HomeMy WebLinkAboutFND-015-11 ring REPORT
FINANCE DEPARTMENT
Meeting: GENERAL PURPOSE AND ADMINISTRATION
Date: JUNE 27, 2011 Resolution#: ' �" By-law#:
Report#: FND-015-11 File#:
Subject: 2010 AUDITED FINANCIAL STATEMENTS
RECOMMENDATIONS:
It is respectfully recommended that the General Purpose and Administration Committee
recommend to Council the following:
1. THAT Report FND-015-11 be received; and
2. THAT the 2010 Draft Audited Financial Statements for the Municipality, its Trust
Funds, the Clarington Public Library and the Business Improvement Areas be
approved.
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Submitted by: ; ,./8 ✓ LA" Reviewed by: r �'
Nancy - lor, V:. C.A. Franklin Wu,
Director of Finance/ Chief Administrative Officer
Treasurer
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CORPORATION OF THE MUNICIPALITY OF CLARINGTON
40 TEMPERANCE STREET, BOWMANVILLE, ONTARIO L1C 3A6 T(905)623-3379
REPORT NO.: FND-015-11 PAGE 2
BACKGROUND:
1.0 Section 296(1) of the Municipal Act, S.O. 2001, c.25 provides that
"A municipality shall appoint an auditor licensed under the Public Accounting Act
who is responsible for,
(a) annually auditing the accounts and transactions of the municipality and
its local boards and expressing an opinion on the financial statements of
these bodies based on the audit;"
1.1 Grant Thornton, Markham, Ontario, were appointed as the Municipality of
Clarington's auditors through RFP2010-6 for a five (5) year term to expire
January 31, 2015.
1.2 Section 5751 of the Canadian Institute of Chartered Accountant's (CICA)
Handbook deals with "Communications with those having oversight responsibility
for the financial reporting process". At the General Purpose and Administration
Committee meeting of December 5, 2005, Council approved report FND-019-05
formally appointing the Audit Review Group to include the Mayor, as Chair of
Finance, the Chief Administrative Officer and the Director of Finance/Treasurer.
This group has the oversight responsibility for the financial reporting process.
1.3 The Municipality of Clarington's 2010 audited financial statements were
presented to the Audit Review Group on June 23, 2010. A complete copy will be
circulated to Members of Council after approval by the audit committee, made
available for public viewing, and posted on the Municipality's website. The
Clarington Public Library statements will be submitted for ratification by the
Clarington Library Board at their next meeting.
1.4 A copy of the excerpts from the financial statements for 2010 are included as
Attachment "A" to this report.
1.5 The Ministry of Municipal Affairs and Housing also requires an audit letter as well
as specialized financial reports entitled Financial Information Returns. The
ministry reviews these and provides Financial Indicator Reviews based on the
information submitted and comparable municipalities.
1.6 It is important to note that the financial statements are the responsibility of the
Municipality's management. The financial statements have been prepared in
accordance with generally accepted accounting principles applicable to local
governments, and conform with accounting standards established by the Public
REPORT NO.: FND-015-11 PAGE 3
Sector Accounting Board (PSAB) of the Canadian Institute of Chartered
Accountants. Where the determination of assets and liabilities is dependent
upon future events, amounts are based upon reasonably determined estimates
and judgments (i.e. Post employment benefit liability).
1.7 The responsibility of the auditor's is to express an opinion on these statements
based on their audit. A draft copy of the Auditor's Report for 2010 is included as
Attachment "B" and reflects what is generally referred to as a clean audit opinion.
A final report will be issued once Council approves the financial statements.
CHANGES TO FINANCIAL REPORTING:
2.0 Section 294.1 of the Municipal Act, S.O. 2001, c.25 provides that
"A municipality shall, for each fiscal year, prepare annual financial statements for
the municipality in accordance with generally accepted accounting principles for
local governments as recommended, from time to time, by the Public Sector
Accounting Board of the Canadian Institute of Chartered Accountants."
2.1 Effective January 1, 2009, the Municipality was required to change its accounting
and financial reporting to conform to the new revised guidelines in the Public
Sector Accounting Handbook on financial reporting presentation (Section PS
1200) and tangible capital accounting (Section PS 3150). These were two of the
most significant changes to municipal financial reporting ever introduced and
required an intense and lengthy effort by municipal staff and auditors to
implement. As part of this exercise, 2008 was also required to be restated in
order to be consistent and comparable to the 2009 financial information. Details
of the significant policies are included in the notes to the consolidated financial
statements. 2009 required a prior period adjustment in the 2010 financial
statements reflecting further refinements to our tangible capital asset reporting as
explained in Note 2 to the financial statements.
2.2 The sheer magnitude of the changes and work required cannot be emphasized
enough. It is critical to note that the financial statements are dramatically
different than what was required in prior years and may take some time for all
parties to become familiar with both the pros and cons of the new reporting
requirements and the impact of the tangible capital assets on the financial
statements. Improvements to the tangible capital asset reporting process are
ongoing by all municipalities including Clarington.
REPORT NO.:, FND-015-11 PAGE 4
HIGHLIGHTS OF 2010 FINANCIAL STATEMENTS:
3.0 The first statement included in Attachment "A" is the Consolidated Statement of
Financial Position. There are several items of note. This statement now includes
tangible capital assets with a net book value of approximately $386 million at
December 31, 2010. Schedule 1 of the complete financial statements
distributed under separate cover provides the breakdown of tangible capital
assets by infrastructure category and between cost (approximately $580 million)
and accumulated depreciation (approximately $194 million).
3.1 The second item of note on the Consolidated Statement of Financial Position is
the accumulated surplus of$421 million at December 31, 2010. It is critical to
note that this is not the "traditional"'surplus in former financial reporting formats
where the objective was to determine any surplus or deficit pertaining to
operations that needed to be recovered in the subsequent budget year. The
surplus now incorporates tangible capital asset implications and reserves and
reserve funds and capital fund together as an overall number. Details on the
surplus can be found in the complete financial statements under Note 18.
3.2 For clarity for Council it is worthwhile to expand on the surplus/deficit issue. The
actual year end accumulated surplus at December 31, 2010 based on the former
financial reporting methodology was approximately $2.4 million. As per approved
Council policy, this will be transferred into the Rate Stabilization Reserve Fund in
2011. The 2010 surplus relates primarily to supplementary taxation revenue and
building permit revenue, both of which were very unpredictable in 2010 due to
the prevailing economic climate. Savings in winter control due to favourable
weather conditions was also a contributory factor.
3.3 Also worthy of note, the municipality's debt has reduced to $29.5 million at
December 31, 2010. Our long-term debt is at a very reasonable level and is
significantly lower than Ministry guidelines for debt capacity. Cash flow issues
around development charges were in place for 2011 but are likely to lessen in the
future.
3.4 The Consolidated Statement,of Operations is the second item included in
Attachment "A". Again, it is critical to be aware that the annual surplus noted of
approximately $9.9 million is not the same as determined under previous
financial reporting methodology. The $9.9 million annual surplus reflected on this
statement is inclusive of contributed assets (i.e assumed roads/subdivision
REPORT NO.: FND-015-11 PAGE 5
works), amortization of tangible capital assets, changes to reserve and reserve
fund balances, as well as typical operating impacts and capital activities.
3.5 Ultimately, the financial statements reflect a strong financial position for
December 31, 2010.
CONCLUSION:
4.0 It is recommended that the 2010 audited financial statements (complete set
distributed under separate cover) be approved including those of the Trust
Funds, Clarington Public Library (subject to Library Board approval) and
Business Improvement Areas and the auditor's be thanked for their assistance
and support provided throughout the year as various issues arose.
Attachments:
Attachment "A" — Excerpts from Financial Statements for 2010
Attachment "B" — Draft Auditors Report for 2010
ATTACHMENT "A" TO FND-015-11
The Corporation of the Municipality of Clarington
Consolidated statement of financial position
as at December 31, 2010
2010 2009
Financial assets
Cash and cash equivalents 30,488,537 29,801,786
Investments (Note 6) 24,640,255 25,035,899
Accounts receivable 9,035,957 6,899,979
Taxes receivable (Note 5) 12,255,738 11,814,175
Inventories for resale 39,326 42,968
Land for resale 146,409 223,521
Promissory notes receivable (Note 7) 8,321,000 8,321,000
Investment in Veridian Corporation (Note 8) 13,639,630 13,196,195
Total financial assets 98,566,852 95,335,523
Liabilities
Accounts payable and accrued liabilities 11,039,132 9,337,072
Employee future benefits liabilities (Note 11) 4,721,719 3,822,465
Net long-term liabilities (Note 12) 29,535,078 32,348,198
Deferred revenue - general 5,461,019 5,533,704
Deferred revenue - obligatory reserve funds (Note 9) 13,815,939 11,778,692
Total liabilities 64,572,887 62,820,131
Net financial assets 33,993,965 32,515,392
Non-financial assets
Tangible capital assets (Note 17) (Schedule 1) 386,323,159 377,889,999
Prepaid expenses 590,813 609,743
Inventory supplies 337,510 273,268
Total non-financial assets 387,251,482 378,773,010
Accumulated surplus (Note 18) 421,245,447 411,288,402
Clarington FS-schedules 61011(2)xls,•2010612011;1:38 PM Page 2
The Corporation of the Municipality of Clarington
Consolidated statement of operations
year ended December 31, 2010
2010 2009
Budget
(unaudited) Actual Actual
Revenues
Taxation and user charges
Property taxation 37,520,679 38,082,181 36,132,168
Taxation from other governments 3,105,381 3,266,401 3,367,444
User charges 7,250,294 9,805,861 8,404,223
Grants
Government of Canada - 2,735,275 158,871
Province of Ontario 76,000 3,003,323 535,196
Other
Deferred revenue earned 10,837,368 9,572,950 8,613,613
Investment income 1,882,899 2,167,020 2,531,308
Penalty and interest on taxes 1,050,000 1,833,647 1,559,214
Fines 144,500 219,987 248,209
Donations and contribution from others 760,000 182,629 504,521
Veridian Corporation
Equity share of net income - 1,153,416 1,495,777
Contributed tangible capital assets 4,163,541 4,163,541 5,747,821
Other income - 460,645 274,188
(Loss) gain on disposal of tangible capital assets - (878,739) 10,256
Total revenues 66,790,662 75,768,137 69,582,809
Expenses
General government 9,434,889 10,110,357 8,635,853
Protection to persons and property 10,977,472 11,773,255 11,703,512
Transportation services 20,364,195 19,649,216 20,267,828
Environmental services 1,021,561 1,163,370 1,045,006
Health services 209,321 222,893 197,528
Recreational and cultural services 17,635,527 19,029,450 18,710,583
Planning and development 3,728,224 3,862,551 4,984,031
Total expenses 63,371,189 65,811,092 65,544,341
Annual surplus 3,419,473 9,957,045 4,038,468
Accumulated surplus, beginning of year
As previously reported 409,166,607
Prior year adjustment(Note 2) (1,916,673)
As restated 413,205,075 411,288,402 407,249,934
Accumulated surplus,end of year 416,624,548 421,245,447 411,288,402
10C 1arington.x1s,-17 10612011;2:22 PM
ATTACHMENT "B" TO FND-015-11
(deport to the Audit Committee—Communication of audit results 7
The Corporation of the Municipality of Clarington
For the year ended December 31,2010
D
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INDEPENDENT AUDITOR'S REPORT
To the Members of Council,Inhabitants and Ratepayers of the Corporation of the Municipality of
Clarington
We have audited the accompanying consolidated financial statements of the Corporation of the
Municipality of Clarington,which comprise the consolidated statement of financial position as at
December 31,2010,and the consolidated statements of operations, changes in net financial assets and
cash flows for the year then ended,and a summary of significant accounting policies and other
explanatory information.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with Canadian public sector accounting standards,and for such internal control as
management determines is necessary to enable the preparation of financial statements that are free
from material misstatement,whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit.We
conducted our audit in accordance with Canadian generally accepted auditing standards.Those
standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements.The procedures selected depend on the auditor's judgment,including the
assessment of the risks of material misstatement of the financial statements,whether due to fraud or
error. In making those risk assessments,the auditor considers internal control relevant to the
Municipality's preparation and fair presentation of the financial statements in order to design audit
procedures that are appropriate in the circumstances,but not for the purpose of expressing an opinion
on the effectiveness of the Municipality's internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made by
management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Opinion
In our opinion,the consolidated financial statements present fairly,in all material respects,the financial
position of The Corporation of the Municipality of Clarington as at December 31,2010,and its
financial performance and its cash flows for the year then ended in accordance with Canadian public
sector accounting standards.
Audit•Tax•Advisory
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Report to the Audit Committee—Communication of audit results g
The Corporation of the Municipality of Clarington
For the year ended [December 31,2010 DD F2q'V
Other matter
Without modifying our report we draw attention to the budget figures which are provided for
comparative purposes only. They have not been subject to audit procedures. Accordingly,we do not
express an opinion on the budget figures.
The financial statements of the Municipality of Clarington for the year ended December 31,2009 were
audited by another auditor who expressed an unmodified opinion on those statements on August 30,
2010.
Markham, Canada
2011 Chartered Accountants
Licensed Public Accountants
Audit•Tax•Advisory
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