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Agenda - Special General Committee - 20060627SPECIAL GENERAL COMMITTEE AUDIT COMMITTEE AGENDA N0. 0643 TUESDAY, TUNE 27, 2006 7:00 P.M. COUNCIL TOWN HALL PUBLIC RELEASE 23/06/06 TOWN OF AURORA SPECIAL GENERAL COMMITTEE MEETING AUDIT COMMITTEE AGENDA NO. 06-13 Tuesday, June 27, 2006 7:00 p.m. Mayor Jones in the Chair. I DECLARATIONS OF PECUNIARY INTEREST II APPROVAL OF AGENDA RECOMMENDED: THAT the content of the Agenda as circulated by the Corporate Services Department be approved as presented. III DELEGATIONS a) Mr. John Gutteridge, Director of Financial Services/Treasurer Re: 2005 Financial Statements b) Mr. Allister Byrne, Grant Thornton, Auditors Re: 2005 Financial Statements Special General Committee Meeting No. 06-13 Page 2 of 2 Tuesday, June 27, 2006 IV CONSIDERATION OF ITEM REQUIRING SEPARATE DISCUSSION 1. FS06-020 – 2005 Financial Statements (pg. 1) RECOMMENDED: THAT the audited financial statement for the year 2005 be received and be published in accordance with Section 295 of the Ontario Municipal Act; and THAT $43,000 of the 2005 Surplus be carried forward to fund Pl anning Projects started in 2005; and THAT $940,587 of the 2005 Surplus be transferred to the Fire Services Capital Discretionary Reserve; and THAT $135,000 of the 2005 Surplus be transferred to the Future Legal Discretionary Reserve Fund; and THAT $507,132 of the 2005 Surplus be transferred to the Municipal Capital Discretionary Reserve. 2. FS06-021 – Water and Sewer Financial Statements (pg. 31) RECOMMENDED: THAT Council adopt the practice of presenting the Sewer and Water Budgets and Financial Statement as separate reports; and THAT Council authorize the utilization of $205,000 from the Storm Sewers Reserve Fund and $205,000 from the W ater and Sewer Reserve Fund to cover the 2005 operating deficit. V ADJOURNMENT SPECIAL GENERAL COMMITTEE - AUDIT - JUNE 27, 2006 AGENDA ITEM# TOWN OF AURORA General Committee Report No. FS06-020 SUBJECT: 2005 Financial Statements FROM: L. John Gutteridge, Director Financial Services/Treasurer DATE: June 21, 2006 RECOMMENDATIONS THAT the audited financial statement for the year 2005 be received and be published in accordance with Section 295 of the Ontario Municipal Act That $43,000. of the 2005 Surplus be carried forward to fund Planning Projects started in 2005. That $940,587. of the 2005 Surplus be transferred to the Fire Services Capital Discretionary Reserve. That $135,000. of the 2005 Surplus be transferred to the Future Legal Discretionary Reserve Fund. That $507,132. of the 2005 Surplus be transferred to the Municipal Capital Discretionary Reserve. BACKGROUND As committed in December 2005 here are the Audited Financial Statements for the year ending 2005. We are presenting these without the management letter from the Municipal Auditor as they have not completed the management letter and will appear before the Audit Committee at a future date. One of the reasons for the management letter not being ready for this meeting is a result of an internal process review that the auditors have to complete whenever a client changes accounting packages and/or municipal systems and major personnel changes. As you know our municipality did all in 2005. The result of this part of their audit will not affect the Financial Statement and if problems are found they will be reported in the Management Letter. —1— SPECIAL GENERAL COMMITTEE - AUDIT - JUNE 27, 2006 June 27. 2006 -2- Report No. FS06-020 As this is the first audit that is reporting on records that I am partially responsible for it has resulted in the audit and statement preparation taking a little longer than we had hoped. However the Financial Statement are complete and we felt that it is important to bring these forward as soon as possible. COMMENTS As I reported in a previous report the municipality has a surplus in 2005 of $1,290,642. as shown on Page 2 of the statements and detailed in Schedule 1 on Page 14, this is not far off the number we reported earlier. A summarized breakdown of the components of the Surplus will be detailed in the Financial Implications portion of this report. Council should be aware that this report is a consolidated report and includes consolidation of the General Operations of the town, the Capital component as well as the Library Board, the Water and Sewer Operations and the impact of the Investment in Borealis Hydro Electric Holdings Inc.. The following is a roll up of how the surplus was derived: Surplus carry forward from 2004 $ 869,800. 2005 Operating Surplus $ 830,919. Library Board $ 0. Sewer and Water Department $ (410,077.) Town of Aurora Surplus $1,290,642. The Library Board didin actual fact have a surplus of $120,695, but it has been the practice in the past to move any surplus to the LibraryCapital Discretionary Reserve fund. Sewer and Water did have a larger than normal deficit and the explanation forthis will be in a separate report to council on the Sewer and Water Department. By removing the consolidation of the other funds the General Operating fund operated in a surplus position for the year of $1,700,719. We will provide a detailed breakdown of the Surplus and the statements in the Financial Impact Section of this report. This report can be consider good news and bad news, the good news is that we have an extra $1,700,719. in which to allocate to various initiatives in the community, with the bad news being having such a large surplus. As for options for these funds Council has already dealt with $75,000. of the surplus to which we reported previously, this resulted from the operating money in the Accessibility Committee budget. A similar thing happened in the Planning and Development, some of their studies in operations were not completed by the end of the year and the budgeted funds were not -2- SPECIAL GENERAL COMMITTEE - AUDIT - JUNE 27, 2006 June 27. 2006 - 3 - Report: No. FS06-020 carried forward or setup as accounts payable. Therefore $43,000. of the surplus is from the planning and development consultants accounts which will still have some expense. It is our recommendation that these funds come from the 2005 operating surplus. As we mentioned with the Accessibility issue these issues will be resolved in the 2007 budget by making items such as this capital projects, so that if they go over the year end period it will not be an issue. Another option that we would like Council to consider with this surplus is to use the surplus to address the Central York Fire Services Budget issue that was identified in report No. TR05-037. You will recall that to resolve this issue it was to have an impact on the 2006 through 2008 budgets. If we use the surplus to resolve this issue it will reduce the tax burden that Council approved. This means that the starting point for levy purposes in 2007 will be down 2% based upon the 2006 levy. Legal Services has shown a surplus of $135,000. resulting from not requiring the funds for outside services. The budget was established initially anticipating that we may have to defend our position on issues which would require outside legal services. Although this didn't happen in 2005 we believe that we should transfer this surplus into the Legal Discretionary Reserve Fund which has a current balance of $236,093. to provide the funds when this will be required for matters in the future. The final recommendation is to apply the remaining $507,132. to the Municipal Capital Reserve Fund. This is contrary to our recommendation to increase our working fund to 10% of our levy primarily because at the present time we have a surplus of cash as a result of the Aurora Hydro Sale Investment Fund and our needs have been more clearly identified in the Capital Asset Management Plan to which these funds can be applied. If you adopt all of the recommendations the following is a recap of the utilization of the surplus funds. Accessibility Committee $ 75,000. Planning and Development $ 43,000. Central York Fire Services Budget $ 940,587. Future Legal Reserve $ 135,000. Municipal Capital Reserve $ 507,132. TOTAL OPERATING FUND SURPLUS $1,700,719. FINANCIAL IMPLICATIONS Attached hereto as Appendix "B" is a breakdown as to how the surplus was generated. CONCLUSIONS —3— SPECIAL GENERAL COMMITTEE — AUDIT — JUNE 27, 2006 June 27, 2006 - 4 - Report No. FS06-020 As promised we are presenting the 2005 financial statements 6 months soonerthan we did the 2004 statements, now that we have gone through the audit routine once with the auditors and understanding what they require to complete the audit we can see no reason why we cannot do better again next year. As for the surplus as a Treasurer this is not a acceptable result as it exceeds what would be a normal variance to budget. We would anticipate that the 2006 results will be better but we are really looking forward to the 2007 process, it will by my first full year to have influence on the process and the results. In addition the Financial Services Department is now at full compliment and all working to this common goal. LINK TO STRATEGIC PLAN Goal "A" maintaining a well -managed and fiscally responsible municipality. ATTACHMENTS Appendix "A" 2005 Audited Financial Statements Appendix "B" Explanation of 2005 budget variances PRE -SUBMISSION REVIEW Management Team - June 21, 2006 Prepared by. L. John Gutteridge, ext. 4111 Director of Finance/Treasurer John. S. Rogers C.A.O. 0 op —4— SPECIAL GENERAL COMMITTEE - AUDIT - JUNE 27, 2006 Town of Aurora Consolidated Financial Statements December 31, 2005 -5- SPECIAL GENERAL COMMITTEE - AUDIT - JUNE 27, 2006 Contents ige 1 2 3 4 13 14 15 16 Grant Thornton ti -6- SPECIAL GENERAL COMMITTEE — AUDIT — JUNE 27, 2006 Grant Thornton Grant Thornton LLP Chartered Accountants Management Consultants Auditors' Report To the Members of Council, Inhabitants and Ratepayers of The Corporation of the Town of Aurora We have audited the consolidated statement of finandial• position "of The Corporation of the Town of Aurora as at December 31, 2005 and the consolidat4s'latements of financial activities and changes in financial position for the year then ended: These consolidated financial statements are the responsibility of they wn's management. °O.ur, responsibility is to express an L'l ll In opinion on these consolidated financial s 111, � jpri�ts based on our audit. We conducted our audit in accordance wit1 Those standards require that we plan andll whether the financial statements are free of m on a test basis, evidence supporting the amour audit also includes assessing the.accounting management, as well as evaluating the overall 0enerally accepted auditing standards. 4, to Otain reasonable assurance sta} I} i U An audit includes examining, sclosu��g� In the financial statements. An used 'Ed significant estimates made by statement presentation. In our opinion, these consolidated flnancial statemelpt,g°"present fairly, in all material respects, the financial position of the Town as tat,December 3,111, 2005 and the results of its operations and changesllljhjlif I�,dna;r,}pj„ position for the year 'then' ended in accordance with Canadian generally figures are p d rI,gd for comparative purposes and have not been subject to audit res. Accordingl�%'rliido not express any opinion regarding the budget figures. Markham, Cali'ad,';'!fj,. II��I�I!!'' May 5, 2006 y �LI��fi'I�� Chartered Accountants 15 Allstate Parkway Suite 200 Markham, Ontario L3R 5B4 T (416)366-0100 F (905) 475-8906 E Markham@GrantThornton.ca W www.Grant-rhornton.ca Canadian Member of Grant Thornton International 1 —7— SPECIAL GENERAL COMMITTEE - AUDIT - JUNE 27, 2006 Town of Aurora Consolidated Statement of Financial Position As at December 31 2005 2004, Assets Cash and short term investments (Note 2) $ 58,316,323 $ 27,673,498 Taxes receivable 6,689,674 4,455,945 User charges receivable 2,454,609 1,520,143 Other receivables 3,528 323, 1,550,907 Investment in Borealis Hydra Electric Holdings Inc. (Note 3) ,, 27,112,557 70':`9881929 62,313,050 Liabilities Payables and accruals 11,793,745 „ 9,777,754 Deposits and deferred revenue IIf��l 4,667,537 4 452,482 Deferred revenue - Obligatory reserve funds (Npt' Ill,' Employee future benefits obligation (Note 5) it �I� If III1,542752 ,i5:0022 "6,810 333 ,425,646 Long Term Debt 6) 111 lf�;j. I I��iIi1II6III900 (Note �II�IIII�I) 35,471,056 21,466,215 Net Financial Assets �IIII!�ll,. $'+17,873 $ 40,846,835 Municipal position Amounts to be Fund balance: Operating fi'. Capital fund Mu icipal position "141i i ii :, Contingl5lnIbl,,rg (Note 12) Ill Approved by II,I1111;lljV� Mayor (16,915,000) $ 1)' �I� iIjlljiir 11290,642 869,800 8,420,872 7,178,547 9 42,721,359 5,685,931liCis Hol27,112,557 (Note 3) 52,432,873 40,846,835 l�illll $ 35,517,873 $ 40,846,835 Clerk See accompanying notes to the consolidated financial statements. N is SPECIAL GENERAL COMMITTEE — AUDIT — JUNE 27, 2006 Town of Aurora Consolidated Statement of Financial Activities Budget Actual Actual Year Ended December31 2005 2005 2004 (Unaudited) Revenues Taxation (Note 7) $ 19,341,077 $ 20,152,742 $ 17,788,102 User charges 14,720,136 20,340,754 16,643,811 Grants 231,420 296,242, 187,638 Other (Note 9) 4,727,765 8,38i,048 'I... 7,743,408 Proceeds from sale of Borealis Hydro dll" Electric Holdings Inc. (Note 3) - 146239,528 - Net income — Borealis Hydro Electric Holdings Inc. (Note 3) 361,066 Expenditures Operating General government 0111; IIIIIIIj';i )j I Illill111�1�11 4 735,81, �01j l i 11111114111729,065 4,867,003 Protection to persons and property 5:913,3 �1�IIIIII;1II'll' 5,851,939 6,816,591 Transportation services 3,186,113 'III111 3 523 9584 Environmental services 8 415,357 1IIII 561 7,619,240 Leisure and cultural services 9,070,197 ,01j55,I247 8,022,158 Planning and development 1 095,297 11 U 58 32 416'.YM 32 iy7 658 30,704,634 j Ca Ital p l'II�aIIIII�Ii�IiIIl llI 'I h+ General govern 1,i ion pp III,n nd II i ty 481,515 410,000 279,677 616,136 12,900Protect Transportatlu4i51{I�� I es I j 4,969,2,00 4,271,460 4,899,302 Environmental s iU I(RI°'„(pe s I �i�j�III��I�li 66 000 3,465,559 1,386,874I Leisure and culturalyl PIannlgdigl'didevelopmI! iTINII,, 3x059,200 ++".iiIIIIIIIIIII II IIII" 150,000 21,846,703 59,286 5,516,768 37,297 1r" IIII I,il.yli I,lI��III'I.il "I"�Illi •°IIII' . 10,619,915 29,922,685 12,469,277 II' ' I -�,I �T'dtal expenditures (f ffi 8) I'1 'IIIII fill 43,036,088 62,500,343 43,173,911 I, Net reyenues (expendituYls) III (4,015,691) 21,909,971 (449,886) Flnancing�arKd transfers Il !' Issuance of t I h ter I hq Changes in er (d'ebt future benefits 16,915,000 pill obligation (ijll+'" (126,376) (31,000) Change in fund balances $ (4,015,691) $ 38,698,595 $ (480,886) See accompanying notes to the consolidated financial statements. 3 mom SPECIAL GENERAL COMMITTEE — AUDIT — JUNE 27, 2006 Town of Aurora Consolidated Statement of Changes in Financial Position Year Ended December 31 2005 2004 Increase (decrease) in cash and short term investments Operating Net revenues (expenditures) $ 21,909,971 $ (449,886) Less: Increase in employee future benefits obligation (126,376)' : (31,000) Increase in equity in Borealis Hydro Electric Holdings Inc. " 1= (361,066) 21,783�685 (841,952) Uses g 1 Increase in taxes receivable Ili{I{ii�lllh�iii„ (2,233,729) (972,625) Increase in user charges receivable I1I1"I (934,466) (214,888) Increase in other receivables II (1,977,416) (484,457) Decrease in deposits and deferred revgllaill I (916;406) Decrease in obligatory reserve funds I IIjI�+(2088,31) 40 473 192) (4,676,695) Sources Ij I�IIII Increase in payables and accrual${ III�IhI lil397: 991 4,976,242 Increase in deposits and deferred,' revenues ti6Increase in employee future benefits dbliefon 31,000 2,057,422 5,007,242 Net changes in cash from operations is ,1'3,727,825 (511,401) Financing Issuance ¢Ih g term d (� 16,915,000 Net increase (decr i II$I'I1V ca i the year 30,642,825 (511,401) u� IIII� II II i, I �II� l�l1 liiW Cashi,�ndi h0 lkeffi inve i its, beginm year 27,673,498 28,184,899 Gash and short ter!ki-�iUIIIZgstmllellnIYII'�id.of year $ 58,316,323 $ 27,673,498 See accompanying notes to the consolidated financial statements. 4 —10— SPECIAL GENERAL COMMITTEE — AUDIT — JUNE 27, 2006 Town of Aurora Notes to the Consolidated Financial Statements December 31, 2005 Nature of operations The Town of Aurora [the "Town"] is a municipality in the Province of Ontario. The Town 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 Basis of presentation it ui The consolidated financial statements of the Town arI Ijj� a repPesentation of management and have been prepared in accordance with Canadiar]''f:� enerally accepted accounting; principles for local governments as recommended by their ' �Sector`' counting Board ['PSil I of The Canadian Institute of Chartered Accountants. i��lilillln,. Illlllle01 Significant accounting policies adopted by the Town are Basis of consolidation The consolidated financial statements reflect the, assets, Iiabilitid� OVenues, expenditures t for governmens enterprise which is and fund balances of the Town, except bush accounted for by the modified equity basis of accounting, comprise all of the organizations, local board and comm' at are accountable.fbr the adrhNitration of their financial affairs and resourcs to f I�Im hich are owned or controlled by the Town. The Aurora Public LibraryBo 1 is full �,�[,t,�Ildated in these consolidated financial statements. All inter- orcanizational.ah , 11I titer -fund tactions and balances are eliminated. Accounting for ets and liabilities with respect to the Boards of of York are not reflected in the Town's AcC�UII accounting Revenue, expendit'I GIs are reported on the accrual basis of accounting. The accrual basis of apCbunting r� ,ognizes revenues as they become available and measurable; expenditures'' � I eco !zed as they are incurred and measurable as a result of receipt of r„ goods or serviccreation of a legal obligation to pay. Inventories I" Expenditures on materials and supplies are reported as an expenditure on the consolidated statement of financial activities in the year of acquisition. Non -financial assets Non -financial assets are recorded in the period the goods or services are acquired. —11— SPECIAL GENERAL COMMITTEE — AUDIT — JUNE 27, 2006 Town of Aurora Notes to the Consolidated Financial Statements December 31. 2005 Summary of significant accounting policies (continued) Capital assets The historical cost and accumulated amortization of capital assets are purposes. Capital assets acquired are reported as an expenditur statement of financial activities in the year of acquisition. Deferred revenue Deferred revenues represent user charges and fees related services have yet to be performed. These the fiscal year the services are performed. The To authority of provincial legislation and Town by-lal in their use and, until applied to specific capital Amounts applied to qualifying capital projects are n are expended. Employee future benefits The present value of the cost of provil expensed as employees earn these entitl earned by employees is actuarially detern on service and man � best estim� health care and;1'iI��U Vacation earned. The T11. i also estlj` s future overtime as th eillarned. ��jjjj Reserves and the T for future df adjustment led for Town consolidated een collected but for which the be recognlzed'asf;revenues in funds'i by their nature, arefrestncted are n�� r,oed as deferred Yevenue. ll!as,a0venub in the fiscal period they loyees with furl a" benefit programs is roughpsiervice.oll� he cost of the benefits ig tQpr,9Act'ed benefit method prorated ement ages of employees and expected its are accrued for as entitlements are relating to accumulated sick credits and ;ouncil, are set aside in reserves and reserve ;. Transfer to/from reserves and reserve funds approved. Subdivislj°'i�i' reets light�115, sidewalks, drainage and other infrastructure are required to be qi provided bi �hvision ' velopers. Upon completion they are turned over to the municipality. The munici 1i{%Eilli}� involved in the construction and does not budget for either the contributionsfro i4i; developer or the capital expenditure. Investment Investment Income earned on surplus operating funds, capital funds, and reserves and reserve funds are reported as revenue in the period earned. Investment income earned on development charges (obligatory reserve funds) is added to the fund balance and forms part of the deferred revenue balance. —12— SPECIAL GENERAL COMMITTEE — AUDIT — JUNE 27, 2006 Town of Aurora Notes to the Consolidated Financial Statements December 31, 2005 1. Summary of significant accounting policies (continued) Government transfers Government transfers are recognized in the financial statements as revenues in the year in which events giving rise to the transfer occur, providing the transfers are authorized, any eligibility criteria have been met, and reasonable estimates of the am6ilfrt can be made. Use of estimates The preparation of financial statements in conformlt 111611' Canadian gererally accepted accounting principles requires management to mal%gglIllestimates and assumptwns,that affect the reported amounts of assets and liabilities at e�tiiate of the financial statements, and .the reported amounts of revenues and expendituresli'. II.'jn� the pertp' �:Actual results could'differ from these estimates. +IIi'�Ili�hn,. dIIaIII,,. Budget figures The approved operating and capital budgets for 2005 areii��P�'' cted on the consolidated statement of financial activities. The b1.U,d'1ge)s,fgst�blished for All �p;lj,�W'fuhd operations are on a project -oriented basis, the costs of 'which may pe carried o t er one or more years and, therefore, may not be comparable with;the curr'gnfyear,actuals1' 2. Short term Short term mve' (4 ' s record@ at cost of $43 883,545 (2004 - $4,922,037), have a market value approximating ., j Th g411 h vestments consist of interest -bearing certificates that are liquid m nature and areI d sphp nd short-term investments. n lliilaiulrl�illan l� ��1��ii� �) ii�i�i ;IIlI11 Il��lly Investment 4 realis � �'o Electric Holdings Inc. §,'I,gI,lowing represen ii,ndense mancial information for Borealis Hydro Electric Holdings Inc: �rsch has been act nted fair on a modified equity basis consistent with the generally vi accepied;;;i;accounting p i ,elples as recommended by PSAB for government business On October 31!iir , i0 IIt�iN'b Town sold its investment in Aurora Hydro Connections Limited for total consider atiol�?l¢,�1$34.5 million. The amount received has been applied in the following manner: 2005 Repayment of promissory note $ 12,736,000 Redemption of outstanding shares 12,385,600 Dividend received 10,117,928 $ 35,239,528 7 —13— SPECIAL GENERAL COMMITTEE - AUDIT - JUNE 27, 2006 Town of Aurora Notes to the Consolidated Financial Statements December 31, 2005 3. Investment in Borealis Hydro Electric Holdings Inc. (continued) The Town of Aurora's investment in Borealis Hydro Electric Holdings Inc. at December 31, 2005 is reported as follows: i 2004 Share capital Borealis Hydro Electric Holdings Inc. - 1,000 common shares Retained earnings Long term debt — unsecured promissory note pli Total investment Details of the continuity of the investment are a§; 0101 � Balance, beginning of year Net Income for the year Proceeds on sale of Hydro Balance, end of year The following Holdings Inc.: Financial Position Current Other Long term Net assets of Aurora financial i6fd'rmation in 14'kji1, 1 $ 12,385,600 ' 1,990,957 12,736,000 1 $ :27,112,557 I� (IIIIII;p 2005 2004 27,112,557 $ 26,751,491 111,8,126,971 361,066 $ $ 27,112,557 of Borealis Hydro Electric 2005 2004 $ 1 $ 11,495,055 20,757,031 1,636,389 1 33,888,475 5,895,582 880,336 12,736,000 19.511,918 $ 1 $ 14,376,557 V. -14- SPECIAL GENERAL COMMITTEE — AUDIT — JUNE 27, 2006 Town of Aurora Notes to the Consolidated Financial Statements December 31, 2005 3. Investment in Borealis Hydro Electric Holdings Inc. (continued) Results of Operations 2005 2004 Revenues $ 34,563,745"'$ 34,772,056 Operating expenses 30M3.043 32,982,330 Income before Interest and amounts in lieu of income taxes 3,65b702 1,789,726 Interest and amounts in lieu of Income taxes 1,963y942 1,428,660 p. Net 1'1 Gainonale of Aurora Hydro 'i�I ��I�il�llp { 6.462,211 361,066 6.462,211 IIII Net Income pIII� illiilili,. $ I1Iile,0,126,971 $ 1066 Related party transactions Related party transactions between Inc. (wholly owned subsidiary of the 4. Interest paid on Rent — 215 Inds Energy purl~ Dividend receiv ent of PS), :ment is in certain circ note 6y South of Aurora and 8'Rj"� h is Hydro Electric Holdings Uded the following IlI�Pp'I' 111 2005 2004 $ 770,942 $ 923,360 85,479 100,034 825,094 700,839 $ 10,117,928 $ — ofY�' Cory reserve funds II Is that d '1��2Ydry reserve funds be reported as deferred revenue. e as pr- uncial legislation restricts how these funds may be used anc.s,11kow these funds may be refunded. �",,I!nsist of the following: Development chdifp 'b Park purposes Development charges transferred to capital but unexpended at the end of the year 2005 2004 $ (1,093,191) $ 1,720,880 2,219,246 1,742,968 1,126,055 3,463,848 416,697 3,346,485 $ 1,542,752 $ 6,810,333 9 —15— SPECIAL GENERAL COMMITTEE - AUDIT - JUNE 27, 2006 Town of Aurora Notes to the Consolidated Financial Statements December 31, 2005 5. Employee future benefits obligation Employee future benefits Accrued sick leave Accrued overtime Employee future benefits are health and dental future retirees, and employees currently on a long post -retirement costs as they are earned during actuarial valuation carried out was December 31,,,, 2005 2004 $ 389,607 $ 356,146 131 :715 %700"'°, 38,800 30,700 $ �52,022 $ 425,646 Gl ,t"are provid'ed'to early retirees, a ilty. The Town 'Qognizes these ployee's tenure of service: The last Information about the Town's post retirement benefif§llp,�',0II,is 2005 2004 a,607 $ 356,146 56,146 $ 325,146 20,954 19,768 21,721 19,843 9214) (8,611) 389,607 $ 356,146 rluation were: mermined using a discount ;e of 10.0% for 2005 and Dental costs were assumed to increase at a average increase of 5.0% in 2005 and thereafter. Actuarial evaluations for accounting purposes are performed every three years using the projected benefit method prorated on services. The most recent actuarial report was prepared at December 31, 2003. The average remaining service period of the active employees covered by the benefit plan is thirteen years for 2005, As there have been no significant changes in staff composition or claims history, nor have there been any major deviations from the assumptions made for the December 31, 2003 valuation, the 2005 benefit liability was estimated extrapolating from the amount of full time salaries and wages. 10 -16- SPECIAL GENERAL COMMITTEE - AUDIT - JUNE 27, 2006 Town of Aurora Notes to the Consolidated Financial Statements December 31, 2005 6. Long Term Debt Long term debt, end of year 2005 2004 $ 16,915,000 $ - In June, 2005, the Town Council approved the issuance of two;fdebentures to fund the construction of the Town's new recreation complex. The debentures;are repayable over ten and twenty year terms and repayments are to commence ;n 2a06 Interest rates vary from. 3.10% to 4.37%. Principal repayments for each of the next five years a�dlerediter are as follows 2006 ;idllli��lf IIII $I it 1,191,470 y, 2007 IIII�II I (IIII h��40,500 2008 IIII IIII III 1,2�$9,796 2009 III 1,342,372 2010 III h�O37 i 453 625 2011 and thereafter . ; r, . 7. Net taxation 10'`Iplil q �aig �fII�I 2005 2004 IIIIP-, ` Ilp Total taxation ci q III 5t{s of the IiwIng: 4IIEI I ' Total taxes levied by own $ 73,911,862 $ 68,039,944 III",II) Ilgillill'1j01ir Less (IIII ' I� Ta 1; !IIP11 I1 IIp�+,IehaI�I�fjj�l`I(Boardsof ��iation T jtes levie �II"(I'll lalf oft II gion of York 24,647,231 29,111,889 23,432,232 26,819,610 �I ill' lI'''il iIInO, IIJill P Ill�li $ 20,152,742 $ 17,788,102 rl',lllli�� .. 8. C6h f!cation of �I penditures by object 2005 2004 I,IIUIIi„!�,IIIIII� Expenditure +:" ,,o„bjecf,;,;onsist of the following: Salaries, wages dY"bi Longterm debt ' Contracted services Materials and supplies Capital and other $ 12,780,679 $ 11,524,849 16, 547,748 15, 895, 227 3,249,231 3,284,558 29, 922, 685 12, 469, 277 $ 62,500,343 $ 43,173,911 11 -17- SPECIAL GENERAL COMMITTEE - AUDIT - JUNE 27, 2006 Town of Aurora Notes to the Consolidated Financial Statements December 31, 2005 9. Other revenue 2005 2004 Operating Penalties and interest on taxes $ 669,846 $ 563,679 Fines 508,535 356,203 Rents and leases 1,766567''•a 2,495,206 Interest income 1i846,421 1,523,960 Other :cill'40'h:333 888,459 5,196.4702 5,827,507 Capital Sale of land ��6 II 1 1,305,712 Proceeds from other municipalities ,! 2,369,321 Proceeds from developers i I 361,713 Other 1111111111 I,l l (llhu,59 527 210,843 2,750,561 1,516,555 Reserves and Reserve Funds hIIII 21,682 349,588 Interest income I Other ,q �, III hiaut''03 49,758 64°785 399,346 $' 381,048 $ 7,743,408 10. Pens!on,a ilir Dements I� The Town makesll l ll li uti l Ilit l he Ontario ,Municipal Employees Retirement System ( OMERS" which is G P ,, rilbehalf of all full-time members of its staff. OMEi(��p�i>I d ben 1iIl n whic �I es the amount of the retirement benefits to be K ped by t e I R eeson the length of service and rates of pay. ributions in 200� �� i' ed fr l ljpol to 9.8% (2004 — 6.0% - 9.8%) depending on level of nas. The 2005 o ltinq exp, se for OMERS was $569,762 (2004 - $480,909). 11. Ip Effective Janua" 111�,,Q'' 2, the Town entered into a Joint Venture Agreement with the Town of Newmarket withll!I'A'Spect to the provision of Fire and Emergency services. Under the Agreement, the.;,lrown of Newmarket assumed responsibility for the combined Central York Fire Services. The cost of these services is shared between the two municipalities on the basis of a pre -defined cost sharing formula. The Town's share of costs for the year was $5,180,809 (2004 - $4,625,494). iv: 110 SPECIAL GENERAL COMMITTEE — AUDIT — JUNE 27, 2006 Town of Aurora Notes to the Consolidated Financial Statements December 31, 2005 12. Contingencies The Town is subject to various legal claims arising in the normal course of its operations. The ultimate outcome of these claims cannot be determined at this time; however, the Town's management believe that the ultimate disposition of these matters will'jbot have a material adverse effect on its financial position. +, ,41 ,;,,• 13. Insurance coverage I 3 The Town is self insured for insurance claims up to $1Qifi{',¢Q fdr any individual claim and for any number of claims arising out of a single occurrencolrli Claim costs during the year amounted to $58,1611;li itip y 4 - $4616`,I`�). ilI��il The Town has made provisions for reserves for self i ( III !�c I' +m' tunder $10,000 which as at December 31, 2005 amounted to $342,386 (200HI�j 33,550). These reserves are report ed on the consolidated stateent of financial activ"If#ii rider reserves set aside b Council. I��I�IQliaO• The Town is a member of the Ontario Wriid+palpl,risurance Excn yl'o'S'; which is a licensed group for liability insurance coverage. C6ritrlbutions hAV been ma , Ito the fund for claims in excess of $10,000 and under $50,000,0000, These contribution' have been reported as :, ..,, expenditures on the c rj ated statement+of,firianc+al actluat+es. The contribution for the year was $216,689 1�{�1.,,283). 14. Certain comparative have been reclassified to conform 13 —19— SPECIAL GENERAL COMMITTEE — AUDIT — JUNE 27, 2006 Town of Aurora Schedule 1- Consolidated Operating Fund Activities Budget Actual Actual Year Ended December 31 2005 2005 2004 (Unaudited) Revenue Taxation (Note 7) $ 19,341,077 $ 20,152,742 $ 17,788,102 User charges 14,720,135 13,250,339 11,633,503 Grants 231,420 199,798. 187,638 Other (Note 9) 4,402,765 5.195e'702"` . 5,827,507 38 695,397 38a798,581 35,436,750 Expenditures General government ; 4,735,880 4,729,065Ili- 5,851,939 4,367,003 6,816,591 Protection to persons and property 5,913,3f��I�l�llpp Transportation services Environmental services 3,18.IIj,3 8,4i357 3523561 8,464,553 ,3,099,584 7 619,240 Leisure and cultural services �V b 7 ,; II�1"9� y I , 965 293 i 043 247 8,022;158 �80.058 Planning and development 1 095 32.4 IIIIIIIIIII 32,577.658 301704,634 Net revenue 6,279,224 illl (illli',6 220 923 4,732,116 Financing and transfers " I IIII Ipi �,376) Change in employee benefit obligations ' ( (31,000) Transfer to Reserves and Reserve Funds (5,227 224) (3; 35,735) (21962,478) Transfer to Capital Fun _(1.052,000) 1837970) (1491361) (6,27-9 224) (5,800,081) (4,484,839) �iIIIIIII�� Change in Opefe p Fund 420,842 247,277 operating Fund balllll� p 9,eeit �� i li egi h�g f dyp!ear 869,800 869,800 622,523 Operating�fEru Ili�l�l)�IIi�III,I��uil!III�I��IIII c��i S� �i nce, �� i�f year II�IIIIItl IU 869,800 $ 1,290 642 $ 869,800 See accompanying notes to the consolidated financial statements. 14 —20— SPECIAL GENERAL COMMITTEE - AUDIT - JUNE 27, 2006 Town of Aurora Schedule 2 - Consolidated Capital Fund Activities Budget Actual Actual Year Ended December 31 2005 2005 2004 (Unaudited) Revenue User charges $ $ 4,089,291 $ 5,583,007 Grants 96,444, - Other (Note 9) 325,000 2 796,5' '-., 1,516,555 325,000 6,97i3.296 7,099,562 Expenditures General government 481,615 279,677„ 616,136 Protection to persons and property 410,0 j 12,900 Transportation services fP11111lliilllg 4196 A0 4,271,460 4,899,302 Environmental services �5�i000 3,465,559 y 386,874 Leisure and cultural services 3q�,Ii40 q �,846,703 1IIIIIh,59 5,516,768 §7.297 Planning and development 150�Q 10 619 9)i '�I 286 [°29.922.685 12,469.277 Net expenditure (10,294,9151 �I 122 946 389) (5,369,715) Financing and transfers IIII Issuance of long term debenture 000 Transfer from Operating Fund 1,052,000 .., 1,;$37,970 1,491,361 Transfer from Reserve 3,5.d''1 816 2,559,790 2,203,123 Transfer from Resp�U� �! 5 701 100 2.875,954 1,478,306 1011" � ��111 10 294,915 24,188,714 5,172,790 Change in CaOitall .g., Ualanc, �� 1,242,325 (196,925) Capital F}td b lance, b'1hg 4Yf!!jldC��1I'!178 547 7.178.547 7,375,472 Capital Fundlbl llhendoNI1�1111,i"„ $ 7,178,547 $ 8,420,872 $ 7,178,547 See accompanying notes to the consolidated financial statements. 15 -21- SPECIAL GENERAL COMMITTEE - AUDIT - JUNE 27, 2006 Town of Aurora Schedule 3 - Consolidated Reserves and Reserve Funds Activities Actual Actual Year Ended December 31 2005 2004 Revenue User charges $ 1,822,834 $ 2,921,993 Net change in obligatory Reserve Funds 1,1782915::, (3,494,692) Proceeds from sale of Borealis Hydra Electric Holdings Inc. 35,2j9528 '' - Other (Note 9) 39'4,785 399.346 38.06 437 (173,353) Financing and transfers Transfer from Operating Fund Iiil; 3,835,75 2,962,478 1,428) Transfer to Capital Fund IIII��I��llllllp;p (1,600.009) -1�'3(688.950) Change in Reserve and Reserve Fund balance °""" 6�fl' 035,428 Ifflhp� '(; 92,303; Reserve and Reserve Fund balance, beginning of year 'Iii�ll� i�" 5.685.931 6,578,234 Reserve and Reserve Fund balance, end of year I�'I$III1,�?.,721,359 $ 5,685,931 Reserves and Reserve Funds are compris6d of: ill) Illlillii Reserves, set aside by Council for specific purposes' ai Acquisition of capital s $ 2,189,411 $ 2,004,107 Working capital IIIIIIIII Contingencies �� I 1,675,959 1,642,946 Engineering o�Illl�l II�i 1,795,463 1,841,237 Other managem ;" I� 273,230 126,710 IIIIIII)I II�I�� IIiIIIi�II��I�Ii 5,934,063 5,615,000 Res, l d'fundsils, Aside foWl� if! purpos � qy legislation, Vie' ion or III m�� ent 36.787.296 70.931 J,illil�'I''_ � Tci%��eerves II and res�1ifunds.,Il $ 42,721,359 $ 5,685,931 See accompanying notes to the consolidated financial statements. 16 -22- SPECIAL GENERAL COMMITTEE — AUDIT — JUNE 27, 2006 APPENDIX "B" The following is a recap of where the $1,700,719. surplus was derive from the 2005 Budget. Department Function and Explanation Functional Surplus/(deficit) Surplus/(deficit) Council Council has a surplus which has a variance to budget of 19% The significant factor in the surplus of council expenses is as a result of an under expenditure in council Salaries and Expenses of $21,876. The second large area is the Accessibility Committee this is showing a surplus of $75,484., the $105,500. reason for this is the improvements ordered for accessibility were not ordered until January of 2006. Council has passed a resolution to transfer surplus to the 2006 Capital Account. Funds will be expended in the next couple of months for planned work at Town Hall. CAO The departments responsible to the CAO's ended the year with a $243,484. significant surplus, with a variance to budget of 22% the following are the major contributors CAO $8,000. LEGAL The following are the line accounts Legal Services Fees are surplus by $19,000. Salaries are Surplus by $28,000, $135,000, Appraisals are in deficit by $19,000. Surveys surplus by $6,000. General Legal Fees are surplus by $10,000. Planning and Development fees are surplus by $15,000. —23— SPECIAL GENERAL COMMITTEE — AUDIT — JUNE 27, 2006 Advocacy fees are in surplus by $50,000. Personnel Administration legal costs are surplus $10,500. Some of the areas identified above were adjusted in the 2006 budget. MARKETING AND COMMUNICATIONS Revenues exceeded expectations by $10,400. advertising sponsorships were higher than budgeted. $41,000. Salaries and wages were also under spent by $31,000. as we had a position that wasn't filled until December. ECONOMIC DEVELOPMENT Surplus resulted in not spending any funds on Consulting and we under $57,800. spent on Promotional Materials by $44,200. Corporate The Corporate Services Function Services ended the year with a surplus and a variance to budget of 10%. $86,726. The following are the results by function CORPORATE SERVICES ADMIN Surplus represents 1%variance from $3,500. budget HUMAN RESOURCES HR had a small surplus representing $7,600. 2% of Budget BY-LAW AND LICENSING This department has a large surplus $108,400. because its revenues exceeded budget b $100,000. this revenue is basically —24— SPECIAL GENERAL COMMITTEE — AUDIT — JUNE 27, 2006 from Provincial Offenses and Parking Violation ANIMAL AND PEST CONTROL This deficit is largely attributable to ($30,600) the shortfall in the sale of dog and cat tags. Financial Ended the year in surplus with a Services budget to variance of 1.02%. However this does not present the $265,794. true picture as there were some significant variances to which explanations follow FINANCIAL SERVICES Financial Services had a large deficit for a number of reasons Salaries and Wages were overspent by $70,000. this was a result of an overlap in Salaries paid to the Directors Position, there was also a need to hire some temporary help to cope with the work load. ($200,000.) Audit fees were also overspent by $136,000. as a result of the extra work required finalizing the 2004 year end audit. The Auditors were also hired to complete a study of the Treasury Department needs. Revenues were also in a deficit of $14,000, all these line items should be adjusted in 2005 budget. INFORMATION TECHNOLOGY, TELECOMMUNICATIONS There was a surplus as a result of savings in the area of Contracts for $0 outside services and EDP Fees for software services. However this was offset by a deficit in Telecommunications MUNICIPAL REVENUES $463,606. —25— SPECIAL GENERAL COMMITTEE — AUDIT — JUNE 27, 2006 The municipality had a very good year with investment income this was a result of increased interest rates and managing our cash flow. On the negative side our return on our promissory note with the Hydro was $150,000. short as a result of the hydro sale being effective November 1, 2005. Building The department ended the year in a positive position, this changed from $65,769. my last report as a result of changes to accrual from previous year. Public The Public Works Department (510,857.) Works ended the year with large deficit the departmental variances follow: PUBLIC WORKS — ADMINISTRATION $14,000. Slight surplus in Administration to help compensate for the over expenditures in winter maintenance. PUBLIC WORKS — ROAD MAINTENANCE Road Maintenance had surplus because of a recognition of the over $11,247. expenditure in Winter Maintenance and a slight reduction in service to compensate. PUBLIC WORKS — STORM WATER SYSTEM ($108,400.) PUBLIC WORKS — WINTER MAINTENANCE ($337,134.) Overspent in most areas as a result of the more snow events in the Jan to —26— SPECIAL GENERAL COMMITTEE —,AUDIT — JUNE 27, 2006 Apr. portion of 2005. PUBLIC WORKS — WASTE COLLECTION OPERATIONS Collection was in a deficit as contract ($133,900.) with collector is on a household basis and we had more households in 2005. PUBLIC WORKS — RECYCLING Surplus resulting from under $43,659. expenditure in the collection contracts of $86,053., however, our grant was short $56,457. Leisure Ended the year with a surplus, this Services represents $153,651. a budget to actual variance of 3% The following are the major budget variances. TOWN HALL BUILDING OPERATIONS Variance is 3.5% to budget, two issues with this budget the revenues ($14,600.) did not meet expectations, but we were also over spent in building repairs by $13,000. on at $28,000. budget. LEISURE SERVICES — ADMINISTRATION This is a 6% variance to budget, $22,200. surplus resulted in savings from salaries and wages and consulting services. LEISURE SERVICES — FACILITIES ADMINISTRATION Deficit in this budget was a result an ($47,200.) over expenditure in salaries and wages, this is partly attributable to wages being improperly allocated —27— SPECIAL GENERAL COMMITTEE — AUDIT — JUNE 27, 2006 with Administration. LEISURE SERVICES — CARPENTER SHOP Surplus here resulted from under $7,800. expenditure in Salaries and Wages and in Overtime. LEISURE SERVICES — COMMUNITY CENTRE Good results $5,000. LEISURE SERVICES — LEISURE COMPLEX Surplus were as a result of saving of $36,800. on administration and $77,000. $43,200. on Complex Operations, the surplus on complex operations is a result of revenues exceeding budget by $67,000. LEISURE SERVICES — JACK WOODS Deficit is a result of budgeted ($13,900.) revenues of $26,000 and only collecting $5,000. LEISURE SERVICES —NEW RECREATION COMPLEX The deficit here is a result of interest expenses on the debentures issues in 2005, because we didn't know when the 2005 budget was developed when ($147,500.) the debentures would be issued there was no provision for the accrued interest from the time of issue of debenture to December 31, this amounted to $161,600. C" SPECIAL GENERAL COMMITTEE — AUDIT — JUNE 27, 2006 LEISURE SERVICES —NEW SENIORS CENTRE When 2005 budget was developed ($13,700.) there was no budget developed for the Senior Centre Operations LEISURE SERVICES — PARKS ADMINISTRATION Landscape fees were $25,000. short on budgeted revenue, Parks Vehicles ($69,000.) were over spent by $19,000. the balance were overages and short fall in a number of line items. LEISURE SERVICES — COMMUNITY PROGRAMS Revenues exceeded budget by $13,000. $80,400. however with increased activity it does result in an increase in expenditures for the programs, however not in the same proportion. LEISURE SERVICES — LEISURE COMPLEX FITNESS CENTRE Deficit on this operation as a result of ($35,000.) Revenues not meeting expectations, revenues were under budget by $67,000, LEISURE SERVICES — LEISURE COMPLEX AQUATICS $34,500. This is the opposite to the Fitness Centre where participation exceeded expectations and revenue exceeded budget by $15,000. LEISURE SERVICES — YOUTH INITIATIVES $22,000, Revenues exceeded budget by $8,500. —29— SPECIAL GENERAL COMMITTEE — AUDIT — JUNE 27, 2006 and we saved money on Cleaning contracts and rentals. LEISURE SERVICES — SENIORS PROGRAMS ($7,000.) Revenue for Seniors programs were short of budget by $25,000. LEISURE SERVICES — COMMUNITY EVENTS Summarized as follows: Administration ($12,600.) Community Recognition $1,700. $22,500. Art Aurora $5,600. Canada Day Celebrations $3,700. Santa Claus Parade $3,800. First Night $5,000. Street Sale $5,500. Artie Adventure $5,000. Concert in the Park $4,600. Planning Budget is within 3% of estimate. SUPPLEMENTARY TAXES With increase in new properties being $821,900. assessed in 2005 we did better than anticipated SURPLUS Brought forward from 2004 $869,800. —30— SPECIAL GENERAL COMMITTEE - AUDIT - JUNE 27, 2006 AGENDA 6TEM 6 TOWN OF AURORA GENERAL COMMITTEE REPORT No. FS06-021 SUBJECT: Water and Sewer Financial Statements FROM: L. John Gutteridge, Director of Finance/Treasurer DATE: June 28, 2006 RECOMMENDATIONS THAT Council adopt the practice of presenting the Sewer and Water Budgets and Financial Statement as separate reports. That Council authorize the utilization of $205,000. from the Storm Sewers Reserve Fund and $205,000. from the Water and Sewer Reserve Fund to cover the 2005 operating deficit. BACKGROUND The Town of Aurora has always blended the financial results of the Water and Sewer Operation into the general financial statements of the Corporation. This is understandable in that the results of these operations has to be consolidated into the Consolidated Financial Statements of the Municipality. However the annual establishment of rates requires a separate by-law, the revenues are user generated from a distinct user group and surplus or deficits are applied to the Water and Sewer users. Therefore we believe that the operation is different and large enough to warrant separate review and reporting. COMMENTS As a result of the way we have handled Water and Sewer budgets and financial reporting in the past it is in the writer's opinion that water and sewer operations do not get the profile that they should. Water and Sewer Rates are a large portion of the money we collect from Aurora Residents and I believe that Council should be provided with more direct reporting on this operation. OPTIONS —31— SPECIAL GENERAL COMMITTEE — AUDIT — JUNE 27, 2006 June 28 2006 - 2 - Report No. FS06-021 It is be suggested that in the future we present the Water and Sewer Budgets separate from the rest of the Operating Budget and that the Water and Sewer budgets and rates be approved in conjunction with the passing of the Water and Sewer Rates By-law. There is some interaction of the operations of Water and Sewer with the rest of Public Works and this interaction does impact both budgets. We believe that the logistics of this interaction can be worked out administratively so that we can accommodate separate financial reports and budget presentation. Of course Council may decide that the current method of presenting Water and Sewer statements is acceptable. FINANCIAL IMPLICATIONS It appears that the past practice has been that any surplus or deficit is applied to the transfer to reserves. Council annually budgets a contribution to reserves from the rates for capital and the practice has been that this is the amount plus or minus the surplus or deficit that will be transferred to the reserves. This year to meet our financial requirements we did not automatically reduce the deficit from the annual contribution to reserve, by not doing this it identifies to council and staff that we did have some issues with the 2005 Water and Sewer Budget. This year the Water and Sewer Fund had an operating deficit of $410,077. For comparison in 2004 we budgeted to contribute to the Reserve Fund $1,035,340. but only contributed $832,038., In 2005 we budgeted to contribute $2,416,105. and we have contributed this amount. Had we practiced what we have done in the past we would have reduced the contribution to reserves by the deficit of $410,077. CONCLUSIONS We believe that this is a large component of the Municipality's business and it deals with a different revenue stream and a different levy base. As such we believe that it requires separate financial statements and regular financial review and would suggest that we segregate the budget process and financial reporting process for the Water and Sewer Department. With regard to the issue of the $410,077. deficit we would recommend this year that we deal with this deficit in the same fashion as in previous years by taking the funds from the Reserve Funds. If Council did not agree with this then we would have to reconsider our rates for 2006 to —32— SPECIAL GENERAL COMMITTEE — AUDIT — JUNE 27, 2006 June 28, 2006 - 3 - Report No. FS06-021 cover the 2005 deficit. LINK TO STRATEGIC PLAN Goal "A" - maintaining a well -managed and fiscally responsible municipality. ATTACHMENTS PRE -SUBMISSION REVIEW Prepared by. L. John Gutteridge, ext. 4111 Director of Finance/Treasurer John. S. Rogers C.A.O. -33-