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HomeMy WebLinkAboutFinancial Statements - 2019THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Consolidated Financial Statements December 31, 2019 THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Consolidated Financial Statements Year Ended December 31, 2019 Table of Contents PAGE Independent Auditors' Report 1 - 2 Consolidated Statement of Financial Position 3 Consolidated Statement of Operations and Accumulated Surplus 4 Consolidated Statement of Changes in Net Financial Debt 5 Consolidated Statement of Cash Flows 6 Notes to the Consolidated Financial Statements 7 - 21 Consolidated Schedule of Segment Disclosure 22 - 23 Schedule of Segment Disclosure 24 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, 2019, and the consolidated statement of operations and accumulated surplus, consolidated statement of changes in net financial debt and consolidated statement of cash flows for the year then ended, and notes to the 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, 2019, and the results of its operations and its cash flows for the year then ended in accordance with Canadian accounting standards for public sector entities. 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 accounting standards for public sector entities, 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. - 1 - 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 Graham Scott Enns LLP May 21, 2020 CHARTERED PROFESSIONAL ACCOUNTANTS Licensed Public Accountants - 2 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Consolidated Statement of Financial Position As At December 31, 2019 2019 2018 $ $ ASSETS FINANCIAL ASSETS Cash 1,009,290 1,197,722 Investments (Note 2)3,554,288 3,479,981 Taxes receivable (Note 3)1,016,502 762,384 Accounts receivable (Note 4)1,001,452 937,508 6,581,532 6,377,595 LIABILITIES Deferred revenue - obligatory reserve funds (Note 9)303,940 100,105 Accounts payable and accrued liabilities 1,216,875 951,979 Net long-term liabilities (Note 6) 5,674,038 5,938,082 7,194,853 6,990,166 NET FINANCIAL DEBT (613,321)(612,571) NON-FINANCIAL ASSETS Tangible capital assets (Note 5)59,061,086 57,636,099 Prepaid expenses and inventory 78,479 80,954 59,139,565 57,717,053 ACCUMULATED SURPLUS (NOTE 7)58,526,244 57,104,482 See accompanying notes to the consolidated financial statements. - 3 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Consolidated Statement of Operations and Accumulated Surplus Year Ended December 31, 2019 Budget Actual Actual (Note 11)2019 2018 $ $ $ REVENUES Property taxation 4,318,474 4,321,908 4,035,113 Taxation from other governments 158,222 158,222 158,900 User charges 2,557,877 2,741,196 2,283,514 Transfer payments Federal 1,007,000 1,050,109 353,824 Provincial 1,445,500 2,041,262 1,434,352 Other municipalities 430,270 442,850 424,829 Contributed tangible capital assets -19,801 - Investment income 52,885 119,747 106,867 Penalties and interest on taxes 111,000 129,841 137,369 Recoveries from benefiting landowners 139,500 382,773 304,783 Other 151,700 102,975 159,454 Total Revenues 10,372,428 11,510,684 9,399,005 EXPENSES General government 1,265,214 1,181,375 1,453,468 Protection to persons and property 1,839,193 1,783,055 1,827,005 Transportation services 2,539,649 3,535,349 3,062,991 Environmental services 2,746,263 2,839,329 2,286,217 Health services 36,469 30,092 45,298 Social and family services 9,000 7,816 7,883 Recreation and cultural services 381,163 444,843 459,912 Planning and development 219,343 259,043 236,200 Loss on disposal of tangible capital assets -8,020 395 Total Expenses (Note 15)9,036,294 10,088,922 9,379,369 ANNUAL SURPLUS 1,336,134 1,421,762 19,636 ACCUMULATED SURPLUS, BEGINNING OF YEAR 57,104,482 57,104,482 57,084,846 ACCUMULATED SURPLUS, END OF YEAR (NOTE 7)58,440,616 58,526,244 57,104,482 See accompanying notes to the consolidated financial statements. - 4 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Consolidated Statement of Changes in Net Financial Debt Year Ended December 31, 2019 Budget Actual Actual (Note 11)2019 2018 $ $ $ ANNUAL SURPLUS 1,336,134 1,421,762 19,636 Acquisition of tangible capital assets (3,363,920)(3,363,920)(2,110,662) Amortization of tangible capital assets 1,885,382 1,885,382 2,218,333 Proceeds on disposal of tangible capital assets -65,332 - Change in prepaid expenses and inventory -2,475 (27,659) Loss on disposal of tangible capital assets -8,020 395 Contributed tangible capital assets -(19,801)- CHANGE IN NET FINANCIAL DEBT (142,404)(750)100,043 NET FINANCIAL DEBT, BEGINNING OF YEAR (612,571)(612,571)(712,614) NET FINANCIAL DEBT, END OF YEAR (754,975)(613,321)(612,571) See accompanying notes to the consolidated financial statements. - 5 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Consolidated Statement of Cash Flows Year Ended December 31, 2019 2019 2018 $ $ OPERATING ACTIVITIES Annual surplus 1,421,762 19,636 Add (deduct) items not involving cash: Amortization of tangible capital assets 1,885,382 2,218,333 Contributed tangible capital assets (19,801)- Loss on disposal of tangible capital assets 8,020 395 3,295,363 2,238,364 Change in non-cash items related to operations (Note 15[b]) 153,144 795,954 3,448,507 3,034,318 CAPITAL Acquisition of tangible capital assets (3,363,920)(2,110,662) Proceeds on disposal of tangible capital assets 65,332 - (3,298,588)(2,110,662) INVESTING Investment income reinvested (74,307)(72,004) FINANCING Long-term debt repayment (264,044)(266,338) NET CHANGE IN CASH AND CASH EQUIVALENTS (188,432)585,314 OPENING CASH AND CASH EQUIVALENTS 1,197,722 612,408 CLOSING CASH AND CASH EQUIVALENTS 1,009,290 1,197,722 SUPPLEMENTARY INFORMATION: Cash paid for interest on debt 157,882 165,387 Cash received for interest on investments 119,747 106,867 See accompanying notes to the consolidated financial statements. - 6 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2019 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.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The consolidated financial statements of the Municipality are prepared by management in accordance with Canadian accounting standards for public sector entities, as recommended by the Public Sector Accounting Board of the Canadian Institute of Chartered Professional Accountants. 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 Inter-departmental and inter-organizational transactions and balances between these organizations are eliminated. 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. 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. - 7 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2019 1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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. Use of Estimates The preparation of consolidated financial statements in conformity with Canadian accounting standards for public sector entities 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 in accordance with Section 3100 of the Public Sector Accounting Handbook 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. - 8 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2019 1.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 financial statements. iv) Interest capitalization The Municipality does not capitalize interest costs associated with the acquisition or construction of a tangible capital asset. v) Leased tangible capital assets Leases are classified as capital or operating leases. Leases which transfer substantially all of the benefits and risks incidental to ownership of property are accounted for as capital leases. All other leases are accounted for as operating leases and the related lease payments are charged to expenses as incurred. - 9 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2019 1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) vi) Inventories of supplies Inventories of supplies held for consumption are recorded at the lower of cost and replacement cost. Tax Revenues In 2019, the Municipality received $4,480,130 (2018 - $4,194,013) 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.). Investments Investments, consisting of one fund pooled bond securities, are recorded at cost plus accrued interest. Investment income earned on available funds is reported as revenue in the period earned. 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. 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. Employee benefits include post employment benefits. Post employment benefits are subject to actuarial valuations and are accrued in accordance with the projected benefit method, prorated on service and management's best estimate of salary escalation and retirement ages of employees. Any actuarial gains and losses related to past service of employees are amortized over the expected average remaining service period. - 10 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2019 1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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, 2019 there were no properties that the Municipality was responsible to remedy and as such no liability has been accrued. Recent Accounting Pronouncements PSAB released a standard related to Financial Instruments (PS 3450). The standard applies to all local governments for fiscal years beginning on or after April 1, 2021. The standard applies to all types of financial instruments. The new standard requires that equity and derivative instruments be measured at fair value, with changes in value being recorded in the statement of remeasurement gains/losses. The standard gives the option of cost/amortized cost vs. fair value of remaining instruments, which is elected upon by the government organization. The Municipality has not yet determined what, if any, financial reporting implications may arise from this standard. 2.INVESTMENTS Investments are comprised of the following: 2019 2018 $ $ $ $ Cost Market Cost Market One fund pooled bond securities 3,554,288 3,299,644 3,479,981 3,215,998 - 11 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2019 3.TAXES RECEIVABLE 2019 2018 $ $ Current taxes receivable 400,042 336,865 Arrears taxes receivable 426,716 306,233 Penalties and interest 189,744 119,286 1,016,502 762,384 The Municipality makes annual estimates and allowances for potential exposure to property tax appeals, reassessments, environmental and collection issues. Included in the taxes receivable is $578,576 (2018 - $427,420) of taxes, penalties and interest that is due from one specific gas pipeline property that is under going various appeals and financial restructuring. The Municipality's exposure to loss on these balances is estimated to be between 25% to 30% if it is determined that nothing is recoverable from this property. At year end, the Municipality made an assessment of the exposure based on current information and didn't make any significant allowances for these amounts in the financial statements. The Municipality is vigorously attempting various forms of collection to mitigate the Municipalitys' exposure to loss. 4.ACCOUNTS RECEIVABLE 2019 2018 $ $ Accounts receivable 414,442 443,304 Government grants and funding 39,031 46,808 Debentures, interest at 2.97%, due 2034 262,982 281,390 Government remittances 284,997 166,006 1,001,452 937,508 - 12 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2019 5. TANGIBLE CAPITAL ASSETS December 31, 2019 Disposals and Cost Opening Additions Adjustments Ending Infrastructure Linear - Roadways 42,471,866 389,371 -42,861,237 Linear - Water Services 10,276,872 26,958 (19,815)10,284,015 Linear - Waste Water Services 15,125,283 1,420,744 -16,546,027 Infrastructure Total 67,874,021 1,837,073 (19,815)69,691,279 General Land 1,096,843 2 -1,096,845 Land Improvements 1,339,130 201,357 198,902 1,739,389 Buildings 11,340,771 280,227 -11,620,998 Machinery and Equipment 3,915,554 174,689 (9,875)4,080,368 Vehicles 2,222,582 577,019 (488,489)2,311,112 General Total 19,914,880 1,233,294 (299,462)20,848,712 Work In Progress 95,123 385,706 (92,153)388,676 Total Cost 87,884,024 3,456,073 (411,430)90,928,667 Accumulated Amortization Disposals and Opening Amortization Adjustments Ending Infrastructure Linear - Roadways 16,062,392 777,317 -16,839,709 Linear - Water Services 2,594,967 255,379 (8,064)2,842,282 Linear - Waste Water Services 3,143,078 171,761 -3,314,839 Infrastructure Total 21,800,437 1,204,457 (8,064)22,996,830 General Land Improvements 608,470 53,216 179,100 840,786 Buildings 4,557,783 290,206 -4,847,989 Machinery and Equipment 1,972,729 98,489 (7,354)2,063,864 Vehicles 1,308,506 239,014 (429,408)1,118,112 General Total 8,447,488 680,925 (257,662)8,870,751 Total Accumulated Amortization 30,247,925 1,885,382 (265,726)31,867,581 Net Book Value Opening Ending Infrastructure Linear - Roadways 26,409,474 26,021,528 Linear - Water Services 7,681,905 7,441,733 Linear - Waste Water Services 11,982,205 13,231,188 46,073,584 46,694,449 General Land 1,096,843 1,096,845 Land Improvements 730,660 898,603 Buildings 6,782,988 6,773,009 Machinery and Equipment 1,942,825 2,016,504 Vehicles 914,076 1,193,000 11,467,392 11,977,961 Work in Progress 95,123 388,676 Total Net Book Value 57,636,099 59,061,086 - 13 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2019 5. TANGIBLE CAPITAL ASSETS (CONTINUED) December 31, 2018 Disposals and Cost Opening Additions Adjustments Ending Infrastructure Linear - Roadways 40,905,284 1,566,582 -42,471,866 Linear - Water Services 10,261,133 15,739 -10,276,872 Linear - Waste Water Services 15,118,609 6,674 -15,125,283 Infrastructure Total 66,285,026 1,588,995 -67,874,021 General Land 1,096,843 --1,096,843 Land Improvements 1,165,880 173,250 -1,339,130 Buildings 10,808,166 532,972 (367)11,340,771 Machinery and Equipment 3,793,191 139,557 (17,194)3,915,554 Vehicles 2,252,727 -(30,145)2,222,582 General Total 19,116,807 845,779 (47,706)19,914,880 Work in Progress 419,235 94,542 (418,654)95,123 Total Cost 85,821,068 2,529,316 (466,360)87,884,024 Accumulated Amortization Disposals and Opening Amortization Adjustments Ending Infrastructure Linear - Roadways 15,288,252 774,140 -16,062,392 Linear - Water Services 2,435,298 159,669 -2,594,967 Linear - Waste Water Services 2,993,507 149,571 -3,143,078 Infrastructure Total 20,717,057 1,083,380 -21,800,437 General Land Improvements 563,912 44,558 -608,470 Buildings 4,202,888 355,262 (367)4,557,783 Machinery and Equipment 1,864,155 125,768 (17,194)1,972,729 Vehicles 728,891 609,365 (29,750)1,308,506 General Total 7,359,846 1,134,953 (47,311)8,447,488 Total Accumulated Amortization 28,076,903 2,218,333 (47,311)30,247,925 Net Book Value Opening Ending Infrastructure Linear - Roadways 25,617,032 26,409,474 Linear - Water Services 7,825,835 7,681,905 Linear - Waste Water Services 12,125,102 11,982,205 45,567,969 46,073,584 General Land 1,096,843 1,096,843 Land improvements 601,968 730,660 Buildings 6,605,278 6,782,988 Machinery and Equipment 1,929,036 1,942,825 Vehicles 1,523,836 914,076 11,756,961 11,467,392 Work in Progress 419,235 95,123 Total Net Book Value 57,744,165 57,636,099 - 14 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2019 6.LONG-TERM LIABILITIES a) The balance of long-term liabilities reported on the Consolidated Statement of Financial Position is made up of the following: 2019 2018 $ $ TD loan, 2.71%, repayable in blended monthly payments of $27,557, due March 2025 (Project Ojibwa)5,150,035 5,338,383 RBC loan, 2.75%, repayable in blended semi-annual payments of $32,500, due July 2026 (Fire Hall)396,876 449,867 Consolidated water board debt, interest rates ranging from 1.5% to 5.75%, maturing August 2018 to March 2027 127,126 149,832 5,674,037 5,938,082 Principal repayments are summarized as follows: Tax User Revenue Charges Total 2020 247,588 23,352 270,940 2021 254,782 23,861 278,643 2022 261,787 24,393 286,180 2023 268,984 12,349 281,333 2024 276,053 12,613 288,666 Beyond 4,237,717 30,558 4,268,275 Total 5,546,911 127,126 5,674,037 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 2019 amounted to $157,882 (2018 - $165,387). - 15 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2019 7.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. 2019 2018 $ $ Operating fund: Municipality -- Cemetery boards 177,680 177,950 Benefiting landowners (706,556)(187,824) (528,876)(9,874) Invested in tangible capital assets 59,061,086 57,636,099 Capital fund (9,627)(5,513) Reserves 2,636,815 2,430,368 Reserve funds 3,040,884 2,991,484 64,200,282 63,042,564 AMOUNTS TO BE RECOVERED Net long-term debt (Note 6)(5,674,038)(5,938,082) ACCUMULATED SURPLUS 58,526,244 57,104,482 RESERVES AND RESERVE FUNDS CONSIST OF THE FOLLOWING: 2019 2018 $ $ Reserves set aside for specific purposes by Council: - for working capital 70,720 128,496 - for capital purposes 408,996 346,483 - for waterworks purposes 1,520,382 1,271,942 - for rate stabilization 213,866 213,866 - for other purposes 422,851 469,581 Total reserves 2,636,815 2,430,368 Reserve funds set aside for specific purposes by Council: - for water system 123,971 109,162 - for construction of sanitary sewers 2,726,834 2,696,218 - for recreation and cultural service purposes 190,079 186,104 Total reserve funds 3,040,884 2,991,484 - 16 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2019 8.TRUST FUNDS Trust funds administered by the Municipality amounting to $261,887 (2018 - $260,737) have not been included in the Consolidated Statement of Financial Position nor have their operations been included in the Consolidated Statement of Operations. 9. 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: 2019 2018 $ $ Development charges 29,422 28,807 Gasoline tax 254,381 54,030 Parkland 20,137 17,268 303,940 100,105 10.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, 2019, and the results of this valuation disclosed actuarial liabilities of $106.4 billion in respect of benefits accrued for service with actuarial assets at that date of $103 billion leaving an actuarial deficit of $3.4 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 2019 was $151,061 (2018 - $143,064). - 17 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2019 11.BUDGET FIGURES The operating budget approved by the council of the Municipality for 2019 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 4,318,474 -4,318,474 Taxation from other governments 158,222 -158,222 User charges 1,947,878 609,999 2,557,877 Transfer payments: Federal 1,007,000 -1,007,000 Provincial 1,445,500 -1,445,500 Other municipalities 430,270 -430,270 Investment income 30,000 22,885 52,885 Penalties and interest on taxes 111,000 -111,000 Recoveries from benefiting landowners 139,500 -139,500 Other 151,700 -151,700 Capital reserve transfers 828,500 (828,500)- Total Revenues 10,568,044 (195,616)10,372,428 EXPENSES General government 1,291,322 (26,108)1,265,214 Protection to persons and property 1,745,660 93,533 1,839,193 Transportation services 1,549,273 990,376 2,539,649 Environmental services 1,637,160 1,109,103 2,746,263 Health services 15,500 20,969 36,469 Social and family services 9,000 -9,000 Recreation and cultural services 281,219 99,944 381,163 Planning and development 190,570 28,773 219,343 Reserve transfers 694,340 (694,340)- Capital 3,154,000 (3,154,000)- Total Expenses 10,568,044 (1,531,750)9,036,294 BUDGETED ANNUAL SURPLUS -1,336,134 1,336,134 - 18 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2019 12.OPERATION OF SCHOOL BOARDS AND THE COUNTY OF ELGIN During 2019, 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 1,487,130 4,226,049 Share of payments in lieu of taxes 964 149,618 Amounts requisitioned 1,488,094 4,375,667 13. ACCRUED LIABILITY ARISING FROM LOAN GUARANTEES The Municipality had guaranteed the debt of the Elgin Military Museum for an amount of $6,000,000. In 2014, management had determined that a contingent liability in the amount of $6,000,000 should be recognized in the financial statements for that fiscal year-end. The Elgin Military Museum defaulted on its loan in March 2015 and the Municipality was required to cover the full $6,000,000 loan guarantee. The guarantee has been funded by long-term debt with an interest rate at 2.71%, in blended monthly payments of $27,557, and is due in March, 2025 (Note 6). In relation to this loan guarantee and the long-term debt, the Municipality was named in a statement of claim for approximately $1,200,000 from a specific vendor of the Elgin Military Museum. During the prior year, the statement of claim from the specific vendor was settled for $200,000 and was expensed in the prior year operations. This $200,000 expense was funded by an offsetting transfer from the liability reserve. In 2016, the Municipality received judgment in the amount of $6,000,000 against the Elgin Military Museum in an attempt to recover some of these expenses and long-term debt repayments. The Municipality expects no further recoveries or significant expenses from the assets of the Elgin Military Museum, but the Municipality will ensure the Writ of Seizure and Sale is registered on title indefinitely. 14. CONTINGENT LIABILITIES As at December 31, 2019 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. 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. - 19 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2019 15. SUPPLEMENTARY INFORMATION: 2019 2018 $ $ [a] Current fund expenses by object: Salaries, wages and employees benefits 2,205,949 2,117,188 Long-term debt interest 157,882 165,387 Materials 3,546,777 2,431,535 Contracted services 2,192,284 2,357,590 Amortization 1,885,381 2,218,333 External transfers to others 92,629 88,941 (Gain) loss on disposal and transfer of assets 8,020 395 10,088,922 9,379,369 [b] Cash flow information: Decrease (increase) in taxes receivable (254,118)110,129 Decrease (increase) in accounts receivable (63,944)864,479 (Increase) decrease in inventories and prepaid expenses 2,475 (27,659) (Decrease) in accounts payable and accrued liabilities 264,896 (95,036) (Decrease) in deferred revenue-obligatory reserve funds 203,835 (55,959) 153,144 795,954 16. SUBSEQUENT EVENT Subsequent to year end, the Municipality was exposed to economic risks associated with the coronavirus pandemic. These risks are beyond the Municipality’s control. The impact of these risks cannot be identified at this time but could impact the Municipality’s operations, future net surplus, cash flows and financial condition. - 20 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2019 17. 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 sys tems, 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 1. For additional information see the Consolidated Schedule of Segment Disclosure and Schedule of Segment Disclosure. - 21 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Consolidated Schedule of Segment Disclosure Year Ended December 31, 2019 Water and Public Other Total Waste Funds Works Segments Consolidated $ $ $ $ REVENUE Taxation -1,549,273 2,930,857 4,480,130 Sales of service and regulatory fees 2,179,570 75,717 485,909 2,741,196 Government transfer 16,413 442,850 3,074,958 3,534,221 Other 119,768 -635,369 755,137 2,315,751 2,067,840 7,127,093 11,510,684 EXPENSES Salaries, wages and employee benefits 403,588 576,989 1,225,372 2,205,949 Long-term debt interest 3,536 -154,346 157,882 Materials 774,221 1,927,076 845,480 3,546,777 Contracted services 499,967 40,908 1,651,409 2,192,284 Amortization 598,129 990,376 296,876 1,885,381 Loss on disposal of tangible assets --8,020 8,020 Transfer to others --92,629 92,629 2,279,441 3,535,349 4,274,132 10,088,922 ANNUAL SURPLUS (DEFICIT)36,310 (1,467,509)2,852,961 1,421,762 - 22 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Consolidated Schedule of Segment Disclosure Year Ended December 31, 2018 Water and Public Other Total Waste Funds Works Segments Consolidated $ $ $ $ REVENUE Taxation -1,643,112 2,550,901 4,194,013 Sales of service and regulatory fees 1,745,441 71,511 466,562 2,283,514 Government transfer 22,759 424,829 1,765,417 2,213,005 Other 121,481 -586,992 708,473 1,889,681 2,139,452 5,369,872 9,399,005 EXPENSES Salaries, wages and employee benefits 336,360 555,382 1,225,446 2,117,188 Long-term debt interest 4,583 -160,804 165,387 Materials 329,342 1,142,818 959,375 2,431,535 Contracted services 475,451 40,085 1,842,054 2,357,590 Amortization 609,248 1,324,706 284,379 2,218,333 Gain on disposal of assets --395 395 Transfer to others --88,941 88,941 1,754,984 3,062,991 4,561,394 9,379,369 ANNUAL SURPLUS (DEFICIT)134,697 (923,539)808,478 19,636 - 23 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Schedule of Segment Disclosure Year Ended December 31, 2019 Budget Actual Actual WATER AND WASTE WATER 2019 2019 2018 $ $ $ Revenue Sales of services and regulatory fees 1,573,328 2,179,570 1,745,441 Government transfers -16,413 22,759 Benefiting land owners 139,500 93,897 100,789 Other 7,500 25,871 20,692 Total Revenues 1,720,328 2,315,751 1,889,681 Expenses Salaries, wages and employees benefits 387,243 403,588 336,360 Long-term debt interest -3,536 4,583 Materials 349,067 774,221 329,342 Contracted services, rents and financial expenses 404,350 499,967 475,451 Amortization 598,129 598,129 609,248 Total Expenditures 1,738,789 2,279,441 1,754,984 Annual Surplus (18,461)36,310 134,697 Budget Actual Actual PUBLIC WORKS 2019 2019 2018 $ $ $ Revenue Taxation 1,549,273 1,549,273 1,643,112 Sales of services and regulatory fees 24,000 75,717 71,511 Government transfers 430,270 442,850 424,829 Total Revenues 2,003,543 2,067,840 2,139,452 Expenses Salaries, wages and employees benefits 605,136 576,989 555,382 Materials 899,837 1,927,076 1,142,818 Contracted services and rents 44,300 40,908 40,085 Amortization 990,376 990,376 1,324,706 Total Expenditures 2,539,649 3,535,349 3,062,991 Annual (Deficit)(536,106)(1,467,509)(923,539) - 24 -