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HomeMy WebLinkAboutFinancial Statements - 2021THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Consolidated Financial Statements December 31, 2021 THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Consolidated Financial Statements Year Ended December 31, 2021 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 - 22 Consolidated Schedule of Segment Disclosure 23 - 24 Schedule of Segment Disclosure 25 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, 2021, 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 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, 2021, 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. - 2 - 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 19, 2022 CHARTERED PROFESSIONAL ACCOUNTANTS Licensed Public Accountants - 3 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Consolidated Statement of Financial Position As At December 31, 2021 2021 2020 $ $ ASSETS FINANCIAL ASSETS Cash 4,090,351 1,582,338 Investments (Note 2)3,662,849 3,603,723 Taxes receivable (Note 3)901,928 1,547,323 Accounts receivable (Note 4)1,134,118 1,107,496 9,789,246 7,840,880 LIABILITIES Deferred revenue - obligatory reserve funds (Note 9)694,326 339,539 Accounts payable and accrued liabilities 1,462,605 1,194,197 Net long-term liabilities (Note 6) 4,838,322 5,060,840 6,995,253 6,594,576 NET FINANCIAL ASSETS 2,793,993 1,246,304 NON-FINANCIAL ASSETS Tangible capital assets (Note 5)58,830,243 59,133,481 Prepaid expenses and inventory 81,507 50,307 58,911,750 59,183,788 ACCUMULATED SURPLUS (NOTE 7) 61,705,743 60,430,092 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, 2021 Budget Actual Actual (Note 11)2021 2020 $ $ $ REVENUES Property taxation 4,906,242 4,754,473 4,680,368 Taxation from other governments 175,049 175,049 168,615 User charges 2,816,440 2,957,219 2,884,842 Transfer payments Federal 348,600 355,302 338,287 Provincial 1,335,600 1,282,207 1,697,768 Other municipalities 441,868 444,594 441,365 Investment income 85,116 77,688 131,676 Penalties and interest on taxes 91,000 (33,831)105,949 Recoveries from benefiting landowners 359,151 362,584 604,215 Other 132,520 106,020 126,145 Total Revenues 10,691,586 10,481,305 11,179,230 EXPENSES General government 1,192,438 1,151,707 1,248,972 Protection to persons and property 1,889,635 1,888,860 1,843,510 Transportation services 2,882,137 2,725,065 2,850,538 Environmental services 2,844,576 2,846,211 2,807,159 Health services 16,500 30,289 29,521 Social and family services 9,000 -- Recreation and cultural services 406,409 307,365 416,644 Planning and development 261,543 239,522 261,649 Loss (gain) on disposal of tangible capital assets -16,635 (182,611) Total Expenses (Note 14) 9,502,238 9,205,654 9,275,382 ANNUAL SURPLUS 1,189,348 1,275,651 1,903,848 ACCUMULATED SURPLUS, BEGINNING OF YEAR 60,430,092 60,430,092 58,526,244 ACCUMULATED SURPLUS, END OF YEAR (NOTE 7)61,619,440 61,705,743 60,430,092 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, 2021 Budget Actual Actual (Note 11)2021 2020 $ $ $ ANNUAL SURPLUS 1,189,348 1,275,651 1,903,848 Acquisition of tangible capital assets (1,628,712)(1,628,712)(2,015,121) Amortization of tangible capital assets 1,915,323 1,915,323 1,909,258 Proceeds on disposal of tangible capital assets --216,079 Change in prepaid expenses and inventory -(31,200)28,172 Loss (gain) on disposal of tangible capital assets -16,627 (182,611) CHANGE IN NET FINANCIAL ASSETS 1,475,959 1,547,689 1,859,625 NET FINANCIAL ASSETS, BEGINNING OF YEAR 1,246,304 1,246,304 (613,321) NET FINANCIAL ASSETS, END OF YEAR 2,722,263 2,793,993 1,246,304 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, 2021 2021 2020 $ $ OPERATING ACTIVITIES Annual surplus 1,275,651 1,903,848 Add (deduct) items not involving cash: Amortization of tangible capital assets 1,915,323 1,909,258 Loss (gain) on disposal of tangible capital assets 16,627 (182,611) 3,207,601 3,630,495 Change in non-cash items related to operations (Note 14[b]) 1,210,768 (595,772) 4,418,369 3,034,723 CAPITAL Acquisition of tangible capital assets (1,628,712)(2,015,121) Proceeds on disposal of tangible capital assets -216,079 (1,628,712)(1,799,042) INVESTING Investment income reinvested (59,126)(49,435) FINANCING Long-term debt repayment (222,518)(613,198) NET CHANGE IN CASH 2,508,013 573,048 CASH, BEGINNING OF THE YEAR 1,582,338 1,009,290 CASH, END OF THE YEAR 4,090,351 1,582,338 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, 2021 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. 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. - 8 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2021 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. - 9 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2021 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. - 10 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2021 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 2021, the Municipality received $4,929,522 (2020 - $4,848,983) 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. - 11 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2021 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, 2021 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, 2022. The standard requires that all financial instruments, which include the One Fund Investments, be reported at fair market value in a statement of remeasurement gains/losses and to disclose any risks associated with it's financial instruments. 2. INVESTMENTS Investments are comprised of the following: 2021 2020 $ $ $ $ Cost Market Cost Market One fund pooled bond securities 3,662,849 3,374,230 3,603,723 3,423,662 - 12 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2021 3. TAXES RECEIVABLE 2021 2020 $ $ Current taxes receivable 593,949 711,283 Arrears taxes receivable 172,457 604,023 Penalties and interest 135,522 232,017 901,928 1,547,323 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 $287,766 (2020 - $695,932) 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 taxes receivable presented on the statement of financial position, but has set aside $67,000 (2020 - $341,000) in the contingency reserve for any losses should they occur on this property. The Municipality is vigorously attempting various forms of collection to mitigate the Municipality's exposure to loss. 4. ACCOUNTS RECEIVABLE 2021 2020 $ $ Accounts receivable 545,679 507,485 Government grants and funding 220,495 193,671 Debentures, interest at 2.97%, due 2034 226,166 244,573 Government remittances 141,778 161,767 1,134,118 1,107,496 - 13 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2021 5. TANGIBLE CAPITAL ASSETS December 31, 2021 Disposals and Cost Opening Additions Adjustments Ending Infrastructure Linear - Roadways 42,758,039 1,712,692 (532,623)43,938,108 Linear - Water Services 10,312,206 11,460 (5,939)10,317,727 Linear - Waste Water Services 16,546,027 --16,546,027 Infrastructure Total 69,616,272 1,724,152 (538,562)70,801,862 General Land 1,063,805 - -1,063,805 Land Improvements 1,752,889 73,579 -1,826,468 Buildings 11,640,255 425,505 (12,376)12,053,384 Machinery and Equipment 4,345,535 - -4,345,535 Vehicles 2,494,937 207,579 -2,702,516 General Total 21,297,421 706,663 (12,376)21,991,708 Work in Progress 1,251,704 444,383 (1,246,486)449,601 Total Cost 92,165,397 2,875,198 (1,797,424)93,243,171 Accumulated Amortization Disposals and Opening Amortization Adjustments Ending Infrastructure Linear - Roadways 17,122,110 752,102 (519,700)17,354,512 Linear - Water Services 3,038,294 260,330 (5,939)3,292,685 Linear - Waste Water Services 3,519,513 201,726 (8)3,721,231 Infrastructure Total 23,679,917 1,214,158 (525,647)24,368,428 General Land Improvements 908,760 64,657 -973,417 Buildings 5,143,899 294,603 (8,664)5,429,838 Machinery and Equipment 2,004,049 131,059 -2,135,108 Vehicles 1,295,291 210,846 -1,506,137 General Total 9,351,999 701,165 (8,664)10,044,500 Total Accumulated Amortization 33,031,916 1,915,323 (534,311)34,412,928 Net Book Value Opening Ending Infrastructure Linear - Roadways 25,635,929 26,583,596 Linear - Water Services 7,273,912 7,025,042 Linear - Waste Water Services 13,026,514 12,824,796 45,936,355 46,433,434 General Land 1,063,805 1,063,805 Land Improvements 844,129 853,051 Buildings 6,496,356 6,623,546 Machinery and Equipment 2,341,486 2,210,427 Vehicles 1,199,646 1,196,379 11,945,422 11,947,208 Work in Progress 1,251,704 449,601 Total Net Book Value 59,133,481 58,830,243 - 14 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2021 5. TANGIBLE CAPITAL ASSETS (CONTINUED) December 31, 2020 Disposals and Cost Opening Additions Adjustments Ending Infrastructure Linear - Roadways 42,861,237 377,157 (480,355)42,758,039 Linear - Water Services 10,284,015 87,496 (59,305)10,312,206 Linear - Waste Water Services 16,546,027 --16,546,027 Infrastructure Total 69,691,279 464,653 (539,660)69,616,272 General Land 1,096,845 -(33,040)1,063,805 Land Improvements 1,739,389 13,500 -1,752,889 Buildings 11,620,998 19,257 -11,640,255 Machinery and Equipment 4,080,368 428,767 (163,600)4,345,535 Vehicles 2,311,112 225,916 (42,091)2,494,937 General Total 20,848,712 687,440 (238,731)21,297,421 Work in Progress 388,676 872,219 (9,191)1,251,704 Total Cost 90,928,667 2,024,312 (787,582)92,165,397 Accumulated Amortization Disposals and Opening Amortization Adjustments Ending Infrastructure Linear - Roadways 16,839,709 762,328 (479,927)17,122,110 Linear - Water Services 2,842,282 255,317 (59,305)3,038,294 Linear - Waste Water Services 3,314,839 204,674 -3,519,513 Infrastructure Total 22,996,830 1,222,319 (539,232)23,679,917 General Land Improvements 840,786 67,974 -908,760 Buildings 4,847,989 295,910 -5,143,899 Machinery and Equipment 2,063,864 103,785 (163,600)2,004,049 Vehicles 1,118,112 219,270 (42,091)1,295,291 General Total 8,870,751 686,939 (205,691)9,351,999 Total Accumulated Amortization 31,867,581 1,909,258 (744,923)33,031,916 Net Book Value Opening Ending Infrastructure Linear - Roadways 26,021,528 25,635,929 Linear - Water Services 7,441,733 7,273,912 Linear - Waste Water Services 13,231,188 13,026,514 46,694,449 45,936,355 General Land 1,096,845 1,063,805 Land Improvements 898,603 844,129 Buildings 6,773,009 6,496,356 Machinery and Equipment 2,016,504 2,341,486 Vehicles 1,193,000 1,199,646 11,977,961 11,945,422 Work in Progress 388,676 1,251,704 Total Net Book Value 59,061,086 59,133,481 - 15 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2021 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: 2021 2020 $ $ TD loan, 2.71%, repayable in blended monthly payments of $27,557, due March 2025 (Project Ojibwa)4,758,090 4,956,906 Consolidated water board debt, interest rates ranging from 1.5% to 3.20%, maturing September 2020 to March 2027 80,233 103,934 4,838,323 5,060,840 Principal repayments are summarized as follows: Tax User Revenue Charges Total 2022 204,272 24,393 228,665 2023 209,877 12,349 222,226 2024 215,309 12,613 227,922 2025 4,128,632 12,890 4,141,522 2026 - 13,181 13,181 Beyond -4,807 4,807 Total 4,758,090 80,233 4,838,323 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 2021 amounted to $134,375 (2020 - $156,871). - 16 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2021 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. 2021 2020 $ $ SURPLUS Municipality - current fund -- Cemetery boards - current fund 182,175 184,196 Benefiting landowners - current fund (128,805)(253,583) Invested in tangible capital assets - capital fund 58,830,243 59,133,481 Reserves 4,411,081 3,545,561 Reserve funds 3,249,371 2,881,277 66,544,065 65,490,932 AMOUNTS TO BE RECOVERED Net long-term debt (Note 6)(4,838,322)(5,060,840) ACCUMULATED SURPLUS 61,705,743 60,430,092 RESERVES AND RESERVE FUNDS CONSIST OF THE FOLLOWING: 2021 2020 $ $ Reserves set aside for specific purposes by Council: - for working capital 96,886 86,886 - for capital purposes 634,527 455,117 - for waterworks purposes 2,277,698 1,869,743 - for rate stabilization -- - for other purposes 1,401,970 1,133,815 Total reserves 4,411,081 3,545,561 Reserve funds set aside for specific purposes by Council: - for water system 142,446 110,693 - for sanitary sewers 3,062,226 2,677,920 - for recreation and cultural service purposes 44,699 92,664 Total reserve funds 3,249,371 2,881,277 - 17 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2021 8. TRUST FUNDS Trust funds administered by the Municipality amounting to $273,166 (2020 - $268,837) 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: 2021 2020 $ $ Development charges 30,735 30,239 Gasoline tax 448,657 261,443 OCIF 154,293 - Parkland 60,641 47,857 694,326 339,539 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, 2021, and the results of this valuation disclosed actuarial liabilities of $120.7 billion in respect of benefits accrued for service with actuarial assets at that date of $117.6 billion leaving an actuarial deficit of $3.1 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 2021 was $166,264 (2020 - $166,264). - 18 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2021 11. BUDGET FIGURES The operating budget approved by the council of the Municipality for 2021 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 4,906,242 - 4,906,242 Taxation from other governments 175,049 - 175,049 User charges 2,141,139 675,301 2,816,440 Transfer payments: Federal 348,600 - 348,600 Provincial 1,335,600 - 1,335,600 Other municipalities 441,868 - 441,868 Investment income 29,000 56,116 85,116 Penalties and interest on taxes 91,000 - 91,000 Recoveries from benefiting landowners 92,000 267,151 359,151 Other 114,500 18,020 132,520 Capital reserve transfers (196,000)(327,381)(523,381) Total Revenues 9,478,998 689,207 10,168,205 EXPENSES General government 1,372,264 (179,826) 1,192,438 Protection to persons and property 1,748,184 141,451 1,889,635 Transportation services 1,904,952 977,185 2,882,137 Environmental services 2,069,774 774,802 2,844,576 Health services 16,500 - 16,500 Social and family services 9,000 - 9,000 Recreation and cultural services 297,847 108,562 406,409 Planning and development 232,770 28,773 261,543 Reserve transfers 199,207 (199,207) - Capital 1,628,500 (3,631,799)(2,003,299) Total Expenses 9,478,998 (1,980,059)7,498,939 BUDGETED ANNUAL SURPLUS -2,669,266 2,669,266 - 19 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2021 12. OPERATION OF SCHOOL BOARDS AND THE COUNTY OF ELGIN During 2021, 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 1,234,593 4,476,000 Share of payments in lieu of taxes 6,379 165,267 Amounts requisitioned 1,240,972 4,641,267 13. CONTINGENCIES As at December 31, 2021, 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, 2021, 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. - 20 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2021 14. SUPPLEMENTARY INFORMATION 2021 2020 $ $ [a] Current fund expenses by object: Salaries, wages and employees benefits 2,281,845 2,193,407 Long-term debt interest 134,375 156,871 Materials 2,521,529 2,845,907 Contracted services 2,239,214 2,257,581 Amortization 1,915,323 1,909,258 External transfers to others 96,741 94,969 (Gain) loss on disposal and transfer of assets 16,627 (182,611) 9,205,654 9,275,382 [b] Cash flow information: Taxes receivable 645,395 (530,821) Accounts receivable (26,622)(106,044) Inventories and prepaid expenses (31,200)28,172 Accounts payable and accrued liabilities 268,408 (22,678) Deferred revenue-obligatory reserve funds 354,787 35,599 1,210,768 (595,772) 15. SIGNIFICANT EVENT During and 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 Municipality has experienced some operational changes, but overall the financial impact has been limited. The Municipality's main exposure is to it's investments (Note 2). These investments may experience reduced returns due to the market fluctuations, but to date these returns have not been significantly impacted. - 21 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2021 16. 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 1. For additional information see the Consolidated Schedule of Segment Disclosure and Schedule of Segment Disclosure. - 22 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Consolidated Schedule of Segment Disclosure Year Ended December 31, 2021 Water and Public Other Total Waste Funds Works Segments Consolidated $ $ $ $ REVENUE Taxation - 1,413,084 3,516,438 4,929,522 Sales of service and regulatory fees 2,404,520 39,736 512,963 2,957,219 Government transfer 5,854 448,317 1,627,932 2,082,103 Other 115,080 -397,381 512,461 2,525,454 1,901,137 6,054,714 10,481,305 EXPENSES Salaries, wages and employee benefits 418,375 617,734 1,245,736 2,281,845 Long-term debt interest 2,505 - 131,870 134,375 Materials 682,463 1,107,065 732,001 2,521,529 Contracted services 534,857 23,092 1,681,265 2,239,214 Amortization 637,955 977,185 300,183 1,915,323 Loss on disposal of tangible capital assets - 12,912 3,715 16,627 Transfer to others --96,741 96,741 2,276,155 2,737,988 4,191,511 9,205,654 ANNUAL SURPLUS (DEFICIT)249,299 (836,851)1,863,203 1,275,651 - 23 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Consolidated Schedule of Segment Disclosure Year Ended December 31, 2020 Water and Public Other Total Waste Funds Works Segments Consolidated $ $ $ $ REVENUE Taxation - 1,286,754 3,562,229 4,848,983 Sales of service and regulatory fees 2,323,194 56,331 505,317 2,884,842 Government transfer - 448,257 2,029,163 2,477,420 Other 117,980 -850,005 967,985 2,441,174 1,791,342 6,946,714 11,179,230 EXPENSES Salaries, wages and employee benefits 409,014 552,381 1,232,012 2,193,407 Long-term debt interest 3,058 - 153,813 156,871 Materials 718,666 1,278,570 848,671 2,845,907 Contracted services 517,523 23,500 1,716,558 2,257,581 Amortization 605,729 996,085 307,444 1,909,258 Loss on disposal of tangible capital assets - (1,296) (181,315)(182,611) Transfer to others --94,969 94,969 2,253,990 2,849,240 4,172,152 9,275,382 ANNUAL SURPLUS (DEFICIT)187,184 (1,057,898)2,774,562 1,903,848 - 24 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Schedule of Segment Disclosure Year Ended December 31, 2021 Budget Actual Actual WATER AND WASTE WATER 2021 2021 2020 $ $ $ Revenue Sales of services and regulatory fees 1,668,377 2,404,520 2,323,194 Government transfers -5,854 - Benefiting land owners 92,000 95,434 96,601 Other 16,830 19,646 21,379 Total Revenues 1,777,207 2,525,454 2,441,174 Expenses Salaries, wages and employees benefits 502,261 418,375 409,014 Long-term debt interest -2,505 3,058 Materials 420,962 682,463 718,666 Contracted services, rents and financial expenses 590,551 534,857 517,523 Amortization 637,955 637,955 605,729 Total Expenditures 2,151,729 2,276,155 2,253,990 Annual Surplus (Deficit)(374,522)249,299 187,184 Budget Actual Actual PUBLIC WORKS 2021 2021 2020 $ $ $ Revenue Taxation 1,413,084 1,413,084 1,286,754 Sales of services and regulatory fees 50,000 39,736 56,331 Government transfers 441,868 448,317 448,257 Total Revenues 1,904,952 1,901,137 1,791,342 Expenses Salaries, wages and employees benefits 753,636 617,734 552,381 Materials 1,105,016 1,107,065 1,278,570 Contracted services and rents 46,300 23,092 23,500 Amortization 977,185 977,185 996,085 Loss (gain) on transfer and disposal of assets -12,912 (1,296) Total Expenditures 2,882,137 2,737,988 2,849,240 Annual Surplus (Deficit)(977,185)(836,851)(1,057,898) - 25 -