charges and Parkl nd deferred reve ue (obligatory reserve funds). These funds are secured by ten year prornisso notes with inter st rates of 5.8% and 5.2% and 5 year promissory notes with interest rates of 5. %. The financ' arrangements and ultimate repayment are approved by Council through the c ~get proc ss. For the purpose of these financial statements, the loans are included in am 0 v ed (Note 10). The following is a summary of the related loans negotiated, by ction. ~i 2005 2004 $ 3,122,129 2,002,544 334,009 97,748 $ 5,556,430 $ 3,647,747 2,081,757 515,868 134,783 $ 6,380,155 ~' Page 11 of21 M Document in 2211 City of Pickering- December 31, 2005- Job; 6/14/06; 4:18 PM FOR DISCUSSION PURPOSES ONLY ....._.--THE-CDRPDRATrONO~-THE-CITy-OF-prCKERlNG Notes to the Consolidated Financial Statements ,- December 31, 2005 l- I (a) Post employment benefit liability 8. POST ElVIPLOYMENT 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 ended health a d drugs. Coverage ceases at the age of 65. Dependent on eligibility, he h overage may e a shared frnancial responsibility between the City and the retired emp y~. The City so provides full time and permanent part-time employees a sick f e . ent d any unused entitlement is accumulated year to year. This accumu ted entitle t' not vested and therefore does not get paid out at the time of retirem t or terminatio. The most recent actuarial valuation of the post-employment benefits w performed at J uary 1, 2004. (i) Discount Rate The present value as at Dece discount rate of 6%. ~-' (ii) Dental Costs The current trend co (iii) M Document in 2211 City of Pickering' December 31. 2005- Job; 6/14/06; 4:18 PM Page 12 of21 FOR DISCUSSION PURPOSES ONLY -t; ---- -'r--":'" . ~-,.-"'--~ .,--, -- -.----1' tj - lrf~ -- -I f Accrued WSIB liability, beginning of year Expense for the period Benefits paid during the period Accrued WSIB liability, end of year THE-cDRP-ORA TfOX-OF-THE-CI TY-OF-prC.KERINli Notes to the Consolidated Financial Statements December 31, 2005 8. POST EMPLOYMENT BENEFITS LIABILITY (continued) (b) Workplace safety and insurance liability (WSIB) Effective January 1, 2001, the Corporation of the City of Picke ' g became a Sc employer under the Workplace Safety & Insurance Act and follow a policy of self' for all its employees. Information about the City's WSIB liability is as follows: 2004 $ 634,973 76,903 (80,090) $ 631,786 Management, using best estimates, iden ' led that the amo t provided in the liability account at year-end of $952,898 (2004 - $631 86) is sufficien to cover the potentia1liability of all existing claims granted by WSIB an outstanding as a ecember 31, 2005. The outcome of any claims filed ith ~ terminable at this time. A WSIB Reserve Fund was stab1ished ~o, The Reserve Fund balance at December 31, 2005 was $589,575 (2004 $378,731). In dition, the City purchased two insurance policies that protect the City ag , st significant cl lIDS to the Corporation, The occupational accident insurance pays loss ~' up~ to $350 00 per work related accident. The excess workers compensation inde 't ance h a $350,000 deductible and will pay for claims up to and including $25 0 r related accident, 9. LONG-TERM L ILITIES ,~' (a) e oflong-term r bilities is made up of the following: 2005 2004 $ 7,984,000 $ 8,791,000 -~ M Document in 2211 City of Pickering- December 31.2005- Job; 6/14/06; 4:18 PM Page 13 of21 FOR DISCUSSION PURPOSES ONLY THE-CURP-ORATION-OF-THE-CITY-OF-PItKERIND Notes to the Consolidated Financial Statements December 31,2005 ~ 9. LONG-TERM LIABILITIES (continued) (b) The above long-term liabilities have maturity dates of November 1, 20 , July 15,2014 nd December 23, 2014 with various interest rates ranging from 3.2500 to repayments are summarized as follows: 2006 2007 2008 2009 2010 Thereafter (c) Long-term liabilities include a principal sum 0 $1, may be raised by the issuance of debentures ver a (d) ;~ (e) Interest expense recorded in the $277,609). 10. AMOUNTS TO BE REeO M Document in 2211 City of Pickering- December 31, 2005- Job: 6/14/06: 4:18 PM FOR DISCUSSION PURPOSES ONLY o as' efundable Debentures' which e . d not to exceed 10 years. 2005 2004 $ 2,127,250 $ 2,118,850 363,323 253,085 5,556,430 6,380,155 7,984,000 8,791,000 589,575 378,731 $ 16,620,578 $ 17,921,821 Page 14 of21 THE C(fRPORATION OF THE CITY OF PICKERING Notes to the Consolidated Financial Statements December 31, 2005 II. MUNIClP AL F(jND BALANCES AT THE END OF THE YEAR The City's fund balances are comprised of the following: (a) Operating Fund Balance 2004 For general reduction oftaxation 88,944 (b) Capital Fund Balance 2004 Funds available for acquisition of tangible capital assets $ 7,712,951 Acquisition of tangible capital assets expected to be Financed by long-term liabilities ,110,939) (31,170) Financed by taxation or user char s (199,752) (221,047) Financed by donations (298,375) (416,793) 4,079,053 $ 7,043,941 (c) Reserves and Reserve Funds ~~ 2005 2004 $ 400,000 $ 400,000 915,514 940,514 722,843 758,175 10,774,911 9,053,320 3,388,965 2,619,565 484,204 1,921,332 237,106 1,025,740 342,533 233,160 75,000 25,000 1,095,129 20,000 18,456,205 16,976,806 set aside for special purposes 265,492 380,604 1,348,078 1,455,054 66,087 33,713 589,575 378,731 otal Reserve Funds 2,269,232 2,248,102 Total Reserves and Reserve Funds $ 20,725,437 $ 19,224,908 ~r M Document in 2211 City of Pickering- December 31. 2005- Job: 6/14/06: 4;18 PM Page 15 of21 FOR DISCUSSION PURPOSES ONLY ~~ THE CORPORATION OF THE CITY OF PICKERING Notes to the Consolidated Financial Statements December 31, 2005 12. PENSION AGREEMENTS The municipality makes contributions to the Ontario Municipal Employ s Retirement F d (OMERS), which is a multi-employer plan, on behalf of the members of . s staff. The pi is a defined benefit plan which specifies the amount of the retirement bene t to be receive y the employees based on the length of service and rates of pay. Contributions on account of current ".-vicefor 2005 were $1,461,25 f~ - $1,400, 7). TRUST FUNDS u~ Trust funds administered by the municipality amounting t $260,785 (2004 $255,359) have not been included in the Consolidated Statement of Financia Position nor ha their operations been included in the Consolidated Statement of Financial Ai;l~ CLASSIFICATION OF EXPENDITURES BY ~ The Consolidated Statement of Financial Ac. ities presents t e expenditures by function; the following classifies those same expenditures object: 13. 14. 2005 2004 Salaries, wages and employee benefit $ 34,725,091 $ 32,825,598 ~ Operating materials and supplies 13,475,404 13,692,883 Contracted Services 2,284,134 2,150,762 Rents and fmancial expenses 1,032,190 1,035,764 External transfers to others 211,905 252,632 Tangible capital assets 11,286,580 5,841,546 Total expenditures by ob. ct $ 63,015,304 $ 55,799,185 15. receive electricity and services from Veridian Corporation, a corporation in rinc. al shareholder. Veridian also provides streetlight and power line a ontract basis. 2005 nsactions Revenues Interest 0 promissory notes Proper! taxes levied Expens Ele trical energy and services Balan es counts payable rornissory notes receivable $ 1,905,244 $ 40,616 $ 1,727,633 $ 156,947 $ 25,069,000 M Document in 2211 City of Pickedng- December 31. 2005- Job: 6/14/06: 4:18 PM FOR DISCUSSION PURPOSES ONLY 2004 $ 1,905,294 $ 31,384 $ 1,690,604 $ 283,550 $ 25,069,000 Page 16 of2l n THE-CD~-ORATrO~OF-THE-CITY-OF-PTCKKRING Notes to the Consolidated Financial Statements December 31,2005 16. GUARANTEES 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 the se of various fa ilities or land. Under the terms of these agreements the City agrees to in mnify the count arties for various items including, but not limited to, all liabilities, 10 s~ts, and d ages arising during, on or after the term of the agreement. The maximu a of any otential future payment cannot be reasonably estimated. (ii) (iii) 17. The Continge y Reserve of $10,774,911 is sufficient to cover any potential liability that may arise from the sett ment of these property assessment appeals. The ity has been named as a defendant in certain legal actions in which damages have been so bt. The outcome of these actions is Dot detenninable as at the date of reporting and cordingly, no provision has been made in these financial statements for any liabilities which may result: M Document in 2211 City of Pickering- December 3/,2005- Job " 6/14/06; 4:/8 PM Page 17 of21 FOR DISCUSSION PURPOSES ONLY ~, c~: '~ THE-CURP-ORATltlN-OF-THE-CITY-OF-PIC-KERING Notes to the Consolidated Financial Statements December 31, 2005 18. BUDGET FIGURES The approved operating and capital budgets for 2005 are reflected on the Co 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-orien d basis, the cost of which may be carried out over one or more years and, therefore, may not b co parable wit e current year actual amounts. As well, the municipality does not have a bud et activity w- -n Reserves and Reserve Funds, with the exception being those transactio w ow thr gh either the operating or capital fund budgets. Budget figures have been re ass! ed e urposes of these statements to comply with PSAB reporting principles. 19. COlVIPARATIVE FIGURES Certain comparative figures have been presentation adopted in the current year. ~ M Document in 2211 City of Pickering- December 31. 2005- Job: 6/14/06: 4:18 PM FOR DISCUSSION PURPOSES ONLY the fmancial statement Page 18 of21 THE-CD1U>-ORATIOKOF-THE-CITrOFPTCKERING Consolidated Schedule of Operating Fund Financial Activities and Fund Balance Year ended December 31, 2005 2005 2004 Budget Actual REVENUES Residential and farm taxation $ 24,4 ,302 Commercial and industrial taxation 6 42,643 Taxation from other governments ,736,363 User charges 9,260,151 Government grants and fees 317,633 Developer contributions and donations 157,896 Investment income 477,979 Penalties and interest on taxes 1,455,787 Fines 379,320 Interest on promissory notes 1,905,294 Other 3,116,639 Total revenues 56,865,007 EXPENDITURES General government 9,377,042 10,250,908 Protection to persons and property 12,977,758 12,486,523 TranspOltation services 12,165,029 10,490,626 Environmental services 42,682 13,745 Social and family services 348,748 358,140 Recreational and cultural services 15,068,380 14,581,546 ~^ Planninc:r and develo ment 1,749,085 1,776,151 Total ex enditures 51,728,724 49,957,639 NET REVENUES 9,149,531 6,907,368 (3,714,378) (5,968,131) (4,604,156) (248,208) (1,671,640) (1,163,779) (1,679,245) (807,000) (266,000) (1,110,725) (846,276) 321,112 (3,187) 8,400 (11,631) (9,220 44,397 (5,641,831 ) (9,237,204) (6,850,632 (110,000) (87,673) 56,736 110,000 88,944 32,208 $ $ 1,271 $ 88,944 -" Worksh et in 2210 City of Pickering- December 3{ 2005 Job # 91686 " 6/14/2006,' 4,'18 PM Page 19 of21 FOR DISCUSSION PURPOSES ONLY Worksh et in 2210 City of Pickering- December 31,2005 Job # 91686; 6/14/2006; 4:18 PM FOR DISCUSSION PURPOSES ONLY Page 20 of21 THE-CURJ>ORATIUN-OF-THE-CITY-OF-PlCKERING Consolidated Schedule of Reserves and Reserve Funds Financial Activities and Fund Balance Year ended December 31, 2005 2005 Budget REVENUES Developer contributions and donations Investment income $ $ NET TRANSFERS FROM (TO) OTHER FUNDS Operating Fund Ca ita! Fund Total net transfers 1,163,779 (351,371) 812,408 CHANGE IN RESERVES AND RESERVE FUND BALANCE 957,720 RESERVES AND RESERVE FUNDS, BEGINNING OF YEAR RESERVES AND RESERVE FUNDS, END OF YEAR 19,224,908 18,267,188 $ 20,725,437 $ 19,224,908 ~' ~'" Worksh et in 2210 City of Pickering- December 31,2005 Job # 91686: 6/14/2006: 4:18 PM Page 21 of21 FOR DISCUSSION PURPOSES ONLY "~' / ;' / / / / / / / I / / / / / / / Financial Statements of i/ II,' (// /) ~,j/ ~". CITY OF PICKERI G'/ PUBLIC LIBRA~ BOARD Decemb" 31, 2005 ~. /,c~ '~ / /-',,- 'I"~ \ /: ) L____ ~ /-~/ '~:::"'., "I MW Document in 22I1,f City of Pickering Public Llbrory Board {.' 6/14/06; 4.37 PM FOR DISCUSSION PURPOSES ONLY err Auditors' Report / / / / / / / Deloitte & Tau,!' LLP 5140 YongeJtreet Suite 1700/ / Toronto ON M2N 6L7 II Canad<V , I Tel/~6-601-6150 / Ix: 416-601-615; wW.deloitte.ca II; / / !/~~) / / / ~/) << /1 We have audited the statement of financial position of t City ~fJRkkeri g Public Library Board as at December 31, 2005 and the statement of financial actijlties and funJ' b ance for the year then ended. These financial statements are the responsibility of he Board's man ement. Our responsibility is to express an opinion on these financial statements bas d on our audit. / / I ~ To the Members of The City of Pickering Public Library Board, Members of Council, Inhabitants and Ratepayers of the City of Pickering We conducted our audit in accordance with anadian genera accepted auditing standards. Those standards require that we plan and perform a auditto obtain asonable assurance whether the financial statements are free of material misstatem t. Ai~>;~;'in udes examining, on a test basis, evidence supporting the amounts and disclosures tr< the finan2i~ stat~ments. An audit also includes assessing the accounting principles used and signifi ant estimates v~e by management, as well as evaluating the overall financial statement presentati . / In our opinion, these financial st tements present airly, in all material respects, the financial position of the City of Pickering Public LilSrary,Board as a ecember 31, 2005 and the results of its operations and the changes in its financial pbsttton)(QLthe y ar then ended in accordance with the Canadian generally accepted accounting princi es.'<:!:.-----J <>. v '~" Chartered Acco /,-. Toronto, 0 ari,0/~<'\ March 31 006 '~;::.) ) -"J' / /Document in 2211-1 City of Pickering PuMc Llbrory Board (6/14/06; 4:37 PM FOR DISCUSSION PURPOSES ONLY .~, ~ ~. I CITY OF PICKERING PUBLIC LIBRARY BOARD Table of Contents December 31,2005 Statement of Financial Position Statement of Financial Activities and Fund Balance Notes to the Financial Statements M Document in 2211-1 City of Pickering Public L,brary Board (6/14/06: 4.37 PM FOR DISCUSSION PURPOSES ONLY / / / 1/ / / I 2 3-5 CITY OF PICKERING PUBLIC LIBRARY BOARD Statement of Financial Position December 31, 2005 / / / / / I / ,/ / /' -' / / / FINANCIAL ASSETS Cash Accounts receivable Due from Government of Canada LIABILITIES CURRENT Accounts payable and accrued libilities Due to the Government of Canada Due to City of Pickering Post-employment benefits obligation (Note 3) NET FINANCIAL LIABILITIES NON-FINANCIAL ASSETS Prepaid expense Inventory NET LIABILITIES BOARD POSITION //()!- AMOUNTS TO BE RE VE~P~ ~ ") / / (il / /~'1 / / / /" $ , / I (!~f "~ FOR DISCUSSION PURPOSES ONLY $ 2~1 2,01 $ 23J? - (/"~~', " '" ',I / 17, ( ~~ 4,918 128,800 221,629 (219,338) 90,538 $ (128,800) $ (128,800) 2004 $ 9,929 22,405 128,200 160,534 (151,036) 21,658 1,178 $ (128,200) $ (128,200) Page 1 of 5 ~, ~. '~~ .~ I / / / / / / / / ;/ 2004 / Actual Actual I $ 3'788'~.76 $ 3'631~ 2i4,~72 367,528 10;J99 ;: 6,734 130,425:>" 172,788 'v 196,852 186,326 4,401,024 4,367,029 / / 2, 10,323 520,522 3,030,845 CITY OF PICKERING PUBLIC LIBRARY BOARD Statement of Financial Activities and Fund Balance Year ended December 31,2005 REVENUES City of Pickering grants - operating City of Pickering grants - capital Federal grants Province of Ontario grants Fines and other receipts EXPENDITURES Operating Salaries Salaries and wages Fringe benefits Material, supplies and utilities Books Utilities Other supplies Services Repairs and maintenance Insurance Travel Audit and legal Advertising Conventions Postage Telephone Freight Seminars and ducation Miscellaneo s I CREASE IN A aUNTS TO BE RECOVERED INCREASE IN ON-FINANCIAL ASSETS CHANGE I FUND BALANCE FUND B~ oANCE, BEGINNING OF YEAR FUND J3ALANCE, END OF YEAR Workshe tin 2211 City of PICkering Public Library Board (#95077); 6/14/2006,' 4:38 PM Budget $ 3,847,865 320,390 106,425 182,221 4,456,901 / // 2, 7,381 /) 32,450,( 2,999,831 ,,) 245,379 34,917 10,872 5,600 6,575 7,490 4,706 60,895 420 7,500 12,168 396,522 4,136,511 320,390 4,456,901 $ FOR DISCUSSION PURPOSES ONLY / 2005 540,204 177,551 41,298 759,053 264,224 32,622 10,699 10,520 7,102 4,093 5,113 51,941 9,033 9,609 404,956 4,194,854 274,472 4,469,326 (68,302) 600 67,702 $ / / 2,390,081 530,860 2,920,941 507,621 179,315 46,761 733,697 237,455 53,546 10.1 21 8,196 4,811 7,380 5,591 58,216 227 8,976 8,436 402,955 4,057,593 367,528 4,425,121 (58,092) 37,100 20,992 $ Page 2 of 5 / / 1. / / /1- / / / / I / SIGNIFICANT ACCOUNTING POLICIES / I The financial .tatement. of the City of Pickecing Public Libmry Boa<d .')f~ cepce"otat.k of management prepared in accordance with Canadian generally acce~d ;accounting ~n~~i~les established by the Public Sector Accounting Board (PSAB) of the Capadt~~titute of Chartered Accountants. / ~;) Significant accounting policies adopted by the Library Board are 'follows: / BasIs of accounting I (a) Accrual basis of accounting I(? A Revenue and expenditures are reported on the crual'B(sis of a ounting. The accrual basis of accounting recognize revenues as they are amed; experiait es are recognized, as they are incurred and measurable as a result of the ceipt of goods d services and the creation of a legal obligation to pay. CITY OF PICKERING PUBLIC LIBRARY BOARD Notes to the Financial Statements December 31,2005 (c) The historical cost and accumu ted\~IU~r:t!~atio for capital assets are not recorded for Library Board purposes. Capi~ assets 'aYc{tllred uring the year are reported on the statement of financial activities and fum(balance as C~P7 expenditures in the year of acquisition. Post employment benefit and Compensatf Absences The present value 0 the cost of pr~ding employees with future benefits programs is recognized as empl yees"eam these titlements through service. Actuarial gains or losses are amortized on a tr'tithi:)fim~ basi over the estimated average remaining service lifetime (EARSL) of e 10yees;(Tliilict ary estimated EARSL to be 17 years. "~ (b) Capital assets ~-' (d) The pr paration of fin cial statements in conformity with Canadian generally accepted acco ting principles r quires management to make estimates and assumptions that affect the reg rted amount of sets, liabilities and the disclosure of contingent liabilities at the date of tile fyian~iql state ents and the reported amounts of revenues and expenditures during the terib(t"Act~al r suits could differ from those estimates. '''~/ 2. APIT AL EXP DITURES / Capital expe itures were incurred to acquire furniture and equipment in the amount of $274,472 (2004 - $3 ,528). / / ~' /Document in 2211.1 Cdy of Pickering Public Library Board (,6/14/06: 4:37 PM FOR DISCUSSION PURPOSES ONLY I Page30f5 / / / Ii / // -/ POST EMPLOYMENT BENEFITS OBLIGATION I / The Library makes available to qualifying employees who retire befot the age of ();5, the opportunity to continue their coverage for such benefits as extended heJrth/and drugs. <;::tverage ceases at the age of 65. Dependent on eligibility. health coverage/1na~be a sharecY financial responsibility between the Library and the retired employees. The L(brary also provi/~s full time and pennanent part-time employees a sick time entitlement ,rid any unu~ed /entitlement is accumulated year to year. This accumulated entitlement is notl'ested and theref.0re does not get paid out at the time of retirement or termination. The most recent actuarial va~tion of the post- employment benefits was performed at January 1, 2004. II / Information about the Library's benefits liabilities is as fo1I6'ws: / I II <~/(I .~2005 Post-employment benefits liability, beginning Ofyi'</<~' . /128,200 Expense for the period / 14,100 Prior Period Service Costs - / Amortization of actuarial loss 800 Interest expense 8,500 Benefit Payments (22,800) Post-employment benefits liability, e $ 128,800 ~ 2005 Accrued post-employment enefits obligatio $ 139,300 Unamortized actuarial 10 (10,500) Post-employment ben ItsI:iabjl~ty $ 128,800 '~~:;,-~ The main actuaria assumption~'i;m oyed in the actuarial valuations are as follows: (0) DL'COuf" The ;Present value as t December 31, 2005 of the future benefits was determined using a ~i ou>>._.t. ra. .te of 6%. ;f.~-'<:: (b) enral~~9!D) 'v The current tr nd cost at January 1,2004 was 4.5% per annum. "'~ CITY OF PICKERING PUBLIC LIBRARY BOARD Notes to the Financial Statements December 31, 2005 3. ,~ (c) / / / 2004 $ 91,100 13,300 36,100 800 8,500 (21,600) $ 128,200 2004 $ 139,500 (11,300) $ 128,200 Healt costs were assumed to increase at 10% in 2005 and decrease by 1 % increments per year to a ultimate rate of 5% per year in 2010 and thereafter. M Document In 2211-1 City of Pickerlflg Pub/lc Library Board (' 6/14/06: 4..37 PM FOR DISCUSSION PURPOSES ONLY I / Page 4 of5 December 31,2005 / / - I / / / / PENSION AGREEMENTS / The Library Board makes contributions to the Ontario Municipal Emp yees Retiremenj~und (OMERS), which is a multi-employer plan, on behalf of eligible member ofj~s. s"taff. fThe Pfa~ lis a defined benefit plan that specifies the amount of the retirement be ef(/(~,be recei ed by the employees based on the length of service and rates of pay. / "~) Contributions in the amount of $125,264 (2004 - $122,244) w7paid to OMERQ~ behalf of its members during the year. / 7 Vl STATEMENT OF CHANGES IN F1NANCIALPosf/f ^ / A statement of changes in financial position has not ),eefr ~e~ented, , the related information is readily determinable from the financial statemen'7s p esented. "~ / GUARANTEES / In the normal course of business, the LI'rbrar~ters into agre ments, which contain guarantees. The Library Board's primary guarantees are a follows: .~ (i) The Library indemnifies emplo/ees a~jtrd mbers for various items including, but not , limited to, all costs to settl; tGits or actl~1;1s e to association with the Library, subject to certain restrictions. The Li~!ary Board has p chased liability insurance to mitigate the cost of any potential future suits? actions. Th~t m of the indemnification is not explicitly defined, but is limited to the peyfod over which t indemnified party served as an employee or board member of the Li~ra Y BO, ard. The m imum amount of any potential future payment cannot be reasonably esti ted.~, IF')) (ii) The Library B rd ha:i:~~i~cfi 0 agreements that may include indemnities in favour of third parties, such s purchase'ilbd Ie agreements, confidentiality agreements, engagement letters with advi rs and consul nts, outsourcing agreements, leasing contracts, information technolo agreements a Cl service agreements. These indemnification agreements may requir the Library B}lard to compensate counterparties for losses incurred by the cou erparties as a reSult of breaches in representation and regulations or as a result of lif atiQ..Q~ claims oystatutory sanctions that may be suffered by the counterparty as a ! n~{qu, ~.,n,<(\ of tI;e' transaction. Th~ ter~s of these indemnities are not explic~tly defined and the rrta~~I11Y~ a ount of any potential reimbursement cannot be reasonably estimated. '''J he nature of t se indemnification agreements prevents the Library Board from making a ~easonable 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 similar mdemnification agreements and therefore no amount has been accrued in the Statement of Final I Position with respect to these agreements. / / / / II / / / CITY OF PICKERING PUBLIC LIBRARY BOARD Notes to the Financial Statements I / / 4. 5. 6. ~?' ~'i' M Document In 2211-1 City of Piekenng PuMe L,brory Board (6/14/06: 4037 PM Page 5 of5 FOR DISCUSSION PURPOSES ONLY .~~ .~ / 1 Financial Statements of THE CORPORATIO THE CITY OF PIC TRUST FUNDS December 31,2005 /? ~ '" ;( o F~" ,;) RING / M W Document in 2212 Pickering Trust Funds (- 6/14/06, 4;51 PM FOR DISCUSSION PURPOSES ONLY Auditors' Report / / / / / / / Deloitte & T. ~/che LLP II 5140 Yonge'Street Suite 1700 Toront9,ON M2N 6L7 / -, Canacj;j I Te0416) 601-6750 / E x: (416) 601-6151 www.deloitte.ca / / To the Memb", of Coune;l, Inhab;tanls and Ratcpaym / of The Corporation of the City of Pickering I We have audited the statement of financial position of the T~F51n~s of the orporation of the City of Pickering as at December 31, 2005 and the statement of finrcia~~cJtvities an fund balances of the Trust Funds for the year then ended. These financial state~~,:!(:re the resp~1Jsib' Ity of the City's management. Our responsibility is to express an opinion on these fij_ial statements 'b ed on our audit. We conducted our audit in accordance with Can;ic1ian generally cepted auditing standards. Those standards require that we plan and perform an arIit to obtain reas nable assurance whether the financial statements are free of material misstatement. An audit inc~ud s examining, on a test basis, evidence supporti.ng the. ar:lOunts and discl~sur.es in th ~n~~ciaJ~ate nts. An audit also includes assess.ing the accountIng pnnclples used and slgmfican estlmat~;Z/fuaae y management, as well as evaluatIng the overall financial statement presentation. \\\ In our opinion, these financial state ents present fair , In all matenal respects, the financial posItion of the Trust Funds of the Corporatio of the City of B ckering as at December 31, 2005 and the results of operations and changes in finan~l position of the rust Funds for the year then ended in accordance with Canadian generally accepted ;t~~I1!ing principl s. /~{y '" ,ant; / II i,;; ~ ~~ FOR DISCUSSION PURPOSES ONLY ~ ~ j _/ / / / / /' / / / / / / / / / Tot~( ~ ;/ 1$ 'vI '~, ) 24 571 '" ' 250,414 250,41y4.J 220,363 5,077 / 5,077 4,310 - / 5,29; 6,115 $ 255,4?1 $ 260;,85 $ 255,359 jr/ L $ 255411? $ 260,785 THE CORPORi\TION OF THE CITY OF PICKERING TRUST FUNDS Statement of Financial Position December 31,2005 FINANCIAL ASSETS Cash Investments Interest receivable Loans receivable TRUST FUND POSITION OHRP $ $ $ 5,294 5,294 5,294 2005 Dorothy Card Estate / / / 2004 / 7 Total/ Worksh et in 22// p,(:kenng Trust Funds (#95078); 6/14/2006: 4.54 PM $ $ 255,359 ~-- \~( \.) Page 1 of3 FOR DISCUSSION PURPOSES ONLY / / / / / / / / / I THE CORPORATION OF THE CITY OF PICKERING TRUST FUNDS Statement of Financial Activities and Fund Balances Year ended December 31, 2005 / / / II _ / Totl -;I /. ~ /7;222 $ /6,694 U1;V 1 96 2005 Dorothy Card Estate OHRP REVENUES Interest 6,247 $ 975 $ EXPENDITURES Provincial payments Administration charges 1,706 90 1,796 810 42 852 NET REVENUES (EXPENDITURES) (821) 6;247 // ;'. ('''JI ~,,>, 249,244'; / 5,842 FUND BALANCE, BEGINNING OF YEAR FUND BALANCE, END OF YEAR $ /K- / \~(::; \) ~L / <::<~~'.-'_/ '.) 255,359 249,517 $ 255,359 $ 260,785 ;;~w ~. Page 2 of3 Worksh et In 2211 Pickering Trust Funds (#95078)' 6/14/2006: 4:54 PM FOR DISCUSSION PURPOSES ONLY 1. / / I / / / / / / The financial statements of the Trust Funds of the The Corporation of the efty of Pickering zire the representations of management prepared in accordance with Can51diaJb generally ;kcepted accounting principles. / l/'~", / ~..~ / Significant accounting policies adopted include: L '"~/ Basis of accounting / Revenues are recorded in the period in which the transactio s or events occvted that gave rise to the revenue. / / Expenditures are reported on the accrual basis of acco nti~h1ch reco nizes expenditures as they are incurred and measurable as a result of the receip of good5'6~servi es and the creation of a legal obligation to pay. '~ / / .~ THE CORPORATION OF THE CITY OF PICKERING TRUST FUNDS Notes to the Financial Statements December 31,2005 ACCOUNTING POLICY Investments ~ Investments are recorded at cost. The cost investments ap oximates their fair market value. 2. ONTARIO HOME RENEWAL PRO ~~;. / The Ontario Home Renewal pr~m ("O~~ ;was established by the Ontario Ministry of Housing in 1973 to provide gra~s for municipaljries to make loans to assist owner occupants to repair, rehabilitate and improv {heir homes to loeal property standards. Individual loans are limited to $7,500 of which the maxi m forgivable p ion is $4,000. Effective July 16, 1993, e Province of ntario discontinued this program. Unused funds were ~ remitted to the Provinc o11;;M~Ich I, 19 4. Outstanding balances of loans issued prior to July 16, 1993 will continue to e adqli9iStered nder the terms of the original program. The City continues to administer the ollection"(j& an outstanding loans and remit the proceeds, net of a 5% administration feifto the Ministry Municipal Affairs and Housing. "OHRP" loa~ceivable at D ember 31, 2005 are comprised entirely of repayable loans of $5,294 (2004 - $6,/15). In the eve of the sale or lease of the home or in the event of the homeowner ceasing tloccupy the horrie, the balances of the repayable loan immediately become due and / payable y......t.hcQo..meoz:n . (/~'" D OTHY'bA~D ST A TE "j 3. he City of Pic ering has established a trust fund for the Dorothy Card Estate for the care and upkeep of th destitute elderly. The fund balance is comprised of cash, investments and accumulated 'nterest amounting to $255,491 (2004 - $249,244). 4. STATE ENT OF CHANGES IN FINANCIAL POSITION II ^ st tement of changes in financial position has not been presented as the information is readily de rminable from the information provided. Page 3 of3 M Document in 2212 Pickering Trust Funds {.' 6/14106; 4:51 PM FOR DISCUSSION PURPOSES ONLY