HomeMy WebLinkAbout2021-08-04Claibygton
Audit Committee
Agenda
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Date: August 4, 2021
Time: 9:00 am
Place: Held Virtually via Microsoft Teams
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1. Call to Order
2. Land Acknowledgement Statement
3. Declarations of Pecuniary Interest
4. Adoption of Minutes of Previous Meeting(s)
4.1. Minutes of meeting held June 29, 2021 Page 3
5. Presentations
5.1 BDO Canada LLP presentation of the 2020 audit findings.
6. Delegations
6.1 none
7. Communications — Receive for Information
7.1 Final letter from BDO Canada LLP — Municipality of Clarington Page 7
Recommendation: That final letter for the Municipality of Clarington be received
for information and signed by CAO and Director of Financial Services/Treasurer
7.2 Final letter from BDO Canada LLP — Historical Downtown Page 19
Bowmanville BIA
Recommendation: That final letter for the Historical Downtown Bowmanville BIA
be received for information and signed by CAO and Director of Financial
Services/Treasurer
1
Audit and Accountability Committee — August 4, 2021
7.3 Final letter from BDO Canada LLP — Newcastle BIA Page 30
Recommendation: That final letter for Newcastle BIA be received for information
and signed by CAO and Director of Financial Services/Treasurer
7.4 Final letter from BDO Canada LLP — Orono BIA Page 41
Recommendation: That final letter for the Orono BIA be received for information
and signed by CAO and Director of Financial Services/Treasurer
7.5 Memo to the Audit and Accountability Committee from the Director of Page 51
Financial Services/Treasurer.
8. Items for Direction
8.1. Report FSD-033-21, 2020 Financial Statements Page 53
Recommendations:
1. That Report FSD-033-21 be received;
2. That the Consolidated Financial Statements for the Municipality of Clarington
for the year ending December 31, 2020 be approved;
3. That the Financial Statements for the Board of Management for Historic
Downtown Bowmanville Business Improvement Area for the year ending
December 31, 2020 be approved;
4. That the Financial Statements for the Board of Management for the Newcastle
Central Business District Improvement Area for the year ending December 31,
2020 be approved;
5. That the Financial Statements for the Board of Management for the Orono
Central Business District Improvement Area for the year ending December 31,
2020 be approved;
6. That the Financial Statements for the Municipality of Clarington Trusts for the
year ending December 31, 2020 be approved; and
7. That, Staff prepare the Annual Financial Report for the year ending December
31, 2020 for public consumption with information substantively as discussed in
Report FSD-033-12 and that it be placed on the Municipality's website.
9. Other Business
10. Adjournment
Claibygton
Audit Committee
Minutes
If this information is required in an alternate format, please contact the Accessibility
Coordinator at 905-623-3379 ext. 2131.
Date: June 29, 2021
Time: 9:0 am
Place: Held Virtually via Microsoft Teams
Present: Mayor Foster, Councillor Hooper, Councillor Neal
Staff Present: Any Allison, Trevor Pinn, Catherine Carr, Heather Lynch, Michelle Pick,
Erika Watson, David Ferguson
1. Call to Order
Councillor Neal called the meeting to order at 9:02 AM.
2. Land Acknowledgement Statement
Mayor Foster recited the Land Acknowledgement Statement.
3. Declarations of Pecuniary Interest
3.1 None
4. Adoption of Minutes of Previous Meeting(s)
Resolution #AAC-006-21
Moved by Mayor Foster
Seconded by Councillor Hooper
That the minutes from the Audit and Accountability Committee held April 7, 2021 be
approved.
Carried
5.
Presentations
5.1
None
6.
Delegations
6.1
None
3
Audit Committee Minutes June 29, 2021
7. Communications — Receive for Information
Resolution #AAC-007-21
Moved by Councillor Hooper
Seconded by Mayor Foster
That the Investment Compliance memo dated May 5, 2021, be received.
Carried
8. Items for Direction
8.1. Report FSD-034-21, Bank Signing Policy
Resolution #AAC-008-21
Moved by Councillor Hooper
Seconded by Mayor Foster
1. That Report FSD-034-21 be received;
2. That the draft Bank Signing Authority Policy, as attachment #1 be approved;
3. That the draft by-law as attachment #2, to repeal Bowmanville By-law 1786 and
Town of Newcastle By-law 88-97 be approved; and
4. That the Municipality's banking institutions, and any delegations, be advised of
Council's decision.
Carried
Recommendation to Council #1
That the Banking signing policy be approved, and the by-law attached to
Report FSD-034-21 be passed.
8.2. Report FSD-035-21, Investment Policy
Resolution #AAC-009-21
Moved by Mayor Foster
Seconded by Councillor Hooper
1. That Report FSD-035-21, be received; and
2. That the proposed updated Investment Policy be approved.
Carried
Page 2 of 4
4
Audit Committee Minutes June 29, 2021
Recommendation to Council #2
That the Investment Policy attached to Report FSD-035-21be approved.
8.3 Report FSD-036-21, Purchasing By-law
Resolution #AAC-010-21
Moved by Councillor Hooper
Seconded by Mayor Foster
1. That Report FSD-036-21, be received;
2. That the updated Purchasing By-law, attached to the Report (Attachment 1), be
passed; and
3. That all interested parties listed in report FSD-036-21 and any delegations be
advised of Council's decision.
Carried
Recommendation to Council #3
That the Purchasing By-law attached to Report FSD-036-21 be approved.
8.4 Report FSD-037-21, Capital Projects (2020 and prior)
Resolution #AAC-011-21
Moved by Mayor Foster
Seconded by Councillor Hooper
1. That Report FSD-037-21, Capital Projects (2020 and prior) be received for
information.
Carried
Recommendation to Council #4
That report FSD-037-21, Capital Projects (2020 and prior) be received for
information.
9. Other Business
9.1 None
Page 3 of 4
5
Audit Committee Minutes June 29, 2021
10. Adjournment
Resolution #AAC-012-21
Moved by Councillor Hooper
Seconded by Mayor Foster
That the meeting adjourn at 10:25 AM.
Carried
Page 4 of 4
JBDO
705 324 7Canada LLP
705 3240774
0774 165 165 Kent Street W
800 955 1509 PO Box 358
www.bdo.ca Lindsay ON K9V 453
August 4, 2021
Municipality of Clarington
40 Temperance Street
Bowmanville ON
L1 C 3A6
Re: Report to the Audit and Accountability committee for the year ending December 31,
2020
Dear Audit and Accountability Committee Members:
Our report is designed to highlight and explain key issues which we believe to be relevant to the
audit, including audit risks, the nature, extent, timing, and results of our audit work and the
terms of our engagement. This report forms a significant part of our overall communication
strategy with the Audit and Accountability Committee and is designed to promote effective
two-way communication throughout the audit process so that we may both share timely
information. We are communicating only those matters of governance interest that come to our
attention as a result of the performance of the audit. We are not required to design audit
procedures for the specific purpose of identifying matters of governance interest.
Our audit and therefore this report will not necessarily identify all matters that may be of
interest to the Audit and Accountability Committee in fulfilling its responsibilities.
This report has been prepared solely for the use of the Audit and Accountability Committee and
should not be distributed without our prior consent. Consequently, we accept no responsibility
to a third party that uses this communication.
Terms of Reference
Our overall responsibility is to form and express an opinion on the consolidated financial
statements based on our audit procedures. The consolidated financial statements are prepared
by management, with oversight by those charged with governance. The audit of the consolidated
financial statements does not relieve management or those charged with governance of their
responsibilities. The scope of our work, as confirmed in our engagement letter are set out below.
Engagement Objectives
► Forming and expressing an audit opinion on the consolidated financial statements.
► Present significant findings to the Audit and Accountability Committee including key audit
and accounting issues, any significant deficiencies in internal control and any other
significant matters arising from our work.
► Provide timely and constructive management letters. This will include deficiencies in
internal control identified during our audit.
► Consult regarding accounting and reporting matters are requested throughout the year.
► Work with management towards the timely issuance of consolidated financial statements.
Page 1 of 9
BDO Canada LLP, a Canadian limited liability partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the
international BDO network of independent member firms
Audit Strategy
Our overall audit strategy involved extensive partner and manager involvement in all aspects of
the planning and execution of the audit and was based on our overall understanding of
Municipality of Clarington.
We performed a risk based audit which allows us to focus our audit effort on higher risk areas and
other areas of concern for management and the Audit and Accountability Committee.
To assess risk accurately, we gained a detailed understanding of Municipality of Clarington's
business and the environment it operates in. This allowed us to identify, assess and respond to
the risks of material misstatement.
To identify, assess and respond to risk, we obtained an understanding of the system of internal
control in place in order to consider the adequacy of these controls as a basis for the preparation
of the consolidated financial statements, to determine whether adequate accounting records
have been maintained and to assess the adequacy of these controls and records as a basis upon
which to design and undertake our audit testing.
Based on our risk assessment, we designed an appropriate audit strategy to obtain sufficient
assurance to enable us to report on the consolidated financial statements.
We chose audit procedures that we believed were the most effective and efficient to reduce
audit risk to an acceptable low level. The procedures are a combination of testing the operating
effectiveness of internal controls, substantive analytical procedures and other tests of detailed
transactions.
Having planned our audit, we performed audit procedures, maintaining an appropriate degree of
professional skepticism, in order to collect evidence to support our audit opinion.
Risks and Planned Audit Responses
Based on our knowledge of Municipality of Clarington's business, our past experience, and
knowledge gained from management and you, we identified the following financial statement
areas with significant risks; those risks of material misstatement that, in our judgment, required
special consideration.
These risks arose mainly because of the complexity of the accounting rules, the extent of
estimation and judgment involved in the valuation of these financial statement areas, and the
existence of new accounting pronouncements that affect them.
Page 2 of 9
Grant Revenue Funding agreements for grants received were reviewed to
determine whether revenue was recorded in accordance with
the terms of the agreements. Grants with terms that could
require a deferral of revenue were found to have been
appropriately recognized or deferred in the year.
Tax Revenue Supplementary revenue and write-off accruals were tested and
analyzed. The estimated accruals for write-off's and
supplementary taxation revenue were found to be reasonable.
Valuation of Employee Future Management uses an expert to determine the employee future
Benefits benefit liability. BDO communicated with the expert and
assessed the assumptions used by the expert that were
provided by the Municipality.
Management Override of We reviewed the appropriateness of journal entries made by
Controls staff and reviewed estimates for any biases and did not note
activity indicating management has overridden controls to
meet their biases.
Materiality
Misstatements, including omitted financial statement disclosures, are considered to be material if
they, individually or in aggregate, could reasonably be expected to influence the economic
decisions of users taken on the basis of the consolidated financial statements.
Judgments about materiality are made in light of surrounding circumstances and include an
assessment of both quantitative and qualitative factors and can be affected by the size or nature
of a misstatement, or a combination of both.
For purposes of our audit, preliminary materiality was set at $2,000,000 for the year ended
December 31, 2020. We communicated all corrected and uncorrected misstatements identified
during our audit to the Audit and Accountability Committee, other than those which we
determined to be "clearly trivial". Misstatements are considered to be clearly trivial for
purposes of the audits when they are inconsequential both individually and in aggregate.
We encouraged management to correct any misstatements identified throughout the audit
process.
Page 3 of 9
Reliance on an Expert
In order for us to perform adequate audit procedures on certain financial statement areas, we
relied on the work of, and the report prepared by Morneau Shepell. Canadian generally accepted
auditing standards require us to communicate with the expert. We discussed the following with
Morneau Shepell:
► The objective and nature of the audit engagement and how we intended to use the
expert's findings and report
► Our assessment of the significance and risk aspects of the engagement that affected the
expert's work
► The requirement to advise us if they have any relationship with Municipality of Clarington
which impaired their judgment or objectivity in the conduct of their engagement
► The nature, timing and extent of the expert's work and our planned review of it, possibly
including review of their working papers
► Confirmation that the assumptions used in their calculations are consistent with those
used in the prior periods and with industry standards
► Their obligation to advise BDO Canada LLP of any matters up to the estimated audit
report date that may affect their calculations and their report
Independence
Our annual communication confirming our independence is included as an Appendix A. Except as
noted in the Appendix A, we are not aware of any relationships between the entity and us that,
in our professional judgment, may reasonably be thought to bear on our independence to date.
Auditor's Considerations of Possible Fraud and Illegal Activities
We are responsible for planning and performing the audit to obtain reasonable assurance that the
consolidated financial statements are free of material misstatements, whether caused by error or
fraud, by:
► Identifying and assessing the risks of material misstatement due to fraud;
► Obtaining sufficient and appropriate audit evidence regarding the assessed risks of
material misstatement due to fraud, through designing and implementing appropriate
responses; and
► Responding appropriately to fraud or suspected fraud identified during the audit.
The likelihood of not detecting a material misstatement resulting from fraud is higher than the
likelihood of not detecting a material misstatement resulting from error because fraud may
involve collusion as well as sophisticated and carefully organized schemes designed to conceal it.
During the audit, we performed risk assessment procedures and related activities to obtain an
understanding of the entity and its environment, including the Municipality's internal control, to
obtain information for use in identifying the risks of material misstatement due to fraud and
made inquiries of management regarding:
Page 4 of 9
10
► Management's assessment of the risk that the consolidated financial statements may be
materially misstated due to fraud, including the nature, extent and frequency of such
assessments;
► Management's process for identifying and responding to the risks of fraud in the
Municipality, including any specific risks of fraud that management has identified or that
have been brought to its attention, or classes of transactions, account balances, or
disclosures for which a risk of fraud is likely to exist;
► Management's communication, if any, to those charged with governance regarding its
processes for identifying and responding to the risks of fraud in Municipality of
Clarington; and
► Management's communication, if any, to employees regarding its view on business
practices and ethical behaviour.
In response to our risk assessment and our inquiries of management, we performed procedures to
address the assessed risks, which may have included:
► Inquired of management, the Audit and Accountability Committee, and others related to
any knowledge of fraud, suspected fraud or alleged fraud;
► Performed disaggregated analytical procedures and consider unusual or unexpected
relationships identified in the planning of our audit;
► Incorporated an element of unpredictability in the selection of the nature, timing and
extent of our audit procedures; and
► Performed additional required procedures to address the risk of management's override
of controls including:
o Testing internal controls designed to prevent and detect fraud;
o Testing the appropriateness of a sample of adjusting journal entries and other
adjustments for evidence of the possibility of material misstatement due to
fraud;
o Reviewing accounting estimates for biases that could result in material
misstatements due to fraud, including a retrospective review of significant prior
years' estimates; and
Adjusted and Unadjusted Differences
We have disclosed all significant adjusted and unadjusted differences and disclosure omissions
identified through the course of our audit engagement. Each of these items, if any, has been
discussed with Management.
Management has determined that the unadjusted differences, if any, are immaterial both
individually and in aggregate to the consolidated financial statements taken as a whole. Should
the Audit and Accountability Committee agree with this assessment, we do not propose further
adjustments.
Uncorrected misstatements aggregated during the audit that were determined by management to
be immaterial amounted to $122,648. A summary of the statement of likely aggregate
misstatements is attached to this letter.
During the audit we became aware of an error relating to interest receivable. Management
decided to voluntarily adjust prior period numbers which were audited by another firm. As a
result we are required to communicate this error to the predecessor auditor.
Page 5 of 9
`s]
IBDO
Significant Findings, Accounting Policies, Estimates and Judgments
Management is responsible for determining the significant accounting policies. The choice of
different accounting policy alternatives can have a significant effect on the financial position and
results of operations of the Municipality. The application of those policies often involves
significant estimates and judgments by management.
We are of the view that nothing has come to our attention that indicates that the significant
accounting policies, estimates, and judgments made by management are not reasonable in the
context of the financial statements taken as a whole.
Management Representations
During the course of the audit, management made certain representations to us. These
representations were verbal or written and therefore explicit, or they were implied through the
consolidated financial statements. Management provided representations in response to specific
queries from us, as well as unsolicited representations. Such representations were part of the
evidence gathered by us to be able to draw reasonable conclusions on which to base the audit
opinion. These representations were documented by including in the audit working papers
memoranda of discussions with management and written representations received from
management.
A summary of the representations we have requested from management is set out in the
management representation letter included in Appendix B to the report.
Management Letter
We will be submitting to management a letter on internal controls and other matters that we feel
should be brought to their attention.
We wish to express our appreciation for the co-operation we received during the audit from
Municipality of Clarington's management and staff who have assisted us in carrying out our work.
We would be pleased to discuss with you the contents of this report and any other matters that
you consider appropriate.
Yours truly,
Galt. I&VnI&
Trina Connell, CPA, CA
Partner
BDO Canada LLP
Chartered Professional Accountants, Licensed Public Accountants
Page 6 of 9
`m
Final Report for Municipality of Clarington
For the year ended December 31, 2020
APPENDIX A: INDEPENDENCE
Page 7 of 9
13
August 4, 2021
Dear Audit and Accountability Committee Members:
At the core of the provision of external audit services is the concept of independence. We are
communicating all relationships between BDO Canada LLP and its related entities and
Municipality of Clarington and its related entities that, in our professional judgment, may
reasonably be thought to have influenced our independence during the audit.
In determining which relationships to report, we have considered the applicable legislation and
relevant rules of professional conduct and related interpretations prescribed by the appropriate
provincial institute/order covering such matters as the following:
Holding a financial interest, either directly or indirectly in a client;
• 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;
Personal or business relationships of immediate family, close relatives, partners or retired
partners, either directly or indirectly, with a client;
• Economic dependence on a client; and
• Provision of services in addition to the audit.
We have prepared the following comments to facilitate our discussion with you regarding
independence matters.
We are not aware of any relationships between the entity and us that, in our professional
judgment, may reasonably be thought to bear on our independence to date.We hereby confirm
that we are independent with respect to the entity within the meaning of the Code of
Professional Conduct of the Chartered Professional Accountants of Ontario as of August 4, 2021.
This communication is intended solely for the use of the Audit and Accountability Committee,
management and others with the entity and should not be used for any other purposes.
Yours truly,
Chartered Professional Accountants, Licensed Public Accountants
Page 8 of 9
14
SRO
APPENDIX B: REPRESENTATION LETTER
Page 9 of 9
15
Municipality of Clarington
40 Temperance Street
Bowmanville ON
L1 C 3A6
August 4, 2021
BDO Canada LLP
Chartered Professional Accountants
165 Kent Street W
PO Box 358
Lindsay ON K9V 4S3
This representation letter is provided in connection with your audit of the financial statements of
Municipality of Clarington for the year ended December 31, 2020, for the purpose of expressing an
opinion as to whether the financial statements are presented fairly, in all material respects, in
accordance with Canadian public sector accounting standards.
We confirm that to the best of our knowledge and belief, having made such inquiries as we considered
necessary for the purpose of appropriately informing ourselves:
Financial Statements
We have fulfilled our responsibilities, as set out in the terms of the audit engagement dated December
11, 2020, for the preparation of the financial statements in accordance with Canadian public sector
accounting standards; in particular, the financial statements are fairly presented in accordance
therewith.
• The methods, significant assumptions, and data used in making accounting estimates and their
related disclosures are appropriate to achieve recognition, measurement and/or disclosure that
are reasonable in accordance with Canadian public sector accounting standards.
• Related party relationships and transactions have been appropriately accounted for and
disclosed in accordance with the requirements of Canadian public sector accounting standards.
• All events subsequent to the date of the financial statements and for which Canadian public
sector accounting standards require adjustment or disclosure have been adjusted or disclosed.
• The financial statements of the entity use appropriate accounting policies that have been
properly disclosed and consistently applied.
• The effects of uncorrected misstatements are immaterial, both individually and in the
aggregate, to the financial statements as a whole. A list of the uncorrected misstatements is
attached to the representation letter.
• We have reviewed and approved all journal entries recommended by the practitioners during
the audit. A list of the journal entries is attached to the representation letter.
Information Provided
• We have provided you with:
• access to all information of which we are aware that is relevant to the preparation of the
financial statements, such as records, documentation and other matters;
• additional information that you have requested from us for the purpose of the audit; and
• unrestricted access to persons within the entity from whom you determined it necessary to
obtain audit evidence.
16
• We are responsible for the design, implementation and maintenance of internal controls to
prevent, detect and correct fraud and error, and have communicated to you all deficiencies in
internal control of which we are aware.
• All transactions have been recorded in the accounting records and are reflected in the financial
statements.
• We have disclosed to you all known instances of non-compliance or suspected non-compliance
with laws and regulations whose effects should be considered when preparing the financial
statements.
• We have disclosed to you the identity of the entity's related parties and all the related party
relationships and transactions of which we are aware.
Fraud and Error
• We have disclosed to you the results of our assessment of the risk that the financial statements
may be materially misstated as a result of fraud.
• We have disclosed to you all information in relation to fraud or suspected fraud that we are
aware of and that affects the entity and involves:
• management;
• employees who have significant roles in internal control; or
• others where the fraud could have a material effect on the financial statements.
• We have disclosed to you all information in relation to allegations of fraud, or suspected fraud,
affecting the entity's financial statements communicated by employees, former employees,
analysts, regulators, or others.
General Representations
• Where the value of any asset has been impaired, an appropriate provision has been made in the
financial statements or has otherwise been disclosed to you.
• We have provided you with significant assumptions that in our opinion are reasonable and
appropriately reflect our intent and ability to carry out specific courses of action on behalf of
the entity when relevant to the use of fair value measurements or disclosures in the financial
statements.
• Except as disclosed in the financial statements, there have been no changes to title, control
over assets, liens or assets pledged as security for liabilities or collateral.
• The entity has complied with all provisions in its agreements related to debt and there were no
defaults in principal or interest, or in the covenants and conditions contained in such
agreements.
• There have been no plans or intentions that may materially affect the recognition,
measurement, presentation or disclosure of assets and liabilities (actual and contingent).
• The nature of all material uncertainties have been appropriately measured and disclosed in the
financial statements, including all estimates where it is reasonably possible that the estimate
will change in the near term and the effect of the change could be material to the financial
statements.
• There were no direct contingencies or provisions (including those associated with guarantees or
indemnification provisions), unusual contractual obligations nor any substantial commitments,
17
whether oral or written, other than in the ordinary course of business, which would materially
affect the financial statements or financial position of the entity, except as disclosed in the
financial statements.
Other Representations Where the Situation Exists
• We have informed you of all known actual or possible litigation and claims, whether or not they
have been discussed with legal counsel. Since there are no actual, outstanding or possible
litigation and claims, no disclosure is required in the financial statements.
• To the extent that our normal procedures and controls related to our financial statement close
process or other reporting processes at any of our locations were adversely impacted by the
COVID-19 outbreak, we took appropriate actions and safeguards to reasonably ensure the fair
presentation of the financial statements in accordance with Canadian public sector accounting
standards.
• Other than as disclosed in the notes to the financial statements, no other impacts from the
COVID-19 outbreak need to be reflected in the financial statements.
• Disclosures included in the financial statements regarding the relevant significant business,
financial, and reporting impacts of the COVID-19 outbreak accurately reflect management's full
consideration of such impacts.
Yours truly,
Signature
Signature
Position
Position
18
JBDO
705 324 7BDO Canada LLP
705 3240774
0774 BDO Canada LLP
1 800 955 1509 165 Kent Street W
www.bdo.ca PO Box 358
Lindsay ON K9V 4S3
August 4, 2021
Historic Downtown Bowmanville Business Improvement Area
40 Temperance Street
Bowmanville, ON
L1 C 3A6
Re: Report to the Audit committee for the year ending December 31, 2020
Dear Board of Directors:
Our report is designed to highlight and explain key issues which we believe to be relevant to the
audit, including audit risks, the nature, extent, timing, and results of our audit work and the
terms of our engagement. This report forms a significant part of our overall communication
strategy with the Board of Directors and is designed to promote effective two-way
communication throughout the audit process so that we may both share timely information. We
are communicating only those matters of governance interest that come to our attention as a
result of the performance of the audit. We are not required to design audit procedures for the
specific purpose of identifying matters of governance interest.
Our audit and therefore this report will not necessarily identify all matters that may be of
interest to the Board of Directors in fulfilling its responsibilities.
This report has been prepared solely for the use of the Board of Directors and should not be
distributed without our prior consent. Consequently, we accept no responsibility to a third party
that uses this communication.
Terms of Reference
Our overall responsibility is to form and express an opinion on the financial statements based on
our audit procedures. The financial statements are prepared by management, with oversight by
those charged with governance. The audit of the financial statements does not relieve
management or those charged with governance of their responsibilities. The scope of our work,
as confirmed in our engagement letter is set out below.
Engagement Objectives
► Forming and expressing an audit opinion on the financial statements.
► Present significant findings to the Board of Directors including key audit and accounting
issues, any significant deficiencies in internal control and any other significant matters
arising from our work.
► Provide timely and constructive management letters. This will include deficiencies in
internal control identified during our audit.
► Consult regarding accounting matters are requested throughout the year.
► Work with management towards the timely issuance of financial statements.
Page 1 of 8
BDO Canada LLP, a Canadian limited liability partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the
international BDO network of independent member firms
19
JBDO
Audit Strategy
Our overall audit strategy involved extensive partner and manager involvement in all aspects of
the planning and execution of the audit and was based on our overall understanding of Historic
Downtown Bowmanville Business Improvement Area.
We performed a risk based audit which allows us to focus our audit effort on higher risk areas and
other areas of concern for management and the Board of Directors.
To assess risk accurately, we gained a detailed understanding of Historic Downtown Bowmanville
Business Improvement Area's business and the environment it operates in. This allowed us to
identify, assess and respond to the risks of material misstatement.
To identify, assess and respond to risk, we obtained an understanding of the system of internal
control in place in order to consider the adequacy of these controls as a basis for the preparation
of the financial statements, to determine whether adequate accounting records have been
maintained and to assess the adequacy of these controls and records as a basis upon which to
design and undertake our audit testing.
Based on our risk assessment, we designed an appropriate audit strategy to obtain sufficient
assurance to enable us to report on the financial statements.
We chose audit procedures that we believed were the most effective and efficient to reduce
audit risk to an acceptable low level. The procedures are a combination of testing the operating
effectiveness of internal controls (when appropriate), substantive analytical procedures and
other tests of detailed transactions.
Having planned our audit, we performed audit procedures, maintaining an appropriate degree of
professional skepticism, in order to collect evidence to support our audit opinion.
Risks and Planned Audit Responses
Based on our knowledge of Historic Downtown Bowmanville Business Improvement Area's
business, our past experience, and knowledge gained from management and you, we identified
the following financial statement areas with significant risks; those risks of material
misstatement that, in our judgment, required special consideration.
These risks arose mainly because of the complexity of the accounting rules, the extent of
estimation and judgment involved in the valuation of these financial statement areas, and the
existence of new accounting pronouncements that affect them.
Revenue • Agreed the tax levy to bank deposits.
Lack of Segregation of Duties • Agreed board payments to T4A's provided by the
municipality.
• Reviewed expenses to board members in our test of
purchases.
Page 2 of 8
20
Materiality
Misstatements, including omitted financial statement disclosures, are considered to be material if
they, individually or in aggregate, could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial statements.
Judgments about materiality are made in light of surrounding circumstances and include an
assessment of both quantitative and qualitative factors and can be affected by the size or nature
of a misstatement, or a combination of both.
For purposes of our audit, preliminary materiality was set at $3,300 for the year ended December
31, 2020. We communicated all corrected and uncorrected misstatements identified during our
audit to the Board of Directors, other than those which we determined to be "clearly trivial".
Misstatements are considered to be clearly trivial for purposes of the audits when they are
inconsequential both individually and in aggregate.
We encouraged management to correct any misstatements identified throughout the audit
process.
Audit Team
In order to ensure effective communication between the Audit Committee and BDO Canada LLP,
we have briefly outlined below the key members of our audit team and the role they played:
Trina Connell Partner 705 3200701
Matt Haire Senior Manager 705 3200726
Independence
Our annual communication confirming our independence is included as an Appendix. We are not
aware of any relationships between the entity and us that, in our professional judgment, may
reasonably be thought to bear on our independence to date.
Auditor's Considerations of Possible Fraud and Illegal Activities
We are responsible for planning and performing the audit to obtain reasonable assurance that the
financial statements are free of material misstatements, whether caused by error or fraud, by:
► Identifying and assessing the risks of material misstatement due to fraud;
► Obtaining sufficient and appropriate audit evidence regarding the assessed risks of
material misstatement due to fraud, through designing and implementing appropriate
responses; and
Page 3 of 8
PAI
► Responding appropriately to fraud or suspected fraud identified during the audit.
The likelihood of not detecting a material misstatement resulting from fraud is higher than the
likelihood of not detecting a material misstatement resulting from error because fraud may
involve collusion as well as sophisticated and carefully organized schemes designed to conceal it.
During the audit, we performed risk assessment procedures and related activities to obtain an
understanding of the entity and its environment, including the Company's internal control, to
obtain information for use in identifying the risks of material misstatement due to fraud and
made inquiries of management regarding:
► Management's assessment of the risk that the financial statements may be materially
misstated due to fraud, including the nature, extent and frequency of such assessments;
► Management's process for identifying and responding to the risks of fraud in the
Company, including any specific risks of fraud that management has identified or that
have been brought to its attention, or classes of transactions, account balances, or
disclosures for which a risk of fraud is likely to exist;
► Management's communication, if any, to those charged with governance regarding its
processes for identifying and responding to the risks of fraud in Historic Downtown
Bowmanville Business Improvement Area; and
► Management's communication, if any, to employees regarding its view on business
practices and ethical behaviour.
In response to our risk assessment and our inquiries of management, we performed procedures to
address the assessed risks, which may have included:
► Inquired of management, the Board of Directors, and others related to any knowledge of
fraud, suspected fraud or alleged fraud;
► Performed disaggregated analytical procedures and consider unusual or unexpected
relationships identified in the planning of our audit;
► Incorporated an element of unpredictability in the selection of the nature, timing and
extent of our audit procedures; and
► Performed additional required procedures to address the risk of management's override
of controls including:
o Testing internal controls designed to prevent and detect fraud;
o Testing the appropriateness of a sample of adjusting journal entries and other
adjustments for evidence of the possibility of material misstatement due to
fraud;
o Reviewing accounting estimates for biases that could result in material
misstatements due to fraud, including a retrospective review of significant prior
years' estimates; and
o Evaluated the business rationale for significant unusual transactions.
Page 4 of 8
Pia
IBDO
Adjusted and Unadjusted Differences
We have disclosed all significant adjusted and unadjusted differences and disclosure omissions
identified through the course of our audit engagement. Each of these items, if any, has been
discussed with Management.
Management has determined that the unadjusted differences, if any, are immaterial both
individually and in aggregate to the financial statements taken as a whole. Should the Board of
Directors agree with this assessment, we do not propose further adjustments.
Uncorrected misstatements aggregated during the audit that were determined by management to
be immaterial amounted to $1,995. The major unadjusted misstatements are as follows:
Purchases related to 2020 not recorded in the correct period $1,000
To reclassify stale dated cheques 995
Total Likely Aggregate Misstatements $1,995
Significant Findings, Accounting Policies, Estimates and Judgments
Management is responsible for determining the significant accounting policies. The choice of
different accounting policy alternatives can have a significant effect on the financial position and
results of operations of the Organization. The application of those policies often involves
significant estimates and judgments by management.
Our comments below are intended to provide you with some thoughts on the qualitative aspects
of the significant accounting policies chosen by management, and the significant estimates and
judgements made by management, so that you can assess the appropriateness of management's
choices.
Revenue Recognition Taxation revenue is recorded when earned and is based on a
special assessment. Other revenues are recorded in the period
in which transactions or events occurred that gave rise to the
revenues.
Based on our procedures performed we note that these
policies are appropriate.
We are of the view that nothing has come to our attention that indicates that the significant
accounting policies, estimates and judgments made by management are not reasonable in the
context of the financial statements taken as a whole.
Management Representations
Page 5 of 8
23
During the course of the audit, management made certain representations to us. These
representations were verbal or written and therefore explicit, or they were implied through the
financial statements. Management provided representations in response to specific queries from
us, as well as unsolicited representations. Such representations were part of the evidence
gathered by us to be able to draw reasonable conclusions on which to base the audit opinion.
These representations were documented by including in the audit working papers memoranda of
discussions with management and written representations received from management.
A summary of the representations we have requested from management is set out in the
management representation letter included in Appendix B to the report.
We will provide you a copy of the management representation letter, which summarizes the
representations we have requested from management.
Management Letter
We have submitted to management a letter on internal controls and other matters that we feel
should be brought to their attention.
We wish to express our appreciation for the co-operation we received during the audit from
Historic Downtown Bowmanville Business Improvement Area's management and staff who have
assisted us in carrying out our work. We would be pleased to discuss with you the contents of
this report and any other matters that you consider appropriate.
Yours truly,
Trina Connell, CPA, CA
Partner
BDO Canada LLP
Chartered Professional Accountants, Licensed Public Accountants
Page 6 of 8
24
Final Report for Historic Downtown Bowmanville Business Improvement Area For the year ended December 31, 2020
APPENDIX A: INDEPENDENCE
August 4, 2021
Dear Board of Directors Members:
At the core of the provision of external audit services is the concept of independence. We are
communicating all relationships between BDO Canada LLP and its related entities and Historic
Downtown Bowmanville Business Improvement Area and its related entities that, in our
professional judgment, may reasonably be thought to have influenced our independence during
the audit.
In determining which relationships to report, we have considered the applicable legislation and
relevant rules of professional conduct and related interpretations prescribed by the appropriate
provincial institute/order covering such matters as the following:
• Holding a financial interest, either directly or indirectly in a client;
• 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;
• Personal or business relationships of immediate family, close relatives, partners or retired
partners, either directly or indirectly, with a client;
• Economic dependence on a client; and
• Provision of services in addition to the audit.
We have prepared the following comments to facilitate our discussion with you regarding
independence matters.
We are not aware of any relationships between the entity and us that, in our professional
judgment, may reasonably be thought to bear on our independence to date.
We hereby confirm that we are independent with respect to the entity within the meaning of the
Code of Professional Conduct of the Chartered Professional Accountants of Ontario as of August
4, 2021.
This communication is intended solely for the use of the Board of Directors, management and
others with the entity and should not be used for any other purposes.
Yours truly,
8L)0 Ca�aa�a. LL. P
Chartered Professional Accountants, Licensed Public Accountants
Page 7 of 8
25
JBDO�
APPENDIX 6: REPRESENTATIONS LETTER
Page 8 of 8
26
Historic Downtown Bowmanville Business Improvement Area
40 Temperance Street
Bowmanville, ON
L1 C 3A6
August 4, 2021
BDO Canada LLP
Chartered Professional Accountants
165 Kent Street W
PO Box 358
Lindsay, ON K9V 4S3
This representation letter is provided in connection with your audit of the financial statements of
Historic Downtown Bowmanville Business Improvement Area for the year ended December 31, 2020, for
the purpose of expressing an opinion as to whether the financial statements are presented fairly, in all
material respects, in accordance with Canadian public sector accounting standards.
We confirm that to the best of our knowledge and belief, having made such inquiries as we considered
necessary for the purpose of appropriately informing ourselves:
Financial Statements
We have fulfilled our responsibilities, as set out in the terms of the audit engagement dated December
11, 2020, for the preparation of the financial statements in accordance with Canadian public sector
accounting standards; in particular, the financial statements are fairly presented in accordance
therewith.
• The methods, significant assumptions, and data used in making accounting estimates and their
related disclosures are appropriate to achieve recognition, measurement and/or disclosure that
are reasonable in accordance with Canadian public sector accounting standards.
• Related party relationships and transactions have been appropriately accounted for and
disclosed in accordance with the requirements of Canadian public sector accounting standards.
• All events subsequent to the date of the financial statements and for which Canadian public
sector accounting standards require adjustment or disclosure have been adjusted or disclosed.
• The financial statements of the entity use appropriate accounting policies that have been
properly disclosed and consistently applied.
• The effects of uncorrected misstatements are immaterial, both individually and in the
aggregate, to the financial statements as a whole. A list of the uncorrected misstatements is
attached to the representation letter.
• We have reviewed and approved all journal entries recommended by the practitioners during
the audit. A list of the journal entries is attached to the representation letter.
Information Provided
• We have provided you with:
• access to all information of which we are aware that is relevant to the preparation of the
financial statements, such as records, documentation and other matters;
• additional information that you have requested from us for the purpose of the audit; and
• unrestricted access to persons within the entity from whom you determined it necessary to
obtain audit evidence.
27
• We are responsible for the design, implementation and maintenance of internal controls to
prevent, detect and correct fraud and error, and have communicated to you all deficiencies in
internal control of which we are aware.
• All transactions have been recorded in the accounting records and are reflected in the financial
statements.
• We have disclosed to you all known instances of non-compliance or suspected non-compliance
with laws and regulations whose effects should be considered when preparing the financial
statements.
• We have disclosed to you the identity of the entity's related parties and all the related party
relationships and transactions of which we are aware.
Fraud and Error
• We have disclosed to you the results of our assessment of the risk that the financial statements
may be materially misstated as a result of fraud.
• We have disclosed to you all information in relation to fraud or suspected fraud that we are
aware of and that affects the entity and involves:
• management;
• employees who have significant roles in internal control; or
• others where the fraud could have a material effect on the financial statements.
• We have disclosed to you all information in relation to allegations of fraud, or suspected fraud,
affecting the entity's financial statements communicated by employees, former employees,
analysts, regulators, or others.
General Representations
• Where the value of any asset has been impaired, an appropriate provision has been made in the
financial statements or has otherwise been disclosed to you.
• We have provided you with significant assumptions that in our opinion are reasonable and
appropriately reflect our intent and ability to carry out specific courses of action on behalf of
the entity when relevant to the use of fair value measurements or disclosures in the financial
statements.
• Except as disclosed in the financial statements, there have been no changes to title, control
over assets, liens or assets pledged as security for liabilities or collateral.
• The entity has complied with all provisions in its agreements related to debt and there were no
defaults in principal or interest, or in the covenants and conditions contained in such
agreements.
• There have been no plans or intentions that may materially affect the recognition,
measurement, presentation or disclosure of assets and liabilities (actual and contingent).
• The nature of all material uncertainties have been appropriately measured and disclosed in the
financial statements, including all estimates where it is reasonably possible that the estimate
will change in the near term and the effect of the change could be material to the financial
statements.
• There were no direct contingencies or provisions (including those associated with guarantees or
indemnification provisions), unusual contractual obligations nor any substantial commitments,
28
whether oral or written, other than in the ordinary course of business, which would materially
affect the financial statements or financial position of the entity, except as disclosed in the
financial statements.
Other Representations Where the Situation Exists
• We have informed you of all known actual or possible litigation and claims, whether or not they
have been discussed with legal counsel. Since there are no actual, outstanding or possible
litigation and claims, no disclosure is required in the financial statements.
• Disclosures included in the financial statements regarding the relevant significant business,
financial, and reporting impacts of the COVID-19 outbreak accurately reflect management's full
consideration of such impacts.
• To the extent that our normal procedures and controls related to our financial statement close
process or other reporting processes at any of our locations were adversely impacted by the
COVID-19 outbreak, we took appropriate actions and safeguards to reasonably ensure the fair
presentation of the financial statements in accordance with public sector accounting standards.
Yours truly,
Signature
Signature
Position
Position
29
JBDO
705 324 7BDO Canada LLP
705 3240774
0774 BDO Canada LLP
1 800 955 1509 165 Kent Street W
www.bdo.ca PO Box 358
Lindsay ON K9V 4S3
August 4, 2021
Newcastle Central Business District Improvement Area
40 Temperance Street
Bowmanville, ON
L1 C 3A6
Re: Report to the Audit committee for the year ending December 31, 2020
Dear Board of Directors:
Our report is designed to highlight and explain key issues which we believe to be relevant to the
audit, including audit risks, the nature, extent, timing, and results of our audit work and the
terms of our engagement. This report forms a significant part of our overall communication
strategy with the Board of Directors and is designed to promote effective two-way
communication throughout the audit process so that we may both share timely information. We
are communicating only those matters of governance interest that come to our attention as a
result of the performance of the audit. We are not required to design audit procedures for the
specific purpose of identifying matters of governance interest.
Our audit and therefore this report will not necessarily identify all matters that may be of
interest to the Board of Directors in fulfilling its responsibilities.
This report has been prepared solely for the use of the Board of Directors and should not be
distributed without our prior consent. Consequently, we accept no responsibility to a third party
that uses this communication.
Terms of Reference
Our overall responsibility is to form and express an opinion on the financial statements based on
our audit procedures. The financial statements are prepared by management, with oversight by
those charged with governance. The audit of the financial statements does not relieve
management or those charged with governance of their responsibilities. The scope of our work,
as confirmed in our engagement letter is set out below.
Engagement Objectives
► Forming and expressing an audit opinion on the financial statements.
► Present significant findings to the Board of Directors including key audit and accounting
issues, any significant deficiencies in internal control and any other significant matters
arising from our work.
► Provide timely and constructive management letters. This will include deficiencies in
internal control identified during our audit.
► Consult regarding accounting matters are requested throughout the year.
► Work with management towards the timely issuance of financial statements.
Page 1 of 8
BDO Canada LLP, a Canadian limited liability partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the
international BDO network of independent member firms
30
JBDO
Audit Strategy
Our overall audit strategy involved extensive partner and manager involvement in all aspects of
the planning and execution of the audit and was based on our overall understanding of Newcastle
Central Business District Improvement Area.
We performed a risk based audit which allows us to focus our audit effort on higher risk areas and
other areas of concern for management and the Board of Directors.
To assess risk accurately, we gained a detailed understanding of Newcastle Central Business
District Improvement Area's business and the environment it operates in. This allowed us to
identify, assess and respond to the risks of material misstatement.
To identify, assess and respond to risk, we obtained an understanding of the system of internal
control in place in order to consider the adequacy of these controls as a basis for the preparation
of the financial statements, to determine whether adequate accounting records have been
maintained and to assess the adequacy of these controls and records as a basis upon which to
design and undertake our audit testing.
Based on our risk assessment, we designed an appropriate audit strategy to obtain sufficient
assurance to enable us to report on the financial statements.
We chose audit procedures that we believed were the most effective and efficient to reduce
audit risk to an acceptable low level. The procedures are a combination of testing the operating
effectiveness of internal controls (when appropriate), substantive analytical procedures and
other tests of detailed transactions.
Having planned our audit, we performed audit procedures, maintaining an appropriate degree of
professional skepticism, in order to collect evidence to support our audit opinion.
Risks and Planned Audit Responses
Based on our knowledge of Newcastle Central Business District Improvement Area's business, our
past experience, and knowledge gained from management and you, we identified the following
financial statement areas with significant risks; those risks of material misstatement that, in our
judgment, required special consideration.
These risks arose mainly because of the complexity of the accounting rules, the extent of
estimation and judgment involved in the valuation of these financial statement areas, and the
existence of new accounting pronouncements that affect them.
Revenue • Agreed the tax levy to bank deposits.
Lack of Segregation of Duties Reviewed the invoices for expenses in our test of
purchases.
Cash Cutoff Reviewed bank statements in 2021 and agreed tested
amounts after year end to support to ensure they were
Page 2 of 8
31
recorded in the correct year.
Materiality
Misstatements, including omitted financial statement disclosures, are considered to be material if
they, individually or in aggregate, could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial statements.
Judgments about materiality are made in light of surrounding circumstances and include an
assessment of both quantitative and qualitative factors and can be affected by the size or nature
of a misstatement, or a combination of both.
For purposes of our audit, preliminary materiality was set at $1,000 for the year ended December
31, 2020. We communicated all corrected and uncorrected misstatements identified during our
audit to the Board of Directors, other than those which we determined to be "clearly trivial".
Misstatements are considered to be clearly trivial for purposes of the audits when they are
inconsequential both individually and in aggregate.
We encouraged management to correct any misstatements identified throughout the audit
process.
Audit Team
In order to ensure effective communication between the Audit Committee and BDO Canada LLP,
we have briefly outlined below the key members of our audit team and the role they played:
Trina Connell Partner 705 3200701
Matt Haire Senior Manager 705 3200726
Independence
Our annual communication confirming our independence is included as an Appendix. We are not
aware of any relationships between the entity and us that, in our professional judgment, may
reasonably be thought to bear on our independence to date.
Auditor's Considerations of Possible Fraud and Illegal Activities
We are responsible for planning and performing the audit to obtain reasonable assurance that the
financial statements are free of material misstatements, whether caused by error or fraud, by:
► Identifying and assessing the risks of material misstatement due to fraud;
► Obtaining sufficient and appropriate audit evidence regarding the assessed risks of
Page 3 of 8
32
material misstatement due to fraud, through designing and implementing appropriate
responses; and
► Responding appropriately to fraud or suspected fraud identified during the audit.
The likelihood of not detecting a material misstatement resulting from fraud is higher than the
likelihood of not detecting a material misstatement resulting from error because fraud may
involve collusion as well as sophisticated and carefully organized schemes designed to conceal it.
During the audit, we performed risk assessment procedures and related activities to obtain an
understanding of the entity and its environment, including the Company's internal control, to
obtain information for use in identifying the risks of material misstatement due to fraud and
made inquiries of management regarding:
► Management's assessment of the risk that the financial statements may be materially
misstated due to fraud, including the nature, extent and frequency of such assessments;
► Management's process for identifying and responding to the risks of fraud in the
Company, including any specific risks of fraud that management has identified or that
have been brought to its attention, or classes of transactions, account balances, or
disclosures for which a risk of fraud is likely to exist;
► Management's communication, if any, to those charged with governance regarding its
processes for identifying and responding to the risks of fraud in Newcastle Central
Business District Improvement Area; and
► Management's communication, if any, to employees regarding its view on business
practices and ethical behaviour.
In response to our risk assessment and our inquiries of management, we performed procedures to
address the assessed risks, which may have included:
► Inquired of management, the Board of Directors, and others related to any knowledge of
fraud, suspected fraud or alleged fraud;
► Performed disaggregated analytical procedures and consider unusual or unexpected
relationships identified in the planning of our audit;
► Incorporated an element of unpredictability in the selection of the nature, timing and
extent of our audit procedures; and
► Performed additional required procedures to address the risk of management's override
of controls including:
o Testing internal controls designed to prevent and detect fraud;
o Testing the appropriateness of a sample of adjusting journal entries and other
adjustments for evidence of the possibility of material misstatement due to
fraud;
o Reviewing accounting estimates for biases that could result in material
misstatements due to fraud, including a retrospective review of significant prior
years' estimates; and
o Evaluated the business rationale for significant unusual transactions.
Adjusted and Unadjusted Differences
There were no significant adjusted and unadjusted differences and disclosure omissions
identified through the course of our audit engagement.
Page 4 of 8
33
Significant Findings, Accounting Policies, Estimates and Judgments
Management is responsible for determining the significant accounting policies. The choice of
different accounting policy alternatives can have a significant effect on the financial position and
results of operations of the Organization. The application of those policies often involves
significant estimates and judgments by management.
Our comments below are intended to provide you with some thoughts on the qualitative aspects
of the significant accounting policies chosen by management, and the significant estimates and
judgements made by management, so that you can assess the appropriateness of management's
choices.
Revenue Recognition Taxation revenue is recorded when earned and is based on a
special assessment. Other revenues are recorded in the period
in which transactions or events occurred that gave rise to the
revenues.
Based on our procedures performed we note that these
policies are appropriate.
We are of the view that nothing has come to our attention that indicates that the significant
accounting policies, estimates and judgments made by management are not reasonable in the
context of the financial statements taken as a whole.
Management Representations
During the course of the audit, management made certain representations to us. These
representations were verbal or written and therefore explicit, or they were implied through the
financial statements. Management provided representations in response to specific queries from
us, as well as unsolicited representations. Such representations were part of the evidence
gathered by us to be able to draw reasonable conclusions on which to base the audit opinion.
These representations were documented by including in the audit working papers memoranda of
discussions with management and written representations received from management.
A summary of the representations we have requested from management is set out in the
management representation letter included in Appendix B to the report.
Management Letter
We have submitted a no issues anagement a letter on internal controls. No matters were
identified that we feel should be brought to their attention.
We wish to express our appreciation for the co-operation we received during the audit from
Newcastle Central Business District Improvement Area's management and staff who have assisted
us in carrying out our work. We would be pleased to discuss with you the contents of this report
and any other matters that you consider appropriate.
Page 5 of 8
34
Yours truly,
Trina Connell, CPA, CA
Partner
BDO Canada LLP
Chartered Professional Accountants, Licensed Public Accountants
Page 6 of 8
35
Final Report for Newcastle Central Business District Improvement Area For the year ended December 31, 2020
APPENDIX A: INDEPENDENCE
August 4, 2021
Dear Board of Directors Members:
At the core of the provision of external audit services is the concept of independence. We are
communicating all relationships between BDO Canada LLP and its related entities and Newcastle
Central Business District Improvement Area and its related entities that, in our professional
judgment, may reasonably be thought to have influenced our independence during the audit.
In determining which relationships to report, we have considered the applicable legislation and
relevant rules of professional conduct and related interpretations prescribed by the appropriate
provincial institute/order covering such matters as the following:
Holding a financial interest, either directly or indirectly in a client;
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;
Personal or business relationships of immediate family, close relatives, partners or retired
partners, either directly or indirectly, with a client;
• Economic dependence on a client; and
• Provision of services in addition to the audit.
We have prepared the following comments to facilitate our discussion with you regarding
independence matters.
We are not aware of any relationships between the entity and us that, in our professional
judgment, may reasonably be thought to bear on our independence to date.
We hereby confirm that we are independent with respect to the entity within the meaning of the
Code of Professional Conduct of the Chartered Professional Accountants of Ontario as of August
4, 2021.
This communication is intended solely for the use of the Board of Directors, management and
others with the entity and should not be used for any other purposes.
Yours truly,
800 Caftada LLP
Chartered Professional Accountants, Licensed Public Accountants
Page 7 of 8
36
SRO
APPENDIX B: REPRESENTATIONS LETTER
Page 8 of 8
37
Newcastle Central Business District Improvement Area
40 Temperance Street
Bowmanville, ON
L1 C 3A6
August 4, 2021
BDO Canada LLP
Chartered Professional Accountants
165 Kent Street W
PO Box 358
Lindsay, ON K9V 4S3
This representation letter is provided in connection with your audit of the financial statements of
Newcastle Central Business District Improvement Area for the year ended December 31, 2020, for the
purpose of expressing an opinion as to whether the financial statements are presented fairly, in all
material respects, in accordance with Canadian public sector accounting standards.
We confirm that to the best of our knowledge and belief, having made such inquiries as we considered
necessary for the purpose of appropriately informing ourselves:
Financial Statements
We have fulfilled our responsibilities, as set out in the terms of the audit engagement dated December
11, 2020, for the preparation of the financial statements in accordance with Canadian public sector
accounting standards; in particular, the financial statements are fairly presented in accordance
therewith.
• The methods, significant assumptions, and data used in making accounting estimates and their
related disclosures are appropriate to achieve recognition, measurement and/or disclosure that
are reasonable in accordance with Canadian public sector accounting standards.
• Related party relationships and transactions have been appropriately accounted for and
disclosed in accordance with the requirements of Canadian public sector accounting standards.
• All events subsequent to the date of the financial statements and for which Canadian public
sector accounting standards require adjustment or disclosure have been adjusted or disclosed.
• The financial statements of the entity use appropriate accounting policies that have been
properly disclosed and consistently applied.
Information Provided
• We have provided you with:
• access to all information of which we are aware that is relevant to the preparation of the
financial statements, such as records, documentation and other matters;
• additional information that you have requested from us for the purpose of the audit; and
• unrestricted access to persons within the entity from whom you determined it necessary to
obtain audit evidence.
• We are responsible for the design, implementation and maintenance of internal controls to
prevent, detect and correct fraud and error, and have communicated to you all deficiencies in
internal control of which we are aware.
All transactions have been recorded in the accounting records and are reflected in the financial
statements.
38
We have disclosed to you all known instances of non-compliance or suspected non-compliance
with laws and regulations whose effects should be considered when preparing the financial
statements.
• We have disclosed to you the identity of the entity's related parties and all the related party
relationships and transactions of which we are aware.
Fraud and Error
• We have disclosed to you the results of our assessment of the risk that the financial statements
may be materially misstated as a result of fraud.
• We have disclosed to you all information in relation to fraud or suspected fraud that we are
aware of and that affects the entity and involves:
• management;
• employees who have significant roles in internal control; or
• others where the fraud could have a material effect on the financial statements.
• We have disclosed to you all information in relation to allegations of fraud, or suspected fraud,
affecting the entity's financial statements communicated by employees, former employees,
analysts, regulators, or others.
General Representations
• Where the value of any asset has been impaired, an appropriate provision has been made in the
financial statements or has otherwise been disclosed to you.
• We have provided you with significant assumptions that in our opinion are reasonable and
appropriately reflect our intent and ability to carry out specific courses of action on behalf of
the entity when relevant to the use of fair value measurements or disclosures in the financial
statements.
• Except as disclosed in the financial statements, there have been no changes to title, control
over assets, liens or assets pledged as security for liabilities or collateral.
• The entity has complied with all provisions in its agreements related to debt and there were no
defaults in principal or interest, or in the covenants and conditions contained in such
agreements.
• There have been no plans or intentions that may materially affect the recognition,
measurement, presentation or disclosure of assets and liabilities (actual and contingent).
• The nature of all material uncertainties have been appropriately measured and disclosed in the
financial statements, including all estimates where it is reasonably possible that the estimate
will change in the near term and the effect of the change could be material to the financial
statements.
• There were no direct contingencies or provisions (including those associated with guarantees or
indemnification provisions), unusual contractual obligations nor any substantial commitments,
whether oral or written, other than in the ordinary course of business, which would materially
affect the financial statements or financial position of the entity, except as disclosed in the
financial statements.
39
Other Representations Where the Situation Exists
• We have informed you of all known actual or possible litigation and claims, whether or not they
have been discussed with legal counsel. Since there are no actual, outstanding or possible
litigation and claims, no disclosure is required in the financial statements.
• Disclosures included in the financial statements regarding the relevant significant business,
financial, and reporting impacts of the COVID-19 outbreak accurately reflect management's full
consideration of such impacts.
• To the extent that our normal procedures and controls related to our financial statement close
process or other reporting processes at any of our locations were adversely impacted by the
COVID-19 outbreak, we took appropriate actions and safeguards to reasonably ensure the fair
presentation of the financial statements in accordance with public sector accounting standards.
Yours truly,
Signature
Signature
Position
Position
40
JBDO
705 324 7BDO Canada LLP
705 3240774
0774 BDO Canada LLP
1 800 955 1509 165 Kent Street W
www.bdo.ca PO Box 358
Lindsay ON K9V 4S3
August 4, 2021
Orono Central Business District Improvement Area
40 Temperance Street
Bowmanville, ON
L1 C 3A6
Re: Report to the Audit committee for the year ending December 31, 2020
Dear Board of Directors:
Our report is designed to highlight and explain key issues which we believe to be relevant to the
audit, including audit risks, the nature, extent, timing, and results of our audit work and the
terms of our engagement. This report forms a significant part of our overall communication
strategy with the Board of Directors and is designed to promote effective two-way
communication throughout the audit process so that we may both share timely information. We
are communicating only those matters of governance interest that come to our attention as a
result of the performance of the audit. We are not required to design audit procedures for the
specific purpose of identifying matters of governance interest.
Our audit and therefore this report will not necessarily identify all matters that may be of
interest to the Board of Directors in fulfilling its responsibilities.
This report has been prepared solely for the use of the Board of Directors and should not be
distributed without our prior consent. Consequently, we accept no responsibility to a third party
that uses this communication.
Terms of Reference
Our overall responsibility is to form and express an opinion on the financial statements based on
our audit procedures. The financial statements are prepared by management, with oversight by
those charged with governance. The audit of the financial statements does not relieve
management or those charged with governance of their responsibilities. The scope of our work,
as confirmed in our engagement letter is set out below.
Engagement Objectives
► Forming and expressing an audit opinion on the financial statements.
► Present significant findings to the Board of Directors including key audit and accounting
issues, any significant deficiencies in internal control and any other significant matters
arising from our work.
► Provide timely and constructive management letters. This will include deficiencies in
internal control identified during our audit.
► Consult regarding accounting matters are requested throughout the year.
► Work with management towards the timely issuance of financial statements.
Page 1 of 7
BDO Canada LLP, a Canadian limited liability partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the
international BDO network of independent member firms
41
JBDO
Audit Strategy
Our overall audit strategy involved extensive partner and manager involvement in all aspects of
the planning and execution of the audit and was based on our overall understanding of Orono
Central Business District Improvement Area.
We performed a risk based audit which allows us to focus our audit effort on higher risk areas and
other areas of concern for management and the Board of Directors.
To assess risk accurately, we gained a detailed understanding of Orono Central Business District
Improvement Area's business and the environment it operates in. This allowed us to identify,
assess and respond to the risks of material misstatement.
To identify, assess and respond to risk, we obtained an understanding of the system of internal
control in place in order to consider the adequacy of these controls as a basis for the preparation
of the financial statements, to determine whether adequate accounting records have been
maintained and to assess the adequacy of these controls and records as a basis upon which to
design and undertake our audit testing.
Based on our risk assessment, we designed an appropriate audit strategy to obtain sufficient
assurance to enable us to report on the financial statements.
We chose audit procedures that we believed were the most effective and efficient to reduce
audit risk to an acceptable low level. The procedures are a combination of testing the operating
effectiveness of internal controls (when appropriate), substantive analytical procedures and
other tests of detailed transactions.
Having planned our audit, we performed audit procedures, maintaining an appropriate degree of
professional skepticism, in order to collect evidence to support our audit opinion.
Risks and Planned Audit Responses
Based on our knowledge of Orono Central Business District Improvement Area's business, our past
experience, and knowledge gained from management and you, we identified the following
financial statement areas with significant risks; those risks of material misstatement that, in our
judgment, required special consideration.
These risks arose mainly because of the complexity of the accounting rules, the extent of
estimation and judgment involved in the valuation of these financial statement areas, and the
existence of new accounting pronouncements that affect them.
Revenue • Agreed the tax levy to bank deposits.
Lack of Segregation of Duties Reviewed expenses and agreed to invoices in our test of
purchases.
Cash Cutoff Reviewed bank statements in 2021 and agreed larger
balances to support to ensure they were recorded in the
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42
correct year.
Materiality
Misstatements, including omitted financial statement disclosures, are considered to be material if
they, individually or in aggregate, could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial statements.
Judgments about materiality are made in light of surrounding circumstances and include an
assessment of both quantitative and qualitative factors and can be affected by the size or nature
of a misstatement, or a combination of both.
For purposes of our audit, preliminary materiality was set at $1,000 for the year ended December
31, 2020. We communicated all corrected and uncorrected misstatements identified during our
audit to the Board of Directors, other than those which we determined to be "clearly trivial".
Misstatements are considered to be clearly trivial for purposes of the audits when they are
inconsequential both individually and in aggregate.
We encouraged management to correct any misstatements identified throughout the audit
process.
Independence
Our annual communication confirming our independence is included as an Appendix. We are not
aware of any relationships between the entity and us that, in our professional judgment, may
reasonably be thought to bear on our independence to date.
Auditor's Considerations of Possible Fraud and Illegal Activities
We are responsible for planning and performing the audit to obtain reasonable assurance that the
financial statements are free of material misstatements, whether caused by error or fraud, by:
► Identifying and assessing the risks of material misstatement due to fraud;
► Obtaining sufficient and appropriate audit evidence regarding the assessed risks of
material misstatement due to fraud, through designing and implementing appropriate
responses; and
► Responding appropriately to fraud or suspected fraud identified during the audit.
The likelihood of not detecting a material misstatement resulting from fraud is higher than the
likelihood of not detecting a material misstatement resulting from error because fraud may
involve collusion as well as sophisticated and carefully organized schemes designed to conceal it.
During the audit, we performed risk assessment procedures and related activities to obtain an
understanding of the entity and its environment, including the Organization's internal control, to
obtain information for use in identifying the risks of material misstatement due to fraud and
made inquiries of management regarding:
► Management's assessment of the risk that the financial statements may be materially
misstated due to fraud, including the nature, extent and frequency of such assessments;
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43
► Management's process for identifying and responding to the risks of fraud in the
Organization, including any specific risks of fraud that management has identified or that
have been brought to its attention, or classes of transactions, account balances, or
disclosures for which a risk of fraud is likely to exist;
► Management's communication, if any, to those charged with governance regarding its
processes for identifying and responding to the risks of fraud in Orono Central Business
District Improvement Area; and
► Management's communication, if any, to employees regarding its view on business
practices and ethical behaviour.
In response to our risk assessment and our inquiries of management, we performed procedures to
address the assessed risks, which may have included:
► Inquired of management, the Board of Directors, and others related to any knowledge of
fraud, suspected fraud or alleged fraud;
► Performed disaggregated analytical procedures and consider unusual or unexpected
relationships identified in the planning of our audit;
► Incorporated an element of unpredictability in the selection of the nature, timing and
extent of our audit procedures; and
► Performed additional required procedures to address the risk of management's override
of controls including:
o Testing internal controls designed to prevent and detect fraud;
o Testing the appropriateness of a sample of adjusting journal entries and other
adjustments for evidence of the possibility of material misstatement due to
fraud;
o Reviewing accounting estimates for biases that could result in material
misstatements due to fraud, including a retrospective review of significant prior
years' estimates; and
o Evaluated the business rationale for significant unusual transactions.
Adjusted and Unadjusted Differences
There were no significant adjusted and unadjusted differences and disclosure omissions identified
through the course of our audit engagement.
Significant Findings, Accounting Policies, Estimates and Judgments
Management is responsible for determining the significant accounting policies. The choice of
different accounting policy alternatives can have a significant effect on the financial position and
results of operations of the Organization. The application of those policies often involves
significant estimates and judgments by management.
Our comments below are intended to provide you with some thoughts on the qualitative aspects
of the significant accounting policies chosen by management, and the significant estimates and
judgements made by management, so that you can assess the appropriateness of management's
choices.
Revenue Recognition Taxation revenue is recorded when earned and is based on a
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44
special assessment. Other revenues are recorded in the period
in which transactions or events occurred that gave rise to the
revenues.
Based on our procedures performed we note that these
policies are appropriate.
We are of the view that nothing has come to our attention that indicates that the significant
accounting policies, estimates and judgments made by management are not reasonable in the
context of the financial statements taken as a whole.
Management Representations
During the course of the audit, management made certain representations to us. These
representations were verbal or written and therefore explicit, or they were implied through the
financial statements. Management provided representations in response to specific queries from
us, as well as unsolicited representations. Such representations were part of the evidence
gathered by us to be able to draw reasonable conclusions on which to base the audit opinion.
These representations were documented by including in the audit working papers memoranda of
discussions with management and written representations received from management.
A summary of the representations we have requested from management is set out in the
management representation letter included in Appendix B to the report.
We will provide you a copy of the management representation letter, which summarizes the
representations we have requested from management.
Management Letter
We have submitted to management a letter on internal controls and other matters that we feel
should be brought to their attention.
We wish to express our appreciation for the co-operation we received during the audit from
Orono Central Business District Improvement Area's management and staff who have assisted us in
carrying out our work. We would be pleased to discuss with you the contents of this report and
any other matters that you consider appropriate.
Yours truly,
Q/rw� v&wa&
Trina Connell, CPA, CA
Partner
BDO Canada LLP
Chartered Professional Accountants, Licensed Public Accountants
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Final Report for Orono Central Business District Improvement Area
For the year ended December 31, 2020
APPENDIX A: INDEPENDENCE
August 4, 2021
Dear Board of Directors Members:
At the core of the provision of external audit services is the concept of independence. We are
communicating all relationships between BDO Canada LLP and its related entities and Orono
Central Business District Improvement Area and its related entities that, in our professional
judgment, may reasonably be thought to have influenced our independence during the audit.
In determining which relationships to report, we have considered the applicable legislation and
relevant rules of professional conduct and related interpretations prescribed by the appropriate
provincial institute/order covering such matters as the following:
Holding a financial interest, either directly or indirectly in a client;
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;
Personal or business relationships of immediate family, close relatives, partners or retired
partners, either directly or indirectly, with a client;
• Economic dependence on a client; and
• Provision of services in addition to the audit.
We have prepared the following comments to facilitate our discussion with you regarding
independence matters.
We are not aware of any relationships between the entity and us that, in our professional
judgment, may reasonably be thought to bear on our independence to date.
We hereby confirm that we are independent with respect to the entity within the meaning of the
Code of Professional Conduct of the Chartered Professional Accountants of Ontario as of August
4, 2021.
This communication is intended solely for the use of the Board of Directors, management and
others with the entity and should not be used for any other purposes.
Yours truly,
800 Ga*tada. LL P
Chartered Professional Accountants, Licensed Public Accountants
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46
SRO
APPENDIX B: REPRESENTATIONS LETTER
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47
Orono Central Business District Improvement Area
40 Temperance Street
Bowmanville, ON
L1 C 3A6
August 4, 2021
BDO Canada LLP
Chartered Professional Accountants
165 Kent Street W
PO Box 358
Lindsay, ON K9V 4S3
This representation letter is provided in connection with your audit of the financial statements of
Orono Central Business District Improvement Area for the year ended December 31, 2020, for the
purpose of expressing an opinion as to whether the financial statements are presented fairly, in all
material respects, in accordance with Canadian public sector accounting standards.
We confirm that to the best of our knowledge and belief, having made such inquiries as we considered
necessary for the purpose of appropriately informing ourselves:
Financial Statements
We have fulfilled our responsibilities, as set out in the terms of the audit engagement dated December
11, 2020, for the preparation of the financial statements in accordance with Canadian public sector
accounting standards; in particular, the financial statements are fairly presented in accordance
therewith.
• The methods, significant assumptions, and data used in making accounting estimates and their
related disclosures are appropriate to achieve recognition, measurement and/or disclosure that
are reasonable in accordance with Canadian public sector accounting standards.
• Related party relationships and transactions have been appropriately accounted for and
disclosed in accordance with the requirements of Canadian public sector accounting standards.
• All events subsequent to the date of the financial statements and for which Canadian public
sector accounting standards require adjustment or disclosure have been adjusted or disclosed.
• The financial statements of the entity use appropriate accounting policies that have been
properly disclosed and consistently applied.
Information Provided
• We have provided you with:
• access to all information of which we are aware that is relevant to the preparation of the
financial statements, such as records, documentation and other matters;
• additional information that you have requested from us for the purpose of the audit; and
• unrestricted access to persons within the entity from whom you determined it necessary to
obtain audit evidence.
• We are responsible for the design, implementation and maintenance of internal controls to
prevent, detect and correct fraud and error, and have communicated to you all deficiencies in
internal control of which we are aware.
All transactions have been recorded in the accounting records and are reflected in the financial
statements.
48
We have disclosed to you all known instances of non-compliance or suspected non-compliance
with laws and regulations whose effects should be considered when preparing the financial
statements.
• We have disclosed to you the identity of the entity's related parties and all the related party
relationships and transactions of which we are aware.
Fraud and Error
• We have disclosed to you the results of our assessment of the risk that the financial statements
may be materially misstated as a result of fraud.
• We have disclosed to you all information in relation to fraud or suspected fraud that we are
aware of and that affects the entity and involves:
• management;
• employees who have significant roles in internal control; or
• others where the fraud could have a material effect on the financial statements.
• We have disclosed to you all information in relation to allegations of fraud, or suspected fraud,
affecting the entity's financial statements communicated by employees, former employees,
analysts, regulators, or others.
General Representations
• Where the value of any asset has been impaired, an appropriate provision has been made in the
financial statements or has otherwise been disclosed to you.
• We have provided you with significant assumptions that in our opinion are reasonable and
appropriately reflect our intent and ability to carry out specific courses of action on behalf of
the entity when relevant to the use of fair value measurements or disclosures in the financial
statements.
• Except as disclosed in the financial statements, there have been no changes to title, control
over assets, liens or assets pledged as security for liabilities or collateral.
• The entity has complied with all provisions in its agreements related to debt and there were no
defaults in principal or interest, or in the covenants and conditions contained in such
agreements.
• There have been no plans or intentions that may materially affect the recognition,
measurement, presentation or disclosure of assets and liabilities (actual and contingent).
• The nature of all material uncertainties have been appropriately measured and disclosed in the
financial statements, including all estimates where it is reasonably possible that the estimate
will change in the near term and the effect of the change could be material to the financial
statements.
• There were no direct contingencies or provisions (including those associated with guarantees or
indemnification provisions), unusual contractual obligations nor any substantial commitments,
whether oral or written, other than in the ordinary course of business, which would materially
affect the financial statements or financial position of the entity, except as disclosed in the
financial statements.
49
Other Representations Where the Situation Exists
• We have informed you of all known actual or possible litigation and claims, whether or not they
have been discussed with legal counsel. Since there are no actual, outstanding or possible
litigation and claims, no disclosure is required in the financial statements.
• Disclosures included in the financial statements regarding the relevant significant business,
financial, and reporting impacts of the COVID-19 outbreak accurately reflect management's full
consideration of such impacts.
• To the extent that our normal procedures and controls related to our financial statement close
process or other reporting processes at any of our locations were adversely impacted by the
COVID-19 outbreak, we took appropriate actions and safeguards to reasonably ensure the fair
presentation of the financial statements in accordance with public sector accounting standards.
Yours truly,
Signature
Signature
Position
Position
50
C►arington
MEMO
If this information is required in an alternate format, please contact the
Accessibility Coordinator at 905-623-3379 ext. 2131.
To: Members of Audit and Accountability Committee
From: Trevor Pinn, CPA, CA — Director of Financial Services/Treasurer
Date: August 4, 2021
File No.:
Re: Management Response to BDO Management Letters
During the annual audit, the external auditors regularly report on concerns regarding internal
controls through a management letter.
In their letter dated August 4, 2021, BDO Canada LLP highlighted concerns with
segregation of duties at the Orono BIA. The concern relates to internal controls and the risk
of fraud posed by the ability of the Treasurer to make deposits, sign cheques (with only one
signature), and reconcile the bank without independent oversight. It is a common internal
control for cheques to require two signatures, this ensures that no one person can sign
cheques.
At its meeting of July 5, 2021, Council for the Municipality of Clarington approved the Bank
Signing Authority Policy. This policy included paragraph 3.7 which reads
"Each board, committee, agency within the reporting requirements of the Municipality shall
establish a procedure for the approval of disbursements which shall include a minimum dual
signature requirement for all disbursements. "
It is Staff's opinion, that this policy addresses the concern brought by the auditors in their
letter dated August 4, 2021. Staff have been advocating for the use of dual signatures for
years as a control and this policy adopted by Council now codifies this requirement.
Staff will be reaching out to all boards, committees and agencies of Council to assist them in
developing the required policies and procedures to ensure compliance with the dual
signature requirement.
Similar letters dated August 4, 2021 by BDO Canada LLP indicated that there were no
significant concerns to be brought to management's attention at Bowmanville BIA or the
Newcastle BIA.
The Corporation of the Municipality of Clarington, 40 Temperance Street, Bowmanville, ON L1 C 3A6
1-800-563-1195 1 Local:905-623-3379 1 info@clarington.net I www.clarington.net
51
Page 2
While the purpose of the Management Letter is to assist management in their duties to
design financial controls, Staff will continue to update Committee on internal control
weaknesses and the response to address these concerns.
If Members of Committee have any questions. please do not hesitate to contact me.
Respectfully submitted,
Trevor Pinn, CPA, CA
Director of Financial Services/Treasurer
Financial Services Department
cc: Andrew Allison — CAO
Michelle Pick, CPA, CGA — Accounting Services Manager/Deputy Treasurer
Catherine Carr — Internal Audit Manager
Orono BIA Board of Directors
The Corporation of the Municipality of Clarington, 40 Temperance Street, Bowmanville, ON L1 C 3A6
1-800-563-1195 1 Local:905-623-3379 1 info@clarington.net I www.clarington.net
0 52
Clarington
Staff Report
If this information is required in an alternate accessible format, please contact the Accessibility
Coordinator at 905-623-3379 ext. 2131.
Report To: Audit and Accountability Committee
Date of Meeting: August 4, 2021 Report Number: FSD-033-21
Submitted By: Trevor Pinn, Director of Financial Services/Treasurer
Reviewed By: Andrew C. Allison, CAO Resolution#:
File Number: [If applicable, enter File Number] By-law Number:
Report Subject: 2020 Financial Statements
Recommendations:
1. That Report FSD-033-21 be received;
2. That the Consolidated Financial Statements for the Municipality of Clarington for the
year ending December 31, 2020 be approved;
3. That the Financial Statements for the Board of Management for Historic Downtown
Bowmanville Business Improvement Area for the year ending December 31, 2020
be approved;
4. That the Financial Statements for the Board of Management for the Newcastle
Central Business District Improvement Area for the year ending December 31, 2020
be approved;
5. That the Financial Statements for the Board of Management for the Orono Central
Business District Improvement Area for the year ending December 31, 2020 be
approved;
6. That the Financial Statements for the Municipality of Clarington Trusts for the year
ending December 31, 2020 be approved; and
7. That, Staff prepare the Annual Financial Report for the year ending December 31,
2020 for public consumption with information substantively as discussed in Report
FSD-033-12 and that it be placed on the Municipality's website.
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Municipality of Clarington
Report FSD-033-21
Report Overview
Page 2
The Municipality is required to prepare financial statements in compliance with Public Sector
Accounting Standards (PSAS) as established by the Public Sector Accounting Board (PSAB)
annually. The Municipality continues to have a strong financial position and positive
operating results, despite the impacts of COVID-19 during the 2020 fiscal period.
The Municipality is also taking steps to increase the transparency and understandability of
financial information through changes to the financial statements (including segmented
budget information) and the first Annual Financial Report.
1. Background
1.1 Section 294.1 of the Municipal Act, 2001 requires that a municipality, 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 Chartered Professional
Accountants of Canada.
1.2 The statements included in the attachments to this report have been prepared in
accordance with the current Public Sector Accounting Standards (PSAS) that are in
force. Municipality of Clarington Financial Services Staff continue to monitor changes to
PSAS as they will become effective in the fiscal years 2022 through 2025.
1.3 The Consolidated Financial Statements for the Municipality of Clarington include the
organizations, local boards and committees that are controlled by the Municipality and
form the reporting entity under PSAS. These include:
a. Board of Management for the Historic Downtown Bowmanville Business
Improvement Area
b. Board of Management for the Newcastle Central Business District Improvement
Area
c. Board of Management for the Orono Central Business District Improvement Area
d. Clarington Public Library Board
e. Clarington Museums and Archives
Newcastle Arena Board
g. Newcastle Community Hall Board
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Municipality of Clarington Page 3
Report FSD-033-21
h. Solina Hall Board
Tyrone Community Hall Board
Clarington Heritage Committee
k. Bowmanville Santa Clause Parade Committee
Orono Cemetery Board
1.4 Section 295 of the Act requires the Municipality to publish, within 60 days, the audited
financial statements in a newspaper having general circulation within the municipality
and a notice that the statements and notes would be available at no cost to the taxpayer
upon request. The information may also be provided in a manner that the Treasurer
considers appropriate. As in the past, these statements will be made available on the
Municipality's website and copies may be obtained from Financial Services.
1.5 Starting this year, Financial Services have drafted an Annual Financial Report which
provides the audited financial statements as well as financial discussion and analysis.
This report is becoming a more common report from larger municipalities and is similar
to reports seen by publicly traded companies. The numbers in a financial statement only
provide a certain amount of information, to be usable to stakeholders' additional
information may be beneficial.
2. Consolidated Financial Statements for the Municipality of
Clarington
Administrative
2.1 In 2020, we have added a letter from the CAO and the Treasurer stating management's
responsibility for the statements. This is a requirement for PSAS and in the past was
implied through a signature at the bottom of the financial statements. I feel that this new
method is more in line with the intent of the PSAS standard and shows greater
transparency on the fact that the financial statements are indeed the Municipality's and
not the responsibility of the auditor.
2.2 The Independent Auditor's Report has been redesigned this year as a result of changes
in Canadian Auditing Standards (CAS). The report indicates the auditor's opinion on
whether or not the financial statements and the notes are in accordance with Canadian
public sector accounting standards. The audit opinion is "clean" which indicates that we
are materially compliant with applicable standards.
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Municipality of Clarington Page 4
Report FSD-033-21
Statement of Financial Position
2.3 The Statement of Financial Position is the public sector accounting equivalent of a
balance sheet. The statement provides a snapshot, on December 31, 2020, of the
assets, liabilities and accumulated surplus (an indicator of service capacity) specifically
on that day.
2.4 Cash and cash equivalents consist of cash on hand, demand deposits and other
investments that are available to be converted to cash within 90 days. During the year
the Municipality saw an increase of approximately $23.3 million, much of this increase is
a result of increased deferred revenue and obligatory reserves (development charges).
The Statement of Cash Flows highlights the activities that increased or decreased the
Municipality's cash during the year.
2.5 Investments have remained relatively stable between the 2019 and 2020 fiscal years.
Investments are made in accordance with the Municipality's investment policy which
follows the legal list of investments prescribed by the Province of Ontario. There has
been a shift from guaranteed investment certificates (GICs) to bonds due to the
relatively better return on investments that bonds had during the year. The Municipality
also saw an increase of $2.1 million in the book value of its investment through ONE
Investment as a result of recognition of realized gains and losses in the equity portfolio.
2.6 Accounts receivable represent funds owed to the Municipality, a decrease of $1.7
million in accounts receivable recognizes improved collection of amounts outstanding
during the year. These amounts typically include work done on behalf of third parties
which are billed back to the developer, grants which are earned and awaiting payment,
rental fees collectible and other miscellaneous amounts.
2.7 Taxes receivable represent unpaid property taxes, net of any allowance for uncollectible
taxes or anticipated appeals. Despite the COVID-19 pandemic the taxes receivable
remained relatively consistent which indicates that the Municipality has been able to
collect on these funds.
2.8 Land for resale consists of the historic cost of property that the Municipality has
declared surplus and is actively marketing. The fair market value of the land may vary
from the historic cost of the land and any loss or gain will be recognized on the
disposition of the land.
2.9 Promissory note receivable and the investment in Elexicon Corporation relate to the
Municipality's investment in the local electric company. The promissory note receivable
is unchanged from 2019 and is an on -demand note. The investment in Elexicon
Corporation is relatively consistent with 2019 indicating no impairment in the investment.
Clarington reports its investment in Elexicon using a modified consolidation basis, this
amount shown in the financial statements is not liquid and cannot easily be converted to
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Municipality of Clarington Page 5
Report FSD-033-21
cash. The financial results of Elexicon have been summarized in note 7 of the financial
statements.
2.10 Liabilities represent financial obligations of the Municipality resulting from events and
decisions which occurred on or before December 31, 2020.
2.11 Accounts payable and accrued liabilities represent short-term liabilities that are
expected to be paid in the following fiscal year. They would consist of amounts owing to
vendors for services rendered during 2020, accruals for unbilled amounts and other
liabilities. Accounts payable and accrued liabilities increased by $3.2 million in 2020,
primarily a result of the timing of payments due for major construction projects and the
timing of the payment to the Region for development charges.
2.12 Employee future benefits includes the present value of the cost of providing employees
with future benefit programs, these benefits are expensed as they are earned through
the employees' service. The employee future benefits include sick leave accumulation
plans for firefighters (2020 - $1,009,061), other employees (2020 - $21,196) as well as
the cost to provide qualifying employees health, dental and life benefits to the age of 65.
2.13 Long-term liabilities represent the outstanding debenture obligations with the Region of
Durham for capital asset investments. There are currently seven outstanding debts with
maturities between 2021 and 2032, ranging in interest rates from 1.90 per cent to 5.12
per cent (maturing 2021). During the 2020 fiscal year, the Municipality did not take on
any new long-term debt and repaid $2.3 million in debt principal.
2.14 Deferred revenue represents funds that have been received by the Municipality where
the associated revenue has not yet been recognized. The main items included in
deferred revenue — general are taxes paid for future years ($6,338,385), subdivision
deposits held ($5,872,393), deposits held for other construction related projects
($925,037) and Community Services related deposits ($705,615).
2.15 Deferred revenue — obligatory funds represent funds received by the Municipality where
there are legislative or contractual restrictions on the use of the funds. Provincial
Infrastructure funds, Federal Gas Tax Funds, Parkland -cash -in -lieu, building permit
revenue, and development charges represent the balance of these funds.
2.16 The vast majority of deferred revenue — obligatory funds, approximately $50.7 million,
consists of development charges paid by developers towards the future capital cost of
growth -related infrastructure costs and certain studies. In 2020, the Municipality
collected $15.9 million from developers, earned investment income of $1.7 million and
utilized $5.1 million. The Municipality approved its updated Development Charges Study
in January 2021 which includes the growth -related capital needs for the years 2021 to
2031.
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Municipality of Clarington Page 6
Report FSD-033-21
2.17 The increase in liabilities is primarily the result of the increase in deferred revenue.
These funds were collected in 2020 and form an obligation on the Municipality to utilize
as allowed under appropriate legislation in future years. The increase in deferred
revenue is related to the increase in cash also shown in the financial statements.
2.18 Non -financial assets primarily consist of tangible capital assets which are used in the
active delivery of programs and services to stakeholders. The decrease of $3.4 million is
reflective of the $21.6 million in amortization, representing the utilization of assets, being
higher than the investment in tangible assets of $15.7 million. A prolonged period of
excess amortization over investment could result in deterioration of the Municipality's
infrastructure network. The decrease is also reflective of the fact that in 2019 the
Municipality benefited from the contribution of $18.9 million in tangible assets, compared
to $5.1 million in 2020. This is due to timing of the completion of subdivisions and their
acceptance by the Municipality.
2.19 Prepaid expenses and inventory supplies, which are items already paid for but will be
utilized in future years, have remained relatively stable and variations are mainly a result
of timing differences.
2.20 A detailed breakdown of accumulated surplus is presented in Note 19 "Accumulated
Surplus" of the Consolidated Financial Statements. The Municipality saw an increase of
approximately $5.1 million which represents an increase in the future service ability of
the Municipality. The term "accumulated surplus" does not mean and cannot be implied
to mean that there are "cash or funds" available for spending. The vast majority of the
value in accumulated surplus represents non -financial assets and reflects the
Municipality's investment in the required infrastructure to deliver the programs and
services that stakeholders expect.
2.21 Overall, the Municipality has a strong financial position with a positive financial asset to
financial liability ratio of 1.8:1.0. The Municipality's reserves and reserve funds of $51.8
million is over five times the long-term liabilities of $9.5 million indicating that there are
sufficient funds available to meet the long-term, and short term, liabilities of the
Municipality.
Statement of Operations
2.22 The Statement of Operations is the public sector accounting equivalent of an income
statement in the private sector. The Statement of Operations provides a summary of
revenue and expenses for the year with the annual surplus representing the difference
between the cost of providing the Municipality's services and the revenues recognized
during the year.
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2.23 In accordance with PSAS, the Municipality uses the accrual basis of accounting rather
than the cash -basis. Revenue is recognized when it is earned and expenses are
recognized when they are incurred, as opposed to when funds transfer.
2.24 The Statement of Operations, as required by PSAS, lists revenues based on like
revenue streams (e.g. taxation, user fees, grants) and expenses based on functional
segmentation. The functional segmentation for expenses follows the Province of
Ontario's Financial Information Return (FIR) segmentation on service lines.
2.25 Information on the segments' expenses by accounting object (e.g. wages, materials,
services) is included in Schedule 2. There are two pages of Schedule 2, one being
specific for 2020 and the following page being the prior year's results.
2.26 New in 2020, the Municipality has added Schedule 3 which shows the budgeted
breakdown by segment for each accounting object. It is hoped that this additional
information provides users of the statement with more usable and relevant information.
2.27 Property taxation includes the Municipality's portion only, funds which are collected on
behalf of the Region of Durham or the Province of Ontario (for education purposes) are
not shown as part of the Statement of Operations; however there is note disclosure on
the funds which have been collected and remitted on behalf of the other governments in
the notes to the financial statements. Property taxation and user charges are in line with
the 2020 budget; however they are below the 2019 actuals by approximately $3.3
million which is mainly due to the impacts of COVID-19 on the recreation and cultural
services which were closed during the year.
2.28 The Safe Restart Program grant from the Province of Ontario has been recognized in
2020 as it was received and earned by the Municipality, this was not budgeted for in
2020 so there is a significant variance to budget.
2.29 Deferred revenue earned decreased year over year by $6.1 million primarily due to a
decrease in capital infrastructure projects which were supported by obligatory reserve
funds.
2.30 Investment income includes dividends from Elexicon which are not budgeted as they
are discretionary and there is no guarantee of receipt. While the investment income is
above budget, due to the Elexicon investments which are budgeted to go directly into
reserve funds but are required to be recorded in the statement of operations for
reporting purposes, overall investment income is down as a result of the market impacts
of COVID-19. The interest rates earned on investments and bank accounts was
dramatically decreased in 2020 and has resulted in a lower rate of return environment
than what was seen in the preceding few years. As investments mature the interest
rates are typically significantly lower resulting lower expected future income.
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2.31 Penalties and interest on taxes is below the 2019 actuals as a result of a decision in
2020 to provide two months relief from interest and penalties due to the COVID-19
pandemic. The relief was approximately $200,000 to $250,000 in lost revenue as it was
provided to all outstanding balances.
2.32 Fines were approximately $203,000 lower in 2020 versus 2019 due to lower parking
meter revenues and fines. In 2020, there was a conscious decision to permit free
parking in the business improvement area for an extended period of time to mitigate
COVID-19 impacts on local businesses. Municipal law enforcement also had a shift in
focus due to the COVID-19 restrictions enforcement of emergency orders of the
Province of Ontario. The closure of the Clarington Public Library also resulted in a
reduction of fines of approximately $45,000 as services were restricted.
2.33 In 2020, the Municipality received tangible capital assets from developers in the amount
of $5.1 million. This relates to subdivisions assumed by the Municipality and the related
infrastructure such as roads, sidewalks, stormwater management and parks/trails.
2.34 In most areas of the Municipality expenses decreased in 2020 compared to 2019, this
can be attributed in part to the COVID-19 pandemic. Areas such as protection to
persons and property, transportation services and health services saw increases in
expenses compared to 2019 resulting from operational changes due to COVID-19. The
Municipality saw increased costs from COVID-19 through added cleaning, protective
equipment, staff time for municipal law enforcement, and other items. Savings were also
recognized through reduced staffing in certain areas, reduced travel costs for training
and meetings as well as reductions in office supplies and utilities.
2.35 While the Municipality took steps to reduce expenses in 2020 due to COVID-19, there
are fixed costs which cannot be reduced. Regular repairs and maintenance of buildings,
including those closed to the public, must occur in order to ensure the integrity of the
building and the systems within it. Amortization expense is a non -cash expense which
allocates the capital cost of assets across the useful life of the asset, it is not impacted
by COVID-19 and was recognized in 2020.
2.36 Overall, the expenses for the Municipality were below the 2020 budget and 2019
actuals. The savings contribute to the surplus recognized for the year, despite the fact
that the Municipality did not recognize the revenue levels that were budgeted. During
the year, the Municipality also received funding from the Province of Ontario and the
Government of Canada's Safe Restart Program, these funds have been recognized as
revenue in 2020. It should be noted that the surplus and budget shown on the
statements are in accordance with PSAB and are shown on the same basis that the
Municipality budgets annually (which uses a modified cash -basis).
Statement of Change in Net Financial Assets
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2.37 The purpose of the Statement of Change in Net Financial Assets is to provide financial
statement users additional information on the Municipality's financial activities during the
year.
2.38 The statement, similarly to the statement of cash flows, starts with the annual surplus
and backs out non -financial activities such as amortization, accounting gains/losses,
and the purchase and sale of assets.
2.39 The main variance between the 2019 and 2020 relates to a significant difference in
contributed assets during 2020. Contributed assets are those assets that are built by
developers during subdivision build out and then assumed by the Municipality. Timing
on development, completion and acceptance by the Municipality will impact the year
over year variances in the contributed asset revenues.
Statement of Cash Flows
2.40 The statement of cash flows explains how organization financed its activities and met its
cash obligations. As is common with public sector entities, the Municipality uses the
indirect method of cash flow statements, which takes the annual surplus/deficit and
adjusts for non -cash transactions as well as the implied cash impact through changes in
the statement of financial position.
2.41 The cash position of the Municipality increased during the year from $55.7 million in
cash to $79.0 million. During the year operating activities contributed to an increase of
$40.3 million, this includes the receipt of receivables as well as cash (development
charges) that are restricted to be used in future years.
2.42 Capital activities represent the investment the Municipality has made in its tangible
capital assets that are utilized in the delivery of services to stakeholders. The
Municipality invested $15.7 million in cash outlays in 2020.
2.43 The Municipality maintained investment levels during 2020, maturing investments were
reinvested resulting in fairly stable investment levels. Dividends from our investment in
Elexicon were received during the year.
2.44 Financing activities during the year included a repayment of $2.3 million in the principal
of long-term debt. There were no new issuances of long-term debt in 2020.
3. Financial Statements for the Board of Management for
Historic Downtown Bowmanville Business Improvement Area
3.1 The major change in the Statement of Financial Position of the Bowmanville BIA is an
increase of $40,248 in the cash and cash equivalents held by the BIA. This corresponds
with the annual surplus of $42,101 during the year.
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Report FSD-033-21
3.2 The activities of the BIA were impacted by the emergency orders issued by the Province
of Ontario due to COVID-19. This has resulted in a surplus in 2020 which the BIA will be
able to utilize in the future when COVID-19 restrictions are lifted.
3.3 The fundraising revenue decreased significantly during the year as a result of the
cancellation of the events normally held by the BIA.
3.4 The events and promotion expenses are lower than prior years as a result of the
cancellation of the events during the year. There was a corresponding decrease in
fundraising revenue which includes the vendor fees. The BIA did continue with other
marketing and promotional activities to try and promote the BIA during the pandemic.
3.5 Salaries and wages increased slightly in 2020 as a result of an additional member as
well as inflation.
3.6 There were no capital projects during the year as a result of COVID-19.
4. Financial Statements for the Board of Management for the
Newcastle Central Business District Improvement Area
4.1 Cash and cash equivalents increased during the year as a result of collection of
outstanding receivables, increase in unearned revenue and the annual surplus.
4.2 The BIA saw an increase in accumulated surplus of $14,724 which can be used to
provide services to members in future years.
4.3 The BIAs revenue was approximately $39,700 lower than in 2019 which is mainly a
result of decreased fundraising (due to COVID-19 restrictions) and a transfer from the
Municipality of Clarington's reserve fund for the BIA ("west end money") which occurred
in 2019.
4.4 Expenses are also lower by approximately $37,700 which is predominantly the events
which were cancelled in 2020 due to COVID-19 and lower safety and decor expenses
(which related to the purchase in 2019 of decorations funded by the "west end money")
4.5 The annual surplus of $14,724 increases the accumulated surplus to $32,977 which can
be utilized in future years to provide services.
5. Financial Statements for the Orono Central Business District
Improvement Area
5.1 The main change in the Orono BIA statement of financial position is a reduction of cash
of approximately $13,300 which corresponds with the annual deficit of $13,400.
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5.2 The BIA saw significant reduction of revenue, of approximately $31,700, between 2019
and 2020. This mainly is a result of donations/events which did not occur in 2020 due to
COVID-19 and a project -specific grant from the Municipality of Clarington which did not
occur in 2020.
5.3 The expenses were higher in 2020 as a result of landscaping and decor purchases
during the year.
5.4 The annual deficit of $13,372 decreased the accumulated surplus of $36,494 to
$23,122. The BIA still has an accumulated surplus which is sufficient to cover its
liabilities.
6. Financial Statements for the Municipality of Clarington Trust
Funds
6.1 The Trust Funds are not included in the Municipality of Clarington's consolidated
financial statements. The financial reporting follows PSAB and includes all of the trust
funds that the Municipality is responsible for. Most of the funds are related to cemetery
trusts with an additional two bequests which are not cemetery related.
6.2 The trusts do not have any liabilities and consist predominantly of investments, which
are primarily GICs. The due (to) from the Municipality of Clarington relates to expenses
incurred at the cemetery or funds received by the Municipality which are due to be
transferred to the trust fund.
6.3 During the year $57,395 in care and maintenance receipts were received with an
additional $23,864 of interest earned on the trust fund investments. The cemetery trusts
transferred to $63,576 to the cemeteries for care and maintenance of the cemeteries.
7. Draft Annual Financial Report
7.1 A growing trend in municipal finance is the preparation of annual financial reports which
provide more information for stakeholders than simply the financial statements. These
documents provide narrative information, charts and other information that is intended to
show the greater picture of the activity of the municipality during the year.
7.2 The Municipality is working on the development of an annual financial report which
provides additional information including financial discussion and analysis. Much of the
information that is included in this report will be provided in a user-friendly manner,
charts, pictures and graphs will provide additional forms of substantively the same
information included here and within the financial statements.
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7.3 The Annual Financial Report will be provided to Council during the summer, after
ratification of the financial statements and final drafting of the report.
8. Concurrence
Not Applicable.
9. Conclusion
It is respectfully recommended that the financial statements for the Municipality and its
components be approved as well as direction to Staff to finalize the Annual Financial
Report.
Staff Contact: Trevor Pinn, Director of Financial Services/Treasurer, 905-623-3379 ext. 2602
or tpinn@clarington.net
Attachments:
Attachment 1 — Draft Consolidated Financial Statements for the Municipality of Clarington for
the year ending December 31, 2020
Attachment 2 — Draft Financial Statements for the Board of Management for Historic
Downtown Bowmanville Business Improvement Area for the year ending December 31, 2020
Attachment 3 — Draft Financial Statements for the Board of Management for the Newcastle
Central Business District Improvement Area for the year ending December 31, 2020
Attachment 4 — Draft Financial Statements for the Board of Management for the Orono Central
Business District Improvement Area for the year ending December 31, 2020
Attachment 5 — Draft Financial Statements for the Municipality of Clarington Trusts for the year
ending December 31, 2020
Interested Parties:
The following interested parties will be notified of Council's decision:
• TD Bank
Ministry of Municipal Affairs and Housing
64
If this information is required in an alternate format, please contact the Accessibility
Co-ordinator at 905-623-3379 ext. 2131
Consolidated financial statements of
The Corporation of the
Municipality of Clarington
December 31, 2020
65
The Corporation of the Municipality of Clarington
December 31, 2020
Table of contents
Management's Responsibility for the Consolidated Financial Statements ..................... 1
Independent auditor's report...................................................................................... 2-3
Consolidated statement of financial position................................................................... 4
Consolidated statement of operations............................................................................. 5
Consolidated statement of change in net financial assets ............................................... 6
Consolidated statement of cash flows............................................................................. 7
Notes to the consolidated financial statements........................................................ 8 - 28
Consolidated schedule of tangible capital assets — Schedule 1 ............................. 29 - 30
Consolidated schedule of segmented information — Actual - Schedule 2............... 31 - 32
Consolidated schedule of segmented information — Budget - Schedule 3 ............. 33 - 34
66
The Corporation of the Municipality of Clarington
December 31, 2020
Management's Responsibility for the Consolidated Financial Statements
The accompanying consolidated financial statements of the Corporation of the
Municipality of Clarington are the responsibility of the Municipality's management and
have been prepared in accordance with Canadian public sector accounting standards.
The preparation of the financial statements necessarily involves the use of estimates
based on management's judgment, particularly when transactions affecting the current
accounting period cannot be finalized with certainty until future periods.
The Corporation maintains a system of internal controls designed to provide reasonable
assurance that the financial information is relevant, reliable, and accurate, that
transactions are properly authorized, and the Corporation's assets are properly
accounted for and adequately safeguarded.
The financial statements have been examined by BDO Canada LLP, Chartered
Professional Accountants, the external auditors for the Corporation. The responsibility
of the external auditor is to express an opinion on whether the financial statements are
fairly presented, in all material respects, in accordance with Canadian public sector
accounting standards.
Council, through the Audit and Accountability Committee, is responsible for ensuring
that management fulfills its responsibility for financial reporting and internal control. The
Audit and Accountability Committee meets periodically with management, as well as the
external auditors to satisfy itself that each party is properly discharging its
responsibilities with respect to internal controls and financial reporting.
The Audit and Accountability Committee meets with management and the external
auditor to review the consolidated financial statements and discuss any significant
financial reporting or internal control matters prior to their approval of the consolidated
financial statements.
Andrew Allison Trevor Pinn, CPA, CA
Chief Administrative Officer Director of Financial Services / Treasurer
August 3, 2021 August 3, 2021
Page 1
67
Independent Auditor's Report
To the Members of Council of the Corporation of the Municipality of Clarington
Opinion
We have audited the consolidated financial statements of the Corporation of the Municipality of
Clarington and its subsidiaries (the Group), which comprise the consolidated statement of financial
position as at December 31, 2020, and the consolidated statement of operations, the consolidated
statement of change in net assets and the consolidated statement of cash flows for the year then ended,
and notes to the consolidated financial statements, including a summary of significant accounting
policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Group as at December 31, 2020, and its consolidated
results of operations, its consolidated change in net financial assets, and its consolidated cash flows for
the year then ended in accordance with Canadian public sector accounting standards.
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit
of the Consolidated Financial Statements section of our report. We are independent of the Group in
accordance with the ethical requirements that are relevant to our audit of the consolidated financial
statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Other Matters
The consolidated financial statements of the Corporation of Municipality of Clarington for the year ended
December 30, 2019 were audited by another auditor who expressed an unmodified opinion on those
statements on September 10, 2020 on the same basis described above.
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial
Statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with Canadian public sector accounting standards, and for such internal control
as management determines is necessary to enable the preparation of consolidated financial statements
that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group's
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless management either intends to liquidate the Group or
to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group's financial reporting process.
Page 2
68
Auditor's Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with Canadian generally accepted auditing standards will always
detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk
of not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
• Obtain an understanding of internal control relevant to the audit 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 Group's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group's ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor's
report to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor's report. However, future events or conditions may cause the Group to cease
to continue as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the
underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the consolidated financial statements.
We are responsible for the direction, supervision and performance of the group audit. We remain
solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
Chartered Professional Accountants, Licensed Public Accountants
Lindsay, Ontario
[Date]
Page 3
69
The Corporation of the Municipality of Clarington
Consolidated Statement of Financial Position
As at December 31, 2020
Financial assets
Cash and cash equivalents
Investments (Note 5)
Accounts receivable (Note 2)
Taxes receivable (Note 6)
Inventories for resale
Land for resale
2019 (Restated —
2020 Note 2)
79, 019, 522
69,280,598
9,090,098
8,538,141
30,206
221,349
55,684,429
69,279,397
10,742,310
8,633,327
27,657
424,898
Promissory notes receivable (Note 7) 8,321,000 8,321,000
Investment in Elexicon Corporation (Note 8) 18,580,998 18,563,427
Total financial assets 193,081,912 171,676,445
Liabilities
Accounts payable and accrued liabilities 11,486,061 8,243,375
Employee future benefits liabilities (Note 9) 9,063,957 8,638,138
Debenture debt (Note 11) 9,545,557 11,879,590
Deferred revenue - general 14,447,534 16,039,513
Deferred revenue - obligatory reserve funds (Note 2,
Note 13) 61,435,647 47,567,505
Total liabilities 105,978,756 92,368,121
Net financial assets
Non -financial assets
Tangible capital assets (Notes 19) (Schedule 1)
Prepaid expenses
87.103.156
464,092,872
972,271
79.308.324
467,499,849
943,127
Inventory supplies 462,308 537,950
Total non -financial assets 465,527,451 468,980,926
Accumulated surplus (Note 20) 552,630,607 548,289,250
Contingencies (Note 15), contractual commitments (Note 16) and impact of Covid-19 (Note 24)
See accompanying notes to the consolidated financial statements
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The Corporation of the Municipality of Clarington
Consolidated Statement of Operations
For the year ended December 31, 2020
2019 (Restated —
2020
2020
Note 2)
Budget
Actual
Actual
Revenues
(Note 21)
Taxation and user charges
Property taxation
64,000,247
64,336,736
61,553,425
Taxation from other governments
4,606,980
4,638,683
4,769,303
User charges
10,538,442
10,394,003
13,702,217
Grants
Government of Canada
23,700
1,049,371
647,219
Province of Ontario
253,381
2,383,243
455,498
Other
Deferred revenue earned
15,450,996
6,866,016
12,934,961
Investment income (Note 2)
932,680
2,183,593
2,725,189
Penalty and interest on taxes
1,250,000
1,269,120
1,417,469
Fines
426,500
368,411
571,782
Donations and contribution from others
5,023,633
2,120,311
2,743,224
Elexicon / Veridian Corporation
Equity share of net income
-
1,063,520
446,232
Contributed tangible capital assets
5,120,862
5,120,862
18,912,296
Other income
-
6,272
25,290
Loss on disposal of tangible capital assets
-
(2,543,605)
(475,792)
Total revenues
107,627,421
99,256,536
120,428,313
Expenses
General government
7,279,945
6,845,738
7,439,161
Protection to persons and property
20,139,322
19,604,062
18,854,337
Transportation services
34,558,863
33,682,585
32,412,918
Environmental services
3,016,539
3,470,674
4,413,890
Health services
390,294
429,164
383,447
Recreational and cultural services
28,199,724
24,522,968
26,259,737
Planning and development
5,523,095
6,359,988
6,559,536
Total expenses
99,107,782
94,915,179
96,323,026
Annual surplus
8,519,639
4,341,357
24,105,287
Accumulated surplus, beginning of year
(Note 2)
549,716,079
548,289,250
524,183,963
Accumulated surplus, end of year
558,235,718
552,630,607
548,289,250
See accompanying notes to the consolidated financial statements
Page 5
71
The Corporation of the Municipality of Clarington
Consolidated Statement of Change in Net Financial Assets
For the year ended December 31, 2020
2019
(Restated —
2020 2020 Note 2)
Budget Actual Actual
Annual surplus 8,519,639 4,341,357 24,105,287
Amortization of tangible capital assets 20,093,171
21,654,409
20,576,843
Acquisition of tangible capital assets (27,618,376)
(20,831,588)
(38,546,370)
Net book value of tangible capital assets
disposals/adjustments
2,584,155
576,437
(Increase) decrease in prepaid expenses
(29,143)
(163,041)
(Increase) decrease in inventory supplies
75,642
74,427
Increase (decrease) in net financial assets 994,434
7,794,832
6,623,583
Net financial assets, beginning of year
Net financial assets, end of year
80,735,153
81,729,587
79,308,324
87,103,156
See accompanying notes to the consolidated financial statements
72,684,741
79,308,324
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72
The Corporation of the Municipality of Clarington
Consolidated Statement of Cash Flows
For the year ended December 31, 2020
2019 (Restated —
2020 Note 2)
Operating activities
Annual surplus 4,341,357 24,831,954
Non cash items
Amortization of tangible capital assets 21,654,409 20,576,843
Loss on disposal of tangible capital assets 2,543,605 475,792
Equity share of Elexicon Corporation net income (1,063,520) (446,232)
Contributed tangible capital assets recorded in revenue (5,120,862) (18,912,296)
Change in non -cash operating items
Accounts receivable 1,652,212 (4,289,392)
Taxes receivable 95,186 (449,522)
Inventories for resale (2,549) 4,475
Inventory of land for resale 203,549 20
Accounts payable and accrued liabilities
3,242,686
114,832
Employee future benefits liabilities
425,819
(22,389)
Deferred revenue - general
(1,591,979)
1,264,016
Deferred revenue - obligatory reserve funds
13,868,142
(231,419)
Prepaid expenses
(29,143)
(163,041)
Inventory supplies
75,642
74,427
40,294,554
22,828,068
Capital activities
Acquisition of tangible capital assets (net of contributed
(15,710,726)
(19,634,074)
tangible capital assets)
Proceeds on disposal of tangible capital assets
40,550
100,645
(15,670,176)
(19,533,429)
Investing activities
Decrease (increase) in investments
(1,201)
1,996,436
Dividends received from Veridian Corporation
1,045,949
941,900
1,044,748
2,938,336
Financing activities
Repayment of debenture debt
(2,334,033)
(2,393,930)
Proceeds of debenture issue
-
(2,334,033)
(2,393,930)
Net increase (decrease) of cash and cash equivalents
23,335,093
3,839,045
Cash and cash equivalents, beginning of year
55,684,429
51,845,384
Cash and cash equivalents, end of year
79,019,522
55,684,429
See accompanying notes to the consolidated financial statements
73 Page 7
The Corporation of the Municipality of Clarington
Notes to the consolidated financial statements
December 31, 2020
The Municipality of Clarington (the "Municipality") is a municipality in the Province of Ontario,
Canada. It conducts its operations guided by the provisions of provincial statues such as the
Municipal Act, the Municipal Affairs Act and related legislation.
Significant accounting policies
The consolidated financial statements of the Municipality are the representations of
management prepared in accordance with Canadian Public Sector Accounting Standards
("PSAS").
Significant accounting policies adopted are as follows:
(a) (i) Reporting entity
These consolidated financial statements reflect financial assets, liabilities,
operating revenues and expenses, and changes in investment in tangible capital
assets of the Municipality of Clarington. The reporting entity is comprised of all
organizations, local boards and committees controlled by the Municipality,
including the following:
- Board of Management for the
Historic Downtown
Bowmanville Business
Improvement Area
- Board of Management for the
Newcastle Central Business
District Improvement Area
- Board of Management for the
Orono Central Business
District Improvement Area
- Clarington Public Library
Board
- Newcastle Arena Board
- Newcastle Community Hall
Board
- Solina Hall Board
- Tyrone Community Hall
Board
- Clarington Heritage
Committee
- Bowmanville Santa Claus
Parade Committee
- Orono Cemetery Board*
Clarington Museums and
Archives
All material inter -entity transactions and balances are eliminated on consolidation.
* As of June 10, 2019, the Municipality assumed operations of the Orono Cemetery
Board. As of the reporting date, the Municipality was working in conjunction with
the Bereavement Authority of Ontario to complete the transfer of the license to the
Municipality.
(ii) Investment in Veridian Corporation / Elexicon Corporation
On April 1, 2019, Veridian Corporation and Whitby Hydro Energy Corporation
merged, forming Elexicon Corporation. As a previous shareholder of Veridian
Corporation, the Municipality of Clarington, along with the City of Pickering, the
Town of Ajax, and the City of Belleville now own 68% of Elexicon Corporation. The
Town of Whitby owns the remaining 32% of Elexicon Corporation. The Municipality
of Clarington holds a 9.248% share of ownership. For the 2020 fiscal year, the
Municipality's investment in Elexicon Corporation and its subsidiaries is accounted
for on a modified equity basis, consistent with generally accepted accounting
principles as recommended by PSAS for investments in government business
Page 8
74
The Corporation of the Municipality of Clarington
Notes to the consolidated financial statements
December 31, 2020
1. Significant accounting policies (continued)
(ii) Investment in Elexicon Corporation (continued)
partnerships. Under the modified equity basis of accounting, the business
partnership's accounting principles are not adjusted to conform to those of the
Municipality and inter -organizational transactions and balances are not eliminated.
The Municipality recognizes its equity interest in the annual income or loss of
Elexicon Corporation in its "Consolidated Statement of Operations" with a
corresponding increase or decrease in its investment asset account. Any dividends
that the Municipality may receive from Elexicon Corporation and other capital
transactions will be reflected as adjustments in the investment asset account.
(iii) Accounting for region and school board transactions
The taxation and other revenues, expenses, assets and liabilities with respect to
the operations of the school boards and the Regional Municipality of Durham are
not reflected in these financial statements.
(iv) Accounting for phase-in/capping provisions
Increases/decreases in property taxes levied as a result of the application of
phase-in/capping legislation are not reflected in the Consolidated Statement of
Operations but are reported on the Consolidated Statement of Financial Position.
(v) Trust funds
Trust funds and their related operations administered by the Municipality are not
included in these consolidated financial statements but are reported separately on
the "Trust Funds Statement of Operations" and "Trust Funds Statement of Financial
Position".
(b) Basis of accounting
(i) Accrual basis of accounting
Revenues and expenses are reported on the accrual basis of accounting. The
accrual basis of accounting recognizes revenues in the period in which transactions
or events occurred that gave rise to the revenues; expenses are recognized in the
period the goods and services are acquired and a liability is incurred or transfers
are due.
(ii) Cash and cash equivalents
Cash and cash equivalents are comprised of cash on hand, demand deposits and
bankers' acceptances, all of which are highly liquid, subject to insignificant risk of
changes in value and have a short-term maturity of less than 90 days.
(iii) Investments
Portfolio investments are carried at cost, net of accumulated amortization on
premiums and discounts. Premiums and discounts are amortized on a straight-line
basis over the term to maturity. Interest income is recorded as it accrues. When
the value of any portfolio investment is impaired, the carrying amount is adjusted to
the estimated realizable amount and any adjustments are included in investment
income in the period the impairment is recognized.
Page 9
75
The Corporation of the Municipality of Clarington
Notes to the consolidated financial statements
December 31, 2020
1. Significant accounting policies (continued)
(b) Basis of accounting (continued)
(iv) Non -financial assets
Non -financial assets are not available to discharge existing liabilities and are held
for use in the provision of services. They have useful lives extending beyond the
current year and are not intended for sale in the ordinary course of operations. The
change in non -financial assets during the year, together with the excess of
revenues over expenses, provides the Changes in Net Financial Assets for the
year.
(a) Tangible capital assets ("TCA")
Tangible capital assets are recorded at cost, which includes all amounts that
are directly attributable to acquisition, construction, development, or betterment
of the asset. The cost, less residual value, of the tangible capital assets are
amortized on a straight-line basis over their estimated useful lives as follows:
Land improvements 20-75 years
Buildings 5-75 years
Vehicles 7-20 years
Equipment 3-25 years
Linear road and related 7-75 years
Linear storm sewers 40-75 years
Amortization
The Municipality uses the straight-line method of amortization. For pooled
assets and networks such as roads and storm sewers, one half of the annual
amortization is charged in the year of acquisition or in-service date and in the
year of disposal. For individual assets, if acquired (or in-service) in the first half
of the year, the full year of the amortization is charged. If acquired (or in-
service) in the second half of the year, one half of the annual amortization is
charged. Similarly, in the year of disposal, if the asset is disposed of in the first
half of the year, one half of the amortization is charged but if disposed of in the
second half of the year the full annual amortization is charged. Assets under
construction are not amortized until the asset is available for productive use, at
which time they are capitalized.
Contribution of tangible capital assets
Tangible capital assets received as contributions are recorded at their fair value
at the date received/assumed and that fair value is also recorded as revenue.
(b) Intangible assets
Intangible assets are not recognized in the consolidated financial statements.
Page 10
76
The Corporation of the Municipality of Clarington
Notes to the consolidated financial statements
December 31, 2020
1. Significant accounting policies (continued)
(b) Basis of accounting (continued)
(iv) Non -financial assets (continued)
(c) Inventories
Inventories held for consumption are recorded at the lower of cost or
replacement cost.
(v) Reserves and reserve funds
Certain amounts, as approved by Council, are set aside in reserves and reserve
funds for future operating and capital purposes. Transfers to and/or from reserves
and reserve funds are an adjustment to the respective fund when approved.
Reserves and reserve funds form part of the Municipality's accumulated surplus.
(vi) Deferred revenues
Deferred Revenues, which include advance payments for tickets, building permits
and program registration fees; contributions from developers according to Section
37 of the Planning Act; and revenues set aside for specific purposes (obligatory
reserve funds), represent fees which have been collected, but for which the related
services have not yet been provided. Revenue is recognized when the related
activity occurs or the service is performed.
(vii) Employee future benefits
The present value of the cost of providing employees with future benefits programs
is expensed as employees earn these entitlements through service. The cost of the
benefits earned by employees is actuarially determined using the projected benefit
method prorated on service and management's best estimate of retirement ages of
employees and expected health care and dental costs.
Actuarial gains or losses are amortized on a straight-line basis over the expected
average remaining service life of all employees covered.
(viii) Contaminated sites
Contaminated sites are the result of contamination being introduced in air, soil,
water or sediment of a chemical, organic, or radioactive material or live organism
that exceed an environmental standard. A liability for remediation of contaminated
sites is recognized, net of any expected recoveries, when all of the following criteria
are met: a) an environmental standard exists; b) contamination exceeds the
environmental standard; c) the organization is directly responsible or accepts
responsibility for the liability; d) future economic benefits will be given up; and e) a
reasonable estimate of the liability can be made. Changes in this estimate are
recorded in the Municipality's statement of operations. As of December 31, 2020,
there was no liability recorded on the statement.
Page 11
77
The Corporation of the Municipality of Clarington
Notes to the consolidated financial statements
December 31, 2020
1. Significant accounting policies (continued)
(b) Basis of accounting (continued)
(ix) Revenue Recognition
Taxation
Property tax billings are prepared by the Municipality based on assessment rolls
issued by the Municipal Property Assessment Corporation ("MPAC"). Tax rates are
established annually by Council, incorporating amounts to be raised for local
services and amounts the Municipality is required to collect on behalf of the
Regional Municipality of Durham and the Province of Ontario in respect of
education taxes.
Taxes are recorded at estimated amounts when they meet the definition of an
asset, have been authorized and the taxable event occurs. For property taxes, the
taxable event is the period for which the tax is levied. As taxes recorded are initially
based on management's best estimate of the taxes that will be received, it is
possible that changes in future conditions, such as reassessments due to audits,
appeals and court decisions, could result in a change in the amount of tax revenue
recognized. Taxes receivable are recognized net of an allowance for anticipated
uncollectable amounts.
A normal part of the assessment process is the issuance of supplementary
assessment rolls which provide updated information with respect to changes in
property assessment. Once a supplementary roll is received, the Municipality
determines the taxes applicable and renders supplementary tax billings.
Assessments of the related property taxes are subject to appeal. Any
supplementary billing adjustments made necessary by the determination of such
changes will be recognized in the fiscal year they are determined, and the effect
shared with the Region of Durham and school boards, as appropriate.
Government transfers
Government transfers are recognized as revenue in the financial statements when
the transfer is authorized and any eligibility criteria are met, except to the extent
that transfer stipulations give rise to an obligation that meets the definition of a
liability. Transfers are recognized as deferred revenue when transfer stipulations
give rise to a liability. Transfer revenue is recognized in the statement of operations
as the stipulation liabilities are settled.
Government transfers and developer contributions -in -kind related to capital
acquisitions are required to be recognized as revenue in the consolidated financial
statements in the period in which the tangible capital assets are acquired.
User fees and service charges
User charges are recognized when the services are performed, or goods are
delivered and there is reasonable assurance of collection.
Other
Other revenue is recorded when it is earned, and collection is reasonably assured.
Page 12
78
The Corporation of the Municipality of Clarington
Notes to the consolidated financial statements
December 31, 2020
1. Significant accounting policies (continued)
(b) Basis of accounting (continued)
Investment income
Investment income earned on operating surplus funds and reserve funds (other
than obligatory reserve funds) are recorded as revenue in the period earned.
Investment income earned on obligatory reserve funds are recorded directly to
each respective fund balance and forms part of the deferred revenue — obligatory
reserve funds balance.
(x) Inventory for resale
Inventory for resale is valued at the lower of cost or net realizable value on an
average cost basis.
(xi) Use of estimates
Since precise determination of many assets and liabilities is dependent upon future
events, the preparation of periodic financial statements necessarily involves the
use of estimates and approximations. These have been made using careful
judgment. Actual results could differ from these estimates.
2. Prior period adjustment
During the year, the Municipality identified a prior period adjustment related to accrued
investment income that was recognized in error. The prior period adjustment impacts the
year ended December 31, 2019 and prior years. As a result, the December 31, 2019
comparative figures have been restated from those previously reported as follows:
Previously
Reported Adjustments Restated
Accounts receivable 12,329,020 1,586,710 10,742,310
Deferred revenue — obligatory reserve
funds 47,727,387 159,882 47,567,505
Accumulated surplus, beginning of
year 524,884,124 700,161 524,183,963
Investment income 3,451,856 726,667 2,725,189
3. Trust funds
Trust funds administered by the Municipality amounting to $1,933,011 (2019 — $1,915,329)
have not been included in the "Consolidated Statement of Financial Position" nor have their
financial activities been included in the "Consolidated Statement of Operations".
4. Operations of school boards and The Regional Municipality of Durham
Further to Note 1(a) (iii), requisitions were made by the Regional Municipality of Durham
and School Boards requiring the Municipality of Clarington to collect property taxes and
Page 13
79
The Corporation of the Municipality of Clarington
Notes to the consolidated financial statements
December 31, 2020
4. Operations of school boards and The Regional Municipality of Durham (continued)
payments in lieu of property taxes on their behalf. The amounts levied and remitted are
summarized below:
Regional
School Municipality
Boards of Durham
$ $
2020
Property taxes 33,327,860 93,206,600
Taxation from other governments 90,735 2,889,931
Total 33,418,595 96,096,531
2019
Property taxes 32,367,970 89,346,215
Taxation from other governments 93,770 2,979,181
Total 32,461,740 92,325,396
5. Investments
Total investments of $69,280,598 (2019 - $69,279,397) reported on the Consolidated
Statement of Financial Position at cost plus accrued interest, have a market value of
$73,104,547 (2019 - $72,701,584) at the end of the year. The investments consist of
investments pursuant to provisions of the Municipality's investment policy and comprise
government bonds and guaranteed investment certificates (GICs) issued by various
financial institutions. It is the Municipality's intention to hold these investments until
maturity.
2020 Cost
2020 Market
Value
2019 Cost
2019 Market
Value
GICs 38,838,412 40,174,373 51,895,933 54,705,469
Bonds 23,536,521 25,262,800 12,690,866 12,831,045
Pooled Funds
Equity 2,588,679 3,492,447 500,000 1,199,929
Pooled Funds
Bonds 4,316,986 4,174,927 4,192,598 3,965,141
Total 69,280,598 73,104,547 69,279,397 72,701,584
The Municipality holds investments with a maturity of less than 90 days, in a High Interest
Savings Account. This value is reported within cash and cash equivalents, due to the
highly liquid nature of these investments. Total investments, with a maturity of less than 90
days, have a value of $24,453,346 (2019 - $23,580,608) reported on the Consolidated
Statement of Financial Position.
Page 14
80
The Corporation of the Municipality of Clarington
Notes to the consolidated financial statements
December 31, 2020
6. Taxes receivable
The balance in taxes receivable, including penalties and interest, is comprised of the
following:
2020 2019
Current year 6,830,452 6,992,835
Arrears previous years 2,457,689 2,390,492
9,288,141 9,383,327
Allowance for uncollectible taxes (750,000) (750,000)
8,538,141 8,633,327
7. Promissory notes receivable
2020 2019
Promissory note receivable from Veridian
Corporation maturing December 31, 2019 or the
closing date and bearing interest at the greater of
6% or the Ontario Energy Board deemed long-
term debt rate on an annual basis to maturity,
transferred on April 1,2019 to a promissory note
receivable from Elexicon Corporation due on
demand and bearing interest at the Ontario
Energy Board deemed long-term debt rate on an
annual basis to maturity (4.13% at Dec 31, 2020). 2,355,000 2,355,000
Promissory note receivable from Veridian
Connection Inc. maturing November 1, 2039 and
bearing interest at 4.47% from January 1, 2015 to
December 31, 2019 and then the Ontario Energy
Board deemed long-term debt rate for each
successive five year period thereafter, transferred
on April 1, 2019 to a promissory note receivable
from Elexicon Energy Inc. maturing November 1,
2039 and bearing interest at the Ontario Energy
Board deemed long-term debt rate on an annual 5,966,000 5,966,000
basis to maturity (4.13% at Dec 31, 2020).
8,321,000 8,321,000
Interest revenue earned from the notes receivable totalled $343,657 (2019 - $359,738).
The Municipality has waived its right to demand repayment of any portion of the principal of
the promissory notes payable before the date of January 1, 2022.
Page 15
81
The Corporation of the Municipality of Clarington
Notes to the consolidated financial statements
December 31, 2020
8. Investment in Veridian Corporation / Elexicon Corporation
Veridian Corporation was a government business partnership which was jointly owned by
the City of Pickering, Town of Ajax, Municipality of Clarington and the City of Belleville. The
Municipality of Clarington owned 1,360 of the outstanding common shares of Veridian
Corporation. This represented a 13.6% share of ownership.
On April 1, 2019, Veridian Corporation and Whitby Hydro Energy Corporation merged,
forming Elexicon Corporation. As a previous shareholder of Veridian Corporation, the
Municipality of Clarington, along with the City of Pickering, the Town of Ajax, and the City of
Belleville now own 68% of Elexicon Corporation. The Town of Whitby owns the remaining
32% of Elexicon Corporation. The Municipality of Clarington holds a 9.248% share of
ownership.
(a) Veridian Corporation
The Municipality is accounting for this investment using a modified equity basis in these
financial statements. The financial impact of the amalgamation to the Municipality of
Clarington's investment and equity are reported below.
The following table provides condensed supplementary financial information of Veridian
Corporation and its subsidiaries for the year ended March 31, 2019:
2019 — as at
March 31
Financial position
Assets
Current
65,333,000
Capital and intangibles
296,565,000
Other
147,000
Regulatory balances
7,231,000
Total assets and regulatory balances
369,276,000
Liabilities
Current
155,284,000
Long-term debt
36,909,000
Other
36,569,000
Total liabilities
228,762,000
Shareholders' Equity
Share capital 67,260,000
Contributed capital 25,000
Retained earnings 67,960,000
Regulatory balances 5,269,000
Total shareholders' equity and regulatory balances 140,514,000
Total liabilities, equity and regulatory balances 369,276,000
Page 16
82
The Corporation of the Municipality of Clarington
Notes to the consolidated financial statements
December 31, 2020
8. Investment in Veridian Corporation / Elexicon Corporation (continued)
(a) Veridian Corporation (continued)
Financial activities
Revenues 79,702,000
Other income 657,000
Expenses (84,348,000)
Net movements in regulatory balances, net of tax 2,640,000
Net income (loss) for the year (1,349,000)
(b) Elexicon Corporation
The Municipality is accounting for this investment using a modified equity basis in these
financial statements. The financial impact of the amalgamation to the Municipality of
Clarington's investment and equity are reported below.
The following table provides condensed supplementary financial information of the
Elexicon Corporation and its subsidiaries for the 2020 fiscal year and the period of April
1 to December 31, 2019:
2019 —April 1 to
2020 December 31
Financial position
Assets
Current
98,525,000
84,933,000
Capital and intangibles
535,400,000
506,254,000
Other
162,000
256,000
Regulatory balances
26,912,000
15,145,000
Total assets and regulatory balances
660,999,000
606,588,000
Liabilities
Current
88,743,000
89,180,000
Long-term debt
214,502,000
180,360,000
Other
110,913,000
89,641,000
Total liabilities
414,158,000
359,181,000
Shareholders' Equity
Share capital
97,692,000
97,692,000
Contributed capital
25,000
25,000
Retained earnings
147,288,000
147,082,000
Regulatory balances
1,836,000
2,608,000
Total shareholders' equity and regulatory
246,841,000
247,407,000
balances
Total liabilities, equity and regulatory balances 660,999,000 606,588,000
Page 17
83
The Corporation of the Municipality of Clarington
Notes to the consolidated financial statements
December 31, 2020
8. Investment in Veridian Corporation / Elexicon Corporation (continued)
(b) Elexicon Corporation (continued)
Financial activities
Revenues 553,366,000 364,204,000
Other income 6,482,000 1,227,000
Expenses (559,888,000) (367,302,000)
Net movements in regulatory balances, net of 11,540,000 8,680,000
tax
Net income for the year 11,500,000 6,809,000
(c) Municipality's equity is represented by:
2020 2019
Promissory notes receivable (Note 7) 8,321,000 8,321,000
Initial investment in shares of the Corporation 10,146,495 10,146,495
Accumulated net income 20,114,574 19,051,053
Net increase in value of investment 400,126 400,126
Accumulated dividends received (12,080,197) (11,034,247)
Total equity 26,901,998 26,884,427
Municipality of Clarington's investment represented by:
Investment in Corporation 18,580,998 18,563,427
Promissory notes receivable 8,321,000 8,321,000
26,901,998 26,884,427
(d) Contingencies and guarantees of Elexicon Corporation (the "Corporation") as disclosed
in their financial statements are as follows:
(i) Insurance claims
The Corporation is a member of the Municipal Electric Association Reciprocal
Insurance Exchange ("MEARIE"), which was created on January 1, 1987. A
reciprocal insurance exchange may be defined as a group of persons formed for
the purpose of exchanging reciprocal contracts of indemnity or inter -insurance with
each other. MEARIE provides general liability insurance to member electric utilities.
MEARIE also provides vehicle and property insurance to the Corporation.
Insurance premiums charged to each member electric utility consist of a levy per
$1,000 of service revenue subject to a credit or surcharge based on each electric
utility's claims experience. The maximum coverage is $30,000,000 per occurrence
for liability insurance, $21,000,000 for vehicle insurance, and $161,680,000 for
property insurance; plus $10,000,000 excess coverage on top of the regular liability
and vehicle coverage.
Page 18
84
The Corporation of the Municipality of Clarington
Notes to the consolidated financial statements
December 31, 2020
8. Investment in Veridian Corporation / Elexicon Corporation (continued)
(ii) Contractual obligation - Hydro One Networks Inc. (continued)
The Corporation's subsidiary, Elexicon Energy Inc. (EEI), is party to a connection
and cost recovery agreement with Hydro One related to the construction by Hydro
One of a transformer station designated to meet EEI's anticipated electricity load
growth. Construction of the project was completed during 2007 and EEI connected
to the transformer station during 2008.
To the extent that the cost of the project is not recoverable from future
transformation connection revenues, EEI is obligated to pay a capital contribution
equal to the difference between these revenues and the construction costs
allocated to EEI. The construction costs allocated to EEI for the project are
$19,950,000.
Hydro One has performed a true -up based on actual load at the end of the tenth
anniversary of the in-service date and the Corporation has paid $2,135,000 (2019 —
637) to Hydro One and recognized the same as an intangible asset. The
Corporation has also recorded a current liability and a corresponding intangible
asset for $1,533,000 as at December 31, 2019, based on management's best
estimate of the future transformation connection revenues shortfall. Hydro One is
expected to perform another true -up based on actual load at the end of the fifteenth
anniversary of the in-service date.
(e) Lease commitments - Elexicon Corporation
Future minimum lease payment obligations under operating leases are as follows:
1J
�a
2021
363,000
2022
229,000
2023
179,000
2024
124,000
2025
95,000
Thereafter
115,000
1,105,000
9. Employee future benefits liabilities
(a) Accumulated sick leave entitlement
(i) Firefighters
The Municipality provides two sick leave accumulation plans for firefighters. Plan A
accumulates at the rate of one day per month of completed years of service to a
maximum of 182 days. These employees may become entitled to a cash payment
on retirement, early retirement, termination, or death, at the rate of 50% of the
accumulated credit, to a maximum of one-half a year's salary. Plan B —
accumulates at the rate of one day per month once the employees complete five
years of service. The estimated liability at December 31, 2020 was $1,009,061
(2019 - $1,023,710).
Page 19
85
The Corporation of the Municipality of Clarington
Notes to the consolidated financial statements
December 31, 2020
9. Employee future benefits liabilities (continued)
(a) Accumulated sick leave entitlement (continued)
(ii) Other
During the 1993 fiscal year, the Municipality negotiated an agreement with all
employees (except firefighters) to terminate the sick leave benefit plan which had
been in effect for many years. The Municipality agreed to pay to those employees
covered by the plan and who had at least five -years' service with the Municipality a
cash equivalent of 50% of sick leave days accumulated to July 1, 1993 to a
maximum of 120 days of salary. Remuneration for the buying out of sick days
identified will be available to the employee at any time up to the time that the
employee either leaves the Corporation or retires, at the rate of remuneration in
effect at July 31, 1993. The estimated liability at December 31, 2020 amounted to
$21,196 (2019 - $18,298).
(b) Post -employment benefits - other
The Municipality makes available to qualifying employees who retire before the age of
65 (firefighters - age 60) the opportunity of continuing their coverage for benefits such
as medical (extended health), dental, and life insurance benefits. Coverage ceases at
age 65.
Dependent upon the eligibility, the cost of this coverage may be a shared responsibility
between the Municipality and the retired employees.
An actuarial valuation was performed as at December 31, 2020 based on data as at
the valuation date and plan provisions. The accrued benefit obligation and net benefit
costs (i.e. the expense) for the 2020 fiscal year end was determined by this valuation.
The significant actuarial assumptions employed for the valuation are as follows:
(i) Discount rate will be 2.50% per annum.
(ii) Future inflation rates will be 2.00%.
(iii) Dental cost trend rates will be 3.00% in fiscal 2021 and remain stable at that
level until 2024.
(iv) Extended health care trend rates will be 5.37% in fiscal 2021 and remain stable
at that level until 2024.
(c) Information about the Municipality's employee future benefits liabilities is as follows:
2020 2019
Accrued benefit obligation
Balance, beginning of year
9,898,089
7,321,218
Employer current service cost
541,249
414,861
Interest cost
252,516
236,833
Benefits paid
(493,252)
(626,106)
Actuarial (gain) loss
516,357
2,551,283
Balance, end of year
10,714,959
9,898,089
Unamortized net actuarial gains (losses)
(1,651,002)
(1,259,951)
Employee future benefits liabilities, end of year
9,063,957
8,638,138
Page 20
86
The Corporation of the Municipality of Clarington
Notes to the consolidated financial statements
December 31, 2020
10. Pension agreements
The Municipality makes contributions to the Ontario Municipal Employees Retirement Fund
("OMERS"). OMERS is a multi -employer defined benefit pension plan which provides
pensions for employees of Ontario municipalities, local boards, public utilities, and school
boards. The pension plan is financed by equal contributions from participating employers
and employees, and by the investment earnings of the fund. The most recent actuarial
valuation of the Plan was conducted at December 31, 2020. The results of this valuation
disclosed total actuarial liabilities of $113,055 million with respect to benefits accrued for
service with actuarial assets at that date of $109,844 million indicating an actuarial deficit of
$3,211 million. Because OMERS is a multi -employer plan, any Plan surpluses or deficits
are joint responsibility of Ontario municipal organizations and their employees. As a result,
the Municipality does not recognize any share of the Plan surplus or deficit.
The Municipality recognizes the expense related to this plan as contributions are made.
The contribution rates and year's maximum pensionable earnings (YMPE) are outlined in
the table below.
NRA 65 up to NRA 65 over NRA 60 up to NRA 60 over
Year YMPE YMPE YMPE YMPE YMPE
2020 $58,700 9.0% 14.6% 9.2% 15.8%
2019 $57,400 9.0% 14.6% 9.2% 15.8%
The amount contributed to OMERS for 2020 was $3,308,521 (2019 - $3,323,567) for
current services and is included as an expense on the statement of operations.
11. Debenture debt
The debenture debt consists of several debentures that mature in the years 2021 to 2032.
(a) At the end of the year, the outstanding principal amount of this liability is $9,545,557
(2019 - $11,879,590).
Interest rate
Regional By-law
Maturity date
Note (i)
#
2020
2019
$
$
July 12, 2021
5.12
52-2006
103,099
201,115
August 21, 2022
4.60 to 4.75
07-2007
2,000,000
3,500,000
July 2, 2024
1.95 to 3.35
38-2014
611,000
755,000
July 2, 2029
1.95 to 3.80
38-2014
4,176,600
4,573,600
October 17, 2031
1.25 to 2.80
48-2016
750,000
811,000
April 13, 2032
1.70 to 3.30
56-2017
834,305
893,002
April 13, 2032
1.70 to 3.30
56-2017
1,070,553
1,145,873
9,545,557
11,879,590
Note (i) Interest rates gradually increase to the upper limits noted in the table.
Page 21
87
The Corporation of the Municipality of Clarington
Notes to the consolidated financial statements
December 31, 2020
11. Debenture debt (continued)
(b) Of the municipal debt reported in (a) of this note, principal payments are payable from
general municipal revenues follows:
2021
1,858,842
2022
1,775,923
2023
797,103
2024
818,737
2025
679,826
Thereafter
3,615,126
9,545,557
(c) The annual principal and interest payments required to service these liabilities are
within the annual debt repayment limit prescribed by the Ministry of Municipal Affairs
and Housing.
(d) Total interest expense related to the net long-term liabilities amounted to $354,362
(2019 - $445,785) and is reported on the Consolidated Statement of Operations.
12. Internal Loans
As a means of funding various capital acquisitions, funds are borrowed from the Municipal
Capital Reserve Fund. These funds are secured by promissory notes with interest rates
ranging from 2.20% to 3.30% and payment terms of 15 years. The financing arrangements
and ultimate repayment are approved by Council through the budget process.
(a) The following is a summary of the individual loans:
Major Parking Lot Rehabilitation 1,560,934
LED Street lighting Conversion 2,320,066
3,881,000
(b) Of the internal loans reported in (a) of this note, principal payments are as follows:
a
2021
250,000
2022
257,000
2023
263,000
2024
271,000
2025
279,000
Thereafter
2,561,000
3,881,000
Page 22
88
The Corporation of the Municipality of Clarington
Notes to the consolidated financial statements
December 31, 2020
13. Deferred revenue - obligatory reserve funds
The continuity of "deferred revenue - obligatory reserve funds" of the Municipality is
summarized as follows:
2020 2019
(Restated —
Note 2)
Balance, beginning of year 47,567,505 47,965,073
Contributions
Contributions from developers 15,080,110 3,813,009
Investment income 1,195,007 1,327,825
Federal Gas Tax 2,791,328 5,534,417
Provincial infrastructure 1,882,464 1,916,537
20,948,909 12,591,788
Utilization:
Transfers to operating 1,700,073 2,410,387
Acquisition of TCA - construction 5,380,694 10,578,969
7,080,767 12,989,356
Change in deferred revenue during the year 13,868,142 (397,568)
Balance, end of year 61,435,647 47,567,505
Balance, end of year - analyzed as follows:
Parkland cash -in -lieu
3,678,240
3,076,312
Federal gas tax
2,456,571
2,208,536
Building code act
2,780,177
2,521,357
Provincial infrastructure
2,505,444
1,437,002
Development charges (Note 14)
50,015,215
38,324,298
Total deferred revenue — obligatory reserve funds
61,435,647
47,567,505
14. Continuity of development charges reserve funds
2020
2019
(Restated
— Note 2)
Balance at the beginning of the year
38,324,298
40,461,730
Development charges collections
15,858,733
3,361,490
Investment income
923,855
1,239,331
Tangible capital assets acquisitions and construction
(2,117,686)
(4,427,799)
Operating expenses
(2,973,985)
(2,310,454)
Balance at the end of the year
50,015,215
38,324,298
Page 23
89
The Corporation of the Municipality of Clarington
Notes to the consolidated financial statements
December 31, 2020
15. Contingencies
Various legal actions and claims have been initiated by and against the Municipality, the
outcomes of which cannot be determined at the time of reporting. Accordingly, no provision
has been made in these consolidated financial statements for any liability which may result.
Should any gain or loss occur as a result of the above legal actions the Municipality will
account for the gain/loss when it is likely that such a gain/loss will occur, and the amount is
measurable.
16. Contractual commitments
During the year the Municipality had work done on several major projects with contract
values totaling approximately $42,939,583 (2019 - $49,923,822). These contracts relate to
the construction and expansion of certain permanent facilities. As at December 31, 2020,
$7,740,569 (2019 - $5,313,275) relating to these contracts had not been expended.
17. Related party transactions and balances - Veridian Corporation / Elexicon
Corporation
2020
2019
Transactions
Dividends received
1,045,949
941,900
Interest earned on promissory notes
343,658
359,738
Property taxes
33,533
33,728
Energy and services purchases
628,746
764,974
Balances
Promissory notes receivable
8,321,000
8,321,000
Accounts payable and accrued liabilities
86,139
57,426
18. Guarantees
In the normal course of business, the Municipality enters into agreements which contain
guarantees. The Municipality's primary guarantees are as follows:
(a) The Municipality has provided indemnities under lease agreements for the use of
various facilities or land. Under the terms of these agreements the Municipality agrees
to indemnify the counterparties for various items including, but not limited to, all
liabilities, losses, suits, and damages arising during, on or after the term of the
agreement. The maximum amount of any potential future payment cannot be
reasonably estimated.
(b) The Municipality indemnifies employees and elected officials for various items
including, but not limited to, all costs to settle suits or actions due to association with the
Municipality, subject to certain restrictions. The Municipality has purchased liability
insurance to mitigate the cost of any potential future suits or actions. The term of the
indemnification is not explicitly defined but is limited to the period over which the
indemnified party served as an employee or elected official of the Municipality. The
maximum amount of any potential future payment cannot be reasonably estimated.
(c) The Municipality has entered into agreements that may include indemnities in favour of
third parties, such as purchase and sale agreements, confidentiality agreements,
Page 24
90
The Corporation of the Municipality of Clarington
Notes to the consolidated financial statements
December 31, 2020
18. Guarantees (continued)
engagement letters with advisors and consultants, outsourcing agreements, leasing
contracts, information technology agreements and service agreements. These
indemnification agreements may require the Municipality to compensate counterparties
for losses incurred by the counterparties as a result of breaches in representation and
regulations or as a result of litigation claims or statutory sanctions that may be suffered
by the counterparty as a consequence of the transaction. The terms of these
reimbursements cannot be reasonably estimated.
The nature of these indemnification agreements prevents the Municipality from making a
reasonable estimate of the maximum exposure due to the difficulties in assessing the
amount of liability which stems from the unpredictability of future events and the unlimited
coverage offered to counterparties. Historically, the Municipality has not made any
significant payments under such or similar indemnification agreements and therefore no
amount has been accrued in these consolidated financial statements with respect to these
agreements.
19. Tangible capital assets
The continuity of the historical cost and accumulated amortization for various categories of
tangible capital assets can be found in Schedule 1.
Further information relating to tangible capital assets is as follows:
(a) Contributed tangible capital assets
The Municipality of Clarington records all tangible assets contributed by an external
party at fair value on the earlier of the date received or of the transfer of risk and
responsibility. Typical examples are roadways, parks, land, and storm sewers installed
by a developer as part of a subdivision agreement. For subdivision assets, the recorded
date is considered to be the date of acceptance with the exclusion of streetlights and
storm sewers with the recorded date as the date of completion. In 2020, there were
contributed assets of $5,120,862 (2019 - $18,912,296).
(b) Works of Art and Historical Treasures
The Municipality has one historical collection. The Municipality of Clarington Joint
Public Library and Museum Board collection is currently insured for $350,000. Also
included in historical treasures are the cenotaphs located in Bowmanville, Newcastle,
Orono and Newtonville. Due to the rural history, there are several abandoned
cemeteries located throughout the Municipality. The land is included in the Land asset
account; however, all associated physical items are considered a historical treasure.
This includes historical signs and cairns, or concrete structures built for old headstones.
Page 25
91
The Corporation of the Municipality of Clarington
Notes to the consolidated financial statements
December 31, 2020
20. Accumulated surplus
Accumulated surplus is comprised of the following:
Invested in tangible capital assets
General surplus
Capital surplus
Inventory - surplus land
Debenture debt to be recovered from future
revenue
Unfunded employee benefits and post -employment
liabilities
Reserves set aside for specific purposes by Council:
Acquisition of capital assets
Legal/consulting issues
Election expenses
Fire prevention
Burketon park improvements
Samuel Wilmot nature area
Secondary plans
Clarington Heritage Committee Board
2020
464,092,872
5,718,505
18,517,314
221,349
2019
(Restated -
Note 2)
467,499,849
2,886,819
18,429,199
424,898
(9,545,557) (11,879,590)
(2,799,829) (3,053,553)
4,238,932 3,788,124
1,524,135 1,173,485
222,338
147,338
284,552
304,552
7,569
7,569
1,592
492
133,054
-
7,051
6,981
Reserve funds set aside for specific purposes by
Council:
General municipal purposes
6,857,815
5,834,785
Rate stabilization
7,325,184
6,583,056
Strategic capital
9,964,744
10,345,340
Recreation programs and facilities
394,764
427,370
Debenture repayment
568,975
437,259
Industrial development
556,028
493,934
Other cultural
132,720
115,645
Acquisition of capital assets
8,171,365
7,581,917
Newcastle Waterfront study
44,603
689
Municipal capital works
3,550,192
4,133,761
Other capital - unspecified
970,237
948,827
Road contributions
3,379,286
3,744,966
Westside Bridge/Bowmanville Marsh
(2,199)
(2,199)
Port Granby LLRW
306,129
180,689
Community Improvement Plan
137,941
122,497
Business Improvement Areas
161,766
158,984
Hampton Union Cemetery
113,642
99,966
Community Emergency Management
471,540
461,174
Equity in Elexicon / Veridian Corporation
26,901,998
26,884,427
Accumulated surplus 552,630,607 548,289,250
Page 26
92
The Corporation of the Municipality of Clarington
Notes to the consolidated financial statements
December 31, 2020
21. Segmented information
The Municipality provides a wide range of services to its residents. Distinguishable
functional segments have been separately reported on Schedule 2. For each segment,
revenues and expenses represent amounts that are directly attributable to each segment.
Tax revenues are reported as part of general government.
The nature of the segments and the activities they encompass are as follows:
(a) General government
General government is comprised of all departments that support the corporate
governance, management, and program support for the Municipality.
(b) Protection to persons and property
Protection to persons and property is comprised of Emergency and Fire Services,
Municipal Law Enforcement, Animal Services and Building inspection / enforcement
services. Emergency and Fire Services includes responsibility for emergency
management, fire prevention and public education, fire suppression, communication,
and training.
(c) Transportation services
Transportation services includes services provided by the Engineering services and
Operations departments. The primary responsibilities include the inspection, planning
and maintenance of the roads, bridges, sidewalks, streetlights, roadsides, winter snow
clearing, subdivision planning, traffic engineering, development, and municipal servicing
reviews. Other services include fleet maintenance, parking, and school crossing
guards.
(d) Environmental services
Environmental services includes stormwater management, erosion control and resale of
waste diversion goods.
(e) Health services
Health services includes the maintenance and operation of the Municipality's active and
abandoned cemeteries and crematorium, cemetery records management and the sale
of cemetery plots, permits and headstones.
(f) Recreation and cultural services
Recreation and cultural services includes the administration, operation and
maintenance of all recreational, aquatic, arena, community recreational facilities, parks
and trails. Clarington Libraries, Museums and other external cultural agencies are also
included in this segment.
(g) Planning and development
Planning and development includes the development of planning policies, urban
design, development approvals, heritage preservation, real estate services and
geomatics. This segment further includes business improvement areas and tourism
activities.
Page 27
93
The Corporation of the Municipality of Clarington
Notes to the consolidated financial statements
December 31, 2020
22. Budget amounts
The budget figures reflected in these consolidated statements are those approved by
Council on March 2, 2020. Budget figures have been translated to reflect Public Sector
Accounting Board standards (PSAS).
23. Comparative figures
Certain comparative figures have been reclassified to conform to the financial statement
presentation adopted in the current year.
24. Impact of COVID-19
In 2020, the COVID-19 pandemic severely impacted many local economies around the
globe. In many countries, including Canada, organizations and businesses were forced to
cease or limit operations for long or indefinite periods of time. Measures taken to contain
the spread of the virus, including travel bans, quarantines, social distancing, and closures
of non -essential services have triggered significant disruptions to organizations worldwide,
resulting in an economic slowdown. Global stock markets have also experienced great
volatility and a significant weakening. Governments and central banks have responded with
monetary and fiscal interventions to stabilize economic conditions.
The COVID-19 pandemic had significant impacts on the activities of the Municipality in
2020. In March of 2020, the Province of Ontario declared a state of emergency and
ordered the closure of all recreation programs and facilities, outdoor amenities and parks,
libraries, museums, and non -essential business. Throughout 2020, the Municipality
maneuvered between various states of Iockdown, and took steps to mitigate lost revenues
by focusing on expense reduction and facility closures. In support of the community, the
Municipality approved interest and penalty relief, provided a property tax rebate program to
assist residential taxpayers and offered community improvement plan grants to small
businesses to assist with adapting their businesses to address public health measures for
reopening purposes.
The ultimate duration and magnitude of the impact the pandemic will have on the economy
and the Municipality are not known at this time. These impacts potentially include an impact
on the Municipality's ability to access and obtain capital financing, impairment of
investments, reduction to operational cash flow as a result of the inability of the Municipality
to fully recover on its customer accounts and potential future decreases in revenue or the
profitability of the Municipality's ongoing operations.
Page 28
94
The Corporation of the Municipality of Clarington
Consolidated Schedule of Tangible Capital Assets — Schedule 1
For the year ended December 31, 2020
2020
General
Infrastructure
Land
Linear Road
Linear Storm
Assets under
Land
Improvements
Buildings
Vehicles
Equipment
Land
& Related
Sewers
Buildings
Vehicles
Equipment
construction
Total
$
$
$
$
$
$
$
$
$
$
$
$
$
Cost
Balance, beginning of year
70,247,117
39,544,967
107,436,329
9,653,798
14,090,194
6,007,350
405,641,185
96,087,711
2,360,968
13,944,053
62,506
15,492,887
780,569,065
Add: additions during the year
2,366,698
2,066,650
960,229
41,142
1,323,419
-
13,279,880
3,020,831
-
865,987
20,539
10,451,338
34,396,713
Less: disposals during the year
(1)
(252,227)
(229,540)
(376,086)
(796,528)
-
(7,848,349)
(493,681)
(100,000)
(234,817)
(26,854)
(13,565,125)
(23,923,208)
Balance, end transfers of year
72,613,814
41,359,390
108,167,018
9,318,854
14,617,085
6,007,350
411,072,716
98,614,861
2,260,968
14,575,223
56,191
12,379,100
791,042,570
Accumulated amortization
Balance, beginning of year
- 14,454,357
49,964,192
6,455,806
8,244,923
- 204,095,858
20,091,808
1,552,127
8,185,380
24,764
- 313,069,215
Add: amortization during the year
- 1,226,193
3,178,263
541,889
1,304,689
- 12,749,153
1,679,094
84,784
884,515
5,829
- 21,654,409
Less: accumulated amortization
- (240,868)
(196,378)
(376,086)
(789,449)
- (5,693,817)
(122,202)
(100,000)
(234,816)
(20,310)
- (7,773,926)
on disposals
Balance, end of year
- 15,439,682
52,946,077
6,621,609
8,760,163
- 211,151,194
21,648,700
1,536,911
8,835,079
10,283
- 326,949,698
Net book value of tangible
capital assets 72,613,814 25,919,708 55,220,941 2,697,245 5,856,922 6,007,350 199,921,522 76,966,161 724,057 5,740,144 45,908 12,379,100 464,092,872
Page 29
95
The Corporation of the Municipality of Clarington
Consolidated Schedule of Tangible Capital Assets — Schedule 1
For the year ended December 31, 2020
2019
General
Infrastructure
Land
Linear Road
Linear Storm
Assets under
Land
Improvements
Buildings
Vehicles
Equipment
Land
& Related
Sewers
Buildings
Vehicles
Equipment
construction
Total
$
$
$
$
$
$
$
$
$
$
$
$
$
Cost
Balance, beginning of year
70,601,885
33,653,769
106,281,872
9,802,323
13,703,408
3,042,876
390,397,170
90,583,363
2,360,968
11,417,048
32,525
15,149,858
747,027,065
Add: additions during the year
-
6,297,135
1,635,615
-
1,113,209
2,964,474
17,680,939
5,526,988
-
2,949,328
35,654
11,186,297
49,389,639
Less: disposals during the year
(354,768)
(405,937)
(481,158)
(148,525)
(726,424)
-
(2,436,924)
(22,641)
-
(422,323)
(5,672)
(10,843,267)
(15,847,639)
Balance, end transfers of year
70,247,117
39,544,967
107,436,329
9,653,798
14,090,193
6,007,350
405,641,185
96,087,710
2,360,968
13,944,053
62,507
15,492,888
780,569,065
Accumulated amortization
Balance, beginning of year
- 13,744,636
47,131,979
6,040,673
7,703,205
- 194,244,714
18,816,611
1,467,342 7,746,863
24,284
- 296,920,307
Add: amortization during the year
- 1,115,658
3,150,331
563,658
1,262,285
- 12,252,848
1,280,284
84,785 860,840
6,154
- 20,576,843
Less: accumulated amortization
- (405,937)
(318,119)
(148,525)
(720,567)
- (2,401,704)
(5,087)
- (422,323)
(5,672)
- (4,427,934)
on disposals
Balance, end of year
- 14,454,357
49,964,191
6,455,806
8,244,923
- 204,095,858
20,091,808
1,552,127 8,185,380
24,766
- 313,069,216
Net book value of tangible
capital assets 70,247,117 25,090,610 57,472,138 3,197,992 5,845,270 6,007,350 201,545,327 75,995,902 808,841 5,758,673 37,741 15,492,888 467,499,849
Page 30
96
The Corporation of the Municipality of Clarington
Consolidated Schedule of Segmented Information — Schedule 2
For the year ended December 31, 2020
2020
Protection
Recreation
General
to persons
Transportation
Environmental
Health
and cultural
Planning and
Government
and property
services
services
services
services
development
Total
Operating revenue
Grants
2,268,424
27,553
842,727
820
-
217,811
75,279
3,432,614
Tax revenues
3,093,412
16,830,418
25,315,567
1,410,256
38,462
17,667,145
4,620,159
68,975,419
Other revenues
5,825,259
2,746,091
7,085,023
(255,298)
390,702
4,271,314
1,664,550
21,727,641
Contributed tangible capital assets
-
-
439,268
2,314,896
-
2,366,698
-
5,120,862
Total operating revenue
11,187,095
19,604,062
33,682,585
3,470,674
429,164
24,522,968
6,359,988
99,256,536
Operating expenditures
Salaries and wages
4,456,815
16,681,472
9,112,487
475,506
228,771
12,329,260
3,969,783
47,254,094
Operating materials and supplies
643,995
852,352
5,665,111
475,785
197,463
4,598,758
420,760
12,854,224
Contracted services
531,120
1,014,387
4,988,905
496,737
-
2,329,434
1,963,083
11,323,666
Rent and financial expenses
159,907
-
-
-
-
102,285
3,499
265,691
External transfers to others
-
6,250
-
-
-
1,078,868
-
1,085,118
Amortization expense
1,021,421
1,049,601
13,645,050
2,022,646
2,930
3,909,898
2,863
21,654,409
Interest on long-term liabilities
32,480
-
271,032
-
-
174,465
-
477,977
Total operating expenditures
6,845,738
19,604,062
33,682,585
3,470,674
429,164
24,522,968
6,359,988
94,915,179
Annual surplus (deficit) 4,341,357 - - - - - - 4,341,357
Page 31
97
The Corporation of the Municipality of Clarington
Consolidated Schedule of Segmented Information - Schedule 2
For the year ended December 31, 2020
2019 (Restated
- Note 2)
Protection Recreation
General to persons Transportation Environmental Health and cultural Planning and
Government and property services services services services development Total
Operating revenue
Grants
221,761
35,445
63,210
378,340
-
386,886
17,075
1,102,717
Tax revenues
22,391,028
14,934,057
9,154,656
-
6,607
15,753,979
4,082,401
66,322,728
Other revenues
5,830,842
3,884,835
14,028,584
121,022
376,840
7,388,389
2,460,060
34,090,572
Contributed tangible capital assets
-
-
9,166,467
7,015,346
-
2,730,483
-
18,912,296
Total operating revenue
28,443,631
18,854,337
32,412,917
7,514,708
383,447
26,259,737
6,559,536
120,428,313
Operating expenditures
Salaries and wages
4,462,654
15,726,287
9,253,874
673,744
213,946
13,949,715
3,749,494
48,029,714
Operating materials and supplies
658,332
1,031,245
7,104,345
1,731,811
159,194
5,492,040
446,116
16,623,083
Contracted services
655,415
1,075,972
2,603,287
425,437
1,508
1,745,771
2,359,086
8,866,476
Rent and financial expenses
636,105
-
-
-
171
43,496
1,977
681,749
External transfers to others
-
10,000
-
-
5,647
948,808
-
964,455
Amortization expense
992,731
1,010,833
13,159,688
1,582,898
2,981
3,824,849
2,863
20,576,843
Interest on long-term liabilities
33,925
-
291,723
-
-
255,058
-
580,706
Total operating expenditures
7,439,162
18,854,337
32,412,917
4,413,890
383,447
26,259,737
6,559,536
96,323,026
Annual surplus (deficit) 21,004,469 - - 3,100,818 - - - 24,105,287
Page 32
98
The Corporation of the Municipality of Clarington
Consolidated Schedule of Segmented Information - Schedule 3
For the year ended December 31, 2020
2020 - Budget
Protection
Recreation
General
to persons
Transportation
Environmental
Health
and cultural
Planning and
Government
and property
services
services
services
services
development
Total
Operating revenue
Grants
-
22,000
118,900
-
-
136,181
-
277,081
Tax revenues
8,494,617
18,037,990
21,067,237
-
-
16,364,088
4,643,295
68,607,227
Other revenues
2,908,000
2,079,332
12,933,458
5,069,304
419,600
9,332,757
879,800
33,622,251
Contributed tangible capital assets
-
-
439,268
2,314,896
-
2,366,698
-
5,120,862
Total operating revenue
11,402,617
20,139,322
34,558,863
7,384,200
419,600
28,199,724
5,523,095
107,627,421
Operating expenditures
Salaries and wages
4,666,423
16,863,735
9,981,905
487,838
268,358
15,016,932
4,099,722
51,384,913
Operating materials and supplies
1,066,047
1,361,502
5,183,476
427,574
119,494
5,725,069
698,760
14,581,922
Contracted services
296,600
943,982
5,720,794
490,786
-
2,322,995
717,511
10,492,668
Rent and financial expenses
205,000
-
-
-
-
51,919
11,000
267,919
External transfers to others
-
10,000
-
207,195
-
1,180,304
(6,761)
1,390,738
Amortization expense
1,013,395
960,103
13,525,271
1,403,146
2,442
3,728,041
2,863
20,635,261
Interest on long-term liabilities
32,480
-
147,417
-
-
174,464
-
354,361
Total operating expenditures
7,279,945
20,139,322
34,558,863
3,016,539
390,294
28,199,724
5,523,095
99,107,782
Annual surplus (deficit) 4,122,672 - - 4,367,661 29,306 - - 8,519,639
Page 33
99
The Corporation of the Municipality of Clarington
Consolidated Schedule of Segmented Information - Schedule 3
For the year ended December 31, 2020
2019 - Budget
Protection
Recreation
General
to persons
Transportation
Environmental
Health
and cultural
Planning and
Government
and property
services
services
services
services
development
Total
Operating revenue
Grants
-
22,000
195,000
-
-
137,481
-
354,481
Tax revenues
21,787,127
17,030,609
7,877,260
-
31,670
14,854,721
4,384,355
65,965,742
Other revenues
2,691,000
1,860,332
15,089,955
108,500
322,350
8,781,158
849,000
29,702,295
Contributed tangible capital assets
-
-
9,166,467
7,015,346
-
2,730,483
-
18,912,296
Total operating revenue
24,478,127
18,912,941
32,328,682
7,123,846
354,020
26,503,843
5,233,355
114,934,814
Operating expenditures
Salaries and wages
4,586,928
15,694,073
9,562,723
685,060
242,837
14,095,999
3,877,401
48,745,021
Operating materials and supplies
1,000,219
1,221,868
5,692,526
1,784,665
106,917
5,593,682
630,773
16,030,650
Contracted services
377,000
886,868
3,659,934
395,851
-
1,766,269
715,918
7,801,840
Rent and financial expenses
239,398
-
-
-
150
41,376
6,400
287,324
External transfers to others
-
10,000
-
83,500
2,000
1,078,773
-
1,174,273
Amortization expense
1,039,051
1,100,132
13,256,697
1,384,165
2,116
3,672,686
2,863
20,457,710
Interest on long-term liabilities
33,925
-
156,802
-
-
255,058
-
445,785
Total operating expenditures
7,276,521
18,912,941
32,328,682
4,333,241
354,020
26,503,843
5,233,355
94,942,603
Annual surplus (deficit) 17,201,606 - - 2,790,605 - - - 19,992,211
Page 34
100
If this information is required in an alternate format, please contact the Accessibility
Coordinator at (905) 623-3379 ext. 2131.
Financial statements of
The Corporation of the
Municipality of Clarington
Board of Management for
Historic Downtown Bowmanville
Business Improvement Area
December 31, 2020
full
The Corporation of the Municipality of Clarington
Board of Management for the Historic Downtown
Bowmanville Business District Improvement
Area
Notes to the financial statements
December 31, 2020
Table of contents
Independent Auditor's Report....................................................................................... 1-3
Statement of financial position........................................................................................ 4
Statementof operations................................................................................................. 5
Statement of change in net financial assets................................................................... 6
Statement of cash flows................................................................................. 7
Notes to the financial statements................................................................................. 8-9
102
Independent Auditor's Report
To the Members of the Corporation of the Municipality of Clarington Board of Management for Historic
Downtown Bowmanville Business Improvement Area, Members of Council, Inhabitants and Ratepayers of
the Township of Scugog
Qualified Opinion
We have audited the accompanying financial statements of the Historic Downtown Bowmanville Business
Improvement Area of the Corporation of the Municipality of Clarington (the Entity), which comprise the
statement of financial position as at December 31, 2020, and the statements of operations, changes in
net financial assets and cash flows for the year then ended, and notes to the financial statements,
including a summary of significant accounting policies.
In our opinion, except for the possible effects of the matter described in the Basis for Qualified Opinion
section of our report, the accompanying financial statements present fairly, in all material respects, the
financial position of the Entity as at December 31, 2020, and its results of operations and its cash flows
for the year then ended in accordance with Canadian public sector accounting standards.
Basis for Qualified Opinion
The Entity derives revenue from fundraising activities the completeness of which is not susceptible to
satisfactory audit verification. Accordingly, verification of these revenues was limited to the amounts
recorded in the records of the Entity. Therefore, we were not able to determine whether any adjustments
might be necessary to event and donation revenue, annual surplus, and cash flows from operations for
the years ended December 31, 2020 and 2020, net financial assets as at December 31, 2020 and 2020,
and accumulated surplus as at January 1 and December 31 for both the 2020 and 2020 years. Our audit
opinion on the financial statements for the year ended December 31, 2020 was modified accordingly
because of the possible effects of this limitation in scope.
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit
of the Financial Statements section of our report. We are independent of the Entity in accordance with
the ethical requirements that are relevant to our audit of the financial statements in Canada, and we
have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that
the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified
audit opinion.
Other Matters
The financial statements of the Historic Downtown Bowmanville Business Improvement Area of the
Corporation of the Municipality of Clarington for the year ended December 31, 2019 were audited by
another auditor who expressed a qualified opinion on those statements on September 10, 2020 on the
same basis described above.
103
Responsibilities of Management and Those Charged with Governance 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.
In preparing the financial statements, management is responsible for assessing the Entity's ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless management either intends to liquidate the Entity or to cease
operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Entity's financial reporting process.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with Canadian generally accepted auditing standards will always detect
a material misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due
to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Entity's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Entity's ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in
our auditor's report to the related disclosures in the financial statements or, if such disclosures
are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained
up to the date of our auditor's report. However, future events or conditions may cause the Entity
to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including
the disclosures, and whether the financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
104
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
Chartered Professional Accountants, Licensed Public Accountants
Lindsay, Ontario
REPORT DATE,
105
The Corporation of the Municipality of Clarington
Board of Management for Historic Downtown
Bowmanville Business Improvement Area
Statement of Financial Position
as at December 31, 2020
2020
2019
Financial assets
Cash and cash equivalents
64,732
24,484
Accounts receivable
-
-
HST receivable
5,529
8,250
Total financial assets
70,261
32,734
Liabilities
Accounts payable
18
4,592
Total liabilities
18
4,592
Net financial assets
70,243
28,142
Accumulated surplus (deficit) 70,243 28,142
Impact of COVID-19 (Note 2)
The accompanying notes are an integral part of these financial statements.
Page 3
106
The Corporation of the Municipality of Clarington
Board of Management for Historic Downtown
Bowmanville Business Improvement Area
Statement of Operations
as at December 31, 2020
Budget 2020 2019
Revenues
Taxation - Municipality of Clarington 167,439 167,439 174,200
Interest 666 816
Fundraising 1,570 61,797
Total revenues 167,439 169,675 236,813
Expenses
Administration
11,000
3,481
1,876
Events and promotion
71,000
50,278
118,202
Salaries and wages
58,200
56,750
47,700
Streetscape
34,000
17,065
24,014
Capital works
16,300
-
32,269
Total expenses
190,500
127,574
224,061
Annual surplus (deficit) (23,061) 42,101 12,752
Accumulated surplus, beginning of year 28,142 28,142 15,390
Accumulated surplus (deficit), end of year 5,081 70,243 28,142
Impact of COVID-19 (Note 2)
The accompanying notes are an integral part of these financial statements.
Page 4
107
The Corporation of the Municipality of Clarington
Board of Management for Historic Downtown
Bowmanville Business Improvement Area
Statement of Change in Net Financial Assets
as at December 31, 2020
Annual surplus (deficit)
Change in prepaid expenses
Budget 2020 2019
(23,061) 42,101 12,752
Change in net financial assets
(23,061)
42,101
12,752
Net financial assets, beginning of year
28,142
28,142
15,390
Net financial assets (liabilities), end of yea
5,081
70,243
28,142
The accompanying notes are an integral part of these financial statements.
Page 5
108
The Corporation of the Municipality of Clarington
Board of Management for Historic Downtown
Bowmanville Business Improvement Area
Statement of Cash Flows
for the year ended December 31, 2020
2020 2019
Operating activities
Annual surplus 42,101 12,752
Non cash items
Amortization of tangible capital assets - -
Changes in non -cash operating items
Decrease (increase) in accounts receivable
-
140
Decrease (increase) due from Government of Canada
2,721
(8,250)
Increase (decrease) in accounts payable and accrued IiabilitiE
(4,574)
4,567
40,248
9,209
Capital activity
Acqusition of tangible capital assets
-
-
Net increase in cash
40,248
9,209
Cash, beginning of year
24,484
15,275
Cash, end of year
64,732
24,484
The accompanying notes are an integral part of these financial statements.
11P�ge 6
The Corporation of the Municipality of Clarington
Board of Management for the Historic Downtown
Bowmanville Business District Improvement
Area
Notes to the financial statements
December 31, 2020
The Corporation of the Municipality of Clarington Board of Management for Historic
Downtown Bowmanville Business Improvement Area is a Municipal Local Board (the
"Board") in the Province of Ontario, Canada. It conducts its operations guided by the
provisions of provincial statutes such as the Municipal Act and related legislation.
1. Significant accounting policies
The financial statements of the Board are the representations of management
prepared in accordance with Canadian public sector accounting standards
("PSAS").
The focus of the financial statements is on the financial position of the Board and
the changes thereto. The Statement of Financial Position includes the assets
and liabilities of the Board.
Financial assets are those assets which could provide resources to discharge
existing liabilities or finance future operations.
Non -financial assets are not available to discharge existing liabilities and are held
for use in the provision of services. They have useful lives extending beyond the
current year and are not intended for sale in the ordinary course of operations.
Accumulated surplus represents the difference between assets and liabilities of
the Board. This provides information about the Board's overall future revenue
requirements and its ability to finance operations and meet its obligations.
a) Revenue recognition
Taxation revenue is recorded when earned and is based on a special
assessment. Other revenues are recorded in the period in which transactions
or events occurred that gave rise to the revenues.
b) Use of estimates
The preparation of financial statements in conformity with PSAS requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the year. Actual results could differ from those
estimates.
c) Cash and cash equivalents
Cash and cash equivalents are made up of cash held in financial institutions
as well as temporary investments with maturities of 90 days or less.
Page 7
110
The Corporation of the Municipality of Clarington
Board of Management for the Historic Downtown
Bowmanville Business District Improvement
Area
Notes to the financial statements
December 31, 2020
2. Impact of COVID-19
In 2020, the COVID-19 pandemic severely impacted many local economies
around the globe. In many countries, including Canada, organizations and
businesses were forced to cease or limit operations for long or indefinite periods
of time. Measures taken to contain the spread of the virus, included travel bans,
quarantines, social distancing, and closures of non -essential services have
triggered significant disruptions to organizations worldwide, resulting in an
economic slowdown. Global stock markets have also experienced great volatility
and a significant weakening. Governments and central banks have responded
with monetary and fiscal interventions to stabilize economic conditions.
The COVID-19 pandemic had significant impacts on the activities of the
Bowmanville BIA. All in -person community events scheduled after March 13,
2020 had to be cancelled or modified to be a virtual offering. The Bowmanville
BIA shifted its focus from community events to the marketing, decor and on-line
promotion of the BIA area.
Although the Bowmanville BIA cannot estimate the length or gravity of the impact
of the COVID-19 outbreak at this time, if the pandemic continues, it may have a
material adverse effect on the Bowmanville BIA's results of future operations,
financial position, and liquidity in the fiscal year 2021.
Page 8
111
If this information is required in an alternate format, please contact the Accessibility
Coordinator at (905) 623-3379 ext. 2131
Financial statements of
The Corporation of the
Municipality of Clarington
Board of Management for the
Newcastle Central Business
District Improvement Area
December 31, 2020
"m
The Corporation of the Municipality of Clarington
Board of Management for the Newcastle Central
Business District Improvement Area
Notes to the financial statements
December 31, 2020
Table of contents
Independent Auditor's Report....................................................................................... 1-2
Statement of financial position........................................................................................ 3
Statement of operations ................. ................................................................................ 4
Statement of change in net financial assets................................................................... 5
Statement of cash flows.................................................................................. 6
Notes to the financial statements............................................................................ 7-8
113
Independent Auditor's Report
To the Members of the Corporation of the Municipality of Clarington Board of Management for the
Newcastle Central Business District Improvement Area, Members of Council, Inhabitants and Ratepayers
of the Township of Scugog
Qualified Opinion
We have audited the accompanying financial statements of the Newcastle Central Business District
Improvement Area of the Corporation of the Municipality of Clarington (the Entity), which comprise the
statement of financial position as at December 31, 2020, and the statements of operations, changes in
net financial assets and cash flows for the year then ended, and notes to the financial statements,
including a summary of significant accounting policies.
In our opinion, except for the possible effects of the matter described in the Basis for Qualified Opinion
section of our report, the accompanying financial statements present fairly, in all material respects, the
financial position of the Entity as at December 31, 2020, and its results of operations and its cash flows
for the year then ended in accordance with Canadian public sector accounting standards.
Basis for Qualified Opinion
The Entity derives revenue from fundraising activities the completeness of which is not susceptible to
satisfactory audit verification. Accordingly, verification of these revenues was limited to the amounts
recorded in the records of the Entity. Therefore, we were not able to determine whether any adjustments
might be necessary to event and donation revenue, annual surplus, and cash flows from operations for
the years ended December 31, 2019 and 2020, net financial assets as at December 31, 2019 and 2020,
and accumulated surplus as at January 1 and December 31 for both the 2019 and 2020 years. The
predecessor auditor's opinion on the financial statements for the year ended December 31, 2019 was
modified accordingly because of the possible effects of this limitation in scope.
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit
of the Financial Statements section of our report. We are independent of the Entity in accordance with
the ethical requirements that are relevant to our audit of the financial statements in Canada, and we
have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that
the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified
audit opinion.
Other Matters
The financial statements of the Newcastle Central Business District Improvement Area of the Corporation
of the Municipality of Clarington for the year ended December 31, 2019 were audited by another auditor
who expressed a qualified opinion on those statements on September 10, 2020 on the same basis
described above.
"EH
Responsibilities of Management and Those Charged with Governance 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.
In preparing the financial statements, management is responsible for assessing the Entity's ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless management either intends to liquidate the Entity or to cease
operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Entity's financial reporting process.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with Canadian generally accepted auditing standards will always detect
a material misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due
to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Entity's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Entity's ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in
our auditor's report to the related disclosures in the financial statements or, if such disclosures
are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained
up to the date of our auditor's report. However, future events or conditions may cause the Entity
to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including
the disclosures, and whether the financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
115
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
Chartered Professional Accountants, Licensed Public Accountants
Lindsay, Ontario
REPORT DATE,
116
The Corporation of the Municipality of Clarington
Board of Management for the Newcastle Central
Business District Improvement Area
Statement of financial position
as at December 31, 2020
2020 2019
Financial assets
Cash
33,775
13,034
Accounts receivable
1,202
7,781
Total financial assets
34,977
20,815
Liabilities
Accounts payable
-
2,562
Deferred revenue
2,000
-
Totalliabilities
2,000
2,562
Net financial assets (liabilities)
32,977
18,253
Accumulated surplus (deficit)
32,977
18,253
The accompanying notes are an integral part of these financial statements.
Page 3
117
The Corporation of the Municipality of Clarington
Board of Management for the Newcastle Central
Business District Improvement Area
Statement of operations
year ended December 31, 2020
2020
2019
Budget
Actual
Actual
Revenues
Taxation - Municipality of Clarington
40,000
40,000
35,000
Grant - Municipality of Clarington
2,000
Grant - Government of Canada
5,000
Fundraising
1,202
28,738
Transfer from Municipality of Clarington
10,000
Miscellaneous
200
Total revenues
40,000
41,202
80,938
Expenses
Administration
2,000
1,461
1,407
Advertising
10,000
10,768
10,810
Events
5,000
1,434
28,736
Downtown safety and decor
23,000
12,815
17,242
Total expenses
40,000
26,478
58,195
Annual surplus (deficit)
-
14,724
22,743
Accumulated surplus, beginning of year
18,253
18,253
(4,490)
Accumulated surplus, end of year
18,253
32,977
18,253
The accompanying notes are an integral part of these financial statements.
Page 4
118
The Corporation of the Municipality of Clarington
Board of Management for Newcastle Central
Business District Improvement Area
Statement of change in net financial assets
as at December 31, 2020
Budget 2020 2019
Annual surplus (deficit) - 14,724 22,743
Change in net financial assets - 14,724 22,743
Net financial assets, beginning of year 18,253 18,253 (4,490)
Net financial assets (liabilities), end of year 18,253 32,977 18,253
The accompanying notes are an inegral part of these financial statements.
P9ge 5
The Corporation of the Municipality of Clarington
Board of Management for the Newcastle Central
Business District Improvement Area
Statement of cash flows
for the year ended December 31, 2020
Operating activities
Annual surplus
Non cash items
Amortization of tangible capital assets
Changes in non -cash operating items
2020 2019
14,724 22,743
Decrease (increase) in accounts receivable
6,579
(7,281)
Increase (decrease) in accounts payable and accrued liabilities
(2,562)
(2,484)
Increase (decrease) in deferred revenue
2,000
-
20,741
12,978
Capital activity
Acqusition of tangible capital assets
-
-
Net increase in cash
20,741
12,978
Cash, beginning of year
13,034
56
Cash, end of year
33,775
13,034
The accompanying notes are an integral part of these financial statements.
109ge 6
The Corporation of the Municipality of Clarington
Board of Management for the Newcastle Central
Business District Improvement Area
Notes to the financial statements
December 31, 2020
Table of contents
Independent Auditor's Report..................................................................................................1-2
Statement of financial position................................................................................................... 3
Statementof operations............................................................................................................. 4
Statement of change in net financial assets........................................................................... 5
Statement of cash flows.................................................................................. 6
Notes to the financial statements............................................................................................7-8
121
The Corporation of the Municipality of Clarington
Board of Management for the Newcastle Central
Business District Improvement Area
Notes to the financial statements
December 31, 2020
The Corporation of the Municipality of CIarington Board of Management forth e
Newcastle Central Business District Improvement Area is a Municipal Local Board in the
Province of Ontario, Canada. It conducts its operations guided by the provisions of
provincial statutes such as the Municipal Act and related legislation.
1. Significant accounting policies
The financial statements of the Board are the representations of management
prepared in accordance with Canadian public sector accounting standards
("PSAS").
The focus of the financial statements is on the financial position of the Board and
the changes thereto. The Statement of Financial Position includes the assets and
liabilities of the Board.
Financial assets are those assets which could provide resources to discharge
existing liabilities orfinance future operations.
Non -financial assets are not available to discharge existing liabilities and are held
for use in the provision of services. They have useful lives extending beyond the
currentyear and are not intended forsale in the ordinary course of operations.
Accumulated surplus represents the difference between assets and liabilities of
the Board. This provides information aboutthe Board's overall future revenue
requirements and its ability to finance operations and meet its obligations.
a) Revenue recognition
Taxation revenue is recorded when earned and is based on a special
assessment. Other revenues are recorded in the period in which transactions
or events occurred that gave rise to the revenues.
b) Use of estimates
The preparation of financial statements in conformitywith Canadian generally
accepted accounting principles requires managementto make estimates and
assumptions thataffect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
year. Actual results could differfrom those estimates.
2. Impact of COVID-19
In 2020, the COVID-19 pandemic severely impacted many local economies
around the globe. In many countries, including Canada, organizations and
businesses were forced to cease or limit operations for long or indefinite periods of
time. Measures taken to contain the spread of the virus, included travel bans,
Page 7
122
The Corporation of the Municipality of Clarington
Board of Management for the Newcastle Central
Business District Improvement Area
Notes to the financial statements
December 31, 2020
2. Impact of COVID-19 (con't)
quarantines, social distancing, and closures of non -essential services have
triggered sign ificant disruptions toorgan izationsworldwide, resulting in an
economic slowdown. Global stock markets have also experienced great volatility
and a sign ificantweaken ing. Governments and central banks have responded with
monetary and fiscal interventions to stabilize economic conditions.
The COVID-19 pandemic had significant impacts on the activities of the Newcastle
BIA. All in -person community events schedu I ed after March 13, 2020 had to be
cancelled or modified to be a virtual offering. The Newcastle BIA shifted its focus
from community events to the marketing, decor and on-line promotion of the BIA
area.
Although the Newcastle BIA cannotestimate the length or gravity of the impact of
the COVID-19 outbreak at thistime, if the pandemic continues, itmay have
material adverse effecton the Newcastle BIA's results of future operations,
financial position, and liquidity in the fiscal year 2021.
Page 8
123
If this information is required in an alternate format, please contact the Accessibility
Coordinatorat (905) 623-3379 ext. 2131.
Financial statements of
The Corporation of the
Municipality of Clarington
Board of Management for the
Orono Central Business
District Improvement Area
December 31, 2020
124
The Corporation of the Municipality of Clarington
Board of Management for the Orono Central
Business District Improvement Area
December 31, 2020
Table of contents
Independent Auditor's Report..................................................................................................1-2
Statement of financial position................................................................................................... 3
Statementof operations............................................................................................................. 4
Statement of change in netfinancial assets........................................................................... 5
Statement of cash flows................................................................................. 6
Notes to the financial statements............................................................................................7-8
125
Independent Auditor's Report
To the Members of the Corporation of the Municipality of Clarington Board of Management for Orono
Central Business Distric Improvement Area, Members of Council, Inhabitants and Ratepayers of the
Township of Scugog
Qualified Opinion
We have audited the accompanying financial statements of the Orono Central Business District
Improvement Area of the Corporation of the Municipality of Clarington (the Entity), which comprise the
statement of financial position as at December 31, 2020, and the statements of operations, changes in
net financial assets and cash flows for the year then ended, and notes to the financial statements,
including a summary of significant accounting policies.
In our opinion, except for the possible effects of the matter described in the Basis for Qualified Opinion
section of our report, the accompanying financial statements present fairly, in all material respects, the
financial position of the Entity as at December 31, 2020, and its results of operations and its cash flows
for the year then ended in accordance with Canadian public sector accounting standards.
Basis for Qualified Opinion
The Entity derives revenue from fundraising activities the completeness of which is not susceptible to
satisfactory audit verification. Accordingly, verification of these revenues was limited to the amounts
recorded in the records of the Entity. Therefore, we were not able to determine whether any adjustments
might be necessary to event and donation revenue, annual surplus, and cash flows from operations for
the years ended December 31, 2020 and 2020, net financial assets as at December 31, 2020 and 2020,
and accumulated surplus as at January 1 and December 31 for both the 2020 and 2020 years. The
predecessor auditor's opinion on the financial statements for the year ended December 31, 2019 was
modified accordingly because of the possible effects of this limitation in scope.
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit
of the Financial Statements section of our report. We are independent of the Entity in accordance with
the ethical requirements that are relevant to our audit of the financial statements in Canada, and we
have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that
the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified
audit opinion.
Other Matters
The financial statements of the Orono Central Business District Improvement Area of the Corporation of
the Municipality of Clarington for the year ended December 31, 2019 were audited by another auditor
who expressed a qualified opinion on those statements on September 10, 2020 on the same basis
described above.
126
Responsibilities of Management and Those Charged with Governance 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.
In preparing the financial statements, management is responsible for assessing the Entity's ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless management either intends to liquidate the Entity or to cease
operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Entity's financial reporting process.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with Canadian generally accepted auditing standards will always detect
a material misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due
to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Entity's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Entity's ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in
our auditor's report to the related disclosures in the financial statements or, if such disclosures
are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained
up to the date of our auditor's report. However, future events or conditions may cause the Entity
to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including
the disclosures, and whether the financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
127
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
Chartered Professional Accountants, Licensed Public Accountants
Lindsay, Ontario
REPORT DATE,
128
The Corporation of the Municipality of Clarington
Board of Management for the Orono Central
Business District Improvement Area
Statement of Financial Position
as at December 31, 2020
2020
2019
Financial assets
Cash and cash equivalents
Accounts and liabilities
23,202
-
36,501
401
Total financial assets
23,202
36,902
Liabilities
Accounts payable
80
408
Total liabilities
80
408
Net financial assets
23,122
36,494
Accumulated surplus (deficit)
23,122
36,494
The accompanying notes are an integral part of these financial statements.
fie 3
The Corporation of the Municipality of Claringtoi
Board of Management for the Orono Central
Business District Improvement Area
Statement of Operations
year ended December 31, 2020
Budget
2020
2019
Revenues
Taxation - Municipality of Clarington (Note 1)
6,000
6,000
6,000
Grants - Municipality of Clarington
22,141
-
22,141
Grants - Other
-
10,830
-
Donations/fundraising/miscellaneous
17,500
769
21,158
Total revenues
45,641
17,599
49,299
Expenses
Advertising and promotion
18,100
5,440
17,789
Landscaping
25,640
24,569
3,856
Miscellaneous
1,547
962
6,912
Total expenses
45,287
30,971
28,557
Annual surplus (deficit)
354
(13,372)
20,742
Accumulated surplus, beginning of year
36,494
36,494
15,752
Accumulated surplus, end of year
36,848
23,122
36,494
The accompanying notes are an integral part of these financial statements.
Page 4
130
The Corporation of the Municipality of Clarington
Board of Management for Orono Central
Business District Improvement Area
Statement of Change in Net Financial Assets
as at December 31, 2020
Budget 2020 2019
Annual surplus (deficit) 354 (13,372) 20,742
Net financial assets, beginning of year
36,494 36,494 15,752
Net financial assets (liabilities), end of year 36,848 23,122 36,494
The accompanying notes are an integral part of these financial statements.
Phge 5
The Corporation of the Municipality of Clarington
Board of Management for the Orono Central
Business District Improvement Area
Statement of Cash Flows
year ended December 31, 2020
2020
2019
Operating activities
Annual surplus
(13,372)
20,742
Non cash items
Amortization of tangible capital assets
-
-
Changes in non -cash operating items
Decrease (increase) in accounts receivable
401
199
Increase (decrease) in accounts payable and accrued liabilities
(328)
105
(13,299)
21,046
Capital activity
Acqusition of tangible capital assets
-
-
Net increase in cash
(13,299)
21,046
Cash, beginning of year
36,501
15,455
Cash, end of year
23,202
36,501
The accompanying notes are an integral part of these financial statements.
1PAge 6
The Corporation of the Municipality of Clarington
Board of Management for the Orono Central
Business District Improvement Area
December 31, 2020
The Corporation of the Municipality of CIarington Board of Management forth Orono
Central Business District Improvement Area is a Municipal Local Board in the Province
of Ontario, Canada. It conducts its operations guided by the provisions of provincial
statutes such as the Municipal Act and related legislation.
1. Significant accounting policies
The financial statements of the Board are the representations of management
prepared in accordance with Canadian public sector accounting standards
("PSAS").
The focus of the financial statements is on the financial position of the Board and
the changes thereto. The Statement of Financial Position includes the assets
and liabilities of the Board.
Financial assets are those assets which could provide resources to discharge
existing liabilities orfinance future operations.
Non -financial assets are not available to discharge existing liabilities and are held
for use in the provision of services. They have useful lives extending beyond the
current year and are not intended for sale in the ordinary course of operations.
Accumulated surplus represents the difference between assets and liabilities of
the Board. This provides information aboutthe Board's overall future revenue
requirements and its ability to finance operations and meet its obligations.
a) Revenue recognition
Taxation revenue is recorded when earned and is based on a special
assessment. Other revenues are recorded in the period in which transactions
or events occurred that gave rise to the revenues.
b) Use of estimates
The preparation of financial statements in conformitywith PSAS requires
managementto make estimates and assumptions that affectthe reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the year. Actual results could differfrom those
esti mates.
2. Impact of COVID-19
In 2020, the COVID-19 pandemic severely impacted many local economies
around the globe. In many countries, including Canada, organizations and
businesses were forced to cease or limit operations for long or indefinite periods
of time. Measures taken to contain the spread of the virus, included travel bans,
Page 7
133
The Corporation of the Municipality of Clarington
Board of Management for the Orono Central
Business District Improvement Area
Notes to the financial statements
December 31, 2020
2. Impact of COVID-19 (con't)
quarantines, social distancing, and closures of non -essential services have
triggered sign ificantdisruptions to organizations worldwide, resulting in an
economic slowdown. Global stock markets have also experienced great volatility
and a significant weakening. Governments and central banks have responded
with monetary and fiscal interventions to stabilize economic conditions.
The COVID-19 pandemic had significant impacts on the activities of the Orono
BIA. All in -person communityevents scheduled after March 13, 2020 had to be
cancelled or modified to be a virtual offering. The Orono BIA shifted its focus
from community events to the marketing, decor and on-line promotion of the BIA
area.
Although the Orono BIA cannotestimate the length orgravity of the impact of the
COVID-19 outbreak at this time, if the pandemic continues, it may have a
material adverse effecton the Orono BIA's results of future operations, financial
position, and liquidity in the fiscal year 2021.
Page 8
134
If this information is required in an alternate format, please contact the Accessibility Co-Ordinator at
(905) 623-3379 ext. 2131
Financial statements of
The Corporation of the
Municipality of Clarington
Trust Funds
December 31, 2020
135
The Corporation of the Municipality of Clarington
Trust Funds
December 31, 2020
Table of contents
Independent Auditor's Report....................................................................................... 1-2
Statement of financial position........................................................................................ 3
Statement of operations................................................................................................. 4
Notes to the financial statements................................................................................. 5-6
136
Independent Auditor's Report
To the Members of Council of the Corportation of the Municipality of Clarington
Opinion
We have audited the financial statements of the Corportation of the Municipality of Clarington Trust
Funds (the Entity), which comprise the statement of financial position as at December 31, 2020, and the
statement of operations and accumulated surplus for the year then ended, and notes to the financial
statements, including a summary of significant accounting policies.
In our opinion, the accompanying financial statements present fairly, in all material respects, the
financial position of the Entity as at December 31, 2020, and its operations for the year then ended in
accordance with Canadian public sector accounting standards.
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the Auditor's Responsibilities for the
Audit of the Financial Statements section of our report. We are independent of the Entity in accordance
with the ethical requirements that are relevant to our audit of the financial statements in Canada, and
we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe
that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Other Matters
The consolidated financial statements of the Entity for the year ended December 30, 2019 were audited
by another auditor who expressed an unmodified opinion on those statements on September 10, 2020 on
the same basis described above.
Responsibilities of Management and Those Charged with Governance 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.
In preparing the financial statements, management is responsible for assessing the Entity's ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless management either intends to liquidate the Entity or to cease
operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Entity's financial reporting process.
Page 1
137
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with Canadian generally accepted auditing standards will always detect
a material misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting
a material misstatement resulting from fraud is higher than for one resulting from error, as fraud
may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal
control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Entity's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Entity's ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor's
report to the related disclosures in the financial statements or, if such disclosures are inadequate,
to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of
our auditor's report. However, future events or conditions may cause the Entity to cease to continue
as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events
in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
Chartered Professional Accountants, Licensed Public Accountants
Lindsay, Ontario
[Date]
Page 2
138
The Corporation of the Municipality of Clarington
Trust Funds
Statement of financial position
as at December 31, 2020
Investments
Cash (Note 3)
Interest revenue
receivable
Due (to) from
Municipality of
Clarington
Net Financial Assets
and Accumulated
Surplus
Advent Cemetery
- 918
22
(22)
918
Bondhead Cemetery
- 196,661
4,373
4,844
205,878
Bowmanville Cemetery
- 1,201,723
4,504
(14,169)
1,192,058
Hampton Cemetery
- 45,394
122
2,994
48,510
Lovekin Cemetery
- 10,000
6
(44)
9,962
Orono Cemetery
1,440 282,705
2,864
(23,758)
263,251
St. George's Cemetery
- 45,861
116
(539)
45,438
Trulls Cemetery
- 1,774
42
(16)
1,800
Vanderveer Legacy Trust
- 1,000
-
(24)
976
1,440 1,786,036
12,049
(30,734)
1,768,791
Estate of Irene Rinch/Newcastle Community Hall
- 5,228
658
6,551
12,437
Montague Trust
- 133,537
8,548
9,698
151,783
Total - 2020
1,440 1,924,801
21,255
(14,485)
1,933,011
Total - 2019 237,493 1,674,976 35,558 (32,699) 1,915,328
Impact of COVID-19 (Note 5)
The accompanying notes are an integral part of these financial statements.
Page 3
139
The Corporation of the Municipality of Clarington
Trust Funds
Statement of operations and accumulated surplus
as at December 31, 2020
Revenues
Care and
Balance
maintenance
Less:
Excess (shortfall)
Accumulated
beginning of
receipts Interest
Contribution
Investments
of revenues over
surplus, end
year
(Note 4) earned Total
to cemeteries
in Capital
expenses
of year
Advent Cemetery
913
- 23 23
24
-
(1)
912
Bondhead Cemetery
191,356
11,957 3,251 15,208
3,915
-
11,293
202,649
Bowmanville Cemetery
1,182,078
39,807 20,330 60,137
50,309
-
9,828
1,191,906
Hampton Cemetery
44,795
3,217 492 3,709
(485)
-
4,194
48,989
Lovekin Cemetery
9,843
- 182 182
429
-
(247)
9,596
Orono Cemetery
275,583
1,894 (3,920) (2,026)
7,287
-
(9,313)
266,270
St. George's Cemetery
46,248
520 945 1,465
2,008
-
(543)
45,705
Trulls Cemetery
1,827
- 45 45
46
-
(1)
1,826
Vanderveer Legacy Trust
983
- 18 18
43
-
(25)
938
1,753,607
57,395 21,366 78,761
63,576
-
15,185
1,768,791
Estate of Irene Rinch
150,314
- 94 94
-
-
94
150,408
Montague Trust
114
- 244 244
-
-
244
13,812
Total - 2020
1,915,328
57,395 23,864 81,259
63,576
-
17,683
1,933, 011
Total - 2019
1,832,849
63,288 32,733 96,021
13,542
-
82,479
1,915,328
The accompanying notes are an integral part of these financial statements
140 Page 4
The Corporation of the Municipality of Clarington
Trust Funds
Notes to the financial statements
December 31, 2020
The Corporation of the Municipality of Clarington Trust Funds consist of various trust
funds administered by the Municipality of Clarington. The funds include holdings related
to the care and maintenance of cemeteries and funds bequest to the Newcastle
Community Hall.
Significant accounting policies
The financial statements of the Corporation of Municipality of Clarington Trust
Funds are the representations of management prepared in accordance with
Canadian public sector accounting standards and reflect the following policies:
Basis of accounting
Revenues are recorded in the period in which the transactions or events occurred
that gave rise to the revenue.
Expenditures are recorded in the period the goods and services are acquired and a
liability is incurred. Refunds are reported in the period issued.
Investments
Investments are recorded at cost which approximates fair value.
Use of estimates
The preparation of the financial statements in conformity with Canadian public
sector accounting standards, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and the
reported amount of revenues and expenditures during the year. Actual results could
differ from these estimates.
2. Statement of cash flows
A statement of cash flows has not been included in these financial statements as
the information is readily determinable from the financial statements presented.
3. Investments
The total investments held by the trust funds of $1,924,802 (2019 — $1,674,976)
reported on the Statement of Financial Position at cost have a fair value of
$1,944,406 (2019 - $1,710,860) at the end of the year. The investments consist of
holdings pursuant to the provisions of the Municipality's investment policy and
comprise government bonds and guaranteed investment certificates (GICs) issued
by various financial institutions. It is the Municipality's intention to hold these
investments until maturity.
Page 5
141
The Corporation of the Municipality of Clarington
Trust Funds
Notes to the financial statements
December 31, 2020
4. Care and maintenance funds
The Care and Maintenance Funds administered by the Municipality are funded by
the sale of cemetery plots. These funds are invested and the interest earned is
used to perform care and maintenance to the Municipality's cemeteries. The
operations and investments of the Funds are undertaken by the Municipality in
accordance with the regulations of the Cemeteries Act.
5. Impact of COVID-19
In 2020, the COVID-19 pandemic severely impacted many local economies around
the globe. In many countries, including Canada, organizations and businesses were
forced to cease or limit operations for long or indefinite periods of time. Measures
taken to contain the spread of the virus, including travel bans, quarantines, social
distancing, and closures of non -essential services have triggered significant
disruptions to organizations worldwide, resulting in an economic slowdown. Global
stock markets have also experienced great volatility and a significant weakening.
Governments and central banks have responded with monetary and fiscal
interventions to stabilize economic conditions.
The main impact on the Trusts stemming from the COVID-19 pandemic were lower
levels of interest earned on investments.
The ultimate duration and magnitude of the impact the pandemic will have on the
economy and the Trusts are not known at this time. These impacts potentially
include a further impairment of investments and a reduction to the transfers to the
Municipality for the operational maintenance of the cemeteries.
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142