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HomeMy WebLinkAboutFinancial Statements 2015 THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Consolidated Financial Statements December 31, 2015 THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Consolidated Financial Statements Year Ended December 31, 2015 Table of Contents PAGE Independent Auditors' Report 1 Consolidated Statement of Financial Position 2 Consolidated Statement of Operations and Accumulated Surplus 3 Consolidated Statement of Change in Net Financial Assets 4 Consolidated Statement of Cash Flows 5 Notes to the Consolidated Financial Statements 6 - 19 Consolidated Schedule of Segment Disclosure 20 - 21 Schedule of Segment Disclosure 22 FtGRAHAM SCOTT ENNS LLP 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: Report on the Financial Statements We have audited the accompanying consolidated financial statements of The Corporation of the Municipality of Bayham, which comprise the consolidated statement of financial position as at December 31, 2015, and the statements of consolidated operations and accumulated surplus, changes in net assets, and cash flow for the year then ended, and a summary of significant accounting policies and other explanatory information. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian accounting standards for public sector entities and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement,whether due to fraud or error. Auditors'Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment,including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management,as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion,the consolidated financial statements present fairly,in all material respects,the statement of financial position of The Corporation of the Municipality of Bayham as at December 31,2015,and the statements of operations and accumulated surplus, changes in net assets, and cash flow for the year then ended in accordance with Canadian accounting standards for public sector entities. St. Thomas, Ontario91Z4/4402Scott Sett4 4,a, May 19, 2016 CHARTERED PROFESSIONAL ACCOUNTANTS Licensed Public Accountants - 1 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Consolidated Statement of Financial Position As At December 31, 2015 2015 2014 $ $ ASSETS FINANCIAL ASSETS Cash 1,020,314 2,085,005 Investments (Note 2) 3,257,030 3,175,840 Taxes receivable (Note 3) 776,225 584,459 Accounts receivable (Note 4) 1,807,414 1,404,314 6,860,983 7.249.618 LIABILITIES Deferred revenue - obligatory reserve funds (Note 9) 248,672 221,650 Accounts payable and accrued liabilities 1,184,869 929,207 Accrued liabilities arising from loan guarantee (Note 13) - 6,000,000 Net long-term liabilities (Note 6) 6,569,992 1,014,459 8,003,533 8.165.316 NET FINANCIAL ASSETS (1,142,550) (915.698) NON-FINANCIAL ASSETS Tangible capital assets (Note 5) 53,911,686 53,757,546 Prepaid expenses and inventory 100,646 58,914 54,012,332 53.816.460 ACCUMULATED SURPLUS (NOTE 7) 52,869,782 52.900.762 See accompanying notes to the consolidated financial statements. - 2 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Consolidated Statement of Operations and Accumulated Surplus Year Ended December 31, 2015 Budget Actual Actual (Note 11) 2015 2014 $ $ $ REVENUES Property taxation 3,477,851 3,486,317 3,242,775 Taxation from other governments 119,138 119,138 88,120 User charges 1,732,543 1,968,304 2,163,188 Transfer payments Federal 239,398 192,930 170,949 Provincial 2,767,981 1,692,770 1,242,989 Other municipalities 496,268 453,486 494,010 Investment income 60,235 121,645 110,537 Penalties and interest on taxes 107,000 94,697 108,790 Recoveries from benefiting landowners 132,215 141,275 132,215 Other 50.700 192,187 46,091 Total Revenues 9.183.329 8,462,749 7.799.664 EXPENSES General government 1,100,517 1,360,873 1,014,217 Protection to persons and property 1,711,967 1,566,270 1,669,396 Transportation services 2,411,764 2,436,488 2,541,085 Environmental services 2,103,751 2,075,578 2,069,679 Health services 19,257 41,848 34,140 Social and family services 10,000 10,721 10,141 Recreation and cultural services 287,640 276,281 382,553 Planning and development 692,551 732,478 295,037 Loss (gain) on disposal of tangible capital assets - (6,808) (43,877) Total Expenses (Note 15) 8,337,447 8,493,729 7,972,371 ANNUAL SURPLUS (DEFICIT) BEFORE CONTINGENCY PROVISION 845,882 (30,980) (172,707) PROVISION FOR ACCRUED LIABILITY- LOAN GUARANTEE (NOTE 13) - - (6,000,000) ANNUAL SURPLUS (DEFICIT) 845,882 (30,980) (6,172,707) ACCUMULATED SURPLUS, BEGINNING OF YEAR 52,900,762 52,900,762 59,073,469 ACCUMULATED SURPLUS, END OF YEAR(NOTE 7) 53,746,644 52,869,782 52,900,762 See accompanying notes to the consolidated financial statements. - 3 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Consolidated Statement of Changes in Net Financial Assets Year Ended December 31, 2015 Budget Actual Actual (Note 11) 2015 2014 $ $ $ ANNUAL SURPLUS (DEFICIT) 845,882 (30,980) (6,172,707) Acquisition of tangible capital assets (1,753,079) (1,753,079) (691,642) Amortization of tangible capital assets 1,529,348 1,529,348 1,504,346 Proceeds on disposal of tangible capital assets - 76,400 48,039 Change in prepaid expenses and inventory - (41,733) (36,418) Loss (gain) on sale of tangible capital assets - (6,808) (43,877) INCREASE (DECREASE) IN NET FINANCIAL ASSETS 622,151 (226,852) (5,392,259) NET FINANCIAL ASSETS, BEGINNING OF YEAR (915,698) (915,698) 4,476,561 NET FINANCIAL ASSETS,END OF YEAR (293,547) (1,142,550) (915,698) See accompanying notes to the consolidated financial statements. - 4 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Consolidated Statement of Cash Flows Year Ended December 31, 2015 2015 2014 $ $ OPERATING ACTIVITIES Annual surplus (deficit) (30,980) (6,172,707) Add (deduct) items not involving cash: Amortization of tangible capital assets 1,529,348 1,504,346 Accrued liability arising from loan guarantee - 6,000,000 Loss (gain) on disposal of and transfer of assets (6,808) (43,877) 1,491,560 1,287,762 Change in non-cash items related to operations (Note 15[b]) (353,917) (406,675) Net change in cash from operating activities 1,137,643 881,087 CAPITAL Acquisition of tangible capital assets (1,753,079) (691,642) Proceeds on disposal of tangible capital assets 76,400 48,039 Net change in cash from capital (1,676,679) (643,603) INVESTING Investment income reinvested (81,190) (86,025) Net change in cash from investing (81,190) (86,025) FINANCING Long-term debt repayment (444,465) (91,396) Net change in cash from financing (444,465) (91,396) NET CHANGE IN CASH AND CASH EQUIVALENTS (1,064,691) 60,063 OPENING CASH AND CASH EQUIVALENTS 2,085,005 2,024,942 CLOSING CASH AND CASH EQUIVALENTS 1,020,314 2,085,005 SUPPLEMENTARY INFORMATION: Cash paid for interest on debt 156,719 39,976 Cash received for interest on investments 121,645 1 10,537 See accompanying notes to the consolidated financial statements. - 5 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2015 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. - 6 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2015 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. Investments Investments, consisting of one fund pooled bond securities, are recorded at the lower of cost plus accrued interest and fair market value. Investment income earned on available funds is reported as revenue in the period earned. 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. - 7 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2015 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. - 8 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2015 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. Investment Income Investment income 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. Tax Revenues In 2015, the Municipality received $3,605,455 (2014 - $3,330,895) 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. 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. - 9 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2015 1, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Financial Instruments The Municipality's financial instruments consist of cash and cash equivalents, accounts receivable, taxes receivable, accounts payable and accrued liabilities and long-term liabilities. Unless otherwise noted, it is management's opinion that the Municipality is not exposed to significant interest, currency, or credit risk arising from these financial instruments. Environmental Provisions and Contaminated Sites The Municipality's 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, 2015 there were no properties that the Municipality was responsible to remedy and as such no liability has been accrued. 2. INVESTMENTS Investments are comprised of the following: 2015 2014 $ $ $ Cost Market Cost Market One fund pooled bond securities 3,257,030 3,151,476 3,175,840 3,091,585 3. TAXES RECEIVABLE 2015 2014 $ $ Taxes receivable 735,283 542,439 Penalties and interest 40,942 42,020 776,225 584,459 4. ACCOUNTS RECEIVABLE 2015 2014 $ $ Accounts receivable 949,680 619,739 Debentures, interest at 2.97%, due 2034 338,168 359,494 Debentures, interest at 3.5% and 6%, due 2017 40,008 73,152 Government remittances 479,558 351,929 1,807,414 1,404,314 - 10 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2015 5. TANGIBLE CAPITAL ASSETS December 31,2015 Disposals and Cost Opening Additions Adjustments Ending Infrastructure Linear-Roadways 38,990,869 633,665 - 39,624,534 Linear-Water Services 6,761,274 113,053 (25,351) 6,848,976 Linear-Waste Water Services 14,691,859 - - 14,691,859 Infrastructure Total 60,444,002 746,718 (25,351) 61,165,369 General Land 1,114,586 - - 1,114,586 Land Improvements 1,028,307 - - 1,028,307 Buildings 9,280,511 188,210 - 9,468,721 Machinery and Equipment 3,457,516 17,495 - 3,475,011 Vehicles 1,834,713 794,314 (191,490) 2,437,537 General Total 16,715,633 1,000,019 (191,490) 17,524,162 Work In Progress 290,547 171,978 (165,636) 296,889 Total Cost 77,450,182 1,918,715 (382,477) 78,986,420 Accumulated Amortization Disposals and Opening Amortization Adjustments Ending Infrastructure Linear-Roadways 13,000,096 741,458 - 13,741,554 Linear-Water Services 1,908,181 164,272 (24,476) 2,047,977 Linear-Waste Water Services 2,212,876 149,184 - 2,362,060 Infrastructure Total 17,121,153 1,054,914 (24,476) 18,151,591 General Land Improvements 462,484 39,553 - 502,037 Buildings 3,707,196 242,356 - 3,949,552 Machinery and Equipment 1,593,114 95,104 - 1,688,218 Vehicles 808,689 97,421 (122,774) 783,336 General Total 6,571,483 474,434 (122,774) 6,923,143 Total Accumulated Amortization 23,692,636 1,529,348 (147,250) 25,074,734 Net Book Value Opening Ending Infrastructure Linear-Roadways 25,990,773 25,882,980 Linear-Water Services 4,853,093 4,800,999 Linear-Waste Water Services 12,478,983 12,329,799 43,322,849 43,013,778 General Land 1,114,586 1,114,586 Land Improvements 565,823 526,270 Buildings 5,573,315 5,519,169 Machinery and Equipment 1,864,402 1,786,793 Vehicles 1,026,024 1,654,201 10,144,150 10,601,019 Work in Progress 290,547 296,889 Total Net Book Value 53,757,546 53,911.686 - 11 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2015 5. TANGIBLE CAPITAL ASSETS (CONTINUED) December 31,2014 Disposals and Cost Opening Additions Adjustments Ending Infrastructure Linear-Roadways 38,853,528 137,341 - 38,990,869 Linear-Water Services 5,883,718 877,556 - 6,761,274 Linear-Waste Water Services 14,691,859 - - 14,691,859 Infrastructure Total 59,429,105 1,014,897 - 60,444,002 General Land 1,114,703 - (117) 1,114,586 Land Improvements 1,028,307 - - 1,028,307 Buildings 9,327,058 7,359 (53,906) 9,280,511 Machinery and Equipment 3,368,684 105,094 (16,262) 3,457,516 Vehicles 1,834,713 - - 1,834,713 General Total 16,673,465 112,453 (70,285) 16,715,633 Work in Progress 726,255 200,020 (635,728) 290,547 Total Cost 76,828,825 1,327,370 (706,013) 77,450,182 Accumulated Amortization Disposals and Opening Amortization Adjustments Ending Infrastructure Linear-Roadways 12,261,370 738,726 - 13,000,096 Linear-Water Services 1,817,576 90,605 - 1,908,181 Linear-Waste Water Services 2,063,692 149,184 - 2,212,876 Infrastructure Total 16,142,638 978,515 - 17,121,153 General Land Improvements 422,683 39,801 - 462,484 Buildings 3,505,124 251,931 (49,859) 3,707,196 Machinery and Equipment 1,487,845 121,531 (16,262) 1,593,114 Vehicles 696,121 112,568 - 808,689 General Total 6,111,773 525,831 (66,121) 6,571,483 Total Accumulated Amortization 22,254,411 1,504.346 (66,121) 23,692,636 Net Book Value Opening Ending Infrastructure Linear-Roadways 26,592,158 25,990,773 Linear-Water Services 4,066,142 4,853,093 Linear-Waste Water Services 12,628,167 12,478,983 43,286,467 43,322,849 General Land 1,114,703 1,114,586 Land improvements 605,624 565,823 Buildings 5,821,934 5,573,315 Machinery and Equipment 1,880,839 1,864,402 Vehicles 1,13 8,592 1,026,024 10,561,692 10,144,150 Work in Progress 726,255 290,547 Total Net Book Value 54,574,414 53,757,546 - 12 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2015 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: 2015 2014 $ $ TD loan, 2.71%,repayable in blended monthly payments of $27,557, due March 2025 (Project Ojibwa) 5,873,351 - RBC loan, 3.56%, repayable in blended semi-annual payments of$32,500, due July 2026 (Fire Hall) 590,956 633,770 RBC loan, 4.1%, repayable in blended quarterly payments of$11,012, due June 2020,repaid in year(water infrastructure) - 256,909 Consolidated water board debt, interest rates ranging from 1.5%to 5.75%,maturing August 2018 to September 2022 105,685 123,779 6,569,992 1,014,458 Principal repayments are summarized as follows: Tax Benefiting Revenue Landowers Total 2016 217,579 18,977 236,556 2017 224,368 19,714 244,082 2018 230,914 20,489 251,403 2019 237,654 11,412 249,066 2020 244,206 11,698 255,904 Beyond 5.309,586 23,395 5.332,981 Total 6,464,307 105,685 6,569,992 b)Interest expense on long-term liabilities in 2015 amounted to $156,719 (2014 - $39,976). - 13 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2015 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. 2015 2014 $ $ Operating fund: Municipality - - Cemetery boards 188,553 186,244 Benefiting landowners (613,923) (115,427) (425,370) 70,817 Invested in tangible capital assets 53,911,686 53,757,546 Capital fund (141,022) (140,316) Reserves 3,644,962 4,124,411 Reserve funds 2,449,518 2,102,763 59,439,774 59,915,221 AMOUNTS TO BE RECOVERED Accrued liability- loan guarantee (Note 13) - (6,000,000) Net long-term debt(Note 6) (6,569,992) (1,014,459) (6,569,992) (7,014,459) ACCUMULATED SURPLUS 52,869,782 52,900,762 RESERVES AND RESERVE FUNDS CONSIST OF THE FOLLOWING: 2015 2014 $ $ Reserves set aside for specific purposes by Council: - for working capital 245,656 316,142 - for capital purposes 355,507 1,219,354 - for waterworks purposes 1,624,771 1,220,383 - for rate stabilization 213,866 425,000 - for other purposes 1,205,162 943,532 Total reserves 3,644,962 4,124,411 Reserve funds set aside for specific purposes by Council: - for water system 80,272 79,499 - for construction of sanitary sewers 2,112,015 1,764,489 - for recreation and cultural service purposes 257,231 258,775 Total reserve funds 2,449,518 2.102.763 - 14 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2015 8. TRUST FUNDS Trust funds administered by the Municipality amounting to $246,537 (2014 - $243,458) have not been included in the Consolidated Balance Sheet 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: 2015 2014 $ $ Development charges 26,928 26,257 Gasoline tax 148,971 129,798 Parkland 72,773 65,595 248,672 221,650 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, 2015, and the results of this valuation disclosed actuarial liabilities of$81.9 billion in respect of benefits accrued for service with actuarial assets at that date of$74.9 billion leaving an actuarial deficit of$7 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 2015 was $129,652 (2014 - $129,155). - 15 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2015 11. BUDGET FIGURES The operating budget approved by the council of the Municipality for 2015 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 3,477,851 - 3,477,851 Taxation from other governments 119,138 - 119,138 User charges 1,566,160 166,383 1,732,543 Transfer payments: Federal 217,120 22,278 239,398 Provincial 2,219,838 548,143 2,767,981 Other municipalities 496,268 - 496,268 Investment income 45,000 15,235 60,235 Penalties and interest on taxes 107,000 - 107,000 Recoveries from benefiting landowners 132,215 - 132,215 Other 50,700 - 50,700 Reserve transfers 1,861,035 (1,861,035) - Total Revenues 10,292,325 (1,108,996) 9,183,329 EXPENSES General government 1,335,776 (235,259) 1,100,517 Protection to persons and property 1,622,179 89,788 1,711,967 Transportation services 1,607,906 803,858 2,411,764 Environmental services 2,121,117 (17,366) 2,103,751 Health services 19,000 257 19,257 Social and family services 10,000 - 10,000 Recreation and cultural services 282,198 5,442 287,640 Planning and development 167,026 525,525 692,551 Capital 3,127,123 (3,127,123) - Total Expenses 10,292,325 (1,954,878) 8,337,447 BUDGETED ANNUAL SURPLUS - 845,882 845,882 - 16 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2015 12. OPERATION OF SCHOOL BOARDS AND THE COUNTY OF ELGIN During 2015, 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 1,415,314 3,418,453 Share of payments in lieu of taxes 283 117.089 Amounts requisitioned 1,415,597 3,535,542 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). The Municipality had approximately $100,000 set up in accounts receivable for fees paid by the Municipality for this letter of guarantee. No funds have been collected for these guarantee fees and management has written these advances off in the year. In relation to this loan guarantee and the long-term debt the Municipality has been named in a statement of claim for approximately $1,200,000 from a specific vendor of the Elgin Military Museum. The Municipality has then made a statement of claim of approximately$6,700,000 against the Elgin Military Museum in an attempt to recover some of these fees and long-term debt repayments. 14. CONTINGENT LIABILITIES As at December 31, 2015 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. - 17 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2015 15. SUPPLEMENTARY INFORMATION: 2015 2014 $ $ [a] Current fund expenses by object: Salaries, wages and employees benefits 2,003,110 1,998,826 Long-term debt interest 156,719 39,976 Materials 2,690,336 2,395,692 Contracted services 2,062,223 2,023,468 Amortization expense 1,529,347 1,504,343 Loss (gain) on disposal and transfer of assets (6,808) (43,877) External transfers to others 58,802 53,943 8,493,729 7,972,371 [b] Cash flow information: (Increase) decrease in taxes receivable (191,766) 237,126 (Increase) decrease in accounts receivable (403,100) (614,741) (Increase) decrease in inventories and prepaid expenses (41,733) (36,418) Increase (decrease) in accounts payable and accrued liabilities 255,660 (66,630) Increase (decrease) in deferred revenue-obligatory reserve funds 27,022 73,988 (353,917) (406,675) - 18 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Notes to the Consolidated Financial Statements Year Ended December 31, 2015 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. - 19 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Consolidated Schedule of Segment Disclosure Year Ended December 31, 2015 Water and Public Other Total Waste Funds Works Segments Consolidated $ $ $ $ REVENUE Taxation - 1,153,228 2,452,227 3,605,455 Sales of service and regulatory fees 1,497,879 50,948 419,477 1,968,304 Government transfer 575,421 448,486 1,315,279 2,339,186 Other 148,856 - 400,948 549,804 2,222,156 1,652,662 4,587,931 8,462,749 EXPENSES Salaries,wages and employee benefits 252,555 631,082 1,119,473 2,003,110 Long-term debt interest 13,168 - 143,551 156,719 Materials 604,689 965,509 1,120,138 2,690,336 Contracted services 191,948 36,039 1,834,236 2,062,223 Amortization 498,007 803,858 227,482 1,529,347 Loss (gain) on disposal and transfer of assets - - (6,808) (6,808) Transfer to others - - 58,802 58,802 1,560.367 2,436,488 4,496,874 8,493,729 ANNUAL SURPLUS (DEFICIT) 661,789 (783,826) 91,057 (30,980) - 20 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Consolidated Schedule of Segment Disclosure Year Ended December 31, 2014 Water and Public Other Total Waste Funds Works Segments Consolidated $ $ $ $ REVENUE Taxation - 1,098,721 2,232,174 3,330,895 Sales of service and regulatory fees 1,447,769 5,790 709,629 2,163,188 Government transfer 104,612 438,313 1,365,023 1,907,948 Other 137.955 - 259.678 397,633 1,690.336 1,542,824 4,566.504 7,799,664 EXPENSES Salaries,wages and employee benefits 273,991 654,295 1,070,540 1,998,826 Long-term debt interest 16,307 - 23,669 39,976 Materials 595,027 1,023,403 777,262 2,395,692 Contracted services 198,027 50,431 1,775,010 2,023,468 Amortization 467,434 812,953 223,956 1,504,343 Loss on transfer and disposal of assets - - (43,877) (43,877) Transfer to others - - 53,943 53,943 1,550,786 2,541,082 3,880,503 7,972,371 ANNUAL SURPLUS (DEFICIT) 139,550 (998,258) 686,001 (172,707) - 21 - THE CORPORATION OF THE MUNICIPALITY OF BAYHAM Schedule of Segment Disclosure Year Ended December 31, 2015 Budget Actual Actual WATER AND WASTE WATER 2015 2015 2014 $ $ $ Revenue Sales of services and regulatory fees 1,489,300 1,497,879 1,447,769 Government transfers 570,421 575,421 104,612 Benefiting land owners 132,215 141,275 132,215 Other 6,955 7,581 5,740 Total Revenues 2,198,891 2,222,156 1,690,336 Expenses Salaries, wages and employees benefits 326,207 252,555 273,991 Long-term debt interest 9,289 13,168 16,307 Materials 635,760 604,689 595,027 Contracted services, rents and financial expenses 323,217 191,948 198,027 Amortization 498.007 498,007 467.434 Total Expenditures 1,792,480 1,560,367 1,550,786 Annual Surplus 406,411 661,789 139,550 Budget Actual Actual PUBLIC WORKS 2015 2015 2014 $ $ $ Revenue Taxation 1,153,228 1,153,228 1,098,721 Sales of services and regulatory fees 8,600 50,948 5,790 Government transfers 446.078 448,486 438.313 Total Revenues 1,607,906 1,652,662 1,542,824 Expenses Salaries, wages and employees benefits 683,672 631,082 654,295 Materials 742,234 965,509 1,023,403 Contracted services and rents 37,000 36,039 50,431 Amortization 803.858 803,858 812.953 Total Expenditures 2,266,764 2,436,488 2,541,082 Annual (Deficit) (658,858) (783,826) (998,258) - 22 -