HomeMy WebLinkAboutCS 17-09
REPORT TO
EXECUTIVE COMMITTEE
ERING Report Number: CS 17-09
Date: July.6, 200Y 9 8
From: Gillis A. Paterson
Director, Corporate Services & Treasurer
Subject: 2008 Year End Audit
Recommendations:
1. That Report CS 17-09 of the Director, Corporate Services & Treasurer be received;
2. That the Audit Results Report as submitted by Deloitte & Touche LLP be received
for information; and,
3. That the 2008 draft Audited Consolidated ;Financial Statements for the City of
Pickering be forwarded to Council for approval
Executive Summary: This report provides the auditor's Audit Results report,
independence letter and the draft Audited Consolidated Financial Statements for the year
ended December 31, 2008.
I am pleased to advise that once again, the auditor did not find it necessary to issue
a Management Letter for 2008 and they have Issued a letter to that effect which is
attached. An update of comments previously identified and their current status has
been attached.
Financial Implications: The financial results for 2008 were once again favourable and
contributed to the City being able to bring in a small property tax increase for 2009.
However these results, as in prior years, are primarily a result of one-time occurrences
and can not be relied upon to continue year after year to produce these favourable
results.
Sustainability Implications: This report does not contain any sustainability
implications.
Background: The audit of the consolidated financial statements for the year ended
December 31, 2008 has been completed. The auditor's Report to the Executive
Report CS 17-09 Date: July 6, 2009
2008 Year-End Audit Page 2
a ~1 9 9
Committee - Audit Results is included as Attachment 1 and also includes the auditor's
independence letter. This report, prepared by beloitte & Touche LLP, summarizes the
results of the December 31, 2008 audit.and comments on significant matters regarding
the auditor other matters they may believe to be of interest to you. Nothing of
significance was noted. On an annual basis the auditor is required to communicate all
relationships between the City and the Firm that may impact on their independence in
addition to confirming their independence with respect to the City. The Independence
Letter in Appendix 1 of the attachment confirms that Deloitte & Touche LLP is
independent with respect to the City.
Again this year, the auditor did not identify any new management comments and a
letter has been prepared indicating same. However an update has been prepared by
staff for comments previously identified and their current status. This summary is
included as Attachment 3.
The draft Audited Consolidated Financial Statements are included as Attachment 2.
They 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. The
Consolidated Financial Statements includes the activities of the City of Pickering Public
Library Board. The City's investment in Veridiah Corporation is accounted for on a
modified equity basis which means the City includes its share of Veridian's income or loss
in the Consolidated Financial Statements.
I am pleased to advise the Committee there were no problems or questionable items 1.
have to report to you at this time. However I would like to summarize some financial
highlights. Overall net assets increased over prior year by approximately $9.0 million.
This was due to an increase in financial assets of approximately $20.0 million offset by an
increase in liabilities of approximately $11.0 million.
Financial Assets
The change in financial assets from prior year was due to the City's increase in the
investment portfolio of $16.9 million combined with increases in taxes receivable and the
increase in the investment in Veridian Corporation.
The investment portfolio balance under management increased by $16.9 million over the
prior year. The primary contributing factors were the large receipt of funds in November
for the debentures issued on the City's behalf of $8.5 million and the Investing in Ontario
Provincial grant of $3.9 million in addition to the overall increase in deferred revenue of
approximately $3.7 million attributed to collection of Development Charges and Federal
Gas Tax funds.
The taxes receivable increase of approximately $1.5 million over the prior year is
reasonable since total taxes billed increased over the prior year. The outstanding
Report CS 17-09 Date: July 6,2009
2008 Year-End Audit Page 3 2 Q Q
receivable balance at December 31, 2008 represents 8.9% (2007 - 8.3%) of total tax
revenue. This slight decline in collections could be a reflection of the downturn in the
economy in the latter half of 2008.
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 total liabilities of approximately $11.0 million is primarily due to the
increase in deferred revenue of approximately $3.7 million and the net increase in long-
term liabilities of $7.3 million.
Deferred revenue increased by approximately $3.7 million which arises from the increase
in the obligatory Reserve Funds. The Obligatory Reserve funds are made up of the
following: Development Charges, Parkland, Thilyd Party/Developer's Contribution 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 balances increased because of the timing of
receipt of funds and occurrence of related capital expenditures.
The net increase in long-term liabilities of approximately $7.3 million represents the
debentures issued on the City's behalf of $8,506,000 offset by the annual principal
repayment of the outstanding debentures.
Revenues & Expenditures
Consolidated revenues and expenditures are comparable with the budget with the
exception of Government grants and fees, General government expenditures and
Planning and development expenditures which are discussed below.
The budget for Government grants and fees includes provincial and federal grant monies
for both current and capital expenditures but the amount primarily represents grants for
capital related expenditures. The higher revenue reported compared to budget is
primarily due to the Investing in Ontario grant of'$3.9 million received in November 2008.
This amount was included in revenue upon receipt of the funds and will be reported in
capital budget figures when it is utilized for future capital projects. This amount in
conjunction with the debenture funds, also received in November 2008, contributed to the
significant increase in the Capital Fund balance from prior year.
General government expenditures, which includes purchased services, insurance, tax
write-offs, contingency and Administration and Corporate Services departments was
underbudget by approximately $2.3 million. There is not one specific factor driving this
under expenditure but multiple underages in cost centres within the Departments and the
contingency account.
Report CS 17-09 Date: July 6,!,2009
2008 Year-End Audit Page 4
201
Planning and development expenditures are underbudget by approximately $1.6 million.
This is primarily a result of under expenditures in the Planning Division consulting account
of $1.3 million which arose from some studies not being started or not completed during
2008. For example the Official Plan Review - Phase 2, budget of $200K, had no
expenditures incurred. The Seaton Neighbourhood Plan, budget of $800K, to be funded
100% from landowners, had no expenditures as funds were not received from the
external parties. This in turn also contributed to the underexpenditure seen in the
revenue line for Other Contributions and Donations.
As you are aware capital expenditures for projects may be incurred over multiple years
therefore comparisons of actual to budget are not meaningful. Total capital expenditures
incurred were significantly lower than the 2008 budgeted amount. Approximately $7.5
million of the total capital expenditures of $9.6 million were for 2008 approved projects.
The balance of the expenditures was for projects budgeted and approved in earlier years.
Attachments:
1. Auditor's Report to the Executive Committee - Audit Results
2. 2008 Draft Audited Consolidated Financial Statements
3. Auditor's 2006 Observations - Continuity and Update of Management Responses
Prepared By: Approved / Endorsed By:
w'
rr ~J \
Kristi a Senior Gillis A. Paterson
Manager, Accounting Services Director, Corporate Services & Treasurer
KAS/vw
Copy: Chief Administrative Officer
Recommended for the consideration of
Pickering City Council
T 15ins J. Qui , D R., III
Chief Administrative Officer
ATTACH M ENT #.L.TO REPORT 0.05-I 1 'o f
202
Delolotte.
The Corporation Of the
City ofPickering
Report to the Executive Committee - Audit Results
Year ended December 31, 2008
i 203
Deloitte. Deloitte & Touche LLP
5140 Yonge Street
Suite 1700
Toronto ON M2N 61_7
Canada
Tel: 416-601-6150
Fax: 416-601-6151
www.deloitte.ca
June 22, 2009
Private and confidential
The Members of the Executive Committee
The Corporation of the City of Pickering
1 The Esplanade
Pickering ON L1 V 6K7
Dear Executive 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, 2008.
Our audit was completed in accordance with the audit plan; presented to you on November 10, 2008. Our
professional standards require that we communicate with you certain 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 report is designed to summarize certain aspects of the 2008 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 Executive Committee (the "Committee").
This report has been provided to the Committee on a confidential basis. It is intended solely for the use of the
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 co-operation we received from senior management, finance staff
and the many employees of the City with whom we work in the discharge of our various responsibilities.
Yours sincerely,
Chartered Accountants
Licensed Public Accountants
204
Table of contents
Page
Status of the audit, audit scope and related representations 3
Matters to report to the Executive Committee 4
Audit findings
• Management judgments and accounting estimates 5
• Adjusted differences 6
• Unadjusted differences 6
• . Omitted disclosures 6
Areas of audit focus 7
Appendices
Appendix I: Independence letter
Appendix ll: Management letter
The Corporation of the City of Pickering - 2
2008 eport to the Executive Committee
205
Status of the audit, audit scope and related
representations
• The audit of the December 31, 2008 consolidated financial statements is substantially complete,
with the exception of the following matters:
• Receipt of actuarial confirmation related to WSIB;
• Receipt of the management representations letter; and
• Approval of the financial statements.
• Our auditors' report on the 2008 consolidated financial statements will:
• be signed following approval by Council;
• be dated June 16, 2009; and
• state that the consolidated financial statements present fairly, in all material respects, the
financial position of the City as at December 31, 2008 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 presented to you on November 10, 2008.
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
consolidated 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 relied on the work of the City's actuaries in the calculation of the post-employment benefit
liability and WSIB benefit liabilities.
• We did not rely on the work of the City's internal auditor in determining the nature, extent and
timing of our work.
• 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 I to this report.
The Corporation of the City of Pickering - 3
2008 Report to the Executive Committee
206
Matters to report to the, Executive
Committee
As discussed in our audit plan, the following reportable matters are required to be reported to the
Executive Committee. Where points of interest are connected with a reportable matter, we have
made reference to the relevant area of this report or the consolidated financial statements
1. Significant weaknesses in internal control relating to No significant weaknesses in internal controls
the financial reporting process relating to the financial reporting process were
identified.
2. Illegal acts None noted.
3. Significant transactions inconsistent with the None noted.
ordinary course of business, including fraud or
possible fraud.
4. Unusual related party transactions. None noted.
5. New significant accounting principles or policies The City implemented PS 2700 Segment
Disclosures - see additional note disclosure and
schedule in the City's consolidated financial
stateMents.
6. Disagreements with management None.
7. Management consultation with other accountants None noted.
about any significant auditing or accounting matters
8. Unusual transactions that significantly increase the None noted.
risk of loss
9. Actions that, if they became public, might cause None noted.
embarrassment
10. Non-compliance with regulatory requirements None noted.
11. Major issues discussed with management that None noted.
influence audit appointment
12. Management's judgments and accounting estimates Reaspnable (see page 5).
13. Misstatements, including unadjusted audit None noted.
differences
14. Difficulties encountered during the audit None.
15. Limitations placed on the scope of our audit None.
The Corporation of the City of Pickering - 4
2008 Report to the Executive Committee
I
i
I
i
207
Management judgments and accounting
estimates
Management judgments and accounting estimates
The preparation of the consolidated financial statements requires management to exercise judgment
and utilize assumptions to make estimates.
The key areas where management estimates are required are as follows:
• Post employment benefit liability and WSIB benefit liabilities;
• Allowance for significant property tax appeals;
• Allowance for doubtful accounts receivable;
• Accrued liabilities; and
• Contingent liabilities - litigation.
Post employment benefit liability and WSIB benefit liabilities
Management uses the assistance of an actuary in determining the post-employment benefits liability
and the WSIB benefit liabilities. The amounts recorded in the financial statements were based on the
January 1, 2008 and December 31, 2008 valuations, respectively.
Property tax appeals and doubtful accounts receivable
Management makes estimates for significant 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.
Accrued liabilities
Management is required to make estimates, mainly for services received to December 31, where
invoices for such work have not been received prior to when the accounting records are finalized.
Also included in accruals at December 31, 2008 are amounts relating to the non-union compensation
review which commenced in 2006 and which is yet to be settled. The accrual is based on budgeted
amounts for 2007 and 2008.
Contingent liabilities - litigation
When preparing the consolidated financial statementsa management makes estimates relating to
litigation based on the information available, at a point in time. As disclosed in Note 18 to the financial
statements, the City recognizes liabilities in the financial statements related to litigation when
management and legal counsel have assessed the outcome of the legal claim as likely and the
amount can be reasonably estimated. Management has determined that the outcome of any legal
actions outstanding as at the reporting date is not determinable and accordingly, no provision has
been made in the consolidated financial statements.
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.
The Corporation of the City of Pickering - 5
2008 Report to the Executive Committee
i
208
Audit findings (continued)
Adjusted differences
No adjustments were made by management as a resullt of our audit work.
Unadjusted difference
No unadjusted differences were noted during our audit.
Omitted disclosures
As part of our audit procedures, we reviewed the disclosures provided in the consolidated financial
statements and compared them to the disclosure requirements of the PSAB handbook. We identified
minor omitted disclosures which were discussed with management and deemed immaterial.
i
The Corporation of the City of Pickering - 6
2008 Report to the Executive Committee
209
Areas of audit focus
On November 10, 2008 we reported to you our planned key areas of audit focus. The following
summarizes our findings in respect of these areas:
Area Issue Response Conclusion
Year end cut-off Determine if cut-off of Focused substantive testing on Satisfactory.
revenues and expenditures accounts payable, accrued
is appropriate. liabilities, deferred revenue
ano accounts receivable.
• Test disbursements and cash
receipts subsequent to year
enO.
• Test supporting assumptions
foriaccrued liabilities, deferred
revenue and accounts
receivable.
Actuarial Accuracy and completeness • Retview actuarial report Satisfactory.
determined of certain liabilities such as including related assumptions.
liabilities Workplace Safety and
Insurance ("WSIB") and • Ensure appropriate accounting
Post employment benefits. treotment has been applied.
• ReNiew related financial
statement note disclosure for
accuracy and completeness.
• Colmmunicate with actuaries
on ;our reliance on their reports
for audit purposes.
Reserves, Approval of transfers to and • Substantive testing on the Satisfactory.
reserve funds from reserves and reserve continuity of material
and capital fund funds. transactions to determine if
transfers are in accordance
with Council approvals and/or
legislative requirements.
The Corporation of the City of Pickering - 7
2008 (deport to the Executive Committee
210
Areas of audit focus (continued) Area Issue , ri
t
Investment in Compliance with PS 3070 Review accounting for Satisfactory.
Veridian "Investment in Government Investment in Veridian
Corporation Business Enterprise". Corporation and related
disclosures.
• Review financial
statements of Veridian
Corporation.
• Communication with
Veridian Corporation's
auditor on our reliance
on their auditor's report
for purposes of the
Citys audit.
Management Requires management judgment Focused review of Satisfactory.
estimates (i.e. allowance for assessment calculations and
appeals, accruals, contingent support.
liabilities, etc.).
• Discussion with
management.
• Analytic review of
related accounts.
Capital Fund Revenue Recognition • Substantive testing to Satisfactory.
determine whether
• Capital expenditures-year end restricted contributions
cut-off (i.e. development
charges, gas tax,
conditional grants) have
been recognized as
revenue in the
appropriate period.
• Substantive testing on
accruals relating to
capital expenditures
incurred before year
end.
The Corporation of the City of Pickering - 8
2008 Report to the Executive Committee
I
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Areas of audit focus (continued)
Response Area Issue YI II I I Y w"'
Public sector accounting Selection of appropriate Review of significant Satisfactory.
standards accounting policies, accounting policies,
adequacy of disclosures implementation of new
and treatment of non- standards and any
routine transactions. unusual transactions.
• Impact of any new or Work with City staff to
determine if appropriate
upcoming accounting implementation plans
standards (e.g. are in place to enable
segmented information compliance with the
fiscal 2008 (PS 2700); new standards.
tangible capital assets
disclosure 2008,
(PsG#7), recognition and
measurement.fiscal 2009
(PS 3150)).
The Corporation of the City of Pickering - 9
2008 Deport to the Executive Committee
212
Appendices
The Corporation of the City of Pickering - 10
2008 Report to the Executive Committee
21 3
Appendix I --independence letter
eLLP
Deloitte, 5140 en Yong e Street
5140 Suite 1700
Toronto ON WNW
Canada
Tel: 416-601-6150
Fax: 416-601-6151
www.deloitte.ca
June 22, 2009
The Members of the Executive Committee
The Corporation of the City of Pickering
The Esplanade
1
Pickering ON LIV 6K7
Dear Executive Committee Members:
We have been engaged to audit the consolidated financial statements of the Corporation of the City of
Pickering (the "City") for the year ended December 31, 2008, which includes:
• The Corporation of the City of Pickering; and
• The Corporation of the City of Pickering Public Library Board.
In addition, we have been engaged to audit the Corporation) of the City of Pickering Trust Funds.
Canadian generally accepted auditing standards ("GARS") 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 engagemej t.
214
Appendix I - Independence letter (continued)
The Corporation of the City of Pickering
June 22, 2009
Page 2
We have prepared the following comments to facilitate our discussion with you regarding independence
matters arising since May 15, 2008, the- date of our last independence letter.
I
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 15, 2008 to June 22, 2009.
The fees (exclusive of GST) billed from May 15, 2008 (the date of our last independence letter) to June 22,
2009 are as follows:
City of Pickering
• Balance of audit fees for the year ended December 31, 2007 $ 4,750
• Audit for the year ended December 31, 2008- interim billings $55,000
• Auditors' report dated March 28, 2008 for the Transfer of Federal
Gas Tax Revenues for the year ended December 31, 2007 $ 3,800
• Review of records retention by-law and research related to various accounting
issues $ 5,500
• Auditors' report dated March 20, 2009 for the Transfer pf Federal Gas
Tax Revenues for the year ended December 31, 2008 $ 3,800
City of Pickering Public Library Board
• Balance of audit fees for the year ended December 31, 2007 $ 1,000
Audit for the year ended December 31, 2008 - interim billing $ 4;500
GAAS requires that we confirm our independence to the Executive 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 Jung 22, 2009.
This report is intended solely for the use of the Executive Committee and others within the City and should not
be used for any other purposes.
Yours truly,
Chartered Accountants
Licensed Public Accountants
21 5
Appendix II Managerr~ent letter
Deloitte, 5140 e & Touche LLP
5140 Yonge Street
Suite 1700
Toronto ON M2N 6L7
Canada
Tel: 416-601-6150
June 22, 2009 Fax: 416-601-6151
www.deloitte.ca
The Members of the Executive Committee
The Corporation of the City of Pickering
1 The Esplanade
Pickering ON L 1 V 6K7
Dear Executive Committee Members:
We have recently completed our examination of the consolidated financial statements of the Corporation of the
City of Pickering (the "City") for the year ended December 31, 2008. Our audit was designed to provide a
basis for formulating an opinion as to whether the consolidated financial statements present fairly in all
material respects, in accordance with generally accepted accounting principles, the financial position, results of
operations and changes in financial position of the City. As part of our examination we reviewed and
evaluated the design and implementation of certain entity level controls and business cycle controls in order to
assess audit risk in accordance with Canadian generally accepted auditing standards.
The main purpose of our review of controls 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 the City's purposes. The scope of such a review of
internal controls is not sufficient to express an opinion as to the effectiveness or efficiency of the City's
internal controls.
While the audit did not include an in-depth evaluation of all systems of internal controls or all aspects of any
individual system and should not therefore be relied upon toi 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.
We did not identify any significant internal control weaknesses during the audit to be reported. We understand
that management will provide the committee with an update on the status of any outstanding comments from
our prior years' management letter.
Yours truly,
gi-
Chartered Accountants
Licensed Public Accountants
216
Deloittel,,,
ATTACHMENT#.~&TO REpm-r. aCS -p Q
217 I
Consolidated financial statements of
The Corporatio of the
City of Picke '
December 31, 2008
O
5w Qocviwif in z?lCLI uiy cfPidoa fiy N»es - Tun I?(16~f79k 6✓z3/t79 ~23PM
FOR DISCUSSION PURL OSES ONLY
The Corporation of the City Pickerin 21 B
g
December 31, 2008
i
Table of contents
t
Auditors' Report .1
Consolidated statement of financial position .................................4............. ........2
Consolidated statement of financial activities ............................................................................3
Consolidated statement of changes in financial position .......................4
Notes to the consolidated financial statements 5-19
Consolidated schedule of operating fund financial activitl a bala e - Schedule I 20
Consolidated schedule of capital fund financial acts esjand fund ba nce - Schedule II ..................21
Consolidated schedule of reserves and reserv fund financial a vities
and fund balance - Schedule III 22
Consolidated schedule of segmented d losures - le IV and V 23-24
O
S Doaa~eni in ?110A lSiyof Pkkr lig tibias-Jun 11(!8179,! Q/73ib9,' 3•T3NN
FOR DISCUSSION PURPOSES ONLY
219
DeIoit<e & T LLP
5140 Yonge
State 1700
Toronto M2N GL7
Canad
Tal• 16-601-6150
F 416.601-6151
deb te.ca
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 positi The Co on of the City of
Pickering as at December 31, 2008 and the consolidated financi activities and of changes
in financial position for the year then ended. These financ' is are a responsibility of the City's
management Our responsibility is to express an opini n these ei statements based on our audit.
We conducted our audit in accordance with Canadi genlerally auditing standards.
Those standards require that we plan and perf audit to o ble assurance whether the
financial statements are free of material ent. An audit ' ludes examining, on a test basis,
evidence supporting the amounts and disclo Arfman ' statements. An audit also includes
assessing the accounting principles used si made by management, as well as
evaluating the overall financial statem
In our opinion, these con soli dated cial statements resent fairly, in all material respects, the financial
position of The Corporation of the ity of Pickering at December 31, 2008 and the results of its
operations and the changes in its positio or the year then ended in accordance with Canadian
generally accepted accouing 1
Chartered Accoun
Licensed Public co
June 16, 2009
5 Dea w"in21104LHyofAnkerigghbfv-.Tun12Q'SMkN2&W,•S23M
FOR DISCUSSION PUR~OSES ONLY
The Corporation of the City of Pickering 220
Consolidated statement of financial position
as at December 31, 2008
2008 20 7
Financial assets
Cash 4,466,058 3,445,5
Investments (Note 4) 63,622,45 46,714 60
Taxes receivable 13,678, 1 12,1 ,647
Accounts receivable 4,88 ,862 5 74,265
Other current assets 5 7 564,288
Investment in Veridian Corporation (Note 5(b)) 38 3 8 6,782,634
Promissory notes receivable Note 6 0 0 25,069,000
0 895 287 130,488,293
Liabilities
Accounts payable and accrued liabilities /36,1,738 11,168,320
Other current liabilities 81,469
Deferred revenue (Note 7) •32,424,941
Long-term liabilities (Note 10) 8,796,011
Post-employment benefit liability (Note 9(a)) 2,343,250
WSIB benefit liabilities Note 9 b 643,045
66 857 312 55,457,036
Net financial assets 84,037,975 75,031,257
Non-financial assets
Inventory 192,417 246,361
Net assets 84,230,392 75,277,618
Municipal position
Operating fund (Note 12(a)) S 125,000 (51,077)
Capital fund (Note 12(b)) Sch
fu u I 13,405,505 2,294,298
Reserves and reserve nds o
0 h ule III 26,555,196 23,927,149
Equity in Veridian Co on Not 66,747,338 64,894,654
106,833,039 9.1,065,024
Amounts to be reco red Note 11 (22,602,647) (15,787,406)
Municipal ositi 84,230,392 75,277,618
Approved by:
!n?210atyofP1d6wlnyFS-Aw12(1&79,k"3&", MAN Paget
FOR DISCUSSION PURPOSES ONLY
i
-221
The Corporation of the City of Pickering
Consolidated statement of financial activities
year ended December 31, 2008
zoos /2007
Budget
Note 19
Unaudited Actu Actual
Revenues
Residential and farm taxation 30,742,064 30, 45,111 28, 4,606
Commercial and Industrial taxation 7,598,765 ,717,742 ,309,321
Taxation from other governments 7,123,031 7, 2,628 7,118,526
User charges 7,364,193 , 431566 7,596,332
Government grants and fees 5,845,525 , 366 2,155,636
Other contributions and donations 1,891,84 67 9 655,349
Development charges and
developer contributions earned 96 00 637, 1,983,824
Investment income 1,0 ,000 1,23 ,452 1,749,766
Penalties and Interests on taxes 1 0,000 2, 4,549 1,822,600
Fines 8 ,400 36,602 800,559
Interest on promissory notes 1
qWJW 5 0 ,905,244 1,905,244
Other 00 420,756 620,293
Total revenues 67 2 68,754,899 62,712,056
Expenditures (Note 15)
Current
Protection to persons and property. 17,161,109 14,330,659
General government /17,820,881 9,939,453 11,813,917
Transportation services 6,584,698 6,109,154
Environmental services 177,688 119,365
Social and family services 367,864 385,401
Recreational and cultural services . 17,603,022 16,529,901
Plannin and develo ent 1 895 566 1,774,748
57,516,563 53,729,400 51,063,145
t
Capital
General government 1,188,430 995,223 1,014,811
Protection to persons an roperty 1,714,980 560,131 1,342,124
Transportation government
5,123,100 3,598,227 5,978,241
Environmental servic 330,000 14,515 132,408
Social and family S rvices 438,000 200,958 25,029
Recreation and tural services 9 982 300 4,224,411 2,186,944
18,776,810 9 593 5 10,679,S57
Total ex ndi es 76,293,373 63,322,865 61,742,702
Veridian jare ratfon
Equity of n et in VNote 5(c)) - 3,574,684 3,654,619
Net reve es (expenditures)/ (9,054,505) 9,006,718 4,623,973
/(D e) Increase in ounts to be recovered
al repayment f debentures (1,544,251) (1,190,648) (1,132,989)
al repayme of Internal loans (1,163,140) (1,162,514) (1,225,949)
ds from bentures Issued 7,358,350 8,506,000 -
ds fro nternal loans - 597,000
mplo nt benefits liability 220,250 26,300
be t liabilities 442 153 47 2 6
4 650 959 6 815 241 1 782 9 4
a increase in non-financial assets - 53 944 36 6 1
in fund balances 4,403,546 15,768 015 2,877 6 0
/n 2210 MY ofPf FS-Aw t2(JW7D,CQ/Z,t/2 Ok 24PM Page 3
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222
The Corporation of the City bf Pickering
Consolidated statement of changes in financial position
year ended December 31, 2008
2008 2007
Operating activities
Net revenue 9,006,718 4,623,9
Equity share of net income of Veridian Corporation 3 574 6 3 654 19
5 432 0 4 9 354
Uses
Increase In taxes receivable (i, 4) (769,661)
Increase In accounts receivable (882,241)
Increase In other current assets - (33,925)
Decrease in accounts payable and accrued liabilities (303,823) (6,456,946)
Decrease in WSIB benefit liabilities (47,286)
(1,844079) (81190,059)
Sources
Decrease in accounts receivable Y3,700,797 03 -
Decrease in other current assets 71 -
Increase in other current liabilities 47 20,301
Increase in deferred revenue 2,990,649
Increase in post-employment benefit Ilabil" 50 26,300
Increase in WSIB benefit liabilities 53 -
S,303,421 3,037,250
Net Increase decrease In cash from erations 8,890,698 (4,183,455)
Investing activities
(Increase) decrease in investor is (16,907,591) 4,152,862
Dividend received from Verldi oration 7 1,722,000 1,640,000
(15,185,591) 5,792,862
Financing activities
Proceeds from deben res issued 8,506,000 -
Principal rea men of debentures (1,190,648) (1,132,989)
7,315,352 (1,132,989)
Net increase in as 1,020,459 476,418
Cash be inns ar 3,445,599 2,969,181
Cash, end AN year 4,466,058 3,445,599
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223
The Corporation of the City f Pickering
Notes to the consolidated financial statemients
December 31, 2008
1. Signiflcant accounting policies
The consolidated financial statements of The Corporation of the City of Pickers (the "City"') ar
the representations of management prepared In accordance with generally cepted accounts
principles for local governments as established by the Public Sector Accou ng Board ("PS N)
of the Canadian Institute of Chartered Accountants. Significant accounti policies adopte by
the City are as follows:
(a) Reporting entity
(i) Consolidated statements
The consolidated financial statementIs reflect the e , Ila venues and
expenditures of the operating fund, capital fund eserve funds reserves.
The reporting entity is comprised of the activ' s of all committ es of Council and
the City of Pickering Public Library Board wh is controlled b the City.
All material inter-fund transactions and b nces are elimin ed on consolidation.
(ii) Investment In Veridian Corporation
the City's Investment in Veridlan Co ora nd its bsidiarles is accounted for
on'a modified equity basis, consist t with g II accepted accounting principles
as recommended by PSAB for inv. Ments in gov nment business enterprises.
Under the modified equity basi of accounting, V ridlan Corporation's accounting
policies are not adjusted to form Ito those o the City, and inter-organizational
transactions and balances a not eliminated a City recognizes Its equity interest
in the annual net income I eridia Corporation In Its consolidated .
statement of financial a viti ponding increase or decrease in its
investment asset acco nt. Divi dsI th the City may receive from Veridian
Corporation and oth capital tr ns are reflected as adjustments in the
Investment asset count.
(Ili) Operations of S ool Boards and e, Regional Municipality of Durham
The taxation t tier-Cevenues, npitures, assets and liabilities with respect to
the operati s school bards and the Regional Municipality of Durham are
not refle idated financial statements.
(iv) Trust ds
Tru funds and their lated operations administered by the municipality are not
co solidated, but a reported separately on the Trust Funds Statement of Financial
ivities and Sta ment of Financial! Position.
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224
The Corporation of the City of Pickering
Notes to the consolidated financial statements
December-31, 2008
1. Significant accounting policies (continued)
(b) Basis of accounting
(1) Investments
Investments are recorded at the lower .of cost plus accrued terest and ma t
value. Any premium or discount at purchase of an invest nt is amortized ver the
life of the investment.
(ii) Tangible capital assets
Tangible capital asset expenditures Incurred durin e. a rec ded as capital
expenditures in the consolidated statement of fin ncial activi
(iii) Accounting for Property Tax Capping Provision resulting from e
Ontario Fair Assessment System
The net impact In property taxes as d res of the applica n of the capping
provisions does not affect the Consolida tement of nandal Activities as the
full amounts of the property taxes w0 1 oweve , the capping adjustments
are reported on the consolidated 5 me nanc I Position as a receivable
from the Region.
(iv) Deferred revenue
Deferred revenues represent ser charges an which have been collected but
for which the related servic have yet to be rformed. These amounts will be
recognized as revenues i h ear t services are performed. In addition,
any contributions receiv d wi I strictions are deferred until the related
expenditures are mad .
(v) Post employment efits
The present val of the cost of p vtiding employees with future benefits programs
is recognized employees ea ese entitlements through service. Actuarial
gains and to es amortlz over the average remaining service period
("ARSP-). T e fined ARSP to be 15 years (2007 - 16 years}.
(vi) Invento
Inven ry is valu a lower of cost and net realizable value. Cost is determined
on eighted-avera basis.
(vii) vernment tran rs
G ment sfers are recognized in the financial statements In the period in
I eve giving rise to the triansfer occur, eligibility criteria are met, and
ason le Imates of the amount can be made.
(viii) Us mates
The p aration of financial statemeots in conformity with Canadian generally
acce ed accounting principles requites management to make estimates and
as mptions that affect the reported amounts in the financial statements and
a mpanying notes. Actual results could differ from these estimates.
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225
The Corporation of the City of Pickering
Notes to the consolidated financial statements
December 31, 2008
2. Ajax Pickering Transit Authority
Effective September 4, 2001, a joint Board of Management was established b he City of
Pickering and the Town of Ajax by way of a Merger Agreement for operating transit system
across Pickering and Ajax. Operations, under the control of the joint board commenced
effective January 1, 2002.
In January 2005, the Councils of the City of Pickering and the Town of jax passed a r olution
agreeing to the transfer of the responsibilities for transit services to a Regional Mu ipality of
Durham (the "Region'). On January 1, 2006 the Ajax Pickering T si hority
transferred its operations to the Region as part of the Durham R i nsit Co fission in
accordance with Regional By-law #85-2004. Negotiations wit a egi ere mpleted
during fiscal 2008. At the Council meeting of September 15, 008, Counci lution 182/08
was passed officially dissolving APIA.
3. Operations of school boards and the Regional M i ' lity of D ham
Further to Note 1 (a) (iii) requisitions are made by e g al Mu pality of Durham (the
"Region") and School Boards requiring the City t colie perry es and payments in lieu of
property taxes on their behalf. The amounts co ed an are summarizes as follows:
R ion School board
Taxation 78,507,629 41,561,056
Payments in lieu of taxes 5,023,581 486,200
83 531,210 42,047,256
4. Investments
The investments have a a lue of ,180+506 (2007 - $47,043,975) at the end of the
year. Investments are o s ury bills, bankers acceptances, medium term notes,
discount notes and b nds.
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.226
The Corporation of the City of Pickering
Notes to the consolidated financial statements
December 31, 2008
5. Investment in Veridian Corporation
(a) Veridian Corporation Is jointly owned by the City of Pickering, Town of x, Municipality
of Clarington•and the City of Belleville. TheClty has a 41 per cent int st In Veridian
Corporation. Veridlan Corporation, as a govlernment business enterp se, Is accounte or
on the modified equity basis in these financial statements. Verldia Corporation se s as
the electrical distribution utility for a number of communities inc ding the four n ed
above and conducts non-regulated utility sorvice ventures thro gh its subsidiari
The following table provides condensed supplementary con id financial formation
for the corporation and its subsidiaries for the year ended a ;er 31:
200 2007
Financial position:
Assets
Current 6/67,366 75,527,060
Capital and Intangibles 14140,321,861
Other 1 6,900,487
Total assets 2X,985,485 222,749,408
Liabilities
Current /~~/23,821,779 08,931,221 53,948,442
Long-term debt - 60,794,000
Other 18,293,223
Total liabilities 132,753,000 133,035,665
Shareholders' equity
Share capital 67,285,173 67,285,173
Contributed cap' I 24,910 24,910
Retained ea 26,922,402 22,403,660
Total shareholders' 94,232,485 89,713,743
Total Iiabill 'sand sha Id ' equity 22.61985,485 222,749,408
Financi activities:
Rev nue 228,759,331 235,271,455
O e e 9,211,416 6,878,200
ses 229,252,005 233,235,950
et 1 e t year 8,718,742 8,913,705
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227
The Corporation of the City of Pickering
Notes to the consolidated financial statements
December 31, 2008
5. Investment In Veridian Corporation (continued)
(b) City of Pickering's equity represented by:
2008 2 7
,Promissory notes receivable Note 6 25,06 /,000 25 69 0 0
Investments in Veridian Corporation
Initial investment in shares of the Corpotation /,4 , 30,496,196
Accumulated income 5,321 11,910,637
Accumulated dividends received 5,020) (6,733,020)
Increase in value of investments 8 82 1 108 8 1
Total investment 38,635,3 8 36,782,634
(c) Equity in Veridian Corporation
/2008 2007
Balance, beginning of year 64,894,654 62,880,035
Equity share of net Income fort year 3,574,684 31654,619
Dividend received from Veridi C (1,722,000) 1 640 0 0
Balance end of year 66,747 338 64,894,654
(d) Contingencies and guara ees of Veridian orporation (the pCorporationff) as disclosed in
their financial stateme are as follows,
(1) Insurance clai s
The Corpor lo s mbe of the Municipal Electric Association Reciprocal
Insuran E") which was created on January 1, 1987. A
recipro insu exc nge may be defined as a gr oup of persons formed for the
purpo of exchan ' g 'procal cotracts of Indemnity or inter-insurance with
eac other. MEARIE vides general liability insurance to member electric utilities.
I urance premiu charged to each member utility consist of a levy per $1,000 of
ervice revenue bject to a credit of surcharge based on each electric utility's
cl ' perie . Insurance limits of up to $30 million per occurrence are covered
M E.
1) i
An a Io has been brought under the Class Proceedings Act, 1992. The plaintiff
class eks $500 million In restitution for amounts paid to Toronto Hydro and to
oth Ontario municipal electric utilities CLDCs") who received late payment
pe alties which constitute interest at an effective rate in excess of 60% per year,
ntrary to Section 347 of the Crimidal Code. Pleadings have closed In this action.
e action has not yet been certified: as a class action and no discoveries have been
held, as the parties were awaiting the outcome of a similar proceeding brought
against Enbrldge Gas Distribution Inc. (formerly Consumers Gas).
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228
The Corporation of the City of Pickering
Notes to the consolidated financial statements
December 31, 2008
5. Investment in Veridian Corporation (continued)
(d) Contingencies and guarantees of Veridian Corporation (the "Corporatio as disclosed In
their financial statements are as follows: (continued)
(11) Other claims (continued)
On April 22, 2004, the Supreme Court of Canada released decision in the
Consumers Gas case rejecting all of the defences which d been raised
Enbridge Gas Distribution Inc., altholugh the Supreme ou of Canada d not
-1 permit the plaintiff class to recover damages for any a prior tot issuance of
the statement of claim in 1994 challenging the vali ty aym t penalties.
The Supreme Court of Canada remitted the matt ba to t n rio Superior
Court of Justice for determination ofthe dama s. At the end of 006, a mediation
process resulted In the settlement of the dam ges payable by bridge Gas
Distribution Inc.
After the release by the Supreme Court ada of Its 2 4 decision in the
Consumers Gas case, the plaintiffs In I e paym t penalties class action
indicated their intention to pro ceed w li ation ainst the LDCs. To date, no
formal steps have been taken to a the fo ard. The electric utilities
Intend to respond to the action if dl when It s on the basis that the LDCs'
situation may be distinguishable m that of Con mers Gas.
The Corporation estimates it Ilected late pay ent penalties of $5,339,593 from
and after 1994. No determi ion of the port' n of these payments which may have
constituted interest at an p ssible ra has been made.
(111) Contractual obligation - ydro a rks Inc. ("HONI')
The Corporation's s sidiary, Ve laj nnections Inc. ("VCI'), is party to a
connection and recovery ag ' ent with HONI related to the construction by
HONI of a transf er station des dated to meet VCI's anticipated electricity load
growth. Const on of the prof Was completed during 2007 and VCI connected
to the transf tlon duri g 2008.
To the t t the project is not recoverable from future
transfo do ectio evenues,; VCI is obliged to pay a capital contribution
equal t the diffe a tween these revenues and the construction. costs
alloc ed to VCI. Th nstruction costs allocated to VCI for the project are
esti ated at $9,974 70.
(Iv) P yments in lieu corporate Income taxes
0 h 22, 07, the Province of Ontario released the 2007 Ontario Budget. The
dge no ced that new rules would be put in place to limit tax deductibility for
res al by municipal electric utilities ("MEUso) to municipalities. Interest
e deductibility for the Corporation and other Ontario MEUs would be
consi a with OEB cost-of-capital rules. As of February 29, 2008, regulations for
these ew rules were not released by the Minister of Finance. In the absence of the
new ulation, the amount of additional tax liability related to excess interest
ca of be determined. The Corporation and subsidiary, VCI, paid interest to
nicipalities of $4,620,344 during 008 that may be subject to the new tax
egulations.
(v) Environmental liability
Environment Canada has Issued new, regulations governing the management of
polychlorinated biphenyis (PCBs). The Corporation is in the process of determining
the extent and impact that the new regulations will have on the Corporation. As at
December 31, 2008, no obligation has been accrued regarding the new regulations.
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22"
The Corporation of the City of Pickering
Notes to the consolidated financial statements
December 31, 2008
5. Investment in Veridian Corporation (continued)
(e) Lease commitments
Future minimum lease payment obligations under operating leases a as follows:
2009 715,300
2010 627,800
2011 578,800
2012 140,000
2013 74,000
Thereafter 2,000
2,137,900
6. Promissory notes receivable
Promissory notes are payable by Veridian rporotion and V than Connections Inc. in the
amount of $7,095,000 and $17,974,000 r pect vely, with n interest rate of 7.6% and
maturity dates of November 1, 2009. se promissory tes are convertible into common
shares at the option of the holder at t m n share for every $1,000 of principal
then outstanding on or before the turf
7. Deferred revenue
2008 2007
Obligatory reserve fu s Ytributions Development ch a es 26,413,355 23,528,009
Parkland 1,984,486 1,557,607
Provincial ga x - 523,014
Federal ga 3,084,862 2,144,075
Third a D o is rve (Fund 2,043,667 2,129,222
33,526,370 29,881,927
Other nearn n s 2,599,368 2,543,014 eQcN
36,125,738 32,424,941
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230
The Corporation of the City of Pickering
Notes to the consolidated financial statements
December 31, 2008
7. Deferred revenue (continued)
Continuity of deferred revenue is as follows:
2008 20 7
Balance beginning of year 32,42 /,941 29 34,292
Restricted funds received 6 3,013,542
z
General funds received , 1,558,140
Interest earned. 1 .94 510 1,259,499
5,664,990/ 5,831,181
Revenue recognized in current operations 562, 3 313,379
Revenue recognized in capital operations 1 40 80 2,527,153
1,904,193 2,840,532
36 25,738 32,424 941
Balance, end of year
8. Interfund loans
As a means of funding various capital onsj, fund are borrowed by the Capital Fund from
Development Charges and Parkland lig nds. These funds are secured by
promissory notes with interest rat rangi m 3. % to 4.7% and various payment terms
ranging from 2 years to 9 years. a financi gements and ultimate repayment are
approved by Council through th current budg rocess. Although these notes have payment
terns as noted above, they a repayable on d and. For the purpose of these financial
statements, the loans are in uded in amoun to pe recovered (Note 11). The following is a
summary of the related to s otlated, b function:
2008 2007
Roads an/~n~-'\ 1,307,327 1,903,668
Communbraries a parks 1,308,514 1,732,892
Protectio321,252 442,584
Environm50,544 66,956
Munici al 33,949 38 0
3,021 586 4,184,100
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231
The Corporation of the City of Pickering
Notes to the consolidated financial statements
December 31, 2008
9. Post-employment benefit liability
(a) Post-employment benefit liability
The City makes available to qualifying employees who retire before t age of 65, the
opportunity to continue their coverage for benefits such as post-re ' ment extende
healthcare benefits. Coverage ceases at the age of 65. The City a o provides full t' e
and permanent part-time employees a sick time entitlement an any unused ent ement
is accumulated year to year. This accumulated entitlement is t vested and is orfeited
at the time of retirement or termination. The post-empioym t nefits oblig on at
December 31, 2008 and the changes in the accrued bene o on for t 2008 fiscal
year was determined by actuarial valuations prepared as J a 20
Information about the City's benefits liability is as foil s:
Accrued benefits liability, beginning of year 2,343, 0 2,316,950
Prior period service cost i5 00 -
Current service costs i ,800 142,800
Interest on accrued benefits 87,200 115,500
Amortization of actuarial losses (gains) 39,200 (25,000)
Benefits aid during the year (348,650) (207,000)
Accrued benefits liability, end of year 2,563,500 2,343,250
Accrued benefit obligation 3,332,700 2,050,400
Unamortized actuarial' losses i (769,200) 292,850
Accrued benefits liability, end ,6f e 2,563,500 2,343,250
The main actuaria ons a toyed in the actuarial valuations are as follows:
(i) Discount to
The pr sent value a ecember 3$, 2008 of the future benefits was determined
usin a discount rate 6.0%.
(ii) D tai costs trend to
he urrent tre cost at January 1, 2008 was 4.0% increase per annum.
(iii en he care trend rate
alth care costs were asst med to increase at 9% in 2009 and decrease
by crements per year to an ultimate rate of 5% per year in 2017 and
therea r.
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The Corporation of the City of Pickering 2 3 2
Notes to the consolidated financial statements
December 31, 2008
9. Post-employment benefit liability (continued)
(b) Workplace Safety and Insurance Board (WSIB) benefit liabilities
Effective January 1, 2001, the City became a Schedule II employer u der the Workpla e
Safety and Insurance Act and follows a policy of self insurance for a risk assodat with
paying benefits for workplace injuries for all its employees. The IB administers e
claims related to workplace injuries and is reimbursed by the C oration. Th e W15 IB
benefit liabilities at December 31, 2008 and the changes in th
liabilities for th fiscal .
a
year were determined by actuarial valuation prepared s at a bar 31, 20 8.
a
Information about the City's WSIB benefit liabilities is s II
20 8 2007
Accrued WSIB benefit liabilities, beginning of y r /64,04S 690,331
Expense for the year 15,719
Benefits aid durin the ear 63 0.05
Accrued WSIB benefit liabilities end of r /1,085,198 643,045
The main actuarial assumptions em oyed in the actu "al valuations are as follows:
Discount rate
The present value as at ce 20 of the future benefits was determined
using a discount rate 6.0%.
(ii) Inflation rate
The rate of Inflat n was assumed o;be 3% per annum.
(iii) WSIB Admini tion Rate
Liabilities f W nefits ve been increased 30% to reflect the administration
rate cha
A WSIB Rese a Fund lished in 2W1. The Reserve Fund balance at
December , 2008 was $ 91907 (2007- $1,103,109). In addition, the City purchased
two lnsu ce policies that rotect the Cty;against significant claims to the Corporation.
The oc ational acciden insurance pays igss claims up to $350,000 per work related
accid . The excess w ers compensation indemnity insurance has a $350,000
ded i will pa for claims up to and Including $25,000,000 per work related
ac de
10. Lo -term liabili
The bala of long-term liabilities is made up of the following:
2008 2007
Th municipality Is responsible for the payment
of principal and Interest charges on long-term
liabilities Issued by the Regional Municipality of
Durham on the City's behalf. At the end of
the year, the outstanding principal amount
of this liability is 16,111,363 8,796,011
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233
The Corporation of the City of Pickering
' Notes to the consolidated financial statements s
December 31, 2008
10. Long-term liabilities (continued)
(b) The above long-term liabilities have maturity dates of July 15, 2009, D ember 23, 2009
July 12, 2011, 2016 and 2021, November 1, 2012, November 21, 20 , 2018, July 15,
2014 and December 23, 2014 with various interest rates ranging f 2.65% to 5.6°/ .
Principal repayments are summarized as follows:
2009 1,891,393
2010 1,683,228
2011 1,753,158
2012 2,792,188
2013 1,390,327
Thereafter 6,601,069
16,111,363
(c) Long-term liabilities include a principal su of $ ,000 a 'Refundable Debentures'
which may be raised by the. Issuance of d entures r a urther period not to exceed
10 years.
(.d) The above long-term liabilities have n approved b ouncil by-law. The annual
principal and interest payments re ired to service ese liabilities are within the annual
debt repayment limit prescribed the Ministry of unicipal Affairs and Housing.
(e) Interest expense recorded in t e ye t these long-term liabilities is $466,281
(2007 - $474,451).
11. Amounts to be recovered
2008 2007
From futuZ
Post-em2,384,500 2,164,250
Internands 3,021,586 4,184,100
XatL
Net lon16,111,363 8,796,011
From reseWSIB b fYO~ 11085,198 643,045
22, 602,647 15, 787,406
12. nicipal fund lances at the end of the yeor
The City's fund alances are comprised of the following:
(a) Opera ng fund balance
2008 2007
For general reduction of taxation 125,000 (51,077)
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The Corporation of the City of Pickering 2,13D 4
Notes to the consolidated financial statements
December 31, 2008
12. Municipal fund balances at the end of the year (continued)
(b) Cap/tal fund balance
200 2 7
Funds available for acquisition of
tangible capital assets 14 5 32 ,625,356
Acquisition of tangible capital assets
expected to be
Financed by long-term liabilities (595,42 ) (3,230,007)
Financed by taxation or user charges (50,840)
Financed b donations and contributions 50 3 (50,211)
13 405 OS 2,294,298
(c) Reserves and reserve funds
/22008 2007
Reserves set aside for special pu oses by;Cound
Working capital 400,000 400,000
Self insurance 951,391 951,391
Replacement of capital uipment 618,419 683,214
Contingencies 1,401,340 1,328,080
Rate stabilization 17,374,935 15,491,176
City's share for de elopment charg 1,168,494 745,244
Transit - 120,999
Continuing st i O 750,534 713,821
Vehicle repl eme 172,547 122,547
Easement ettlement 131,279 -
Eastern ranch 80,000 55,000
Move ntario 8,243 308,243
Ca I asset mana ent 75,000 -
Tot re 23,132,182 20,919,715
ese n se aside for
specia es by Council
Recreati programs and facilities 192,845 180,880
Acquis on of tangible capital assets 1,516,365 1,458,193
Squ h courts 92,530 119,057
W B 1,339,907 1,103,109
imal shelter 152,896 146,195
Men's slow itch 128,471 -
16tal reserve funds 3,423,014 3,007,434
otal reserves and reserve funds 26,555,196 23,927,149
S cbarnrnrin227acs►yofPia6rrlignbrss-Jr~nl2ry8rr9xQ✓2523aM Page 16
FOR DISCUSSION PURPOSES ONLY
I 235
The Corporation of the City of Pickering
Notes to the consolidated financial statements
December 31, 2008
.13. Pension agreements
The City makes contributions to the Ontario Municipal Employees Retirement stem (OMERS)
which is a multi-employer plan, on behalf of the members of its staff. The pi is a defined
benefit plan which specifies. the amount of the retirement benefit to be rec ived by the
employees based on the length of service and raffles of pay.
Contributions on account of current service for 2008 were $2,034,410 2007 - $1,828, 5).
14. Trust Funds
Trust funds administered by the municipality amounting to $ 8,070 (20 77,274) have
not been Included in the Consolidated Statement of Fnanci Position nor ha their operations
been included in the Consolidated Statement of Financial vities.
15. Classification of expenditures by object
The Consolidated Statement of Financial Actia ex nditures by function; the
following classifies those same expenditures by jed:
2008 2007
Salaries, wages and employe37,308,861 35,963,876
Operating materials and su13,037,951 11,881,810
Contracted services 2,262,138 2;054,598
Rents and financial expense947,568 961,143
External transfers to others 172,882 201,718
Tangible capital assets 9,393,465 10,679,557
Total expenditures b owoft 63 322,865 61,742,702
O
ons
16. Rela1pra
VerlThe v electricity and services from Veridian Corporation
(Note 5), a
corpis a principal sharehplder. Veridian also provides streetlight and
powrvices on a contract basis.
2008 2007
ransactions
Revenues
Interest n promissory notes 1,905,244 1,905,244
Prope taxes levied 42,558 42,093
Expen s
El rical energy and services 1,941,923 1,919,134
Bala es
counts payable and accrued liabilities 406,725 393,505
Promissory notes receivable 25,069,000 25,069,000
5 CawrrarrlnzztM aryofPVcingnfre-JunfZparr9~Q✓z3ro9 az3aM y Page 17
1
FOR DISCUSSION PUR"ES ONLY
i
The Corporation of the Cof Pickerin 2 3 6
-City g
Notes to the consolidated financial statements
December 31, 2008
17. Guarantees
In the normal course of business, the City enters, into agreements which cont guarantees.
The City's primary guarantees areas follows:
(1) The City has provided indemnities under lease agreements for the a of various fac ties
or land. Under the terms of these agreements the City agrees to demnify the
counterparties for various items including, but not limited to, al iabilities, loss, ts, and
damages arising during, on or after the term of the agreeme . The maximum mount of
any potential future payment cannot be reasonably estI at
(ii) The City indemnites employees and elected officials r v rio s incl ing, but not
limited to, all costs to settle suits or action$ due to ass ation with , subject to
certain restrictions. The City has purchased liability i rance to mitiga the cost of any
potential future suits or actions. The term of the Ind nification is n explicitly defined,
but is limited to the period over which the indemn ed party served s an employee or
elected official of the City. The maximum amou of any potential ture payment cannot
be reasonably estimated.
(iii) The City has entered Into agreements that! ay Inde sties in favour of third
parties, such as purchase and sale agree nts, c entia agreements, engagement
letters with advisors and consultants, uucing ag nts, leasing contracts,
information technology agreements a service agreem nts. These indemnification
agreements may require the City to mpensate coun rparties for losses incurred by the
counterparties as a result of breac In represents ' nand regulations or as a result of
.litigation claims or statutory san ons that. may uffered by the counterparty as a
consequence of the transaction th a Indemnities are not explicitly defined
and the maximum amount of 21/
ny Po ursement cannot be reasonably
estimated.
The nature of these indemnifl on agreemen revents the City from making a reasonable
estimate of the maximum ex sure due to the if ficuities in assessing the amount of liability
which stems from the unp ictabilityof futu events and the unlimited coverage offered to
counterpartles. Historical) , th sty has no made any significant payments under such or
similar indemnification a and reforel no amount has been accrued in the
consolidated financial t e pest to these agreements.
18. Contingent liab ties
Utlgatlon
The City he be named as defendant in certain legal actions in which damages have been
sought. T of th a actions is not determinable as'at the date of reporting and
accords ly o pro ion as been made in theses financial statements for any liabilities which
may r ult.
19. dget figures
The approved erating and capital budgets for 2008 are reflected on the Consolidated
Schedule of erating Fund Financial Activities and Fund Balance, Consolidated Schedule of
Capital Fun Financial Activities and Fund Balance, and the Consolidated Statement of Financial
Activities. he budgets established for the capital fund operations are on a project-oriented
basis, t costs of which may be carried out overione or more years and, therefore, may not be
comp able with the current year actual amounts. As well, the municipality does not have a
bud t for activity within Reserves and Reserve Funds, with the exception being those
tr sactions which flow through either the operating or capital fund budgets. Budget figures
ve been reclassified for the purposes of these consolidate financial statements to comply with
SAB reporting principles.
S 0oanernf1HMOA0fyefP1d HftJAbfes-Jun12(18179.k&2. VP&23AM Page 18
FOR DISCUSSION PU"OSES ONLY
237
The Corporation of the .City of Pickering
Notes to the consolidated financial statements
December 31, 2008
20. Tangible capital assets
For fiscal years commencing after January 1, 20019, the City will be required t report tangible
capital assets in its consolidated financial statements in accordance with Th ublic Sector
Accounting Handbook of the Canadian Institute of Chartered Accountants Ion PS3150 -
Tangible Capital Assets. The City is currently working toward obtaining t necessary
information in order to comply with PS 3150. Public Sector Guideline 7 equires the disc sure of
tangible capital asset information in the notes to the financial statem is to the exten hat
reliable information is available. For 2008, the City has identified ority of the anoible
capital assets and Is currently working on finalizing the opening b a s for these ssets. As at
December 31, 2008, the City does not have any detailed tangib c ssed i rmation to
disclose.
For the year ended December 31, 2008 tangible capital a nditures incurre during the year
are recorded as capital expenditures in the consolidated tement of fina ial activities.
21. Segmented Information
The City provides a wide range of services to its ide
Segmented information has been provided in hedule IV f following City Services:
• Protection to persons and property
• Public works services
• Recreation and culture
• Planning and development
• Social and family services
• General government
Revenues and expenditures di ly attributa each segment are reported by segment.
Typically general government penditures are tuned In support of all services. Similarly
general government revenu including taxes re, used to finance all activities of the City. For
purposes of segmented re rtin , general vemirnent revenues and expenditures have not
been allocated to the of r but er ar* shown separately.
22. Comparative figu
Certain compare ve figures have n reclassified to conform with the current year financial
statement pre ntation..
oaw wt in 2zra4 Of), of PYcfisrng hbAcs -Tin 12(IeV79,! 6/23W9 32d AN Page 19
FOR DISCUSSION PURPOSES ONLY
38
The Corporation of the City of Pickering
Consolidated schedule of operating fund financial activities and
fund balance - Schedule I
year ended December 31, 2008
/2007
2008 Budget
Note 19
Unaudited A al A Revenues
Commercial and Industrial taxation 7,598,765 42 7,309,321
Residential and farm taxation 30,742,064 j336,242 11 ,994,606
Taxation from other governments 7,123,031 28 7,118,526
User charges 7,364,19 7,596,332
Govemment grants and fees 308,5 9 615,023
Other contributions and donations 1,066 97,461
Investment Income 1,0 ,000 38 1,632,872
Penalties and Interest on taxes i, 0,000 49 1,822,600
Fines 8 o 02 800,559
Interest on promissory notes 1, , 0 44 1,905,244
Other 00 571,625
Total revenues 59,794M 60 134 505 58,464,169
Expenditures
General government 12,270, 4 9,939,453 11,813,917
Protection to persons and property 16,62 ,182 17,161,109 14,330,659
Transportation services 6,7 ,720 6,584,698 6,109,154
Environmental services 66,758 177,688 119,365
Social and family services 400,246 367,864 385,401
Recreational and cultural services 7,820,881 17,603,022 16,529,901
Planning and development 3 495 162 1,895,566 1,774,748
Total expenditures 57,516,563 53,729,400 51,063,145
Net revenues 2,245,005 6,405,105 7,401,Q24
Financing and transfers
Dividend received fro m Verid n 1,694,000 1,722,000 1,640,000
Transfers to capital fund '(3,278,993) (3,405,174) (2,242,532)
Transfers from (to) rase and rese s 1,937,379 (2,801,151) (4,456,014)
Increase (decrease) in unts to be erect
Principal repayme of debentures (1,544,251) (1,190,648) (1,132,989)
Principal repaym t of internal loan (1,163,140) (1,162,514) (1,225,949)
Post-employm t t liability - 220,250 26,300
WSIB benef! la - 442,153 (47,286)
Decrease I re In non na al assets - 53 944 36,601
(2,355,005) (6,229,028) (7,401,$69)
operating fund ba nce (110,000) 176,077 (845)
Operfund balance,
Chan:Fnning
be of year 110,000 (51,077) 50 32
O ng fund bala oe,
end of ear - 125,000 (51,077)
iez2roCiiyofaa~mrngFS-Tunlt(ltelr9tE✓29/2no9 SvAI Page 20
FOR DISCUSSION PURPOSES ONLY
239
The Corporation of the City of Pickering
Consolidated schedule of capital fund financial activities and
fund balance - Schedule II
year ended December 31, 2008
2008 2Budget
Note 19
Unaudited Actu. 1 Revenues
Grants 15,537,000 7 867 ,540,613
Other contributions and donations 825,000 ,982 373,499
Development charges and developer
contributions earned 965,300 63 , 1,983,824
Other 150,000 84,514 48,668
Total revenues 477 30 8 350 64 3,946,604
Expenditures
Protection to persons and property 1 1,342,124
General government /330,0 /4,224,5411 3 1,014,811
Transportation services 7 5,978,241
Environmental services 5 132,408
Social and family services 8 25,029
Recreation and cultural services 2,186,944
Total expenditures 1 776 810 9,593,465 10,679,557
Net expenditures (11,299,51/0) (1,242,818) (6,732,953)
Financing and transfers
Transfers from operating fund X7,358,350 310 3,405,174 2,242,532
Transfers from reserves and reserv/fus 850 442,851 978,374
Proceeds from debentures Issued 8,506,000 -
Proceeds from internal loans - - 597,000
Net financing and transfers 1j,299,510 12,354,025 3,817,906
Change in capital fund balance O - 11,111,207 (2,915,047)
Capital fund beginning of - 2,294,298 5,209,345
Capital fund, and of ear - 13,405,505 2,294,298
In 2210 6/y offfdW- W FS- An MtSB179,1 LiIMM09- S26 PM Page 21
FOR DISCUSSION PURPOSES ONLY
240
The Corporation of the City of Pickering
Consolidated schedule of reserves and
reserve funds financial activities and fund;balance - Schedule III
year ended December 31, 2008
zoos /18,3
Revenues
X Other contributions and donations 136, 3 Investment income 13 14 2 47 401,283
Net transfers from (to)
other funds
Operating fund /2,801,151 4,456,014
Ca ital fund 42 85 (978,374)
Total net transfers 2,3S8,30 3,477,640
Change in reserves and
reserve fund balance /2,8,047 3,778,923
Reserves and reserve funds,
be innin of ear 49 20,148,226
Reserves and reserve funds,
and of year /26,555,196 23,927,149
O.
1nW00?yofAr %"VF5-Am12(18179,k 6✓Y3/Zdi09. A-24 AN Pape 22
FOR DISCUSSION PURPOSES ONLY
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243
i
Financial statements of
The Corporatio o
City of Picke ' g Trus unds
December 31, 2008
O
5WWaRmtIn22I02WOT 0AudrN0w(-W2&0179,&JVA1f
FOR DISCUSSION PURE OSES ONLY
I
I
244
The Corporation of the
City of Pickering Trust Funds
I December 31, 2008
Table of contents
Auditors' Report ......1
Statement of financial position 2
Statement of financial activities and fund balances .....................3
Notes to the financial statements ....................................................4
O
s noo,~~rMzzlozooe nwrfi~ndsnbtesG en~~9ax
FOR DISCUSSION PURPOSES ONLY
245
Deloitte & Tou a LLP
5140 Yonge
Suite 1700
I Toronto M2N 6L7
Canad
Tel- 16-601-6150
F .416-601-6151
Aeloitte.ca
Auditors' Report
To the Members of Council, Inhabitants and Ratepayers
of The Corporation of the City of Pickering
We have audited the statement of financial position of The Co on of the of Pickering Trust
Funds as at December 31, 2008 and the statement of finaaci ' 'es and d balances of the Trust
Funds for the year then ended. These financial statements nsib' ty of the City's
management. Our responsibility is to express an opinio on th c' statements based on our audit.
We conducted our audit in accordance'. =t generally acce auditing standards.
Those standards require that we plan and perfo audit to ob reasonable assurance whether the
financial statements are free of material ent An audit ' eludes examining, on a test basis,
evidence supporting the amounts and disclos c' statements. An audit also includes
assessing the accounting principles used si etas made by management, as well as.
evaluating. the overall financial statemen resentati
o .
In our opinion, these financial is present fair , in all material respects, the financial position of
The Corporation of the City of Pi eying Trust Fun as at December 31, 2008 and the results of
operations and cash flows of th ds for a yearthen ended in accordance with Canadian
generally accepted accoun ' ip
Chartered Acco
Licensed Publ' un
June 16, 200
S Doae~uit/n721010AB7iwFAaiabAbfrs~b/23/G9,a•19AN
FOR DISCUSSION PURPOSES ONLY
1
i
The Corporation of the 2 4 6
City of Pickering Trust Funds
Statement of financial position
as at December 31, 2008
200 2007
Dorothy Card
OHRP Estate T tal To
Financial assets
Investments - 277,351 7,351 256,674
Interest receivable - 8,905 8,905 18,360
Loans receivable 1,814 814 2,240
1,814 286,$6 28 7 277,274
Trust Fund position 1,814 L62S6 28 ,070 277,274
O
In 1211 TOOB hwt }iNds fli~mrc+~alsMfenwr# Cf Q✓7d/ZQ09 F 2 DPM Page 2
FOR DISCUSSION PUROOSES ONLY
2A7
The Corporation of the
City of Pickering Trust Funds
Statement of financial activities and fund balances
year ended December 31, 2008
200 2007
(Dorothy Card
OHRP Estate tai To I
Revenues
Interest 161 11,222 //>11,383 10,452
Expenditures
Provincial payments 558 1,658
Administration char es 29. - 29 87
587 - 587 1,745
Net revenues (expenditures) (426) ,222 /277,274 0,796 8,707
Fund balance be lnnln• of year 2,240 7134 268,507
Fund balance end of year 1,814 256 288,070 277,274
O
I
!e 22112008 tMt An* fimr ddsfafwssnfs (#21440 a02342A09, SWAM Page 3
FOR DISCUSSION PURPOSES ONLY
i
I
I
i
243
The Corporation of the
City of Pickering Trust Funds
Notes to the financial statements
December 31, 2008
1. Accounting policy
i The financial statements of The Corporation of the City of Pickering Trust nds are the
representations of management prepared in accordance with Canadian nerally accepte
accounting principles.
Significant accounting policies adopted Include:
I _ Basis of accounting
Revenues are recorded in the period in which the transactions r events o rr that gave rise
to the revenue.
Expenditures are reported on the accrual basis of accoun ' g which recogn' es expenditures as
they are incurred and measurable as a result of the rec pt of goods or s ices and the creation
of a legal obligation to pay.
Investments
Investments are recorded at cost. The cost of in stme pro ates their fair value.
.2. Ontario Home Renewal Program
The Ontario Home Renewal Program r RP') was estab . hed by the Ontario Ministry of
Housing in 1973 to provide grants for u es to ake loans to assist owner occupants to
repair, rehabilitate and improve thei om t perry standards. Individual loans are
limited to $7,500 of which the ma um fo able ortion is $4,000.
Effective July 16, 1993, the Pro nce of Ontari d ntinued this program. Unused funds were
remitted to the Province on M h 1, 1994. 0 nding balances of loans Issued prior to
July 16, 1993 will continue t be administe under the terms of the original program. The City
continues to administer th collection of an outstanding loans and remit the proceeds, net of a
5% administration fee to h ry of nicipal Affairs and Housing.
"OHRP" loans r eceiva a , 2008 are comprised entirely of repayable loans of
$1,814.(2007 - $2, 0). In ven f the sale or lease of the home or in the event of the
homeowner ceasi to occupy me, the balances of the repayable loan immediately
become due and yabie by the h meowner.
3. Dorothy C rd Est4te
The City f erin as biished a trust fund !for the Dorothy Card Estate for the care and
upkee of th sti a deny. The fund balance; is comprised of investments and accumulated
ante st amoun o 286,256 (2007 - $275,034).
4. tatement of sh flows
A statement cash flows has not been presented as the information is readily determinable
from the fln nclal statements presented.
i
Doasnent/a221020M rhatFunds Abfes~ 6✓28r09 WVAN Page 4
FOR DISCUSSION PURPOSES ONLY
i
249
i
Financial statements of
The Corporation
City of Picke '
Public Libra Board
December 31, 2008
• O
SW DDCL~/eMOBHdmrligQ1pAibFo-fJbo~das~I2d(7I4NC6/23/179.•&MPM
FOR DISCUSSION PURI OSES ONLY
The Corporation of the City of Pickering 250
Public Library Board
December 31, 2008
Table of contents
Auditors' Report .....1
Statement of financial position .............2
Statement of financial activities and change in fund balance ..........................3
Notes to the financial statements .........................4-7
O
I
i
I
Ioammw/n moo Q✓d AW, x31 PM
FOR DISCUSSION PURROSES ONLY
251
Deloitte & T LLP
5140 Yonge
Suite 1700
Toronto M2N OU
Canad
Tel- 16-601-6150
F 41e-601-6151
.deloitte.ca
Auditors' Report
To the Members of
The Corporation of the City of Pickering Public Library Board,
Members of Council, Inhabitants and Ratepayers
of The Corporation of the City of Pickering
We have audited the statement of financial position of n of City of Pickering Public
Library Board as at December 31, 2008 and the statem of 'ties and change in fund
balance for the year then ended These financial is are the ibility of the Library Board's
management. Our responsibility is to express an op' on on these cial statements based on our audit.
We conducted our audit in accordance with generally ted auditing standards. Those
standards require that we plan and perform nable assurance whether the financial
statements are free of material m* em An u examining, on a test basis, evidence
supporting the amounts and disclosures ' the financ ments. An audit also includes assessing the
accounting principles used and signifi t estimates by management, as well as evaluating the
overall financial statement presentati
In our opinion, these financial s present ly, io all material respects, the financial position of
The Corporation of the City o is 'c brary Board as at December 31, 2008 and the results of
its operations and the char in i cial sition for the year then ended in accordance with
Canadian generally accoun 'ples.
Chartered Ac un
Licensed he Acco is
June 16, 09
FOR DISCUSSION PURPOSES ONLY
The Corporation of the City of Pickering 252
Public Library Board
Statement of financial position
as at December 31, 2008
2008 2007
Finandial assets
Cash 2,31 2, 0
Accounts receivable 63
Due from the City of Pickering 93 41 772
9 600 /43,645
Liabilities
Current
Accounts payable and accrued liabilities 117,10 82,018
Deferred revenue 8,388 13,350
Due to the Government of Canada 349 459
Post-employment benefits liability Note 3 12010 117,300
245 7 213,127
Net financial liabilities (1 ,337) (169,482)
Non-financial assets
Prepaid expense 29 237 52,182
Net liabilities /(120,100) (117,300)
Board position
Amounts to be recovered (120,100) (117,300)
O
1a22f0APldw*y-QHy-Ae6/!c-U&wy*=tPJZ0M144.fk&Z/IQD9,•" M Page 2
FOR DISCUSSION PURROSES ONLY
5
The Corporation of the City of Pickering
Public Library Board
Statement of financial activities and change in fund balance
year ended December 31, 2008
2008 2007
Budget
Note 7
Unaudited Actual Actu
Revenue
City of Pickering grants - operating 4,638,235 ;4,2 ,549 4, 0,554
City of Pickering grants - capital ];95,900 9 0 197,880
Federal grants 93,000 20 7,487
Province of Ontario grants 119,775 7 133,875
Fines and other receipts '88 000 5 199,952
4,234,910 4 792 593 4,549,7!M
Expenditures
Operating
Salaries
Salaries and wages 2,718 ,0 2,/,661 2,628,979
Frin benefits 2 547,7515
3 97 6 364 305 3,176,735
Material, supplies and utilities
Books 614,350 534,948 502,541
Utilities x;99,882 175,873 192,249
Other supplies :581595 51,405 53,315
72 8 762,226 748,105
Services
Repairs and maintenance ?j ,508 275,162 227,773
Insurance ,282 34,090 42,013
Travel 4,528 4,008 10,397
Consulting and professional 30,100 37,489 17,880
Advertising 19,370 34,555 10,562
Conferences 8,295 1,936 7,457
Postage O 6,000 5,442 6,248
Telephone :50,020 48,659 52,501
Seminars and educa ' n 8,500 8,855 6,873
Vehicle repairs and aintenance 10,864 2,682 1,763
Miscellaneous 21 063 17,319 16,679
175,S30 470,197 400,146
Total operatin a re 4,046,010 4,596,728 4,324,986
Ca vital ex De di s 2 a@8,900 17S,720 197,880
Total ex a itu 4,034,910 4,772,448 4,522,866
Net rave es - 20,145 26,882
Increas (decrease) in /assets s to be recovered - 2,800 (5,700)
Decre a in non-financi (22,945) (21,182)
C nge in fund bai - - -
QMi
nd balance be nin of ear -
und balance d of year
-
!n?210A Ndw*WO
Owti-128(714t1X Qi/?VXW, &40 PM Page 3
FOR DISCUSSION PURPOSES ONLY
254
The Corporation of the City of Pickering
Public Library Board
Notes to the financial statements
December 31, 2008
1. Significant accounting policies
The financial statements of The Corporation of the City of Pickering Public brary Board (th
"Library Board") are the representations of management prepared in ac rdance with Ca dian
generally accepted accounting principles for local'govemment establis d by the Public or
Accounting Board (PSAB) of the Canadian Institute of Chartered Ac ntants.
Significant accounting policies adopted by the Library Board are a I s:
Basis of accounting
(a) Accrual basis of accounting .
Revenues and expenditures are reported on the acc 1 basis of accou ing. The accrual
basis of accounting recognize revenues as they are amed and mea rable; expenditures
are recognized, as they are incurred and meesura a as a result of a receipt of goods and
services and the creation of a legal obligation to a .
(b) Tangible capital assets
The historical cost and accumulated amort' action for ibi capital assets are not
recorded for Library Board purposes. Ta ible capital a acquired during the year are
reported on the statement of financial ivitles and cha a in fund balance as capital
expenditures in the year of acquisitio
(c) Post employment benefits
The present value of the cost of rovi o es with future benefits programs Is
recognized as employees ea ese en emle through service. Any actuarial gains or
losses are amortized on a st Ight-line b s er the average remaining service period
(ARSP) of employees. The ctuary estimate the ARSP to be 15 years (2007 - 16 years).
(d) Use of estimates
The preparation of fi n ' temen in conformity with Canadian generally accepted
accounting principl i a ment to make estimates and assumptions that affect
the reported amo nt , a sties and the disclosure of contingent assets and
liabilities at the ate of nan al statements and the reported amounts of revenues and
expenditures ring the pe Actual results could differ from those estimates.
2. Capital ex ditures
Capital ex a were curred to acquire furniture and equipment in the amount of
$175,7 ( 7 $ 7,
3. P t-employment eflts liability
he Library Boar makes available to qualifying employees who retire before the age of 65, the
opportunity to ntinue their coverage for benefits such as post-retirement extended healthcare
benefits. Cov ge ceases at the age of 65. The Library Board also provides full time and
permanent art-time employees a sick time entitlement and any unused entitlement is
accumula d year to year. This accumulated entitlement Is not vested and therefore is forfeited
at the ti a of retirement or termination. The post-employment benefits obligation at
Dece er 31, 2008 and the changes in the accrued benefit obligation for the 2008 fiscal year
was etermined by actuarial valuation prepared as at January 1, 2008.
S QoaAmtinT2lQBPlaforrinpQfyRrbl~aLidrq~•60osdf2Q(21441X6/2310P*31PM Page4
FOR DISCUSSION PURE OSES ONLY
2 5 5
The Corporation of the City of Pickering
Public Library Board
Notes to the financial statements
December 31, 2008
3. Post-employment benefits liability (continued)
Information about the Library Board's post employment benefits liabilities as follows:
2008 2007
Post-employment benefits liability, beginning of ytrar Current service costs 15,800
Interest expense /1/,3,000
8,000
Amortization of actuarial losses 800
Benefits aid durin the ear 2 (30,300)
Post-employment benefits liability, end of year 1 100 117,300
2008 2007
$ $
Accrued post-employment benefit obligation 171,300 126,200
Unamortized actuarial losses (51,200) (8,900)
Post-employment benefits liabili 120,100 117,300
The main actuarial assumptions a ployed I e is anal valuations are.as follows:
(a) Discount rate
The present value as at ecember 31, 20 of the future benefits was determined using a
discount rate of 6.0%.
(b) Dental cost trend ra
The current den co cost t 3anuary; 1, 2008 was 4.0% per annum.
(c) Extended heal care tren
Health Cos were assumed Increase at 99t In 2009 and decrease by 0.5% increments
per year an ultimate rat of 5% per year lm 2017 and thereafter.
4. Pensio g me
The L• rary B k contributions to the Ontorio Municipal Employees Retirement System
(OM S), which ulti-employer plan, on behalf of eligible members of its staff. The plan Is
a fined benefit pi that specifies the amount of the retirement benefit to be received by the
ployees based n the length of service and rates of pay.
Contributions i the amount of $161,830 (2007 - $149,696) were paid to OMERS on behalf of
its members usng the year.
S Doamwtin 271QBNdrrGg QtyR~bNe L/bn~• dadd-116Y7141(~ N73 M, &31 PMT Page 5
FOR DISCUSSION PURPOSES ONLY
The Corporation of the City of Pickering 2 5 6 .
Public Library Board
Notes to the financial statements
December 31, 2008
5. Statement of changes In financial position.
A statement of changes in financial position has not been presented, as th related informa n
Is readily determinable from the flnancial statements presented.
6. Guarantees
In the normal course of business,.the Library Board enters into re ts, whic contain
guarantees. The Library Board's primary guarantees are as foil s.
(i) The Library Board indemnifies employees and board me bens for various ems including,
but not limited to, all costs to settle suits or actions d to association th the Library
Board, subject to certain restrictions. The Library has purchase lability insurance to
mitigate the cost of any potential future suits or a 'ons. The term o e indemnification is
not explicitly defined, but Is limited to the period a hich the in emnified party served as
an employee or board member of the Library rd axim amount of any potential
future payment cannot be reasonably estima
([I) The Library Board has entered into agre em is that nc de indemnities in favour of
third parties, such as purchase and sale a ements, con ntiality agreements,
engagement letters with advisors ac suonts, outso ing agreements, leasing
contracts, information technology ;nd
g menta and serv agreements. These
indemnification agreements may re the Library rd to compensate counterparties for
losses incurred by the counterparti a result of aches in representation and
regulations or as a result of litiga on a _ tory sanctions that may be suffered by
the counterparty as a conseque ce of rksa ion. The terms of these indemnities are
not explicitly defined and the aximum oun of any potential reimbursement cannot be
reasonably estimated.
The nature of these indemnifl tion agreemen prevents the Library Board from making a
reasonable estimate of the ximum exposu due to the difficulties in assessing the amount of
liability, which stems fro he predictabi of future events and the unlimited coverage
offered to counterpartie H Ily, the brary 'Board has-not made any significant payments
under such or similar i e ifi ements and therefore no amount has been accrued in
the Statement of Fn vial on w' respect to these agreements.
7. Budget frgu
Budgets esta fished for capita expenditures are set on a project-oriented basis, the costs of
which may a out ov r one or more fiscal years and may not be comparable with the
current y r u oun
8. Ta ible capita is
F r fiscal years co mencing after January 1, 200$, the Library Board will be required to report
ngible capital is in its financial statements ip accordance with The Public Sector
Accounting Ha book of the Canadian Institute of Chartered Accountants, Section PS3150 -
Tangible Cap I Assets. The Library Board is currently working toward obtaining the necessary
Information order to comply with PS 3150. Public Sector Guideline 7 requires the disclosure of
tangible ital asset Information in the notes to the financial statements to the extent that
reliable formation is available. For 2008, the Library Board has identified the majority of the
tangib capital assets and is currently working onifinalizing the opening balances for these
asse . As at December 31, 2008, the Library Board does not have detailed tangible capital
ass information to disclose. For the year ended December 31, 2008 tangible capital
enditures incurred during the year are recorded as capital expenditures on the statement of
nanciai activities and change in fund balance.
S Qvaur~/nz2~araafaa~goY~fl~L/endpias~~~e(ti4/t~6/x?in9~3rvdri
Page 6
FOR DISCUSSION PURPOSES ONLY
257
The Corporation of the City of Pickering
Public Library Board
Notes to the financial statements
December 31, 2008
9. Comparative figures
Certain of the prior year's comparative figures have been reclassified to co form to the cu nt
year's financial statement presentation.
O
S D00AWWtIn22100Adorf~c~~+iubkC~fb~vya,ad-lz t+~rt6✓WK.5.31 gw Pagel
FOR DISCUSSION PU"SES ONLY
ATTACHMENT #..I-TO REPORT#ILP-01
Auditor's 2006 010servations 258
Management Responses Summary
(Attachment 1 to Report CS 30.08 Updated June, 2009)
i) Security Policy
Deloitte's 2006 concern was the lack of all encompassing documentation
pertaining to system security policies and ! procedures. It was perceived that since
Information Technology (IT) had only developed one policy, that being the
Personal Computer (PC) Use Policy (ADM030), that certain aspects of security had
not been addressed. During the 2007 review, Deloitte became more familiar with
the comprehensiveness of the PC Use Policy. Additionally, Deloitte understands
that IT updates the policy at least once per year to ensure its currency, and
schedules bi monthly training sessions on the policy for new staff. The policy is
posted on the intranet to allow access for all employees. New employees are also
provided hard copies of the policy for ease 'of reference.
IT does not rest alone on the PC Use Policy to ensure network security. In 2005, a
penetration test was performed to test the City's network defences, both internal
and external. Weaknesses were uncovered regarding the internal defences. It was
recommended by the security firm that the City begin to implement login tokens,
and the City did so. By 2009, all employees who access a computer will require a
login token to connect to the City's computer network. To maintain our diligence, a
follow-up security penetration test will be performed during the third quarter of this
year.
In addition, IT develops security-related login messages several times per year. In
conclusion, this concern is considered addressed and closed.
Update: The PC Use Policy (ADM030) was rewritten so that it is now an
overview for Information Technology (IT) and its function. The specifics of the
policy are now contained within the procedure ADM030-001. The procedure,
including security-related matters, was updated in 2008. A security penetration
test was performed as planned, and IT performed very well regarding security-
related systems. IT conducted nine security training sessions over a period of
three days. Additional login tokens have been budgeted for within 2009, and all
staff will be assigned a token by the end of 12010. The multi-year purchase of login
tokens is budget related.
Review of Logical Access Rights
Deloitte rightfully addressed the issue of logical access rights, and the need to
ensure that only those employees rightfully entitled to access specific files and
systems are permitted to do so. In 2007, IT implemented a system that provided
employee 'file access rights upon request of the Department Head. During May
2008, IT will issue an email reminder to all Directors and Division Heads reminding
them of this service. When the odd employee terminates their services with the
City, the replacement employee is usually granted the same access rights as the
previous employee.
259
To conclude, the concern is certainly legitimate that only authorized employees
should be permitted access to certain files and systems. We feel for the above
reasons the City is addressing this concern appropriately. Therefore, this concern
is considered addressed and closed.
Update: During 2008, IT implemented ,a system to provide Directors the ability
to request employee file access rights. The notification of this service was emailed
to all Directors. To date, there have been no requests.
iii) Documentation
Deloitte correctly identified that a number of IT functions/tasks were not
documented, including day-to-day tasks,, network-monitoring activities, and the
reviewing of audit logs. It is acknowledged that documentation is a requirement if
absolute consistency is required. However, one must also consider the limited
staffing available to IT. The development of documentation is one thing, to monitor
that the documentation is being followed is another. It needs to be noted that it
was never the intent of IT to monitor the audit logs being backed up. The intent
was merely to have copies of the audit files should reference to them be required.
All user requests are currently documented) by way of the Help Desk. All inventory
changes are documented by way of an in-house developed tracking system.
Therefore, two of the most important activities within IT are indeed documented.
We believe the intent of Deloitte's recommendation is in fact being fulfilled. Thus,
this issue has been addressed and closed.
Update: Change Management documentation procedures were implemented
during 2008. Furthermore, in early 2009, a Software Acquisition Policy was
drafted and is under review with implemenotion in 2009.
iv) Change Management Procedures and Documentation
Deloitte has noted that the City lacks formal change-management procedures and
documentation. In a larger organization, this would indeed be a concern. In the
City, network changes, other than employee adds and changes, are implemented
only by two employees, they being the ;Supervisor, Network Support and the
Network Analyst. Application changes, such as for the financial and property-
based systems are not an excessive concern since they are purchased systems
and not in-house developed. As a result, system changes are fully tested prior to
them being received by the City. Changes to the databases are controlled by the
DBA. As can be noted, indirect controls currently exist. However, the essence of
Deloitte's arguments for change management procedures and documentation are
valid. Starting in June, in-house tracking systems will be developed that will
include the need to seek approval before certain tasks can be performed. Systems
will be developed for both application and network changes. Change control will
be further enhanced for the application and DBA changes in that all significant
changes to application and DBA systems will now be approved by IT prior to the
I
i
260
changes being enacted. For both network and application changes, should the
changes be significant enough, the Manager, Information Technology must provide
approval to proceed. Since IT will be implementing Deloitte's recommendations,
this concern is addressed and closed.
Update: Formal change controls were put in place for all application and
network changes during 2008. The systems were developed in-house, and reside
on the intranet where they are only accessible by IT staff.
v) Business Continuity and Disaster Recovery Planning (BCDR)
No one disputes the necessity of BCDR. What can be argued are the resources
required versus that available to be applied against it. As previously reported, the
City spent approximately $23,000 during 2004 to have Deloitte develop a first-
phase plan. The result was a list of computer-related systems that would be
restored in priority sequence should a disaster befall IT. Council declined to
authorize the $40,000 funding required to restore the number one system, that
being the telephone system. It was then rOcognized that the City could not support
the expenditures related to a full-scale BCDR due to the limited funding that is
available to the City as a whole.
The City, while not pursuing a full-fledged BCDR system, is proceeding in a
methodical manner, adding to IT's capabilities on an annual basis. An informal
estimate of implementing all aspects, excluding the development of an actual plan,
was approximately $1.2 million which was deemed by staff to be too high a cost to
implement in one year. In 2008, Council approved approximately $270,000 for
various aspects of this and other initiatives identified by the Auditors and/or
Manager. IT will be implementing a SAN solution, virtual servers which will allow
for quicker restoration of systems, and', the O'Brien room will be wired to
accommodate servers and PCs should a disaster strike the Civic Centre. Each
year since 2004, new capabilities have been added to IT's repertoire of response
tools. It is anticipated that this will continue! in future year's budgets.
The need for a BCDR has been acknowledged. The City has on a yearly basis
further responded to that need. To conclude, we believe the City is meeting the
main requirements, and will continue to do so. As a result, this matter is
considered addressed and closed.
Update: All projects identified within Report CS . 30-08 were implemented
during 2008. Furthermore, IT has enhanced the capabilities of the MEOC located
in Claremont, and plans are in place to continue to do so.
Each year as budget affordability provides, aspects of Business Continuity and
Disaster Recovery measures are put in place. In this way, while taking longer, the
city avoids a very large budget increase in any one year for these purposes.