Consolidated Financial Statements of
THE CORPORATION OF
THE TOWN OF
Consolidated Financial Statements of
THE CORPORATION OF
THE TOWN OF
Auditors' Report
To the Members of Council,
Inhabitants
and Ratepayers of The Corporation of
The Town of
We have audited the consolidated statement of
financial position of The Corporation of The Town of Markham as at
We conducted our audit in
accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform
an audit to obtain reasonable assurance whether the financial statements are
free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation.
In our opinion, these consolidated financial
statements present fairly, in all material respects, the financial position of
the Town as at December 31, 2004 and the results of its operations and the
changes in its financial position for the year then ended in accordance with
Canadian generally accepted accounting principles.
Chartered Accountants
May
xx, 200
5
1. SIGNIFICANT ACCOUNTING
POLICIES
The
consolidated financial statements of The Corporation of The Town of Markham are
the representations of management prepared in accordance with local government
accounting standards, as recommended by the Public Sector Accounting Board
(“PSAB”) of the Canadian Institute of Chartered Accountants. Significant aspects of the accounting
policies are as follows:
Reporting
entity
These consolidated financial
statements reflect the assets, liabilities, revenues and expenditures of the
operating fund, capital fund, and reserve and reserves funds of the reporting
entity. The reporting entity is
comprised of all organizations, local boards and committees accountable for the
administration of their financial affairs and resources, to the Town, and which
are owned or controlled by the Town, including the following:
Town of
Unionville Business Improvement
Area
All material inter-entity
transactions and balances are eliminated on consolidation.
Investment
in
Markham Energy Corporation and its subsidiaries are
accounted for on a modified equity basis, consistent with the generally
accepted accounting principles as recommended by PSAB for government business
enterprises. Under the modified equity
basis of accounting, the business enterprise’s accounting principles are not
adjusted to conform to those of the Town, and inter-organizational transactions
and balances are not eliminated. The
Town recognizes its equity interest in the annual income or loss of Markham
Energy Corporation in its statement of financial activities with a
corresponding increase or decrease in its investment asset account. Any dividends that the Town may receive from
Markham Energy Corporation will be reflected as reductions in the investment
asset account.
Accounting
for Region and School Board transactions
The taxation, other revenues, expenditures, assets and
liabilities with respect to the operations of the school boards and the Region
of York are not reflected in the municipal fund balances of these financial
statements.
1. SIGNIFICANT ACCOUNTING POLICIES
(continued)
Trust
Funds
Trust funds and their related operations administered
by the municipality are not consolidated, but are reported separately on the
"Trust Funds Statement of Financial Position" and the "Trust
Funds Statement of Financial Activities and Fund Balances".
Basis of Accounting
Revenues are recorded in the
period in which the transactions or events occurred that gave rise to the
revenue.
Expenditures are the cost of
goods and services acquired in the period whether or not payment has been made
or invoices received.
Tangible Capital Assets
Expenditures made on capital
assets are reported as capital expenditures in the statement of financial
activities in the period incurred.
Government Transfers
Government transfers are
recognized in the financial statements in the period in which the events giving
rise to the transfer occur, providing that the transfers are authorized, any
eligibility criteria have been met, and reasonable estimates of the amounts can
be made.
Deferred Revenue
Funds received for specific
purposes are accounted for as deferred revenue until the Town discharges the
obligation, which led to receipt of the funds.
TAXATION AND RELATED REVENUES
Property tax billings are prepared by the Town based
on assessment rolls compiled by the Municipal Property Assessment Corporation
("MPAC"). Tax rates are established annually by Town Council,
incorporating amounts to be raised for local services and amounts that the Town
is required to collect on behalf of the Region of York and for education
purposes. Realty taxes are billed based on the assessment rolls provided
by MPAC. Taxation revenues are recorded at the time tax billings are
issued.
1. SIGNIFICANT
ACCOUNTING POLICIES (continued)
A normal part of the assessment process is the
issuance of supplementary assessment rolls that provide updated information
with respect to changes in property assessment. Once a supplementary
assessment roll is received, the Town determines the taxes applicable and
issues supplementary tax bills. Assessments and the related property
taxes are subject to appeal. Any supplementary billing adjustments made
necessary by the determination of such changes will be recognized in the fiscal
year they are determined and the impact shared with the regional government and
school boards as appropriate.
The Town is entitled to collect interest and penalties
on overdue taxes. These revenues are recorded in the period the interest
and penalties are levied.
Employee Future Benefits
The Town accounts for its
participation in the Ontario Municipal Employee Retirement System (OMERS), a
multi-employer public sector pension fund, as a defined contribution plan.
Vacation entitlements are accrued for as entitlements are earned. Sick leave
benefits are accrued where they are vested and subject to pay out when an
employee leaves the Town’s employ. Other post-employment benefits 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. The discount rate used to determine the accrued benefit obligation
was determined by reference to market interest rates at the measurement date on
high quality debt instruments with cash flows that match the timing and amount
of expected benefit payments.
INVESTMENT
INCOME
Investment income earned on
surplus operating funds, capital funds, reserves and reserve funds (other than
obligatory reserve funds) is reported as revenue in the period earned.
Investment income earned on obligatory reserve funds, such as development
charges, is added to the fund balance and forms part of the respective deferred
revenue balance.
Use
of Estimates
The preparation of financial statements 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 consolidated financial statements and the reported amount of
revenues and expenditures during the period.
Actual results could differ from these estimates.
1. SIGNIFICANT
ACCOUNTING POLICIES (continued)
BUDGET FIGURES
The
approved operating and capital budgets for 2004 are reflected on the
Consolidated Schedules of Operating Fund Activities, Capital Fund Activities
and Financial Activities. The budgets
established for the capital fund operations are on a project-oriented basis,
the costs of which may be carried out over one or more years and, therefore,
may not be comparable with the current year actual amounts. As well, the municipality does not budget for
activity within Reserve Funds, with the exception being those transactions
which affect either the operating or capital funds.
2. OPERATIONS OF SCHOOL BOARDS AND THE REGION OF
Further
to Note 1, requisitions were made by the York Region and School Boards
requiring the Town to collect property taxes and payments in lieu of property
taxes on their behalf. The amounts collected and remitted are summarized as
follows:
3. TRUST FUNDS
Trust
funds administered by the municipality for the benefit of others amounting to $
1,560 (2003 - $1,489) have not been
included in the "Consolidated Statement of Financial Position" nor
have their operations been included in the "Consolidated Statement of
Financial Activities". The trust
funds have been reported separately on the "Trust Funds Statement of
Financial Position" and "Trust Funds Statement of Financial
Activities and Fund Balances".
4. CASH AND CASH EQUIVALENTS
Investments, which are reported at cost, had a market value of $ 269,775 (2003 - $266,673) at the end of the year. Investments consist of authorized investments pursuant to the provisions of the Municipal Act and include short-term instruments of various financial institutions, Government bonds, and Treasury Bills. For the 2004 year, the average rate of return earned was 3.72% (2003 – 4.27%).
5. PENSION AGREEMENTS
The municipality makes
contributions to the Ontario Municipal Employees Retirement System (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.
In 2003 as part of a phase in
approach, the Town was required to pay one-third of its total OMERS costs. In 2004, the Town commenced making full
contributions.
The amount contributed to OMERS for 2004 was
$3,096 (2003 - $1,054).
6. AMOUNTS TO BE RECOVERED
7. TAXES RECEIVABLE
The balance in taxes
receivable, including penalties and interest, is comprised of the following:
MPAC continues to refine the assessed
property values established in 2003 in the Town and across the Province. These values were used by the Town to compute
the 2004 property tax bills. However,
the property tax revenue and tax receivables of the Town are subject to
measurement uncertainty as a number of submitted appeals have yet to be heard.
Additionally, the Province enacted legislation that permits taxpayers and/or
municipalities to file tax appeals retroactive to 1998, most of which have not
yet been dealt with. This additional financial uncertainty continues the need
for the allowance established for tax appeals in the amount of $4,240 (2003 -
$4,918). The provision is required due
to a number of different types of tax adjustments, including frozen assessment
listing (“FAL”) appeals, new construction retroactive appeals, and commercial
vacancy rebates. Any supplementary
billings adjustments made necessary by the determination of such changes will
be recognized in the fiscal year they occur and the effect shared with the
regional government and school boards as appropriate.
The Province enacted legislation, the “Continued Protection
for Taxpayers Act” (Bill 140) in December 2000 that continued the capping
provisions for 2001 and onward that were in place between 1998 and 2000. The effect of this legislation, together with
regulations issued subsequent to its enactment, will limit assessment-related
tax increases to 5% annually for multi-residential, commercial and industrial
properties until these properties attain a level of tax equivalent to full
CVA. The adjustments caused by this
legislation may also impact the amounts of rebates which the municipality must
issue to certain charitable organizations and the interest and penalties the municipality
can collect on arrears of taxes where it is subsequently determined that such
amounts have been overstated.
This program is administered by the Region of York on behalf
of the area municipalities, and therefore, there is no impact on the
“Consolidated Statement of Financial Activities”.
8. CLASSIFICATION OF EXPENDITURES BY OBJECT
The
Consolidated Statement of Financial Activities presents the expenditures by
function; the following classifies those same expenditures by object:
9. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities include
financial obligations to outside organizations and individuals as a result of
transactions and events on or before the end of the accounting period. They are the result of contracts, agreements
and legislation in force at the end of the accounting period that require the
Town of
10. DEFERRED
REVENUE
Deferred revenues represent user charges and
fees which have been collected but for which the related services have yet to
be performed. These amounts will be
recognized as revenues in the fiscal year the services are performed. The following is the current status of the
deferred revenues:
11.
USER
CHARGES
12.
EMPLOYEE
FUTURE BENEFITS LIABILITIES
EMPLOYEE
FUTURE BENEFITS
Employee Future Benefits are
health and dental benefits that the Town of
Actuarial
valuations: The following table sets out the actuarial determined results for each
of the plans as at
Information about the Town’s
defined benefit plans is as follows:
12.
EMPLOYEE
FUTURE BENEFITS LIABILITIES (continued)
The actuarial valuations of
the plans were based upon a number of assumptions about future events, which
reflect management’s best estimates. The following represents the more
significant assumptions made:
VESTED SICK LEAVE BENEFITS
Under the sick leave benefit
plan, which is available only to the Town's firefighters, employees can
accumulate unused sick leave and may become entitled to a cash payment when
they leave the municipality's employment.
The liability for these accumulated days, to the extent that they have
vested and could be taken in cash by an employee on termination, amounted to
approximately $3,415. The accrued benefit
liability and the net periodic benefit cost were determined by an actuarial
valuation completed December 2004.
WORKPLACE SAFETY & INSURANCE OBLIGATIONS
Effective
The Town also maintains an
insurance policy, which protects the Corporation against single claims in
excess of $250.
13.
COMPARATIVE
FIGURES
Certain
comparative figures have been reclassified to conform with the financial
statement presentation adopted in the current
year.
14. MUNICIPAL FUND BALANCES AT THE END OF THE YEAR
(a) Operating
fund balance
(b)
Capital
fund balance
14. MUNICIPAL
FUND BALANCES AT THE END OF THE YEAR (continued)
(c)
Reserves
and Reserve Funds
15. PUBLIC SECTOR SALARY DISCLOSURE
The
Public Sector Salary Disclosure Act, 1996 requires the municipality to disclose
the names, positions, salaries and benefits of employees who were paid a salary
of $100,000 or more during the calendar year.
As
required under the Act, applicable salaries and benefits paid to employees
during 2004 are as follows:
16. LEASE OBLIGATIONS
(a) As at
(b)
The
17. CONTINGENCY
UNSETTLED LEGAL CLAIMS AND POTENTIAL OTHER CLAIMS
The Town has been named as
the defendant in certain legal actions in which damages have been sought. The outcome of these actions is not
determinable at this time and, accordingly, no provision has been made in these
financial statements for any liability that may result.
MARKHAM ENERGY
CORPORATION
A class action
claiming $500,000 in restitutionary payments plus interest was served on
The
Electricity Distributors Association is undertaking the defence of this class
action. At this time it is not possible
to determine the effect, if any, on the financial position of Markham Energy
Corporation and on that of the Town of
18.
INVESTMENT IN
The following provides condensed consolidated
financial information for Markham Energy Corporation including its wholly-owned
subsidiary Markham District Energy Inc. as well as a 41% interest in PowerStream
Inc.
During 2002, Council ratified a shareholders’
agreement made with the City of
