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Home My WebLink AboutFIN-19-059 - 2018 Audited Financial Statements1 - 1 1 - 2 1 - 3 1 - 4 1 - 5 1 - 6 1 - 7 1 - 8 1 - 9 1 - 10 1 - 11 1 - 12 1 - 13 1 - 14 1 - 15 1 - 16 1 - 17 1 - 18 1 - 19 1 - 20 1 - 21 1 - 22 1 - 23 1 - 24 1 - 25 1 - 26 1 - 27 1 - 28 1 - 29 1 - 30 1 - 31 1 - 32 1 - 33 1 - 34 1 - 35 1 - 36 1 - 37 1 - 38 1 - 39 1 - 40 1 - 41 1 - 42 1 - 43 1 - 44 1 - 45 GJOBODJBM Qsfqbsfe!cz;! BDDPVOUJOH!EJWJTJPO 2 1 - 46 Xifsf!xf!bsf Bt!uif!mbshftu!nvojdjqbmjuz!jo!Xbufsmpp!Sfhjpo-!Ljudifofs!jt!tjuvbufe!jo!uif!ifbsu!pg!Tpvuixftufso!Poubsjp-!! dmptf!up!nbkps!ijhixbzt!.!jodmvejoh!Dbobebt!tvqfs!ijhixbz-!512!.!uibu!fbtjmz!dpoofdut!up!Mpoepo!boe!uif! Hsfbufs!Upspoup!Bsfb/! Tjuvbufe!po!uif!Hsboe!Sjwfs-!Ljudifofs!jt!uif!qfsgfdu!eftujobujpo!gps!sfdsfbujpo!boe!mfjtvsf!bdujwjujft-!xjui!b! qmfuipsb!pg!dipjdft-!jodmvejoh!nboz!qbslt-!usbjmt!boe!obuvsbm!bsfbt/! Epxoupxo!Ljudifofs!jt!uif!ifbsu!pg!uif!bsut!boe!dvmuvsf!tdfof!gps!Xbufsmpp!Sfhjpo/!Gftujwbmt!boe!tqfdjbm! fwfout!qspwjef!uif!pqqpsuvojuz!up!fyqfsjfodf!b!wbsjfuz!pg!bdujwjujft!boe!dvmuvsbm!fwfout-!jo!dfmfcsbujpo!pg!! pvs!hsfbu!ejwfstjuz/! 3 1 - 47 Table ofContents Introductory Section Message from the Mayor2 City Council3 Organizational Structure4 Message from the City Treasurer5 Financial Section ConsolidatedFinancial Statements22 Trust Funds47 BelmontImprovement Area Board of Management55 Kitchener Downtown Improvement Area Board ofManagement63 Kitchener Public Library73 The Centre inthe Square Inc.86 Gasworks Enterprise101 Kitchener GenerationCorporation107 Kitchener Power Corp114 Statistical Section Financial and Statistical Review151 1 - 48 3 1 - 49 4 1 - 50 ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 5 1 - 51 Message from the City Treasurer I am pleased to present the Annual Financial Report for the City of Kitchener for the year endedDecember 31, 2018. This report communicates the 2018 financial results for the CityofKitchener to council, residents and other interested parties. These results demonstrateKitchener’s continued sound financial management and fiscal prudence. Thefinancial statements and related information contained in this annual report are theresponsibility of the management team of the City of Kitchener. Management has instituted a systemof internal controls intended to safeguard assets and to provide accurate, timely and complete financial information for both internal decision-making and external reporting. Thecity has the following foundations in place to ensure appropriate financial controls andaccountability are maintained, and to take a proactive approach to identify and address financialchallenges. FOCUS ON EFFECTIVE AND EFFICIENT GOVERNMENT IN STRATEGIC PLANNING At the beginning of each new four-year term of council, the City of Kitchener develops astrategicplan to advance the vision, mission and goals for Kitchener. The 2015-2018 strategicplan was developed in collaboration with extensive community input. The plan is designedtoensure that over time, the public funds the city is entrusted to manage on behalf ofcitizens are allocated to top public priorities, invested effectively and spent efficiently. 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. 1 - 52 The 2015-2018 plan includedfive key strategic priorities: Open GovernmentWe will be transparent and accountable to citizens, providing easy access to information, a great customer service experience, and meaningful opportunities to participate in the democratic process. Strong & Resilient We will work within a collaborative network of city-builders to create a Economydynamic and prosperous Kitchener that is rich with employment opportunities and successful business ventures that can grow and thrive within the broader global economy. Safe & Thriving We will work with community partners to create complete, connected, Neighbourhoods safe and walkable neighbourhoods with a range of housing options. We will encourage people to come together, interact with one another and build relationships through inclusive programs, services, events and great public gathering places. Sustainable We will have well planned, managed and cost effective infrastructure Environment & systems that support long-term community needs for services, Infrastructureharnessing the benefits of nature through green infrastructure programs to create a healthy urban environment. Effective & We will deliver quality public services that meet the day-to-day needs of Efficient City the community in a reliable and affordable way, made possible through Services technology, innovation, employee engagement and a sound long-term financial plan. 1 - 53 Work is currently underway on the development ofthe 2019-2022 Strategic Plan. The five themesthatwillbeincludedare:People-FriendlyTransportation;CaringCommunity; VibrantEconomy; Environmental Leadership; and Great Customer Service. BUSINESS PLANNING AND BUDGET PROCESS Thepurposeofthebusiness planningprocessistomanageandsupportthestrategicplan toguidethemedium-termcourseofthecorporation.The2018BusinessPlansetsoutthe CityofKitchener’splanforworktobeundertakenin2018and2019.TheBusiness Plan was developed by staff across the organization under the guidance of the Corporate LeadershipTeamandwithcleardirectionfromCityCouncil.TheBusinessPlanincludesa profileofeachofthecity’s47coreservicesandadescriptionofeachofthe121projects underway in 2018 and 2019. The goal of the 2018 Business Plan is to meet community expectations and respond to emergingissuesinasustainableandaffordableway.ItpromotesprogressonStrategic Planpriorities, maintain and continuously improv core services. Approximately90%oftheprojectsintheBusinessPlanarededicatedtocoreservices andongoing operations, while 10% are allocatedto strategic projectsand initiatives. Inaddition to the business planning process, City Council approves the annual budget, made up ofthreeparts:operating,capitalandreserves.TheCityofKitchenerischargedwith responsibly managing and investing the tax dollars and user fees its residents pay to meet the needs of the community and ensure all of the strategic priorities are addressed. 1 - 54 City Council and staff are committed to striking a healthy balance between offering valuedservices and programs to residents, making strategic investments in community priorities, and keeping property taxes at a reasonable rate. To provide transparency in the budget process, budget information is posted on the city’swebsite and budget meetings are held in a public forum.Citizens are able to provide their input through a number of channels, including by phone, letter, email, social media, or in person at a public delegation night. Managementstaff review their budgets regularly. Detailed variance reports are prepared and presented to council three times per year, at the end of April, August and December. Thesereportsensure departmental accountability for financial results and are a key tool to allow management to respond to financial pressures during the year. 1 - 55 EXTERNAL AUDIT As required by the Municipal Act, City Council has appointed a public accounting firm, KPMGLLP, to express an independent audit opinion on management’s consolidated financialstatements.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. AUDIT COMMITTEE The audited consolidated financial statements are presented to the audit committee for approval.The committee provides a focal point for communications between council, the externalauditor, the internal auditor and management, and facilitates an impartial, objective and independent review of management practices through the internal and external audit functions. 1 - 56 FINANCIAL STATEMENT DISCUSSION AND ANALYSIS The City of Kitchener’s consolidated financial statements have been prepared in accordancewith reporting standards set by the Public Sector Accounting Board (PSAB) of the Chartered ProfessionalAccountants 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 andfinancial and statistical review. There arefour requiredfinancial statements: statementof financialposition; statement of operations; statement of change in netfinancial assets, and statement of cashflow. The consolidated financial statements reflect the assets, liabilities, reserves, surpluses/deficits, revenue,andexpenditures 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 onthe modified equity basis of accounting. References to the “city” below include all activity for the consolidated entity. Ontario’s Cap and Trade System (the “system”) came into effect on January 1, 2017 and then was subsequently eliminated on October 1, 2018. As a natural gas supplier, the City of Kitchener was a mandatory participant in the system while it was in place and needed to submit allowances to the Ministry of the Environment and Climate Change equal to the emissions of their gas customers for the compliance period. The gas delivery rates charged to the City of Kitchener’s customers during the lifespan of the system included an amount to cover the cost of compliance. As a result of the system only being in place for a portion of the year in 2018, both Gasworks user fees and expenses were lower than they were in 2017. The elimination of the system in 2018 has also led to decreases in trade receivables and inventory held for resale as compared to 2017. 1 - 57 CONSOLIDATED STATEMENT OF FINANCIAL POSITION 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’sability to meet its financial obligations and commitments. Thecity’s net financial asset balance is $222 million, an increase of $1 million from 2017. This balance is calculated as total financial assets less liabilities and represents the amount availabletofinance future operations. The increase year over year is due to changes in the various balancesheet accounts which are described in the paragraphs below.Of note, many municipalities maintain a net financial liability balance as their liabilities exceed their financial assets.The fact that the city has a positive net financial asset balance and that it has grown or maintained this balance over the last number of years demonstrates the city’s strong financial position. NET FINANCIAL ASSETS Millions $300 $250 $222 $221 $214 $194 $187 $200 $150 $100 $50 $- 20142015201620172018 Cash and cash equivalents Thecity’s cash position is closely managed and remains adequate along with short-term investments to meet ongoing cash requirements. The cash position has increased to $42 million from$23million in 2017. The Consolidated Statement of Cash Flows summarizes the sources and uses of cash in both2018 and 2017. 1 - 58 Taxes receivable Theincreasein Taxes receivableatyearendto$18 million from$17 millionin 2017 is due to alarger amount of supplementary taxes being processed and billedjust before yearend. A PERCENT OF CURRENT LEVY 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 20142015201620172018 Trade and other accounts receivable TheamountinTradeandotheraccountsreceivablehasdecreasedto$39millionfrom $43millionin2017.Thisisdueprimarilytoasignificantone-timegrantincludedin receivablesin2017. In addition,the 2017 balance included significant late year adjustments due from the Regionof Waterloo and the School Boards,whereas 2018 was a more typical year wherethecity owedthese entities taxes collected on their behalf. Inventory for esale Thecityholdscertaininventoryitemsforresale(primarilyrelatedtotheGasworks enterprise).Thisinventoryhasdecreasedto$8millionfrom$16millionin2017duetothe cityno longer holding allowances for the cap and trade system as the system was wound up in 2018. There is also a lower value of natural gas heldat yearend. 1 - 59 Investments TheCity of Kitchener invests in a manner that provides the highest return while protecting and preservingcapital,maintainingliquiditytomeetthedailycashflowdemandsandtoconform toall legislation governing the investment of publicfunds.The balance in investments grew in2018to$182millionfrom$164millionin2017.Thisincreaserelatestoincreasedreserve fundbalancesaswellasthefactthatfundswerefreedupin2018duetonolongerhavingto hold an inventory of allowances for the cap and trade system. Investment in Kitchener Power Corp. & Kitchener Generation Corporation Thecity’s investment in both Kitchener Power Corp.andits affiliates and Kitchener Generation Corporationismadeupofthecity’sinitialinvestmentanditsshareofnetincome sinceacquisitionlessdividendsreceived.SeeNotes6and7totheConsolidated FinancialStatements for further details. Accounts ayable and ccrued iabilities Accountspayableandaccruedliabilitieshasincreasedto$113millionfrom$76millionin 2017.Themajorityoftheincreasedliabilitieshavetodowithamountsowingtothe RegionofWaterlooandtheSchoolBoards.Theseliabilitiesrelatetopaymentof constructionprojectscompletedbytheRegiononbehalfofthecity,onemonth’sworthof watercoststotheRegion,taxescollectedonbehalfoftheRegionandSchoolBoards (asmentionedaboveintheReceivablessection),andanincreaseintheirshareof developmentchargesduetoincreasedactivitybydeveloperstoobtainpermitsbeforethe development charge exemption expired. Municipal ebt The city hasthree componentsthat comprise the overall debttotal. Debt hasbeen issued to fund: a portion of the tax-supported capital program capitalimprovementstoEnterprises,wherethedebtchargeswillbefundedthroughuser fees or external sources, such asthe Parking Enterpriseorthe KitchenerRangers the EconomicDevelopmentInvestment Fund (EDIF) 1 - 60 MUNICIPAL DEBT Millions $125 $103 $94 $100 $85 $78 $71 $75 $61 $55 $49 $43 $37 $50 $22 $21 $16 $19$17 $25 $20 $18 $18 $18 $17 $0 20142015201620172018 TaxEnterpriseEDIF Thecity’s capital investment philosophy ensures that any increases in debt charges from one yeartothenextdonotexceedassessmentgrowth(excludingtheimpactofthedebt associatedwithEDIF).Aswell,theoverallcontributionfromthetaxbasethroughtaxesand debt charges will not increase more than assessment growth plus inflation from one year to the next. This philosophy ensuresthat the impact on the taxpayer does not exceed inflation and that the citymust prioritize projects to fit the funding available. ThecitycreatedEDIFin2004asa$110millioncommitmenttoinvestincatalystprojects tostrengthenthelocaleconomyandstimulateurbandevelopmentinDowntownKitchener. EDIFinvestmentshavehadaremarkablypositiveimpactonthecity,increasingthecity’s recognitionas a location for innovation, entrepreneurship, and a sought-after urban lifestyle. Municipal debt has decreased to $71 million from $78 million in 2017. The change in debt is aresultofnewdebtissuanceof$4.3millionoffsetbyrepaymentof$11.0millionofexisting debt.DebtisexpectedtodecreaseforthenextnumberofyearsastheEDIFprogram continues to be paid down. Employee uture enefits Totalemployeefuturebenefitsincludesliabilitiesforfuturesickleavecosts,post- retirementbenefits and future Workplace Safety and Insurance Board (WSIB) payments. The liability has increased from $46 million in 2017 to $49 million in 2018. The increase relates to increases in salaries for employees entitled to sick leave and expandedcoverages under WSIB. 1 - 61 Tangible apital ssets Tangiblecapitalassetsarerecordedatcostwhichincludesallamountsthat are directlyattributabletoacquisition,construction,developmentorbettermentoftheasset. The cost less residualvalue of the tangible capital assets is amortized on a straight-line basis over their estimated useful lives ranging from 3 to100 years. During 2018, the city acquired $122 million in tangible capital assets (2017 -$95million). Amortization of assets was $48 million (2017 -$46 million). Refer to Note 13 and Schedule A oftheConsolidatedFinancialStatementsforadetailedbreakdownoftangiblecapitalasset activityfor2018. The net book value of tangible capital assets at December 31, 2018 is $1.19 billion,up from $1.11 billion in 2017. TANGIBLE CAPITAL ASSETS BY ASSET TYPE Linear Assets $663M ($601M) Assets under construction $45M ($45M) Land$194M ($188M) Vehicles$17M ($15M) Computer Hardware & Software$22M ($24M) Leasehold Improvements $2M ($2M) Land Improvements Buildings $36M ($29M) Machinery and Equipment $181M ($182M) $25M ($25M) Accumulated urplus The city’s accumulated surplus for fiscal 2018 is $1.41 billion (2017 -$1.34 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 reserves. 1 - 62 Reserve unds Reservefundsareincludedaspartofaccumulatedsurplusandthesebalancesaredisclosed inNote14tothefinancialstatements.Reservefundbalanceshaveincreasedduring201to $70million (2017 -$61 million). Under the authority of theMunicipal Act, the city and certain of its consolidated entities have establishedreservefundstoensurefutureliabilitiescanbemet,capitalassetsare properlymaintainedandsufficientfinancialflexibilityexiststorespondtoeconomic cycles or unanticipated financial requirements. Council or the Boards of the consolidated entitiesareresponsibleforexercisingdiscretionwithrespecttotheuseofreservefunds, subjecttothetermsoftheirrespectivepolicies,as wellasstatutoryandlegalrequirements. Council’s reserve policy contains guiding principles to ensure the reserves continue to support the financial goals and serve thehighest priority needs of the city and its citizens. RESERVE FUNDS Millions $80 $70 $70 $60 $61 $55 $50 $51 $40 $41 $30 $20 $10 $- 2014201520162018 1 - 63 CONSOLIDATED STATEMENT OF OPERATIONS The Consolidated Statement of Operations reports the revenue collected by the city, the cost of providing municipal servicesandthe resulting annual surplus/deficit. This year, overall assessment growth was 1.59%. While this new assessment creates revenueforthecity, there is also a cost to provide services to new development. In addition, cost increasesin excess of inflation, public demand for new services and unreliable revenue sources allplace significant pressure on the city budget. The tax rate increase for 2018 operations was 1.60%. REVENUE BY TYPE Millions $140 $120 $100 $80 $60 $40 $20 $- TaxationGasworksWater,Other user feesGrantsOther sewer & storm water 2018 Budget20182017 Revenue Revenue is received from the following sources: taxation; user fees from gasworks, water,sewer,stormwater and other; grants and other.Kitchener is one of only two municipalities in Ontario that own and operate a natural gas utility. Water, sewer & storm water revenue is $8 million greater than in 2017 due to the approvedincreases in the user fee rates charged for these services in addition to greater water consumption by the city’s customers. 1 - 64 Otheruserfeesaregreaterthanbudgetandprioryearasaresultofrevenuesofthe localboardsbeinghigherthanlastyearandbudget.Twoofthecity’sroadsprojectshad some cost recoveries in 2018 that are recognized in this financial statement grouping. GrantrevenueislessthanprioryearduetothemajorityoftheCleanWater WastewaterInfrastructurefundingbeingearnedin2017.Grantrevenueisgreaterthan budget due to the city receiving Public Transit Infrastructure Funding and Ontario Municipal CommuterCyclingProgram funds during 2018.These amounts were not confirmed at the time the budget was set. The‘Other’categoryintheRevenuebyTypechartaboveincludescontributionof tangiblecapitalassets,investmentincome,penaltiesandinterestontaxes, development charge revenue recognized, and share of net income of Kitchener Power Corp.andKitchenerGenerationCorporation.Revenueinthiscategoryinhigherfor2018 compared to 2017 primarily dueto significantly larger amounts ofcontributed assets to the city.The timing of asset contributions is not something the city control. 1 - 65 EXPENSES BY FUNCTION Millions $100 $80 $60 $40 $20 $- GeneralProtectionTransport-Environ-RecreationOtherGasworks governmentservicesationmental& cultural servicesservicesservices 2018 Budget20182017 Expenses TheCityofKitchenerisadiversifiedgovernmentinstitutionandprovidesawiderange ofservicestoitscitizensincludingfire,roads,water,sewer,naturalgas,libraries,and communityservices.ScheduleBoftheConsolidatedFinancialStatementsbreaksthe expenses into major functional activities, consistent with legislated requirements. AsiscommonwithmostOntariomunicipalities,theCityofKitchenerdoesnotbudget foramortizationoftangiblecapitalassetsorgainsandlossesondisposalofassets. However,toprovideamoremeaningfulcomparisontoactuals,theCouncil-approved budgethasbeenadjustedtoincludeamortizationexpenseandotheraccounting adjustmentsmandatedbythePublicSectorAccountingBoardtoexpressthefinancial statementsonanaccrualbasis.Thisprovidesgreaterclarityforallreadersinassessing budget to actual variances. Environmental services expenses are $5.2million under budget due to certain projects being delayed.The expenses are $5.1million higher than in 2017 as a result of the increased rates for waterandsewagetreatmentbeingchargedbytheRegionofWaterlooandasaresultof higherconsumptionofwaterandthereforegreatersewageproductionbythecity’s customers.Therewas also an increase in capital work in this area in 2018that did not meet the criteria of creating a tangible capital asset. Recreationandculturalservicesexpensesare$5.5millionhigherin2018than2017due tohigherexpensesattheCentreintheSquareandduetoashiftininternalcharges fromTransportationtoEnvironmentalservicesduetoachangeinallocationmethodfor certainactivities. 1 - 66 The ‘Other’ category in the Expenses by Function chart includes Health services, Social andfamily services,andPlanning and development. The expenses in this function are $3.4 millionhigherthan budget due to the expenses in the budget beingoffset by expected proceedsonthesale of a parcel of land. This sale was not completed in 2018, so the proceeds are not offsetting expenses. EXPENSES BY TYPE Materials and services $162M ($152M) Debenture debt interest $3M ($3M) Grants and other $6M ($5M) Amortization $48M ($46M) Loss/(Gain) on sale of assets $-3M ($1M) Salaries, wages and employee benefits $159M ($152M) CONSOLIDATED STATEMENT OF CHANGE IN NET FINANCIAL ASSETS The Statement of Change in Net Financial Assets explains the difference between amunicipality’ssurplus or deficit for the reporting year and its change in net financial assets in thesame reporting year. This statement provides for the reporting of the acquisition of tangiblecapital assets and other significant items that impact the difference between the annual surplus/deficitand the change in net financial assets. 1 - 67 CONSOLIDATED STATEMENT OF CASH FLOW The statement of cash flows reports changes in cash and cash equivalents resulting fromoperations,capital, investing and financing activities and shows how the city financed its activities during the year and met its cash requirements. LOOKING AHEAD Looking ahead to 2019, the city will be working to develop its first comprehensive Long- TermFinancialPlan.The plan will provide insight into the city’s financial governance framework,bringingtogether and highlighting the city’s financial policies and practices, and identifying financial strategies that will help guide the city moving forward. Witha strong reputation for financial stability, Kitchener will strive to remain financiallyresponsible, flexible and sustainable. Guided by these principles, the Long-Term Financial Plan will continue to build on the city’s current financial strength and ensure that the city is well positioned both now and in the future to meet the needs of a growing community. Jonathan Lautenbach, CPA, CGA Chief Financial Officer &City Treasurer June24, 2019 1 - 68 KPMG LLP 115 King Street South 2ndFloor Waterloo ONN2J 5A3 Canada Tel 519-747-8800 Fax 519-747-8830 INDEPENDENT AUDITORS’ REPORTUDITORS’ REPORTUDITORS’ REPORT To the Mayor and Members of Council, Inhabitants and Ratepayers of and Members of Council, Inhabitants and Ratepayers of and Members of Council, Inhabitants and Ratepayers of the T Corporation of the City of KitchenerCorporation of the City of KitchenerCorporation of the City of Kitchener F Opinion We have audited the consolidated financial statements ofWe have audited the consolidated financial statements ofWe have audited the consolidated financial statements ofthe Corporation of the City of KitchenerCity of KitchenerCity of Kitchener(the Entity), which comprise:(the Entity), which comprise:(the Entity), which comprise: A the consolidated the consolidated the consolidated statement of statement of the financial positionas at December 31, 2018 the consolidated the consolidated the consolidated statestatestatement of operationsfor the year then ended R the consolidated the consolidated the consolidated statement of change in net financial assetsfor the year then endedendedended the consolidated the consolidated the consolidated statement of cash flowsfor the year then ended D and notes to the consolidated financial statements, including asummary of significant accounting policies (Hereinafter referred to as the “consolidated financial statements”). In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, theconsolidated financial positionof the Entity as at December 31, 2018, and its consolidated results of operations, its changes in consolidated net financial assets, and its consolidated cash flowsfor the year then ended in accordance with Canadian public sector accounting standards. Basis for Opinion We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in 1 - 69 Page 2 the “Auditors’ Responsibilities for theAudit of theConsolidatedFinancial Statements” section of our auditors’report. We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of theconsolidatedfinancial statements in Canada and we have fulfilled our otherethicalresponsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate We believe that the audit evidence we have obtained is sufficient and appropriate We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of Management and Those Charged wiResponsibilities of Management and Those Charged wiResponsibilities of Management and Those Charged with Governance for the Consolidated Consolidated Consolidated Financial StatementsFinancial StatementsFinancial Statements Management is responsible for the Management is responsible for the Management is responsible for the preparation and fair presentation of the preparation and fair presentation of the preparation and fair presentation of the T consolidated financial statementsfinancial statementsfinancial statementsin accordance with Canadian public sector in accordance with Canadian public sector in accordance with Canadian public sector accounting standardsand for such internal controand for such internal controand for such internal control as management determines is necessary to enable the preparation ofnecessary to enable the preparation ofnecessary to enable the preparation ofconsolidatedconsolidatedconsolidatedfinancial statementsthat are F free from material misstatement, whether due to fraud or error.free from material misstatement, whether due to fraud or error.free from material misstatement, whether due to fraud or error. In preparing the In preparing the In preparing the consolidated consolidated consolidated financial statements, management is responsible financial statements, management is responsible for assessing the Entity’s ability to continue as a going concern, disclosing as r assessing the Entity’s ability to continue as a going concern, disclosing as r assessing the Entity’s ability to continue as a going concern, disclosing as A applicable, matters related to going concern and using the going concern basis of applicable, matters related to going concern and using the going concern basis of applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Entity or to cease accounting unless management either intends to liquidate the Entity or to cease accounting unless management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so.operations, or has no realistic alternative but to do so.operations, or has no realistic alternative but to do so. R Those charged with governance are responsible for overseeing the Entity’s Those charged with governance are responsible for overseeing the Entity’s Those charged with governance are responsible for overseeing the Entity’s financial reporting process.financial reporting process.financial reporting process. AuditorsAuditorsAuditors’ Responsibilities for the Audit of theConsolidated D FinancialStatements Our objectives are to obtainreasonable assurance about whether the consolidatedfinancial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of theconsolidatedfinancial statements. 1 - 70 Page 3 As part of anaudit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout theaudit. We also: Identify and assess the risks of material misstatement of theconsolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is The risk of not detecting a material misstatement resulting from fraud is The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, her than for one resulting from error, as fraud may involve collusion, her than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal forgery, intentional omissions, misrepresentations, or the override of internal forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to theObtain an understanding of internal control relevant to theObtain an understanding of internal control relevant to theaudit in order to design audit procedures that are appropriate in the circumstances, but not for dures that are appropriate in the circumstances, but not for dures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity's the purpose of expressing an opinion on the effectiveness of the Entity's the purpose of expressing an opinion on the effectiveness of the Entity's internal control. Evaluate the appropriateness of accounting policies used and the Evaluate the appropriateness of accounting policies used and the Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by reasonableness of accounting estimates and related disclosures made by reasonableness of accounting estimates and related disclosures made by management.management.management. Conclude on the appropriateness of management's use of the going concern Conclude on the appropriateness of management's use of the going concern Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a basis of accounting and, based on the audit evidence obtained, whether a basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions thatmaterial uncertainty exists related to events or conditions thatmaterial uncertainty exists related to events or conditions thatmay cast significant doubt on the Entity's ability to continue as a going concern. If we significant doubt on the Entity's ability to continue as a going concern. If we significant doubt on the Entity's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention conclude that a material uncertainty exists, we are required to draw attention conclude that a material uncertainty exists, we are required to draw attention in our in our in our auditors’report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’report. However, future events or conditions may cause the Entity to cease to continue as a going concern. 1 - 71 Page4 Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether theconsolidated financialstatements represent the underlying transactions and events in a manner that achieves fair presentation. Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during ouraudit. Obtain sufficient appropriate audit evidence regarding the financial Obtain sufficient appropriate audit evidence regarding the financial Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group Entity to information of the entities or business activities within the Group Entity to information of the entities or business activities within the Group Entity to express an opinion on theconsolidatedconsolidatedconsolidatedfinancial statements. We are financial statements. We are financial statements. We are responsible for the direction, supervision and performance of the group audit. responsible for the direction, supervision and performance of the group audit. responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.We remain solely responsible for our audit opinion.We remain solely responsible for our audit opinion. T Chartered Professional Chartered Professional Accountants, Licensed Public AccountantsAccountants, Licensed Public AccountantsAccountants, Licensed Public Accountants F A Waterloo, CanadaWaterloo, CanadaWaterloo, Canada ___________________________________________________ R D 1 - 72 TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD 1 - 73 TTTTTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAAAAA RRRRRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDDDDD 1 - 74 TTTTTTTTTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAAAAAAAAA RRRRRRRRRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDDDDDDDDD 1 - 75 TTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAA RRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDD 1 - 76 T F A R D 1 - 77 T F A R D 1 - 78 TTTTTTTTTTTTT FFFFFFFFFFFFF AAAAAAAAAAAAA RRRRRRRRRRRRR DDDDDDDDDDDDD 1 - 79 T F A R D 1 - 80 TTTTTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAAAAA RRRRRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDDDDD 1 - 81 TTTTTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAAAAA RRRRRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDDDDD 1 - 82 TTTTTTTTTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAAAAAAAAA RRRRRRRRRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDDDDDDDDD 1 - 83 TTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAA RRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDD 1 - 84 TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD 1 - 85 TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD 1 - 86 TTTTTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAAAAA RRRRRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDDDDD 1 - 87 TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD 1 - 88 TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD 1 - 89 T F A R D 1 - 90 TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD 1 - 91 TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD 1 - 92 TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD 1 - 93 KPMG LLP 115 King Street South 2ndFloor Waterloo ONN2J 5A3 Canada Tel 519-747-8800 Fax 519-747-8830 INDEPENDENT AUDIAUDIAUDITORS’ REPORTTORS’ REPORTTORS’ REPORT To the Mayor and Members of Council, Inhabitants and Ratepayers of The Members of Council, Inhabitants and Ratepayers of The Members of Council, Inhabitants and Ratepayers of The T Corporation of the City of KitchenerCorporation of the City of KitchenerCorporation of the City of Kitchener F Opinion We have audited the financial statements of We have audited the financial statements of We have audited the financial statements of The Trust Funds of the Corporation of the City of Kitchenerof the City of Kitchenerof the City of Kitchener(the Entity), which comprise:(the Entity), which comprise:(the Entity), which comprise: A the the the balance sheetbalance sheetbalance sheetas at December 31, 2018as at December 31, 2018 the statement of the statement of the statement of continuitycontinuitycontinuityfor the year then ended R and notes to the and notes to the and notes to the financial statements, including a summary of significant accounting policiessignificant accounting policiessignificant accounting policies (Hereinafter referred to as the “financial statements”).(Hereinafter referred to as the “financial statements”).(Hereinafter referred to as the “financial statements”). D In our opinion, the accompanying financial statements present fairly, in all material respects, thebalance sheetof the Entity as at December 31, 2018, and the statement of continuityfor the year then ended in accordance with Canadian public sector accounting standards. Basis for Opinion We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in 1 - 94 Page 2 the “Auditors’ Responsibilities for the Audit of the Financial Statements” section of our auditors’report. We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of Management and Those Charged with Responsibilities of Management and Those Charged with Responsibilities of Management and Those Charged with Governance for the Financial StatementsGovernance for the Financial StatementsGovernance for the Financial Statements Management is responsible for the Management is responsible for the Management is responsible for the preparation and fair presentation preparation and fair presentation preparation and fair presentation ofthe financial statementsin accordance with Canadian public sector accounting in accordance with Canadian public sector accounting in accordance with Canadian public sector accounting T standardsand for such internal control as management determines is necessary and for such internal control as management determines is necessary and for such internal control as management determines is necessary to enable the preparation of to enable the preparation of to enable the preparation of financial statementsfinancial statementsfinancial statementsthat arefree from material misstatement, whethermisstatement, whetherdue to fraud or error.due to fraud or error.due to fraud or error. F In preparing the financial statements, management is responsible for assessing In preparing the financial statements, management is responsible for assessing In preparing the financial statements, management is responsible for assessing the Entity’s ability to continue as a going concern, disclosing as applicable, the Entity’s ability to continue as a going concern, disclosing as applicable, the Entity’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accomatters related to going concern and using the going concern basis of accomatters related to going concern and using the going concern basis of accounting A unless management either intends to liquidate the Entity or to cease operations, unless management either intends to liquidate the Entity or to cease operations, unless management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so.or has no realistic alternative but to do so.or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Entity’s Those charged with governance are responsible for overseeing the Entity’s Those charged with governance are responsible for overseeing the Entity’s R financial reporting process.financial reporting process.financial reporting process. AuditorsAuditorsAuditors’ Responsibilities for the Audit of the Financial D Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’report thatincludes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of thefinancial statements. 1 - 95 Page 3 As part of anaudit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout theaudit. We also: Identify and assess the risks of material misstatement ofthe financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is The risk of not detecting a material misstatement resulting from fraud is The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, higher than for one resulting from error, as fraud may involve collusion, higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal forgery, intentional omissions, misrepresentations, or the override of internal forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to Obtain an understanding of internal control relevant to Obtain an understanding of internal control relevant to theaudit in order to T design audit procedures that are appropriate in the circumstances, but not for design audit procedures that are appropriate in the circumstances, but not for 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 the purpose of expressing an opinion on the effectiveness of the Entity's the purpose of expressing an opinion on the effectiveness of the Entity's internal control. F Evaluate the appropriateness of accounting policies used and tEvaluate the appropriateness of accounting policies used and tEvaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by reasonableness of accounting estimates and related disclosures made by reasonableness of accounting estimates and related disclosures made by management.management.management. A Conclude on the appropriateness of management's use of the going concern Conclude on the appropriateness of management's use of the going concern Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a basis of accounting and, based on the audit evidence obtained, whether a basis of accounting and, based on the audit evidence obtained, whether a R material uncertainty exists related to events or conditions that may cast material uncertainty exists related to events or conditions that may cast material uncertainty exists related to events or conditions that may cast significant doubt on the Entity's ability to continue as a going concern. If we significant doubt on the Entity's ability to continue as a going concern. If we significant doubt on the Entity's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention conclude that a material uncertainty exists, we are required to draw attention conclude that a material uncertainty exists, we are required to draw attention in our in our in our auditors’report to the related disclosures in the financial statements or, D if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Entity to cease to continue as a going concern. 1 - 96 Page4 Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during ouraudit. Chartered Professional Accountants, Licensed Public AccountantsAccountants, Licensed Public AccountantsAccountants, Licensed Public Accountants T Waterloo, Canada __________________________________ F A R D 1 - 97 TTTTT FFFFF AAAAA RRRRR DDDDD 1 - 98 TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD 1 - 99 T F A R D 1 - 100 TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD 1 - 101 KPMG LLP 115 King Street South 2ndFloor Waterloo ONN2J 5A3 Canada Tel 519-747-8800 Fax 519-747-8830 INDEPENDENT AUDIAUDIAUDITORS’ REPORTTORS’ REPORTTORS’ REPORT To the Members of the Belmont Improvement Area Board of Managementhe Belmont Improvement Area Board of Managementhe Belmont Improvement Area Board of Management T Opinion F We have audited the financial statements of Belmont Improvement Area Board of ted the financial statements of Belmont Improvement Area Board of ted the financial statements of Belmont Improvement Area Board of Management (the Entity), which comprise:Management (the Entity), which comprise:Management (the Entity), which comprise: A the the statement of financial position as at December 31, 2018statement of financial position as at December 31, 2018statement of financial position as at December 31, 2018 the statement of the statement of the statement of revenue and expenses and accumulatedrevenue and expenses and accumulated surplussurplussurplusfor the year then endedfor the year then endedfor the year then ended R thethestatement of changes in net financial assetsstatement of changes in net financial assetsstatement of changes in net financial assetsfor the year then endedendedended and notes to the and notes to the and notes to the financial statements, including a summary of D significant accounting policies (Hereinafter referred to as the “financial statements”). In our opinion, the accompanying financial statements present fairly, in all material respects, thefinancial position of the Entity as at December 31, 2018, and its results of operations,andits changes in net financial assetsfor the year then ended in accordance with Canadian public sector accounting standards. Basis for Opinion We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in 1 - 102 Page 2 the “Auditors’ Responsibilities for the Audit of the Financial Statements” section of our auditors’report. We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of Management and Those Charged wResponsibilities of Management and Those Charged wResponsibilities of Management and Those Charged with Governance for the Financial StatementsGovernance for the Financial StatementsGovernance for the Financial Statements Management is responsible for the Management is responsible for the Management is responsible for the preparation and fair presentation of the preparation and fair presentation of the preparation and fair presentation of the financial statementsin accordance with Canadian public sector accounting in accordance with Canadian public sector accounting in accordance with Canadian public sector accounting T standardsand for such internal control as management determineand for such internal control as management determineand for such internal control as management determines is necessary to enable the preparation of to enable the preparation of to enable the preparation of financial statementsfinancial statementsfinancial statementsthat arefree from material misstatement, whether due to fraud or error.misstatement, whether due to fraud or error.misstatement, whether due to fraud or error. F In preparing the financial statements, management is responsible for assessing In preparing the financial statements, management is responsible for assessing In preparing the financial statements, management is responsible for assessing the Entity’s ability to continue as a going concern, disclosing as applicable, the Entity’s ability to continue as a going concern, disclosing as applicable, the Entity’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting matters related to going concern and using the going concern basis of accounting matters related to going concern and using the going concern basis of accounting A unless management either intends to liquidate the Entity or to cease operations, unless management either intends to liquidate the Entity or to cease operations, unless management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so.or has no realistic alternative but to do so.or has no realistic alternative but to do so. Those chThose chThose charged with governance are responsible for overseeing the Entity’s arged with governance are responsible for overseeing the Entity’s arged with governance are responsible for overseeing the Entity’s R financial reporting process.financial reporting process.financial reporting process. AuditorsAuditorsAuditors’ Responsibilities for the Audit of the Financial D Statements Our objectives are to obtain reasonable assurance about whether the financial statements asa whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of thefinancial statements. 1 - 103 Page 3 As part of anaudit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintainprofessional skepticism throughout theaudit. We also: Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is The risk of not detecting a material misstatement resulting from fraud is The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, higher than for one resulting from error, as fraud may involve collusion, higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,misrepresentations, or the override of internal misrepresentations, or the override of internal misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to theObtain an understanding of internal control relevant to theObtain an understanding of internal control relevant to theaudit in order to T design audit procedures that are appropriate in the circumstances, but not for design audit procedures that are appropriate in the circumstances, but not for 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 the purpose of expressing an opinion on the effectiveness of the Entity's the purpose of expressing an opinion on the effectiveness of the Entity's internal control. F Evaluate the appropriateness of accounting policies used and the Evaluate the appropriateness of accounting policies used and the Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by reasonableness of accounting estimates and related disclosures made by reasonableness of accounting estimates and related disclosures made by management.management.management. A Conclude on the appropriateness of management's use of tConclude on the appropriateness of management's use of tConclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a basis of accounting and, based on the audit evidence obtained, whether a basis of accounting and, based on the audit evidence obtained, whether a R material uncertainty exists related to events or conditions that may cast material uncertainty exists related to events or conditions that may cast material uncertainty exists related to events or conditions that may cast significant doubt on the Entity's ability to continue as a going concern. If we significant doubt on the Entity's ability to continue as a going concern. If we significant doubt on the Entity's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention conclude that a material uncertainty exists, we are required to draw attention conclude that a material uncertainty exists, we are required to draw attention in our in our in our auditors’report to the related disclosures in the financial statements or, D if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditors’ report. However, future events or conditions may cause the Entity to cease to continue as a going concern. 1 - 104 Page4 Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Communicate with those charged with governance regarding, among other matters, theplanned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during ouraudit. Chartered Professional Accountants, Licensed Public AccountantsAccountants, Licensed Public AccountantsAccountants, Licensed Public Accountants T Waterloo, Canada __________________________________ F A R D 1 - 105 TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD 1 - 106 TTTTTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAAAAA RRRRRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDDDDD 1 - 107 T F A R D 1 - 108 TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD 1 - 109 KPMG LLP 115 King Street South 2nd Floor Waterloo ON N2J 5A3 Canada Tel 519-747-8800 Fax 519-747-8830 INDEPENDENT AUDITORS’ REPORTINDEPENDENT AUDITORS’ REPORTINDEPENDENT AUDITORS’ REPORT Opinion We have audited the financial statements of We have audited the financial statements of We have audited the financial statements of Kitchener Downtown Improvement Area Kitchener Downtown Improvement Area Kitchener Downtown Improvement Area Board of Management (the “Entity”), which comprise:), which comprise:), which comprise: the statement of financial position as at end of December 31, 2018the statement of financial position as at end of December 31, 2018the statement of financial position as at end of December 31, 2018 the statement of revenue and expenses and accumulated surplusthe statement of revenue and expenses and accumulated surplusthe statement of revenue and expenses and accumulated surplusfor the year then ended the statement of changes in net financial assets for the year then endedthe statement of changes in net financial assets for the year then endedthe statement of changes in net financial assets for the year then ended the statement of cash flows for the year then endedthe statement of cash flows for the year then endedthe statement of cash flows for the year then ended and notes to the financial statements, including a summary of significantand notes to the financial statements, including a summary of significantand notes to the financial statements, including a summary of significant accounting policiesaccounting policiesaccounting policies (Hereinafter referred to as the “financial statements”).(Hereinafter referred to as the “financial statements”).(Hereinafter referred to as the “financial statements”). In our opinion, the accompanying financial statements present fairly, in all mateIn our opinion, the accompanying financial statements present fairly, in all mateIn our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Entityrespects, the financial position of the Entityrespects, the financial position of the Entityas at end of December 31, 2018, and its results of operations, its changes in net financial assets and its cash flows for the year then ended in accordance with Canadian public sector accounting standards. Basis for Opinion We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the “Auditors’Responsibilities for the Audit of the Financial Statements” section of our auditors’report. We are independent of the Entityin accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 1 - 110 Page 2 Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the 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. In preparing the financial statements, management is responsible for assessing the In preparing the financial statements, management is responsible for assessing the In preparing the financial statements, management is responsible for assessing the Entity’s ability to continue as a going concern, disclosing as applicable, matters ’s ability to continue as a going concern, disclosing as applicable, matters ’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless oing concern and using the going concern basis of accounting unless oing concern and using the going concern basis of accounting unless management eitherintends to liquidate the Entityintends to liquidate the Entityintends to liquidate the Entityor to cease operations, or has no or to cease operations, or has no or to cease operations, or has no realistic alternative but to do so. T Those charged with governance are responsible for overseeing the EntityThose charged with governance are responsible for overseeing the EntityThose charged with governance are responsible for overseeing the Entity’s financial reporting process. F Auditors’Responsibilities for the Audit of the Financial StatementsResponsibilities for the Audit of the Financial StatementsResponsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial Our objectives are to obtain reasonable assurance about whether the financial Our objectives are to obtain reasonable assurance about whether the financial A statements as a whole are free from material misstatement, whether due to fraud or statements as a whole are free from material misstatement, whether due to fraud or statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’error, and to issue an auditors’error, and to issue an auditors’report that includes our opinion. report that includes our opinion. report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an Reasonable assurance is a high level of assurance, but is not a guarantee that an Reasonable assurance is a high level of assurance, but is not a guarantee that an R audit conducted in accordance with Canadian generally accepted auditing standards audit conducted in accordance with Canadian generally accepted auditing standards audit conducted in accordance with Canadian generally accepted auditing standards will always detwill always detwill always detect a material misstatement when it exists. ect a material misstatement when it exists. ect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, Misstatements can arise from fraud or error and are considered material if, Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the individually or in the aggregate, they could reasonably be expected to influence the individually or in the aggregate, they could reasonably be expected to influence the D economic decisions of users taken on the basis of thefinancial statements. As part of anaudit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout theaudit. We also: Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. 1 - 111 Page 3 Obtain an understanding of internal control relevant to theaudit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion onthe effectiveness of the Entity's internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. Conclude on the appropriateness of management's use of the going concernConclude on the appropriateness of management's use of the going concernConclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether basis of accounting and, based on the audit evidence obtained, whether basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may castmaterial uncertainty exists related to events or conditions that may castmaterial uncertainty exists related to events or conditions that may cast significant doubt on the Entity's ability to continue as a going concern. If wesignificant doubt on the Entity's ability to continue as a going concern. If wesignificant doubt on the Entity's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention inconclude that a material uncertainty exists, we are required to draw attention inconclude that a material uncertainty exists, we are required to draw attention in T our auditors’report to the related disclosures in the financial statements or, ifrt to the related disclosures in the financial statements or, ifrt to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions aresuch disclosures are inadequate, to modify our opinion. Our conclusions aresuch disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’based on the audit evidence obtained up to the date of our auditors’based on the audit evidence obtained up to the date of our auditors’report. F However, future events or conditions mHowever, future events or conditions mHowever, future events or conditions may cause the Entityay cause the Entityto cease to continue as a going concern.as a going concern.as a going concern. Evaluate the overall presentation, structure and content of the financialEvaluate the overall presentation, structure and content of the financialEvaluate the overall presentation, structure and content of the financial A statements, including the disclosures, and whether the financial statementsstatements, including the disclosures, and whether the financial statementsstatements, including the disclosures, and whether the financial statements represent the underlying transactions and everepresent the underlying transactions and everepresent the underlying transactions and events in a manner that achieves fair presentation.presentation.presentation. R Communicate with those charged with governance regarding, among otherCommunicate with those charged with governance regarding, among otherCommunicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings,matters, the planned scope and timing of the audit and significant audit findings,matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during ourincluding any significant deficiencies in internal control that we identify during ourincluding any significant deficiencies in internal control that we identify during our audit. D Chartered Professional Accountants, Licensed Public Accountants Waterloo, Canada April, 2019 1 - 112 KITCHENER DOWNTOWN IMPROVEMENT AREA BOARD OF MANAGEMENT Statement of Financial Position Year endedDecember 31, 2018, with comparative informationfor 2017 20182017 Financial Assets Cash$ 251,964 $ 106,473 Term deposits (note 2) 112,886112,135 Accounts receivable30,22234,990 Prepaid expenses6,3996,926 401,471260,524 Financial Liabilities Accounts payable and accrued charges122,203122,20377,989 Due to the City of Kitchener (note 4)34,36134,36134,361 156,564156,564156,564112,350 TTTTT Net financial assets244,907148,174 Non-Financial Assets FFFFF Tangible capital assets(note 5) 44,45457,833 Net assets$ 289,361 $ 206,007 AAAAA Accumulated SurplusAccumulated SurplusAccumulated Surplus RRRRR Reserve for rate stabilizationor rate stabilizationor rate stabilization$ 50,000 $ 50,000 Accumulated net revenueAccumulated net revenueAccumulated net revenue194,90798,174 Invested in tangible capital Invested in tangible capital Invested in tangible capital assetsassetsassets44,45457,833 DDDDD Total accumulated surplus$ 289,361 $ 206,007 See accompanying notes tofinancial statements. On behalf of the Board: ______________________________ Director ______________________________ Director 1 - 113 KITCHENER DOWNTOWN IMPROVEMENT AREA BOARD OF MANAGEMENT Statement of Revenue and Expenses and Accumulated Surplus Year ended December 31, 2018, with comparative informationfor 2017 BudgetActualActual 201820182017 Revenue: Assessments$ 1,279,000 $ 1,279,000 $ 1,082,021 Interest-755396 Other income100,00024634,455 1,379,0001,280,0011,116,872 Expenses: Promotions and advertising434,000326,578281,458 Salaries, wages and benefits373,502364,350430,987 Administration108,698100,532100,532138,060 Meetingsand seminars21,30021,30021,30017,39017,3905,074 Safety and beautification160,000160,000160,000166,642166,642142,224 Member relations17,50017,50017,50014,87814,8784,890 Amortization19,00019,00019,00017,57217,57217,57219,719 Downtown Improvement Project11100,00000,00000,00054,544- TTTTTTT Queen Street Project100,000100,000100,000100,000- 1,334,0001,334,0001,334,0001,162,4861,022,412 Net revenuebefore other items45,00045,00045,000117,51594,460 FFFFFFF Net assessment write-offs (note 4) 4) 4) 45,00045,00034,36134,361 Net revenue0 83,15460,099 AAAAAAA Accumulated surplus, beginning of year, beginning of year, beginning of year206,007206,007145,908 Accumulated surplusAccumulated surplusAccumulated surplus, end of year, end of year, end of year$ 206,007 $ 289,161 $ 206,007 RRRRRRR See accompanying notes to financial statements.ng notes to financial statements.ng notes to financial statements. DDDDDDD 1 - 114 KITCHENER DOWNTOWN IMPROVEMENT AREA BOARD OF MANAGEMENT Statement of Changes in Net Financial Assets Year ended December 31, 2018, with comparative informationfor 2017 20182017 Net revenue$ 83,154 $ 60,099 Acquisition of tangible capital assets(3,993) - Amortization of tangible capital assets17,57219,719 Change in net financial assets96,733 79,818 Net financial assets, beginning of year148,17468,356 Net financial assets, end of year$ $ $ 244,90244,907 $ 148,174 See accompanying notes to financial statements. TTT FFF AAA RRR DDD 1 - 115 KITCHENER DOWNTOWN IMPROVEMENT AREA BOARD OF MANAGEMENT Statement of Cash Flows Year ended December 31, 2018, with comparative informationfor 2017 20182017 Cash provided by (used in): Operating activities: Net revenue$ 83,154 $ 60,099 Item not involving cash: Amortization17,57219,719 Changes in non-cash assets and liabilities: Accounts receivable4,768(11,925) Prepaid expenses527(59) Accounts payable and accrued liabilities44,21444,214(33,044) Due to/fromCity of Kitchener-(12,199) Cash from operating activities150,235150,235150,23522,591 Investing activities: TTTTTT Acquisition of tangible capital assets(3,993) - Redemption (purchase) of investments(751)(541) Cash used in investing activities(4,744) (541) FFFFFF Increase in cash145,491 22,050 Cash,beginning of year106,47384,423 AAAAAA Cash,end of year$ 251,964 $ 106,473 See accompanying notes to financial statements.See accompanying notes to financial statements.See accompanying notes to financial statements. RRRRRR DDDDDD 1 - 116 KITCHENER DOWNTOWN IMPROVEMENT AREA BOARD OF MANAGEMENT Notes to Financial Statements Year ended December 31, 2018 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. Thefinancial statements of the Board are the representation of management and have beenfinancial statements of the Board are the representation of management and have beenfinancial statements of the Board are the representation of management and have been prepared in accordance with Canadian generally accepted accounting principles for localenerally accepted accounting principles for localenerally accepted accounting principles for local governments, as recommended by the Public Sector Accounting Board (PSAB) of the Canadiangovernments, as recommended by the Public Sector Accounting Board (PSAB) of the Canadiangovernments, as recommended by the Public Sector Accounting Board (PSAB) of the Canadian Professional Accountants. Since precise determination of many assets and liabilities is. Since precise determination of many assets and liabilities is. Since precise determination of many assets and liabilities is dependent upon future events, the preparation of periodic financial statements necessarily, the preparation of periodic financial statements necessarily, the preparation of periodic financial statements necessarily involves the use of estimates and approximations. These have been made using carefulinvolves the use of estimates and approximations. These have been made using carefulinvolves the use of estimates and approximations. These have been made using careful judgment. TTTT (a)Tangible capitalassets: Tangible capital assets are recorded at cost which includes amounts Tangible capital assets are recorded at cost which includes amounts Tangible capital assets are recorded at cost which includes amounts that are directly FFFF attributable to acquisition, construction, development or betterment of the asset. The cost,attributable to acquisition, construction, development or betterment of the asset. The cost,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, areless residual value, of the tangible capital assets, excluding land and landfill sites, areless residual value, of the tangible capital assets, excluding land and landfill sites, are amortized on a straightamortized on a straightamortized on a straight---line basis over their estimated useful lives as follows:line basis over their estimated useful lives as follows:line basis over their estimated useful lives as follows: AAAA AssetUseful Life - Years ComputersComputersComputers4 years RRRR Furniture and fixturesFurniture and fixturesFurniture and fixtures7 years Leasehold improvementsLeasehold improvementsLeasehold improvements7 years Event equipmentEvent equipmentEvent equipment10 years DDDD 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. 1 - 117 KITCHENER DOWNTOWN IMPROVEMENT AREA BOARD OF MANAGEMENT Notes to Financial Statements, page 2 Year ended December 31, 2018 1.Summary of significant accounting policies(continued): (c)Revenue recognition: Revenues are recognized as follows: The Board Assessment revenue is recorded on an annual basis using the proportionate share of the total number of businesses for the year and an annually established rate per business.of the total number of businesses for the year and an annually established rate per business.of the total number of businesses for the year and an annually established rate per business. Revenue is recognized when assessed. Other revenues are recorded upon sale of goods or provision of service when collection isd upon sale of goods or provision of service when collection isd upon sale of goods or provision of service when collection is reasonably assured. 2.Term deposits: TTTTT The term deposits consist of the following: PrincipalMaturityMaturityMaturityRate FFFFF $ 50,653March 29, 2019March 29, 2019March 29, 20190.40% 51,370February 1, 2019February 1, 2019February 1, 20191.30% 10,709November November November 13, 201913, 201913, 20191.20% AAAAA 3.Commitments: During 2016, t, t, the Boardhe Boardhe Boardexecuted a new lease agreementexecuted a new lease agreementexecuted a new lease agreement. The lease expires onJune 30, 2021. RRRRR The Board is committed to the following minimum paymentsThe Board is committed to the following minimum paymentsThe Board is committed to the following minimum paymentsunder the agreement: 2018 $ 35,539 DDDDD 201935,539 202035,539 202117,769 4.City of Kitchener: The Boardreceives assessment income from the Cityof Kitchener for its operations. During the year, assessment write-offs were incurred for $34,361 (2017 - $34,361). The 2017amount was paidtothe City of Kitchener in 2018. 1 - 118 - Net year 3,915 end of 15,10825,23144,254 book value, $ $ year 3,498 end of 23,233 100,963 amortization, Accumulated $ $ - 749 7,07851,2886,74522,944 17,572 Amortization --- Deletions $ -$3, $ $ - NetNet 3,671 22,186 of year57,833 31,976 TTTTTTT beginningbeginningbeginning book value,book value,book value, $ $ FFFFFFF atedated 3,498 of yearof yearof year 19,48419,48419,48444,21044,21044,21016,19983,391 tization,tization,tization, beginningbeginningbeginning $ $ amoramoramor AccumulAccumulAccumul AAAAAAA $ yearyear 3,4983,4983,498 end of 27,14827,14827,14866,39666,39666,39648,17548,17548,175 145,217145,217 Balance, RRRRRRR $ $ $ ------- DDDDDDD downs $ $ $ Write- --- MPROVEMENT AREA BOARD OF MANAGEMENT Transfers Disposals/ $ -$-$ $ --- 993 3,993 Additions $ 3, $ 3,498 2018 23,15566,39648,175 balance 141,224 Opening $ ber 31, ent $ e ovements mpr I ComputersFurnitur Tangible capital assets:Leasehold Event equipm 1 - 119 KITCHENER DOWNTOWN I Notes to Financial Statements, continuedYear ended Decem5. KPMG LLP 115 King Street South 2nd floor Waterloo ON N2J 5A3 Canada Tel 519-747-8800 Fax 519-747-8830 Opinion Basis for Opinion ''Auditors' Responsibilities for the Audit of the Financial Statements'' 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. 1 - 120 Responsibilities of Management for the Financial Statements Auditors' Responsibilities for the Audit of the Financial Statements 1 - 121 1 - 122 1 - 123 1 - 124 1 - 125 1 - 126 1 - 127 1 - 128 1 - 129 1 - 130 1 - 131 1 - 132 1 - 133 1 - 134 1 - 135 1 - 136 1 - 137 1 - 138 1 - 139 1 - 140 1 - 141 1 - 142 1 - 143 1 - 144 1 - 145 1 - 146 1 - 147 KPMG LLP 115 King Street South 2ndFloor Waterloo ONN2J 5A3 Canada Tel 519-747-8800 Fax 519-747-8830 INDEPENDENT AUDITOAUDITOAUDITORS’ REPORTRS’ REPORT To the Mayor and Members of Council, Inhabitants and Ratepayers of The bers of Council, Inhabitants and Ratepayers of The bers of Council, Inhabitants and Ratepayers of The T Corporation of the City of KitchenerCorporation of the City of KitchenerCorporation of the City of Kitchener F Opinion We have audited the financial statements of We have audited the financial statements of We have audited the financial statements of the Corporation of the City of KitchenerKitchenerKitchenerGasworks EnterpriseGasworks EnterpriseGasworks Enterprise(the Entity), which comprise:(the Entity), which comprise: A the statement of operations and accumulated surplusthe statement of operations and accumulated surplusthe statement of operations and accumulated surplusfor the year then endedthen endedthen ended (Hereinafter referred to as the “financial statements”).(Hereinafter referred to as the “financial statements”).(Hereinafter referred to as the “financial statements”). R In our opinion, In our opinion, In our opinion, the accompanying financial statements presents fairly, in all material respects, material respects, material respects, the statement of operations and accumulated surplus for the D year ended December 31, 2018in accordance with Canadianpublic sector accounting standards. Basis for Opinion We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in 1 - 148 Page 2 the “Auditors’ Responsibilities for the Audit of the Financial Statements” section of our auditors’report. We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada andwe have fulfilled our otherethicalresponsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of Management and Those Charged with Responsibilities of Management and Those Charged with Responsibilities of Management and Those Charged with Governance for the Financial StatementsGovernance for the Financial StatementsGovernance for the Financial Statements Management is responsible for the Management is responsible for the Management is responsible for the preparation and fair presentation of the preparation and fair presentation of the preparation and fair presentation of the financial statementsin accordance with Canadian public sector accounting in accordance with Canadian public sector accounting in accordance with Canadian public sector accounting T standardsand for such internal control as management and for such internal control as management and for such internal control as management determines is necessary to enable the preparation of to enable the preparation of to enable the preparation of financial statementsfinancial statementsfinancial statementsthat arefree from material misstatement, whether due to fraud or error.misstatement, whether due to fraud or error.misstatement, whether due to fraud or error. F In preparing the financial statements, management is responsible for assessing In preparing the financial statements, management is responsible for assessing In preparing the financial statements, management is responsible for assessing the Entity’s ability to continue as a going concern, disclosing as applicable, the Entity’s ability to continue as a going concern, disclosing as applicable, the Entity’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting matters related to going concern and using the going concern basis of accounting matters related to going concern and using the going concern basis of accounting A unless management either intends to liquidate the Entity or to cease operations, unless management either intends to liquidate the Entity or to cease operations, unless management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so.or has no realistic alternative but to do so.or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Entity’s Those charged with governance are responsible for overseeing the Entity’s Those charged with governance are responsible for overseeing the Entity’s R financial reporting process.financial reporting process.financial reporting process. AuditorsAuditorsAuditors’ Responsibilities for the Audit of the Financial D Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of thefinancial statements. 1 - 149 Page 3 As part of anaudit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment andmaintain professional skepticism throughout theaudit. We also: Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is The risk of not detecting a material misstatement resulting from fraud is The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, higher than for one resulting from error, as fraud may involve collusion, higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal missions, misrepresentations, or the override of internal missions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to theObtain an understanding of internal control relevant to theObtain an understanding of internal control relevant to theaudit in order to T design audit procedures that are appropriate in the circumstances, but not for design audit procedures that are appropriate in the circumstances, but not for design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opithe purpose of expressing an opithe purpose of expressing an opinion on the effectiveness of the Entity's nion on the effectiveness of the Entity's nion on the effectiveness of the Entity's internal control. F Evaluate the appropriateness of accounting policies used and the Evaluate the appropriateness of accounting policies used and the Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by reasonableness of accounting estimates and related disclosures made by reasonableness of accounting estimates and related disclosures made by management.management.management. A Conclude on the appropriateness of management'sConclude on the appropriateness of management'sConclude on the appropriateness of management'suse of the going concern basis of accounting and, based on the audit evidence obtained, whether a basis of accounting and, based on the audit evidence obtained, whether a basis of accounting and, based on the audit evidence obtained, whether a R material uncertainty exists related to events or conditions that may cast material uncertainty exists related to events or conditions that may cast material uncertainty exists related to events or conditions that may cast significant doubt on the Entity's ability to continue as a going concern. If we significant doubt on the Entity's ability to continue as a going concern. If we significant doubt on the Entity's ability to continue as a going concern. If we conconconclude that a material uncertainty exists, we are required to draw attention clude that a material uncertainty exists, we are required to draw attention clude that a material uncertainty exists, we are required to draw attention in our in our in our auditors’report to the related disclosures in the financial statements or, D if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the auditevidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Entity to cease to continue as a going concern. 1 - 150 Page 4 Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during ouraudit. Chartered Professional Accountants, Licensed Public AccountantsAccountants, Licensed Public AccountantsAccountants, Licensed Public Accountants T Waterloo, Canada __________________________________ F A R D 1 - 151 TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD 1 - 152 TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD 1 - 153 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 necessarilyinvolves 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 24, 2019. Management maintained a system of internal controls designed to provide reasonable assurance that Management maintained a system of internal controls designed to provide reasonable assurance that 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 the assets were safeguarded and that reliable information was available on a timely basis. The system 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 included formal policies and procedures and an organizational structure that provided for the included formal policies and procedures and an organizational structure that provided for the appropriate delegation of authority and segregation of responsibilities. appropriate delegation of authority and segregation of responsibilities. appropriate delegation of authority and segregation of responsibilities. KITCHENER GENERATION CORPORATION On behalf of management, T F Jonathan Lautenbach, CPA, CGA Chief Financial Officer and City TreasurerChief Financial Officer and City TreasurerChief Financial Officer and City Treasurer A June 24, 2019 Kitchener, Canada R D 1 - 154 TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD 1 - 155 TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD 1 - 156 T F A R D 1 - 157 TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD 1 - 158 T F A R D 1 - 159 T F A R D 1 - 160 KPMG LLP 115 King Street South 2nd Floor Waterloo ON N2J 5A3 Canada Tel 519-747-8800 Fax 519-747-8830 Opinion Basis for Opinion Auditors’ Responsibilities for the Audit of the Financial Statements 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. 1 - 161 KPMG Canada provides services to KPMG LLP. Responsibilities of Management and Those Charged with Governance for the Financial Statements Auditors’ Responsibilities for the Audit of the Financial Statements 1 - 162 1 - 163 1 - 164 KITCHENERPOWER CORP. Consolidated Statement of Financial Position Year endedDecember 31, 2018, with comparative information for 2017 (Expressed in thousands of dollars) Note20182017 Liabilities and Shareholder's Equity Current liabilities: Accounts payable and accrued liabilities$22,656$26,057 Income taxes payable449336 11 Current portion of long-term debt1,1761,127 13 Current portion customer deposits8,1238,638 Current portion of deferred revenue855732 Total current liabilities33,25936,890 Non-current liabilities: 11 Long-term debt77,56978,745 12 Employee future benefits5,3055,213 13 Long-term customer deposits6,1365,886 Deferred revenue32,91029,118 9 Deferred tax liablilty2,0211,535 Total non-current liabilities123,941120,497 Total liabilities157,200157,387 Shareholders' equity: 14 Share capital - common shares66,38966,389 Retained earnings88,73981,857 Accumulated other comprehensive loss(278)(278) Total shareholder's equity154,850147,968 Total liabilities and shareholder's equity312,050305,355 10 Regulatory deferral account credit balances6,95011,021 Deferred taxes associated with regulatory accounts1,2871,104 Total equity, liabilities and shareholder's equity$320,287$317,480 Theaccompanying notes are an integral part of these financial statements. On behalf of the Board: Director__________________________ Director 1 - 165 1 - 166 1 - 167 1 - 168 1 - 169 Ontario Energy Board Act, 1998 Distribution revenue and electricity rates 1 - 170 1 - 171 Sale and distribution of electricity 1 - 172 Capital contributions Revenue from Contracts with Customers Revenue from Contracts with Customers Other revenue 1 - 173 1 - 174 1 - 175 1 - 176 1 - 177 1 - 178 1 - 179 Electricity Act 1 - 180 1 - 181 1 - 182 1 - 183 1 - 184 1 - 185 1 - 186 1 - 187 1 - 188 1 - 189 1 - 190 1 - 191 1 - 192 1 - 193 1 - 194 1 - 195 1 - 196 IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial Instruments Revenue from Contracts with Customers Financial Instruments Lease s 1 - 197 20182017201620152014 1.DEMOGRAPHIC STATISTICS 1 Population255,070252,520246,700239,900236,500 1 Households97,83096,72094,17092,05090,560 2 Area in acres33,79733,79733,80233,80233,802 2.TAXABLE ASSESSMENT ($000's) 3 Residential and farm 24,878,82723,639,29022,414,56721,215,65219,990,326 3 Commercial and industrial3,740,8333,525,2813,390,2593,291,8543,177,397 Total 28,619,66027,164,571 25,804,82624,507,50623,167,723 3.TAX RATES Residential and Farm Taxable Full City0.354700.362120.367420.374880.38135 Region0.605050.611470.613590.614890.61875 School Boards0.170000.179000.188000.195000.20300 Total1.129751.152591.169011.184771.20310 Commercial Taxable Full City0.691660.706130.716470.731010.74363 Region1.179841.192371.196501.199031.20656 School Boards1.340001.390001.400001.430001.46000 Total3.211503.288503.312973.360043.41019 Industrial Taxable Full City0.691660.706130.716470.731010.74363 Region1.179841.192371.196501.199031.20656 School Boards1.340001.390001.500001.530001.56000 Total3.211503.288503.412973.460043.51019 1. Source: Planning, Housing and Community Services Department, Regional Municipality of Waterloo 2. Source: Statistics Canada, 2016 Census Data (2017 to 2018); 2011 Census Data (2014 to 2016) 3. 2014 to 2015 data has been restated to show Phase-in taxable assessment rather than Current assessment value. 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 have shown for 2011. 1 - 198 2018201720162014 2015 ($000's) (Restated) 4.COLLECTION STATISTICS Total taxes billed423,032406,605394,020379,110368,577 Total collections422,659405,060389,608382,899365,882 Total collections as a % of current levy100%100%99%101%99% Taxes receivable, net of allowance17,82616,87820,59819,61722,706 Total receivable as a % of current levy4%4%5%5%6% 5.CONSOLIDATED REVENUE 4 Taxation and user charges384,069367,621339,203333,884335,344 Grants10,66112,9085,83010,0136,991 Share of net income of Kitchener Power Corp. and its affiliates10,1049,3489,59310,1219,793 Development charge revenue recognized10,2947,30310,38811,0448,076 Other34,85715,85221,09725,80121,020 Total revenue449,985413,032386,111390,863381,225 6.CONSOLIDATED EXPENSES Expenses by Function General government43,29939,43638,93231,27337,797 Protection services48,96647,26845,29144,72842,727 Transportation services37,02237,80535,10034,56635,328 4 Environmental services85,45280,38076,31772,86371,962 Health services2,5022,2962,2572,2452,144 Social and family services2,7422,6622,7222,7522,609 Recreation and cultural services75,36269,84768,49668,64566,141 Planning and development11,37413,12313,16012,06013,100 Gasworks67,44967,38652,18459,24670,824 Total Expenses374,168360,203334,459328,378342,632 Expenses by Object Salaries, wages and employee benefits158,659151,980147,224141,941138,259 4 Materials and services162,396152,371138,301141,577153,736 Debenture debt interest2,8813,1803,5343,8693,740 Grants and other6,1865,2954,2143,0314,192 Amortization47,87646,18842,65840,27439,646 Loss/(Gain) on sale of assets(3,830)1,189(1,472)(2,314)3,059 Total Expenses 374,168360,203334,459328,378342,632 7.ANNUAL SURPLUS75,81752,82951,65262,48538,593 4.Water purchases and wastewater treatment surcharge had previously been netted against user charges. In 2018 this process was changed to present the gross revenue and expenses. 2014 to 2017 figures have been restated to match the current year presentation. 1 - 199 20182017201620152014 (Restated) 8.ANALYSIS OF LONG-TERM DEBT ($000's) Gross debt issued by the municipality71,17977,88984,85993,536102,999 Less debt recoverable from municipal enterprises and consolidated boards9,0569,59610,12110,62911,125 Less debt recoverable from other sources6,5717,2528,5879,87011,105 Net debt to be repaid from property taxes55,55261,04166,15173,03780,770 Net debt per capita ($'s)218242268304342 Repayment of principal & interest ($000's)13,90314,58914,59214,49814,452 5 Annual repayment limit ($000's)73,78971,77772,32770,31968,741 Interest on long-term debt as a % of total expenditures 0.8%1.0%1.2%1.4%1.3% 9.ACCUMULATED SURPLUS ($000's) Reserves, reserve funds and deferred revenue - obligatory reserve funds104,78098,75488,09777,08147,982 Unexpended capital financing99,849118,172108,09994,92785,939 Accumulated surplus 1,411,650 1,335,832 1,283,004 1,231,351 1,176,249 10.NEW CONSTRUCTION Value of construction ($000's)566,135498,220739,739565,081573,063 Number of building permits2,6242,5033,1582,7492,559 Number of single family dwelling starts303300840614504 11.NET FINANCIAL ASSETS ($000's)221,799220,788214,048194,460187,392 5.The debt limit is based on the Financial Information Return from the second immediate preceding year. 1 - 200 12. PRINCIPAL CORPORATE TAXPAYERS 2018 Taxable Assessment Value ($000's) DREWLO HOLDINGS INC423,380 CF/REALTY HOLDINGS INC254,524 ONTREA INC.235,487 EUROPRO (KITCHENER) GP INC100,107 ONTARIO MINISTER OF ENERGY & INFRASTRUCTURE87,612 VOISIN DEVELOPMENTS LIMITED80,259 THE INCC CORP74,516 MORGUARD NAR (ONTARIO) HOLDINGS LIMITED71,010 KITCHENER HOUSING INC67,322 HOMESTEAD LAND HOLDINGS LIMITED67,008 1940750 ONTARIO INC66,867 ACTIVA HOLDINGS INC63,937 STAMM INVESTMENTS LIMITED61,282 CP REIT ONTARIO PROPERTIES LIMITED51,768 STEEVES & ROZEMA ENTERPRISES LIMITED49,441 1 - 201 1 - 202