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, 2005 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
Mar, 200
6
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 Enterprises Corporation
(previously 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 2005 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 $ 1,609 (2004 - $1,560) 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 for money market and face
value for bonds , had a market value of $ 262,298 (2004 - $269,775) 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 2005 year,
the average rate of return earned was 3.99% (2004 – 3.72%).
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 2005 was $3,942 (2003 - $3,096).
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 2005 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 $3,113 (2004 -
$4,240). 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.
As part of its 2004 budget, the Ontario
Government implemented new provisions through Bill 83 that permitted
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
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 $3,854
(2004 - $3,415). The accrued benefit liability and the net periodic benefit
cost were determined by an actuarial valuation completed December 2005.
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. LEASE OBLIGATIONS
(a) As at
(b)
The
16. 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
ENTERPRISES 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 Enterprises Corporation and on that of the Town of
17. INVESTMENT IN
The Town of
The following consolidated financial
statements of Markham Enterprises Corporation include the financial information
of its subsidiaries Markham District Energy Inc., and Power Stream Inc.
(consolidated on a proportionate share basis).
