HomeMy WebLinkAboutFCS-15-093 - COK Financial Report - Year Ending Dec 31, 2014FCS_ COK _Financia]ReportGRN_Mayl5.indd 1 2015 -06 -18 4:34 PM
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Building cities, staying connected
Kitchener City Council
Message from the Mayor
Message from the CAD
Organizational Structure
2014 in Review
Message from the city's Treasurer
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Consolidated Financial Statements
Trust Funds
Belmont Improvement Area Board of Management
Kitchener Downtown Improvement Area Board of Management
Kitchener Public Library
The Centre in the Square Inc.
Gasworks Enterprise
Kitchener Generation Corporation
Kitchener Power Corp.
Financial and Statistical Review
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2014 KITCHENER FINANCIAL REPORT
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take a while to settle in to a full understanding of roles and processes, and what it means to build a city.
As Mayor Berry Vrbanovic said in his inaugural 2015 State of Our City speech as mayor, "City- building is
about making smart and strategic investments into the communitythat will benefit all of our residents and
all of our neighbourhoods. But city - building is about more than just counting pennies and building more roads;
it's about creating awesome, dynamic and inclusive places and spaces where people can live, work and play."
Kitchener is a smart, caring, connected city built on strong neighbourhoods, innovation, a growing and diverse
economy, support for citizens, and a strong local government.
Connecting strong neighbourhoods is where city - building starts. Great neighbourhoods are made great by
placemaking —creating more meaningful and memorable places and spaces and a more diverse, interesting
and sustainable city.
The success of implementing this type of strategic direction is to involve the city at every level, including
engaging citizens and business planning to ensure everyone is working toward the same vision. The purpose
of business planning is to manage and support an integrated corporate blueprint to guide the course of the
corporation ... which means facilitating a process that engages council, the corporate leadership team,
management and staff to establish active priorities that are:
qVI driven by the objectives of the strategic plan;
qVI responsive to the expectations of the community;
qVI achievable, and
qVI financially sustainable into the future.
This annual financial report is a snapshot of our financial balances, and highlights the revenue and expenses of
last year in order to deliver on the strategic plan. At the same time, we also try to make this report a meaningful
story for our citizens, and we do this through accountability, transparency and community participation.
That's what it means to build a city.
FCS _COK_FnanciaJReportGRN_May15Jndd 2 2015 -06 -18 4 :34 PM
MAYOR
Berry Vrbanovic
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WARD 1 Councillor WARD 2 Councillor WARD 3 Councillor WARD 4 Councillor WARD 5 Councillor
Scott Davey Dave Schnider John Gazzola Yvonne Fernandes Kelly Ga lloway-Sea lock
WARD 6 Councillor WARD 7 Councillor WARD 8 Councillor WARD 9 Councillor WARD 10 Councillor
Paul Singh Bil loannidis Zyg Janecki Frank Etherington Sarah Marsh
Kitchener city council is an elected body, made up of one mayor and 10 city councillors. All council members are
elected for a four -year term. The mayor is elected by voters from all parts of the city; and councillors are elected
by voters within specific wards.
Members of city council meet at regularly scheduled council and committee meetings throughout the year to
discuss issues facing the city and its residents - as well as day -to -day operational business, and to make
decisions on those items based on information presented by city staff as well as their own knowledge and
beliefs, and the opinions expressed by constituents.
Public hearings, special council meetings, business license hearings and courts of revision are also held as
needed to consider specific matters.
As a collective group, representing the interests of citizens, council is responsible for:
qV1 representing the public and considering the well -being and interests of the municipality;
qV1 developing and evaluating the policies and programs of the municipality;
qV1 determining which services the municipality provides;
qV1 ensuring administrative policies, practices and procedures and controllership policies, practices
and procedures are in place to implement the decisions of council;
qV1 ensuring the accountability and transparency of the operations of the municipality, including the
activities of the senior management of the municipality, and
qV1 maintaining the financial integrity of the municipality.
2014 KITCHENER FINANCIAL REPORT 3
FCS_ COK_FinancialReportGRN_May15Jndd 3 2015 -06 -19 9:23 AM
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On behalf of council, I am pleased to introduce the 2014 Annual Financial Report. Last year, we at the City of
Kitchener worked really hard to begin a number of initiatives that contributed to accountability, transparency
and community participation.
Our council and staff brought those values to the business planning process, during which we collectively
and collaboratively set priorities for the coming year. With new members around the council horseshoe, the
experience was both a steep learning curve and a valuable one. Because each priority we settled upon has
an impact on our financial wellbeing as a corporation.
More than half of all projects included in this business plan directly support the city's progress in at least one
of the six areas of community priorities for 2015 -2018: government, economy, environment, transportation,
development and neighbourhoods.
We know it's important to our citizens that we manage our resources responsibly— including our finances.
We work diligently to deliver a balanced budget every year, and that means making tough decisions. But
engaging with this process is an effort that goes beyond the walls of the council chambers. It moves out into
our neighbourhoods and communities, our cultural associations and service clubs. It is a stepping stone to
achieving the vision of this city that we all can embrace.
Take this step with me. Let's be city - builders together.
Berry Vrbanovic, Mayor
City of Kitchener, June 29, 2015
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I am proud to present the City of Kitchener's Annual Financial Report, which details ourfinancial position and
highlights our key accomplishments through 2014. The report is a snapshot of our finances and reflects the
process of business planning that staff and city council undertook last year. The ultimate outcome is to help
citizens understand how money collected by the city is, in turn, used to provide services.
Staff and council are committed to transparency and accountability, and take pride in preparing a document
that reflects those commitments. It is no easy task to pull this report together. There are few decisions that
matter more than setting financial goals to build a better community. Our staff has done an excellent job in
balancing financial objectives with meeting community priorities, among them healthy neighbourhoods,
environmental stewardship and a strong economy bolstered by responsible development.
As we look ahead and plan for the priorities set by council, with the goal of building a better community for
our citizens, the best way we can do this is to remain accountable, transparent and to inform our decisions
through community participation.
Jeff Willmer, Chief Administrative Officer
City of Kitchener, June 29, 2015
2014 KITCHENER FINANCIAL REPORT
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:.., Accounting
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DevTyagi: Deputy CAD
Jeff Willmer: Chief Administrative Officer
;.,, Asset Management
:.., Corporate Communications and Marketing
:.., Engineering Services
:.., Corporate Customer Service
:.., Facilities Management
:.., Economic Development
:.., Fleet
:.., Office of the Mayor and Council
:.., Operations
:.., Project Planning and Integration
:.., Transportation Services
:.., Strategic and Business Planning
:.., Utilities
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Michael May: Deputy CAD Dan Chapman: Deputy CAD
:.., Building
:.., Accounting
:.., Bylaw Enforcement
;.., Financial Planning
:.., Community Programs and Services
;.�, Human Resources
:.., Enterprise
:.., Information Technology
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:.., Planning
:.., Legislated Services
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During 2014, there was a change in leadership at the city with the retirement of long- standing mayor, Carl Zehr,
who has been involved with municipal politics for three decades, and influenced many positive changes for the
city, while aiming to keep taxes at an affordable level for citizens.
On October 27, 2014, the city voted in a new mayor, Berry Vrbanovic, also a long- standing member of council.
Berry's outlook is also to keep taxes at an affordable level for citizens, while at the same time providing the
excellent level of service city residents have come to expect.
In 2014, the property tax increase was 0.99 per cent, in line with inflation and the result was a $10 increase per
year for the average household. Council was still able to address the need for investment in certain areas with
budget deficits, such as bylaw enforcement, mobile technology and asset management. At the same time, the
city focused on delivering services, keeping in mind those things that are important to our citizens, such as arts
and culture, the environment, well- maintained roads and infrastructure, technology and innovation.
Below are some of the major projects and initiatives that took place in 2014.
Neighbourhood strategy
The City of Kitchener has a long history of planning, building and supporting safe and thriving neighbourhoods
through municipal investments, and partnerships with other orders of government, community organizations
and citizens.
In addition to this municipal work, a variety of community groups play an active and critical role in helping to
create safe and thriving neighbourhoods. The following diagram shows the different components and community
groups that contribute to safe and thriving neighbourhoods. While this diagram doesn't show everything that
contributes to our healthy neighbourhoods, it does demonstrate how complex and diverse they are, and the
positive impact community groups can have.
2014 KITCHENER FINANCIAL REPORT
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A comprehensive perspective to a neighbourhood
Work began in 2014 to develop an official Neighbourhood Strategy, which was approved by council in early 2015.
The strategy offers benefits to the corporation and to the broader community through:
qV1 increased citizen engagement;
qV1 greater sense of belonging;
qV1 citizen -led and city - facilitated approach to place- making;
qV1 celebration of our heritage /history;
qV1 alignment of city and community efforts, and
qV1 contribution to a healthy community.
SAP customer relationship and billing implementation
The city is currently undergoing a transformation of its customer information system (CIS, which is a critical
application that supports the city's property tax and utilities revenue management and billing processes).
Implementing a new system will result in a positive change in how the city manages billings and collections
for property tax and utilities. It is expected that as the implementation moves forward, the city will be able
to offer customers the option of paying and reviewing their bills online through a City of Kitchener portal.
This will improve delivery of customer service overall to our residents.
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ION - Rapic
Regional count;ll appluvtu ligilL IdPIU LiansrL kLRI) as Lilt PItltlltu Lt;lnlulugy lul a nlurLi- Pnastu, Ingliti-
order transit system intended to connect Cambridge, Kitchener and Waterloo. Stage 1 of the construction
project started in 2014, and will be completed (with trains operational in Kitchener and Waterloo) by 2017.
The City of Kitchener has been encouraging growth and development in the downtown since 2004's Economic
Development Investment Fund (EDIF). The fundamental goals of ION are: focusing development and investment
in the core, limiting urban sprawl and protecting the environment, all of which support the fundamentals of
Kitchener's EDIF planning.
Although rapid transit is a regional project and responsibility, many of the initiatives require the participation
of the cities of Kitchener, Waterloo and Cambridge. Kitchener's participation in all of these ongoing initiatives
is coordinated by the Kitchener rapid transit coordination group and working group. They will be responsible
for many facets of rapid transit planning and operations at the City of Kitchener level as this project proceeds.
PingStreet
One innovative solution implemented in 2014 is PingStreet. This is a part of the next evolution of the City
of Kitchener's customer service strategy and one of the several ways we're making it as easy as possible to
connect with us - anytime, anywhere. PingStreet is a free mobile application that puts real -time, one -touch
access to city information and tools in the palm of your hand.
Open data
Open data is data that is made freely available to the public in machine - readable
format within the agreements of the open data license. The City of Kitchener is
committed to improving citizen engagement and enhancing transparency and
accountability to its residents by providing public access to its data.
The data currently available from the city is found in our data catalogue,
http : / /app.kitchener.ca /opendata /. We encourage you to explore the data sets.
The catalogue will provide data in multiple formats, wherever possible and
new data sets will be added as they become available.
Through your feedback, the city will prioritize the data sets to be delivered. If you have an idea for information
that would be useful as open data or would like to request alternative formats or additional information on
existing data sets, your input is welcome. Please submit your idea to opendata @kitchener.ca.
2014 KITCHENER FINANCIAL REPORT
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GOVERNMENT SERVICES
RECREATION, LEISURE AND CULTURE
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IN,
INFRASTRUCTURE MAINTENANCE
ern 2,000 lane kilometres (km) of roads
inspected and maintained;
1,100 km of sidewalk inspected annually
with 2,800 repairs performed;
iw 63,900 water meters in service;
816 km of sanitary sewer maintained;
600 km of storm sewer maintained.
FACILITIES AND AMENITIES
176 facilities and structures maintained;
� 3,000 parking customer accounts
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maintained;
e, 75 locations of crossing guards provided;
e, 170 sports fields and outdoor courts �a
maintained;
e, 245 km of city trails maintained.
FCS_COK_Financi.lReportGRN_Mayl 5.indd 11 2015 -06 -18 4:34 PM
12
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I am pleased to present the Annual Financial Report for the
City of Kitchener for the year ended December 31, 2014.
This report communicates the 2014 financial results for the
City of Kitchener to council, residents and other interested parties.
These results demonstrate hitchener's continued sound
financial management and fiscal prudence.
FINANCIAL MANAGEMENT
The financial statements and related information contained in this annual report are the responsibility of the
management team of the City of Kitchener. Management has instituted a system of internal controls intended
to safeguard assets and to provide accurate, timely and complete financial information for both internal
decision - making and external reporting.
The city has the following foundations in place to ensure appropriate financial controls and accountability are
maintained, and to take a proactive approach to identify and address financial challenges.
FCS _COK_FnanciaJReportGRN_May15Jndd 12 2015 -06 -18 4 :34 PM
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At the beginning of each new term of council, the City of Kitchener develops a strategic plan to advance the
vision, mission and goals for Kitchener over the next four years. With limited resources available, the city
needs to be strategic in setting goals for the future and focus resources on those areas that will have the
greatest positive impact on the overall quality of life in Kitchener. A strategic plan for the city developed in
collaboration with the community helps to allocate those limited resources to programs and services that
matter most to citizens.
The City of Kitchener Strategic Plan 2015 -2018 will set out the organization's highest priorities for this term
of council. The plan is designed to ensure that, over time, the public funds the city is entrusted to manage on
behalf of citizens are allocated to top public priorities, invested effectively and spent efficiently. Once the
strategic plan is approved, each department develops a four -year business plan that outlines how their key
activities will support strategic plan priorities. Simply stated, the strategic plan serves as the community's
roadmap to take us from where we are today to where we want to go in the coming years.
The new key strategic priorities related to effective and efficient government cover areas such as continuous
improvement; future investment in technology and systems; a culture of accountability; long -term financial
sustainability; emergency management and business continuity, and working collaboratively with the Region
of Waterloo and neighbouring municipalities on issues of public concern.
2014 KITCHENER FINANCIAL REPORT 13
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Business planning
The purpose of the business planning process is to manage and support the integrated corporate business
plan to guide the medium -term course of the corporation. This involves the development, communication
and facilitation of a process that engages council, the corporate leadership team, management and staff
in establishing operational priorities that are:
qV1 driven by the objectives of the strategic plan;
qV1 responsive to the expectations of the community;
qV1 achievable, and
qV1 financially sustainable into the future.
With this, the organization as a whole will be able to make progress on its strategic objectives, as well as
maintain and continuously improve the city's core services.
Typically, the business plan is a four -year plan that is updated annually and is comprised of a brief overview
of each department. It contains a profile of the city's 47 core services delivered by those departments, service
trends and future challenges, and a listing of project commitments by division identifying the primary link back
to the strategic plan.
Over the past three years, significant work has been invested to improve the scope and quality of information
provided to council and the public through the city's business plan.
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The 2013 business plan was focused primarily on corporate and divisional projects as an achievable first step.
In 2014, the business plan included information on all city services to provide a whole system's view of the
work being done within the organization and the staff available to support those services.
In 2015, the quality of information continues to improve and work has begun to develop a comprehensive
performance measurement framework that will monitor and report on key results on an annual basis.
Measures for 12 city services will be incorporated into the monitoring process for 2015. The governance
structure, monitoring processes and reporting framework continues to be enhanced on an ongoing basis.
Budget process
In addition to the business planning process, city council approves the operating and capital budgets for
the property tax - supported operations, as well as all city enterprises. The City of Kitchener is charged with
responsibly managing and investing the tax dollars and user fees you pay to meet the needs of the community
and ensure all of our strategic priorities are addressed.
We are committed to striking a healthy balance between offering valued services and programs to residents,
making strategic investments in community priorities, and keeping property taxes at a reasonable level.
To provide transparency in the budget process, budget information is posted on the city's website and budget
meetings are held in a public forum. Citizens are able to provide their input through a number of channels,
including social media, the city's interactive budget website, or in person at a public delegation night.
Management staff review their budgets regularly. Detailed variance reports are prepared and presented to
council three times per year at the same time as the progress reports on business planning. These reports
ensure departmental accountability for financial results and are a key tool to allow management to respond
to financial pressures during the year.
2014 KITCHENER FINANCIAL REPORT 15
FCS _COK_FnancialReportGRN_May15Jndd 15 2015 -06 -18 4 :34 PM
11j
As required by the Municipal Act, city council has appointed a public accounting firm, KPMG LLP, to express an
independent audit opinion on management's consolidated financial statements. Their reports to the members of
council, inhabitants and ratepayers of the Corporation of the City of Kitchener accompany the various financial
statements in the financial section of this report.
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The audited consolidated financial statements are presented to the audit committee for approval. The committee
provides a focal point for communications between council, the external auditor, the internal auditor and
management, and facilitates an impartial, objective and independent review of management practices through
the internal and external audit functions.
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FINANCIAL STATEMENT DISCUSSION AND ANALYSIS
The City of Kitchener's consolidated financial statements have been prepared in accordance with reporting
standards set by the Public Sector Accounting Board (PSAB) of the Chartered Professional Accountants of
Canada. KPMG LLP have audited the financial statements and provided the accompanying auditors' report.
The financial statements and auditors' report satisfy a legislated reporting requirement as set out in the
Municipal Act of Ontario.
The following financial statement discussion and analysis has been prepared by management and should be
read in conjunction with the audited consolidated financial statements and financial and statistical review.
There are four required financial statements:
qV1 statement of financial position;
qV1 statement of operations;
qV1 statement of change in net financial assets, and
qV1 statement of cash flow.
The consolidated financial statements reflect the assets, liabilities, reserves, surpluses /deficits, revenue, and
expenditures of city funds and governmental functions or entities. These functions and entities comprise a part
of the combined city operations based upon control exercised by the city. The exception is the city's government
business enterprises, which are accounted for on the modified equity basis of accounting. References to the
"city" below include all activity for the consolidated entity.
2014 KITCHENER FINANCIAL REPORT 17
FCS _COK_FnancialReportGRN_May15Jndd 17 2015 -06 -18 4 :34 PM
Millions
$250
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The Consolidated Statement of Financial Position highlights four key figures that together describe the financial
position of a government: 1) cash resources, 2) net financial asset position, 3) non - financial assets that are
normally held for service provision such as tangible capital assets, and 4) accumulated surplus (deficit).
The statement is used to evaluate the City's ability to meet its financial obligations and commitments.
The City's net financial asset balance is $187 million (2013 - $176 million), an increase of $11 million. This
balance is calculated as total financial assets less liabilities and represents the amount available to finance
future operations. The increase year over year is due to the culmination of changes in the various balance
sheet accounts which are described in the paragraphs below.
Cash and Cash Equivalents
The City's cash position is closely managed and remains adequate along with short -term investments to meet
ongoing cash requirements. The cash position has decreased to $40 million from $56 million in 2013 as more
money was invested at year end and more of the accounts payable were paid off before December 31 this year.
The Consolidated Statement of Cash Flows summarizes the sources and uses of cash in both 2014 and 2013.
Taxes Receivable
Taxes receivable have increased to $23 million from $21 million in 2013 due to supplementary taxes billed
toward the end of 2014 that weren't collected until early 2015.
Loans Receivable
Loans receivable decreased to $12 million from $14 million in 2013. The decline is primarily due to a continued
decrease in use of the Appliance Financing Program administered by Kitchener Utilities. Details of loans
receivable are included in Note 4 of the Consolidated Financial Statements.
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FCS_ COK _Financi.lReportGRN_Mayl5.indd 18 2015 -06 -18 4:34 PM
Investments
It is the policy of the City of Kitchener to invest public funds in a manner that provides the highest investment
return while protecting and preserving capital, maintaining liquidity to meet the daily cash flow demands and
to conform to all legislation governing the investment of public funds.
The balance in investments grew in 2014 to $101 million from $89 million in 2013. This increase relates
primarily to a shift from cash held in 'Cash and Cash Equivalents' in 2013 to Government Investment
Certificates (GICs) that were yielding higher returns than in previous years.
Investment in Kitchener Power Corp. & Kitchener Generation Corporation
The City's investment in both Kitchener Power Corp. and its affiliates and Kitchener Generation Corporation is
made up of the City's initial investment and its share of net income since acquisition less dividends received.
See Notes 6 and 7 to the Consolidated Financial Statements for further details.
Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consist of all vendor related payable balances, accrued liabilities,
payroll related liabilities, intercompany payables and sales tax payables. The combined balance of $76 million
in 2014 is approximately $9 million lower than 2013. The decrease in the payables in 2014 was due to a later
final payment run in 2014 than in 2013, resulting in more of the invoices being paid out by year end.
Deferred Revenue
The increase in deferred revenue — obligatory reserve funds is due to collections exceeding contributions used
within the year. Please see Note 9 to the financial statements which provides greater detail regarding activity in
2014 compared to 2013. The increase in deferred revenue — other is due to deferral of Federal grants given the
work on these projects was not complete before year end.
2014 KITCHENER FINANCIAL REPORT 19
FCS _COK_FnancialReportGRN_May15Jndd 19 2015 -06 -18 4 :34 PM
Millions
$111.... $.112
r, nn
2010 2011 2012 2013 2014
® Tax ® Enterprise FI EDIF
Municipal Debt
The City has three components that comprise the overall debt total. Debt has been issued to fund:
qV1 a portion of the tax - supported capital program;
qV1 capital improvements to Enterprises, where the debt charges will be funded through user fees
or external sources, such as the Parking Enterprise or the Kitchener Rangers, and
qV1 the Economic Development Investment Fund (EDIF).
The City's capital investment philosophy ensures that any increases in debt charges from one year to the next
do not exceed assessment growth (excluding the impact of the debt associated with EDIF). As well, the overall
contribution from the tax base through taxes and debt charges will not increase more than assessment growth
plus inflation from one year to the next.
This philosophy has ensured that the impact on the taxpayer does not exceed inflation and that the City must
prioritize projects to fit the funding available.
The City created EDIF in 2004 as a $110 million commitment to invest in catalyst projects to strengthen the
local economy and stimulate urban development in Downtown Kitchener. The fund has provided dollars for major
strategic investment projects including the University of Waterloo School of Pharmacy, Communitech Hub, and
King Street streetscaping. EDIF investments have had a remarkable positive impact on the City, increasing
the City's recognition as a location for innovation, entrepreneurship, and a sought -after urban lifestyle.
Municipal debt has decreased to $103 million from its peak at $112 million in 2013. The change in debt is
a result of new debt issuance of $1.7 million offset by repayment of $10.7 million of existing debt. Debt is
expected to decrease for the next number of years as the ten year EDIF program continues to be paid down.
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11 Land
$184M ($183P
Assets under
construction
$26M ($43M)
Land Improvement
$27M ($28M)
Buildings Eli
$197M ($176M)
Leasehold
Improvernents
$3M ($3M)
Machinery and 111
Equipment
$24M ($24M)
Computer Hardware is
& Software
$8M ($8M)
Linear Assets
$5O1M ($479M)
Tangible Capital Assets
Vehicles oim
$15M ($14M)
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
is amortized on a straight -line basis over their estimated useful lives ranging from 1 to 100 years.
During 2014, the City acquired $70 million in tangible capital assets (2013 - $70 million). Amortization of
assets was $40 million (2013 - $37 million). Refer to Note 13 and Schedule A of the Consolidated Financial
Statements for a detailed breakdown of tangible capital asset activity for 2014. The net book value of tangible
capital assets at December 31, 2014 is $985 million, up from $958 million in 2013.
2014 KITCHENER FINANCIAL REPORT 21
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Accumulated Surplus
Invested in Tangible 11
Capital Assets
$985M ($958M)
Other IIIIIIIII
$ -91VI ($ -13M)
Equity in KPC IIIIIU
$190M ($183M)
Equity in KGC M
$4M ($4M)
Employee IIIIIIIIIIII
Future Benefits
$ -35M ($ -32M)
Reserve Funds lure
$41M ($37M)
The City's accumulated surplus forfiscal 2014 is $1.18 billion (2013 - $1.14 billion). The accumulated surplus
reflects the resources that have been built over time at the City and the balance includes items such as tangible
capital assets, equity in Kitchener Power Corp. and Kitchener Generation Corporation and various reserve funds.
Reserve Funds
Reserve funds are included as part of accumulated surplus and these balances are disclosed in Note 14 to the
financial statements. Reserve fund balances have increased during 2014 to $41 million (2013 - $37 million).
Under the authority of the Municipal Act, the City has established reserve funds to set aside funds to be used
for future purposes.
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Millions
$45
Reserve funds are established to ensure future liabilities can be met, capital assets are properly maintained
and sufficient financial flexibility exists to respond to economic cycles or unanticipated financial requirements.
Council is responsible for exercising discretion with respect to the use of reserve funds, subject to the terms
of Council policy, as well as statutory and legal requirements.
A comprehensive review of the reserve policy was undertaken in 2012 with new guiding principles for reserves
developed to ensure the reserves continue to support the financial goals and serve the highest priority needs of
the City and its citizens.
The Consolidated Statement of Operations reports the revenue collected by the City, the cost of providing municipal
services and the resulting annual surplus /deficit.
This year, overall assessment growth was 1.31 %. While this new assessment creates revenue for the City, there
is also a cost to provide services to new development. In addition, cost increases in excess of inflation, public
demand for new services and unreliable revenue sources all place significant pressure on the City budget.
The tax rate increase for 2014 operations was 0.99 %.
2014 KITCHENER FINANCIAL REPORT
23
FCS_ COK _Financi.lReportGRN_Mayl5.indd 23 2015 -06 -18 4:34 PM
$120
$100
$80
$60
$40
$20
Millions
Taxation Gasworks Water, sewer & Other user fees Grants Other
storm water
W 2014 Budget 1112014 Actual W 2013 Actual
Revenue
Revenue is received from the following sources: taxation, users fees, grants and other. Kitchener is one of only
two municipalities in Ontario that own and operate a natural gas utility.
Natural gas volumes were up significantly this year due to the colder weather, which resulted in 2014 Gasworks
revenue being $7M higher than 2013.
Grants revenue increased from 2013 due to an increase in the amount of Federal Gas Tax revenue recognized.
Revenue can only be recognized when eligible expenditures are made.
The 'Other' category in the chart above includes contribution of tangible capital assets, investment income,
penalties and interest on taxes, obligatory reserve funds revenue recognized, and share of net income of
Kitchener Power Corp. and Kitchener Generation Corporation. Revenue is notably higher in this category for 2014
compared to budget, due to the timing of obligatory reserve fund revenue being recognized. Amounts were
budgeted in prior years, but could only be recognized in 2014 as the reserve fund returned to a surplus position.
24
FCS_ COK _Financi.lReportGRN_Mayl5.indd 24 2015 -06 -18 434 PM
$80
$70
$60
$50
$40
$30
$20
$10
Millions
General Protection Transportation Environmental Recreation & Other Gasworks
government services services services cultural services
2014 Budget 0 2014 Actual fib 2013 Actual
Expenses
The City of Kitchener is a diversified government institution and provides a wide range of services to its
citizens including fire, roads, water, sewer, natural gas, libraries, and community services. Schedule B of
the Consolidated Financial Statements breaks the expenses into major functional activities, consistent with
provincially - legislated requirements.
As is common with most Ontario municipalities, the City of Kitchener does not budget for amortization of
tangible capital assets or gains and losses on disposal of assets. In order that the actual results may be
compared to budget in a meaningful way, the Council- approved budgets have been adjusted to include
amortization expense and other accounting adjustments mandated by the Public Sector Accounting Board
to express the financial statements on an accrual basis. This provides greater clarity for all readers in
assessing budget to actual variances.
General government expenses are $1.8 million higher in 2014 than 2013. This is primarily due to reallocation
of staff costs from other areas of the City to this category.
2014 KITCHENER FINANCIAL REPORT 25
FCS_ COK _FinancialReponGRN_Mayl5.indd 25 2015 -06 -18 434 PM
Materials M
and services
$11oM ($99M)
Debenture 1111111111
debt interest
$4M ($4M)
Grants and other M
$4M ($4M)
Amortization w
$40M ($37M)
Loss /(Gain) 1ni
on sale of asset
$3M ($4M)
Salaries, wages and NO
employee benefits
$138M ($133M)
Transportation services is greater than budget and 2013 as a result of winter maintenance (snow removal)
costs being higher due to heavier than normal snow in the early part of 2014.
Environmental services expenses have decreased $1.4 million from 2013, due to there being a larger loss on
disposal of tangible capital assets in 2013.
In 2014, Recreation and Cultural services increased $3.2 million over 2013. This was largely a result of
increased interest on long term debt as a full year of interest was incurred on recently issued debt for the
Kitchener Memorial Auditorium and Kitchener Public Library. There were also increased losses on disposal
of tangible capital assets in 2014.
The 'Other' category in the Expenses by Function chart on page 25 includes Health services, Social and Family
services and Planning and Development. The increase in expenses compared to 2013 relates to the sale of
some significant properties in the prior year resulting in a gain on sale, which lowered overall expenses in 2013.
Additional external transfers were recorded in 2014 on properties meeting requirements for development grants.
The increase in Gasworks expenses in 2014 relates to the purchase of natural gas to accommodate the increased
sales volumes related to the colder weather.
26
FCS_ COK _Financi.lReportGRN_Mayl5.indd 26 2015 -06 -18 4:34 PM
C'110III4,S0III III II) TII 11]') ,S'FA TIII II IIIlC�IIIII ` MI �C��� Ilh °III III � d IIIIC� III II1�4 III T III II 14 A I �C'� III A III SS� 1 11111TS
The Statement of Change in Net Financial Assets explains the difference between a municipality's surplus or
deficit for the reporting year and its change in net financial assets in the same reporting year. This statement
provides for the reporting of the acquisition of tangible capital assets and other significant items that impact
the difference between the annual surplus /deficit and the change in net financial assets.
The statement of cash flows reports changes in cash and cash equivalents resulting from operations, capital,
investing and financing activities and shows how the Cityfinanced its activities during the year and met its
cash requirements.
Looking ahead to 2015, the City will continue to face pressure from the community to sustain or improve service
levels while keeping property tax and user fee increases to an affordable level. A rigorous budget process, in
addition to the development of a comprehensive long -term financial plan and business planning cycles will
help the City determine the optimal balance of taxes levied and services provided.
Continuing to focus on building an even stronger financial position through lower debt levels and healthier
reserve fund balances will also position the City favourably to respond to future challenges and opportunities,
not just in 2015 but for the years to come.
Dan Chapman, CPA, CA, MPA, Deputy CAD, Finance and Corporate Services & City Treasurer
City of Kitchener, June 29, 2015
2014 KITCHENER FINANCIAL REPORT 27
FCS_ COK _Financi.lReportGRN_Mayl5.indd 27 2015 -06 -18 4:34 PM
KPMG LLP Telephone 519 - 747 -8800
115 King Street South, 2nd Floor Fax 519 - 747 -8830
Waterloo ON N2J 5A3 Internet vvvvvv.kpmg.ca
INDEPENDENT AUDITORS' REPORT
To the Mayor and Members of Council, Inhabitants and Ratepayers of
The Corporation of the City of Kitchener
We have audited the accompanying consolidated financial statements of the Corporation of the City
of Kitchener, which comprise the consolidated statement of financial position as at December 31,
2014, the consolidated statements of operations, change in net financial assets and cash flows for
the year then ended, and notes, comprising a summary of significant accounting policies and other
explanatory information.
Management's Responsibility for the consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with Canadian public sector accounting standards, and for such internal
control as management determines is necessary to enable the preparation of consolidated 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 consolidated 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 about whether the consolidated financial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the consolidated financial statements. The procedures selected depend on our judgment, including
the assessment of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. In making those risk assessments, we consider internal control relevant
to the entity's preparation and fair presentation of the consolidated 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 consolidated
financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG International Cooperative
( "KPMG" International'), a Swiss entity.
KPMG Canada provides services to KPMG LLP.
28
i1-4 M.,t .:_.
Page 2
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the
consolidated financial position of the Corporation of the City of Kitchener as at December 31, 2014,
and its consolidated results of operations and its consolidated cash flows for the year then ended in
accordance with Canadian public sector accounting standards.
DRAFT
Chartered Professional Accountants, Licensed Public Accountants
Waterloo, Canada
29
THE CORPORATION OF THE CITY OF KITCHENER
Consolidated Statement of Financial Position
As at December 31, 2014
2014 2013
Financial assets
Cash and cash equivalents
$ 39,554,767
$ 55,826,776
Taxes receivable
22,706,141
20,610,222
Trade and other accounts receivable
42,099,858
43,453,856
Loans receivable (Note 4)
12,027,850
13,837,516
Inventory for resale
11,368,567
10,739,237
Investments (Note 5)
101,446,120
88,719,533
Investment in Kitchener Power Corp. and its affiliates (Note 6)
190,010,877
183,288,924
Investment in Kitchener Generation Corporation (Note 7)
3,716,028
3,948,280
422,930,208
420,424,344
Liabilities
Accounts payable and accrued liabilities
75,570,993
84,547,853
Deferred revenue - obligatory reserve funds (Note 9)
7,367,308
3,625,077
Deferred revenue - other
14,750,065
12,325,403
Municipal debt (Note 10)
102,999,040
112,039,283
Employee future benefits (Note 12)
34,851,294
31,685,242
235,538,700
244,222,858
Net financial assets
187,391,508
176,201,486
Non - financial assets
Tangible capital assets (Note 13)
984,942,842
957,932,884
Inventory of supplies
2,618,800
2,407,285
Prepaid expenses
1,295,774
1,114,532
988,857,416
961,454,701
Accumulated surplus
$ 1,176,248,924
$ 1,137,656,187
See accompanying notes
30
THE CORPORATION OF THE CITY OF KITCHENER
Consolidated Statement of Operations
For the Year Ended December 31, 2014
Grants
2014
Budget
2014
2013
Revenue
6,677,087
6,677,087
10,338,038
Taxation
$ 108,961,402 $
109,826,103 $
106,218,573
User fees and charges
3,300,000
3,085,740
3,044,161
Gasworks
85,305,749
94,880,959
87,529,918
Water, sewer and stormwater
46,893,523
43,024,620
44,611,523
Other
40,258,725
43,982,021
42,513,349
Grants
8,746,071
6,991,185
4,225,862
Contributions of tangible capital assets
6,677,087
6,677,087
10,338,038
Investment income
6,593,768
7,499,355
7,822,633
Penalties and interest on taxes
3,300,000
3,085,740
3,044,161
Obligatory reserve funds revenue recognized
2,557,000
8,076,165
6,891,567
Share of net income of Kitchener Power Corp.
and its affiliates (Note 6)
9,792,956
9,792,956
7,639,368
Share of net loss of Kitchener Generation
Corporation (Note 7)
-
(59,418)
(57,269)
Other
4,232,684
3,817,699
4,795,669
Total revenue
323,318,965
337,594,472
325,573,392
Expenses
General government
42,822,873
37,797,470
36,032,964
Protection services
43,209,139
42,726,718
41,775,584
Transportation services
33,032,768
35,327,512
32,907,683
Environmental services
26,064,296
28,331,804
29,729,558
Health services
2,070,114
2,144,309
2,155,206
Social and family services
2,427,779
2,608,554
2,639,843
Recreation and cultural services
66,951,247
66,140,828
62,907,167
Planning and development
12,248,782
13,100,164
8,600,340
Gasworks
64,329,943
70,824,376
64,605,488
Total expenses
293,156,941
299,001,735
281,353,833
Annual surplus
30,162,024
38,592,737
44,219,559
Accumulated surplus, beginning of year
1,137,656,187
1,137,656,187
1,093,436,628
Accumulated surplus, end of year (Note 14)
$ 1,167,818,211
$ 1,176,248,924
$ 1,137,656,187
See accompanying notes
31
THE CORPORATION OF THE CITY OF KITCHENER
Consolidated Statement of Change in Net Financial Assets
For the Year Ended December 31, 2014
2014 2014 2013
Budget
Annual surplus
$ 30,162,024 $
38,592,737 $
44,219,559
Amortization of tangible capital assets
39,645,916
39,645,916
37,355,305
Acquisition of tangible capital assets
(56,002,623)
(70,034,603)
(69,892,632)
Loss (gain) on disposals of tangible capital assets
2,763,551
2,763,551
302,385
Proceeds on disposal of tangible capital assets
615,178
615,178
3,706,828
Acquisition of supplies of inventories
-
(6,872,232)
(5,677,192)
Acquisition of prepaid expenses
-
(928,169)
(785,873)
Consumption of supplies inventory
-
6,660,717
5,331,990
Use of prepaid expenses
-
746,927
1,075,110
Change in net financial assets
17,184,046
11,190,022
15,635,480
Net financial assets, beginning of year
176,201,486
176,201,486
160,566,006
Net financial assets, end of year
$ 193,385,532 $
187,391,508 $
176,201,486
See accompanying notes
32
THE CORPORATION OF THE CITY OF KITCHENER
Consolidated Statement of Cash Flow
For the Year Ended December 31, 2014
2014 2013
Operating
Annual surplus $ 38,592,737 $ 44,219,559
Items not involving cash
Amortization 39,645,916 37,355,305
Loss on disposal of tangible capital assets 2,763,551 302,385
Share of net income of Kitchener Power Corp. and its affiliates (9,792,956) (7,639,368)
Share of net loss of Kitchener Generation Corporation 59,418 57,269
Change in employee future benefits 3,166,052 3,757,185
Contributions of tangible capital assets (6,677,087) (10,338,038)
Change in non -cash assets and liabilities
Taxes receivable
(2,095,919)
976,076
Trade and other accounts receivable
1,353,998
(8,702,657)
Loans receivables
1,809,666
2,840,272
Inventory of supplies
(211,515)
(345,197)
Inventory for resale
(629,330)
294,324
Prepaid expenses
(181,242)
289,237
Deferred revenue - obligatory reserve funds
3,742,231
765,724
Deferred revenue - other
2,424,662
3,543,688
Accounts payable and accrued liabilities
(8,976,860)
(1,418,052)
Net change in cash from operating activities
64,993,322
65,957,712
Investing
Dividends received from Kitchener Power Corp.
3,071,003
3,388,433
Debt and equity payments received from Kitchener Generation Corporation
172,834
174,983
Net acquisition of investments
(12,726,587)
(14,435,080)
Net change in cash from investing activities
(9,482,750)
(10,871,664)
Financing
Municipal debt issued
1,672,000
10,515,000
Municipal debt repaid
(10,712,243)
(9,738,514)
Net change in cash from financing activities
(9,040,243)
776,486
Capital
Acquisition of tangible capital assets
(63,357,516)
(59,554,594)
Proceeds on disposal of tangible capital assets
615,178
3,706,828
Net change in cash from capital activities
(62,742,338)
(55,847,766)
Net change in cash and cash equivalents
(16,272,009)
14,768
Cash and cash equivalents, beginning of year
55,826,776
55,812,008
Cash and cash equivalents, end of year $
39,554,767 $
55,826,776
See accompanying notes
33
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2014
1. Summary of significant accounting policies
These consolidated financial statements of The Corporation of the City of Kitchener (the "City ") have been
prepared by management in accordance with Canadian generally accepted accounting principles for local
governments as established by the Public Sector Accounting Board of the Chartered Professional Accountants
of Canada. The following is a summary of the significant accounting policies followed in the preparation of
these financial statements:
a. Basis of consolidation
Consolidated entities
These consolidated financial statements reflect the assets, liabilities, reserves, surpluses /deficits,
revenues, and expenditures of those City funds and governmental functions or entities which have been
determined to comprise a part of the aggregate City operations based upon control exercised by the City
except for the City's government businesses which are accounted for on the modified equity basis of
accounting. The following boards, municipal enterprises and utilities have been included in the
consolidated financial statements:
• Kitchener Public Library
• Kitchener Downtown Improvement Area Board of Management
• Belmont Improvement Area Board of Management
• The Centre in the Square Inc.
• Waterworks Enterprise
• Gasworks Enterprise
• Sewer Surcharge Enterprise
• Storm Water Management Enterprise
• Building Enterprise
• Golf Enterprise
• Parking Enterprise
All inter - organizational and inter -fund transactions and balances have been eliminated.
Government business enterprises
Kitchener Generation Corporation and Kitchener Power Corp. and its affiliates are not consolidated but
are accounted for on the modified equity basis which reflects the City of Kitchener's investment in the
enterprises and its share of net income since acquisition. Under the modified equity basis, the
enterprises' accounting principles are not adjusted to conform to those of the City, and inter -
organizational transactions and balances are not eliminated.
iii. Accounting for region and school board transactions
The taxation, other revenue, expenditures, assets and liabilities, with respect to the operations of the
school boards and the Regional Municipality of Waterloo, are not reflected in these consolidated financial
statements.
iv. Trust funds
Trust funds and their related operations administered by the City are not consolidated, but are reported
separately on the "Trust Funds Statement of Continuity and Balance Sheet" (see Note 3).
34
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2014
1. Summary of significant accounting policies (continued)
b. Basis of accounting
i. Accrual basis of accounting
The consolidated financial statements are prepared using the accrual basis of accounting. The accrual
basis of accounting recognizes revenues in the period in which the transactions or events occurred that
gave rise to the revenues. Expenses are recognized in the period the goods and services are acquired
and a liability is incurred or transfers are due.
ii. Cash and cash equivalents
Cash and cash equivalents include cash on hand and highly liquid investments with original maturity of
90 days or less as at the end of the year.
iii. Trade and other accounts receivable
Trade and other accounts receivable are reported net of any allowance for doubtful accounts.
iv. Loans receivable
Loans receivable are reported net of any allowance for doubtful accounts. Interest income is recorded as
it accrues. When the value of any loan receivable is identified as impaired, an allowance is set up to
offset the carrying amount and any adjustments are included in materials and services expense in the
period the impairment is recognized.
v. Inventory for resale
Inventory for resale is valued at the lower of cost or net realizable value on an average cost basis.
vi. Investments
Portfolio investments are carried at cost, net of accumulated amortization on premiums and discounts.
Premiums and discounts are amortized on a straight line basis over the term to maturity. Interest income
is recorded as it accrues. When the value of any portfolio investment is identified as impaired, the
carrying amount is adjusted to the estimated realizable amount and any adjustments are included in
investment income in the period the impairment is recognized.
vii. 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 or for the purchase of tangible capital assets. In addition, certain user
charges and fees are collected for which the related services have yet to be performed. Revenue is
recognized in the period when the related expenses are incurred, services performed or the tangible
capital assets are acquired.
viii. Employee future benefits
The contributions to a multi - employer, defined benefit pension plan are expensed when contributions are
due. The costs of post- retirement benefits are recognized when the event that obligates the City
occurs. Costs include projected future income payments, health care continuation costs and fees paid to
independent administrators of these plans, calculated on a present value basis.
35
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2014
1. Summary of significant accounting policies (continued)
b. Basis of accounting (continued)
viii. Employee future benefits (continued)
The costs of post- retirement benefits are actuarially determined using the projected benefits method
prorated on service and management's best estimate of retirement ages of employees, salary escalation,
expected health care costs and plan investment performance. Liabilities are actuarially determined using
discount rates that are consistent with the market rates of high quality debt instruments. Any gains or
losses from changes in assumptions or experience are amortized over the average remaining service
period for active employees.
ix. Non - financial assets
Non - financial assets are not available to discharge liabilities and are held for use in the provision of
services. They have useful lives that extend 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 consolidated change in net financial assets for the year.
a. 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 is amortized on a straight -line basis over their estimated useful lives as
follows:
Assets Amortization Period
Land
Land Improvements
Buildings & building improvements
Leasehold improvement
Machinery & equipment
Computer hardware
Computer software
Linear assets
The original cost of land is not amortized
10 to 100 years
15 to 50 years
Over the useful life of the improvement or the lease
term, whichever is shorter
1 to 20 years
3 to 10 years
1 to 10 years
2 to 100 years
Vehicles 1 to 25 years
b. Contributions of tangible capital assets
Tangible capital assets received as contributions are recorded at their fair value at time of receipt
and are recorded as revenue.
c. Leases
Leases are classified as capital or operating leases. Leases which transfer substantially all the risks
and benefits incidental of ownership 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.
W
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2014
1. Summary of significant accounting policies (continued)
b. Basis of accounting (continued)
ix. Non - financial assets (continued)
d. Inventory of supplies
Inventories held for consumption are recorded at the lower of cost and replacement cost.
e. 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.
x. Government transfers
Government transfers are recognized in the financial statements in the period in which the events giving
rise to the transfer occur, providing the transfers are authorized, any eligibility criteria have been met and
reasonable estimates of the amounts can be made.
Government transfers and developer contributions -in -kind related to capital acquisitions are required to
be recognized as revenue in the consolidated financial statements in the period in which the tangible
capital assets are acquired.
xi. Use of estimates
Since precise determination of many assets and liabilities is dependent upon future events, the
preparation of periodic financial statements necessarily involves the use of estimates and
approximations. These have been made using careful judgments. Actual results could differ from these
estimates.
2. Operations of school boards and the Regional Municipality of Waterloo
Further to Note 1 a) iii, the taxation, other revenues and requisitions for the school boards and the Regional
Municipality of Waterloo are comprised of the following:
School Region Total
Boards
Taxation and user charges
$ 85,943,842
$ 214,145,934
$ 300,089,776
Share of payments in lieu of taxes
4,251
2,962,012
2,966,263
Share of linear properties
63.470
123.707
187.177
Amounts requisitioned $ 86,011,563 $ 217,231,653 $ 303,243,216
3. Trust funds
Trust funds administered by the City have not been included in the Consolidated Statement of Financial
Position, nor have their operations been included in the Consolidated Statement of Operations. The trust funds
under administration are comprised of cemetery perpetual care and prepaid interment funds totalling
$12,560,214 (2013 - $11,956,505).
37
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2014
4. Loans receivable
Loans receivable are made up of the following:
2014 2013
Major capital improvement loans receivable $ 9,321,887 $ 9,894,449
Loans receivable with forgiveness provisions 113,170 162,200
Minor capital improvement and other loans receivable 2,592,793 3,780,867
$ 12,027,850 $ 13,837,516
Major capital improvement loans are individual loans in excess of $500,000 when issued with no forgiveness
provision built into the loan. These loans have repayment terms ranging from 12 to 15 years (2013 - 12 to 15
years). All major capital improvement loans are unsecured and bear interest at rates ranging from 1.40% to
2.55% (2013 - 1.40% to 2.55 %).
Forgivable loans are those initially offered with forgiveness provisions built into the agreement. All loans in this
category are unsecured and have repayment terms of five to ten years (2013 - five to ten years). The
forgiveness provisions range from 15% to 100% (2013 - 15% to 100 %). The balances recorded are net of the
allowance for forgiveness. Interest rates on these loans range from 0% to 8% (2013 - 0% to 896).
Minor capital improvement and other loans receivable comprise any loan receivable not fitting into the first two
categories. There is a variety of terms related to these loans with payment terms ranging from six months to 25
years (2013 - six months to 25 years). The majority of these loans are secured by the asset the loan was
granted to finance, but others are unsecured. The interest rates on these loans range from 0.0% to 12.9%
(2013 - 0.0% to 12.9 %).
5. Investments
Investments are made up of the following
2014
2014
2013
2013
Cost
Market
Cost
Market
Value
Value
Guaranteed investment certificates $ 93,546,587
$ 94,368,625 $
79,906,052 $
80,566,788
Bonds and debentures 7,575,357
7,983,786
7,919,721
8,200,388
Common stock 324,176
489,904
893,760
1,252,788
$ 101,446,120
$ 102,842,315 $
88,719,533 $
90,019,964
38
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2014
6. Investment in Kitchener Power Corp. and its Affiliates
Under the provincial government's Electricity Competition Act (Bill 35), Kitchener Power Corp., a holding
company, along with its wholly owned subsidiaries, including Kitchener - Wilmot Hydro Inc., was incorporated on
July 1, 2000.
On August 1, 2000, under by -laws passed by the City and the Township of Wilmot, the net assets of the former
Hydro - Electric Commission of Kitchener - Wilmot were transferred to the new corporation. The City took back a
92.25% share in the common shares of Kitchener Power Corp. and a 92.25% share in long -term notes payable
by the affiliates for the assets transferred. Certain surplus property assets and cash funds were excluded from
the transfer and turned over to the City and the Township.
The investment is comprised of the following:
2014 2013
Kitchener Power Corp. common shares $ 61,244,208 $ 61,244,208
Kitchener - Wilmot Hydro Inc. long -term notes receivable 70,997,576 70,997,576
Share of net income and prior period adjustments due to changes in
accounting policies since acquisition, net of dividends 57,769,093 51,047,140
$ 190,010,877 $ 183,288,924
The Kitchener - Wilmot Hydro Inc. notes are unsecured and bear interest at the rate of 4.83% (2013 - 5.87 %).
There are no repayment terms and there is no intent to redeem the notes or the shares.
The following table provides condensed financial information with respect to Kitchener Power Corp.:
Current assets
2014 2013
$ 71,349,628 $ 77,749,312
Capital assets
186,373,289
181,051,618
Regulatory assets
7,578,179
923,358
Future income taxes
5,267,764
6,782,009
Total assets
270,568,860
266,506,297
Current liabilities
41,260,590
43,653,334
Long -term debt
81,987,954
82,980,595
Regulatory liabilities
8,402,121
8,539,337
Other liabilities
9,906,484
9,607,990
Total liabilities
141,557,149
144,781,256
Net assets
129,011,711
121,725,041
Results of operations
Revenues 236,918,753 228,895,834
Expenses (226,303,083) (220,614,676)
Net income 10,615,670 8,281,158
City's share of net income - 92.25% $ 9,792,956 $ 7,639,368
39
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2014
7. Investment in Kitchener Generation Corporation
Under the Business Corporation Act (Ontario), Kitchener Generation Corporation was incorporated on
December 9, 2011.
Effective January 1, 2012, the City transferred the solar roof asset constructed on the surface of the Kitchener
Operations Facility to Kitchener Generation Corporation in exchange for 100% of its common shares and
interest bearing debt.
The investment in Kitchener Generation Corporation is comprised of the following:
2014 2013
Kitchener Generation Corporation common shares $ 386,592 $ 403,875
Kitchener Generation Corporation long -term notes receivable 3,479,328 3,634,878
Share of net income since acquisition, net of dividends (149,892) (90,473)
$ 3,716,028 $ 3,948,280
The notes receivable are unsecured and bear interest at the rate of 5.01%. To the extent that Kitchener
Generation Corporation has positive annual cash flows after any dividend payment, the cash will be returned to
the City as repayment of the outstanding debt and return of capital. The proportion to which they contribute is
90% debt, 10% equity.
The following table provides condensed financial information with respect to Kitchener Generation Corporation:
2014 2013
Current assets
$ 27,633 $
40,718
Capital assets
3,716,028
3,948,280
Total assets
3,743,661
3,988,998
Current liabilities
27,633
-
Long -term debt
3,479,327
3,634,878
Total liabilities
3,506,960
3,634,878
Net assets
236,701
354,120
Results of operations
Revenues 372,373 379,880
Expenses (431,791) (437,149)
Net loss (59,418) (57,269)
City's share of net loss -100% $ (59,418) $ (57,269)
.I
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2014
8. Insurance pool
Liabilities include an amount of $4,366,767 (2013 - $5,652,303) which represents funds belonging to the
Waterloo Region Municipalities Insurance Pool and administered by the City on behalf of the Pool's members.
The members entered an agreement in 1998 to purchase property damage and public liability insurance on a
group basis and share a retained level of risk.
The members pay an actuarially determined annual levy to fund insurance, prefund expected losses and
contribute to a surplus. The Pool has purchased insurance to fund losses above a predetermined deductible
and any losses above a predetermined total in any year.
The City's share of Pool levies is 25.18 % (2013 - 23.55 %) and its share of the Pool surplus as at May 31, 2014
was $1,062,027 (2013 - $1,131,779). The City's share of the Pool surplus has not been included in the
Consolidated Statement of Financial Position.
9. Obligatory deferred revenue
2014 2013
Recreational land $ 4,652,177 $ 3,625,077
Development charges 2,715,131 -
$ 7,367,308 $ 3,625,077
The continuity of deferred revenue is as follows:
2014 2013
Balance, beginning of year $ 3,625,077 $ 2,859,353
Collections 10,930,733 -
Interest earned 26,454 74,484
Other revenue 1,366,505 1,338,483
Contributions used (8,581,461) (647,243)
Balance, end of year $ 7,367,308 $ 3,625,077
41
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2014
10. Municipal debt
The City has assumed responsibility for the payment of principal and interest charges on certain long -term debt
issued by other municipalities. At the end of the year, the outstanding principal amount of this liability is
$102,999,040 (2013 - $112,039,283).
The annual principal repayments are:
2015 $ 10,629,385
2016 10,948,352
2017 11,076,256
2018 10,280,151
2019 10,137,884
2020 and thereafter 49,927,012
$ 102,999,040
The annual principal and interest payments required to service the long -term debt are within the annual debt
repayment limit prescribed by the Ontario Ministry of Municipal Affairs and Housing.
The long -term liabilities carry interest rates ranging from 1.15% to 5.60% (2013 — 1.25% to 6.4096). Interest
charges for 2014 relating to municipal debt totalled $3,739,632 (2013 - $3,940,774).
11. Pension plan
The City 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. Employee
contributions are matched by the City. Contributions were required on account of current service in 2014
amounting to $9,698,485 (2013 - $9,253,959).
12. Employee future benefits
The estimated liability for employee future benefits is comprised of the following:
2014 2013
Sick leave benefit plan $ 15,290,093 $ 14,344,962
Post - retirement benefits 13,296,501 12,056,880
Future payments to WSIB 6,264,700 5,283,400
$ 34,851,294 $ 31,685,242
Ly,
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2014
12. Employee future benefits (continued)
a. Sick Leave
Under the sick leave benefit plan, unused sick leave can accumulate and certain employees may become
entitled to cash payments when they leave the City's employment. The expense for the current year was
$2,425,211 (2013 - $2,508,519) and is comprised of the following items:
2014 2013
Current period benefit cost $ 875,049 $ 947,844
Amortization of actuarial losses 634,931 757,612
Sick leave benefit expense 1,509,980 1,705,456
Sick leave benefit interest expense 915,231 803,063
Total expenses related to sick leave benefits $ 2,425,211 $ 2,508,519
The actuarial valuation of the future liability for sick leave assumes a discount rate of 3.50% (2013 —
4.50 %). The last actuarial valuation for this liability was completed at December 31, 2014.
As at December 31, 2014, the unamortized actuarial losses were $6,135,416 (2013 — $5,858,495) and are
amortized over 12.0 to 13.0 years (2013 — 12.0 to 13.0 years). The amount of benefits paid during the year
were $1,480,080 (2013- $1,207,881).
A reserve fund to provide for this liability is included in accumulated surplus, in the amount of $5,522,208 (2013
- $5,355,187).
Anticipated undiscounted payments to employees who are eligible to retire are
2015
$ 2,093,876
2016
828,141
2017
885,924
2018
949,900
2019
1,019,625
2020 and thereafter
12,268,843
$ 18,046,309
43
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2014
12. Employee future benefits (continued)
b. Post - retirement benefits
The City pays certain health, dental and life insurance benefits on behalf of its retired employees up to the age
of 65 if they have at least ten years of service with the City. The expense for the year was $1,979,864 (2013 -
$2,092,008) and is comprised of the following items:
2014 2013
Current period benefit cost $ 699,770 $ 774,910
Amortization of actuarial losses 545,322 691,831
Post - retirement benefit expense 1,245,092 1,466,741
Post - retirement benefit interest expense 714,772 625,267
Total expenses related to post- retirement benefits $ 1,959,864 $ 2,092,008
The actuarial valuation of the future liability for post- retirement benefits assumes a discount rate of 3.75%
(2013 — 4.50 %) and inflation rates for benefit premiums of 4.0% to 7.4% (2013 — 4.0% to 7.8 %).
As at December 31, 2014, the unamortized actuarial losses were $6,297,426 (2013 — $3,497,281) and are
amortized over 10 to 13 years (2013 — 10 to 13 years). The amount of benefits paid during the year were
$740,243 (2013 - $592,861). The last actuarial valuation for this liability was completed at December 31, 2014.
The City holds no reserve in accumulated surplus to meet this liability.
c. WSIB
The Workplace Safety and Insurance Board (WSIB) administers injured worker benefits payments on behalf of
the City as a Schedule 2 employer. The expense for the current year was $1,805,900 (2013 - $1,700,900) and
is comprised of the following items:
2014 2013
Current period benefit cost $ 1,191,700 $ 1,168,300
Amortization of actuarial losses 259,300 261,500
WSIB benefit expense 1,451,000 1,429,800
WSIB benefit interest expense 354,900 271,100
Total expenses related to WSIB benefits $ 1,805,900 $ 1,700,900
The actuarial valuation of the future liability for WSIB assumes a discount rate of 3.75% (2013 — 4.5096). The
last actuarial valuation for this liability was completed at December 31, 2014.
As at December 31, 2014, the unamortized actuarial gains were $100,100 (2013 — unamortized actuarial
losses $1,823,700) and are amortized over 10 years (2013 — 10 years). The amount of benefits paid during the
year were $824,600 (2013 - $743,500).
A reserve fund to provide for this liability is included in accumulated surplus, in the amount of $1,040,336 (2013
- $1,044,060).
ELI'
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2014
13. Tangible capital assets
The continuity schedule of tangible capital assets is presented in schedule A.
Assets under construction having a value of $26,034,680 (2013 - $42,750,019) have not been amortized.
Amortization of these assets will commence when the assets are put into service.
Contributed tangible capital assets of $6,677,087 (2013- $10,338,038) have been recognized at fair market
value at the date of contribution.
The write -down of tangible capital assets during the year was $1,005,462 (2013 — $2,682,590).
14. Accumulated surplus
The accumulated surplus consists of individual fund surpluses/ (deficits) and reserve funds as follows:
2014 2013
Surplus:
Invested in tangible capital assets $ 984,942,842 $ 957,932,884
Other (8,183,729) (13,047,750)
Equity in Kitchener Power Corp. and its affiliates 190,010,877 183,288,924
Equity in Kitchener Generation Corporation 3,716,028 3,948,280
Employee future benefits (unfunded) (34,851,294) (31,685,242)
Total surplus 1,135,634,724 1,100,437,096
Reserve funds set aside for specific purposes by Council for:
Capital
24,716,247
21,373,354
Stabilization
4,878,962
14,221,719
Program specific
3,032,198
3,428,819
Corporate
7,062,446
4,974,217
Development charges
-
(7,115,239)
Kitchener Public Library
381,259
186,308
Kitchener Downtown Business Improvement Area
-
25,641
The Centre in the Square Inc.
543,088
124,272
Total reserve funds
40,614,200
37,219,091
Accumulated surplus
$1,176,248,924
$1,137,656,187
15. Contingent liabilities
a. The City has extended a line of credit not to exceed $2,000,000 to Kitchener Housing Inc.. Interest is
charged on the outstanding balance at bank prime plus 1 % (rate as at December 31, 2014 was 4 %).
b. Legal actions have been undertaken against the City relating to a number of contract disputes and other
matters. The outcome of these actions is not presently determinable. It is management's opinion that the City's
insurance will adequately cover any potential liability arising from these contract disputes and other
matters. Should any liability be determined and not covered by insurance it will be recognized in the period
when it is determined.
M
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2014
16. Segmented information
The City of Kitchener is a diversified municipal government institution that provides a wide range of services to
its citizens, including fire, roads, water, sewer, storm sewer, gasworks, libraries, and community services.
Segmented information has been prepared by major functional classification of activities provided, consistent
with the Consolidated Statement of Operations and provincially legislated requirements.
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.
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.
See Schedule B
17. Budget figures
The budget figures reflected in these consolidated statements are those approved by Council at a meeting on
January 30, 2014. Budget figures have been translated to reflect Public Sector Accounting Board standards.
18. Comparative figures
Certain of the prior year's comparative figures have been restated to conform to the current year's presentation.
IR
THE CORPORATION OF THE CITY OF KITCHENER
Schedule A - Tangible Capital Assets
For the Year Ended December 31, 2014
47
General
Infrastructure
Land
Land
Buildings
Leasehold
Machinery &
Computer
Computer
Vehicles
Land
Buildings Linear Assets Assets Under
Total
Improvements
Improvements
Equipment
Software
Hardware
Construction
Cost
Balance, beginning of
year
$ 40,503,283
$ 50,195,584 $ 204,977,687 $
3,054,251 $ 57,064,202 $
20,706,088 $
6,060,432 $ 31,780,779
$ 142,658,676 $
66,198,896 $ 759,220,998 $ 42,750,019
$1,425,170,895
dditions
75,487
1,584,633
5,465,876
-
4,295,585
391,995
1,136,418
3,278,325
1,694,923
314,389 36,159,663 15,637,309
70,034,603
Transfers
55,513
-
23,313,582
-
72,473
-
-
516589
(55,513)
- 8,418,841 (32,321,485)
Disposals
(848,777)
(420,270)
(731,827)
(104,892)
(774,923)
798
(49,417) 3 598 395 (31,163)
17 686 490
Balance end of year
39,785,506
51,359,947
233,025,318
3,054,251
53 832 899
20,993,191
6,421,927
32 049 026
144,297,288
66 63,868 800,201,107 26,034,680
1 477 519 008
ccumulated
amortization
Balance, beginning of
year
-
(22,292,507)
(86,626,562)
(523,468)
(33,044,102)
(15,628,813)
(2,699,455)
(17,968,742)
-
(8,188,983) (280,265,379)
(467,238,011)
Disposals
-
218,993
560,821
-
7,529,910
104,892
771,878
2,931,001
-
4,942 2,185,324
14,307,761
mortization expense
(1,922,584)
(6,325,268)
(71,196)
(3,921,151)
(1,072,165)
(2,053,579)
(2,123,353) (21,044,388)
(39,645,916)
Balance end of year
(23,996,098)
(92 391 009
(594,664)
29 435 343 )
(16,636,153)
(2 999 742 )
(17,091,320)
(10 307 394 ) (299,124,443)
492 576 166
Net book value, end of
year
39,785,506
27,363,849
140,634,309
2,459,587
24 397 556
4,357,038
3 422 185
14,957,70E.
144,297,288
56,156,474 501,076,664 26,034,680
984 942 842
Net book value,
beginning of year
$ 40,503,283 $ 27,903,077 $ 118,351,125 $
2,530,783 $ 24,020,100 $
5,077,275 $
3,360,977 $ 13,812,037
$ 142,658,676 $ 58,009,913 $ 478,955,619 $ 42,750,019
$ 957,932,884
47
THE CORPORATION OF THE CITY OF KITCHENER
Schedule B - Segmented Information
For the Year Ended December 31, 2014
48
General
Protection Transportation Environmental
Health
Social and
Recreation
Planning and
Gasworks
Total
Government
Services
Services
Services
Services
Family
and Cultural
Development
Services
Services
Revenue
Taxation
$ 22,479,223 $
31,404,260 $
13,856,072 $
469,149 $
104,151 $
1,243,013 $
34,436,784 $
5,833,451 $
- $
109,826,103
User fees and charges
2,242,139
7,700,213
8,549,781
43,024,611
1,405,298
464,692
20,536,929
3,082,978
94,880,959
181,887,600
Grants
386,900
-
4,836,728
252,870
-
636,302
878,385
-
-
6,991,185
Investment income
6,374,569
123,778
(343)
189,670
280,830
2,469
349,993
3,711
174,678
7,499,355
Penalties and interest on taxes
3,085,740
-
-
-
-
-
-
-
-
3,085,740
bligatory reserve funds revenue recognized
646,096
1,138
1,813,669
3,954,601
-
-
1,483,875
102,039
74,747
8,076,165
Share of net income of Kitchener Power Corp. and its affiliates
9,792,956
-
-
-
-
-
-
-
-
9,792,956
Share of net loss of Kitchener Generation Corporation
(59,418)
-
-
-
-
-
-
-
-
(59,418)
ontributions of tangible capital assets
-
-
3,204,994
3,383,285
-
-
88,808
-
-
6,677,087
ther
762,908
345,637
105,437
415,975
24,224
60,069
1,419,945
196,713
486,791
3,817,699
Total Revenue
45,711,113
39,575,026
32,366,338
51,690,161
1,814,503
2,406,545
59,194,719
9,218,892
95,617,175
337,594,472
Aerating expenses
aIaries, wages and employee benefits
32,194,735
35,997,433
11,418,686
8,749,396
1,420,907
1,881,712
35,881,313
5,547,125
5,167,952
138,259,259
Materials
15,012,722
3,266,466
8,080,186
6,833,156
362,016
516,681
17,285,505
2,546,608
56,202,063
110,105,403
Long term debt interest
341,523
188,217
369,524
71,824
26,035
43,273
1,689,434
1,009,802
-
3,739,632
Interfunctional and program support
(15,587,731)
1,775,324
2,184,763
4,840,004
176,601
79,180
2,186,024
1,178,538
3,167,297
External transfers
409,337
-
7,048
338,392
-
10,577
1,321,962
2,104,867
-
4,192,183
Amortization oftangible capital assets
5,364,668
1,189,077
12,259,945
7,078,442
149,808
77,131
6,703,675
656,972
6,166,198
39,645,916
Loss (gain) on disposals of tangible capital assets
62,216
310,201
1,007,360
420 590
8,942
1,072,915
56,252
120,866
3,059,342
otal expenses
37,797,470
42,726,718
35,327,512
28,331,804
2,144,309
2,608,554
66,140,828
13,100,164
70,824,376
299,001,735
nnual surplus
$ 7,913,643 $
3,151 692 $
(2,961,174) $
23,358,357 $
(329,806) $
(202,009) $
(6,946,109) $
(3,881,272) $
24,792,799 $
38,592,737
48
THE CORPORATION OF THE CITY OF KITCHENER
Schedule B - Segmented Information (Continued)
For the Year Ended December 31, 2013
49
General
Protection Transportation Environmental
Health
Social and
Recreation
Planning and
Gasworks
Total
Government
Services
Services
Services
Services
Family
and Cultural
Development
Services
Services
Revenue
Taxation
$ 18,329,035 $
31,820,381 $
13,954,798 $
1,504,664 $
168,326 $
1,256,397 $
33,945,158 $
5,239,814 $
- $
106,218,573
User fees and charges
2,430,775
7,305,580
7,833,933
44,611,523
1,441,053
481,709
20,287,737
2,732,562
87,529,918
174,654,790
Grants
66,300
-
2,337,893
243,545
-
659,328
918,796
-
-
4,225,862
Investment income
6,785,080
113,717
7,517
149,576
313,022
2,801
164,278
1,153
285,489
7,822,633
Penalties and interest on taxes
3,044,161
-
-
-
-
-
-
-
-
3,044,161
bligatory reserve funds revenue recognized
91,965
-
1,987,565
2,024,237
-
-
2,280,698
504,372
2,730
6,891,567
Share of net income of Kitchener Power Corp. and its affiliates
7,639,368
-
-
-
-
-
-
-
-
7,639,368
Share of net loss of Kitchener Generation Corporation
(57,269)
-
-
-
-
-
-
-
-
(57,269)
ontributions of tangible capital assets
-
-
7,733,977
2,278,450
5,643
-
162,516
145,846
11,606
10,338,038
ther
1,204,262
405,247
153,793
737,569
48,823
98,174
1,621,525
247,807
278,469
4,795,669
Total revenue
39,533,677
39,644,925
34,009,476
51,549,564
1,976,867
2,498,409
59,380,708
8,871,554
88,108,212
325,573,392
Aerating expenses
aIaries, wages and employee benefits
30,012,173
35,626,987
10,776,737
8,755,303
1,356,254
1,908,768
34,317,875
5,306,162
5,403,459
133,463,718
Materials
13,197,900
2,919,453
7,404,599
5,689,353
448,401
517,357
16,322,382
1,833,242
50,385,899
98,718,586
Long term debt interest
986,524
208,142
929,078
94,256
2,027
49,524
763,494
907,729
-
3,940,774
Interfunctional and program support
(13,991,195)
1,682,773
1,581,589
5,084,678
169,113
55,546
1,809,445
979,767
2,628,284
External transfers to others
28,050
-
6,944
433,534
-
9,000
2,723,831
677,648
-
3,879,007
Amortization oftangible capital assets
5,507,459
1,202,138
10,904,919
6,144,591
127,616
89,586
6,725,755
632,880
6,020,361
37,355,305
Loss (gain) on disposals of tangible capital assets
292,053
136,091
1,303,817
3 527 843
51,795
10,062
244,385
(1,737,088)
167,485
3,996,443
otal expenses
36,032,964
41,775,584
32,907,683
29,729,558
2,155,206
2,639,843
62,907,167
8,600,340
64,605,488
281,353,833
nnual surplus
$ 3,500,713 $
2,130 659 $
1,101,793 $
21,820,006 $
(178,339) $
(141,434) $
(3,526,459) $
271,214 $
23,502,724 $
44,219,559
49
iL) {...1'r.LY ier�.rP.
KPMG LLP Telephone 519 - 747 -8800
115 King Street South, 2nd Floor Fax 519 - 747 -8830
Waterloo ON N2J 5A3 Internet vvvvvv.kpmg.ca
INDEPENDENT AUDITORS' REPORT
Trust Funds
To the Mayor and Members of Council, Inhabitants and Ratepayers of
The Corporation of the City of Kitchener
We have audited the accompanying financial statements of the Trust Funds of the Corporation of the
City of Kitchener, which comprise the balance sheet as at December 31, 2014 and the statement of
continuity for the year then ended, and notes, comprising 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 public sector accounting standards, 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 about whether the financial statements are free from 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 our 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, we consider 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.
KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG International Cooperative
( "KPMG" International "), a Swiss entity.
KPMG Canada provides services to KPMG LLP.
50
I �' t 1w M"
Zl- I I-
Page 2
Opinion
In our opinion, the financial statements present fairly, in all material respects, the balance sheet of the
Trust Funds of the Corporation of the City of Kitchener as at December 31, 2013, and its results of
operations and its cash flows for the year then ended in accordance with Canadian public sector
accounting standards.
Chartered Professional Accountants, Licensed Public Accountants
June 29, 2015
Waterloo, Canada
51
CORPORATION OF THE CITY OF
KITCHENER TRUST FUNDS
Balance Sheet
As at December 31, 2014
2014 2013
Assets
Accounts receivable
$ 101,366 $
125,205
Interest receivable
41,336
69,812
Investments (Note 2)
Short -term
4,504,101
2,217,039
Long -term
7,915,011
9,546,549
12,561,814
11,958,605
Liabilities
Accounts payable
1,600
2,100
Fund Balance 12,560,214 11,956,505
$ 12,561,814 $ 11,958,605
See accompanying notes
52
CORPORATION OF THE CITY OF
KITCHENER TRUST FUNDS
Statement of Continuity
For the Year Ended December 31, 2014
2014 2013
Re ce i pts
Perpetual care
Interest earned
Other
$ 267,806 $
413,282
201,865
296,319
456,112
109,773
882,953
862,204
Expenditures
Transfer to cemeteries operations
279,244
311,350
279,244
311,350
Net change in fund
603,709
550,854
Balance, beginning of year
11,956,505
11,405,651
Balance, end of year
$ 12,560,214 $
11,956,505
See accompanying notes
53
CORPORATION OF THE CITY OF
KITCHENER TRUST FUNDS
Notes to Financial Statements
For the Year Ended December 31, 2014
Summary of Significant Accounting Policies
The Financial Statements have been prepared in accordance with Canadian generally
accepted accounting principles for local government as recommended by the Public Sector
Accounting Board of the Canadian Institute of Chartered Accountants. The significant
accounting policies are summarized below.
a. Basis of Accounting
Sources of financing and expenditures are reported on the accrual basis of accounting.
The accrual basis of accounting recognizes receipts as they become available and
measurable; expenditures are recognized as they are incurred and measurable as a
result of receipt of goods or services and the creation of a legal obligation to pay.
Investments
The long -term investments of $7,915,011 (2013 - $9,546,549) reported on the Balance
Sheet at cost, have a market value of $8,337,490 (2013 - $9,827,681).
Statement of Cash Flows
A separate statement of cash flows is not presented, since cash flows from operating,
investing and financing activities are readily apparent from the other financial statements.
54
CORPORATION OF THE CITY OF KITCHENER TRUST FUNDS
Schedule of Continuity by Fund
For the Year Ended December 31, 2014
Cemetery Trusts
F.E. Tremain
15,550
526
526
15,550
0
w
8,783
297
297
M
L.F. Glick
20,664
699
699
20,664
�
1,331
M
Gl
F
N
Q
W
W
N
M
42,614
r
1,357
W
46
E W
E
r
1,287
U
3
W N
N
3,817,412
w
w
176,974 -
U
$ 11,956,505 $
Q" C
W
Gl
t
N
C E
f`6
7
N
C
f6
m
a Li
O
F U
D
m
Perpetual Care
Mount Hope Cemetery $
586,288 $
2,845 $
19,858 $
950 $
19,858 $
$
590,083
Woodland Cemetery
4,554,878
92,510
155,352
8,900
155,352
4,656,288
Bridgeport Cemetery
143,961
2,443
4,906
400
4,906
146,804
Williamsburg Cemetery
2,235,207
170,008
78,188
13,591
78,188
2,418,806
St. Peter's Cemetery
490,395
-
16,599
1,050
16,599
491,445
Cemetery Trusts
F.E. Tremain
15,550
526
526
15,550
Florence V. Cober
8,783
297
297
8,783
L.F. Glick
20,664
699
699
20,664
Edna Atherton
1,331
45
45
1,331
George Wright Estate
42,614
1,441
1,441
42,614
E. L. Goetz
1,357
46
46
1,357
E. Weiderhold
38,065
1,287
- 1,287
38,065
Prepaid Interments
3,817,412
- 134,038
176,974 -
4,128,424
$ 11,956,505 $
267,806 $ 413,282 $
201,865 $ 279,244 $
$ 12,560,214
55
J
KPMG LLP Telephone 519 - 747 -8800
115 King Street South, 2nd Floor Fax 519 - 747 -8830
Waterloo ON N2J 5A3 Internet vvvvvv.kpmg.ca
INDEPENDENT AUDITORS' REPORT
To the Members of the Belmont Improvement Area Board of Management
We have audited the accompanying financial statements of the Belmont Improvement Area Board of
Management, which comprise the statement of financial position as at December 31, 2014, the
statements of revenue and expenses and accumulated surplus and change in net financial assets for
the year then ended, and notes, comprising 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 public sector accounting standards, 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 about whether the financial statements are free from 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 our 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, we consider 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.
KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG International Cooperative
( "KPMG" International "), a Swiss entity.
KPMG Canada provides services to KPMG LLP.
6M
Page 2
Opinion
In our opinion, the financial statements present fairly, in all material respects, the financial position of
the Belmont Improvement Area Board of Management as at December 31, 2013, and its results of
operations and its cash flows for the year then ended in accordance with Canadian public sector
accounting standards.
Chartered Professional Accountants, Licensed Public Accountants
June 29, 2015
Waterloo, Canada
57
BELMONT IMPROVEMENT AREA
BOARD OF MANAGEMENT
Statement of Financial Position
As at December 31, 2014
2014 2013
Financial assets
Cash $ 19,753 $ 13,827
Accounts receivable 275 754
20,028 14,581
Financial liabilities
Accounts payable 5,503 9,519
Net financial assets 14,525 5,062
Non - financial assets
Tangible capital assets
1,831
3,051
Prepaid expenses
613
585
2,444
3,636
Net assets
16,969
8,698
Accumulated surplus
Accumulated net revenue 15,138 5,647
Invested in tangible capital assets 1,831 3,051
Total accumulated surplus $ 16,969 $ 8,698
See accompanying notes
58
BELMONT IMPROVEMENT AREA
BOARD OF MANAGEMENT
Statement of Revenue and Expenses and Accumulated Surplus
For the Year Ended December 31, 2014
2014 2013
Revenue
Assessments
$ 40,000 $
25,000
Other revenue
963
8,488
40,963
33,488
Expenses
Streetscaping
1,301
2,671
Audit
1,808
1,808
Summer maintenance
4,440
4,916
Insurance
1,289
670
Winter maintenance
20,992
20,497
Advertising
226
2,527
Miscellaneous
1,416
1,566
Amortization
1,220
1,342
32,692
35,997
Net surplus (deficit) for year
8,271
(2,509)
Accumulated surplus, beginning of year
8,698
11,207
Accumulated surplus, end of year
$ 16,969 $
8,698
See accompanying notes
59
BELMONT IMPROVEMENT AREA
BOARD OF MANAGEMENT
Statement of Change in Net Financial Assets
For the Year Ended December 31, 2014
2014 2013
Net surplus (deficit) for year $ 8,271 $ (2,509)
Acquisition of tangible capital assets - -
Amortization of tangible capital assets 1,220 1,342
Acquisition of prepaid expenses (28) (585)
Change in net financial assets 9,463 (1,752)
Net financial assets, beginning of year 5,062 6,814
Net financial assets, end of year $ 14,525 $ 5,062
See accompanying notes
I-
BELMONT IMPROVEMENT AREA
BOARD OF MANAGEMENT
Notes to Financial Statements
For the Year ended December 31, 2014
Summary of Significant Accounting Policies
The financial statements of the Belmont Improvement Area Board of Management are the
representation of management and have been prepared in accordance with Canadian
generally accepted accounting principles for local governments as recommended by the
Public Sector Accounting Board of the Canadian Institute of Chartered Accountants. Since
precise determination of many assets and liabilities is dependent upon future events, the
preparation of periodic financial statements necessarily involves the use of estimates and
approximations. These have been made using careful judgment. The following is a summary
of the significant accounting policies followed in the preparation of these financial statements
a) Tangible capital assets
Tangible capital assets are recorded at cost which includes amounts that are directly
attributable to acquisition, construction, development or betterment of the asset. The
cost, less residual value, of the tangible capital assets is amortized on a straight -line
basis over their estimated useful lives as follows:
Assets Amortization period
Equipment 5 years
Annual amortization is charged in the year of acquisition and in the year of disposal.
Assets under construction are not amortized until the asset is available for productive
use.
Tangible capital assets received as contributions are recorded at their fair value at the
date of receipt and also are recorded as revenue.
b) Accrual basis of accounting
Revenues and expenditures are reported on the accrual basis of accounting. The accrual
basis of accounting recognizes revenues as they become available and measurable;
expenditures are recognized as they are incurred and measurable as a result of receipt of
goods or services and the creation of a legal obligation to pay.
Statement of Cash Flows
A separate statement of cash flows is not presented, since cash flows from operating,
investing and financing activities are readily apparent from the other financial statements.
61
fpY Ilwil���� Ili �lipi I;
KPMG LLP Telephone 519 - 747 -8800
115 King Street South, 2nd Floor Fax 519 - 747 -8830
Waterloo ON N2J 5A3 Internet vvvvvv.kpmg.ca
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying financial statements of Kitchener Downtown Improvement Area
Board of Management, which comprise the statement of financial position as at December 31, 2014,
the statements of revenue and expenses and accumulated surplus and changes in net financial
assets for the year then ended, and notes, comprising 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 public sector accounting standards, 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 an audit to obtain
reasonable assurance about whether the financial statements are free from 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 our 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, we consider 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.
KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG International Cooperative
( "KPMG' International'), a Swiss entity.
KPMG Canada provides services to KPMG LLP.
I
Page 2
Opinion
In our opinion, the financial statements present fairly, in all material respects, the financial position of
Kitchener Downtown Improvement Area Board of Management as at December 31, 2014, and its
results of operations and its cash flows for the year then ended in accordance with Canadian public
sector accounting standards.
Chartered Professional Accountants, Licensed Public Accountants
April 23, 2015
Waterloo, Canada
63
KITCHENER DOWNTOWN IMPROVEMENT AREA
BOARD OF MANAGEMENT
Statement of Financial Position
Year ended December 31, 2014, with comparative information for 2013
2014 2013
Financial Assets
Cash $ 182,405 $ 77,000
Term deposits (note 4) 66,262 65,709
Accounts receivable 42,911 39,118
Due from the City of Kitchener (note 4) - 10,141
Prepaid expenses 2,987 1,720
294,565 193,688
Financial Liabilities
Accounts payable and accrued charges
Due to the City of Kitchener (note 4)
Net financial assets
Non - Financial Assets
93,648 46,411
22,198 -
115,846
178,719
46,411
147,277
Tangible capital assets (note 6) 32,829 26,786
Net assets $ 211,548 $ 174,063
Accumulated Surplus
Reserve for future assessment write -offs $ - $ 25,641
Accumulated net revenue 178,719 121,636
Invested in tangible capital assets 32,829 26,786
Total accumulated surplus $ 211,548 $ 174,063
See accompanying notes to financial statements.
On behalf of the Board:
Director
Director
M.",
KITCHENER DOWNTOWN IMPROVEMENT AREA
BOARD OF MANAGEMENT
Statement of Revenue and Expenses and Accumulated Surplus
Year ended December 31, 2014, with comparative information for 2013
See accompanying notes to financial statements.
Budget
Actual
Actual
2014
2014
2013
Revenue:
Assessments
$ 903,004
$ 903,449
$ 683,979
Interest
500
600
388
Special events income
12,000
21,030
44,400
Other income
20,125
25,228
10,502
935,629
950,307
739,269
Expenses:
Promotions and advertising
338,000
323,340
255,075
Salaries, wages and benefits
327,540
345,569
260,710
Administration
99,408
85,547
65,846
Meetings and seminars
33,200
16,243
10,252
Safety and beautification
119,500
87,318
26,249
Member relations
33,500
18,192
22,857
Amortization
-
9,057
5,808
951,148
885,266
646,797
Net revenue before other items
15,519
65,041
92,472
Net assessment write -offs (note 4)
14,000
27,556
3,837
Net revenue
(29,519)
37,485
88,635
Accumulated surplus, beginning of year
174,063
174,063
85,428
Accumulated surplus, end of year
$ 144,544
$ 211,548
$ 174,063
See accompanying notes to financial statements.
KITCHENER DOWNTOWN IMPROVEMENT AREA
BOARD OF MANAGEMENT
Statement of Changes in Net Financial Assets
Year ended December 31, 2014, with comparative information for 2013
See accompanying notes to financial statements.
2014
2013
Net revenue
$ 37,485
$ 88,635
Acquisition of tangible capital assets
(15,100)
(9,247)
Amortization of tangible capital assets
9,057
5,808
Change in net financial assets
31,442
85,196
Net financial assets, beginning of year
147,277
62,081
Net financial assets, end of year
$ 178,719
$ 147,277
See accompanying notes to financial statements.
KITCHENER DOWNTOWN IMPROVEMENT AREA
BOARD OF MANAGEMENT
Notes to Financial Statements
Year ended December 31, 2014
1. Summary of significant accounting policies:
Kitchener Downtown Improvement Area Board of Management (the "Board ") is established for
the main purpose of revitalizing the Central Business District of the City of Kitchener. It is
designated as a Business Improvement Area (BIA) through the Ontario Municipal Act and a City
of Kitchener by -law enacted in 1977.
The financial statements of the Board are the representation of management and have been
prepared in accordance with Canadian generally accepted accounting principles for local
governments, as recommended by the Public Sector Accounting Board (PSAB) of the Canadian
Professional Accountants. Since precise determination of many assets and liabilities is
dependent upon future events, the preparation of periodic financial statements necessarily
involves the use of estimates and approximations. These have been made using careful
judgment.
(a) Tangible capital assets:
Tangible capital assets are recorded at cost which includes amounts that are directly
attributable to acquisition, construction, development or betterment of the asset. The cost,
less residual value, of the tangible capital assets, excluding land and landfill sites, are
amortized on a straight -line basis over their estimated useful lives as follows:
Asset Useful Life - Years
Computers 4 years
Furniture and fixtures 7 years
Leasehold improvements 7 years
Annual amortization is charged in the year of acquisition and in the year of disposal. Assets
under construction are not amortized until the asset is available for productive use.
Tangible capital assets received as contributions are recorded at their fair value at the date of
receipt and also are recorded as revenue.
(b) Accrual basis of accounting:
The accrual basis of accounting recognizes revenues as they become available and
measurable; expenditures are recognized as they are incurred and measurable as a result of
receipt of goods or services and the creation of a legal obligation to pay.
67
KITCHENER DOWNTOWN IMPROVEMENT AREA
BOARD OF MANAGEMENT
Notes to Financial Statements, page 2
Year ended December 31, 2014
2. Term deposits:
The term deposits consist of the following:
Principal Maturity Rate
$ 10,441 January 3, 2015 0.80%
55,821 September 15, 2015 0.80%
3. Commitments:
During 2013, the Board executed a new joint premises lease agreement with two other unrelated
parties. The lease allows for certain amounts of exclusive space for the Board and certain
amounts of common area space shared with the other joint tenants. The lease expires on June
30, 2016. The Board is committed to the following minimum payments under the agreement:
2015 $ 34,723
2016 17,567
4. City of Kitchener:
The Board receives assessment income from the City of Kitchener for its operations. During the
year, assessment write -offs were incurred for $27,556 (2013 - $3,837). This amount was paid to
the City of Kitchener in 2014.
5. Statement of cash flows:
A separate statement of cash flows is not presented since cash flows from operating, investing
and financing activities are readily apparent from the other financial statements.
.:
KITCHENER DOWNTOWN IMPROVEMENT AREA BOARD OF MANAGEMENT
Notes to Financial Statements, continued
Year ended December 31, 2014
6. Tangible capital assets:
Accumulated Net
Accumulated
Net
Balance,
amortization, book value,
amortization,
book value,
Opening
Disposals/
Write- end of
beginning beginning
end of
end of
balance
Additions
Transfers
downs year
of year of year
Deletions Amortization
year
year
Computers $
8,582
$ 7,257
$ $
$ 15,839
$ 7,023 $ 1,559
$ $ 2,407
$ 9,430 $
6,409
Furniture
35,206
7,843
43,049
11,977 23,229
6,150
18,127
24,922
Leasehold
improvements
3,498
-
3,498
1,500 1,998
500
2,000
1,498
$
47,286
$ 15,100
$ $
$ 62,386
$ 20,500 $ 26,786
$ $ 9,057
$ 29,557 $
32,829
69
KPMG LLP Telephone (519) 747 -8800
115 King Street South, 2nd floor Fax (519) 747 -8830
Waterloo Ontario N2J 5A3 Internet www.kpmg.ca
Canada
INDEPENDENT AUDITORS' REPORT
To the members of the Kitchener Public Library Board
We have audited the accompanying financial statements of the Kitchener Public Library, which
comprise the statement of financial position as at December 31, 2014 and the statements of
revenues, expenses and accumulated net revenue and changes in net financial assets for the year
then ended, and notes, comprising 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 public sector accounting standards, 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 about whether the financial statements are free from 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 our 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, we consider 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 qualified audit opinion.
Basis for Qualified Opinion
In common with many public library boards, the Kitchener Public Library derives revenue from fines,
rentals, partnerships, photocopying and other miscellaneous revenues, the completeness of which is
not susceptible to satisfactory audit verification. Accordingly, our verification of these revenues was
limited to the amounts recorded in the records of the entity and we were not able to determine
whether any adjustments might be necessary to contributions, excess of revenues over expenses,
current assets and net financial assets.
KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG International Cooperative
( "KPMG International'), a Swiss entity.
KPMG Canada provides services to KPMG LLP.
70
! l� / ",
Page 2
Qualified Opinion
In our opinion, except for the possible effects on the financial statements of the matter described in
the Basis for Qualified Opinion paragraph, the financial statements present fairly, in all material
respects, the financial position of the Kitchener Public Library as at December 31, 2014, and its
results of operations and its cash flows for the year then ended in accordance with Canadian public
sector accounting standards.
kAW'6:� Z4P
Chartered Professional Accountants, Licensed Public Accountants
April 15, 2015
Waterloo, Canada
71
KITCHENER PUBLIC LIBRARY
Statement of Financial Position
December 31, 2014, with comparative information for 2013
Assets
Cash
Accounts receivable
Due from Citv of Kitchener
2014 2013
$ 1,591,784 $ 1,708,472
113,704 60,339
164,599 93,720
1,870,087 1,862,531
Financial Liabilities
Accounts payable and accrued liabilities 552,035 770,107
Deferred revenue (note 2) 936,793 906,116
1,488,828 1,676,223
Net financial assets
Non - Financial Assets
Tangible capital assets (note 3)
381,259 186,308
6,306,441 5,103,092
$ 6,687,700 $ 5,289,400
Accumulated Surplus
General $ - $ -
Invested in tangible capital assets 6,306,441 5,103,092
Reserves 381,259 186,308
See accompanying notes to financial statements.
On behalf of the Board:
Director
Director
72
$ 6,687,700 $ 5,289,400
KITCHENER PUBLIC LIBRARY
Statement of Operations and Changes in Net Assets
Year ended December 31, 2014, with comparative information for 2013
2014 2013
Revenues:
7,961,915
7,516,362
Grants:
1,514,275
1,516,602
Province of Ontario
$ 286,755 $
286,755
City of Kitchener:
188,838
203,830
Operating
10,092,880
9,453,379
Capital and special (note 4)
2,318,768
581,904
Special grants (note 5)
85,493
36,754
Fines
198,282
193,149
Interest and miscellaneous
37,987
30,800
Partnerships
23,789
22,802
Room rental
10,440
5,493
Photocopy
21,743
19,350
13,076,137
10,630,386
Expenses
Personnel costs (Schedule 1)
7,961,915
7,516,362
Resource materials
1,514,275
1,516,602
Equipment (Schedule 2)
544,465
468,670
Administrative(Schedule 3)
188,838
203,830
Facilities costs (Schedule 4)
657,414
428,021
Processing /bindery
127,455
109,393
Programs and publicity (Schedule 5)
45,889
67,010
General library equipment
4,415
9,495
Expenditures related to capital and special (note 4)
547,678
255,651
Required expenditures related to (note 5)
85,493
36,754
11,677,837 10,611,788
Net revenue 1,398,300 18,598
Accumulated net revenue, beginning of year 5,289,400 5,270,802
Accumulated net revenue, end of year $ 6,687,700 $ 5,289,400
See accompanying notes to financial statements.
73
KITCHENER PUBLIC LIBRARY
Statement of Changes in Net Financial Assets
Year ended December 31, 2014, with comparative information for 2013
See accompanying notes to financial statements.
74
2014
2013
Excess of revenue over expenditures
$ 1,398,300
$ 18,598
Acquisition of tangible capital assets
(2,696,147)
(1,259,641)
Amortization of tangible capital assets
1,492,798
1,390,118
Change in net financial assets
194,951
149,075
Net financial assets, beginning of year
186,308
37,233
Net financial assets, end of year
$ 381,259
$ 186,308
See accompanying notes to financial statements.
74
KITCHENER PUBLIC LIBRARY
Notes to Financial Statements
Year ended December 31, 2014
Kitchener Public Library (the "Board ") was incorporated as a not - for - profit organization, without
share capital, under the laws of Ontario. It is a Board of the City of Kitchener (the "City ") and is
dependent on the City for a significant portion of its operating and capital funding.
The Board contributes to the community as a resource and a gateway with sources of information
and works of imagination.
The financial statements of the Board are the representation of management and have been
prepared in accordance with Canadian generally accepted accounting principles for local
governments, as recommended by the Public Sector Accounting Board of the Canadian Institute of
Chartered Accountants. Since precise determination of many assets and liabilities is dependent
upon future events, the preparation of periodic financial statements necessarily involves the use of
estimates and approximations. These have been made using careful judgments. The following is a
summary of the significant accounting policies followed in the preparation of these financial
statements.
1. Significant accounting policies:
(a) Accrual basis of accounting:
The accrual basis of accounting recognizes revenues as they become available and
measurable; expenditures are recognized as they are incurred and measurable as a result
of receipt of goods or services and the creation of a legal obligation to pay.
(b) Tangible capital assets:
Tangible capital assets are recorded at cost which includes amounts that are directly
attributable to acquisition, construction, development or betterment of the asset. The cost,
less residual value, of the tangible capital assets, excluding land are amortized on a
straight -line basis over their estimated useful lives as follows:
Furniture, fixtures and equipment
Specialty and other equipment
Computer
Books and audio visual resources
2. Deferred revenue:
10 - 30 years
8 years
3 - 10 years
2 -10 years
Deferred revenue represents the annual Board's approval of the appropriation of unspent funds,
and are subject to external restrictions as to how the funds are disbursed. These appropriations
are included in required expenses and are subsequently charged directly to operations when
spent.
75
KITCHENER PUBLIC LIBRARY
Notes to Financial Statements (continued)
Year ended December 31, 2014
3. Tangible capital assets:
Accumulated Accumulated Net book
Balance, amortization, amortization, value
2014 Opening end of beginning of end of end of
balance Additions Disposals vear vear Amortization Disposals vear vear
Books and audio visual
resources
$ 15,317,752
$ 1,178,458 $ (6,391,349) $ 10,104,861
$ 11,307,315
$ 1,176,373
$ (6,391,349) $ 6,092,339 $
4,012,522
Computer
1,580,638
394,824 (208,287) 1,767,175
986,614
213,696
(208,287) 992,023
775,152
Furniture fixtures and
equipment
856,560
1,122,865 (100,500) 1,878,925
381,715
96,778
(100,500) 377,993
1,500,932
Other equipment and
vehicle
95,306
- - 95,306
71,520
5,951
- 77,471
17,835
$ 17,850,256 $ 2,696,147 $ (6,700,136) $ 13,846,267 $ 12,747,164 $ 1,492,798 $ (6,700,136) $ 7,539,826 $ 6,306,441
76
KITCHENER PUBLIC LIBRARY
Notes to Financial Statements (continued)
Year ended December 31, 2014
3. Tangible capital assets (December 31, 2013):
2013
Opening
balance
Additions
Balance,
end of
year
Accumulated
amortization,
beginning of
year
Net book
value,
beginning of
year
Amortization
Accumulated
amortization,
end of
year
Net book
value,
end of
year
Books and audio visual
resources
$ 14,315,647
$ 1,002,105
$ 15,317,752
$ 10,140,285
$ 4,175,362
$ 1,167,030
$ 11,307,315 $
4,010,437
Computer
1,446,912
133,726
1,580,638
818,834
628,078
167,780
986,614
594,024
Furniture fixtures and
equipment
732,750
123,810
856,560
332,359
400,391
49,356
381,715
474,845
Other equipment and
vehicle
95,306
-
95,306
65,568
29,738
5,952
71,520
23,786
$ 16,590,615
$ 1,259,641
$ 17,850,256
$ 11,357,046
$ 5,233,569
$ 1,390,118
$ 12,747,164 $
5,103,092
77
KITCHENER PUBLIC LIBRARY
Notes to Financial Statements (continued)
Year ended December 31, 2014
4. Capital and special grants:
Each year, the City approves capital and special grants for the Board to purchase specific
capital items.
The capital grants approved for 2014 included $87,500 for general renovations, maintenance
and upgrading of existing facilities, $187,299 for communication infrastructure and technology
upgrades, $26,000 for KPL Accessibility Fund and $35,000 for Customer Needs Survey.
The portion of these grants and previous year grants that are included in revenue in 2014, is
$920,027 (2013 - $581,805).
5. Special grants:
In 2014, the Board received various special non - recurring grants and donations totaling
$162,696 (2013 - $171,123). The portion of these grants and previous year special grants that
are included in revenue in 2014, is $85,493 (2013 - $36,754). The remainder is included in
deferred revenue.
6. Pension plan:
The Board makes contributions to the Ontario Municipal Employees Retirement Systems
(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 rate of pay.
During the year, the Board incurred expenses equal to $565,695 (2013 - $542,917) for current
service on behalf of its staff.
78
KITCHENER PUBLIC LIBRARY
Notes to Financial Statements (continued)
Year ended December 31, 2014
7. Related party transactions:
The Kitchener Public Library Foundation (the "Foundation ") is an independent organization
which raises funds to support the development of the Kitchener Public Library.
The accounts of the Foundation are not included in these financial statements.
During the year, the Foundation donated $20,944 (2013 - $17,347) to the Board to fund various
projects.
8. Statement of cash flows:
A separate statement of cash flows is not presented, since cash flows from operating, investing
and financing activities are readily apparent from the other financial statements.
79
KITCHENER PUBLIC LIBRARY
Schedules of Personnel, Equipment, Administrative, Facilities and Programs and Publicity Expenses
Year ended December 31, 2014, with comparative information for 2013
2014
2013
Schedule 1 - Personnel
Personnel:
Salaries
$
6,530,850
$
6,137,390
Health benefits
383,225
362,826
Pension benefits
819,613
784,232
Employment insurance
136,524
131,231
WSIB
25,367
22,772
Sick leave reserve
25,000
25,000
Staff training
41,336
52,911
$
7,961,915
$
7,516,362
Schedule 2 - Equipment
Equipment:
Technology
$
206,370
$
227,735
Equipment maintenance
21,670
17,847
Amortization
316,425
223,088
$
544,465
$
468,670
Schedule 3 - Administrative
Administrative:
Postage and delivery
$
10,681
$
11,539
Insurance
17,849
17,501
Professional services
53,287
69,124
General business
42,743
52,796
Telephone
23,118
22,982
Stationery
41,160
29,888
$
188,838
$
203,830
Schedule 4 - Facilities
Facilities:
Facilities expenses
$
295,951
$
254,000
Country Hills building
39,179
38,088
Main utilities
267,936
87,861
Forest Heights utilities
21,823
22,307
Pioneer Park building
27,703
20,993
Grand River Stanley Park building
4,822
4,772
$
657,414
$
428,021
KITCHENER PUBLIC LIBRARY
Schedule 5 - Programs and Publicity
Year ended December 31, 2014, with comparative information for 2013
Programs and publicity:
Promotional
Public programs
81
2014 2013
$ 26,352 $ 24,979
19,537 42,031
$ 45,889 $ 67,010
III
KPMG LLP
115 King Street South
2nd Floor
Waterloo ON N2J 5A3
Telephone 519 - 747 -8800
Fax 519 - 747 -8830
Internet www.kpnng.ca
INDEPENDENT AUDITORS' REPORT
To the Directors of The Centre in the Square Inc.
We have audited the accompanying financial statements of The Centre in the Square Inc., which
comprise the statement of financial position as at December 31, 2014, the statements of operations,
changes in net financial assets, and cash flows for the year then ended, and notes, comprising 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 public sector accounting standards, 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 an audit to obtain
reasonable assurance about whether the financial statements are free from 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 our 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, we consider 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.
KPMG LLP, is a Canadian limited liability partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG International Cooperative
( "KPMG International "), a Swiss entity.
KPMG Canada provides services to KPMG LLP.
M
Page 2
Opinion
In our opinion, the financial statements present fairly, in all material respects, the financial position of
The Centre in the Square Inc. as at December 31, 2014, and its results of operations and its cash
flows for the year then ended in accordance with Canadian public sector accounting standards.
Z.cp
Chartered Professional Accountants, Licensed Public Accountants
March 25, 2015
Waterloo, Canada
83
THE CENTRE IN THE SQUARE INC.
Statement of Financial Position
December 31, 2014, with comparative information for 2013
Accumulated Surplus
Operating fund activities (note 10)
Reserves - Capital (notes 5 and 11)
Reserves - Performance Development (note 6)
Reserves - Restricted (notes 7 and 11)
Invested in tangible capital assets
R
E5
98,702
444,386 124,272
8,891,138 9,378,462
Accumulated surplus $ 9,434,226 $ 9,502,734
See accompanying notes to financial statements.
On behalf of the Board:
Director
Director
;.i
2014
2013
Net Assets
Financial assets:
Cash
$ 2,145,764
$ 1,765,324
Due from The City of Kitchener
501,078
9,238
Accounts receivable
106,383
12,463
Interest receivable
465
3,033
Costs to be recovered
55,954
142,893
Investments (note 3)
499,627
1,514,792
Total financial assets
3,309,271
3,447,743
Financial liabilities:
Accounts payable and accrued liabilities
1,033,784
1,716,907
Deferred revenue (note 4)
1,990,340
1,810,640
3,024,124
3,527,547
Net (debt) financial assets
285,147
(79,804)
Non - financial assets:
Tangible capital assets (note 9)
8,891,138
9,378,462
Inventories (note 2)
49,661
65,247
Prepaid expenses
208,280
138,829
9,149,079
9,582,538
Net assets
$ 9,434,226
$ 9,502,734
Accumulated Surplus
Operating fund activities (note 10)
Reserves - Capital (notes 5 and 11)
Reserves - Performance Development (note 6)
Reserves - Restricted (notes 7 and 11)
Invested in tangible capital assets
R
E5
98,702
444,386 124,272
8,891,138 9,378,462
Accumulated surplus $ 9,434,226 $ 9,502,734
See accompanying notes to financial statements.
On behalf of the Board:
Director
Director
;.i
THE CENTRE IN THE SQUARE INC.
Statement of Operations
Year ended December 31, 2014, with comparative information for 2013
Budget 2014 Actual 2014 Actual 2013
Revenues:
Performances
$ 6,310,373
$ 6,873,350 $
6,159,468
Rent - Kitchener - Waterloo Symphony
95,000
97,285
98,065
Capital reserve fund surcharge (note 5)
323,375
276,815
282,356
Grants from The City of Kitchener - Operating
1,400,000
1,400,000
1,400,000
Grants from The City of Kitchener - Capital
251,721
251,721
246,031
Grants from The City of Kitchener - Operating 2013
-
155,000
-
Grants from The City of Kitchener - Capital 2013
-
350,000
-
Grants from other governments - Operating
62,000
72,422
39,275
Capital asset donations
-
40,300
109,640
Donations
-
4,964
4,292
Investment income
24,000
55,751
89,320
Sponsorships and memberships
28,500
119,679
101,901
Rent - Kitchener - Waterloo Art Gallery
92,099
92,099
92,528
Other
87,920
76,332
35,387
Gain (loss) on investments
-
268,685
45,499
Gain (loss) on sale of assets
-
16,640
-
Portion of operating loss for The City of Kitchener
362,500
499,451
-
Total revenue
9,037,488
10,650,494
8,703,762
Expenses:
Direct:
Performances
5,350,000
6,190,164
5,459,377
Operating:
Administration
531,892
530,241
571,733
Marketing
255,000
237,697
291,981
Occupancy
680,000
695,595
683,470
Salaries and wages
2,841,851
3,221,051
3,029,072
Recoveries - performances
(833,851)
(1,118,828)
(1,126,448)
Amortization
700,000
704,361
744,642
Write down of tangible capital assets
-
277,339
88,008
Reserves expenditures (recoveries) (note 11)
-
(18,618)
479,539
Total expenses
9,524,892
10,719,002
10,221,374
Excess of expenses over revenue (487,404) (68,508) (1,517,612)
Accumulated surplus, beginning of year 9,502,734 9,502,734 11,020,346
Accumulated surplus, end of year $ 9,015,330 $ 9,434,226 $ 9,502,734
See accompanying notes to financial statements.
THE CENTRE IN THE SQUARE INC.
Statement of Change in Net Financial Assets
Year ended December 31, 2014, with comparative information for 2013
Excess of expenses over revenue
$ (68,508)
$ (1,517,612)
Acquisition of tangible capital assets
(494,376)
(1,436,577)
Amortization of tangible capital assets
704,361
744,642
Write -downs of tangible capital assets
277,339
88,008
418,818
(2,121,539)
Net acquisition use of supplies inventory
15,586
(12,342)
Acquisition use of prepaid expenses
(69,451)
51,611
(53,865)
39,269
Increase (decrease) in net financial assets
364,951
(2,082,270)
Net financial assets, beginning of year
(79,804)
2,002,466
Net financial (debt) assets, end of year $ 285,147 $ (79,804)
See accompanying notes to financial statements.
::
THE CENTRE IN THE SQUARE INC.
Statement of Cash Flow
Year ended December 31, 2014, with comparative information for 2013
2014 2013
Operating activities
Excess of expenses over revenue $ (68,508) $ (1,517,612)
Items not involving cash:
Amortization 704,361 744,642
Write down of tangible capital assets 277,339 88,008
Change in non -cash operating working capital (1,060,041) 607,239
Cash (used) provided by operating activities (146,849) (77,723)
Capital activities:
Cash used to acquire tangible capital assets (487,876) (1,427,577)
Investing activities
Investments 1,015,165 (82,746)
Increase (decrease) in cash 380,440 (1,588,046)
Cash, beginning of year 1,765,324 3,353,370
Cash, end of year $ 2,145,764 $ 1,765,324
See accompanying notes to financial statements.
87
THE CENTRE IN THE SQUARE INC.
Notes to Financial Statements
Year ended December 31, 2014
The mission of The Centre in the Square Inc. ( "The Centre "), is to create memorable experiences. It
is incorporated as a not - for - profit corporation without share capital, is exempt from income taxes
under the Income Tax Act, and is a registered charity. The Centre is a governed by a Board of
Directors and receives an operating grant from the City of Kitchener ( "the City ").
1. Significant accounting policies:
The financial statements of The Centre are the representation of management and have been
prepared in accordance with Canadian generally accepted accounting principles for local
governments, as recommended by the Public Sector Accounting Board (PSAB) of the Canadian
Institute of Chartered Accountants. Since precise determination of many assets and liabilities is
dependent upon future events, the preparation of periodic financial statements necessarily
involves the use of estimates and approximations. These have been made using careful
judgment.
(a) Tangible capital assets:
Tangible capital assets are recorded at cost which includes amounts that are directly
attributable to acquisition, construction, development or betterment of the asset. The cost,
less residual value, of the tangible capital assets, excluding land, are amortized on a straight -
line basis over their estimated useful lives as follows:
Asset
Rate
Building
9 - 100 years
Equipment
4 - 50 years
Computers
5 - 14 years
Software
3 years
Site
10 - 50 years
(b) Accrual basis of accounting:
The accrual basis of accounting, recognizes revenues as they become available and
measurable; expenditures are recognized as they are incurred and measurable as a result of
receipt of goods or services and the creation of a legal obligation to pay.
::
THE CENTRE IN THE SQUARE INC.
Notes to Financial Statements, continued
Year ended December 31, 2014
1. Significant accounting policies (continued):
(c) Inventories:
Bar stock inventories are valued at the most recent replacement cost. Supplies inventories
are valued at the lower of cost and net realizable value on a first -in, first -out basis. Net
realizable value is defined as replacement cost.
(d) Investments:
Investments are recorded at the lower of cost or market value on a fund portfolio basis.
Interest income and all expenses are fully accrued.
(e) Deferred revenue:
Performance revenue is recognized when the show occurs. Deferred gift certificate revenue
is an estimate based upon gift certificate sales during the period from July 1 to December 31
of the current year.
2. Inventories:
Inventories consist of the following:
2014 2013
Bar stock $ 42,970 $ 61,234
Supplies 6,691 4,013
$ 49,661 $ 65,247
3. Investments:
Investments consist of:
Carrying value Market Carrying value Market
2014 2014 2013 2013
Shares $ 324,176
$ 489,904
$ 893,760
$ 1,252,788
Bonds 172,738
172,094
609,651
606,709
Cash 2,713
2,713
11,381
11,381
$ 499,627
$ 664,711
$ 1,514,792
$ 1,870,878
THE CENTRE IN THE SQUARE INC.
Notes to Financial Statements, continued
Year ended December 31, 2014
4. Deferred revenue:
Deferred revenue consists of the following:
2014 2013
Sponsorships $ 25,772 $ 53,358
Performances 1,903,125 1,646,644
Gift certificates 42,838 48,264
Donations 2,155 14,228
Membership 8,732 4,914
Other 7,718 43,232
$ 1,990,340 $ 1,810,640
5. Capital Reserve Fund Surcharge:
The Capital Reserve Fund represents the collection of a surcharge from sale of tickets.
At the direction of the Board of Directors, expenditures from the Capital Reserve Fund are made
to finance, in whole or in part, major capital items, replacements and major maintenance projects.
6. Performance Development Reserve Fund:
At the direction of the Board of Directors, transfers are made to and from the Performance
Development Reserve Fund, equal to one -half of the annual operating net revenue.
In 2014, The Centre's Board of Directors approved the transfer of the remaining funds from the
Performance Development Reserve Fund ($0) to the Operating Fund to fund the operating deficit.
7. Restricted Fund:
The Restricted Fund was set up by the Board of Directors of The Centre in 2000 by a transfer of
investments from the Sustainability Reserve Fund in accordance with the Restricted Fund Policy.
Income from this fund is to be used for capital requirements, special projects and /or new
programming initiatives that help further The Centre's mandate.
In 2014, the Centre's Board of Directors approved transfers out of the Restricted Fund for major
capital asset projects ($342,536) and to the Operating Fund to fund the operating deficit.
8. 2014 budget:
The original budgeted figures were approved by the Board of Directors at their meeting in October
2014 and included certain expenses and offsetting recoveries on a net basis. For purposes of
presentation in these financial statements, these items have been shown as gross amounts.
l
THE CENTRE IN THE SQUARE INC.
Notes to Financial Statements, continued
Year ended December 31, 2014
9. Tangible capital assets:
Accumulated
Net
Accumulated
Net
Balance,
amortization,
book value,
amortization,
book value,
Opening
Disposals/ Write-
end of
beginning
beginning
end of
end of
balance
Additions
Transfers downs
year
of year
of year
Deletions
Amortization
year
year
Land
$ 975,300
$ -
$ - $
975,300
$ -
$ 975,300
$ -
$ -
$ -
$ 975,300
Building
8,735,762
313,468
(587,045)
8,462,185
3,946,812
4,788,950
(455,144)
250,188
3,741,856
4,720,329
Equipment
5,366,810
55,598
(13,960)
5,408,448
3,080,416
2,286,394
(7,633)
293,058
3,365,841
2,042,607
Computers
360,576
2,494
(122,826)
240,244
212,009
148,567
(119,781)
33,933
126,161
114,083
Software
150,125
5,724
155,849
52,603
97,522
51,594
104,197
51,652
Site
1,730,750
117,092
(272,132)
1,575,710
649,021
1,081,729
(136,066)
75,588
588,543
987,167
$ 17,319,323
$ 494,376
$ (995,963) $
$ 16,817,736
$ 7,940,861
$ 9,378,462
$ (718,624)
$ 704,361
$ 7,926,598
$ 8,891,138
91
THE CENTRE IN THE SQUARE INC.
Notes to Financial Statements, continued
Year ended December 31, 2014
10. Operating fund activities:
Revenues:
Performances
Rent - Kitchener - Waterloo Symphony
Grants from City of Kitchener
Grants, other Governments and Foundations
Donations
Investment income
Sponsorships and memberships
Rent - Kitchener - Waterloo Art Gallery
Other
Total revenue
Budget Actual Actual
2014 2014 2013
$ 6,310,373 $ 6,873,350 $ 6,159,468
95,000
97,285
98,065
1,400,000
1,400, 000
1,400,000
62,000
72,422
39,275
-
1,100
1,268
24,000
24,751
24,659
28,500
119,679
101,901
92,099
92,099
92,528
87,920
76,332
35,387
8,099,892 8,757,018 7,952,551
Current fund expenditures:
(998,902) (956,634)
362,500
499,451 956,634
Direct:
499,451 -
Performances
5,350,000
6,190,164
5,459,377
Operating:
Administration
531,892
530,241
571,733
Marketing
255,000
237,697
291,981
Occupancy
680,000
695,595
683,470
Salaries and wages
2,841,851
3,221,051
3,029,072
Recoveries - performances
(833,851)
(1,118,828)
(1,126,448)
Total current fund expenditures
8,824,892
9,755,920
8,909,185
Operating fund net revenues before amortization
Transfer from reserve funds
Transfer from the City of Kitchener
(725,000)
(998,902) (956,634)
362,500
499,451 956,634
362,500
499,451 -
Fund balances, end of year $ - $ - $ -
THE CENTRE IN THE SQUARE INC.
Notes to Financial Statements, continued
Year ended December 31, 2014
11. Schedule of reserve funds:
935,462 157,067 301,496 1,394,025
Expenditures:
Cost of fundraising - - - -
Professional fees - - 13,910 13,910
Restructuring costs - - (32,528) (32,528)
- - (18,618) (18,618)
Excess of revenue over
expenditures (expenditures over
revenue) 935,462 157,067 320,114 1,412,643
Transfer to accumulated surplus
tangible capital assets (494,376) - - (494,376)
Other transfers (342,384) (157,067) - (499,451)
Balance, beginning of year - - 124,272 124,272
Balance, end of year $ 98,702 $ - $ 444,386 $ 543,088
93
Total
Capital Sustainability
Restricted
Funds
Revenue:
Donations and sundry
$ 40,300 $ -
$ 3,864 $
44,164
Grants from The City
of Kitchener 2014
251,721 -
-
251,721
Grants from the
City of Kitchener - 2013
350,000 155,000
-
505,000
Ticket surcharge
276,815
276,815
Investment income (loss)
(14) 2,067
28,947
31,000
Gain on investments
- -
268,685
268,685
Gain on sale of assets
16,640 -
-
16,640
935,462 157,067 301,496 1,394,025
Expenditures:
Cost of fundraising - - - -
Professional fees - - 13,910 13,910
Restructuring costs - - (32,528) (32,528)
- - (18,618) (18,618)
Excess of revenue over
expenditures (expenditures over
revenue) 935,462 157,067 320,114 1,412,643
Transfer to accumulated surplus
tangible capital assets (494,376) - - (494,376)
Other transfers (342,384) (157,067) - (499,451)
Balance, beginning of year - - 124,272 124,272
Balance, end of year $ 98,702 $ - $ 444,386 $ 543,088
93
KPMG LLP Telephone 519- 747 -8800
115 King Street South, 2nd Floor Fax 519 - 747 -8830
Waterloo ON N2J 5A3 Internet www.kpmg.ca
INDEPENDENT AUDITORS' REPORT
To the Mayor and Members of Council, Inhabitants and Ratepayers of
The Corporation of the City of Kitchener
We have audited the accompanying statement of operatio 'jand accu ft surplus of The
"
Corporation of the City of Kitchener Gasworks Enterprise for year ended Dec �y r 31, 2014 ( "the
financial statement ").
Management's Responsibility for the Financial Statement
Management is responsible for the preparatio; ��,� nd fair pre y. tion of this financial statement in
accordance with Canadian public sector acco��� �; ards r�° t to preparing such a financial
statement, and for such internal control as m� gem mi e s is necessary to enable the
preparation of the financial statement that is free e I I statement, whether due to fraud or
error.0 / / / / / / / %,,,j
Auditors' Res onsibilit i
p� financial statement based on our audit. We
Our responsibility is to ex re n e
�i "
conducted our audit in ordanQ ith Canadian generally accepted auditing standards. Those
standards require t
GO wit it ical requirements and plan and perform the audit to obtain
reasonable assur a about w er th uncial statement is free from material misstatement.
An audit involves' Orming prolar/rocedures res to obtain audit evidence about the amounts and disclosures
� %ice
in the financial st nt. Th selected depend on our judgment, including the
assessment of the risk ���'�
�j� �, 61 misstatement of the financial statement, whether due to fraud or
error. In making those rY�F6assessments, we consider internal control relevant to the entity's
preparation and fair presentation of the financial statement 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 statement.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG International Cooperative
( "KPMG" International "), a Swiss entity.
•d
KPMG Canada provides services to KPMG LLP.
,�.
Page 2
Opinion
In our opinion, the financial statement presents fairly, in all material respects the results of operations
and accumulated surplus of The Corporation of the City of Kitchener Gasworks Enterprise for the
year ended December 31, 2014 in accordance with Canadian public sector accounting standards
relevant to preparing such a financial statement.
Chartered Profi
DRAFT
Waterloo, Cane
99
THE CORPORATION OF THE CITY OF
KITCHENER GASWORKS ENTERPRISE
Statement of Operations and Accumulated Surplus
For the Year Ended December 31, 2014
2014 2014 2013
Budget
DELIVERY OPERATIONS
22,746,266
25,251,062
19,692,509
Gas delivery
32,920,004
39,070,130
35,576,067
Revenue
$ 38,098,801 $
40,103,713 $
32,645,865
Expenses
17, 529,199
17, 650, 522
15, 900, 630
Transfer to Gas Investment Reserve
20,569,602
22,453,191
16,745,235
Other programs
22,746,266
25,251,062
19,692,509
(Customer Service, Rental Water Heaters & Financing)
118,017,088
120,526,554
108,446,120
Revenue
8,996,557
9,710,147
10,231,083
Expenses
6,819,893
6,912,276
7,283,809
2,176,664
2,797,871
2,947,274
Dispatch
Revenue
482,865
686,438
713,379
Expenses
482,865
686,438
713,379
Excess of revenue over expenses
22,746,266
25,251,062
19,692,509
Accumulated Surplus - Delivery
32,920,004
39,070,130
35,576,067
Balance, beginning of year
108,446,120
108,446,120
101,632,987
Interest Revenue
84,702
89,372
120,624
Transfer to Gas Investment Reserve
(13,260,000)
(13,260,000)
(13,000,000)
Add excess of revenue over expenses
22,746,266
25,251,062
19,692,509
Balance, end of year
118,017,088
120,526,554
108,446,120
SUPPLY OPERATIONS
Gas supply
Revenue
32,920,004
39,070,130
35,576,067
Expenses
31,839,736
39,269,884
36,803,590
Excess of revenue over expenses
1,080,268
(199,754)
(1,227,523)
Accumulated Surplus - Supply
Balance, beginning of year
1,638,457
1,638,457
2,821,688
Interest Revenue
36,300
25,374
44,292
Add excess of revenue over expenses
1,080,268
(199,754)
(1,227,523)
Balance, end of year
2,755,025
1,464,077
1,638,457
TRANSPORTATION OPERATIONS
Gas transportation
Revenue 7,692,924 8,033,472 11,116,164
Expenses 7,761,156 7,909,738 5,795,159
Excess of revenue over expenses (68.232) 123.734 5.321.005
Accumulated Surplus - Transportation
Balance, beginning of year 1,021,005 1,021,005 -
Interest Revenue 12,265 15,812 -
Less one -time transfer - Final Transportation Benefit - - (4,300,000)
Add excess of revenue over expenses (68,232) 123,734 5,321,005
Balance, end of year $ 965,038 $ 1,160,551 $ 1,021,005
MANAGEMENT REPORT
Management's Responsibility for Financial Reporting
The accompanying financial statements of Kitchener Generation Corporation are the responsibility
of management and have been prepared in accordance with Canadian public sector accounting
standards. The significant accounting policies followed by Kitchener Generation Corporation are
described in the Significant Accounting Policies contained in Note 2 of the financial statements. The
preparation of financial statements necessarily involves the use of estimates based on
management's judgment, particularly when transactions affecting the current accounting period
cannot be finalized with certainty until future periods. The financial statements have been prepared
within reasonable limits of materiality and in light of information available up to June 29, 2015.
Management maintained a system of internal controls designed to provide reasonable assurance
that the assets were safeguarded and that reliable information was available on a timely basis. The
system included formal policies and procedures and an organizational structure that provided for
the appropriate delegation of authority and segregation of responsibilities.
KITCHENER GENERATION CORPORATION
On behalf of management,
Dan Chapman
Deputy CAO, Finance & Corporate Services and City Treasurer
June 29, 2015
Kitchener, Canada
97
KITCHENER GENERATION CORPORATION
Statement of Financial Position
As at December 31, 2014
2014 2013
Financial assets
Accounts receivable $ 27,633 $ 40,718
27,633 40,718
Liabilities
Due to The Corporation of the City of Kitchener 27,633 40,718
Long -term debt (Note 3) 3,479,327 3,634,878
3,506,960 3,675,596
Net financial debt (3,479,327) (3,634,878)
Non - financial assets
Tangible capital assets - net (Note 4) 3,716,028 3,948,280
Total non - current assets 3,716,028 3,948,280
Accumulated Surplus (Note 5) $ 236,701 $ 313,402
See accompanying notes
M.
KITCHENER GENERATION CORPORATION
Statement of Operations
For the Year Ended December 31, 2014
2014 2014 2013
Budget
Revenue
Sale of Electricity $ 386,000 $ 372,373 $ 379,880
Total revenue 386,000 372,373 379,880
Expenses
Maintenance
17,000
16,482
11,100
Professional seNces
2,040
960
3,800
Amortization
232,262
232,262
232,252
Total expenses
261,292
249,684
247,152
Surplus before interest and provision for
payments -in -lieu of corporate income taxes 133,708 122,689 132,728
Interest expense 182,107 182,107 189,997
Deficit before provision for payments -in -lieu of
corporate income taxes (48,399) (69,418) (57,269)
Provision for payments -in -lieu of corporate income
taxes - - -
Annual deficit $ (48,399) $ (69,418) $ (57,269)
See accompanying notes
..
KITCHENER GENERATION CORPORATION
Statement of Change in Net Financial Debt
For the Year Ended December 31, 2014
2014 2013
Annual deficit
$ (59,418) $
(57,269)
Change in share capital
(17,283)
(17,499)
Amortization of tangible capital assets
232,252
232,252
Change in net financial debt
155,551
157,484
Net financial debt, beginning of year
(3,634,878)
(3,792,362)
Net financial debt, end of year
$ (3,479,327) $
(3,634,878)
See accompanying notes
100
KITCHENER GENERATION CORPORATION
Statement of Cash Flow
For the Year Ended December 31, 2014
2014 2013
Operating
Annual deficit
$ (59,418) $
(57,269)
Items not involving cash
Amortization
232,252
232,252
Net change in cash from operating activities
172,834
174,983
Investing
Acquisition of tangible capital assets
-
-
Net change in cash from investing activities
-
-
Financing
Change in contributed capital
(17,283)
(17,499)
Change in long -term debt
(155,551)
(157,484)
Net change in cash from financing activities
(172,834)
(174,983)
Net change in cash and cash equivalents
-
-
Cash and cash equivalents, beginning of year
-
-
Cash and cash equivalents, end of year
See accompanying notes
101
KITCHENER GENERATION CORPORATION
Notes to Financial Statements
For the Year Ended December 31, 2014
1. Incorporation
On December 9, 2011, Kitchener Generation Corporation (the Company) was incorporated under
the Business Corporation Act (Ontario). Effective January 1, 2012, The Corporation of the City of
Kitchener transferred the solar roof asset constructed on the surface of the Kitchener Operations
Facility to the Company in exchange for 100% of the Company's common shares and interest
bearing debt.
2. Significant Accounting Policies
a) Basis of Accounting
The financial statements have been prepared by management in accordance with Canadian
generally accepted accounting principles for local governments as established by the Public
Sector Accounting Board of the Canadian Institute of Chartered Accountants.
b) 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 asset is amortized on a straight -line basis over its
estimated useful life of nineteen years.
c) Revenue Recognition
The Company records revenue from the sale of electricity on the basis of regular meter
readings and estimates of energy generation since the last meter reading to the end of the
year.
d) Use of Estimates
Since precise determination of many assets and liabilities is dependent upon future events, the
preparation of periodic financial statements necessarily involves the use of estimates and
approximations. These have been made using careful judgments. Actual results could differ
from these estimates.
3. Long -Term Debt
Effective January 1, 2012 the Company incurred an unsecured promissory note payable to The
Corporation of the City of Kitchener. For shareholder debt, payments are made annually including
interest and principal. Interest is calculated at the fixed rate of 5.01% per annum. Interest paid in
2014 was $182,107 (2013 - $189,997).
4. Tangible Capital Assets
Accumulated
Cost Amortization Net Book Value
Opening balance $ 4,412,784 $ (464,504) $ 3,948,280
Additions - - -
Depreciation expense - (232,252) (232,252)
Disposals - - -
Ending balance $ 4,412,784 $ (696,756) $ 3,716,028
102
KITCHENER GENERATION CORPORATION
Notes to Financial Statements
For the Year Ended December 31, 2014
5. Accumulated Surplus
The accumulated surplus consists of the following:
2014 2013
Share capital - common shares (Note 6) $ 386,592 $ 403,875
Retained earnings (149,891) (90,473)
$ 236,701 $ 313,402
6. Share Capital
Authorized
Unlimited common shares
Issued
1,000 common shares
103
December 31, 2014
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
The accompanying consolidated financial statements of Kitchener Power Corp. are the
responsibility of management and have been prepared in accordance with accounting
principles generally accepted in Canada. The significant accounting policies followed by
the Company are described in note 2 of the notes section to the consolidated financial
statements. The preparation of the consolidated financial statements necessarily
involves the use of estimates based on management's best judgement, particularly when
transactions affecting the current accounting period cannot be finalized with certainty until
future periods. The consolidated financial statements have been prepared in light of
information available up to February 28, 2015.
Management maintains appropriate systems of internal control designed to provide
reasonable assurance that the Company's assets were safeguarded and financial records
are relevant and reliable. T he system includes formal corporate -wide policies and
procedures, and an organizational structure that provides for the appropriate delegation
of authority and segregation of responsibilities.
On behalf of management,
Jerry Van Ooteghem, P. Eng.
President & C. E.O.
Margaret Nanning MBA, CPA, CGA
Vice - President Finance & C.F.O.
104
I & 4"
""11M,
KPMG LLP Telephone 519- 747 -8800
115 King Street South, 211 Floor Fax 519 - 747 -8830
Waterloo ON N2J 5A3 Internet www.kpmg.ca
To the Shareholders of Kitchener Power Corp.
We have a udited the accompanying consolidated financial statements of Kitchener Power Corp.,
which comprise the consolidated balance sheet as at December 31, 2014, the consolidated
statements of operations and comprehensive income, retained earnings and cash flows for the year
then ended, and notes, comprising a summa ry of significant accounting policies and other
explanatory information.
Management's Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with Canadian generally accepted accounting principles, and for such
internal control as management determines is necessary to enable the preparation of consolidated
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 consolidated 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 about whether the consolidated financial statements are free from
material misstatement.
An audit involves pe rforming procedures to obtain audit eviden ce about the amount s and
disclosures in the consolidated financial statements. The procedures selected depend on our
judgment, including the assessment of the risks of material misstat ement of the
consolidated financial statements, whether due to fraud or error. In making those risk assessments,
we consider internal control relevant to the entity's preparation and fai r presentation of the
consolidated 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 consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG International Cooperative
( "KPMG" International "), a Swiss entity.
KPMG Canada provides services to KPMG LLP.
105
Page 2
Opinion
In our opini on, the con solidated financial statements present fairly, in all material re spects, the
consolidated financial position of Kitchene r Power Corp. a s at December 31, 2014, and its
consolidated results of operatio ns and its con solidated cash flows for the year then en ded in
accordance with Canadian generally accepted accounting principles.
ZOO
Chartered Professional Accountants, Licensed Public Accountants
April 24, 2015
Waterloo, Canada
106
Kitchener Power Corp.
CONSOLIDATED BALANCE SHEET
As at December 311
ASSETS
Current assets
Cash and cash equivalents
Accounts receivable (note 4)
Inventories (note 5)
Prepaid expense
Payment -in -lieu of corporate income taxes receivable
Current portion of regulatory assets (note 18)
Total current assets
Non - current assets
Capital assets — netof accumulated amortization (note 6)
Regulatory assets (note 18)
Future income taxassets (note 19)
Total non - current assets
Total assets
See accompanying notes
107
2014 2013
$ 13,049,630
$ 12,858,553
51,191,442
46,957,396
3,136,319
3,134,303
1,084,844
897,009
33,695
683,877
2,853,698
13,218,174
71,349,628
77,749,312
186,373,289
181,051,618
7,578,179
923,358
5,267,764
6,782,009
199,219,232
188,756,985
$ 270,568,860 $ 266,506,297
Kitchener Power Corp.
CONSOLIDATED BALANCE SHEET (Continued)
As at December 31St
2014 2013
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities (note 7) $ 28,276,002 $ 26,406,688
Current portion of long term debt 992,641 951,481
Current portion of customers and construction deposits (note 8) 7,107,368 4,225,272
Current portion of regulatory liabilities (note 18) 4,884,579 12,069,893
Total current liabilities 41,260,590 43,653,334
Long -term liabilities
Long -term debt (note 9)
81,987,954
82,980,595
Customer deposits (note 8)
4,072,968
3,836,508
Post-em ploym ent benefits (note 11)
5,833,516
5,771,482
Regulatory liabilities (note 18)
8,402,121
8,539,337
Total long -term liabilities
100,296,559
101,127,922
Total liabilities
141,557,149
144,781,256
Shareholders' equity
Share capital — common shares (note 12)
66,389,385
66,389,385
Retained earnings
62,622,326
55,335,656
Total shareholders' equity
129,011,711
121,725,041
Total liabilities and shareholders' equity
$ 270,568,860
$ 266,506,297
See accompanying notes
Approved by the Board of Directors
J. Van Ooteghem, President & C.E.O. / Director
108
Kitchener Power Corp.
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
As at December 31St
Retained earnings, beginning of year
Net Income
Dividends paid out (note 22)
Retained earnings, end of year
See accompanying notes
109
2014 2013
$ 55,335,656 $ 50,727,598
10,615,670 8,281,158
(3,329,000) (3,673,100)
$ 62,622,326 $ 55,335,656
Kitchener Power Corp.
CONSOLIDATED STATEMENT OF OPERATIONS AND
COMPREHENSIVE INCOME
For the year ended December 311
2014 2013
REVENUE
Sales revenue
Distribution services revenue $ 38,141,303 $ 38,220,116
Electric energy services (note 13) 194,113,236 187,434,193
232,254,539 225,654,309
Other revenue
194,113,236
187,434,193
Other investment income
341,820
420,551
Late payment penalties
266,081
241,341
Miscellaneous revenue (note 14)
1,209,022
1,088,063
Community relations
1,816,923
1,749,955
Non - utility operations revenue
348,946
332,999
Energy Conservation - OPA Funding (note 15)
2,847,291
1,491,570
Total revenue
236,918,753
228,895,834
EXPENSE
Operation expense
Electric energy services (note 13)
194,113,236
187,434,193
Distribution operations and maintenance
10,144,795
10,450,740
Customer accounts
3,367,505
3,039,398
General administration
2,922,079
2,693,543
Community relations
251,315
245,479
Property and capital taxes
348,946
332,999
Amortization (note 16)
7,058,505
8,502,226
218,206,381
212,698,578
Non - utility operation expense
Energy conservation - OPAprograms (note 15)
2,263,262
1,537,637
Total expense
220,469,643
214,236,215
Income before interest and provision for
16,449,110
14,659,619
payments -in -lieu of corporate income taxes
Interest expense
4,331,346
5,173,690
Income before provision for payments -in -lieu
12,117,764
9,485,929
of corporate income taxes
Provision for payments -in -lieu of corporate income taxes (note 19)
1,502,094
1,204,771
NETINCOME
$ 10,615,670
$ 8,281,158
See accompanying notes
110
Kitchener Power Corp.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended December 31 st
OPERATING ACTIVITIES
Net Income
Add (deduct) charges to operations not requiring a current cash payment:
Gain on disposal of capital assets
Amortization (note 16)
(Decrease) in future income taxes (note 19)
Increase (decrease) in non - current customer deposits (note 8)
Increase in post - employment benefits obligation (note 11)
Net change in non -cash operating working capital (note 17)
Cash provided by operating activities
2014 2013
$ 10,615,670 $ 8,281,158
(25,542)
7,667,935
(22,753)
236,461
62,034
4,156,856
22,690,662
(82,757)
9,021,798
(44,655)
(37,095)
166,166
(11,459,167)
5,845,448
INVESTING ACTIVITIES
Additions to capital assets
(19,203,879)
(20,085,547)
Decrease (increase) in long -term regulatory assets /liabilities (note 18)
(5,255,039)
5,968,723
Proceeds on disposals of capital assets
32,105
86,528
Cash applied to investing activities
(24,426,813)
(14,030,296)
RNANCING ACTIVITIES
Increase in contributed capital
6,207,710
4,873,516
(Decrease) in long term debt
(951,482)
(912,029)
Dividends paid out (note 22)
(3,329,000)
(3,673,100)
Cash provided by financing activities
1,927,228
288,387
Net cash provided (applied) during the year
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Cash and cash equivalents represented by:
Cash
Supplemental cash flow information
Interest paid
Payments -in -lieu of corporate income taxes and capital taxes
See accompanying notes
111
191,077 (7,896,461)
12,858,553 20,755,014
$ 13,049,630 $ 12,858,553
$ 13,049,630 $ 12,858,553
$ 4,331,346 $ 5,036,431
$ 874,665 $ 1,189,229
Kitchener Power Corp.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
1. INCORPORATION
On July 1, 2000, Kitchener Power Corp. [the Company] was incorporated under the Business
Corporation Act (Ontario) along with its affiliate companies, Kitchener - Wilmot Hydro Inc., Kitchener
Energy Services Inc. and FibreTech (Kitchener) Inc. The incorporation was required in accordance with
the provincial government's Electricity Competition Act (Bill 35). The City of Kitchener and the Township
of Wilmot both passed by -laws, which transferred the net assets of the former Hydro - Electric
Commission of Kitchener - Wilmot to the new Company on August 1, 2000. Certain surplus property
assets and cash funds were excluded from the transfer and were retained by the City and the Township.
The net assets of FibreTech (Kitchener) Inc. were subsequently transferred to Fibretech
Telecommunications Inc. on November 1, 2000 as a result of a statutory amalgamation with Fibretech
Telecommunications (Cambridge) Inc and Fibretech Waterloo Inc. On September 1, 2005, Fibretech
Telecommunications Inc. merged with Guelph FibreWired to create a new telecommunications company,
Atria Networks Inc. ( "Atria "). Atria was subsequently sold to a third party on November 7, 2006 and was
dissolved on October 15, 2009 pursuant to Section 237(b) of the Business Corporation Act (Ontario).
Kitchener Power Corp., the holding company for the affiliate companies, oversees the operations of
Kitchener - Wilmot Hydro Inc. ['KWHI'], a regulated distribution company, and Kitchener Energy Services
Inc. ['KESI'], an unregulated retail services company.
Outstanding share capital includes 18,450 common shares held by the City of Kitchener and 1,550
common shares held by the Township of Wilmot. These municipalities are the sole shareholders of
Kitchener Power Corp.
2. SIGNIFICANT ACCOUNTING POLICIES
[I] Adoption of new accounting standards
Publicly accountable enterprises in Canada were required to adopt International Financial Reporting
Standards [ "IFRS "] in place of Canadian GAAP for annual reporting purposes for fiscal years
beginning on or after January 1, 2011. The Accounting Standards Board granted a s eries of
deferrals for IFRS adoption for entities subject to rate regulation. During this deferral period, the
Company has elected to take the optional deferral of its adoption of IFRS; therefore, it continues to
prepare its consolidated financial statements in accordance with Canadian GAAP accounting
standards in Part V of the CICA Handbook.
The last deferral, issued in February 2013, extended the deadline for mandatory adoption of IFRS
for rate regulated entities to January 1, 2015 and it is not expected that any additional deferrals will
be granted by the Accounting Standards Board.
The Company will therefore release its December 31, 2015 audited financial statements using IFRS,
with the fiscal year 2014 restated to IFRS format for comparative purposes
[II] Basis of accounting
The financial statements have been prepared by management in accordance with Canadian
generally accepted accounting principles [ "GAAP "] including accounting principles prescribed by the
Ontario Energy Board [the "OEB "] in the Accounting Procedures Handbook [the "AP Handbook "] for
Electric Distribution Utilities, and reflect the significant accounting policies as summarized below.
112
Kitchener Power Corp.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
[III] Regulation
KWHI is regulated by the OEB under the authority of the Ontario Energy Board Act, 1998. The OEB
is charged with the responsibility of approving or fixing rates for the transmission and distribution of
electricity, providing continued rate protection for rural and remote electricity customers, and for
ensuring that the distribution companies fulfill obligations to connect and service customers.
The OEB has the general power to include or exclude costs and revenues in the rates of a specific
period, resulting in a change in the timing of accounting recognition from that which would have
applied in an unregulated company. The economic impact of rate regulation is reported in these
financial statements.
The following regulatory treatments have resulted in accounting treatments that differ from GAAP for
enterprises operating in a non - regulated environment:
Regulatory assets represent future increase in revenues associated with costs that have been
deferred because it is probable that they will be recovered from customers in future periods through
the rate - making process.
Regulatory liabilities represent future reduction in revenues associated with amounts that are
expected to be refunded to customers through the rate - making process.
[IV] Other accounting policies
[a] Financial instruments
Financial instruments — recognition and measurement — Section 3855
This Section establishes the standards for the recognition and measurement of financial
assets and financial liabilities. At inception, all financial instruments which meet the definition
of a financial asset or financial liability are to be recorded at fair value, unless fair value cannot
be reliably determined. Depending on the nature of the financial instrument, revenues,
expenses, gains and losses would be reported in either net income or other comprehensive
income. Subsequent measurement of each financial instrument will depend on the balance
sheet classification elected by the Company. The Company has elected the following balance
sheet classifications with respect to its financial assets and financial liabilities:
• Cash is classified as "Assets Held- for - Trading" and is measured at fair value.
• Cash equivalents, comprising short -term investments, are classified as "Held -to-
Maturity Investments" and are measured at amortized cost, which, upon initial
recognition, is considered equivalent to fair value.
• Accounts receivable are classified as "Loans and Receivables" and are measured at
amortized cost, which, upon initial recognition, is considered equivalent to fair value.
Subsequent measurements are recorded at amortized cost using the effective interest
rate method.
• Accounts payable and accrued liabilities and the long -term debt are classified as
"Other Financial Liabilities" and are initially measured at their fair value. Subsequent
measurements are recorded at amortized cost using the effective interest rate method.
113
Kitchener Power Corp.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
[IV] Other accounting policies (continued)
Comprehensive income — Section 1530
This Section describes the recognition and disclosure requirements with respect to
comprehensive income. Comprehensive income consists of net income and other
comprehensive income. Other comprehensive income represents the changes in the fair value
of a financial instrument which have not been included in net income.
The Company had no adjustments to other comprehensive income during the period ending
December 31, 2014.
Hedges — Section 3865
This Section establishes standards regarding the use of hedge accounting, in particular, the
criteria to be met for the application of hedge accounting and the methods of executing various
hedging strategies. T he Company has not entered into any hedging transactions as at
December 31. 2014.
[b] Inventories
Inventories consist of parts, supplies and materials held for future capital expansion. The
Company valued its inventories according to the provisions of CICA Handbook Section 3031.
Under this standard, inventories are valued at the lower of cost and net realizable value, and
items considered major spare parts are recorded as capital assets. The standard also contains
provisions requiring the reversal of inventory write -downs if the circumstances resulting in the
original write -down have reversed.
[c] Spare transformers and meters
Spare transformers and meters are classified as capital assets in accordance with guidance in
the CICA Handbook.
114
Kitchener Power Corp.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
[IV] Other accounting policies (continued)
[d] Capital assets and amortization
Capital assets are recorded at cost. C osts for assets installed or erected by the Company
include material, labour and overhead.
Amortization is provided on a straight -line basis for capital assets available for use over their
estimated service lives, at the following annual rates:
Buildings
2%-5%
Transformer station equipment
2% -6.67%
Distribution station equipment
2% -6.67%
Distribution system
1.67 % -4%
Meters
4%-6.67%
SCADA equi pm ent
6.67%
Other capital assets
10%-33%
Amortization on general equipment directly used in the installation of other capital assets, is
capitalized to the new assets based on a pro- ration of the time during the year they are used for
such purposes.
Half year (2013 — full year) amortization is recorded in the year of acquisition and none in the
year of disposal, except for readily identified assets, which are amortized on a monthly basis.
For readily identifiable assets retired or disposed of, the asset and related accumulated
amortization are removed from the records. Differences between the proceeds, if any and the
unamortized asset amount plus removal costs are recorded as a gai n or loss in the year of
disposal.
For grouped assets, the assets and accumulated amortization are removed from the records at
the end of their estimated average service life, regardless of actual service life.
[e] Construction in progress
Capital assets under construction at year -end are referred to as construction in progress and
disclosed as a component of capital assets. Construction in progress is recognized as a capital
asset and amortized when the asset is either put into service or construction is substantially
completed.
[f] Contributed capital
Contributed capital contributions are required contributions received from outside sources, used
to finance additions to capital assets. Contributed capital contributions received are treated as a
"credit" contra account included in the determination of capital assets. The amount is
subsequently amortized by a charge to accumulated amortization and a c redit to amortization
expense, at an equivalent rate to that used for the amortization of the related capital assets.
115
Kitchener Power Corp.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
[IV] Other accounting policies (continued)
[g] Customer deposits
Customer deposits are cash collections from customers to guarantee the payment of energy
bills. Deposits expected to be refunded to customers within the next fiscal year are classified as
a current liability.
[h] Payments -in -lieu of corporate income taxes and capital taxes
The current tax - exempt status of the Company under the Income Tax Act (Canada) and the
Corporations Tax Act (Ontario) reflects the fact that the Company is wholly owned by
municipalities. This tax - exempt status might be lost in a number of circumstances, including if
the municipality ceases to own 90% or more of the shares or capital of the Company or if a non -
government entity has rights immediately or in the future, either absolutely or contingently, to
acquire more than 10% of the shares of the Company.
Commencing October 1, 2001, the Company is required, under the Electricity Act 1998, to make
payments -in -lieu of corporate income taxes [ "PILs "] to the Ontario Electricity Financial
Corporation, which will be used to repay the stranded debt incurred by the former Ontario
Hydro. These payments are calculated in accordance with the rules for computing income and
taxable capital and other relevant amounts contained in the Income Tax Act (Canada) and the
Corporations Tax Act (Ontario) as modified by the Electricity Act 1998 and related regulations.
As a result of becoming subject to PILs, the Company's taxation year was deemed to have
ended immediately beforehand and a n ew taxation year was deemed to have commenced
immediately thereafter. The Company was therefore deemed to have disposed of each of its
assets at their then fair market value and to have reacquired such assets at that same amount
for purposes of computing its future income subject to PILs. For purposes of certain provisions,
the Company was deemed to be a new company and, as a result, tax credits or tax losses not
previously utilized by the Company would not be available to it after the change in tax status.
Essentially, the Company was taxed as though it had a "fresh start" at the time of its change in
tax status.
[i] Post - employment benefits
Employee future benefits provided by KWHI include medical and life insurance benefits. These
plans provide benefits to certain employees when they are no longer providing active service.
Employee future benefit expense is recognized in the period in which the employees render the
services.
Employee future benefits are recorded on an accrual basis. The accrued benefit obligations
and current service cost are calculated using the projected benefits method pro -rated on service
and based on assumptions that reflect management's best estimate. The current service cost
for a period is equal to the actuarial present value of benefits attributed to employees' services
rendered in the period. Past service costs from plan amendments are amortized on a straight -
line basis over the average remaining service period of employees active at the date of
amendment.
The Company has adopted the corridor method of accounting for the actuarially determined
experience gains (losses). The excess of the net accumulated actuarial gains (losses) over
10% of the accrued benefit obligation is amortized into expense over the average remaining
service period of active employees.
116
Kitchener Power Corp.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
[IV] Other accounting policies (continued)
0] Pension plan
KWHI provides a pension plan for its employees through the Ontario Municipal Employees
Retirement System [ "OMERS "]. OMERS is a multi - employer pension plan, which operates as
the Ontario Municipal Employees Retirement Fund [the "Fund "] and provides pensions for
employees of Ontario municipalities, local boards, public utilities, and school boards. The Fund
is a contributory defined benefit pension plan, which is financed by equal contributions from
participating employers and employees, and by the investment earnings of the Fund. The
Company recognizes the expense related to this plan as contributions are made.
[k] Revenue recognition and cost of electrical energy
KWHI records revenue from the sale of energy on the basis of regular meter readings and
estimates of customer usage since the last meter reading to the end of the year. The cost of
power is recognized when the energy is consumed.
[I] Use of estimates
The preparation of the consolidated financial statements, in conformance with Canadian
generally accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and t he disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amounts
of revenue and expense for the year. Actual results could differ from those estimates including
changes as a result of future decisions made by the OEB, Minister of Energy, or the Minister of
Finance.
3. CREDIT RISK AND FINANCIAL INSTRUMENTS
[i] Credit risk
For distribution retail customers, credit losses are generally low across the sector. The Company
provides for an allowance for doubtful accounts to absorb credit losses.
At December 31, 2014, there are no significant concentrations of credit risk with respect to any class
of financial assets.
[ii] Interest rate risk
Cash balances not required to meet day -to -day obligations of the Company are invested in
Canadian money market instruments, with terms of one day to 364 days, exposing the Company to
fluctuations in short -term interest rates. These fluctuations could impact the level of interest income
earned by the Company.
117
Kitchener Power Corp.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
4. ACCOUNTS RECEIVABLE
Electric energy
Miscellaneous
Less: Allowance for doubtful accounts
Unbilled revenue receivable
Interest receivable
Related parties receivable:
Oty of Kitchener
Township of Wilmot
2014 2013
$17,288,200 $
14,226,942
4,748,474
2,829,379
22,036,674
17, 056, 321
(250,000)
(250,000)
21,786,674
16, 806, 321
29,183,776 30,024,407
40,551 37,474
174,373
88,867
6,068
327
180,441
89,194
$ 51,191,442 $ 46,957,396
Related Party Transactions
The Company conducted the following transactions with related parties during the year ended December
31, 2014. These transactions are in the normal course of operations and are measured at the exchange
amount, which is the amount of consideration established and agreed to by the related parties.
2014 2013
City of Kitchener— capital and maintenance of street lights $ 915,210 $ 1,520,138
Township of Wilmot— capital and maintenance of street lights 36,177 12,054
$ 951,387 $ 1,532,192
5. INVENTORIES
Inventories consist of:
2014 2013
Stores $ 2,459,689 $ 2,282,489
Transformers 676,630 657,588
Conservation programs inventory - 194,226
$ 3,136,319 $ 3,134,303
118
Kitchener Power Corp.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
6. CAPITAL ASSETS — NET OF ACCUMULATED AMORTIZATION
2014
La nd
Land Rights
Buildings
Transformer Station Equipment
Distribution Station Equipment
Distribution System - Conductors and devices
Distribution System - Line and network transformers
Meters
SCADA -System Supervisory Equipment
Other Capital Assets
Construction in Progress
Less: Contributed Capital
Tota I
2013
Land
Land Rights
Buildings
Transformer Station Equipment
Distribution Station Equipment
Distribution System - Conductors and deices
Distribution System - Line and network transformers
Meters
SCADA- System Supervisory Equipment
Other Capital Assets
Construction in Progress
Less: Contributed Capital
Total
119
Accumulated
Cost Amortization Net Book Value
$ 3,735,257
$ -
$ 3,735,257
265,449
260,526
4,922
27,172,679
7,673,414
19,499,265
63,482,722
21,745,179
41,737,543
2,932,918
2,046,957
885,961
197,013,365
83,031,882
113,981,483
57,375,998
27,435,587
29,940,411
15,550,194
4,751,883
10,798,311
1,566,480
1,555,450
11,030
21,147,567
14,505,122
6,642,445
5,171,577
-
5,171,577
395,414,205
163,006,001
232,408,205
(60,777,962)
(14,743,046)
(46,034,916)
$ 334,636,244
$ 148,262,955
$ 186,373,289
Accum uI ate d
Cost Amortization Net Book Value
$ 3,735,257
$ -
$ 3,735,257
265,449
257,873
7,576
26,368,763
6,852,373
19,516,390
62,560,429
20,336,071
42,224,358
2,930,969
2,005,202
925,767
185,445,409
79,895,043
105,550,366
55,053,765
26,688,890
28,364,875
14,711,639
3,780,444
10,931,195
1,566,480
1,551,390
15,090
20,246,460
13,637,078
6,609,382
3,766,910
-
3,766,910
376,651,530
155,004,364
221,647,166
(54,079,649)
(13,484,101)
(40,595,548)
$ 322,571,881
$ 141,520,263
$ 181,051,618
Kitchener Power Corp.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
7. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Independent Electricity System Operator
Ontario Electricity Financial Corporation (DRC)
Energy rebates payable (OCEB)
CDM/OPAprograms payable
Other
8. CUSTOMER AND CONSTRUCTION DEPOSITS
Construction deposits
Customer deposits — current portion
Customer deposits — non current portion
120
2014 2013
$19,538,831 $17,779,519
911,025 909,183
1,380,376 1,245,361
188,367 1,564,784
6,257,403 4,907,841
$ 28,276,002 $ 26,406,688
2014 2013
$ 4,263,568 $ 1,591,272
2,843,800 2Q34,000
$ 7,107,368 $ 4225,272
$ 4,072,968 $ 3,836,508
Kitchener Power Corp.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
9. LONG -TERM DEBT
[i] Effective August 1, 2000, KWHI incurred unsecured promissory notes payable to the City of
Kitchener and to the Township of Wilmot.
During 2010, KWHI incurred at en year senior unsecured debenture payable to Ontario
Infrastructure Projects Corporation. T he initial payable of $7,000,000 was received by the
Corporation on February 1, 2010 followed by a second payment of $3,000,000 on May 17, 2010.
The amounts due at the end of the year are:
2014 2013
City of Kitchener $ 70,997,576
$ 70,997,576
Township of Wilmot 5,964,566
5,964,566
Ontario Infrastructure Projects Corporation 6,018,453
6,969,934
82,980,595
83932,076
Less: Ontario Infrastructure Projects Corporation - Current Portion 992,641 951,481
$ 81,987,954 $ 82,980,595
[ii] For Shareholder Debt, interest is paid quarterly at an annual effective rate established by the OEB.
The annual effective rate for January 1, 2014 to December 31, 2014 was 4.88 %. Repayment of all
or part of the outstanding principal may be made upon eighteen months written notice.
For Ontario Infrastructure Project Corporation debt, the annual effective interest rate is 4.28 %.
Payments, which include both principal and interest, are made semi - annually in May and November.
The Company paid the following interest:
2014 2013
City of Kitchener $ 3,464,682 $ 4,167,558
Township of Wilmot 291,071 350,120
Ontario Infrastructure Projects Corporation 284,846 323,901
$ 4,040,599 $ 4,841,579
10. PENSION PLAN
The cash pension costs for the year ended December 31, 2014 in the amount $1,483,840 (2013 —
$1,384,654) have been expensed during the period in which they were incurred.
121
Kitchener Power Corp.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
11. POST - EMPLOYMENT BENEFITS
KWHI pays certain health, dental and life insurance benefits on behalf of its retired employees.
The significant actuarial assumptions adopted in measuring the accrued benefit obligations are as
fo I I ows:
Discount Rate -Jan 1
Discount Rate - Dec 31
Future general salary and wage levels increase
Future general inflation increase
Dental costs increase
Medical costs increase
Information about KWHI's defined benefits plans is as follows:
Accrued Benefit Obligation
Balance, beginning ofyear
C u rre nt s e rvi ce cost
Interest cost
Benefits paid
Unamortized actuarial gains
Balance, beginning of the year
Actuarial gain for the year
Currentyear amortization
Accrued benefit liability at December 31 as determined byactuarial
valuation
122
2014 2013
4.50%
4.50%
3.95%
4.50%
3.20%
3.30%
2.00%
2.00%
4.60% 5.00%
7.00% 7.63%
2014 2013
$ 4,522,490 $ 5,122,729
112,935 152,363
204,234 232,112
(193,847) (218,309)
4,645,812 5,288,895
482,587 482,587
766,405 -
(61,288) -
1,187,704 482,587
$ 5,833,516 $ 5,771,482
Kitchener Power Corp.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
12. SHARE CAPITAL
2014 2013
Authorized
Unlimited common shares
Issued
20,000 common shares $66,389,385 $66,389,385
13. ELECTRIC ENERGY SERVICES
$ 194,113,236 $ 187,434,193
2014 2013
Pole attachment rentals, buildings and other rentals $ 508,407 $ 514,690
Change of occupancy charges 258,660 150,770
Scrap sales 186,930 152,197
Net gain on disposal of capital assets 25,542 62,757
Unsealing/ reconnection charges 81,925 64,515
Accounts payable discounts taken 43,397 33,624
Return cheque charges 20,533 19,904
Sundry 83,628 89,606
$ 1,209,022 $1,088,063
15. NON - UTILITY OPERATIONS
In 2011, KWHI entered into an agreement with the Ontario Power Authority [ "OPA "] to deliver OPA
funded energy conservation and demand management [ "CDM "] programs. T he OEB classifies the
revenue funding and related expense to deliver the OPA CDM programs as non - utility operations.
123
2014
2013
Revenue
Electricity revenue
$ 166,618,656
$ 161,062,781
Wholesale market services
10,240,373
9,615,261
Transmission services
16,374,707
16,139,521
Smart Meter Entity Charge
833,651
565,602
Retailer services
45,849
51,028
$ 194,113,236
$ 187,434,193
Costs
Electricity
$ 166,618,656
$ 161,062,781
Wholesale market services
10,240,373
9,615,261
Transmission services
16,374,707
16,139,521
Smart Meter Entity Charge
833,651
565,602
Retailer services
45,849
51,028
$ 194,113,236 $ 187,434,193
2014 2013
Pole attachment rentals, buildings and other rentals $ 508,407 $ 514,690
Change of occupancy charges 258,660 150,770
Scrap sales 186,930 152,197
Net gain on disposal of capital assets 25,542 62,757
Unsealing/ reconnection charges 81,925 64,515
Accounts payable discounts taken 43,397 33,624
Return cheque charges 20,533 19,904
Sundry 83,628 89,606
$ 1,209,022 $1,088,063
15. NON - UTILITY OPERATIONS
In 2011, KWHI entered into an agreement with the Ontario Power Authority [ "OPA "] to deliver OPA
funded energy conservation and demand management [ "CDM "] programs. T he OEB classifies the
revenue funding and related expense to deliver the OPA CDM programs as non - utility operations.
123
Kitchener Power Corp.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
16. AMORTIZATION
Amortization - capital assets
Various expense accounts
17. NET CHANGE IN NON -CASH OPERATING WORKING CAPITAL
(Increase) in accounts receivable
Decrease in inventories
(Increase) in prepaid expense
Decrease in payment -in -lieu of corporate income taxes
Decrease (increase) in current portion of regulated liabilities
Increase in accounts payable and accrued liabilities
Increase (decease) in current portion of customer and
construction deposits
(Decrease) increase in current portion of regulatory liabilities
124
2014 2013
$ 7,058,505 $ 8,502,226
609,430 519,572
$ 7,667,935 $ 9,021,798
2014 2013
$ (4,234,046)
$ (8,984,911)
(2,016)
(954,523)
(187,836)
(78,799)
650,182
785,097
10,364,476
(12,311,653)
1,869,314
1,635,485
2,882,096
(2,939,069)
(7,185,314)
11,389,206
$ 4,156,856
$(11,459,167)
Kitchener Power Corp.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
18. REGULATORY ASSETS AND LIABILITIES
The "Electricity Pricing, Conservation and Supply Act, 2002" [Bill 2101 deems certain costs and variance
account balances to be accounted for as regulatory assets [note 2(111)].
[i] Regulatory assets consist of the following:
2014 2013
Current portion regulatory assets
IFRS transition costs $ - $ 197,646
Lost WIP 200,097 765,071
Smart meterfunding and cost recovery 658,011 2,830,541
Retailer service costvariances 6,675 40,052
Retail settlementvariances 1,774,399 8,858,101
Other deferred costs 214,516 526,763
2,853,698 13,218,174
Long -term portion regulatory assets
Lost WIP - 21,145
Retailer service costvariances 23,817 16,504
Retail settlementvariances 6,549,891 698,898
Recovery of Regulatory Assets 838,321 99,081
Other deferred credits 166,150 87,730
7,578,179 923,358
Total regulatory assets $ 10,431,877 $ 14,141,532
[ii] Regulatory liabilities consist of the following:
2014 2013
Current portion of regulatory liabilities
Retailer service cost variances $ 11,901 $ 71,407
Retail settlement variances 3,610,360 6,807,358
IFRS PP &E Adjustments 1,220,321 5,191,128
Deferred PILS 40,797 -
Other deferred debits 1,200 -
4,884,579 12,069,893
Long -term portion of regulatory liabilities
Future tax asset 31611,853 5,148,851
Retail settlement variances 4,501,345 3,274,415
Large User revenue removal 237,519 -
Other deferred debits 51,404 116,071
8,402,121 8,539,337
Total regulatory liabilities $ 13,286,700 $ 20,609,230
125
Kitchener Power Corp.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
18. REGULATORY ASSETS AND LIABILITIES (Continued)
[iii] The following table illustrates the pro -forma effect on income before provision for payments -in -lieu of
corporate income taxes, of the recognition of regulatory assets and liabilities:
Income before provision for payments -in -lieu of
corporate income tax
Energy related variances:
Retail settlement services
Smart Meter Entity Charge
Interest on energy related variances
Non - energy related variances:
Lost WIP
Retailer services
Renewable Connection Funding Adder
Renewable Connection Capital
Renewable Connection OM &A
Smart meter funding and cost recovery
Smart grid capital
IFRS Transition - PP &E Adjustments
Regulatory asset recovery
Large User revenue removal
Deferred PILs
Interest on non - energy related variances
Incremental effect on income
Income before provision for payments -in -lieu of corporate
income taxes without recognition of
regulatory assets and liabilities
126
2014 2013
$12,172,556 9,527,728
732,690 2,570,463
11,190 (52,296)
19,653 (24,462)
763,533 2,493,705
616,439
(2,000)
30,592
(116,074)
(4,321)
2,172,530
(765,071)
(16,394)
(34,450)
1,227,994
-
20,000
(3,970,807)
2,925,915
1,688,850
-
235,943
-
(62,336)
-
(42,428)
(27,222)
546,388
3,330,772
1,309,921
5,824,477
$ 13,482,477 $ 15,352,205
Kitchener Power Corp.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
19. CORPORATE INCOME AND CAPITAL TAXES
The provision for PILs differs from the amount that would have been recorded using the combined
Canadian Federal and Ontario statutory income tax rate. Reconciliation between the statutory and
effective tax rates is provided as follows:
[i] Statement of Operations
Com ponents of incom e tax expense:
Current tax expense $ 1,524,847 $ 1,249,426
Future tax (recovery) arising from term porary differences (22,753) (44,655)
$ 1,502,094 $ 1,204,771
[ii] Balance Sheet
Future income taxes reflect the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for income
tax purposes. Significant components of the Company's future income tax assets as at December
31. 2014 are as follows:
2014 2013
Capital assets - differences in net bookvalue and
undepieciated capital cost $ 2,654,712 $ 3,784,405
Regulatory adjustments 957,141 1,364,446
Post - employment benefits 1,545,882 1,529,443
Loss carry- forwards 110,029 103,715
$ 5,267,764 $ 6,782,009
As at December 31, 2014, the Company has capital losses of $82,340 (2013 — $82,340) and non -
capital loss carry forwards of approximately $460,284 (2013 — $364,131).
127
2014
2013
Rate reconciliation:
Income from continuing operations before income taxes
$12,117,764
$ 9,485,929
Statutory Canadian Federal and Provincial income tax rate
26.50%
26.50%
Expected taxes on income
3,211,207
2,513,771
Other permanent differences
(211,763)
(73,180)
Other current year timing differences not benefited
(1,432,581)
(1,156,730)
Other adjustments
(54,188)
(176,020)
Dividend refund
(89,108)
-
Increasedtaxon investment income
78,527
96,930
Income tax expense
$ 1,502,094
$ 1,204,771
Effective tax rate
12.40%
12.70%
Com ponents of incom e tax expense:
Current tax expense $ 1,524,847 $ 1,249,426
Future tax (recovery) arising from term porary differences (22,753) (44,655)
$ 1,502,094 $ 1,204,771
[ii] Balance Sheet
Future income taxes reflect the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for income
tax purposes. Significant components of the Company's future income tax assets as at December
31. 2014 are as follows:
2014 2013
Capital assets - differences in net bookvalue and
undepieciated capital cost $ 2,654,712 $ 3,784,405
Regulatory adjustments 957,141 1,364,446
Post - employment benefits 1,545,882 1,529,443
Loss carry- forwards 110,029 103,715
$ 5,267,764 $ 6,782,009
As at December 31, 2014, the Company has capital losses of $82,340 (2013 — $82,340) and non -
capital loss carry forwards of approximately $460,284 (2013 — $364,131).
127
Kitchener Power Corp.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
20. PRUDENTIAL SUPPORT OBLIGATION
KWHI purchases power from the Independent Electricity System Operator [IESO] on behalf of its
customers and retailers. The IESO is responsible for ensuring that prudential support is posted by all
market participants to mitigate the impact of an event of default by a market participant on the rest of the
market. In this regard, at December 31, 2014, KWHI has posted an irrevocable standby letter of credit as
security in the amount of $35,000,000 (2013 - $35,000,000) underwritten by KWHI's principal bank. The
Company has entered into a credit facility agreement with its bank in which contains certain financial
covenants.
21. GENERAL LIABILITY INSURANCE
The Company is a member of the Municipal Electric Association Reciprocal Insurance Exchange
[ MEARIE], which is a pooling of general liability insurance risks. M embers of MEARIE would be
assessed on a pro -rata basis should losses be experienced by MEARIE, for the years in which the
Company was a member. To December 31, 2014, the Company has not been made aware of any
additional assessments.
22. DIVIDENDS
Dividends in the amount of $3,329,000 (2013 - $3,673,100) were received from KWHI, a subsidiary of
Kitchener Power Corp.
Dividends paid out to shareholders are as follows:
2014 2013
City of Kitchener $ 3,071,000 $ 3,388,450
Township of Wilmot 258,000 284,650
$ 3,329,000 $ 3,673,100
23. EMERGING ACCOUNTING CHANGES
International Financial Reporting Standards [ "IFRS "]
On February 13, 2008, the Accounting Standards Board of Canada [ "AcSB "] announced that publicly
accountable enterprises will be required to change over to IFRS effective January 1, 2011.
In February 2013, the AcSB extended the deferral of mandatory transition to IFRS for rate - regulated
entities to January 1, 2015. This was the fourth such deferral granted by the AcSB.
Effective January 1, 2015, the Company will adopt IFRS for its financial reporting. As such, the audited
financial statements issued for the fiscal year 2015 will use IFRS as the accounting standard with the
fiscal year 2014 restated to IFRS for comparative purposes.
The International Accounting Standards Board ( "IASB ") has approved IFRS 14 Regulatory Deferral
Accounts in January 2014. This standard provides specific guidance on accounting for the effects of rate
regulation and p ermits first -time adopters of IFRS to continue using previous GAAP to account for
regulatory deferral account balances while the IASB completes its comprehensive project in this
area. Adoption of this standard is optional for entities eligible to use it. Deferral account balances and
movements in the balances will be required to be presented as separate line items on the face of the
financial statements distinguished from assets, liabilities, income and expenses that are recognized in
accordance with other IFRSs. Extensive disclosures will be required to enable users of the financial
statements to understand the features and nature of and risks associated with rate regulation and the
effect of rate regulation on the entity's financial position, performance and cash flows.
128
Kitchener Power Corp.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
23. EMERGING ACCOUNTING CHANGES (Continued)
Some of the converged standards will be implemented in Canada during the transition period with the
remaining standards adopted at the change over date. KWHI has launched an internal initiative to
govern the conversion process and is currently in the process of evaluating the potential impact of the
conversion to IFRS on its financial statements.
24. COMPARATIVE FIGURES
Certain prior year comparative figures may have been restated to conform to the current year's
presentation.
129
FINANCIAL & STATISTICAL REVIEW
As at December 31 (unaudited)
1. Source: Planning, Housing and Community Services Department, Regional Municipality of Waterloo
2. 2011 through 2014 - Source: Statistics Canada, 2011 Census Data, 2010 - Source: Statistics Canada,
2006 Census Data
Cumulative Tax Rate & CPI
Weighted Assessment Growth
Final 2012: 1.81% 30
Fina12013: 1.69% 25
5 % Fina12014:1.31%
20
4 15
3
2 10
1 5
0 0 III III '
04 05 06 07 08 09 10 11 12 13 14 04 05 06 07 08 09 10 11 12 13 14
Year Year
+City Tax Rate ( %) % Ontario CPI ( %)
( The 2011 tax rate increase has been restated to indicate what the tax rate increase would have been prior to
the transfer of storm water management costs to a new user rate. Without this restatement, a decrease
would be shown for 2011.
130
2014
2013
2012
2011
2010
1. DEMOGRAPHIC STATISTICS
Population'
236,500
234,000
234,100
232,300
229,400
Households'
90,560
88,765
88,540
87,720
86,750
Area in acres2
33,802
33,802
33,802
33,802
33,826
2. TAXABLE ASSESSMENT ($000's)
Residential and farm
21,596,614
21,314,131
17,720,136
16,558,715
15,415,724
Commercial and industrial
3,359,143
3,273,998
3,040,482
2,853,553
2,629,617
Total
24,955,757
24,588,129 20,760,618
19,412,268
18,045,341
3. TAX RATES
Residential and Farm Taxable Full
City
0.38135
0.39217
0.40039
0.41015
0.44361
Region
0.61875
0.62784
0.62967
0.64445
0.66709
School Boards
0.20300
0.21200
0.22100
0.23100
0.24100
Total
1.20310
1.23201
1.25106
1.28560
1.35170
Commercial Taxable Full
City
0.74363
0.76474
0.78076
0.79980
0.86503
Region
1.20656
1.22429
1.22785
1.25668
1.30082
School Boards
1.46000
1.49000
1.49000
1.66538
1.77644
Total
3.41019
3.47903
3.49861
3.72186
3.94229
Industrial Taxable Full
City
0.74363
0.76474
0.78076
0.79980
0.86503
Region
1.20656
1.22429
1.22785
1.25668
1.30082
School Boards
1.56000
1.59000
1.59000
1.93000
2.27248
Total
3.51019
3.57903
3.59861
3.98648
4.43833
1. Source: Planning, Housing and Community Services Department, Regional Municipality of Waterloo
2. 2011 through 2014 - Source: Statistics Canada, 2011 Census Data, 2010 - Source: Statistics Canada,
2006 Census Data
Cumulative Tax Rate & CPI
Weighted Assessment Growth
Final 2012: 1.81% 30
Fina12013: 1.69% 25
5 % Fina12014:1.31%
20
4 15
3
2 10
1 5
0 0 III III '
04 05 06 07 08 09 10 11 12 13 14 04 05 06 07 08 09 10 11 12 13 14
Year Year
+City Tax Rate ( %) % Ontario CPI ( %)
( The 2011 tax rate increase has been restated to indicate what the tax rate increase would have been prior to
the transfer of storm water management costs to a new user rate. Without this restatement, a decrease
would be shown for 2011.
130
FINANCIAL & STATISTICAL REVIEW
As at December 31 (unaudited)
($000's)
2014
2013
2012
2011
2010
Protection services
42,727
41,776
40,572
38,691
(restated)
4. COLLECTION STATISTICS
35,328
32,908
29,508
31,101
30,117
Total taxes billed
368,577
359,385
346,514
338,414
336,801
Total collections
365,882
359,339
344,955
337,067
335,952
Total collections as a % of current levy
99%
100%
100%
100%
100%
Taxes receivable, net of allowance
22,721
20,648
21,661
22,276
20,978
Total receivable as a % of current levy
6%
6%
6%
7%
6%
5. CONSOLIDATED REVENUE
70,824
64,605
64,551
73,508
79,393
Taxation and user charges
291,714
280,998
273,446
282,682
277,140
Grants
6,991
4,101
11,772
21,766
23,256
Share of net income of Kitchener Power
Corp. and its affiliates
9,793
7,639
8,448
8,351
7,522
Other
21,020
25,943
37,424
25,948
27,217
Obligatory fund revenue recognized
8,076
6,892
6,877
9,928
17,840
Total revenue
337,595
325,573
337,967
348,675
352,975
6. CONSOLIDATED EXPENSES
Expenses by Function
General government
37,797
36,033
38,010
34,509
27,563
Protection services
42,727
41,776
40,572
38,691
40,695
Transportation services
35,328
32,908
29,508
31,101
30,117
Environmental services
28,332
29,730
32,291
20,999
22,530
Health services
2,144
2,155
1,947
1,867
1,775
Social and family services
2,609
2,640
2,307
1,859
1,830
Recreation and cultural services
66,141
62,907
59,490
60,169
57,206
Planning and development
13,100
8,600
9,243
11,065
11,830
Gasworks
70,824
64,605
64,551
73,508
79,393
Total Expenses
299,002
281,354
277,919
273,768
272,939
Expenses by Object
Salaries, wages and employee benefits
138,259
133,464
128,444
123,722
112,829
Materials and services
110,106
98,719
103,261
112,620
121,543
Debenture debt interest
3,740
3,941
3,889
3,543
3,275
Grants and other
4,192
3,879
3,867
3,514
3,007
Amortization
39,646
37,355
34,299
29,898
28,435
Loss /(Gain) on sale of assets
3,059
3,996
4,159
471
3,850
Total Expenses
299,002
281,354
277,919
273,768
272,939
7. ANNUAL SURPLUS
38,593
44,219
60,048
74,907
80,036
131
FINANCIAL & STATISTICAL REVIEW
As at December 31 (unaudited)
2014 2013 2012 2011 2010
(restated)
8. ANALYSIS OF LONG -TERM DEBT ($000's)
Gross debt issued by the municipality
102,999
112,039
111,263
98,188
81,327
Less debt recoverable from municipal
enterprises and consolidated boards
11,125
11,607
12,077
12,538
6,962
Less debt recoverable from other sources
11,105
12,292
13,434
3,857
4,663
Net debt to be repaid from property taxes
80,770
88,140
85,752
81,793
69,702
Net debt per capita ($'s)
342
377
366
352
304
Legal debt limit ($000's)3
281,852
305,717
294,540
313,022
315,365
Interest on long -term debt as a % of
total expenditures
1.3%
1.4%
1.4%
1.3%
1.2%
9. ACCUMULATED SURPLUS ($000's)
Reserves, reserve funds and deferred
revenue - obligatory reserve funds
47,982
40,844
37,832
31,813
21,984
Unexpended capital financing
85,939
83,448
68,323
65,886
41,733
Accumulated surplus
1,176,249
1,137,656
1,093,437
1,033,389
958,483
10. NEW CONSTRUCTION
Value of construction ($000's)
573,063
331,491
418,227
666,026
495,345
Number of building permits
2,559
2,307
2,420
2,458
2,664
Number of single family dwelling starts
504
348
396
590
580
11. NET FINANCIAL ASSETS ($000's)
187,392
176,202
160,566
160,278
148,319
3. The debt limit is based on the Financial Information Return from the second immediate preceding year
132
New Construction
FINANCIAL & STATISTICAL REVIEW
As at December 31 (unaudited)
12. PRINCIPAL CORPORATE TAXPAYERS
2014 Assessment ($000's)
Drewlo Holdings Inc
232,231
CF /Realty Holdings Inc
204,396
Ontrea Inc
197,005
Ontario Minister of Energy & Infrastructure
79,356
Voisin Developments Limited
76,305
Morguard Nar (Ontario) Corporation
72,630
Homestead Land Holdings Limited
61,653
Kitchener Housing Inc
61,627
The INCC Corp
60,739
Stamm Investments Limited
53,441
Steeves & Rozema Enterprises Limited
44,233
7550332 Canada Inc
43,827
Kingswood Drive Kitchener GP Inc
42,810
Activa Holdings Inc.
42,525
CP Reit Ontario Properties Limited
41,367
133
FCS_ COK _Financia]ReportGRN_Mayl5.indd 28 2015 -06 -18 4:34 PM