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HomeMy WebLinkAboutFinancial Statements - 2025 THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Consolidated Financial Statements December 31, 2025 THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Consolidated Financial Statements Year Ended December 31, 2025 Table of Contents PAGE Management Responsibility for Financial Reporting 1 Independent Auditors' Report 2 - 3 Consolidated Statement of Financial Position 4 Consolidated Statement of Operations and Accumulated Surplus 5 Consolidated Statement of Changes in Net Financial Assets 6 Consolidated Statement of Cash Flows 7 Notes to the Consolidated Financial Statements 8 - 24 Consolidated Schedule of Segment Disclosure 25 - 26 MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING The accompanying consolidated financial statements are the responsibility of the management of The Corporation of the Municipality of Bayham and have been prepared in accordance with Canadian public sector accounting standards. These consolidated financial statements include: • Independent Auditors'report * Consolidated Statement of Financial Position * Consolidated Statement of Operations and Accumulated Surplus * Consolidated Statement of Change in Net Financial Assets & Consolidated Statement of Cash Flows ■ Notes to the Consolidated Financial Statements * Consolidated Schedule of Segment Disclosure The Acting Chief Administrative Officer and Treasurer and the Treasurer are responsible for ensuring that management fulfills its responsibility for financial reporting and is ultimately responsible for reviewing the consolidated financial statements before they are submitted to Council for approval. The integrity and reliability of The Corporation of the Municipality of Bayham reporting systems are achieved through the use of formal policies and procedures, the careful selection of employees and an appropriate division of responsibilities. These systems are designed to provide reasonable assurance that the financial information is reliable and accurate. The consolidated financial statements have been audited on behalf of the Members of Council, Inhabitants and Ratepayers of The Corporation of the Municipality of Bayham by Graham Scott Inns LLP in accordance with Canadian generally accepted auditing standards. Lorne James Acting Chief rinistrative Officer and Treasurer Straffordville, Ontario May 21, 2026 - I - GRAHAM SCOTTENNSLLP CHARTERED PROFESSIONAL ACCOUNTANTS P.519-633-0700 • F.519-633-7009 P.519-773-9265 • F.519-773-9683 450 Sunset Drive,St.Thomas,ON N5R 5V1 25 John Street South,Aylmer,ON N5H 2C1 www.grahamscottenns.com INDEPENDENT AUDITORS' REPORT To the Members of Council,Inhabitants and Ratepayers of The Corporation of the Municipality of Bayham: Opinion We have audited the consolidated financial statements of The Corporation of the Municipality of Bayham, which comprise the consolidated statement of financial position as at December 31, 2025, and the consolidated statement of operations and accumulated surplus, consolidated statement of changes in net financial assets, and 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 Municipality's consolidated financial statements present fairly, in all material respects, the financial position of the Municipality as at December 31, 2025, and the results of its operations and its 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 Auditors' Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Municipality 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. 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 Municipality'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 Municipality or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Municipality's financial reporting process. Auditors' 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. - 2 - GRAHAM SCOTTENNSLLP CHARTERED PROFESSIONAL ACCOUNTANTS P.519-633-0700 • F.519-633-7009 P.519-773-9265 • F.519-773-9683 450 Sunset Drive,St.Thomas,ON N5R 5V1 25 John Street South,Aylmer,ON N5H 2C1 www.grahamscottenns.com INDEPENDENT AUDITORS'REPORT(CONTINUED) Auditors' Responsibilities for the Audit of the Consolidated Financial Statements (Continued) 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 Municipality'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 Municipality'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 Municipality 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. 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. St. Thomas, Ontario May 21, 2026 CHARTERED PROFESSIONAL ACCOUNTANTS Licensed Public Accountants - 3 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Consolidated Statement of Financial Position As At December 31, 2025 2025 2024 ASSETS FINANCIAL ASSETS Cash 12,004,624 4,643,942 Investments (Note 3) - 8,438,288 Taxes receivable (Note 4) 1,040,832 1,043,138 Accounts receivable (Note 5) 910,706 940,460 13,956,162 15,065,828 LIABILITIES Deferred revenue - obligatory reserve funds (Note 10) 1,501,666 1,006,773 Accounts payable and accrued liabilities 1,026,214 705,746 Security and grading deposits 1,218,285 1,248,546 Net long-term liabilities (Note 7) 18,392 4,159,831 3,764,557 7,120,896 NET FINANCIAL ASSETS 10,191,605 7,944,932 NON-FINANCIAL ASSETS Tangible capital assets (Note 6) 59,877,405 59,861,381 Prepaid expenses and inventory 139,737 85,926 60,017,142 59,947,307 ACCUMULATED SURPLUS (NOTE 8) 70,208,747 67,892,239 ACCUMULATED REMEASUREMENT GAINS AND LOSSES - - 70,208,747 67,892,239 See accompanying notes to the consolidated financial statements. - 4 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Consolidated Statement of Operations and Accumulated Surplus Year Ended December 31, 2025 Budget Actual Actual (Note 12) 2025 2024 REVENUES Property taxation 6,499,360 6,601,522 6,283,948 Taxation from other governments 215,910 215,190 208,746 User charges 3,469,394 3,892,939 3,507,817 Transfer payments Federal 4,884,850 410,565 216,258 Provincial 1,389,300 1,483,166 1,723,156 Other municipalities 540,951 539,968 534,852 Investment income 458,094 319,765 719,080 Penalties and interest on taxes 86,000 130,897 87,558 Recoveries from benefiting landowners 138,206 113,603 172,802 Other 166,991 85,342 86,148 Total Revenues 17,849,056 13,792,957 13,540,365 EXPENSES General government 1359,270 1,432,502 1,394,763 Protection to persons and property 2:329,677 2,152,950 2,124,777 Transportation services 3,723,047 3,626,275 3,373,746 Environmental services 3,316,432 3,247,932 3,160,526 Health services 53,866 53,893 40,010 Social and family services 9,000 7,440 6,999 Recreation and cultural services 413,724 413,996 393,369 Planning and development 410,259 510,720 399,373 Loss (gain) on disposal of tangible capital assets - 30,741 (L, L) Total Expenses (Note 16) 11,615,275 11,476,449 10,889,897 ANNUAL SURPLUS 6,233,781 2,316,508 2,650,468 ACCUMULATED SURPLUS, BEGINNING OF YEAR 67,892,239 67,892,239 65,241,771 ACCUMULATED SURPLUS, END OF YEAR(NOTE 8) 74,126,020 70,208,747 67,892,239 See accompanying notes to the consolidated financial statements. - 5 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Consolidated Statement of Changes in Net Financial Assets Year Ended December 31, 2025 Budget Actual Actual (Note 12) 2025 2024 ANNUAL SURPLUS 6,233,781 2,316,508 2,650,468 Acquisition of tangible capital assets (2,139,412) (2,139,412) (2,133,065) Amortization of tangible capital assets 2,092,647 2,092,647 2,068,162 Proceeds on disposal of tangible capital assets - - 4,000 Change in prepaid expenses and inventory - (53,811) 8,650 Loss (gain) on disposal of tangible capital assets - 30,741 ( ,666) CHANGE IN NET FINANCIAL ASSETS 6,187,016 2,246,673 2,594,549 NET FINANCIAL ASSETS, BEGINNING OF YEAR 7,944,932 7,944,932 5,350,383 NET FINANCIAL ASSETS, END OF YEAR 14,131,948 10,191,605 7,944,932 See accompanying notes to the consolidated financial statements. - 6 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Consolidated Statement of Cash Flows Year Ended December 31, 2025 2025 2024 $ $ OPERATING ACTIVITIES Annual surplus 2,316,508 2,650,468 Add (deduct) items not involving cash: Amortization of tangible capital assets 2,092,647 2,068,162 Loss (gain) on disposal of tangible capital assets 30,741 (3,666) 4,439,896 4,714,964 Change in non-cash items related to operations (Note 16[b]) 763,349 487,584 5,203,245 5,202,548 CAPITAL Acquisition of tangible capital assets (2,139,412) (2,133,065) Proceeds on disposal of tangible capital assets - 4,000 (2,139,412) (2,129,065) INVESTING Purchase of investments - (1,000,000) Redemption of investments 8,438,288 818,327 Investment income reinvested - (529,947) 8,438,288 (711,620) FINANCING Long-term debt repayment (4,141,439) (227,841) NET CHANGE IN CASH 7,360,682 2,134,022 CASH,BEGINNING OF THE YEAR 4,643,942 2,509,920 CASH, END OF THE YEAR 12,004,624 4,643,942 See accompanying notes to the consolidated financial statements. - 7 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2025 The Corporation of the Municipality of Bayham (the "Municipality") is a municipality in the Province of Ontario. It conducts its operations guided by the provisions of provincial statutes such as the Municipal Act, Municipal Affairs Act and related legislation. 1. CHANGE IN ACCOUNTING POLICIES On January 1, 2024 Municipality adopted accounting policies to conform to new standards issued under Canadian public sector accounting standards. The Municipality adopted the following standards which had the following impact: • PS 3400 - Revenue - These standard may impact the timing of the revenue reported by the Municipality. There is no impact on the Municipality's financial reporting as a result of the adoption of this standard. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The consolidated financial statements of the Municipality are prepared by management in accordance with Canadian public sector accounting standards. Significant aspects of the accounting policies adopted by the Municipality are as follows: Reporting Entity The consolidated financial statements include the assets, liabilities, revenues and expenses of the reporting entity. The reporting entity is comprised of all organizations, committees and local boards accountable for the administration of their financial affairs and resources to the Municipality and which are 100% owned or controlled by the Municipality. Consolidated Entities The following local boards are consolidated: -Various Cemetery Boards Proportionate Consolidation The Elgin Area Primary Water Board and Port Burwell Water Board have been consolidated on a proportionate basis. The Water Boards are proportionately consolidated based upon the water flow used by our Municipality in proportion to the entire flows provided by the joint boards. - 8 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2025 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Accounting for School Board Transactions Although the Municipality collects taxation on behalf of the School Boards, the taxation, other revenues, expenses, assets and liabilities with respect to the operations of the school boards are not reflected in these statements. Trust Funds Trust funds and their related operations administered by the Municipality are not included in these consolidated financial statements. Basis of Accounting The consolidated financial statements are prepared using the accrual basis of accounting. The accrual basis of accounting records revenue as it is earned and measurable. Expenses are recognized as they are incurred and measurable based upon receipt of goods or services and/or the creation of a legal obligation to pay. Deferred Revenue Government transfers, contributions and other amounts are received from third parties pursuant to legislation, regulation or agreement and may only be used in the conduct of certain programs, in the completion of specific work. In addition, certain user charges and fees which have been collected but for which the related services have yet to be performed. Revenue is recognized in the period when the related expense are incurred, services preformed. Investments Investment income consists of interest, dividends and realized gains or losses on sale of investments is recognized as revenue in the period when it is earned. Unrealized gains and losses on investments are recognized in the accumulated remeasurement gains and losses until settlement. Once realized, these gains and losses are recognized as revenue or expenses in the consolidated statement of operations. When required by funding government or related Act, investment income earned on deferred revenue is added to the investment and forms part of the deferred revenue balance. Financial Instruments The Municipality,upon initial recognition, classifies it's financial instruments into two categories: i. fair value or; ii. cost or amortized cost; Long-term debt is initially recorded at fair value and subsequently measured at amortized cost using the effective interest rate method. Transaction costs related to the issuance of long-term debt are capitalized and amortized over the term of the debt. - 9 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2025 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Financial Instruments (continued) Other financial instruments including cash, accounts receivable, accounts payable and accrued liabilities are initially measured at fair value and subsequently measured at cost. Investments are initially recorded at fair value and subsequently measured at fair value with the fair value determined as follows: i. Level 1 - Fair value measurements are those derived from quoted prices (in active markets); ii. Level 2 - Fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the assets, either directly (i.e. as prices) or indirectly(i.e. derived from prices); iii. Level 3 - Fair value measurements are those derived from valuation techniques that include inputs for the asset that are not based on observable data(unobservable inputs). Unrealized gains and losses from changes in the fair value of financial instruments are recognized in the statement of remeasurement gains and losses. All financial assets are tested annually for impairment. When financial assets are impaired, impairment losses are recorded in the statement of operations. Use of Estimates The preparation of consolidated 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 amounts of revenues and expenses during the period. In addition, the Municipality's implementation of the Public Sector Accounting Handbook PS3150 has required management to make estimates of historical cost and useful lives of tangible capital assets. These estimates and assumptions are based on the best information and judgment and may differ significantly from actual results. Government Transfers Government transfers are recognized in the consolidated financial statements as revenues in the financial period in which events giving rise to the transfer occur, providing the transfers are authorized, any eligibility criteria have been met including performance and return requirements, and reasonable estimates of the amounts can be determined. Any amount received but restricted is recorded as deferred revenue and recognized as revenue in the period in which the resources are used for the purpose specified. In addition, the Municipality periodically receives senior government capital funding in the form of infrastructure grants and receives ongoing funding from both senior levels of government as a result of an allocation of the gas tax funds. - 10 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2025 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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 Change in Net Financial Assets for the year. i) Tangible capital assets 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: Building and components 20 to 75 years Vehicles 5 to 25 years Machinery and equipment 5 to 27 years Land improvements 18 to 25 years Plants and facilities 20 to 75 years Roads 20 to 60 years Bridges and other structures 15 to 80 years Underground and other networks 17 to 100 years No amortization is charged in the year of acquisition and a full year of amortization is charged in the year of disposal. Assets under construction are not amortized until the asset is available for productive use. ii) Contributions of tangible capital assets Tangible capital assets received as contributions are recorded at their fair value at the date of receipt and also are recorded as revenue. iii) Works of art and cultural and historic assets Works of art and cultural and historic assets are not recorded as assets in these consolidated financial statements. iv) Interest capitalization The Municipality does not capitalize interest costs associated with the acquisition or construction of a tangible capital asset. vi) Inventories of supplies Inventories of supplies held for consumption are recorded at the lower of cost and replacement cost. - 11 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2025 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Tax Revenues In 2025, the Municipality received $6,816,712 (2024 - $6,492,694) in property tax revenues for municipal purposes. The authority to levy and collect property taxes is established under the Municipal Act 2001, the Assessment Act, the Education Act, and other legislation. The amount of the total annual property tax levy is determined each year through Council's approval of the annual budget. Municipal tax rates are set annually by Council for each class or type of property, in accordance with legislation and Council-approved policies, in order to raise the revenue required to meet operating budget requirements. Education tax rates are established by the Province each year in order to fund costs of education on a Province-wide basis. Taxation revenues are recorded at the time billings are issued. Additional property tax revenue can be added throughout the year, related to new properties that become occupied, or that become subject to property tax, after the return of the annual assessment roll used for billing purposes. The Municipality may receive supplementary assessment rolls over the course of the year from MPAC that identify new or omitted assessments. Property taxes for these supplementary/omitted amounts are then billed according to the approved tax rate for the property class. Taxation revenues in any year may also be reduced as a result of reductions in assessment value rising from assessment and/or tax appeals. Each year, an amount is identified to cover the estimated amount of revenue loss attributable to assessment appeals, tax appeals or other deficiencies in tax revenue (e.g. uncollectible amounts, write-offs, etc.). Employee Benefit Plans The Municipality accounts for its participation in the Ontario Municipal Employees Retirement System (OMERS), a multi-employer public sector pension fund, as a defined contribution plan. The OMERS plan specifies the retirement benefits to be received by the employees based on the length of service and pay rates. The fund is a contributory defined benefit pension plan. As this is a multi- employer plan, no liability is recorded in the Municipality's consolidated financial statements. The employers contribution to a multi-employer defined benefit plan are expensed as the obligations arise. Environmental Provisions and Contaminated Sites The Municipality may be exposed to litigation or other costs of remediation due to contaminated properties in it's jurisdiction. A liability for remediation is recognized in the financial statements when an environmental standard exists, contamination exceeds the standard, the government is responsible for the remediation and a reasonable estimate of the liability can be made. As at December 31, 2025 there were no properties that the Municipality was responsible to remedy and as such no liability has been accrued. - 12 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2025 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Related Party Transactions Related parties exist when one party has the ability to control or has shared control over another party. Individuals that are key management personnel or close family members may also be related parties. Disclosure is made when the transaction or events between related parties occur at a value different from what would have been recorded if they were not related and the transaction could have a material financial impact on the consolidated financial statements. Inter-Entity Transactions Transactions between related parties are recorded at carrying amounts with the exception of the following: i. Transactions in the normal course of business or with fair consideration are recorded at exchange amount; ii. Transfer of an asset or liability at nominal amounts or no consideration are recorded by the provider at carrying amounts and the recipient has the choice of either carrying amount or fair value; iii. Cost allocations are reported using the exchange amounts and revenues and expenses are reported on a gross basis; iv. Unallocated costs for the provision of goods or services maybe recorded by the provider at cost, fair value or another amount dictated by policy, accountability structure or budget practice. Asset Retirement Obligations The Municipality may be exposed to obligations of remediation associated with their tangible capital assets. If a legal obligation exists of remediation for a tangible capital asset then the Municipality would be required to set up an estimated future cost and liability associated with these obligations. As at December 31, 2025 there were no tangible capital assets that Municipality has controlled, constructed, owned or used that would have a legal obligation of remediation. - 13 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2025 3. INVESTMENTS 2025 2024 Cost Market Cost Market Guaranteed investment certificates - - 8,438,288 8,438,288 The investments consisted of guaranteed investment certificates and cash which are recorded at their fair market value. The certificates matured between February 2025 and December 2025 and yielded interest rates from 3.00%to 5.20%. Total interest earned on these investments was $162,557 (2024 - $529,547). These investments were redeemed in the year. Subsequent to the year end, the Municipality purchased a $7,000,000 non-redeemable guaranteed investment certificate, due March 2027,with an interest rate of 3.85%. All of the above investments are valued as Level 1 investments. 4. TAXES RECEIVABLE 2025 2024 Current taxes receivable 771,496 789,705 Arrears taxes receivable 177,421 166,845 Penalties and interest 91,915 86,588 1,040.832 1,043,138 5. ACCOUNTS RECEIVABLE 2025 2024 Accounts receivable 472,950 514,449 Government grants and funding 103,270 126,263 Debentures, interest at 2.97%, due 2034 152,533 170,941 Government remittances receivable 181,953 128,807 910,706 940,460 - 14 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2025 6. TANGIBLE CAPITAL ASSETS December 31,2025 Disposals and Cost Opening Additions Adjustments Ending Infrastructure Linear-Roadways 48,294,260 517,155 - 48,811,415 Linear-Water Services 11,743,058 48,402 (16,484) 11,774,976 Linear-Waste Water Services 16,546,027 7,851 16,553,878 Infrastructure Total 76,583,345 573,408 (16,484) 77,140,269 General Land 1,063,805 - - 1,063,805 Land Improvements 2,081,454 50,350 - 2,131,804 Buildings 12,040,128 194,887 - 12,235,015 Machinery and Equipment 4,604,518 473,110 (79,200) 4,998,428 Vehicles 3,223,459 447,566 (223,531) 3,447,494 General Total 23,013,364 1,165,913 (302,731) 23,876,546 Work in Progress 565,487 510,981 (110,890) 965,578 Total Cost 100,162,196 2,250,302 (430,105) 101,982,393 Accumulated Amortization Disposals and Opening Amortization Adjustments Ending Infrastructure Linear-Roadways 19,891,374 948,006 - 20,839,380 Linear-Water Services 4,098,788 139,349 - 4,238,137 Linear-Waste Water Services 4,326,962 334,810 (16,484) 4,645,288 Infrastructure Total 28,317,124 1,422,165 (16,484) 29,722,805 General Land Improvements 1,186,056 77,522 - 1,263,578 Buildings 6,132,098 238,070 - 6,370,168 Machinery and Equipment 2,504,760 118,807 (48,459) 2,575,108 Vehicles 2,160,777 236,083 (223,531) 2,1734329 General Total 11,983,691 670,482 (271,990) 12,3824183 Total Accumulated Amortization 40,300,815 2,092,647 (288,474) 42,104,988 Net Book Value Opening Ending Infrastructure Linear-Roadways 28,402,886 27,972,035 Linear-Water Services 7,644,270 7,536,839 Linear-Waste Water Services 12,219,065 11,908,590 48,266,221 47,417,464 General Land 1,063,805 1,063,805 Land Improvements 895,398 868,226 Buildings 5,908,030 5,864,847 Machinery and Equipment 2,099,758 2,423,320 Vehicles 14062,682 1,274,165 11,029,673 11,494,363 Work in Progress 565,487 965,578 Total Net Book Value 59,861,381 59,877,405 - 15 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2025 6. TANGIBLE CAPITAL ASSETS (CONTINUED) December 31,2024 Disposals and Cost Opening Additions Adjustments Ending Infrastructure Linear-Roadways 47,013,882 1,280,378 - 48,294,260 Linear-Water Services 11,599,565 155,468 (11,975) 11,743,058 Linear-Waste Water Services 16,546,027 16,546,027 Infrastructure Total 75,159,474 1,435,846 (11,975) 76,583,345 General Land 1,063,805 - - 1,063,805 Land Improvements 2,066,098 15,356 - 2,081,454 Buildings 11,885,433 154,695 - 12,040,128 Machinery and Equipment 4,574,784 29,734 - 4,604,518 Vehicles 2,810,280 588,283 (175,104) 3,223,459 General Total 22,400,400 788,068 (175,104) 23,013,364 Work in Progress 656,336 151,178 (242,027) 565,487 Total Cost 98,216,210 2,375,092 (429,106) 100,162,196 Accumulated Amortization Disposals and Opening Amortization Adjustments Ending Infrastructure Linear-Roadways 18,989,588 901,786 - 19,891,374 Linear-Water Services 3,790,296 320,133 (11,641) 4,098,788 Linear-Waste Water Services 4,124,683 202,279 Z 4,326,962 Infrastructure Total 26,904,567 1,424,198 (11,641) 28,317,124 General Land Improvements 1,108,067 77,989 - 1,186,056 Buildings 5,900,790 231,308 - 6,132,098 Machinery and Equipment 2,381,270 123,490 - 2,504,760 Vehicles 2,124,704 211,177 (175,104) 2,160,777 General Total 11,514,831 643,964 (175,104) 11,983,691 Total Accumulated Amortization 38,419,398 2,068,162 (186,745) 40,300,815 Net Book Value Opening Ending Infrastructure Linear-Roadways 28,024,294 28,402,886 Linear-Water Services 7,809,269 7,644,270 Linear-Waste Water Services 12,421,344 12,219,065 48,254,907 48,266,221 General Land 1,063,805 1,063,805 Land Improvements 958,031 895,398 Buildings 5,984,643 5,908,030 Machinery and Equipment 2,193,514 2,099,758 Vehicles 685,576 1,062,682 10,885,569 11,029,673 Work in Progress 656,336 565,487 Total Net Book Value 594796,812 59,861,381 - 16 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2025 7. LONG-TERM LIABILITIES a) The balance of long-term liabilities reported on the Consolidated Statement of Financial Position is made up of the following: 2025 2024 TD loan, 2.71%,repayable in blended monthly payments of $27,557, due March 2025 (Project Ojibwa) - 4,128,631 Consolidated water board debt, interest rates ranging from 2.55%to 2.85%, maturing March 2027 18,392 31,200 18,392 4,159,831 Principal repayments are summarized as follows: Tax User Revenue Charges Total 2026 - 13,181 13,181 2027 - 5,211 5,211 Total - 18,392 18,392 b) All long-term liabilities issued on or before December 31, 1992 have received approval of the Ontario Municipal Board. Long-term liabilities issued after January 31, 1993 have been approved by by-law. 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. c) Interest expense on long-term liabilities in 2025 amounted to $27,645 (2024 - $116,351). - 17 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2025 8. ACCUMULATED SURPLUS The accumulated surplus balance is comprised of current fund, capital fund, balances in reserves and discretionary reserve funds, unfunded liabilities to be recovered in the future and investment in tangible capital assets. 2025 2024 SURPLUS Municipality- current fund - - Cemetery boards - current fund 184,323 181,696 Benefiting landowners - current fund (260,050) (121,423) Invested in tangible capital assets - capital fund 59,877,405 59,861,381 Reserves 2,916,550 5,235,784 Reserve funds 7,508,911 6,894,632 70,227,139 72,052,070 AMOUNTS TO BE RECOVERED Net long-term debt(Note 7) (18,392) (4,159,831) ACCUMULATED SURPLUS 70,208,747 67,892,239 RESERVES AND RESERVE FUNDS CONSIST OF THE FOLLOWING: 2025 2024 Reserves set aside for specific purposes by Council: - for working capital 1241481 87,096 - for capital purposes 770,732 701,131 - for debt reduction purposes - 2,976,532 - for other purposes 2,021,337 1,471,025 Total reserves 2,916,550 5,235,784 Reserve funds set aside for specific purposes by Council: - for water system- consolidated 2,593,131 2,261,321 - for sanitary sewers 3,689,498 3,488,426 - for recreation and cultural service purposes 297,301 303,889 - for waterworks purposes 928,981 840,996 Total reserve funds 7,508,911 6,894,632 - 18 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2025 9. TRUST FUNDS Trust funds administered by the Municipality amounting to $268,273 (2024 - $262,573) have not been included in the Consolidated Statement of Financial Position nor have their operations been included in the Consolidated Statement of Operations. 10. DEFERRED REVENUE - OBLIGATORY RESERVE FUNDS A requirement of the public sector accounting principles of the Canadian Institute of Chartered Professional Accountants is that obligatory reserve funds be reported as deferred revenue. This requirement is in place as provincial legislation restricts how these funds may be used and under certain circumstances these funds may be refunded. The balances in the obligatory reserve funds of the Municipality are summarized below: 2025 2024 Development charges 897,301 551,577 Canada Community Building Fund 271,921 281,503 Ontario Community Infrastructure Fund 118,301 - Parkland 214,143 173,693 1,501,666 1,006,773 11. PENSION AGREEMENTS The Municipality makes contributions to the Ontario Municipal Employees Retirement Fund (OMERS), which is a multi-employer plan, on behalf of its staff. The plan is a defined benefit plan which specifies the amount of the retirement benefit to be received by the employees based on the length of service and rates of pay. Each year, an independent actuary determines the funding status of OMERS Primary Pension Plan (the Plan) by comparing the actuarial value of invested assets to the estimated present value of all pension benefits the members have earned to date. The most recent actuarial valuation of the Plan was conducted December 31, 2025 and the results of this valuation disclosed actuarial liabilities of$151.4 billion in respect of benefits accrued for service with actuarial assets at that date of$150 billion leaving an actuarial deficit of$1.3 billion. Since any surpluses or deficits are a joint responsibility of all Ontario municipalities and their employees, the Municipality does not recognize any share of the OMERS Pension surplus or deficit in these consolidated financial statements. The amount contributed to OMERS for 2025 was approximately$267,000 (2024 - $206,000). - 19 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2025 12. BUDGET FIGURES The operating budget approved by the council of the Municipality for 2025 is reflected on the consolidated statement of operations. Budget figures have been reclassified for the purposes of these financial statements to comply with PSAB reporting requirements. These adjustments include reserve transfers, capital expenditures, amortization and debt financing and repayment. Approved PSAB Budget Adjustments Budget REVENUES Property taxation 6,499,360 - 6,499,360 Taxation from other governments 215,910 - 215,910 User charges 2,602,515 866,879 3,469,394 Transfer payments: Federal 4,884,850 - 4,884,850 Provincial 1,389,300 - 1,389,300 Other municipalities 540,951 - 540,951 Investment income 204,500 253,594 458,094 Penalties and interest on taxes 86,000 - 86,000 Recoveries from benefiting landowners 50,255 87,951 138,206 Other 133,000 33,991 166,991 Capital reserve transfers 384,500 (384,500) - Total Revenues 16,991,141 857,915 17,849,056 EXPENSES General government 1,373,593 (14,323) 1,359,270 Protection to persons and property 2,183,213 146,464 2,329,677 Transportation services 2,221,474 1,501,573 3,723,047 Environmental services 2,105,080 1,211,352 3,316,432 Health services 22,500 31,366 53,866 Social and family services 9,000 - 9,000 Recreation and cultural services 292,264 121,460 413,724 Planning and development 360,281 49,978 410,259 Reserve transfers 298,988 (298,988) - Capital 8,124,748 (8,124,748) - Total Expenses 16,991,141 (5,375,866) 11,615,275 BUDGETED ANNUAL SURPLUS - 6,233,781 6,233,781 -20 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2025 13. OPERATION OF SCHOOL BOARDS AND THE COUNTY OF ELGIN During 2025, requisitions were made by the school boards and the County of Elgin requiring the municipality to collect property taxes and payments in lieu of property taxes on their behalf. The amounts collected and remitted are summarized below: School Boards County Taxation and user charges 1,642,254 5,790,909 Share of payments in lieu of taxes 6,379 180,978 Amounts requisitioned 1,648,633 5,971,887 14. CONTINGENCIES As at December 31, 2025, certain legal actions are pending against the Municipality. The final outcome of the outstanding claims cannot be determined at this time. However, management believes that ultimate disposition of these matters will not materially exceed the amounts recorded in these consolidated financial statements. As at December 31, 2025, the Municipality also has a Writ of Seizure and Sale registered against the assets of the Elgin Military Museum. Although the Municipality expects no further recoveries from the assets of the Elgin Military Museum, the Municipality will ensure the Writ of Seizure and Sale is registered on title indefinitely. Estimated costs to settle claims are based on available information and projections of estimated future expenses developed based on the Municipality's historical experience. Claims are reported as an operating expense in the year of the loss, where the costs are deemed to be likely and can be reasonable determined. Claim provisions are reported as a liability in the consolidated statement of financial position. 15. FINANCIAL INSTRUMENTS .Risks and Concentrations The Municipality is exposed to various risks through its financial instruments. The following analysis provides a measure of the Municipality's risk exposure and concentrations at the balance sheet date. Market Risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: currency risk, interest rate risk and other price risk. The Municipality is mainly exposed to interest and price risk. -21 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2025 15. FINANCIAL INSTRUMENT RISKS (CONTINUED) Interest Rate Risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Municipality is exposed to interest rate risk on its fixed rate long-term debt. As the interest rates are fixed the Municipality doesn't believe that interest rate risk is a significant risk. Price Risk Price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market. The Municipality is exposed to price risk through its investments in quoted One Fund investments. These investments were redeemed in the prior year and price risk is no longer considered a significant risk. It is management's opinion that the Municipality is not exposed to significant currency risk. Liquidi . Risk Liquidity risk is the risk that a Municipality will encounter difficulty in meeting obligations associated with financial liabilities. The Municipality is exposed to this risk mainly in respect of its accounts payable, accrued liabilities and long-term debt. The Municipality doesn't believe that liquidity risk is a significant risk. Credit Risk Credit risk is the risk that one parry to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Municipality's main credit risks relate to its accounts receivable and taxes receivable. The Municipality manages this risk by monitoring active receivable balances and forces tax sale on properties considered unrecoverable. At year end, the Municipality had approximately $73,067 (2024 - $188,173) in accounts receivable over 90 days of which the Municipality has deemed no allowance is necessary. The balances of taxes and utility receivables (water and sewer) are normally collectible from the property owner and the Municipality is able to force tax sale on properties to recover. In some instances the property owner may challenge property values which will in impact future recovery of taxes and potential repayments to the property owners. The Municipality actively monitors these assessment challenges and provides provisions when reasonable estimates can be made. At year end, the Municipality has provided an allowance of $nil (2024 - $nil) for these assessment challenges and $nil (2024 - $nil) in potential uncollectible tax assessments. -22 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2025 16. SUPPLEMENTARY INFORMATION 2025 2024 [a] Current fund expenses by object: Salaries,wages and employees benefits 3,180,904 2,929,679 Long-term debt interest 27,645 116,351 Materials 3,525,390 3,321,396 Contracted services 2,507,607 2,352,228 Amortization 2,092,647 2,068,162 External transfers to others 111,515 105,747 Loss (gain) on disposal of tangible capital assets 30,741 (3,666) 11,476,449 10,889,897 [b] Cash flow information: Taxes receivable 2,306 (265,748) Accounts receivable 29,754 (19,311) Inventories and prepaid expenses (53,811) 8,650 Accounts payable and accrued liabilities 320,468 (111,621) Security and grading deposits (30,261) 458,199 Deferred revenue-obligatory reserve funds 494,893 417,415 763,349 487,584 17. COMPARATIVE FIGURES Certain comparative figures presented in the financial statements have been reclassified to conform to the presentation adopted in the current year. -23 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2025 18. SEGMENTED INFORMATION The Municipality is a diversified municipal government institution that provides a wide range of services to its citizens, including fire, roads, sewer and water. For management reporting purposes the Government's operations and activities are organized and reported by Fund. Funds were created for the purpose of recording specific activities to attain certain objectives in accordance with special regulations, restrictions or limitations. Municipal services are provided by departments and their activities are reported in these funds. Certain departments that have been separately disclosed in the segmented information, along with the services they provided, are as follows. Public Works The Public Works department is responsible for the delivery of municipal public works services related to the planning, development and maintenance of roadway systems, the maintenance of parking and open space, and street lighting. The Water and Waste Funds The water and wastewater department provides drinking water to citizens of the municipality, as well as, collection and treatment of wastewater. This department is responsible for the operation and maintenance of both systems in accordance with government regulations under the Safe Drinking Water Act and other pieces of legislation. Other segments This segment includes the remaining departments and activities of the Municipality. Some of the larger activities in this segment include general government, fire, police, public health services, recreation and cultural services, planning and development and solid waste collection and disposal. For each reported segment, revenues and expenses represent both amounts that are directly attributable to the segment and amounts that are allocated on a reasonable basis. Therefore, certain allocation methodologies are employed in the preparation of segmented financial information. The General Revenue Fund reports on municipal services that are funded primarily by taxation such as property and business tax revenues. Taxation and payments-in-lieu of taxes are apportioned to General Revenue Fund services based on the Fund's net surplus. Certain government transfers, transfer from other funds, and other revenues have been apportioned based on a percentage of budgeted expenses. The accounting policies used in these segments are consistent with those followed in the preparation of the consolidated financial statements as disclosed in Note 2. For additional information see the Consolidated Schedule of Segment Disclosure and Schedule of Segment Disclosure. -24 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Consolidated Schedule of Segment Disclosure Year Ended December 31, 2025 Water and Public Other Total Waste Funds Works Segments Consolidated REVENUE Taxation - 1,139,572 5,677,140 6,816,712 Sales of service and regulatory fees 2,828,342 140,647 923,950 3,892,939 Government transfer - 527,347 1,906,352 21433,699 Other 28,622 - 620,985 649,607 2,856,964 1,807,566 9,128,427 13,792,957 EXPENSES Salaries, wages and employee benefits 588,350 914,899 1,677,655 3,180,904 Long-term debt interest 648 - 26,997 27,645 Materials 879,869 1,473,507 1,172,014 3,525,390 Contracted services 682,738 46,622 1,778,247 2,507,607 Amortization 594,266 1,191,247 307,134 2,092,647 Loss (gain) on disposal of tangible capital assets - - 30,741 30,741 Transfer to others - - 111,515 111,515 2,745,871 3,626,275 5,104,303 11,476,449 ANNUAL SURPLUS (DEFICIT) 111,093 (1,818,709) 4,024,124 2,316,508 - 25 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Consolidated Schedule of Segment Disclosure Year Ended December 31, 2024 Water and Public Other Total Waste Funds Works Segments Consolidated REVENUE Taxation - 1,254,550 5,238,144 6,492,694 Sales of service and regulatory fees 2,672,275 115,591 719,951 3,507,817 Government transfer 76,320 523,592 1,874,354 214749266 Other 31,624 - 1,033,964 1,065,588 2,780,219 1,893,733 8,866,413 13,540,365 EXPENSES Salaries, wages and employee benefits 538,726 850,770 1,540,183 2,929,679 Long-term debt interest 974 - 115,377 116,351 Materials 911,190 1,356,957 1,053,249 3,321,396 Contracted services 589,789 24,612 1,737,827 2,352,228 Amortization 640,039 1,141,408 286,715 2,068,162 Loss on disposal of tangible capital assets 334 - (4,000) (3,666) Transfer to others - - 105,747 105,747 2,681,052 3,373,747 4,835,098 10,889,897 ANNUAL SURPLUS (DEFICIT) 99,167 (1,480,014) 4,031,315 2,650,468 - 26 -