Report to: General Committee Report
Date:
SUBJECT: Draft 2008 Consolidated Financial Statements
PREPARED BY: Joel Lustig, Ext. 4715
Director, Financial & Client Services
RECOMMENDATION:
- That
the report “Draft 2008
Consolidated Financial Statements be received;
- And
That Council approve the Corporation of the Town of Markham’s Draft Consolidated Financial
Statements for the fiscal year ended December 31, 2008;
- And That Council authorize Staff to issue the Consolidated Financial Statements for the fiscal year ended December 31, 2008 upon finalization of all consolidated amounts;
- And that Staff be authorized and directed to do all things necessary to give effect to this resolution.
EXECUTIVE SUMMARY:
The Town of
The statements were prepared in accordance with
“Generally Accepted Accounting Principles”, the audit was performed in
accordance with “Generally Accepted Auditing Standards”, and KPMG has expressed
an unqualified or “clean” opinion that these statements present fairly the
financial position of the Town. These
statements indicate how the Town financed its activities and met its cash
requirements. Additionally, the
statements confirm that the resources were obtained and used in accordance with
the operating and capital budgets as approved by Council.
At the time of this report, audited consolidated financial statements
for Markham Enterprises Corporation (MEC), are not finalized. MEC’s
shareholdings in Powerstream Inc. and Markham District Energy Inc. will be
consolidated into the MEC statements. MEC financial information at the end of
2007 is temporarily reflected in the draft 2008 Financial Statements and upon
receipt of MEC’s audited financial statements, Staff will consolidate the
results with the Town’s and publish the consolidated statements along with the
2008 Annual Report. Copies of the Report
will be distributed to Council when available.
As in previous years, the 2008 statements were prepared in accordance with Public Sector Accounting Board (PSAB) guidelines. PSAB issues recommendations and reporting requirements that serve in the public’s interest by strengthening accountability in the public sector by developing, recommending and gaining acceptance of accounting and financial reporting standards.
Under PSAB, municipal reporting
requirements should include as a minimum:
Consolidated
Statement of Financial Position
Consolidated
Statement of Financial Activities
Consolidated
Statement of Changes in Financial Position
Additionally, the Town’s financial
package includes the following:
Schedule
of Operating Fund Activities
Schedule
of Capital Fund Activities
Schedule
of Reserves and Reserve Funds
Comments and a brief explanation for each of
the main financial statements are outlined under the Options/Discussion section
of this report.
PURPOSE:
To obtain Council’s approval of the Town of
BACKGROUND:
The Town of
OPTIONS/ DISCUSSION:
The Town’s various financial activities are classified into three funds, Operating, Capital and Reserve and Reserve Funds plus the Town’s equity in Markham Enterprises Corporation. Each year, the net result of each of these funds appears under the Municipal Position section of the Consolidated Statement of Financial Position. The comparative balances for 2008 and 2007 are as follows:
The Operating Fund Balance, which is mainly tax and water rate funded, reflects the net result of operating revenues and expenditures. This also includes Library, BIA’s and Community Boards. (Details of operating fund activities are noted on page 4 and 5 of this report)
The Capital and Reserve Funds reflect the net effect of financial
activities as it relates to the Capital Fund and changes in the Reserves and
Reserve Funds.
The Equity in Markham Enterprises Corporation has not been finalized for 2008; the 2007 figures are used for illustrative purpose only.
Consolidated
Statement of Financial Position (Appendix A - page 1)
This statement describes the financial position of the Corporation in terms of assets and liabilities. This allows the reader to determine whether the financial position has improved or deteriorated.
Financial Assets are the resources
controlled by the organization as a result of past events and from which future
economic benefits are expected to flow to the organization. Current assets are
cash and other assets expected to be converted to cash, sold or consumed either
in a year or in the operating cycle. These assets are continually turned over
in the course of a business during normal business activity.
Liabilities are financial
obligations to outside organizations or individuals that are the result of
transactions or events that occurred on or before the end of the accounting
period.
Both Financial Assets and Liabilities
are estimated as accurately as possible in order that the readers of the
statements are provided with a complete picture of the organization’s financial
position.
The municipal position represents
funding that is available to assist in offsetting future revenue requirements
and amounts that have been set aside to finance future expenditures. Municipalities account for and report on a
“fund” basis. Traditionally these funds
are comprised of operating, capital, reserves, and reserve funds. The Town’s net equity in Markham Enterprises
Corporation will also be included within this section of the statement.
Consolidated Statement of Financial Activities (Appendix A - page 2)
This statement accounts for the difference between a local government’s revenue and expenditures, adjusted for any changes in valuation allowances, in the accounting period. This statement also accounts for the combined change in the balances of a local government’s funds. Reporting information about the changes in its fund balance helps users to assess the local government’s short-term revenue requirements, and its ability to finance its operations and meet its current obligations.
Consolidated Statement of Changes in Financial Position (Appendix A - page
3)
This statement presents changes in cash and cash equivalents by highlighting the sources and uses of cash. The statement indicates how the Town’s activities were financed and how cash requirements were met.
Operating
Fund Activities
The Consolidated Schedule of Operating
Fund Activities (Appendix A - Schedule 1- page 22) identifies the 2008 year
end deficit to be funded by a transfer in accordance with the Town’s Reserve
Policy. Additionally, this statement
enables the Town’s citizens to access the actual operating results against the
budgets that Council approved. The deficit of $ 3.21 million is comprised as
follows:
Town of
The Town’s 2008 year end
results from operations yielded a surplus of $0.01 million. It has been Town’s
practice to fund year end accounting accruals in the results of operations. In
2008, these accounting accruals total $1.72 million placing the Town in a
deficit position of $1.71 million. The operating fund expenditure in 2008 was
$2.10 million higher compared to 2007 due to winter maintenance operations.
Library Board
The library surplus in
2008 was $0.31 million which is $0.13 million less than 2007 due to the opening
of Markham Village Library.
The library surplus of
$0.31 million thus reduced the overall deficit from $1.71 million to $1.4
million. In accordance with the Town’s reserve policy, the 2008 operating fund
deficit of $1.4 million will be funded from the Corporate Rate Stabilization
Reserve in 2009. Council approved this transfer at the
The 2008 unfavourable
variance in Building Standards, Planning & Design and Engineering has
already been funded from Town’s respective reserves in 2008 and already
reflected in the operating results.
Town of
The 2008 waterworks
budget included a budgeted surplus of $8.23 million which was transferred to
reserves upon budget approval. The actual result yielded a $6.23 million
surplus resulting in a $2.0 million deficit.
The $2.0 million
unfavourable variance will be funded from the Waterworks reserve in 2009.
Capital Fund Activities
The Consolidated
Schedule of Capital Fund Activities (Appendix A - Schedule 2 – page 23)
informs the reader whether permanent financing has been secured for the
organization’s capital expenditures or whether the financing has been secured
but not spent. The Town’s balance of $51.05
million represents a net position indicating capital financing has been
secured, but not spent (capital projects have been funded but have not been
completed). The increase in the Capital Fund in the amount of $27.09 million is
mainly due to the receipt of Federal and Provincial Grants totalling $17.0
million.
Reserves and Reserve
Fund Activities
The Consolidated Schedule of Reserves and
Reserve Funds Activities (Appendix
A -Schedule 3- page 24) represents funds that have been set aside
by Council to offset future expenditures in either the operating or capital
funds. At
PSAB
In June 2006, Public Sector Accounting Board
(PSAB), approved the revisions to Section 3150 of the Public Sector Accounting
Handbook - Tangible Capital Assets stating that effective
In order to be fully compliant with the new
requirements, all tangible capital assets currently owned by the Town must be
inventoried and valued at their historic cost.
The useful life of each asset, or asset class, must be determined and
amortization must then be calculated from the time the asset was put into
service. The Town’s 2009 Financial
Statements must include 2008 comparative numbers along with a budget. This will require that the Town’s 2008
Financial Statements be restated to be PSAB 3150 compliant.
Effective
An update on the status of this project will be presented to General
Committee in the 2nd Quarter of 2009
Communication
The Municipal Act 2001, Section 295 (1) requires municipalities to annually communicate to its ratepayers, the results of the municipality’s year end. Section 295 (1) reads as follows:
Within 60 days after receiving the audited financial statements of the municipality for the previous year, the treasurer of the municipality,
a) shall publish in a newspaper having general circulation in the municipality,
a copy of the audited financial statements, the notes to the financial statements, the auditor’s report and the tax rate information for the current year as contained in the financial review or
a notice that the information contained in (i) above will be made available at no cost to any tax payer or resident of the municipality upon request; and
b) may provide the information described in sub clause (a) (i) or (ii) to such persons and in such other manner as the treasurer considers appropriate.
Publication of the Town’s statements will occur after consolidation of MEC’s 2008 results and receipt of the Town’s audited financial statements.
RECOMMENDED
BY: ________________________ ________________________
Barb Cribbett, Treasurer Andy Taylor, Commissioner,
Corporate Services
ATTACHMENTS:
Appendix A - Corporation of the Town of
Draft Consolidated Financial
Statements,