HomeMy WebLinkAboutAudit Agenda - 2019-06-24if FN R
Office of the City Clerk
Kitchener City Hall
200 King St.W. - 2nd Floor
Kitchener ON N2G 4G7
Audit Committee
Agenda
Monday, June 24, 2019
12:30 p.m. - 2:00 p.m.
Council Chamber
Page 1 Chair — Mayor B. Vrbanovic
Delegations
Pursuant to Council's Procedural By-law, delegations are permitted to address the Committee for a maximum of 5
minutes.
• Item 1 - Matt Betik, KPMG
Discussion Items
1. FIN -19-059 - 2018 Audited Financial Statements (60 min)
2. FIN -19-058 - P19-024 Audit Services (10 min)
Please note: Any recommendation arising from the Committee regarding this matter will be
considered at the Council meeting scheduled for later this same date.
Status Reports
3. CAO -19-009 - Second Quarter Audit Status Report (20 min)
D. Saunderson
Committee Administrator
J
Staff Repod K�WHIIN,0
Financial Services Departn7cnt www,kitchenerca
REPORT TO: Audit Committee
DATE OF MEETING: June 24, 2019
SUBMITTED BY: Sheri Brisbane, Supervisor Financial Reporting, 519-741-2200 ext 7349
PREPARED BY: Sheri Brisbane, Supervisor Financial Reporting, 519-741-2200 ext 7349
WARD (S) INVOLVED: All
DATE OF REPORT: June 14, 2019
REPORT NO.: FIN -19-059
SUBJECT: 2018 Audited Consolidated Financial Statements
RECOMMENDATION:
That the 2018 Audited Consolidated Financial Statements of the City of Kitchener be
approved.
BACKGROUND:
Staff is pleased to submit the 2018 Audited Consolidated Financial Statements of the City of
Kitchener. A presentation of financial statement highlights will be given at the Audit Committee
meeting on June 24. Representatives of the City's external auditors will also be in attendance
to discuss the Audit Findings Report.
REPORT:
The consolidated financial statements are prepared in accordance with Canadian generally
accepted accounting principles for local governments as established by the Public Sector
Accounting Board of the Chartered Professional Accountants of Canada. These financial
statements are prepared on a full accrual basis and combine the results of the tax -based
operations, enterprises, local boards, capital activity, and reserve fund activities. Local boards
include The Centre in the Square Inc., Kitchener Public Library, Belmont Improvement Area, and
Kitchener Downtown Improvement Area. The 2018 year end results for the tax -based operations
and the enterprises were reported to Council in March. Please see Appendix A to this report for
a reconciliation between the non -consolidated figures provided in March and the Audited
Consolidated Financial Statements.
ALIGNMENT WITH CITY OF KITCHENER STRATEGIC PLAN:
The recommendation of this report supports the achievement of the city's strategic vision through
the delivery of core service.
FINANCIAL IMPLICATIONS:
None.
*** This information is available in accessible formats upon request. ***
Please call 519-741-2345 or TTY 1-866-969-9994 for assistance.
1-1
COMMUNITY ENGAGEMENT:
INFORM — This report has been posted to the City's website with the agenda in advance of the
council / committee meeting. The audited financial statements will be posted on the City website
and notice will be provided to all residents through one of the widely distributed local newspapers
in accordance with Section 295 (1) of the Municipal Act, 2001.
ATTACHMENTS:
City of Kitchener Financial Report for the Year Ended December 31, 2018
• Audit Committee Presentation
• Audit Findings Report for the year ended December 31, 2018 (KPMG)
ACKNOWLEDGED BY: Jonathan Lautenbach, Chief Financial Officer, Financial Services
1-2
Appendix A — Annual Surplus Reconciliation
Year-end results were provided previously in report FIN -19-021 included on the March 18, 2019
Community & Infrastructure Services Committee Agenda. The annual surplus presented in the
Audited Consolidated Financial Statements reconciles to the City of Kitchener year-end results
as follows:
Year Ended Dec 31, Year Ended Dec
2018 31, 2017
Tax supported surplus (deficit) 1,732,222 1,416,487
Enterprise surplus (deficit) 5,331,917 4,948,549
Total operating surplus as presented in March 7,064,139 6,365,036
Consolidation
Kitchener Public Library
The Centre in the Square
Kitchener Downtown Improvement Area
Belmont Improvement Area
(412,571)
(137,914)
1,153,857
3,510,962
83,154
66,692
777
5,000
Kitche ne r Powe r Corp. and its Affiliates
10,104,143
9,347,693
Kitchener Generation Corporation
13,831
3,407
Change in actuarial estimate for employee future benefits
10, 943,191
12, 795, 840
Revenues not included in operating surplus
(852,194)
(2,649,773)
Reserve fund revenue
24,649,033
26,384,418
Contributed assets
17,743,804
582,657
Gain (loss) on sale of tangible capital assets
612,804
(2,710,761)
Other capital revenue
5,576,945
17,863,907
48, 582, 586
42,120, 221
Items in operating surplus, not in consolidated statements
Net transfers to capital and reserves 73,804,166 62,767,610
Various PSAB adjustments 3,406,914 4,871,872
77,211,080 67,639,481
COK expenses not included in operating surplus
Amortization of tangible capital assets
(45,432,280)
(43,839,062)
Other capital expenses
(18,548,782)
(25,941,286)
Change in actuarial estimate for employee future benefits
(3,150,197)
(3,661,739)
Reserve fund expenses
(852,194)
(2,649,773)
(67,983,453)
(76,091,860)
Annual surplus per Consolidated F/S
75,817,543
52,828,718
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1-45
Alm
REPORT
DECEMBER 31, 2018
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IIII II Ilu ° cl u c 1 u� ° e c 11", III °�Iln
Message from the Mayor
City Council
Organizational Structure
Message from the City Treasurer
IIII �iaIIIIIScuvaIIS S e �tIII (,,,) Ii
Consolidated Financial Statements
Trust Funds
Belmont Improvement Area Board of Management
Kitchener Downtown Improvement Area Board of Management
Kitchener Public Library
The Centre in the Square Inc.
Gasworks Enterprise
Kitchener Generation Corporation
Kitchener Power Corp.
St aflI sflI c a III S e cflI (,)III °III
Financial and Statistical Review
2
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fts sg e uu um I�OIIp n>.an"'ll to llllll �l�
^VIIV N�4
IIt '"Nh11im ,p�ry ayn>�an"'ll IIIIpY
i mmiTBllY
On behalf of Kitchener City Council, I am pleased to introduce the 2018 Annual
Financial Report. This past year was another resounding success for our
community, building on our momentum in making Kitchener a more innovative, caring
and vibrant city.
As elected officials, one of our most important duties is the prudent and diligent
stewardship of public funds. When I look back at our financial performance over the
past term of council, I am proud of how we have lived up to that duty.
For the eight years prior to 2015, the city finished each year with an operating budget
deficit and council made it a priority to eliminate those ongoing deficits. I am proud
to say that operating budget deficits have been eliminated while maintaining
property tax rates that are among the lowest seen in large Ontario
municipalities. At the same time, we have considerably improved our debt
position without needing to forgo important long-term investments in infrastructure.
These trends prove to me that staff and council are living and breathing their duty
as stewards of the public trust. This builds exactly the kind of confidence in
government that enables real partnership across our community.
Our recent budgets demonstrate how successful we can be when we invest in building
a better Kitchener. Our Love My Hood neighbourhood strategy is building stronger,
more connected neighbourhoods. Our Make It Kitchener economic development
strategy supports the creation and growth of a diverse array of businesses. Our
strategic investments in water infrastructure will prepare our community for a
growing population and changing climate.
As we look forward to the new term of council and our new four-year strategic
plan, there are certainly lessons learned. We can make our goals more measurable,
we can solicit public engagement on policy matters more effectively and we can
take further steps to deliver our services in an environmentally -friendly manner.
But more than any other lesson, what we have learned is that we are successful as a
municipality and as a community when we put people first. We will continue to
invest in transportation infrastructure, we will become more sustainable, we will
grow our economy, we will be more inclusive and we will deliver exceptional
customer service. And every step of the way, we will remember our duty to the
people of Kitchener, and continue to put them first.
2
1-49
tc '"NEim fm a III '"NEim 'FYI OII �� IIIIIII mt""� ��u ror�aa"'ll ^a11VVmn'�Itltl fmmullll� 0u�' IIIIIII
,nu
MAYOR
Berry Vrbanovic
WARD 1 Councillor WARD 2 Councillor WARD 3 Councillor WARD 4 Councillor
Scott Davey Dave Schnider John Gazzola Christine Michaud
WARD 5 Councillor
Kelly Galloway-Sealock
WARD 6 Councillor WARD 7 Councillor WARD 8 Councillor WARD 9 Councillor
Paul Singh Bill loannidis Margaret Johnston Debbie Chapman
WARD 10 Councillor
Sarah Marsh
2018 KITCHENER FINANCIAL � REPORT O
1:'111 II 11111; m,�II IC II IIII;
Dan Chapman: Chief Administrative Officer
C(111'A119J1.111°111""If°A
Michael May: General Manager and Deputy CAO
Bylaw Enforcement
Corporate Customer Service
Fire
Neighbourhood Programs & Services
Sport
Victoria Raab: General Manager
Corporate Communications & Marketing
Human Resources
Legal Services
Legislated Services
Technology Innovation & Services
III.; IIIIIII W�IVVwII^N q IIIIIII.1111111 IIIIIII I;z W�IVVwi wIIIIIIII mo w ), 1N I„I
WI�Vua IIIIIII n>Pou"' IIIIIII m IIIIIII W�IVVwi
VV N�°�uualllllllow ���Vuw� cllt��Vu�� Illllll�w° , I
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"j IF C��bll...al:'?,V Cll:...CCu
Justin Readman: General Manager
Building
Economic Development
Engineering
Planning
Transportation Services
°°IIII'vIAINCIA,IL..:�GIIIIIIIII:II'°w1A11�1:mIIIIIIIIIC1:11
Jonathan Lautenbach: Chief Financial Officer
Accounting
Asset Management &
Business Solutions
Financial Planning
Procurement
Revenue
1f11'° 1.):.1"'1C"'1.111'° IIIIIIIII: �� IIIIIIII:II°' All 0IIIIIIIIC8
Denise McGoldrick: General Manager
Facilities Management
Fleet
Operations - Roads & Traffic
Parks & Cemeteries
Utilities
4
1-51
Message nn the iW W
I am pleased to present the Annual Financial Report for the City of Kitchener for the year
ended December 31, 2018. This report communicates the 2018 financial results for the
City of Kitchener to council, residents and other interested parties. These results
demonstrate Kitchener's continued sound financial management and fiscal prudence.
The financial statements and related information contained in this annual report are
the responsibility of the management team of the City of Kitchener. Management has
instituted a system of internal controls intended to safeguard assets and to provide
accurate, timely and complete financial information for both internal decision-making and
external reporting.
The city has the following foundations in place to ensure appropriate financial controls
and accountability are maintained, and to take a proactive approach to identify and address
financial challenges.
���Dcus UN NTf � III ""'1111"' IIIw �I' III �f �I III
At the beginning of each new four-year term of council, the City of Kitchener develops
a strategic plan to advance the vision, mission and goals for Kitchener. The 2015-2018
strategic plan was developed in collaboration with extensive community input. The plan is
designed to ensure that over time, the public funds the city is entrusted to manage on behalf
of citizens are allocated to top public priorities, invested effectively and spent efficiently.
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 included five key strategic priorities:
,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
Open Government
We 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
Economy
dynamic 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,
Infrastructure
harnessing 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 of the 2019-2022 Strategic Plan. The five
themes that will be included are: People -Friendly Transportation; Caring Community;
Vibrant Economy; Environmental Leadership; and Great Customer Service.
h' �4III �fA N N �I N G A N If Ilh' III f G III "'1111""' IIL III'° IIIwI
The purpose of the business planning process is to manage and support the strategic plan
to guide the medium-term course of the corporation. The 2018 Business Plan sets out the
City of Kitchener's plan for work to be undertaken in 2018 and 2019. The Business
Plan was developed by staff across the organization under the guidance of the Corporate
Leadership Team and with clear direction from City Council. The Business Plan includes a
profile of each of the city's 47 core services and a description of each of the 121 projects
underway in 2018 and 2019.
The goal of the 2018 Business Plan is to meet community expectations and respond to
emerging issues in a sustainable and affordable way. It promotes progress on Strategic
Plan priorities, and maintains and continuously improves core services.
Approximately 90% of the projects in the Business Plan are dedicated to core services
and ongoing operations, while 10% are allocated to strategic projects and initiatives.
In addition to the business planning process, City Council approves the annual budget, made up
of three parts: operating, capital and reserves. The City of Kitchener is charged with
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
valued services 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's website 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.
Management staff 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.
These reports ensure departmental accountability for financial results and are a key tool
to allow management to respond to financial pressures during the year.
1-55
Ex r IlrR 1111 A L AUDi llr
As required by the Municipal Act, City Council has appointed a public accounting firm,
KPMG LLP, to express an independent audit opinion on management's consolidated
financial statements. Their reports to the members of council, inhabitants and
ratepayers of the Corporation of the City of Kitchener accompany the various financial
statements in the financial section of this report.
AUDi lr c oIll�viiIll�vii Ill lr lr E uc
The audited consolidated financial statements are presented to the audit committee for
approval. The committee provides a focal point for communications between council, the
external auditor, the internal auditor and management, and facilitates an impartial, objective and
independent review of management practices through the internal and external audit functions.
1-56
FINANCIAL STATEMENT DISCUSSION AND ANALYSIS
The City of Kitchener's consolidated financial statements have been prepared in
accordance with reporting standards set by the Public Sector Accounting Board (PSAB) of
the Chartered Professional Accountants of Canada. KPMG LLP have audited the financial
statements and provided the accompanying auditors' report. The financial statements and
auditors' report satisfy a legislated reporting requirement as set out in the Municipal Act of
Ontario.
The following financial statement discussion and analysis has been prepared by management
and should be read in conjunction with the audited consolidated financial statements
and financial and statistical review.
There are four required financial statements:
• statement of financial position;
• statement of operations;
• statement of change in net financial assets, and
• statement of cash flow.
The consolidated financial statements reflect the assets, liabilities, reserves, surpluses/deficits,
revenue, and expenditures of city funds and governmental functions or entities. These functions
and entities comprise a part of the combined city operations based upon control exercised by
the city. The exception is the city's government business enterprises, which are accounted for
on the modified equity basis of accounting. References to the "city" below include all activity for
the consolidated entity.
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
CGNSU..] III f fS A M N U
The Consolidated Statement of Financial Position highlights four key figures that
together describe the financial position of a government: 1) cash resources, 2) net
financial asset position, 3) non-financial assets that are normally held for service provision
such as tangible capital assets, and 4) accumulated surplus (deficit). The statement is used to
evaluate the city's ability to meet its financial obligations and commitments.
The city's net financial asset balance is $222 million, an increase of $1 million from 2017. This
balance is calculated as total financial assets less liabilities and represents the amount
available to finance future operations. The increase year over year is due to changes in
the various balance sheet 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.
Cash and cash equivalents
The city's cash position is closely managed and remains adequate along with short-term
investments to meet ongoing cash requirements. The cash position has increased to $42 million
from $23 million in 2017. The Consolidated Statement of Cash Flows summarizes the sources
and uses of cash in both 2018 and 2017.
1-58
Taxes receivable
The increase in Taxes receivable at yearend to $18 million from $17 million in 2017 is due to
a larger amount of supplementary taxes being processed and billed just before yearend.
Trade and other accounts receivable
The amount in Trade and other accounts receivable has decreased to $39 million from
$43 million in 2017. This is due primarily to a significant one-time grant included in
receivables in 2017. In addition, the 2017 balance included significant late year adjustments
due from the Region of Waterloo and the School Boards, whereas 2018 was a more typical
year where the city owed these entities taxes collected on their behalf.
Inventory for resale
The city holds certain inventory items for resale (primarily related to the Gasworks
enterprise). This inventory has decreased to $8 million from $16 million in 2017 due to the
city no 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 held at yearend.
1-59
Investments
The City of Kitchener invests in a manner that provides the highest return while protecting and
preserving capital, maintaining liquidity to meet the daily cash flow demands and to conform
to all legislation governing the investment of public funds. The balance in investments grew
in 2018 to $182 million from $164 million in 2017. This increase relates to increased reserve
fund balances as well as the fact that funds were freed up in 2018 due to no longer having to
hold an inventory of allowances for the cap and trade system.
Investment in Kitchener Power Corp. & Kitchener Generation Corporation
The city's investment in both Kitchener Power Corp. and its affiliates and Kitchener Generation
Corporation is made up of the city's initial investment and its share of net income
since acquisition less dividends received. See Notes 6 and 7 to the Consolidated
Financial Statements for further details.
Accounts payable and accrued liabilities
Accounts payable and accrued liabilities has increased to $113 million from $76 million in
2017. The majority of the increased liabilities have to do with amounts owing to the
Region of Waterloo and the School Boards. These liabilities relate to payment of
construction projects completed by the Region on behalf of the city, one month's worth of
water costs to the Region, taxes collected on behalf of the Region and School Boards
(as mentioned above in the Receivables section), and an increase in their share of
development charges due to increased activity by developers to obtain permits before the
development charge exemption expired.
Municipal debt
The city has three components that comprise the overall debt total. Debt has been issued to
fund:
• a portion of the tax -supported capital program
• capital improvements to Enterprises, where the debt charges will be funded through user
fees or external sources, such as the Parking Enterprise or the Kitchener Rangers
• the Economic Development Investment Fund (EDIF)
1-60
Millions
$125
$100
$75
$50
$25
$0
2014 2015 2016 2017 2018
IITax M Enterprise 0 EDIF
The city's capital investment philosophy ensures that any increases in debt charges from one
year to the next do not exceed assessment growth (excluding the impact of the debt
associated with EDIF). As well, the overall contribution from the tax base through taxes and
debt charges will not increase more than assessment growth plus inflation from one year to
the next. This philosophy ensures that the impact on the taxpayer does not exceed inflation
and that the city must prioritize projects to fit the funding available.
The city created EDIF in 2004 as a $110 million commitment to invest in catalyst projects
to strengthen the local economy and stimulate urban development in Downtown Kitchener.
EDIF investments have had a remarkably positive impact on the city, increasing the city's
recognition as a location for innovation, entrepreneurship, and a sought-after urban lifestyle.
Municipal debt has decreased to $71 million from $78 million in 2017. The change in debt is
a result of new debt issuance of $4.3 million offset by repayment of $11.0 million of existing
debt. Debt is expected to decrease for the next number of years as the EDIF program
continues to be paid down.
Employee future benefits
Total employee future benefits includes liabilities for future sick leave costs, post-
retirement benefits 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 expanded coverages under WSIB.
1-61
Tangible capital assets
Tangible capital assets are recorded at cost, which includes all amounts that
are directly attributable to acquisition, construction, development or betterment of the asset.
The cost less residual value of the tangible capital assets is amortized on a straight-line
basis over their estimated useful lives ranging from 3 to 100 years.
During 2018, the city acquired $122 million in tangible capital assets (2017 - $95 million).
Amortization of assets was $48 million (2017 - $46 million). Refer to Note 13 and Schedule A
of the Consolidated Financial Statements for a detailed breakdown of tangible capital asset
activity for 2018. The net book value of tangible capital assets at December 31, 2018 is $1.19
billion, up from $1.11 billion in 2017.
® Ve.hicIe.s$1.7M($15M)
Corn p uterHardware9,
Softwa re $22M ($24M)
Le as ehold l rnp rove ment,
;�1M p2m)
Machi neryand Equipment Buildings
$25M ($25M) $1.81M ($1.82M)
Li nearAssets
Accumulated surplus
Assets under construction
$45M ($45M)
Lai n $1.94M ($1.881`4)
tuna irnprovemenrs
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 funds
Reserve funds are included as part of accumulated surplus and these balances are disclosed
in Note 14 to the financial statements. Reserve fund balances have increased during 2018 to
$70 million (2017 - $61 million).
Under the authority of the Municipal Act, the city and certain of its consolidated entities have
established reserve funds to ensure future liabilities can be met, capital assets are
properly maintained and sufficient financial flexibility exists to respond to economic
cycles or unanticipated financial requirements. Council or the Boards of the consolidated
entities are responsible for exercising discretion with respect to the use of reserve funds,
subject to the terms of their respective policies, as well as statutory and legal requirements.
Council's reserve policy contains guiding principles to ensure the reserves continue to support
the financial goals and serve the highest priority needs of the city and its citizens.
1-63
CUNSU..] III f fS A M N 0 0 I 11" �I
The Consolidated Statement of Operations reports the revenue collected by the city, the cost of
providing municipal services and the resulting annual surplus/deficit.
This year, overall assessment growth was 1.59%. While this new assessment creates
revenue for the city, there is also a cost to provide services to new development. In
addition, cost increases in excess of inflation, public demand for new services and unreliable
revenue sources all place significant pressure on the city budget. The tax rate increase for
2018 operations was 1.60%.
Millions
$140
$120
$100
$80
$60
$40
$20
Taxation Gasworks Water, Other user fees Grants Other
sewer &
storm water
2018 Budget E 2018 a 2017
Revenue
Revenue is received from the following sources: taxation; user fees from gasworks,
water, sewer, storm water 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
approved increases in the user fee rates charged for these services in addition to
greater water consumption by the city's customers.
1-64
Other user fees are greater than budget and prior year as a result of revenues of the
local boards being higher than last year and budget. Two of the city's roads projects had
some cost recoveries in 2018 that are recognized in this financial statement grouping.
Grant revenue is less than prior year due to the majority of the Clean Water
Wastewater Infrastructure funding being earned in 2017. Grant revenue is greater than
budget due to the city receiving Public Transit Infrastructure Funding and Ontario Municipal
Commuter Cycling Program funds during 2018. These amounts were not confirmed at the time
the budget was set.
The `Other' category in the Revenue by Type chart above includes contribution of
tangible capital assets, investment income, penalties and interest on taxes,
development charge revenue recognized, and share of net income of Kitchener Power
Corp. and Kitchener Generation Corporation. Revenue in this category in higher for 2018
compared to 2017 primarily due to significantly larger amounts of contributed assets to the
city. The timing of asset contributions is not something the city controls.
1-65
Millions
$100
$80
$60
$40
$20
General Protection Transport- Environ- Recreation Other Gasworks
government services ation mental & cultural
services services services
le 2018 Budget 112018 (w�;2017
Expenses
The City of Kitchener is a diversified government institution and provides a wide range
of services to its citizens including fire, roads, water, sewer, natural gas, libraries, and
community services. Schedule B of the Consolidated Financial Statements breaks the
expenses into major functional activities, consistent with legislated requirements.
As is common with most Ontario municipalities, the City of Kitchener does not budget
for amortization of tangible capital assets or gains and losses on disposal of assets.
However, to provide a more meaningful comparison to actuals, the Council -approved
budget has been adjusted to include amortization expense and other accounting
adjustments mandated by the Public Sector Accounting Board to express the financial
statements on an accrual basis. This provides greater clarity for all readers in assessing
budget to actual variances.
Environmental services expenses are $5.2 million under budget due to certain projects being
delayed. The expenses are $5.1 million higher than in 2017 as a result of the increased rates for
water and sewage treatment being charged by the Region of Waterloo and as a result of
higher consumption of water and therefore greater sewage production by the city's
customers. There was also an increase in capital work in this area in 2018 that did not meet the
criteria of creating a tangible capital asset.
Recreation and cultural services expenses are $5.5 million higher in 2018 than 2017 due
to higher expenses at the Centre in the Square and due to a shift in internal charges
from Transportation to Environmental services due to a change in allocation method for
certain activities.
1-66
The `Other' category in the Expenses by Function chart includes Health services, Social
and family services, and Planning and development. The expenses in this function are $3.4
million higher than budget due to the expenses in the budget being offset by expected
proceeds on the sale of a parcel of land. This sale was not completed in 2018, so the proceeds
are not offsetting expenses.
Materia Isand 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)
ClSDIK III' IIIASS
The Statement of Change in Net Financial Assets explains the difference between
a municipality's surplus or deficit for the reporting year and its change in net financial assets in
the same reporting year. This statement provides for the reporting of the acquisition of
tangible capital assets and other significant items that impact the difference between
the annual surplus/deficit and the change in net financial assets.
1-67
CUNSU..] III f fS A M N U° I l III �f
The statement of cash flows reports changes in cash and cash equivalents resulting
from operations, 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 -
Term Financial Plan. The plan will provide insight into the city's financial governance
framework, bringing together and highlighting the city's financial policies and practices,
and identifying financial strategies that will help guide the city moving forward.
With a strong reputation for financial stability, Kitchener will strive to remain
financially responsible, 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
June 24, 2019 1-68
_68
KPMG LLP
115 King Street South
2nd Floor
Waterloo ON N2J 5A3
Canada
Tel 519-747-8800
Fax 519-747-8830
To the Mayor and Members
Corporation of the City of Kitch,
Inhabitant's and Ratepayers of the
financial statements of the Corporation of the
comprise:
statement of the financial position as at December 31, 2018
nt of operations for the year then ended
statement of change in net financial assets for the year then
lidated statement of cash flows for the year then ended
• and notes to the consolidated financial statements, including a summary 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, the consolidated financial position of the Entity as at
December 31, 2018, and its consolidated results of operations, its changes in
consolidated net financial assets, and its consolidated 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
Page 2
the "Auditors' Responsibilities for the Audit of the Consolidated 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 consolidated 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. mullllll u
Responsibilities of Managemr 111111111d Those Charged with
Governance for the Consoli ed Fin "al Statements
Management is responsible the p ration and fair presentation of the
consolidated financial statemen cordance with Canadian public sector
accounting standards a or such i al control as management determines is
necessary to enable the n of solidated financial statements that are
free from material missta e due to fraud or error.
In preparinrthe for assesillapplicable
Lyconcern
cial statements, management is responsible
continue as a going concern, disclosing as
and using the going concern basis of
management either intends to liquidate the Entity or to cease
)e realistic alternative but to do so.
roith governance are responsible for overseeing the Entity's
process.
>ponsibilities for the Audit of the Consolidated
Financial Statements
Our objectives are to obtain reasonable assurance about whether the
consolidated 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 the consolidated financial
statements.
1-70
I ARM
T. A& '11
Page 3
As part of an audit in accordance with Canadian generally accepted auditing
standards, we exercise professional judgment and maintain professional
skepticism throughout the audit.
We also:
• Identify and assess the risks of material misstatement of the consolidated
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 m' atement resulting from fraud is
higher than for one resulting from as fraud may involve collusion,
forgery, intentional omissions, misr ese ons, or the override of internal
control. IIIIIIIIIIIIIIIIIIIIIIIIIIIIIVu„
•
Obtain an understanding tern ntrol relevant to the audit in order to
design audit procedures that ropriate in the circumstances, but not for
the purpose of ex ing an on on the effectiveness of the Entity's
internal control. IIV
• Evaluate pro ness of accounting policies used and the
reason„ ness f acc ting estimates and related disclosures made by
• .11111111111ll e MWe appropriateness of management's use of the going concern
basisco"''g'IJPng and, based on the audit evidence obtained, whether a
matecertainty exists related to events or conditions that may cast
4nif2icaoubt on the Entity's ability to continue as a going concern. If we
at a material uncertainty exists, we are required to draw attention
inors' 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
Ila 'I. -M
Page 4
• Evaluate the overall presentation, structure and content of the consolidated
financial statements, including the disclosures, and whether the consolidated
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 our audit.
Obtain sufficient appropriate and
information of the entities or busin'
express an opinion on tl
responsible for the direction
We remain solely responsill
regarding the financial
within the Group Entity to
ficial statements. We are
mance of the group audit.
Public Accountants
1-72
THE CORPORATION OF THE CITY OF KITCHENER
Consolidated Statement of Financial Position
As at December 31, 2018
Non-financial assets
Tangible capital assets (Note 13)
Inventory of supplies
Prepaid expenses
Accumulated surplus
The accompanying notes are
1,185,483,730
3,087,990
1,279,152
1,189,850,872
$ 1,411,649,827
of these consolidated financial statements.
1,111,359,528
2,508,729
1,175,915
1,115,044,172
$ 1,335,832,285
1-73
2018
2017
Financial assets
Cash and cash equivalents
$ 42,379,340 $
22,607,209
Taxes receivable
17,826,351
16,877,835
Trade and other accounts receivable
38,660,941
43,404,844
Loans receivable (Note 4)
7,381,734
8,163,370
Inventory for resale
8,222,456
16,312,870
Investments (Note 5)
182,499,639
164,314,904
Investment in Kitchener Power Corp. and its affiliates (Note 6)
213,548,014
207,199,184
Investment in Kitchener Generation Corporation Note 7
2,785,503
3,019,238
513,303,978
481,899,454
Liabilities
Accounts payable and accrued liabilities
112,818,900
76,142,394
Deferred revenue - obligatory reserve funds (Note 9)
14,942,147
38,044,861
Deferred revenue - otheruo
,Illll 1111111
3,514,724
23,134,881
Municipal debt Note 10 III
p ( )
71,178,897
77,889,047
Employee future benefits Note 12
49,050,355
45,900,158
291,505,023
261,111,341
Net financial assets IL Wthhh.
221,798,955
220,788,113
Non-financial assets
Tangible capital assets (Note 13)
Inventory of supplies
Prepaid expenses
Accumulated surplus
The accompanying notes are
1,185,483,730
3,087,990
1,279,152
1,189,850,872
$ 1,411,649,827
of these consolidated financial statements.
1,111,359,528
2,508,729
1,175,915
1,115,044,172
$ 1,335,832,285
1-73
THE CORPORATION OF THE CITY OF KITCHENER
Consolidated Statement of Operations
For the Year Ended December 31, 2018
2018 2018 2017
Budget
Revenue
Taxation $ 124,574,725 $ 125,217,867 $ 119,727,010
User fees and charges
Gasworks 85,823,488 88,302,505 88,514,388
Water, sewer and storm water 114,417,266 117,967,686 109,954,554
Other 46,831,305 52,580,635 49,425,542
Grants 8,793,621 10,661,118 12,907,930
Contributions of tangible capital assets 17,743,804 17,743,804 582,656
Investment income 7,960,07 a 9572,644 7,928,699
Penalties and interest on taxes 3,162 2,983,094 3,247,419
Development charge revenue recognized 8,2 00 10,293,694 7,303,467
Share of net income of Kitchener Power Corp. and its
affiliates (Note 6) ,841,250 00,104,143 9,347,693
Share of net income of Kitchener Generation �IIIIIIIIII IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII�O
Corporation (Note 7) - 13,831 3,407
Other 15,367 4,544,280 4,088,761
Total revenue 8,6'111 00 449,985,301 413,031,526
Expenses
General government 44,100,959 43,298,557 39,436,600
Protection services 49,051,100 48,966,190 47,268,313
Transportation services 37,149,404 37,021,768 37,804,616
Environmental services 90,665,938 85,452,353 80,379,669
Health services (IIII 2,082,960 2501637 2,295,627
Social and family servicAll
V 2,516,187 2,742,600 2,661,773
Recreation and cultural s 72,701,511 75,362,148 69,846,801
Planning and development IIII 8,634,623 11,373,853 13,123,204
Gasworks 68,200,455 67,448,653 67,386,205
Total expenses 375,103,137 374,167,759 360,202,808
Annual surplus 53,501,763 75,817,542 52,828,718
Accumulated surplus, beginning of year 1,335,832,285 1,335,832,285 1,283,003,567
Accumulated surplus, end of year (Note 14) $ 1,389,334,048 $ 1,411,649,827 $ 1,335,832,285
The accompanying notes are an integral part of these consolidated financial statements.
THE CORPORATION OF THE CITY OF KITCHENER
Consolidated Statement of Change in Net Financial Assets
For the Year Ended December 31, 2018
The accompanying notes are an integral part of these consolidIfto,11floWncial statements.
1-75
2018
Budget
2018
2017
Annual surplus
$ 53,501,763 $
75,817,542 $
52,828,718
Amortization of tangible capital assets
47,876,073
47,876,073
46,188,121
Acquisition of tangible capital assets
(66,649,835)
(122,372,910)
(95,072,534)
Loss (gain) on disposals of tangible capital assets
(4,562,126)
(4,702,301)
740,630
Proceeds on disposal of tangible capital assets
5,074,936
5,074,936
1,844,578
Acquisition of supplies of inventories
-
(7,288,113)
(6,173,446)
Acquisition of prepaid expenses
-
(994,985)
(205,620)
Consumption of supplies inventory
-
6,708,853
6,232,893
Use of prepaid expenses
891,747
356,863
Change in net financial assets
35,240
1,010,842
6,740,203
Net financial assets, beginning of year
220,7 , 13
220,788,113
214,047,910
Net financial assets, end of year
$ 2.. 8,924 $
X21,798,955 $
220,788,113
The accompanying notes are an integral part of these consolidIfto,11floWncial statements.
1-75
THE CORPORATION OF THE CITY OF KITCHENER
Consolidated Statement of Cash Flow
For the Year Ended December 31, 2018
Capital
Acquisition of tangible capital assets (104,629,106) (94,489,878)
Proceeds on disposal of tangible capital assets 5,074,936 1,844,578
Net change in cash from capital activities (99,554,170) (92,645,300)
Net change in cash and cash equivalents 19,772,131 (15,969,870)
Cash and cash equivalents, beginning of year 22,607,209 38,577,079
Cash and cash equivalents, end of year $ 42,379,340 $ 22,607,209
The accompanying notes are an integral part of these consolidated financial statements.
1-76
2018
2017
Operating
Annual surplus
$ 75,817,542 $
52,828,718
Items not involving cash
Amortization
47,876,073
46,188,121
Gain on disposal of tangible capital assets
(4,702,301)
740,630
Share of net income of Kitchener Power Corp. and its affiliates
(10,104,143)
(9,347,693)
Share of net income of Kitchener Generation Corporation
(13,831)
(3,407)
Change in employee future benefits
3,150,197
3,661,739
Contributions of tangible capital assets
(17,743,804)
(582,656)
Capital
Acquisition of tangible capital assets (104,629,106) (94,489,878)
Proceeds on disposal of tangible capital assets 5,074,936 1,844,578
Net change in cash from capital activities (99,554,170) (92,645,300)
Net change in cash and cash equivalents 19,772,131 (15,969,870)
Cash and cash equivalents, beginning of year 22,607,209 38,577,079
Cash and cash equivalents, end of year $ 42,379,340 $ 22,607,209
The accompanying notes are an integral part of these consolidated financial statements.
1-76
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2018
1. Summary of significant accounting policies
These consolidated financial statements of The Corporation of the City of Kitchener (the "City") have been
prepared by management in accordance with Canadian generally accepted accounting principles for local
governments as established by the Public Sector Accounting Board of the Chartered Professional Accountants
of Canada. The following is a summary of the significant accounting policies followed in the preparation of
these financial statements:
a. Basis of consolidation
Consolidated entities
These consolidated financial statements reflect the aKll��l�111111111,
ities, reserves, surpluses/deficits,
revenues, and expenditures of those City funds and govenctions or entities which have been
determined to comprise a part of the aggregate City operaupon control exercised by the City
except for the City's government businesses which areor on the modified equity basis of
accounting. The following boards, municipal enterpries have been included in the
consolidated financial statements: uillllll �
• Building Enterprise lull 111111111,
• Golf Enterprise
• Parking Enterpris
All inter -or anizat.11 jVl and inIlllnl sactions and balances have been eliminated.
ii. Government1kisiness en prises
Kitchener Generation"or n and Kitchener Power Corp. and its affiliates are not consolidated but
are accounted for on
Nified equity basis which reflects the City of Kitchener's investment in the
enterprises and its share of net income since acquisition. Under the modified equity basis, the
enterprises' accounting principles are not adjusted to conform to those of the City, and inter -
organizational transactions and balances are not eliminated.
Accounting for region and school board transactions
The taxation, other revenue, expenditures, assets and liabilities, with respect to the operations of the
school boards and the Regional Municipality of Waterloo, are not reflected in these consolidated financial
statements.
iv. Trust funds
Trust funds and their related operations administered by the City are not consolidated, but are reported
separately on the "Trust Funds Statement of Continuity and Balance Sheet" (see Note 3).
1-77
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2018
1. Summary of significant accounting policies (continued)
b. Basis of accounting
Accrual basis of accounting
The consolidated financial statements are prepared using the accrual basis of accounting. The accrual
basis of accounting recognizes revenues in the period in which the transactions or events occurred that
gave rise to the revenues. Expenses are recognized in the period the goods and services are acquired
and a liability is incurred or when an external transfer is due.
Cash and cash equivalents
Cash and cash equivalents include cash on hand and highly 1
90 days or less as at the end of the year. 11111
iii. Trade and other accounts receivable
Trade and other accounts receivable are reported
iv. Loans receivable
Loans receivable are reported net of any allowan
as it accrues. When the value of any loan eiv�
offset the carrying amount and any adjus
period the impairment is recognized.
v
Inventory for resale
Inventory for resale is val
vi. Investments
Portfolio investment
Premiums and dis
is recorded as
carrying amount i
investment income i
vii. Deferred revenue
investments with original maturity of
r doubtful accounts.
abtful accounts. Interest income is recorded
ntified as impaired, an allowance is set up to
JW in materials and services expense in the
r net realizable value on an average cost basis.
ost, net of accumulated amortization on premiums and discounts.
ti on a straight line basis over the term to maturity. Interest income
the value of any portfolio investment is identified as impaired, the
e estimated realizable amount and any adjustments are included in
e impairment is recognized.
Government transfers, contributions and other amounts are received from third parties pursuant to
legislation, regulation or agreement and may only be used in the conduct of certain programs, in the
completion of specific work or for the purchase of tangible capital assets. A requirement of the Public
Sector Accounting Board of the Chartered Professional Accountants of Canada is that obligatory
reserves be reported as deferred revenue. Obligatory reserves include development charges,
recreational lands, building permits and gas tax funding. In addition, certain user charges and fees are
collected for which the related services have yet to be performed. These are recorded under the
classification Deferred revenue - other. Revenue is recognized in the period when the related expenses
are incurred, services performed or the tangible capital assets are acquired.
viii. Employee future benefits
The contributions to a multi-employer, defined benefit pension plan are expensed when contributions are
due. The costs of post-retirement benefits are recognized when the event that obligates the City
occurs. Costs include projected future income payments, health care continuation costs and fees paid to
independent administrators of these plans, calculated on a present value basis.
1-78
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2018
1. Summary of significant accounting policies (continued)
b. Basis of accounting (continued)
viii. Employee future benefits (continued)
The costs of post-retirement benefits are actuarially determined using the projected benefits method
prorated on service and management's best estimate of retirement ages of employees, salary
escalation, expected health care costs and plan investment performance. Liabilities are actuarially
determined using discount rates that are consistent with the market rates of high quality debt
instruments. Any gains or losses from changes in assumptions or experience are amortized over the
average remaining service period for active employees.
ix
Contaminated sites are defined as the result of contami
sediment of a chemical, organic, or radioactive material
standard. This Standard relates to sites that are not i
an unexpected event resulted in contamination. As ec
on the statement
X.
Non-financial assets
Non-financial assets are not available
services. They have useful lives that e;
ordinary course of operations. The ct
excess of revenues over expens,,
Tangible capital
Tangible capital assets
to acquisition,c
the tangible c o I as..
follows: ulllllll
ing introduced into air, soil, water or
nism that exceeds an environment
6nd sites in productive use where
,2 there was no liability recorded
e liab"lel111, and are held for use in the provision of
ur nt year and are not intended for sale in the
-fin ial assets during the year, together with the
nsolidated change in net financial assets for the year.
JTqdffst which includes all amounts that are directly attributable
ent or betterment of the asset. The cost less residual value of
�d on a straight-line basis over their estimated useful lives as
Land ""illllllllllluu° The original cost of land is not amortized
Land Improvements 15 to 100 years
Buildings & building improvements 15 to 50 years
Leasehold improvement Over the useful life of the improvement or the lease
term, whichever is shorter
Machinery & equipment 3 to 20 years
Computer hardware 5 years
Computer software 5 to 10 years
Linear assets 6 to 100 years
Vehicles 5 to 16 years
b. Contributions of tangible capital assets
Tangible capital assets received as contributions are recorded at their fair value at time of receipt
and are recorded as revenue.
1-79
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2018
1. Summary of significant accounting policies (continued)
b. Basis of accounting (continued)
x. Non-financial assets (continued)
c. Leases
Leases are classified as capital or operating leases. Leases which transfer substantially all the risks
and benefits incidental of ownership are accounted for as capital leases. All other leases are
accounted for as operating leases and the related lease payments are recorded as expenses when
incurred.
d. Inventory of supplies
Inventories held for consumption are recorded at the lova{,,, cost and replacement cost.
e. Works of art and cultural and historic assets lluIF ''011lllllllllllllllllllllllll
Works of art and cultural and historic asset llre not recor4� as assets in these financial
statements.
xi. Revenue recognition
Revenues are recognized in the period in a trllllllllllllll VIII ons or events occurred that ave rise to the
9 p 9
revenues. All revenues are recorded o a I s, except when the accruals cannot be
determined with a reasonable degree of ce ty'll eir estimation is impracticable.
Government transfers are rec s re ues when the transfer is authorized and any eligibility
criteria are met, except to t xtent t tran r stipulations give rise to an obligation that meets the
definition of a liability. Tran are eferred revenue when transfer stipulations give rise to
a liability. Transfer revenue i ize i a statement of operations as the stipulation liabilities are
settled.
Government tra s, contn ons nd other amounts are received from third parties pursuant to
legislation, regul or agree nt and may only be used in the conduct of certain programs, in the
completion of spec ork, or purchase of tangible capital asset. In addition, certain user charges
and fees are collecte w the related services have yet to be performed. Revenue is recognized
in the period when the d expenses are incurred, services performed, or the tangible assets are
acquired.
Tax revenue is recognized when it is authorized and in the period for which the tax is levied. Tax revenue
reported relates to property taxes.
xii. Use of estimates
Since precise determination of many assets and liabilities is dependent upon future events, the
preparation of periodic financial statements necessarily involves the use of estimates and
approximations. These have been made using careful judgment. Actual results could differ from these
estimates.
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2018
2. Operations of school boards and the Regional Municipality of Waterloo
Further to Note 1 a) iii, the taxation, other revenues and requisitions for the school boards and the Regional
Municipality of Waterloo are comprised of the following:
School Region Total
Boards
Taxation and user charges $ 91,325,862 $ 256,537,098 $ 347,862,960
Share of payments in lieu of taxes 579 2,726,057 2,726,636
Share of linear properties 61,869 125,571 187,440
Amounts requisitioned $ 91,3 10 $ 259,388,726 $ 350,777,036
3. Trust funds
Trust funds administered by the City have not beene
in the olidated Statement of Financial
Position, nor have their operations been included in theated Statem of Operations. The trust funds
under administration are comprised of cemetery p and prepaid interment funds totalling
$15,428,514 2017 - $14,707,650).
4. Loans receivable
Loans receivable are made u of the following:
p,mulllllll
JP It 2018 2017
Major capital improvement loans re" Cb $ 6,861,345 $ 7,502,617
Loans receivable with forgive 26,229 42,392
Minor ca ital im roveme o roaaceivable 494,160 618,361
$ 7,381,734 $ 8,163,370
Major capital improvemeVsa ividual loans in excess of $500,000 when issued with no forgiveness
provision built into the los have repayment terms ranging from 10 to 12 years (2017 - 10 to 12
years). All major capitalans are unsecured and bear interest at rates ranging from 1.53% to
2.40% (2017 - 1.53% to 1.9596).
Forgivable loans are those initially offered with forgiveness provisions built into the agreement. All loans in this
category are unsecured and have repayment terms of 5 years (2017 - 5 years). The forgiveness provisions
range from 15% to 50% (2017 - 15% to 5096). The balances recorded are net of the allowance for forgiveness.
Interest rates on these loans range from 0% to 8% (2017 - 0% to 896).
Minor capital improvement and other loans receivable comprise any loan receivable not fitting into the first two
categories. There is a variety of terms related to these loans with payment terms ranging from 6 months to 25
years (2017 - 6 months to 25 years). The majority of these loans are secured by the asset the loan was
granted to finance, but others are unsecured. The interest rates on these loans range from 0.0% to 12.9%
(2017 - 0.0% to 12.996).
1-81
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2018
5. Investments
Investments are made up of the following:
2018
Cost
2018 2017 2017
Market Cost Market
Value Value
Guaranteed investment certificates $ 169,934,570
$ 171,856,314 $ 155,309,123 $ 157,281,753
Bonds and debentures 12,280,759
12,074,485 8,673,023 8,654,050
Common stock 284,310
413,328 332,758 514,227
$ 182,499,639
$ 184,3 27 $ 164,314,904 $ 166,450,030
6. Investment in Kitchener Power Corp. and its Affiliates
Under the provincial government's Electricity Competition(Bill
35) chener Power Corp., a holding
company, along with its wholly owned subsidiaries, includ' II
itchener-film ydro Inc., was incorporated on
July 1, 2000. l Vllu„
On August 1, 2000, under by-laws passed by the City and t
wnship of Wilmot, the net assets of the former
Hydro -Electric Commission of Kitchener -Wilmot transfe
to the new corporation. The City took back a
92.25% share in the common shares of Kitchen rp.
lllua 92.25% share in long-term notes payable
by the affiliates for the assets transferred. Certain rpl
y assets and cash funds were excluded from
the transfer and turned over to the City ae To
The investment is comprised of the f III Ing:
2018 2017
Kitchener Power Corp. c on
61,244,208 61,244,208
Kitchener -Wilmot Hydr c. long-te ote eceivable
70,997,576 70,997,576
Share of net income an r period j ustments due to changes
in
accounting policies since uisiti et of dividends
81,306,230 74,957,400
$ 213,548,014 $ 207,199,184
The Kitchener -Wilmot Hydro Inc. notes are unsecured and bear interest at the rate of 4.88% (2017 - 4.8896).
There are no repayment terms and there is no intent to redeem the notes or the shares.
1-82
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2018
6. Investment in Kitchener Power Corp. and its Affiliates (continued)
The following table provides condensed financial information with respect to Kitchener Power Corp.:
2018 2017
Current assets
$ 65,862,000
$ 72,120,000
Non-current assets
247,059,000
235,287,000
Regulatory assets
7,366,000
10,073,000
Total assets
320,287,000
317,480,000
Current liabilities
33,259,000
Vu
36,890,000
Long-term debt
77,569,000
78,745,000
Regulatory liabilities
8,237,000
11,021,000
Other liabilities
46,372,000
42,856,000
Total liabilities
165,437,000
169,512,000
Net assets mulllllll
muuu,,154,850,000
147,968,000
Results of operations
Revenues
Expenses
Net income
City's share of net income - 92.25%
7. Investment in Kitchener
Under the provincial g
incorporated on Decemb(
Effective January 1, 20% City tr
Operations Facility to ner Gen
interest bearing debt. um. m
The investment in Kitchener
244,310,000 251,356,000
(233,357,000) (241,223,000
10,953,000 10,133,000
$ 10,104,143 $ 9,347,693
iness Corporation Act, Kitchener Generation Corporation was
rr6d the solar roof asset constructed on the surface of the Kitchener
on Corporation in exchange for 100% of its common shares and
n Corporation is comprised of the following:
2018 2017
Kitchener Generation Corporation common shares $ 288,514 $ 313,271
Kitchener Generation Corporation long-term notes receivable 2,596,632 2,819,442
Share of net income since acquisition, net of dividends (99,643) (113,475)
$ 2,785,503 $ 3,019,238
The notes receivable are unsecured and bear interest at the rate of 5.01%. To the extent that Kitchener
Generation Corporation has positive annual cash flows after any dividend payment, the cash will be returned to
the City as repayment of the outstanding debt and return of capital. The proportion to which they contribute is
90% debt, 10% equity.
1-83
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2018
7. Investment in Kitchener Generation Corporation (continued)
The following table provides condensed financial information with respect to Kitchener Generation Corporation:
2018 2017
Current assets
$ 7,029 $
13,354
Capital assets
2,787,020
3,019,272
Total assets
2,794,049
3,032,626
Current liabilities
8,547
13,387
Long-term debt
2,596,631
2,819,442
Total liabilities
2,605,178
2,832,829
Net assets
mullll
188,871
199,797
Results of operations
Revenues
enses uuu°"" Vu 01iIIIIII Vu 391,313 390,542
(377,482) (387,135
Net income 13,831 3,407
City's share of net income - 100% mulllllllllllluuuu um. $ 13,831 $ 3,407
8. Insurance pool
Liabilities include an amount of $9,1 201 $6,347,875) which represents funds belonging to the
Waterloo Region Municipalities Ins ce Po (the " I") and administered by the City on behalf of the Pool's
members. The members entere agr 98 to purchase property damage and public liability
insurance on a group basis andIIIIIIIIIIIIsha inel °Pof risk.
The members pay ane
to d annual levy to fund insurance, prefund expected losses and
contribute to a surplusool h ur ed insurance to fund losses above a predetermined deductible
and any losses above ermine tal in any year.
The City's share of Pool Ie ' 'se24% (2017 - 26.11%) and its share of the Pool surplus as at May 31, 2018
was $1,597,878 (2017 - $1,The City's share of the Pool surplus has not been included in the
Consolidated Statement of Finasition.
9. Deferred revenue - obligatory reserve funds
Obligatory deferred revenue is comprised of the following:
2018 2017
Development charges $ 15,860,990 $ 18,017,536
Federal gas tax 4,796,771 4,793,167
Building 7,705,113 8,108,258
Recreational land 6,579,273 7,125,900
$ 34,942,147 $ 38,044,861
1
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2018
9. Deferred revenue - obligatory reserve funds (continued)
The continuity of obligatory deferred revenue is as follows:
Development Federal gas Recreational
charges tax Building land Total
Balance, January 1, 2018
$ 18,017,536
$ 4,793,167 $
8,108,258
$ 7,125,900
$ 38,044,861
Collections
8,137,148
6,980,232
-
943,160
16,060,540
Interest earned
-
34,429
171,255
8,049
213,733
Contributions used
(10,293,694)
(7,011,057)
574,400
(1,497,836)
(19,376,987)
Balance. December 31. 2018
15.860.990
4.796.771
7,,M. 113
6.579.273
34.942.147
Balance, January 1, 2017
Collections
Interest earned
Contributions used
Balance. December 31. 2017
10. Municipal debt
16,552,083
8,627,280
14,957
(7,176, 784
$ 18,017,536
The City has assumed responsibility for mer
issued by other municipalities. At t end the
$71,178,897 (2017 - $77,889,047),
The annual principal repayments are�pu�lll III
5,749,00 """""'
8,7N58
$ 11,272,884
7,362,697
38,400,547
6,780
9,544,187
2022
1,260,706
16,673,891
96
jj
Vm 1,
26,612
184,801
7,7
4
759,536
(1,524,115)
(17,214,378
4,793'jgL
$
8,108,258 $
7,125,900
$ 38,044,861
5rincipal and interest charges on certain long-term debt
r, the outstanding principal amount of this liability is
2019
$ 11,272,884
2020
10,437,731
2021
9,544,187
2022
11,640,113
2023
6,389,518
2024 and thereafter
21,894,464
$ 71,178,897
The annual principal and interest payments required to service the long-term debt are within the annual debt
repayment limit prescribed by the Ontario Ministry of Municipal Affairs and Housing.
The long-term liabilities carry interest rates ranging from 1.30% to 5.30% (2017 - 1.25% to 5.2096). Interest
charges for 2018 relating to municipal debt totalled $2,880,804 (2017 - $3,179,481).
1 -13.5
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2018
11. Pension plan
The City makes contributions to the Ontario Municipal Employees Retirement System (OMERS), which is a
multi-employer plan, on behalf of its staff. The plan is a defined benefit plan which specifies the amount of the
retirement benefit to be received by the employees based on the length of service and rates of pay. Employee
contributions are matched by the City. Contributions were required on account of current service in 2018
amounting to $11,018,087 (2017 - $10,390,276).
The latest available report for the OMERS plan was as at December 31, 2018. At that time the plan reported a
$4.2 billion actuarial deficit, based on actuarial liabilities of $100.1 billion and actuarial assets of $95.9 billion.
Ongoing adequacy of the current contribution rates will need to be monitored and may lead to increased future
funding requirements. As at December 31, 2018, the City has no obligation under the past service provisions of
the OMERS agreement. mulllllllll
12. Employee future benefits
The estimated liability for employee future benefits is compri II 'of the foll
2018 2017
Sick leave benefitIan 19,611,287 18,786,169
p ill
Post-retirement benefits 19,862,168 17,942,289
Future payments to WSIB V 9,576,900 9171700
$ 49,050,355 $ 45,900,158
a. Sick leave benefitp Ian
Under the sick leave benefit plan, us VIII can accumulate and certain employees may become
entitled to cash payments when they the City's employment. The amount of benefits paid during the year
were $1,706,193 (2017 - $
A reserve fund to provi or liab is i fuded in accumulated surplus, in the amount of $4,553,015 (2017
- $5,019,68' ) .
Anticipated undiscounted pa nts mployees who are eligible to retire are:
2019 $ 2,716,665
2020 1,210,044
2021 1,315,395
2022 1,035,438
2023 1,506,138
2024 and thereafter 8,193,332
$ 15,977,012
The actuarial valuation of the future liability for sick leave assumes a discount rate of 3.75% (2017 -
3.25%). The last actuarial valuation for this liability was completed at December 31, 2017.
1 : •
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2018
12. Employee future benefits (continued)
a. Sick leave benefit plan (continued)
The actuarial expense for the current year was $2,531,311 (2017 - $2,709,894) and is comprised of the
following items:
2018 2017
Current period benefit cost $ 1,142,066 $ 1,129,334
Amortization of actuarial losses 692,607 795,085
Sick leave benefit expense 1,834,673 1,924,419
Sick leave benefit interest expense 696,638 785,475
Total expenses related to sick leave benefits2 2,709,894
II $ 531311 $
As at December 31, 2018, the unamortized actuarial loss were $8 �l 1 (2017 - $2,359,866) and are
amortized over 11 to 13 years (2017 - 10 to 13 years). IIIIIIIIIIIIIIIIIIIIIIIIIIIIIV
b. Post-retirement benefits
The Cit pays certain health dental and life ins eneft behalf of its retired employees u to theae
Yp Y �p 9
of 65 if they have at least ten years of service wi h The ount of benefits paid during the year were
$1,208,919 (2017 - $1,116,951).
The City holds no reserve to meet this
The actuarial valuation of the fut4 liabili os t tirement benefits assumes a discount rate of 3.75%
(2017 - 3.25%) and inflation rates ms of 4.0% to 6.5% (2017 - 4.0% to 6.596). The last
actuarial valuation for this Iia as III leted at December 31, 2017.
The actuarial expense a ye as 28,798 (2017 - $2,672,153) and is comprised of the following
items: VIII
2018 2017
Current period benefit cost $ 1,068,215 $ 1,121,128
Amortization of actuarial losses 730,648 739,764
Amortization plan improvements 606,552 -
Post-retirement benefit expense 2,405,415 1,860,892
Post-retirement benefit interest expense 723,383 811,261
Total expenses related to post-retirement benefits $ 3,128,798 $ 2,672,153
As at December 31, 2018, the unamortized actuarial losses were $1,885,690 (2017 - $3,851,874) and are
amortized over 11 to 13 years (2017 - 11 to 13 years).
1-87
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2018
12. Employee future benefits (continued)
c. WSIB
The Workplace Safety and Insurance Board (WSIB) administers injured worker benefits payments on behalf of
the City as a Schedule 2 employer. The amount of benefits paid during the year were $1,391,200 (2017 -
$785, 400).
A reserve fund to provide for this liability is included in accumulated surplus, in the amount of $2,499,377 (2017
- $2,226,495).
The actuarial valuation of the future liability for WSIB assumes a discount rate of 3.75% (2017 - 3.2596). The
last actuarial valuation for this liability was completed at December 31, 2041116.
The actuarial expense for the current year was $1,796,400 (2011 VIII$"1,820,200) and is comprised of the
following items: ullllll uulll.
2018 2017
Current period benefit cost lull ull $ 1,137,300 $ 1,229,800
Amortization of actuarial losses 300,800 203,600
WSIB benefit expense 1,438,100 1,433,400
WSIB benefit interest expense IMI 358,300 311,200
Plan amendments ullllll °°°°""� - 75,600
Total expenses related to WSIB benefi
As at December 31, 2018, the
amortized over 11 years (2017 -
13. Tangible capital assets
The continuity schedul1q,
tangible cc'
Assets under constructioving a
Amortization of these assets „.com
1,796,400 $ 1
losses were $769,500 (2017 - $1,410,300) and are
is presented in schedule A.
ae of $45,131,973 (2017 - $45,194,743) have not been amortized.
ce when the assets are put into service.
Contributed tangible capital ass'1ft of $17,743,804 (2017 - $582,656) have been recognized at fair market
value at the date of contribution. The contributed assets include land right of way as well as developer created
linear assets such as water, sanitary, storm, and road assets.
The write-down of tangible capital assets during the year was $nil (2017 - $nil).
The amount of interest capitalized was $nil (2017 - $nil).
1 . .
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2018
14. Accumulated surplus
The accumulated surplus consists of individual fund surpluses/(deficits) and reserve funds as follows:
15. Contingent liabilities
Legal actions have been undertaken against the City relating to a number of contract disputes and other
matters. The outcome of these actions is not presently determinable. It is management's opinion that the City's
insurance will adequately cover any potential liability arising from these contract disputes and other
matters. Should any liability be determined and not covered by insurance it will be recognized in the period
when it is determined.
1
2018
2017
Surplus:
Invested in tangible capital assets
$1,185,483,730
$1,111,359,528
Other
(10,954,437)
(554,533)
Equity in Kitchener Power Corp. and its affiliates
213,548,014
207,199,184
Equity in Kitchener Generation Corporation
uo 2,785,503
3,019,238
Employee future benefits unfunded
49,050,355
(45,900,158)
Total surplus lull
1,341,812,455
1,275,123,259
Reserve funds set aside for specific purposes by Couor:
Vu
Capital lull uo
23,053,610
24,845,538
Stabilization
23,148,449
15,563,634
Program specific
13,183,830
10,348,180
Corporate
8,364,409
8249804
IL
67,750,298
59,007,156
Reserve funds set aside for specific es b nsolidated
entities:
Kitchener Public Library lull III
t
381,387
381,354
Kitchener Downtown Business Impr Area
50,000
50,000
The Centre in the Square I
1,655,687
1,270,516
2,087,074
1,701,870
Total reserve funds31
69,837,372
60,709,026
Accumulated surplus um.r „ui
$1,411,649,827
$1,335,832,285
15. Contingent liabilities
Legal actions have been undertaken against the City relating to a number of contract disputes and other
matters. The outcome of these actions is not presently determinable. It is management's opinion that the City's
insurance will adequately cover any potential liability arising from these contract disputes and other
matters. Should any liability be determined and not covered by insurance it will be recognized in the period
when it is determined.
1
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2018
16. Segmented information
The City of Kitchener is a diversified municipal government institution that provides a wide range of services to
its citizens, including fire, roads, water, sewer, storm sewer, gasworks, libraries, and community services.
Segmented information has been presented in Schedule B by major functional classification of activities
provided, consistent with the Consolidated Statement of Operations and provincially legislated requirements.
For each reported segment, revenues and expenses represent both amounts that are directly attributable to the
segment and amounts that are allocated on a reasonable basis.
The accounting policies used in these segments are consistent with those followed in the preparation of the
consolidated financial statements as disclosed in Note 1.
17. Budget figures
The budget figures reflected in these consolidated statemenwts,7those''1111 roved by Council at a meeting onBudget figures have been translated to reflect Public Sectorunting Bo lum§tandards.
18. Comparative figures
Certain of the prior year's comparative figures
presentation. A significant reclassification in the
treatment of water and wastewater by the Regio
under the caption Water, sewer and storm water.
services expenses. As a result of
th ssi
increased
dby 7d74,449 compare
� bli:
remains unchangemIII
11
have
be" eclassified to conform to the current year's
npar k@,. figures relates to the costs associated with
Tobse were historically grouped to User fees,
presented on a gross basis in Enviromental
the 2017 Total revenue and Total Expenses have
17 consolidated statements while the annual surplus
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KPMG LLP
115 King Street South
2nd Floor
Waterloo ON N2J 5A3
Canada
Tel 519-747-8800
Fax 519-747-8830
To the Mayor and Members
Corporation of the City of Kitch
Inhabitantt and Ratepayers of The
;ments of The Trust Funds of the Corporation
which comprise:
as at December 31, 2018
nuity for the year then ended
r
othe financial statements, including a summary of
ccounting policies
referred to as the "financial statements").
In our opinion, the accompanying financial statements present fairly, in all
material respects, the balance sheet of the Entity as at December 31, 2018, and
the statement of continuity 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
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 Managee
Governance for the Financialme
Management is responsible fo
financial statements in accor
standards and for such internal
to enable the preparat� of fi
misstatement, whether
preparation
Those Charged with
fair presentation of the
r Canadian public sector accounting
management determines is necessary
atements that are free from material
In preparing the f ancial ents, anagement is responsible for assessing
the Entity's cont a as a going concern, disclosing as applicable,
matters re d to g g con and using the going concern basis of accounting
unless mi e ends to liquidate the Entity or to cease operations,
or ha a rea alternative but to do so.
Audi .
Statements
Aj�, governance are responsible for overseeing the Entity's
process.
Responsibilities
the Audit of the Financial
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 the financial statements.
1-95
I ARM
T. A& '11
Page 3
As part of an audit in accordance with Canadian generally accepted auditing
standards, we exercise professional judgment and maintain professional
skepticism throughout the audit.
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
higher than for one resulting from
forgery, intentional omissions, misrqo
control. uillllllllu^
Obtain an understanding
design audit procedures that
the purpose of ex ing
internal control.
�atement resulting from fraud is
as fraud may involve collusion,
Wons, or the override of internal
trol relevant to the audit in order to
'iate in the circumstances, but not for
on the effectiveness of the Entity's
of accounting policies used and the
estimates and related disclosures made by
Doauditors'
e appropriateness of management's use of the going concern
cong and, based on the audit evidence obtained, whether a
certainty exists related to events or conditions that may cast
oubt on the Entitys ability to continue as a going concern. If we
ata material uncertainty exists, we are required to draw attention
report to the related disclosures in the 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.
Ila 'I.-M
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 our audit.
Chartered Professional Accountants, Liqgpedftlolic Accountants
Waterloo, Canada
1-97
CORPORATION OF THE CITY OF KITCHENER TRUST
FUNDS
Balance Sheet
As at December 31, 2018
2018 2017
Assets
Accounts receivable
$ 79,857
$ 111,721
Interest
121,722
71,338
Investments (Note 2)
Short-term
88,467
430,809
Long-term
15,138,468
14,093,782
15,428,514
14,707,650
Fund Balance
The accompanying notes are an integral part of these financial
$15,428,514 $14,707
1
CORPORATION OF THE CITY OF KITCHENER TRUST
FUNDS
Statement of Continuity
For the Year Ended December 31, 2018
2018 2017
Receipts
Perpetual care $ 426,960 $ 397,885
Interest earned 467,961 441,122
Other 133,692 129,008
1,028,613 968,015
Expenditures
Transfer to cemeteries operations 307,749 289,915
Net cha
Balance
Balance
in fund
Beginning of
end of vear
The accompanying notes are an integral part of these finan
307,749 289,915
720,864 678,100
14,707,650 14,029,550
um,,,15,428,514 $ 14,707,650
CORPORATION OF THE CITY OF KITCHENER TRUST
FUNDS
Notes to the Financial Statements
For the Year Ended December 31, 2018
1. Summary of significant accounting policies
The Financial Statements have been prepared in accordance with Canadian generally accepted accounting
principles for local government as recommended by the Public Sector Accounting Board of the Chartered
Professional Accountants of Canada. The significant accounting policies are summarized below.
a. Basis of Accounting
Sources of financing and expenditures are reported on the accrual basis of accounting. The accrual basis of
accounting recognizes receipts as they become available and measurable; expenditures are recognized as
they are incurred and measurable as a result of receipt of goods or ervices and the creation of a legal
obligation to pay. mullllll
2. Investments 10 11111111,""'iillllll
The long-term investments of $15,138,468 (2017 - $14,093 � reported o� Balance Sheet at cost, have a
market value of $15,626,209 (2017 - $14,486,160). V
3. Statement of Cash Flow
Z,'M11111
A se arate statement of cash flow is not reseow from o eratin investin and financinactivities are readily apparent from the other finan ` I11
1-100
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1-101
KPMG LLP
115 King Street South
2nd Floor
Waterloo ON N2J 5A3
Canada
Tel 519-747-8800
Fax 519-747-8830
To the Members of therove nt Area
,� VIII III
Opinion luu^
of Management
the statent of changes in net financial assets for the year then
• antes to the financial statements, including a summary of
significant accounting policies
(Hereinafter referred to as the "financial statements").
In our opinion, the accompanying financial statements present fairly, in all
material respects, the financial position of the Entity as at December 31, 2018,
and its results of operations, and its changes in net financial assets 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
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 Manageme nd Those Charged with
Governance for the Financial a is
Management is responsible for
financial statements in accor
standards and for such internal c
to enable the preparat� of fir
misstatement, whether
preparation " fair presentation of the
� Canadian public sector accounting
management determines is necessary
itements that are free from material
In preparing the f ancial ents, anagement is responsible for assessing
the Entity's cont a as a going concern, disclosing as applicable,
matters re d to g g con and using the going concern basis of accounting
unless mi e ends to liquidate the Entity or to cease operations,
or has, rea alternative but to do so.
Audi .
Statements
governance are responsible for overseeing the Entity's
process.
Responsibilities for the Audit of the Financial
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 the financial statements.
1-103
I ARM
T. A& '11
Page 3
As part of an audit in accordance with Canadian generally accepted auditing
standards, we exercise professional judgment and maintain professional
skepticism throughout the audit.
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 m' tement resulting from fraud is
higher than for one resulting from fraud may involve collusion,
forgery, intentional omissions, misr PeNse..IIIIIIIIIIIIIIII s, or the override of internal
control. Illllllllllllllllllllllllllllu„ III
• Obtain an understanding tern ntrol relevant to the audit in order to
design audit procedures that ropriate in the circumstances, but not for
the purpose of ex ing an on on the effectiveness of the Entity's
internal control. IIV
• Evaluatepro ness of accounting policies used and the
„
reasonness f acc ting estimates and related disclosures made by
• VIIID
e appropriateness of management's use of the going concern
co fling and, based on the audit evidence obtained, whether a
certainty exists related to events or conditions that may cast
oubt on the Entity's ability to continue as a going concern. If we
ata material uncertaint exists we are re uired to draw attention
y ars' report to the related disclosures in the 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.
1-104
Ila 'I.-M
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 our audit.
Chartered Professional Accountants, Liqgpedftlolic Accountants
Waterloo, Canada
1-105
BELMONT IMPROVEMENT AREA BOARD OF
MANAGEMENT
Statement of Financial Position
As at December 31, 2018
Non-financial assets
Tangible capital assets
Prepaid expenses
Net assets
Accumulated Surplus
Accumulated net revenue
Invested in tangible capital assets
Total accumulated surplus
The accompanying notes are an integra
e finaftal statements.
1,568
775
2,343
42,282
40,714
1,568
42,282
2,195
703
2,898
41.505
39,310
2,195
41,505
1-106
2018
2017
Financial assets
Cash
$ 46,069 $
44,930
Accounts receivable
-
775
46,069
45,705
Financial liabilities
Accounts payable and accrued liabilities
6,130
7,098
Net financial assets
39,939
38,607
Non-financial assets
Tangible capital assets
Prepaid expenses
Net assets
Accumulated Surplus
Accumulated net revenue
Invested in tangible capital assets
Total accumulated surplus
The accompanying notes are an integra
e finaftal statements.
1,568
775
2,343
42,282
40,714
1,568
42,282
2,195
703
2,898
41.505
39,310
2,195
41,505
1-106
BELMONT IMPROVEMENT AREA BOARD OF
MANAGEMENT
Statement of Revenue and Expenses and Accumulated Surplus
For the Year Ended December 31, 2018
2018 2017
Revenue
Assessments $ 40,394 $ 40,235
Other revenue 4,068 2,732
44.462 42.967
Expenses
Streetscaping
Audit
Summer maintenance
Insurance
Winter maintenance
Advertising
Miscellaneous
Amortization
Net surplus for year
Accumulated surplus, beginning of
Accumulated surplus, end of vei
The accompanying notes are an integ
statements.
9,773
1,808
6,092
1,592
15,910
3,823
4,060
627
3,231
1,808
7,282
1,471
15,930
2,691
4,925
628
43,685 37,966
777 5,001
41,505 36,504
$ 42,282 $ 41,505
1-107
BELMONT IMPROVEMENT AREA BOARD OF
MANAGEMENT
Statement of Change in Net Financial Assets
For the Year Ended December 31, 2018
2018 2017
Net surplus for year $ 777 $ 5,001
Amortization of tangible capital assets 627 628
Acquisition of prepaid expenses (72) (39)
Change in net financial assets 1,332 5,590
Net financial assets, beginning of year 38,607 33,017
Net financial assets, end of year $ 39,939 $ 38,607
The accompanying notes a
1-108
BELMONT IMPROVEMENT AREA BOARD OF
MANAGEMENT
Notes to Financial Statements
For the Year Ended December 31, 2018
1. Summary of significant accounting policies
The financial statements of the Belmont Improvement Area Board of Management are the representation of
management and have been prepared in accordance with Canadian generally accepted accounting principles
for local governments as recommended by the Public Sector Accounting Board of the Canadian Institute of
Chartered Accountants. Since precise determination of many assets and liabilities is dependent upon future
events, the preparation of periodic financial statements necessarily involves the use of estimates and
approximations. These have been made using careful judgment. The following is a summary of the significant
accounting policies followed in the preparation of these financial statements:
a) Tangible capital assets u^
Tangible capital assets are recorded at cost which includes mounts that are directly attributable to
acquisition, construction, development or betterment oft es The cost less residual value of the
tangible capital assets is amortized on a straight-line bap, ver th timated useful lives as follows:
Assets JJ ortiz n Period
Equipment
5
Annual amortization is charged in the
construction are not amortized until the
Tangible capital assets received
are recorded as revenue. 111111111l
b) Accrual basis of accou
Revenue and expen
recognizes revenue
incurred and me
to pay. u
2. Tangible Capital Assets
in the year of disposal. Assets under
uctive use.
re recorded at their fair value at time of receipt and
on the accrual basis of accounting. The accrual basis of accounting
9vailable and measurable; expenses are recognized as they are
ureceipt of goods or services and the creation of a legal obligation
Accumulated Net Book
Cost Amortization Value
Opening balance $ 9,237 $ (7,042) $ 2,195
Additions - - -
Amortization expense - (627) (627)
Disposals - - -
Ending balance $ 9,237 $ (7,669) $ 1,568
3. Statement of cash flow
A separate statement of cash flow is not presented, since cash flow from operating, investing and financing
activities are readily apparent from the other financial statements.
1-109
KPMG LLP
115 King Street South
2nd Floor
Waterloo ON N2J 5A3 Canada
Tel 519-747-8800
Fax 519-747-8830
INDEPENDENT PDITORS'REPORT
Opinion III
We have audited the financial state20hcorpprise:
°1IIIIIIIKitchelllllll llllllllwntown Improvement Area
Board of Management (the "Entity"), Illi Ju
• the statement of financial positiod''IftgPInd of December 31, 2018
then ended x en' nd accumulated surplus for the year
• p
IVi�
..
• the statementges RWt financial assets for the year then ended
• the staterftt of c, §,,,f he year then ended
H
financial statements, including a summary of significant
to as the "financial statements").
In our o"e accompanying financial statements present fairly, in all material
respectsWthancial position of the Entity as 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 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.
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. mulllllllllu
In preparing the financial statements, man
Entity's ability to continue as agoing c
related to going concern and using t
management either intends to liqui the
realistic alternative but to do so. um.
Those charged with
reporting process.
Auditors'
Our objecti\
statements
error, and to
is responsible for assessing the
losing as applicable, matters
as
is of accounting unless
to ase operations, or has no
ible for overseeing the Entity's financial
the Financial Statements
Isonable assurance about whether the financial
m material misstatement, whether due to fraud or
port that includes our opinion.
$ a high level of assurance, but is not a guarantee that an
accordance with Canadian generally accepted auditing standards
material misstatement when it exists.
Misstate " can arise from fraud or error and are considered material if,
individually r in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of the financial statements.
As part of an audit in accordance with Canadian generally accepted auditing
standards, we exercise professional judgment and maintain professional skepticism
throughout the audit.
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.
Page 3
• Obtain an understanding of internal control relevant to the audit in order to
design audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the Entity's internal
control.
Evaluate the
reasonableness
management.
audit.
appropriateness of accounting policies used and the
of accounting estimates and related disclosures made by
N
use of the going concern
nce obtained, whether a
onditions that may cast
s a going concern. If we
we are required to draw attention in
ares in the financial statements or, if
ify our opinion. Our conclusions are
to the date of our auditors' report.
cause the Entity to cease to continue
res tation, structure and content of the financial
isclosures, and whether the financial statements
ng transactions and events in a manner that achieves fair
with those charged with governance regarding, among other
anned scope and timing of the audit and significant audit findings,
significant deficiencies in internal control that we identify during our
Chartered Professional Accountants, Licensed Public Accountants
Waterloo, Canada
April, 2019
1-112
KITCHENER DOWNTOWN IMPROVEMENT AREA
BOARD OF MANAGEMENT
Statement of Financial Position
Year ended December 31, 2018, with comparative information for 2017
2018 2017
Financial Assets
Cash
$ 251,964
$ 106,473
Term deposits (note 2)
112,886
112,135
Accounts receivable
30,222
34,990
Prepaid expenses
6,399
6,926
112,350
401,471
260,524
Financial Liabilities
Accounts payable and accrued charges122,203
IIIIIIIIIIIIIIIIIIIIII"
11111
Due to the City of Kitchener (note 4)
mullllui^
llll.34 361
34,361
6,564
112,350
Net financial assets
244,907
148,174
Non -Financial Assets
llluu
Tangible capital assets (note 5)
44,454
57,833
Net assets
289,361
206,007
IIIIIIIIII IIIIIIIIII
Accumulated Illlllllllllllllllllllllllluu�
Reserve for rate st°11lll ation
$
50,000
$ 50,000
Accumulated net reve
194,907
98,174
Invested in tangible capi
IIIIIIIIII
44,454
57,833
Total accumulated surplus
$
289,361
$ 206,007
See accompanying notes to financial 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 information for 2017
See accompanying
statements.
Budget
2018
Actual
2018
Actual
2017
Revenue:
Assessments
$ 1,279,000
$ 1,279,000
$ 1,082,021
Interest
-
755
396
Other income
100,000
246
34,455
1,379,000
1,280,001
1,116,872
Expenses:
Promotions and advertising
434,000
Vu^ 326,578
281,458
Salaries, wages and benefits
373,502
364,350
430,987
Administration
108,698
100,532
138,060
Meetings and seminars
21,30
17,390
5,074
Safety and beautification
160
166,642
142,224
Member relations
1 0
14,878
4,890
Amortization
000
Vi17,572
19,719
Downtown Improvement Project
0,00
54,544
-
Queen Street Project
100,000
-
1,33
1,162,486
1,022,412
Net revenue before other items
0
117,515
94,460
Net assessment write-offs (note 4
IIIIIIIIIIIII 45,000
34,361
34,361
Net revenue
0
83,154
60,099
Accumulated surplus, b it
206,007
206,007
145,908
Accumulated surp�,Wfflend of ye
$ 206,007
$ 289,161
$ 206,007
See accompanying
statements.
KITCHENER DOWNTOWN IMPROVEMENT AREA
BOARD OF MANAGEMENT
Statement of Changes in Net Financial Assets
Year ended December 31, 2018, with comparative information for 2017
See accompanying notes to financial statements.
1-115
2018
2017
Net revenue
$ 83,154
$ 60,099
Acquisition of tangible capital assets
(3,993)
-
Amortization of tangible capital assets
17,572
19,719
Change in net financial assets
96,733
79,818
Net financial assets, beginning of year
148,174
68,356
Net financial assets end of year
244,907
$148,174
See accompanying notes to financial statements.
1-115
KITCHENER DOWNTOWN IMPROVEMENT AREA
BOARD OF MANAGEMENT
Statement of Cash Flows
Year ended December 31, 2018, with comparative information for 2017
Cash provided by (used in):
Operating activities:
Net revenue
Item not involving cash:
Amortization
Changes in non-cash assets and liabilities:
Accounts receivable
Prepaid expenses
Accounts payable and accrued liabilities
Due to/from City of Kitchener
Cash from operating activities
Investing activities:
Acquisition of tangible capital assets
Redemption (purchase) of investments
Cash used in investing activities t
Increase in cash
Cash, beginning of year
,e
See accompanyi
nts.
2018 2017
$ 83,154 $ 60,099
17,572 19,719
4,768 (11,925)
527 (59)
44,214 (33,044)
- (12,199)
um„„150,235 22,591
(3,993)
(751)
(4,744)
(541)
(541)
145,491 22,050
106,473 84,423
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.
The financial statements of the Board are the representation f management and have been
prepared in accordance with Canadian generally accep accounting principles for local
governments, as recommended by the Public Sector Ac Board (PSAB) of the Canadian
Professional Accountants. Since precise determip, n ,any assets and liabilities is
dependent upon future eventE
involves the use of estimates
judgment.
(a) Tangible capital assets:
Tangible capital assets
attributable to acquisition,
less residual value, of
amortized on a straiahA
d,
are
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 annu icy established rate per business.
Revenue is recognized when assessed.
Other revenues are recorded upon sale of goods 90ro n of service when collection is
reasonably assured.
2. Term deposits: III
The term deposits consist of the following: ""iillllll ui°
Principal ritY um„ Rate
4. City of Kitchener:
The Board receives assessment income from the City of Kitchener for its operations. During the
year, assessment write-offs were incurred for $34,361 (2017 - $34,361). The 2017 amount was
paid to the City of Kitchener in 2018.
1-118
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KPMG LLP
115 King Street South
2nd floor
Waterloo ON N2J 5A3
Canada
Tel 519-747-8800
Fax 519-747-8830
INDEPENDENT AUDITORS' REPORT
To the members of Kitchener Public Library
Opinion
We have audited the financial statements of Kitchener Public Library (the Entity), which
comprise:
• the statement of financial position as at December 31, 2018
• the statement of revenues, expenses and accumulated net revenue for the year then
ended
• the statement of cash flows for the year then ended
• the statement of changes in net financial assets for the year then ended
• and notes to the financial statements, including a summary of significant accounting
policies
(Hereinafter referred to as the "financial statements").
In our opinion, the accompanying financial statements present fairly, in all material
respects, the financial position of the Entity as at December 31, 2018 and its results of
operations 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 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.
1-120
Page 2
Responsibilities of Management 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
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 unless management either
intends to liquidate the Entity or to cease operations, or has no realistic alternative but to
do so.
Auditors' Responsibilities for the Audit of the Financial 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 the financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards,
we exercise professional judgment and maintain professional skepticism throughout the
audit.
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.
• Obtain an understanding of internal control relevant to the audit in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Entity's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by management.
1-121
Page 3
• Conclude on the appropriateness of management's use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a 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 conclude that a material uncertainty exists,
we are required to draw attention in our auditors' report to the related disclosures in
the 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.
• 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 our audit.
l
Chartered Professional Accountants, Licensed Public Accountants
Waterloo, Canada
March 20, 2019
1-122
KITCHENER PUBLIC LIBRARY
Statement of Financial Position
December 31, 2018, with comparative information for 2017
2018 2017
Assets
Cash $ 1,698,526 $ 1,333,546
Accounts receivable 119,651 68,482
Investments 50,000 50,000
Endowment investments 100,000 100,000
Prepaid expenses - 25,325
Due from City of Kitchener 279,828 144,461
2,248,005 1,721,814
Financial Liabilities
Accounts payable and accrued liabilities 866,418 482,026
Deferred revenue (note 2) 900,200 758,433
1,766,618 1,240,460
Net financial assets 481,387 481,354
Non -Financial Assets
Tangible capital assets (note 3) 5,712,999 6,125,603
$ 6,194,386 $ 6,606,957
Accumulated Surplus
Invested in tangible capital assets
Endowment investments
Reserves
See accompanying notes to financial statements.
On behalf of the Board:
Director
Director
5,712,999 6,125,603
100,000 100,000
381,387 381,354
$ 6,194,386 $ 6,606,957
1-123
KITCHENER PUBLIC LIBRARY
Statement of Revenues, Expenses and Accumulated Net Revenue
Year ended December 31, 2018, with comparative information for 2017
2018
Budget 2018 2017
Revenue
8,814,500
8,717,515
8,555,081
Grants:
394,700
1,471,942
1,471,028
Province of Ontario
$ 286,755 $
286,755 $
286,755
City of Kitchener:
186,700
214,248
206,857
Operating
10,823,395
10,823,395
10,611,172
Capital and special (note 4)
-
643,403
627,144
Special grants (note 5)
-
115,571
200,084
Fines
225,000
222,261
218,296
Endowment investment
9,850
9,362
7,689
contributions
-
-
100,000
Interest and miscellaneous
28,000
51,850
36,798
Partnerships
27,400
29,202
27,757
Room rental
36,000
39,500
37,773
Photocopy
42,000
44,305
40,994
11,468,550
12,256,242
12,186,773
General and administrative expenses
Personnel costs (Schedule 1)
8,814,500
8,717,515
8,555,081
Resource materials
394,700
1,471,942
1,471,028
Equipment (Schedule 2)
251,000
711,202
692,934
Administrative(Schedule 3)
186,700
214,248
206,857
Facilities costs (Schedule 4)
807,100
807,055
753,621
Processing/bindery
115,000
114,224
119,881
Programs and publicity
(Schedule 5)
76,500
90,428
67,979
General library equipment
9,850
9,362
7,689
Expenditures related to capital
and special (note 4)
813,200
417,266
249,533
Required expenditures related to
special grants (note 5)
-
115,571
200,084
11,468,550
12,668,813
12,324,687
Net deficit
Accumulated net revenue,
beginning of year
(412,571) (137,914)
6,606,957 6,744,871
Accumulated net revenue, end
of year $ - $ 6,194,386 $ 6,606,957
See accompanying notes to financial statements.
1-124
KITCHENER PUBLIC LIBRARY
Statement of Cash Flows
Year ended December 31, 2018, with comparative information for 2017
2018 2017
Operating activities
Net deficit
$ (412,571)
$ (137,914)
Items not involving cash:
Amortization
1,505,421
1,522,113
Changes in non-cash operating working capital
Accounts receivable
(51,169)
4,275
Prepaid expenses
25,325
(25,325)
Due from City of Kitchener
(135,367)
23,958
Accounts payable and accrued liabilities
384,391
(8,430)
Deferred revenue
141,767
72,573
Cash flows from operating activities
1,457,797
1,451,250
Capital activities
Acquisition of tangible capital assets (1,092,817) (1,284,181)
Investing activities:
Endowment investments - (100,000)
Increase in cash 364,980 67,069
Cash, beginning of year 1,333,546 1,266,477
Cash, end of year $ 1,698,526 $ 1,333,546
1-125
KITCHENER PUBLIC LIBRARY
Statement of Changes in Net Financial Assets
Year ended December 31, 2018, with comparative information for 2017
See accompanying notes to financial statements.
1-126
2018
2017
Excess of expenses over revenue
$ (412,571)
$ (137,914)
Acquisition of tangible capital assets
(1,092,817)
(1,284,181)
Amortization of tangible capital assets
1,505,421
1,522,113
Change in net financial assets, before the undernoted
33
100,018
Receipt of endowment investment
-
(100,000)
Change in net financial assets
33
18
Restriction of endowment investment
-
100,000
Net financial assets, beginning of year
481,354
381,336
Net financial assets, end of year
$ 481,387
$ 481,354
See accompanying notes to financial statements.
1-126
KITCHENER PUBLIC LIBRARY
Notes to Financial Statements
Year ended December 31, 2018
Kitchener Public Library (the "Board") was incorporated as a not-for-profit organization, without
share capital, under the laws of Ontario. It is a Board of the City of Kitchener (the "City") and is
dependent on the City for a significant portion of its operating and capital funding.
The Board contributes to the community as a resource and a gateway with sources of information
and works of imagination.
The financial statements of the Board are the representation of management and have been
prepared in accordance with Canadian generally accepted accounting principles for local
governments, as recommended by the Public Sector Accounting Board of the Chartered
Professional Accountants of Canada. Since precise determination of many assets and liabilities is
dependent upon future events, the preparation of periodic financial statements necessarily involves
the use of estimates and approximations. These have been made using careful judgments. The
following is a summary of the significant accounting policies followed in the preparation of these
financial statements.
1. Significant accounting policies:
(a) Accrual basis of accounting:
The accrual basis of accounting recognizes revenues as they become available and
measurable; expenditures are recognized as they are incurred and measurable as a result
of receipt of goods or services and the creation of a legal obligation to pay.
(b) Investments:
Investments consist of bonds and are recorded at amortized cost. Discounts and
premiums arising on the purchase of these investments are amortized over the term of the
investments. When there has been a loss in value that is other than a temporary decline in
value, the respective investment is written down to recognize the loss.
(c) Endowment investments:
Endowment investments received are recorded as financial assets which have the
principal restricted for use.
Income earned on the endowment is used for the purpose specified by the donor. Any
unspent funds earned during the year are deferred for future use.
1-127
KITCHENER PUBLIC LIBRARY
Notes to Financial Statements (continued)
Year ended December 31, 2018
1. Significant accounting policies (continued):
(d) Tangible capital assets:
Tangible capital assets are recorded at cost which includes amounts that are directly
attributable to acquisition, construction, development or betterment of the asset. The cost,
less residual value, of the tangible capital assets, excluding land are amortized on a
straight-line basis over their estimated useful lives as follows:
Furniture, fixtures and equipment
Specialty and other equipment
Computer
Books and audio visual resources
2. Deferred revenue:
10 - 30 years
8 years
3 - 10 years
2 - 10 years
Deferred revenue represents the annual Board's approval of the appropriation of unspent funds,
and are subject to external restrictions as to how the funds are disbursed. These appropriations
are included in required expenses and are subsequently charged directly to operations when
spent.
1-128
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1-129
KITCHENER PUBLIC LIBRARY
Notes to Financial Statements (continued)
Year ended December 31, 2018
4. Capital and special grants:
Each year, the City approves capital and special grants for the Board to purchase specific
capital items.
The capital grants approved for 2018 included $94,000 (2017 - $92,000) for general
renovations, maintenance and upgrading of existing facilities, $284,207 (2017 - $279,262) for
communication infrastructure and technology upgrades, $28,000 (2017 - $27,000) for KPL
Accessibility Fund, $500,000 for the library automation system (2017 - $nil) and $50,874 for a
customer needs survey (2017 - $nil).
The portion of these grants and previous year grants that are included in revenue in 2018, is
$524,501 (2017 - $469,848).
5. Special grants:
In 2018, the Board received various special non-recurring grants and donations totaling
$257,338 (2017 - $271,432). The portion of these grants and previous year special grants that
are included in revenue in 2018, is $115,571 (2017 - $200,084). The remainder is included in
deferred revenue.
6. Pension plan:
The Board makes contributions to the Ontario Municipal Employees Retirement Systems
(OMERS), which is a multi-employer plan, on behalf of its staff. The plan is a defined benefit
plan which specifies the amount of the retirement benefit to be received by the employees
based on the length of service and rate of pay.
During the year, the Board incurred expenses equal to $615,348 (2017 - $596,824) for current
service on behalf of its staff.
1-130
KITCHENER PUBLIC LIBRARY
Schedules of Personnel, Equipment, Administrative, Facilities and Programs and Publicity Expenses
Year ended December 31, 2018, with comparative information for 2017
1-131
2018
2017
Schedule 1 - Personnel
Personnel:
Salaries
$
7,104,484
$
6,957,267
Health benefits
445,941
450,844
Pension benefits
900,269
877,930
Employment insurance
134,779
129,962
WSIB
24,133
21,824
Sick leave reserve
70,000
70,000
Staff training
37,909
47,254
$
8,717,515
$
8,555,081
Schedule 2 - Equipment
Equipment:
Technology
$
240,380
$
241,148
Equipment maintenance
18,762
21,238
Amortization
452,060
430,548
$
711,202
$
692,934
Schedule 3 - Administrative
Administrative:
Postage and delivery
$
6,411
$
7,347
Insurance
19,212
18,835
Professional services
52,448
48,505
General business
60,531
55,063
Telephone
23,156
25,360
Stationery
52,490
51,747
$
214,248
$
206,857
Schedule 4 - Facilities
Facilities:
Facilities expenses
$
463,425
$
387,952
Country Hills building
43,673
49,386
Main utilities
253,286
266,282
Forest Heights utilities
24,137
23,828
Pioneer Park building
21,188
23,129
Grand River Stanley Park building
1,346
3,044
$
807,055
$
753,621
1-131
KITCHENER PUBLIC LIBRARY
Schedule 5 - Programs and Publicity
Year ended December 31, 2018, with comparative information for 2017
Programs and publicity:
Promotional
Public programs
2018 2017
$ 49,023 $ 36,810
41,405 31,169
$ 90,428 $ 67,979
1-132
KPMG LLP
1l5King Street South
2nd Floor
Waterloo ON N2J5A3
Canada
Tel 519-747-8800
Fax 51Q'747-8830
To the 0nachore of The Centre In The Square Inc.
Opinion
We have audited the financial statements of The Centre In The Square Inc. (the
Centre).which comprise:
n the statement offinancial position oaatend ofDecember 31.2O1D
° the statement ofoperations for the year then ended
m the statement of changes innet financial assets for the year then ended
* the statement ofcash flows for the year then ended
° and notes to the financial atabamanta, including a summary of significant
accounting policies
(Hereinafter referred toamthe "financial statements").
In our opinion. the accompanying financial ahabamanta present foidy, in all material
respects, the financial position of the Centre as at end of December 31, 2018, and its
naauko of operations, its changes in net financial aeuado and he 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 /or the Audit of the Financial Statements" section of
our auditors' report.
We are independent of the Centre in accordance with the ethical requirements that
are pa|avent 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 basis for our opinion.
KPMG LLP i,,c"=a"".=m^liability w^,e"^.'and ""embe,^m,*m"KPMG m�tw°,^w*deae"dem"=ir^°,firms affiliated with KPMG
I"m=*~*n-parmi-)rmwo"Swiss °t*
KPMG Ca,,ada aro,id- -,r—o, to KPMG LLP.
Responsibilities ofManagement 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 onntm| as management determines is necessary to enable the
preparation of financial statements that are free from material mionta(ement,
whether due tofraud or error.
In preparing the financial aiatamente, management is responsible for assessing the
Centre's ability to continue as a going concern, disclosing as upp|ioub|e, matters
related to going concern and using the going concern basis of accounting unless
management either intends to liquidate the Centre or to cease operations, or has no
realistic alternative but todoso.
Those charged with governance are responsible for overseeing the Centre's
financial reporting process.
Auditors' Responsibilities for the Audit ofthe Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as awho|u are free from material miaetatement, whether due tnfraud or
error, and toissue enauditors' report that includes our opinion.
Reasonable maoumnoe is a high level of assurance, but is not aguarantee that un
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 orinthe aggregate, they could reasonably beexpected to influence the
economic decisions of users taken on the basis of the financial statements.
As pert of an audit in accordance with Canadian generally accepted auditing
standordo, we exercise professional judgment and maintain professional skepticism
throughout the audit.
We also:
m
Identify and aeoeao the risks of material misstatement of the financial
otdemente, whether due to fraud or error, design and perform audit procedures
responsive to those hnka, and obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion.
The risk ofnot detecting o msAehn| misstatement resulting from fraud is higher
than for one resulting from ennr, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control.
w Obtain on understanding of internal control relevant to the audit in order to
design audit procedures that are appropriate in the oimumuhancee, but not for
the purpose of expressing an opinion on the effectiveness of the Centre's
°
Evaluate the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related diao|oauma made by
management.
v
Conclude on the appropriateness of management's use of the going concern
basis of accounting and, based on the audit evidence obtainad, whether a
material uncertainty exists related to events or conditions that may oeat
significant doubt onthe Centre's ability tocontinue maagoing concern. If we
conclude that a material uncertainty exioto, we are required to draw attention in
our auditors' report to the related disclosures in the financial statements or, if
such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the dobe mfour auditors' report.
Hnwever, future events or conditions may cause the Centre to cease to
continue aaagoing concern.
w
Evaluate the overall preeantakon, structure and content of the 0nende|
atatemento, including the dioc|oeuree, and whether the financial statements
represent the underlying transactions and events in a manner that achieves fair
presentation.
"
Communicate with those charged with governance nsAavding, 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
our audit.
Chartered Professional Accountants, Licensed Public Accountants
kAw, 40X"" /4ho
Waterloo, Canada
March 2G'2O19
THE CENTRE IN THE SQUARE INC.
Statement of Financial Position
December 31, 2018, with comparative information for 2017
Net assets $ 14,278,133 $ 13,228,177
Accumulated Surplus
Operating fund activities (note 7) $ $
Reserves - Capital (notes 8 and 12) 878,852 508,111
Reserves - Performance Development (note 9)
Reserves - Sustainability (notes 9 and 12) 206,863 203,538
Reserves - Restricted (notes 10 and 12) 569,972 558,867
Invested in tangible capital assets 12,622,446 11,957,661
Accumulated surplus $ 14,278,133 $ 13,228,177
See accompanying notes to financial statements.
On b If of the Board.
Director
d erector
�µ
1-136
2018
2017
(restated — note 2)
Net Assets
Financial assets:
Cash
$ 4,789,533
$ 3,438,579
Due from The City of Kitchener
92,754
579,928
Accounts receivable
123,419
203,233
Interest receivable
2,042
1,389
Costs to be recovered
308,546
366,072
Investments (note 3)
1,389,705
1,371,508
Total financial assets
6,705,999
5,960,709
Financial liabilities:
Accounts payable and accrued liabilities
3,060,393
2,324,593
Deferred revenue (note 4)
2,321,923
2,652,048
5,382,316
4,976,641
Net financial assets
1,323,683
984,068
Non-financial assets:
Tangible capital assets (note 5)
12,622,446
11,957,661
Inventories (note 6)
81,868
61,758
Prepaid expenses
250,136
224,690
12,954,450
12,244,109
Net assets $ 14,278,133 $ 13,228,177
Accumulated Surplus
Operating fund activities (note 7) $ $
Reserves - Capital (notes 8 and 12) 878,852 508,111
Reserves - Performance Development (note 9)
Reserves - Sustainability (notes 9 and 12) 206,863 203,538
Reserves - Restricted (notes 10 and 12) 569,972 558,867
Invested in tangible capital assets 12,622,446 11,957,661
Accumulated surplus $ 14,278,133 $ 13,228,177
See accompanying notes to financial statements.
On b If of the Board.
Director
d erector
�µ
1-136
THE CENTRE IN THE SQUARE INC.
Statement of Operations
Year ended December 31, 2018, with comparative information for 2017
Budget 2018 Actual 2018 Actual 2017
(restated - note 2)
Revenues
Performances
$ 6,362,800
$ 7,659,122 $
6,743,390
Rent - Kitchener -Waterloo Symphony
101,915
102,485
98,170
Capital reserve fund surcharge (note 8)
315,000
357,438
330,202
Grants from The City of Kitchener - Operating
2,000,000
2,000,000
2,000,000
Grants from The City of Kitchener- Capital
3,232,969
1,101,258
2,655,965
Grants from other governments - Operating
_
51,700
40,993
Grants from other governments - Capital
1,206,208
285,025
1,006,552
Donations
2,000
16,888
10,240
Investment income
64,000
94,003
60,402
Sponsorships and memberships
149,234
85,921
102,293
Rent - Kitchener -Waterloo Art Gallery
99,185
99,185
97,240
Lottery revenue
9,822
7,666
Other
132,300
508,243
439,785
Gain (loss) on investments
-
(924)
44,712
Gain (loss) gain on sale of tangible capital assets
-
3,000
Portion of operating gain for The City
of Kitchener
-
(139,217)
Total revenue
13,665,611
12,370,166
13,501,393
Expenses:
Direct:
Performances
5,272,800
6,736,435
5,767,459
Operating:
Administration
569,527
531,002
451,720
Marketing
101,050
130,685
101,134
Lottery expenses
-
9,892
7,648
Occupancy
826,462
809,763
771,013
Salaries and wages
2,640,501
3,017,662
3,151,549
Recoveries -performances
(541,464)
(1,015,340)
(964,513)
Amortization
700,000
920,168
818,400
Write down of tangible capital assets
612,500
158,340
11,863
Reserves expenditures (note 12)
15,000
21,603
4,855
Total expenses
10,196,376
11,320,210
10,121,128
Excess of revenue over expenses
3,469,235
1,049,956
3,380,265
Accumulated surplus as previously
stated, beginning of year
13,124,276
13,124,276
9,731,390
Prior period adjustment (note 2)
103,901
103,901
116,522
Accumulated surplus restated, beginning of year
13,228,177
13,228,177
9,847,912
Accumulated surplus, end of year
$ 16,697,412
$ 14,278,133 $
13,228,177
See accompanying notes to financial statements.
1-137
THE CENTRE IN THE SQUARE INC.
Statement of Change in Net Financial Assets
Year ended December 31, 2018, with comparative information for 2017
2018 2017
(restated — note 2)
Excess of revenue over expenses
$ 1,049,956
$ 3,380,265
Acquisition of tangible capital assets
(1,743,293)
(4,270,122)
Amortization of tangible capital assets
920,168
818,400
Write-downs of tangible capital assets
158,340
11,863
385,171
(59,594)
Net acquisition of supplies inventory
(20,110)
(10,264)
Use (acquisition) of prepaid expenses
(25,446)
1,686
(45,556)
(8,578)
Increase (decrease) in net financial assets 339,615 (68,172)
Net financial assets, beginning of year
984,068 1,052,240
Net financial assets, end of year $ 1,323,683 $ 984,068
See accompanying notes to financial statements.
1-138
THE CENTRE IN THE SQUARE INC.
Statement of Cash Flows
Year ended December 31, 2018, with comparative information for 2017
Operating activities:
Excess of revenue over expenses
Items not involving cash:
Amortization
Write down of tangible capital assets
Change in non-cash operating working capital
2018 2017
(restated — note 2)
$ 1,049,956 $
3,380,265
920,168
818,400
158,340
11,863
983,980
(327,427)
Cash provided by operating activities 3,112,444 3,883,101
Capital activities.
Cash used to acquire tangible capital assets (1,743,293) (4,270,122)
Investing activities:
Investments (18,197) (60,124)
Increase (decrease) in cash 1,350,954 (447,145)
Cash, beginning of year 3,438,579 3,885,724
Cash, end of year $ 4,789,533 $ 3,438,579
See accompanying notes to financial statements.
1-139
THE CENTRE IN THE SQUARE INC.
Notes to Financial Statements
Year ended December 31, 2018
The mission of The Centre In The Square Inc. ("The Centre"), is to create memorable experiences. It
is incorporated as a not-for-profit corporation without share capital, is exempt from income taxes
under the Income Tax Act, and is a registered charity. The Centre is a governed by a Board of
Directors and receives an operating grant from the City of Kitchener ("the City").
1. Significant accounting policies:
The financial statements of The Centre are the representation of management and have been
prepared in accordance with Canadian generally accepted accounting principles for local
governments as established by the Public Sector Accounting Board (PSAB) of the Chartered
Professional Accountants of Canada. Since precise determination of many assets and liabilities
is dependent upon future events, the preparation of periodic financial statements necessarily
involves the use of estimates and approximations. These have been made using careful
judgment.
(a) Tangible capital assets:
Tangible capital assets are recorded at cost which includes amounts that are directly
attributable to acquisition, construction, development or betterment of the asset. The cost,
less residual value, of the tangible capital assets, excluding land, are amortized on a straight-
line basis over their estimated useful lives as follows:
Asset Rate
Building
5 - 100 years
Equipment
4 - 50 years
Computers
3 - 10 years
Software
3 years
Site
2 - 50 years
(b) Accrual basis of accounting:
The accrual basis of accounting, recognizes revenues as they become available and
measurable; expenditures are recognized as they are incurred and measurable as a result of
receipt of goods or services and the creation of a legal obligation to pay.
(c) Inventories:
Bar stock inventories are valued at the most recent replacement cost. Supplies inventories
are valued at the lower of cost and net realizable value on a first -in, first -out basis. Net
realizable value is defined as replacement cost.
1-140
THE CENTRE IN THE SQUARE INC.
Notes to Financial Statements, continued
Year ended December 31, 2018
1. Significant accounting policies (continued):
(d) Investments.
Investments are recorded at the lower of cost or market value on a fund portfolio basis.
Interest income and all expenses are fully accrued.
(e) Deferred revenue.
Performance revenue is recognized when the show occurs. Deferred gift certificate revenue
is an estimate based upon gift certificate sales during the period from July 1 to December 31
of the current year.
2. Prior year adjustment:
During the year, The Centre adjusted their accounting records for tangible capital assets that had
previously been written off in error but are still in use as of December 31, 2018.
This adjustment is applied retrospectively and is detailed below.
Statement of Financial Position
As previously Restated as at
presented Restatements December 31, 2017
Tangible capital assets $ 11,853,760 $ 103,901 $ 11,957,661
Invested in tangible capital assets 11,853,760 103,901 11,957,661
Statement of Operations
As previously Restated as at
presented Restatements December 31, 2017
Amortization $ 805,779 $ 12,621 $ 818,400
Statement of Change in Net Financial Assets
As previously Restated as at
presented Restatements December 31, 2017
Excess of revenue over expenses $ 3,392,886 $ (12,621) $ 3,380,265
Amortization of tangible capital assets 805,779 12,621 818,400
Statement of Cash Flows
As previously Restated as at
presented Restatements December 31, 2016
Excess of revenue over expenses $ 3,392,886 $ (12,621) $ 3,380,265
Amortization of tangible capital assets 805,779 12,621 818,400
THE CENTRE IN THE SQUARE INC.
Notes to Financial Statements, continued
Year ended December 31, 2018
3. Investments:
Investments consist of:
4. Deferred revenue:
Deferred revenue consists of the following:
2018 2017
Sponsorships
Carrying value
Market
Carrying value
Market
2,312,882
2018
2018
2017
2017
Cash
$ 2,321
$ 2,321
$ 4,852
$ 4,852
GICs
774,645
774,645
763,631
763,631
Bonds
328,429
324,446
270,267
266,707
Shares
284,310
413,328
332,758
514,227
$ 1,389,705
$ 1,514,740
$ 1,371,508
$ 1,549,417
4. Deferred revenue:
Deferred revenue consists of the following:
2018 2017
Sponsorships
$ 24,000
$ 24,167
Performances
2,081,308
2,312,882
Gift certificates
38,710
41,015
Membership
6,540
6,346
Other
171,365
267,638
$ 2,321,923 $ 2,652,048
1-142
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1-144
THE CENTRE IN THE SQUARE INC.
Notes to Financial Statements, continued
Year ended December 31, 2018
6. Inventories:
Inventories consist of the following:
2018 2017
Bar stock $ 76,594 $ 56,952
Supplies 5,274 4,806
$ 81,868 $ 61,758
7. Operating fund activities:
Revenues
Performances
Rent - Kitchener -Waterloo Symphony
Grants from The City of Kitchener
Grants, other Governments and Foundations
Donations
Investment income
Sponsorships and memberships
Rent - Kitchener -Waterloo Art Gallery
Lottery revenue
Other
Budget
Actual
Actual
2018
2018
2017
$ 6,362,800
$ 7,659,122
$ 6,743,390
101,915
102,485
98,170
2,000,000
2,000,000
2,000,000
-
51,700
40,993
-
14,491
7,913
24,000
59,764
26,994
149,234
85,921
102,293
99,185
99,185
97,240
809,763
9,822
7,666
132,300
508,243
439,785
Total revenue 8,869,434 10,590,733 9,564,444
Current fund expenditures:
Direct
Performances
5,272,800
6,736,435
5,767,459
Operating
Administration
569,527
531,002
451,720
Marketing
101,050
130,685
101,134
Lottery expenses
_
9,892
7,648
Occupancy
826,462
809,763
771,013
Salaries and wages
2,640,501
3,017,662
3,151,549
Recoveries - performances
(541,464)
(1,015,340)
(964,513)
Total current fund expenditures
8,868,876
10,220,099
9,286,010
Operating fund net revenues before amortization
Transfer to reserve funds
Transfer to The City of Kitchener
558 370,634 278,434
(558) (370,634) (139,217)
- (139,217)
Fund balances, end of year $ - $ - $
1-145
THE CENTRE IN THE SQUARE INC.
Notes to Financial Statements, continued
Year ended December 31, 2018
8. Capital Reserve Fund Surcharge:
The Capital Reserve Fund represents the collection of a surcharge from sale of tickets.
At the direction of the Board of Directors, expenditures from the Capital Reserve Fund are made
to finance, in whole or in part, major capital items, replacements and major maintenance projects.
In 2018, the Centre's Board of Directors approved transfers out of the Capital Reserve Fund for
major capital asset projects of $1,743,293 (2017 - $4,270,122).
9. Performance Development and Sustainability Reserve Funds:
At the direction of the Board of Directors, transfers are made to and from the Performance
Development Reserve and Sustainability Funds, equal to one-half of the annual operating net
revenue.
In 2018, The Centre's Board of Directors approved the transfer of the funds to the Sustainability
Fund of $nil (2017 - $139,217) from the operating fund.
10. Restricted Fund:
The Restricted Fund was set up by the Board of Directors of The Centre in 2000 by a transfer of
investments from the Sustainability Reserve Fund in accordance with the Restricted Fund Policy.
Income from this fund is to be used for capital requirements, special projects and/or new
programming initiatives that help further The Centre's mandate.
11. 2018 budget:
The original budgeted figures were approved by the Board of Directors at their meeting in August
2017 and included certain expenses and offsetting recoveries on a net basis. For purposes of
presentation in these financial statements, these items have been shown as gross amounts.
1-146
THE CENTRE IN THE SQUARE INC.
Notes to Financial Statements, continued
Year ended December 31, 2018
12. Schedule of reserve funds:
13. Comparative information:
The financial statements have been reclassified, where applicable, to conform to the presentation
used in the current year. The changes do not affect prior year's excess of revenue over
expenses.
Performance
Total
Development
Capital
Sustainability
Restricted
Funds
Revenue:
Donations and sundry
$
$ _
$
$ 2,397 $
2,397
Grants from The City
of Kitchener
1,101,258
_
1,101,258
Grants from the
other governments
285,025
285,025
Ticket surcharge
-
357,438
-
357,438
Investment income
11,272
3,325
19,642
34,239
Loss on investments
_
(924)
(924)
Total revenue
1,754,993
3,325
21,115
1,779,433
Expenses:
Professional fees
-
_
10,010
10,010
Capital costs
-
11,593
-
11,593
Total expenses
_
11,593
10,010
21,603
Excess of revenue
overexpenses
1,743,400
3,325
11,105
1,757,830
Transfer to accumulated
surplus - tangible
capital assets
(1,743,293)
-
(1,743,293)
Other transfers
370,634
370,634
Balance, beginning of year
508,111
203,538
558,867
1,270,516
Balance, end of year
$ -
$ 878,852
$ 206,863
$ 569,972 $
1,655,687
13. Comparative information:
The financial statements have been reclassified, where applicable, to conform to the presentation
used in the current year. The changes do not affect prior year's excess of revenue over
expenses.
KPMG LLP
115 King Street South
2nd Floor
Waterloo ON N2J 5A3
Canada
Tel 519-747-8800
Fax 519-747-8830
Corporation of the City of
.e_
Inhabitantt and Ratepayers of The
statements of the Corporation of the City of
ie Entity), which comprise:
of operations and accumulated surplus for the year
to as the "financial statements").
rpects,
,the accompanying financial statements presents fairly, in all
the statement of operations and accumulated surplus for the
er 31, 2018 in accordance with Canadian public sector
year enaed Decemb
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 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 Manageme nd Those Charged with
Governance for the Financial a is
Management is responsible for
financial statements in accor
standards and for such internal c
to enable the preparat� of fir
misstatement, whether
preparation " fair presentation of the
� Canadian public sector accounting
management determines is necessary
itements that are free from material
In preparing the f ancial ents, anagement is responsible for assessing
the Entity's cont a as a going concern, disclosing as applicable,
matters re d to g g con and using the going concern basis of accounting
unless mi e ends to liquidate the Entity or to cease operations,
or has, rea alternative but to do so.
Audi .
Statements
Aj�, governance are responsible for overseeing the Entity's
process.
Responsibilities for the Audit of the Financial
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 the financial statements.
1-149
J-gi,imi
Page 3
As part of an audit in accordance with Canadian generally accepted auditing
standards, we exercise professional judgment and maintain professional
skepticism throughout the audit.
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
higher than for one resulting from
forgery, intentional omissions, misrqo
control. uillllllllu^
Obtain an understanding
design audit procedures that
the purpose of ex ing
internal control.
�atement resulting from fraud is
as fraud may involve collusion,
Wons, or the override of internal
trol relevant to the audit in order to
'iate in the circumstances, but not for
on the effectiveness of the Entity's
of accounting policies used and the
estimates and related disclosures made by
Doauditors'
e appropriateness of management's use of the going concern
cong and, based on the audit evidence obtained, whether a
certainty exists related to events or conditions that may cast
oubt on the Entitys ability to continue as a going concern. If we
ata material uncertainty exists, we are required to draw attention
report to the related disclosures in the 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.
1-150
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 our audit.
Chartered Professional Accountants, Liqgpedftlolic Accountants
Waterloo, Canada
1-151
THE CORPORATION OF THE CITY OF KITCHENER
GASWORKS ENTERPRISE
Statement of Operations and Accumulated Surplus
For the Year Ended December 31, 2018
2018 2018 2017
Budget
DELIVERY OPERATIONS
Gas delivery
Balance, beginning of year
152,958,112
Revenue $
38,541,228 $
40,128,596 $
40,744,283
Expenses
19,383,722
19,378,816
18,872,786
Balance end of year
19,157,506
20,749,780
21,871,497
Other programs
(Customer service, Rental water heaters & Financing)
u.
6,740,563
8,338,456
Revenue
10,548
143,095
10,474,065
10,088,625
Expenses
6,7 35
(3,464,350)
6,852,310
6,970,815
-
7,784
3,621,755
3,117,810
Dispatch lull
6,740,563
Vu„
Revenue
011"55
597,955
574,152
Expenses
35,055
597,955
574,152
Excess of revenue over expenses
Accumulated surplus - Delivery
Balance, beginning of year
152,958,112
lull
Interest revenueCar
20,599
Carbon closeout
21,804,187
Transfer to gas investment re
(14,353,050)
Add excess of revenue ov ense
22,985,290
Balance end of year
161,610,951
F,
152,958,112
47,030
(200,970)
(14,353,050)
24,371,535
162.822.657
24.989
142,040,831
(408)
(14,071,618)
24,989,307
152.958.112
SUPPLY OPERATIONS
Revenue
28,907,288
31,649,027
21,804,187
Expenses
32,502,612
33,713,101
25,268,537
Excess of revenue over expenses
(3,595,324)
(2,064,074)
(3,464,350)
Accumulated surplus - Supply
Balance, beginning of year
6,740,563
6,740,563
8,338,456
Interest revenue
92,009
143,095
122,905
Add excess of revenue over expenses
(3,595,324)
(2,064,074)
(3,464,350)
Other
-
-
1,743,552
Balance, end of year
3,237,248
4,819,584
6,740,563
1-152
THE CORPORATION OF THE CITY OF KITCHENER
GASWORKS ENTERPRISE
Statement of Operations and Accumulated Surplus
For the Year Ended December 31, 2018
2018 2018 2017
Budget
TRANSPORTATION OPERATIONS
Revenue
- - 7,290,586
Expenses
- - 7,331,221
Excess of revenue over expenses
- - (40,635)
Accumulated surplus - Transportation
Balance, beginning of year
- - (828,250)
Interest revenue
- - (12,208)
u
Add excess of revenue over expenses
III
- (40,635)
Other mullllll
- 881,093
Balance, end of year
CARBON OPERATIONS
Revenue
Expenses
Excess of revenue over expenses
Accumulated Surplus - Carbon
Balance, beginning of year
Carbon interest
Add excess of revenue over expe
Transfer to delivery stabilization
Balance. end of vear mullllllllll
,862
7,412,884
7,719,099
1306.215
9,116,117
9,007,007
109.110
103,007 103,007 (6,014)
861 2,238 (89)
254,459 (306,215) 109,110
- 200,970 -
$ 358,327 $ - $ 103
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 necessarily involves the use of estimates based on management's
judgment, particularly when transactions affecting the current accounting period cannot be finalized
with certainty until future periods. The financial statements have been prepared within reasonable limits
of materiality and in light of information available up to June 24, 2019.
Management maintained a system of internal controls designed to
the assets were safeguarded and that reliable information was avail
included formal policies and procedures and an organizatio
appropriate delegation of authority and segregation of responsib�l l
KITCHENER GENERATION CORPORATION
On behalf of management,
Jonathan Lautenbach, CPA, CGA
Chief Financial Officer and City Trey
June 24, 2019
Kitchener, Canada
reasonable assurance that
a timely basis. The system
are that provided for the
1-154
KITCHENER GENERATION CORPORATION
Statement of Financial Position
As at December 31, 2018
(Unaudited)
2018 2017
Financial assets
Accounts receivable $ 7,029 $ 13,354
7.029 13.354
Liabilities
Due to The Corporation of the City of Kitchener 8,547 13,387
Long-term debt (Note 3) 2,596,631 2,819,442
2,605,178 2,832,829
Net financial debt (2,598,149) (2,819,475)
Non-financial assets
Tangible capital assets (Note
Total non-current assets
Accumulated surplus
The accompanying notes are an integral part of these financial
787,020
3,019,272
787,020
3,019,272
188,871 $
199,797
1-155
KITCHENER GENERATION CORPORATION
Statement of Operations
For the Year Ended December 31, 2018
(Unaudited)
2018 2018 2017
Budget
Revenue
Sale of electricity $ 385,000 $ 391,313 $ 390,542
Total revenue 385.000 391.313 390.542
Expenses
Maintenance
20,808
3,976
3,003
Amortization
232,252
232,252
232,252
Total expenses
253,060
236,228
235,255
Surplus before interest and provision for
payments -in -lieu of corporate income taxes
131,9
155,085
155,287
Interest expense
141J9
141,254
151,880
Surplus/(deficit) before provision for payments-
uo
in -lieu of corporate income taxes
Provision for payments -in -lieu of corporate income
lull
1,489)
Vu 13,831
3,407
taxes
-
-
-
Annual suralus/Idefic
$ 13,831 $
The accompanying notes are an integral part of these fi
1-156
KITCHENER GENERATION CORPORATION
Statement of Change in Net Financial Debt
For the Year Ended December 31, 2018
(Unaudited)
Annual surplus
2018 2017
13,831 $ 3,407
Change in share capital
(24,757)
(23,566)
Amortization of tangible capital assets
232,252
232,252
Change in net financial debt
221,326
212,093
Net financial debt, beginning of year
(2,819,475)
(3,031,568)
Net financial debt, end of year
$ (2,598,149)
$ (2,819,475)
The accompanying notes are an integral part of these financial statements.
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IM
1-157
KITCHENER GENERATION CORPORATION
Statement of Cash Flow
For the Year Ended December 31, 2018
(Unaudited)
2018 2017
Operating
Annual surplus $ 13,831 $ 3,407
Items not involving cash
Amortization 232,252 232,252
Change in non-cash assets and liabilities
Trade and other accounts receivable
6,325
(8,471)
Accounts payable and accrued liabilities
(4,840)
8,471
Net change in cash from operating activities
247,568
235,659
Financing
a
Change in contributed capital
III
(24,757)
(23,566)
Change in long-term debt
(222,811)
212,093
Net change in cash from financing activities
247,568
(235,659)
Net change in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash eauivalents. end of vear
um mulllllll $ - $
-
The accompanying notes are an integral part of these
1-158
KITCHENER GENERATION CORPORATION
Notes to the Financial Statements
For the Year Ended December 31, 2018
(Unaudited)
1. Incorporation
On December 9, 2011 KITCHENER GENERATION CORPORATION (the company) was incorporated under
the Business Corporation Act (Ontario). Effective January 1, 2012, The Corporation of the City of Kitchener
transferred the solar roof asset constructed on the surface of the Kitchener Operations Facility to the Company
in exchange for 100% of the Company's common shares and interest bearing debt.
2. Summary of significant accounting policies
a. Basis of accounting
The financial statements have been prepared by management inordance with Canadian generally
accepted accounting principles for local governments as established be
Public Sector Accounting Board of
the Chartered Professional Accountants of Canada. muillllll
b. Tangible capital assets
Tangible capital assets are recorded at cost which incl Illi "all amounts
acquisition, construction, development or betterment of t sset. e cost les tare directly attributable to
residual value of the tangible
capital asset is amortized on a straight-line basis over its a III a seful life of nineteen years.
c. Revenue recognition
The Company records revenue from the sale of el is b of regular meter readings and estimates
of energy generation since the last meter reading to o °° """ ear.
d. Use of estimates
Since precise determination of ma
periodic financial statements nec&
made using careful judgments„,”
3. Long-term debt
Effective January 1, 2012 tf
the City of Kitchener. For
Interest is calculated at the
- $151,880).
4. Tangible capital assets
Opening balance
Additions
Amortization expense
w
is dependent upon future events, the preparation of
e of estimates and approximations. These have been
could differ from these estimates.
curred an unsecured promissory note payable to The Corporation of
debt, payments are made annually including interest and principal.
5.01 % per annum. Interest paid in 2018 amounted to $141,254 (2017
Accumulated Net Book
Cost Amortization Value
$ 4,412,784 $ (1,393,512) $ 3,019,272
(232,252) (232,252)
Disposals - - -
Ending balance $ 4,412,784 $ (1,625,764) $ 2,787,020
1-159
KITCHENER GENERATION CORPORATION
Notes to the Financial Statements
For the Year Ended December 31, 2018
(Unaudited)
5. Accumulated surplus
The accumulated surplus consists of the following:
2018 2017
Share capital - common shares (Note 6) $ 288,514 $ 313,271
Retained earnings (99,643) (113,474)
$ 188,871 $ 199,797
6. Share capital
Authorized
Unlimited common shares
Issued
1,000 common shares
1-160
-1 V j1p F� I
KPMG LLP
115 King Street South
2nd Floor
Waterloo ON N2J 5A3 Canada
Tel 519-747-8800
Fax 519-747-8830
INDEPENDENT AUDITORS' REPORT
To the Shareholders of Kitchener Power Corporation
Opinion
We have audited the consolidated financial statements of Kitchener Power Corporation (the
Entity), which comprise:
• the consolidated statement of financial position as at December 31, 2018
• the consolidated statement of comprehensive income for the year then ended
• the consolidated statement of changes in equity for the year then ended
• the consolidated statement of cash flows for the year then ended
• and notes to the consolidated financial statements, including a summary of significant
accounting policies
(Hereinafter referred to as the "financial statements").
In our opinion, the accompanying financial statements present fairly, in all material respects,
the consolidated financial position of the Entity as December 31, 2018, and its consolidated
financial performance and its consolidated cash flows for the year then ended in accordance
with International Financial Reporting Standards (IFRS).
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 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.
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. 3.
-1 V Jip F� I
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 International Financial Reporting Standards (IFRS), 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 consolidated financial statements, management is responsible for
assessing 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 unless
management either intends to liquidate the Entity or to cease operations, or has no realistic
alternative but to do so.
Those charged with governance are responsible for overseeing the Entity's financial
reporting process.
Auditors' Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated 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 the consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we
exercise professional judgment and maintain professional skepticism throughout the audit.
We also:
• Identify and assess the risks of material misstatement of the consolidated 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.
1-162
-1 V j1p F� I
Page 3
• Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Entity's internal control.
• 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 concern basis of
accounting and, based on the audit evidence obtained, whether a 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 conclude that a material uncertainty exists,
we are required to draw attention in our auditors' report to the related disclosures in the
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.
• Evaluate the overall presentation, structure and content of the financial statements,
including the disclosures, and whetherthe 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 our audit.
• Obtain sufficient appropriate audit evidence regarding the financial information of the
entities or business activities within the Group Entity to express an opinion on the
financial statements. We are responsible for the direction, supervision and performance
of the group audit. We remain solely responsible for our audit opinion.
/410
Chartered Professional Accountants, Licensed Public Accountants
Waterloo, Canada
March 22, 2019
1-163
KITCHENER POWER CORP.
Consolidated Statement of Financial Position
As at December 31, 2018, with comparative information for 2017
(Expressed in thousands of dollars)
Regulatory deferral account debit balances 10 7,366 10,073
Total assets and regulatory assets $ 320,287 $ 317,480
1-164
Note
2018
2017
Assets
Current assets
Cash
4 $
22,199 $
29,045
Accounts receivable
5
18,540
18,203
Unbilled revenue
22,122
21,854
Inventory
6
1,949
2,209
Prepaid expenses
1,044
809
Income taxes receivable
8
-
Total current assets
65,862
72,120
Non-current assets:
Property, plant and equipment
7
245,229
234,215
Intangible assets
8
716
890
Deferred tax assets
9
147
140
Investment in subsidiaries and associates
967
42
Total non-current assets
247,059
235,287
Total assets
312,921
307,407
Regulatory deferral account debit balances 10 7,366 10,073
Total assets and regulatory assets $ 320,287 $ 317,480
1-164
KITCHENER POWER CORP.
Consolidated Statement of Financial Position
Year ended December 31, 2018, with comparative information for 2017
(Expressed in thousands of dollars)
Shareholders' equity:
Share capital - common shares
Retained earnings
Accumulated other comprehensive loss
Total shareholder's equity
14 66,389
Note
2018
2017
Liabilities and Shareholder's
Equity
154,850
147,968
Current liabilities:
Accounts payable and accrued liabilities
$
22,656 $
26,057
Income taxes payable
449
336
Current portion of long-term debt
11
1,176
1,127
Current portion customer deposits
13
8,123
8,638
Current portion of deferred re\/enue
855
732
Total current liabilities
33,259
36,890
Non-current liabilities:
Long-term debt
11
77,569
78,745
Employee future benefits
12
5,305
5,213
Long-term customer deposits
13
6,136
5,886
Deferred re\/enue
32,910
29,118
Deferred tax liablilty
9
2,021
1,535
Total non-current liabilities
123,941
120,497
Total liabilities
157,200
157,387
Shareholders' equity:
Share capital - common shares
Retained earnings
Accumulated other comprehensive loss
Total shareholder's equity
14 66,389
66,389
88,739
81,857
(278)
(278)
154,850
147,968
Total liabilities and shareholder's equity 312,050 305,355
Regulatory deferral account credit balances 10 6,950 11,021
Deferred taxes associated with regulatory accounts 1,287 1,104
Total equity, liabilities and shareholder's equity $ 320,287 $ 317,480
The accompanying notes are an integral part of these financial statements.
On behalf of the Board:
Director Director
1-165
KITCHENER POWER CORP.
Consolidated Statement of Comprehensive Income
Year ended December 31, 2018, with comparative information for 2017
(Expressed in thousands of dollars)
Income before income taxes
Note 2018
2017
Energy sales
$ 197,253 $
204,010
Cost of energy sold
194,142
204,075
in regulatory deferral account balances
3,111
(65)
Other operating revenue
Distribution sales
38,354
40,508
Other income
15 2,595
2,785
Net operating revenue
44,060
43,228
Expenses:
10,953
10,166
Operations and maintenance
11,661
10,674
Customer services
4,545
4,230
Administration
4,180
4,204
Amortization
9,104
8,552
29,490
27,660
Other
Energy conservation program revenue
(4,971)
(3,523)
Energy conservation program expense
3,674
3,523
Net energy conservation programs
(1,297)
-
Finance income
16 (498)
(301)
Finance charges
16 4,117
4,109
Net finance costs
3,619
3,808
Income before income taxes
12,248
11,760
Income tax expense
9 1,934
1,823
Income for the year before movements
in regulatory deferral account balances
10,314
9,937
Net movement in regulatory deferral account balances
related to profit or loss and the related deferred
tax movement
10 639
229
Income for the year and net movements in
regulatory deferral account balances
10,953
10,166
Other comprehensive loss
12 -
(33)
Total comprehensive income for the year
$ 10,953 $
10,133
The accompanying notes are an integral part of these financial statements
1-166
KITCHENER POWER CORP.
Consolidated Statement of Changes in Equity
Year ended December 31, 2018, with comparative information for 2017
(Expressed in thousands of dollars)
Net income
Dividends
10,953 10,953
(4,071) (4,071)
Balance at December 31, 2018 $ 66,389 $ (278) $ 88,739 $ 154,850
The accompanying notes are an integral part of these financial statements.
1-167
Accumulated
Share capital other
Retained
Total
comprehensive
earnings
income (loss)
Balance at January 1, 2017
$ 66,389 $ (245)
$ 75,886 $
142,030
Net income
-
10,166
10,166
Other comprehensive income
(33)
-
(33)
Dividends
-
(4,195)
(4,195)
Balance at December 31, 2017
66,389 (278)
81,857
147,968
Net income
Dividends
10,953 10,953
(4,071) (4,071)
Balance at December 31, 2018 $ 66,389 $ (278) $ 88,739 $ 154,850
The accompanying notes are an integral part of these financial statements.
1-167
KITCHENER POWER CORP.
Consolidated Statement of Cash Flows
Year ended December 31, 2018, with comparative information for 2017
(Expressed in thousands of dollars)
Cash flows from investing activities:
Proceeds on disposals of property, plant and equipment 136 29
Purchase of property, plant and equipment (20,361) (20,888)
Purchase of intangible assets (276) (136)
Net cash used in investing activities (20,501) (20,995)
Cash flows from financing activities:
2018
2017
Cash flows from operating activities:
250
315
Total comprehensive income for the year $
10,953 $
10,133
Adjustments to reconcile net income to cash provided by (used in) operations:
(4,071)
(4,195)
Amortization
9,789
9,252
Amortization of deferred revenue
(782)
(658)
Gain on disposal of property, plant and equipment
(128)
(29)
Income tax expense
1,934
1,823
Income taxes paid
(1,798)
(1,711)
Increase decrease in employee future benefits
92
178
20,060
18,988
Change in non-cash operating working capital:
Accounts receivable
(337)
5,561
Unbilled revenue
(268)
5,735
Inventory
260
655
Prepaid expenses
(235)
139
Other current assets
-
-
Accounts payable and accrued liabilities
(3,401)
(2,551)
Other current liabilities
(392)
194
Change in regulatory assets
2,707
(5,445)
Change in regulatory liabilities
(3,919)
1,834
Change in deferred tax
479
3,410
Net cash from operating activities
14,954
28,520
Cash flows from investing activities:
Proceeds on disposals of property, plant and equipment 136 29
Purchase of property, plant and equipment (20,361) (20,888)
Purchase of intangible assets (276) (136)
Net cash used in investing activities (20,501) (20,995)
Cash flows from financing activities:
Net change in customer deposits
250
315
Investments in subsidiaries and associates
(925)
28
Dividends paid out
(4,071)
(4,195)
Change in contributed capital received
4,574
6,004
Repayment of long-term debt
(1,127)
(1,080)
Net cash from financing activities
(1,299)
1,072
Change in cash and cash equivalents
(6,846)
8,597
Cash and cash equivalents, beginning of year
29,045
20,448
Cash and cash equivalents, end of year
$ 22,199 $
29,045
The accompanying notes are an integral part of these financial statements.
1-168
KITCHENER POWER CORP. - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2018
(Expressed in thousands of dollars)
1. Reporting entity:
Kitchener Power Corp. (the "Corporation") is a holding company for the affiliate companies,
Kitchener -Wilmot Hydro Inc. and Kitchener Energy Services Inc., and is itself wholly owned by the
Corporation of the City of Kitchener and the Corporation of the Township of Wilmot.
The Corporation oversees the operations of Kitchener -Wilmot Hydro Inc., a regulated distribution
company, and Kitchener Energy Services Inc., an unregulated retail services company. The
Corporation also owns 33% of Grand River Energy Solutions Corp. (GRE), a generation and
renewable energy solutions company.
It is located in the City of Kitchener. The address of the Corporation's registered office is 301
Victoria Street South, Kitchener, Ontario, Canada.
The financial statements are for the Corporation as at and for the year ended December 31, 2018
2. Basis of presentation:
(a) Statement of compliance:
The Corporation's financial statements have been prepared in accordance with International
Financial Reporting Standards ("IFRS"). The financial statements were approved by the Board
of Directors on March 22, 2019.
(b) Basis of measurement:
The financial statements have been prepared on the historical cost basis except for the
following:
(i) Where held, financial instruments at fair value through profit or loss
(ii) Contributed assets are initially measured at fair value.
The methods used to measure fair values are discussed further in note 22.
(c) Functional and presentation currency:
These financial statements are presented in Canadian dollars, which is the Corporation's
functional currency. All financial information presented in Canadian dollars has been rounded
to the nearest thousand.
1-169
KITCHENER POWER CORP. - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2018
(Expressed in thousands of dollars)
2. Basis of presentation (continued):
(d) Use of estimates and judgments:
The preparation of financial statements in conformity with IFRS requires management to make
judgments, estimates and assumptions that affect the application of accounting policies and
the reported amounts of assets, liabilities, income and expenses and disclosure of contingent
assets and liabilities. Actual results may differ from those estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognized in the year in which the estimates are revised and in any
future periods affected.
Information about critical judgments in applying accounting policies that have the most
significant effect on the amounts recognized in these financial statements is included in the
following notes:
i) Note 7 — Property, plant and equipment
ii) Note 9 — Deferred tax assets
iii) Note 12 — Employee future benefits
iv) Note 17 — Commitments and contingencies
v) Note 3(b) — Determination of the performance obligation for contributions from customers
and the related amortization period
(e) Rate regulation:
The Corporation is regulated by the Ontario Energy Board ("OEB"), under the authority granted
by the Ontario Energy Board Act, 1998. Among other things, the OEB has the power and
responsibility to approve orset rates forthe transmission and distribution of electricity, providing
continued rate protection for electricity consumers in Ontario, and ensuring that transmission
and distribution companies fulfill obligations to connect and service customers. The OEB may
also prescribe license requirements and conditions of service to local distribution companies
("LDCs"), such as the Corporation, which may include, among other things, record keeping,
regulatory accounting principles, separation of accounts for distinct businesses, and filing and
process requirements for rate setting purposes.
The Corporation is required to bill customers for the debt retirement charge set by the province.
The Corporation may file to recover uncollected debt retirement charges from Ontario
Electricity Financial Corporation ("OEFC") once each year.
Rate setting:
Distribution revenue and electricity rates
The OEB sets electricity prices for low-volume consumers twice each year based on an
estimate of how much it will cost to supply the province with electricity for the next year. All low
volume customers without a contract with an energy retailer are charged the OEB mandated
rate for electricity. If a customer (regardless of volume) has a retailer agreement, then retailer
rates are charged instead. All remaining consumers pay the market price for electricity. The
1-170
KITCHENER POWER CORP. - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2018
(Expressed in thousands of dollars)
2. Basis of presentation (continued):
(e) Rate regulation (continued):
Corporation is billed for the cost of the electricity that its customers use and passes this cost
on to the customer at cost without a mark-up.
Forthe distribution revenue included in electricity sales, the Corporation files a "Cost of Service"
("COS") rate application with the OEB every four years where rates are determined through a
review of the forecasted annual amount of operating and capital expenses, debt and
shareholder's equity required to support the Corporation's business. The Corporation
estimates electricity usage and the costs to service each customer class to determine the
appropriate rates to be charged to each customer class. The COS application is reviewed by
the OEB and intervenors and rates are approved based upon this review, including any
revisions resulting from that review.
In the intervening years an Incentive Rate Mechanism application ("IRM") is filed. An IRM
application results in a formulaic adjustment to distribution rates that were set under the last
COS application. The previous year's rates are adjusted for the annual change in the Gross
Domestic Product Implicit Price Inflator for Final Domestic Demand ("GDP IPI -FDD") net of a
productivity factor and a "stretch factor" determined by the relative efficiency of an electricity
distributor.
As a licensed distributor, the Corporation is responsible for billing customers for electricity
generated by third parties and the related costs of providing electricity service, such as
transmission services and other services provided by third parties. The Corporation is required,
pursuant to regulation, to remit such amounts to these third parties, irrespective of whether the
Corporation ultimately collects these amounts from customers.
The Corporation last filed a COS application on June 21, 2013 for rates effective January 1,
2014 to December 31, 2014. The GDP IPI -FDD for 2018 is 1.2%, the Corporation's productivity
factor is 0% and the stretch factor is 0.15%, resulting in a net adjustment of 1.05% to the
previous year's rates.
(f) Investments
Investments in subsidiary companies, associates and other long-term investments are
accounted for by the equity method. Dividends received are recorded as a reduction of the
carrying value of these investments.
1-171
KITCHENER POWER CORP. - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2018
(Expressed in thousands of dollars)
3. Significant accounting policies:
The accounting policies set out below have been applied consistently in all years presented in these
financial statements unless otherwise indicated.
(a) Financial instruments:
At initial recognition, the Company measures its financial assets at fair value plus, in the case
of a financial asset not at fair value through profit or loss, transaction costs that are directly
attributable to the acquisition of the financial asset. Transaction costs of financial assets carried
at fair value through profit or loss are expensed in profit or loss.
Subsequent measurement of the financial asset depends on the classification determined on
initial recognition. Financial assets are classified as either amortized cost, fair value through
other comprehensive income or fair value through profit or loss, depending on its business
model for managing the financial assets and the contractual cash flow characteristics of the
financial assets. Financial assets are not reclassified subsequent to their initial recognition,
unless the Company changes its business model for managing financial assets.
Financial liabilities are initially measured at fair value, net of transaction costs incurred. They
are subsequently carried at amortized cost using the effective interest rate method; any
difference between the proceeds (net of transaction costs) and the redemption value is
recognized as an adjustment to interest expense over the period of the borrowings.
The Corporation has not entered into derivative instruments.
Hedge accounting has not been used in the preparation of these financial statements.
Cash equivalents include short-term investments with maturities of three months or less when
purchased.
(b) Revenue recognition:
Sale and distribution of electricity
The performance obligations for the sale and distribution of electricity are recognized overtime
using an output method to measure the satisfaction of the performance obligation. The value
of the electricity services transferred to the customer is determined on the basis of cyclical
meter readings plus estimated customer usage since the last meter reading date to the end of
the year and represents the amount that the Corporation has the right to bill. Revenue includes
the cost of electricity supplied, distribution, and any other regulatory charges. The related cost
of power is recorded on the basis of power used.
For customer billings related to electricity generated by third parties and the related costs of
providing electricity service, such as transmission services and other services provided by third
parties, the Corporation has determined that it is acting as a principal for these electricity
charges and, therefore, has presented electricity revenue on a gross basis.
Customer billings for debt retirement charges are recorded on a net basis as the Corporation
is acting as an agent for this billing stream.
1-172
KITCHENER POWER CORP. - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2018
(Expressed in thousands of dollars)
3. Significant accounting policies (continued):
(b) Revenue recognition (continued):
Capital contributions
Developers are required to contribute towards the capital cost of construction of distribution
assets in order to provide ongoing service. The developer is not a customer and therefore the
contributions are scoped out of IFRS 15 Revenue from Contracts with Customers. Cash
contributions, received from developers are recorded as deferred revenue. When an asset
other than cash is received as a capital contribution, the asset is initially recognized at its fair
value, with a corresponding amount recognized as deferred revenue. The deferred revenue,
which represents the Corporation's obligation to continue to provide the customers access to
the supply of electricity, is amortized to income on a straight-line basis over the useful life of
the related asset.
Certain customers are also required to contribute towards the capital cost of construction of
distribution assets in orderto provide ongoing service. These contributions fall within the scope
of IFRS 15 Revenue from Contracts with Customers. The contributions are received to obtain
a connection to the distribution system in order receive ongoing access to electricity. The
Corporation has concluded that the performance obligation is the supply of electricity over the
life of the relationship with the customer which is satisfied over time as the customer receives
and consumes the electricity. Revenue is recognized on a straight-line basis over the useful
life of the related asset.
Other revenue
Revenue earned from the provision of services is recognized as the service is rendered.
Government grants and the related performance incentive payments under CDM programs are
recognized as revenue in the year when there is reasonable assurance that the program
conditions have been satisfied and the payment will be received.
(c) Inventory:
Inventory, comprising material and supplies, the majority of which is consumed by the
Corporation in the provision of its services, is valued at the lower of cost and net realizable
value, with cost being determined on a weighted average cost basis, and includes expenditures
incurred in acquiring the material and supplies and other costs incurred in bringing them to their
existing location and condition.
Net realizable value is the estimated selling price in the ordinary course of business, less
estimated selling expenses.
(d) Property, plant and equipment:
Items of property, plant and equipment ("PP&E") used in rate -regulated activities and
acquired prior to January 1, 2015 are measured at deemed cost established on the transition
date, less accumulated depreciation. All other items of PP&E are measured at cost, or, where
the item is transferred from customers, its fair value, less accumulated depreciation.
Consistent with IFRS 1, the Corporation elected to use the carrying amount as previously
1-173
KITCHENER POWER CORP. - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2018
(Expressed in thousands of dollars)
3. Significant accounting policies (continued):
(d) Property, plant and equipment (continued):
determined under Canadian GAAP as the deemed cost at January 1, 2015, the transition date
to IFRS.
Cost includes expenditures that are directly attributable to the acquisition of the asset. The
cost of self -constructed assets includes the cost of materials, direct labour, and any other costs
directly attributable to bringing the asset to a working condition for its intended use.
When parts of an item of property, plant and equipment have different useful lives, they are
accounted for as separate items (major components) of property, plant and equipment.
Gains and losses on the disposal of an item of PP&E are determined by comparing the
proceeds from disposal, if any, with the carrying amount of the item of PP&E and are
recognized net within other income in profit or loss.
Major spare parts and standby equipment are recognized as items of PP&E.
The cost of replacing a part of an item of property, plant and equipment is recognized in the
net book value of the item if it is probable that the future economic benefits embodied within
the part will flow to the Corporation and its cost can be measured reliably. In this event, the
replaced part of property, plant and equipment is written off, and the related gain or loss is
included in profit or loss. The costs of the day-to-day servicing of property, plant and equipment
are recognized in profit or loss as incurred.
Depreciation is calculated over the depreciable amount and is recognized in profit or loss on a
straight-line basis over the estimated useful life of each part or component of an item of
property, plant and equipment. The depreciable amount is cost. Land is not depreciated.
Construction -in -progress assets are not amortized until the projects are complete and in
service.
The estimated useful lives are as follows:
Buildings
20-50 years
Transformer station equipment
15-50 years
Distribution station equipment
15-50 years
Distribution system
25-60 years
Meters
15-25 years
SCADA equipment
15 years
Other capital assets
3-10 years
Depreciation methods, useful lives, and residual values are reviewed at each reporting date
and adjusted prospectively if appropriate.
1-174
KITCHENER POWER CORP. - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2018
(Expressed in thousands of dollars)
3. Significant accounting policies (continued):
(e) Intangible assets (continued):
(i) Computer software:
Computer software that is acquired or developed by the Corporation, including software
that is not integral to the functionality of equipment purchased which has finite useful lives,
is measured at cost less accumulated amortization and accumulated impairment losses.
(ii) Land rights:
Payments to obtain rights to access land ("land rights") are classified as intangible assets.
These include payments made for easements, right of access and right of use over land
for which the Corporation does not hold title. Land rights are measured at cost less
accumulated amortization and accumulated impairment losses.
(iii) Amortization:
Amortization is recognized in profit or loss on a straight-line basis overthe estimated useful
lives of intangible assets, other than goodwill, from the date that they are available
for use. The estimated useful lives are:
Computer software 3-10 years
Land rights 100 years
Amortization methods and useful lives of all intangible assets are reviewed at each
reporting date and adjusted prospectively if appropriate.
(f) Impairment:
(i) Financial assets:
A loss allowance for expected credit losses on financial assets measured at amortized cost
is recognized at the reporting date. The loss allowance is measured at an amount equal
to the lifetime expected credit losses for the asset.
1-175
KITCHENER POWER CORP. - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2018
(Expressed in thousands of dollars)
3. Significant accounting policies (continued):
(f) Impairment (continued):
(ii) Non-financial assets:
The carrying amounts of the Corporation's non-financial assets, other than inventories and
deferred tax assets are reviewed at each reporting date to determine whether there is any
indication of impairment. If any such indication exists, then the asset's recoverable amount
is estimated
For the purpose of impairment testing, assets are grouped together into the smallest group
of assets that generates cash inflows from continuing use that are largely independent of
the cash inflows of other assets or groups of assets (the "cash -generating unit"). The
recoverable amount of an asset or cash -generating unit is the greater of its value in use
and its fair value less costs to sell. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-taxdiscount rate that reflects current
market assessments of the time value of money and the risks specific to the asset.
An impairment loss is recognized if the carrying amount of an asset or its cash -generating
unit exceeds its estimated recoverable amount. Impairment losses are recognized in profit
or loss.
An impairment loss in respect of goodwill is not reversed. For assets other than goodwill,
impairment recognized in prior periods is assessed at each reporting date for any
indications that the loss has decreased or no longer exists. An impairment loss is reversed
if there has been a change in the estimates used to determine the recoverable amount.
An impairment loss is reversed only to the extent that the asset's carrying amount does not
exceed the carrying amount that would have been determined, net of depreciation or
amortization, if no impairment loss had been recognized.
(g) Provisions:
A provision is recognized if, as a result of a past event, the Corporation has a present legal or
constructive obligation that can be estimated reliably, and it is probable that an outflow of
economic benefits will be required to settle the obligation. Provisions are determined by
discounting the expected future cash flows at a pre-tax rate that reflects current market
assessments of the time value of money and the risks specific to the liability.
1-176
KITCHENER POWER CORP. - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2018
(Expressed in thousands of dollars)
3. Significant accounting policies (continued):
(h) Regulatory deferral accounts:
Regulatory deferral account debit balances represent costs incurred in excess of amounts
billed to the customer at OEB approved rates. These amounts have been accumulated and
deferred in anticipation of their future recovery in electricity distribution rates. Regulatory
deferral account credit balances represent amounts billed to the customer at OEB approved
rates in excess of costs incurred by the Corporation.
Regulatory deferral account debit balances are recognized if it is probable that future billings
in an amount at least equal to the capitalized cost will result from inclusion of that cost in
allowable costs for rate -making purposes. The offsetting amount is recognized in profit and
loss. The debit balance is reduced by the amount of customer billings as electricity is delivered
to the customer and the customer is billed at rates approved by the OEB for the recovery of the
capitalized costs.
Regulatory deferral account credit balances are recognized if it is probable that future billings
in an amount at least equal to the credit balance will be reduced as a result of rate -making
activities. The offsetting amount is recognized in profit and loss. The credit balance is reduced
by the amounts returned to customers as electricity is delivered to the customer at rates
approved by the OEB for the return of the regulatory account credit balance.
The probability of recovery or repayment of the regulatory account balances are assessed
annually based upon the likelihood that the OEB will approve the change in rates to recover or
repay the balance. Any resulting impairment loss is recognized in profit and loss in the year
incurred.
Regulatory deferral accounts attract interest at OEB prescribed rates. The rates from January
to March 2018 were 1.5%, April to September 2018 were 1.89% and October to December
2018 were 2.17% (2017 — 1.2%).
1-177
KITCHENER POWER CORP. - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2018
(Expressed in thousands of dollars)
3. Significant accounting policies (continued):
(i) Employee future benefits:
(i) Pension plan:
The Corporation provides a pension plan for all its full-time employees through Ontario
Municipal Employees Retirement System ("OMERS"). OMERS is a multi-employer
pension plan which operates as the Ontario Municipal Employees Retirement Fund ("the
Fund"), and provides pensions for employees of Ontario municipalities, local boards and
public utilities. The Fund is a contributory defined benefit pension plan, which is financed
by equal contributions from participating employers and employees, and by the investment
earnings of the Fund. To the extent that the Fund finds itself in an under -funded position,
additional contribution rates may be assessed to participating employers and members.
OMERS is a defined benefit plan. However, as OMERS does not segregate its pension
asset and liability information by individual employers, there is insufficient information
available to enable the Corporation to directly account for the plan. Consequently, the plan
has been accounted for as a defined contribution plan. Obligations for contributions to
defined contribution pension plans are recognized as an employee benefit expense in net
income when they are due.
(ii) Post -employment benefits, other than pension:
The Corporation provides some of its retired employees with life insurance and medical
benefits beyond those provided by government sponsored plans.
The cost of these benefits is expensed as earned by employees through employment
service. The accrued benefit obligations and the current service costs are actuarially
determined by applying the projected unit credit method and reflect management's best
estimate of certain underlying assumptions. Actuarial gains and losses arising from
defined benefit plans are recognized immediately in other comprehensive income and
reported in retained earnings. When the benefits of a plan are improved, the portion of the
increased benefit relating to past service by employees is recognized in net income on a
straight-line basis over the average period until the benefits become vested. In
circumstances where the benefits vest immediately, the expense is recognized
immediately in net income.
1-178
KITCHENER POWER CORP. - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2018
(Expressed in thousands of dollars)
3. Significant accounting policies (continued):
Q) Deferred revenue and assets transferred from customers:
Certain customers and developers are required to contribute towards the capital cost of
construction in order to provide ongoing service. When an asset is received as a capital
contribution, the asset is initially recognized at its fair value, with the corresponding amount
recognized as deferred revenue. Deferred revenue represents the Corporation's obligation to
continue to provide customers access to the supply of electricity, and is amortized to income
on a straight-line basis over the economic useful life of the acquired or contributed asset, which
represents the period of ongoing service to the customer.
(k) Leased assets:
Leases, where the terms cause the Corporation to assume substantially all the risks and
rewards of ownership, are classified as finance leases. Upon initial recognition, the leased
asset is measured at an amount equal to the lower of its fair value and the present value of the
minimum lease payments. Subsequent to initial recognition, the asset is accounted for in
accordance with the accounting policy applicable to that asset.
All other leases are classified as operating leases and the leased assets are not recognized on
the Corporation's balance sheet. Payments made under operating leases are recognized in
profit or loss on a straight-line basis over the term of the lease.
(1) Finance income and finance costs:
Finance income is recognized as it accrues in profit or loss, using the effective interest method.
Finance income comprises interest earned on cash and cash equivalents and on regulatory
assets.
Finance charges comprise interest expense on borrowings, finance lease obligations,
regulatory liabilities and unwinding of the discount on provisions and impairment losses on
financial assets. Finance costs are recognized as an expense unless they are capitalized as
part of the cost of qualifying assets.
1-179
KITCHENER POWER CORP. - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2018
(Expressed in thousands of dollars)
3. Significant accounting policies (continued):
(m) Income taxes:
The income tax expense comprises current and deferred tax. Income tax expense is
recognized in profit or loss except to the extent that it relates to items recognized directly in
equity, in which case, it is recognized in equity.
The Corporation is currently exempt from taxes under the Income Tax Act (Canada) and the
Ontario Corporations Tax Act (collectively the "Tax Acts"). Under the Electricity Act, 1998, the
Corporation makes payments in lieu of corporate taxes to the Ontario Electricity Financial
Corporation ("OEFC"). These payments are calculated in accordance with the rules for
computing taxable income and taxable capital and other relevant amounts contained in the
Income Tax Act (Canada) and the Corporations Tax Act (Ontario) as modified by the Electricity
Act, 1998, and related regulations. Prior to October 1, 2001, the Corporation was not subject
to income or capital taxes. Payments in lieu of taxes are referred to as income taxes.
Current tax is the tax payable on the taxable income for the year, using tax rates enacted or
substantively enacted at the reporting date, and any adjustment to tax payable in respect of
previous years.
Deferred tax is recognized using the balance sheet method. Under this method, deferred
income taxes reflect the net tax effects of temporary differences between the tax basis of assets
and liabilities and their carrying amounts for accounting purposes, as well as for tax losses
available to be carried forward to future years that are likely to be realized. Deferred tax assets
and liabilities are measured using enacted or substantively enacted tax rates, at the reporting
date, expected to apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the year that includes the date of enactment or
substantive enactment.
1-180
KITCHENER POWER CORP. - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2018
(Expressed in thousands of dollars)
4. Cash:
2018 2017
Cash $ 22,199 $ 29,045
5. Accounts receivable:
2018 2017
Customer and other trade receivables $ 18,433 $ 17,985
Trade receivables from related parties 107 218
$ 18,540 $ 18,203
6. Inventory:
The amount of inventories consumed by the Corporation and recognized as an expense during
2018 was $311 (2017 - $406).
7. Property, plant and equipment:
(a) Cost or deemed cost:
Land and
Distribution
Other fixed
Construction -
buildings
equipment
assets
in -progress
Total
Balance at January 1, 2018
$ 23,598
$ 224,431
$ 7,091
$ 4,342
$
259,462
Additions
936
18,141
2,004
-
21,081
Transfers
-
-
-
(720)
(720)
Disposals/Retirements
(71)
(154)
(245)
-
(470)
Balance at December 31, 2018
$ 24,463
$ 242,418
$ 8,850
$ 3,622
$
279,353
Land and
Distribution
Other fixed
Construction -
buildings
equipment
assets
in -progress
Total
Balance at January 1, 2017
$ 22,606
$ 203,502$
6,727
$ 6,900
$
239,735
Additions
1,016
20,900
1,530
-
23,446
Transfers
-
-
-
(2,558)
(2,558)
Disposals/Retirements
(24)
29
(1,166)
-
(1,161)
Balance at December 31, 2017
$ 23,598
$ 224,431
$ 7,091
$ 4,342
$
259,462
KITCHENER POWER CORP. - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2018
(Expressed in thousands of dollars)
7. Property, plant and equipment (continued)
(b) Accumulated depreciation:
Land and Distribution
Other fixed Construction -
buildings equipment
assets in -progress
Total
Balance at January 1, 2018 $
1,461 $
22,699 $
1,087 $ - $
25,247
Depreciation charge
663
7,467
1,209 -
9,339
Disposals/Retirements
(71)
(154)
(237) -
(462)
Balance at December 31, 2018 $
2,053 $
30,012 $
2,059 $ - $
34,124
Land and Distribution Other fixed Construction -
buildings equipment
assets in -progress
Total
Balance at January 1, 2017 $
829 $
15,701 $
1,046 $ - $
17,576
Depreciation charge
656
6,969
1,207 -
8,832
Disposals/Retirements
(24)
29
(1,166) -
(1,161)
Balance at December 31, 2017 $
1,461 $
22,699 $
1,087 $ - $
25,247
(c) Carrying amounts:
Land and
Distribution
Other fixed Construction -
buildings
equipment
assets in -progress
Total
At December 31, 2018
$ 22,410
$ 212,406
$ 6,791 $ 3,622
$ 245,229
At December 31, 2017
$ 22,137
$ 201,732
$ 6,004 $ 4,342
$ 234,215
(d) Leased plant and equipment:
The Corporation does not have leases for plant or equipment.
(e) Security:
At December 31, 2018, the Corporation had zero properties subject to a general security
agreement.
(f) Borrowing costs:
During the year, borrowing costs of $ nil (2017 - $ nil) were capitalized as part of the cost of
property, plant and equipment.
1-182
KITCHENER POWER CORP. - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2018
(Expressed in thousands of dollars)
7. Property, plant and equipment (continued):
(g) Allocation of depreciation and amortization:
The depreciation of property, plant and equipment and the amortization of intangible assets
has been allocated to profit or loss as follows:
Operations Customer Energy
and services Administration conservation Other Total
maintenance expense expense expense
expense
December 31, 2018:
- $
7 $
8,552
$ 9,252
8. Intangible assets:
(a) Cost or deemed cost:
Depreciation of property, plant
Computer
Software
Land
Rights
and equipment
$ 672
$ 6
$ -
$ 7
$ 8,654
$ 9,339
Amortization of intangible
$ 8
$
2,810
Balance at January 1, 2017
Additions
$ 2,390
136
$ 8
-
assets
-
-
-
-
450
450
$ 672
$ 6
$ -
$ 7
$ 9,104
$ 9,789
Operations
Customer
Energy
and
services
Administration
conservation
Other
Total
maintenance
expense
expense
expense
expense
December 31, 2017:
Depreciation of property, plant
and equipment
$ 685
$ 8
$ -
$ 7
$ 8,132
$ 8,832
Amortization of intangible
assets
-
-
-
-
420
420
$ 685 $ 8 $
- $
7 $
8,552
$ 9,252
8. Intangible assets:
(a) Cost or deemed cost:
Computer
Software
Land
Rights
Total
Balance at January 1, 2018
Additions
$ 2,526
276
$ 8
-
$
2,534
276
Balance at December 31, 2018
$ 2,802
$ 8
$
2,810
Balance at January 1, 2017
Additions
$ 2,390
136
$ 8
-
$
2,398
136
Balance at December 31, 2017
$ 2,526
$ 8
$
2,534
1-183
KITCHENER POWER CORP. - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2018
(Expressed in thousands of dollars)
8. Intangible assets (continued):
(b) Accumulated amortization:
Computer
Land
Software
Rights
Total
Balance at January 1, 2018
$ 1,636
$ 8
$
1,644
Additions
450
-
450
Balance at December 31, 2018
$ 2,086
$ 8
$
2,094
Balance at January 1, 2017
$ 1,216
$ 8
$
1,224
Additions
420
-
420
Balance at December 31, 2017
$ 1,636
$ 8
$
1,644
(c) Carrying amounts:
Computer
Land
Software
Rights
Total
At December 31, 2018
$ 716
$ -
$
716
At December 31, 2017
890
-
890
1-184
KITCHENER POWER CORP. - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2018
(Expressed in thousands of dollars)
9. Income tax expense:
Current tax expense:
2018
2017
Current period
$
2,120
$
1,906
Adjustment for prior periods
(155)
(55)
$
1,965
$
1,851
Deferred tax expense:
2018
2017
Original & reversal of temporary differences
$
(25)
$
(12)
Recognition of previously unrecognized tax losses
(7)
(17)
$
(32)
$
(29)
Reconciliation of effective tax rate:
2018
2017
Total comprehensive income for the year
$
10,953
$
10,133
Total income tax expense
1,934
1,823
Comprehensive income before income taxes
12,887
11,956
Income tax using the Corporation's statutory tax rate of 26.5%
3,415
3,169
Temporary differences not benefitted
(1,326)
(1,291)
Under (over) provided in prior periods
(155)
(55)
$
1,934
$
1,823
Significant components of the Corporation's deferred tax balances are as follows:
2018
2017
Deferred tax assets (liabilities):
Plant and equipment
$
(12,518)
$
(11,145)
Non -vested sick leave
144
144
Employee benefits
1,405
1,381
Intangible assets
7
7
Loss carry -forward
140
133
Deferred tax liability
2,021
1,535
Deferred revenue - contributed capital
8,948
8,085
$
147
$
140
1-185
KITCHENER POWER CORP. - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2018
(Expressed in thousands of dollars)
10. Regulatory deferral account balance:
The following is a reconciliation of the carrying amount for each class of regulatory deferral account
balances:
Remaining
recovery/
Balances reversal
arising in the Recovery/ period
2017 period Reversal Other 2018 (years)
Regulatory deferral account debit balances
Group 1 deferred accounts
$ 4,576 $
(104) $
(1,630) $ (1,030) $ 1,812 Note 1
Regulatory asset recovery account
794
3,672
(6,177) 1,711 - Note 1
Smart meter recovery
13
-
- 13
Deferred tax asset
4,164
693
- 4,857 Note 2
Other
526
188
(30) 684
iotas amount reiatea to regulatory
deferral account debit balances $ 10,073 $ 4,449 $ (7,807) $ 651 $ 7,366
1-186
Remaining
recovery/
Balances
reversal
arising in the
Recovery/
period
2017
period
Reversal Other
2018
(years)
Regulatory deferral account credit balances
Group 1 deferred accounts $ 10,657
$ 3,049
$ (7,808) $ (1,030) $
4,868
Note 1
Regulatory asset recovery account $ -
$ -
$ $ 1,711 $
1,711
Note 1
Other 364
37
(30)
371
Total amount related to regulatory
deferral account credit balances $ 11,021
$ 3,086
$ (7,808) $ 651 $
6,950
2018
2017
Movements in regulatory accounts
Net change in regulatory deferral account
debit and credit balances
$
1,364
$ 4,885
Less movement related to the balance sheet
Deferred income tax
(693)
(4,697)
Deferred revenue
(32)
41
Amounts moved to property, plant, equipment
-
-
Net movement in regulatory deferral account balances
related to profit or loss and the
related deferral tax movement
$
639
$ 229
1-186
KITCHENER POWER CORP. - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2018
(Expressed in thousands of dollars)
10. Regulatory deferral account balance (continued):
Note 1 The Corporation expects to be approved for collection of these amounts in its 2018
filing for 2019 rates
Note 2 The Corporation has not sought approval forthe disposition of this amount as changes
in underlying assumptions may reduce the amounts recorded in the account. KWHI
may seek refunds in the future.
11. Long-term debt:
Effective August 1, 2000, the Corporation incurred unsecured promissory notes payable to the City
of Kitchener and the Township of Wilmot, and have an interest rate of 4.88% per annum. Interest
is payable in quarterly installments, in arrears, on March 31St, June 30th, September 30th and
December 31 st
Effective February 1, 2010, the Corporation incurred a ten year senior unsecured debenture
payable to Ontario Infrastructure Projects Corporation. An initial payment of $7,000 was received
February 1, 2010, followed by a second payment of $3 million on May 17, 2010. The debenture
has an interest rate of 4.28%, and interest is payable in equal semi-annual installments, in arrears,
on May 17th and November 17th each year commencing November 17, 2010 until maturity.
2018 2017
Senior unsecured debentures:
City of Kitchener $ 70,998 $ 70,998
Township of Wilmot 5,965 5,965
Ontario Infrastructure Projects Corporation 1,782 2,909
Senior unsecured debentures, net proceeds $ 78,745 $ 79,872
Less: current portion of long-term debt $ (1,176) $ (1,127)
Total long-term debt $ 77,569 $ 78,745
12. Employee future benefits:
The Corporation pays certain medical and life insurance benefits on behalf of some of its retired
employees. The Corporation recognizes these post-retirement costs in the period in which
employees' services were rendered. The accrued benefit liability at December 31, 2018 of $5,305
was based on an actuarial valuation completed in 2016 using a discount rate of 3.9%.
1-187
KITCHENER POWER CORP. - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2018
(Expressed in thousands of dollars)
12. Employee future benefits (continued):
Changes in the present value of the defined benefit unfunded obligation
and the accrued benefit
liability:
2018
2017
Defined benefit obligation, beginning of year
$
5,213
$ 5,035
Current service cost
162
166
Interest cost
199
194
Benefits paid during the year
(269)
(227)
Actuarial loss recognized in other
-
45
comprehensive income
Accrued benefit liability, end of year
$
5,305
$ 5,213
Components of net benefit expense recognized are as follows:
2018
2017
Current service cost
$
162
$ 166
Interest cost
199
194
Net benefit expense recognized
$
361
$ 360
Actuarial losses recognized in other comprehensive income:
2018
2017
Cumulative amount at January 1
$
(278)
$ (245)
Recognized during the year
-
(33)
Cumulative amount at December 31
(278)
(278)
Net benefit expense recognized
$
-
$ (33)
1-188
KITCHENER POWER CORP. - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2018
(Expressed in thousands of dollars)
12. Employee future benefits (continued):
The significant actuarial assumptions used in the valuation are as follows (weighted average):
2018
2017
Accrued benefit obligation:
Discount rate
3.9%
3.9%
Benefit cost for the year:
Age
Withdrawal rate
18-29 3.50%
3.50%
30-34 2.50%
2.50%
35-39 2.2%
2.2%
40-49 1.8%
1.8%
50-54 1.4%
1.4%
Assumed health care cost trend rates:
Initial health care cost trend rate
Health 6.2%
6.2%
Dental 4.5%
4.5%
The approximate effect on the accrued benefit obligation of the entire plan and the estimated net
benefit expense of the entire plan if the health care trend rate assumption was
increased or
decreased by 1 %, and all other assumptions were held constant, is as follows:
Benefit
Periodic
Obligation
Benefit Cost
1% increase in health care trend rate
$ 186
$ 28
1% decrease in health care trend rate
$ (149)
$ (24)
Historical Information
Amounts for the current and previous year, for the entire plan, are as follows:
2018
2017
Defined benefit obligation
$ 5,305
$ 5,213
Experience adjustments
$ -
$ (33)
1-189
KITCHENER POWER CORP. - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2018
(Expressed in thousands of dollars)
12. Employee future benefits (continued):
The main actuarial assumptions utilized for the valuation are as follows:
General inflation - future general inflation levels, as measured by the changes in the Consumer
Price Index, were assumed at 2% in 2018, and thereafter (2017 - 2%).
Discount (interest) rate - the discount rate used to determine the present value of future liabilities
and the expense for the year ended December 31, 2018, was 3.9% (2017 — 3.9%).
Salary levels - future general salary and wage levels were assumed to increase at 3.3% (2017 -
3.3%) per annum.
Medical costs - medical costs were assumed to increase 5.99% for 2018, (6.2% for 2017)
decreasing annually to 4.5% in 2025 and beyond.
Dental costs - dental costs were assumed to be 4.5% for 2018 and thereafter.
13. Customer and IESO deposits:
Customer deposits represent cash deposits from electricity distribution customers and retailers, as
well as construction deposits.
Deposits from electricity distribution customers are refundable to customers who demonstrate an
acceptable level of credit risk as determined by the Corporation in accordance with policies set out
by the OEB or upon termination of their electricity distribution service.
Construction deposits represent cash prepayments for the estimated cost of capital projects
recoverable from customers and developers. Upon completion of the capital project, these deposits
are transferred to deferred revenue.
The Corporation delivers conservation and demand management programs for its customers on
behalf of the IESO. Prepayments received from the IESO have been recorded and will be
transferred to revenue as programs are delivered and the revenue is earned.
The deposits comprise:
2018 2017
Customer deposits $ 7,471 $ 7,664
Construction deposits 5,630 5,702
IESO deposit for energy conservation programs 1,158 1,158
Total customer and IESO deposits $ 14,259 $ 14,524
1-190
KITCHENER POWER CORP. - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2018
(Expressed in thousands of dollars)
14. Share capital:
2018 2017
Authorized:
Unlimited number of common shares
Issued:
20,000 common shares $ 66,389 $ 66,389
Dividends:
The holders of the common shares are entitled to receive dividends as declared from time to
time. The Corporation paid aggregate dividends in the year on common shares of $4,071 (2017 -
$4,195).
15. Other operating revenue:
Other income comprises:
1-191
2018
2017
Specific service charges
$ 1,479 $
1,654
Deferred revenue
782
658
Scrap sales
175
363
Net gain on disposal of capital assets
128
29
Retailer services
28
35
Sundry
3
46
Total other income
$ 2,595 $
2,785
16. Finance income and expense:
2018
2017
Interest income on bank deposits
$ 498 $
301
Finance income
498
301
Interest expense on long-term debt
3,864
3,911
Interest expense on BMO Letter of Credit
123
123
Interest expense on deposits
121
70
Other
9
5
4,117
4,109
Net finance costs recognized in profit or loss
$ 3,619 $
3,808
1-191
KITCHENER POWER CORP. - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2018
(Expressed in thousands of dollars)
17. Commitments and contingencies:
Contractual Obligations
There are no contractual obligations
General
From time to time, the Corporation is involved in various litigation matters arising in the ordinary
course of its business. The Corporation has no reason to believe that the disposition of any such
current matter could reasonably be expected to have a materially adverse impact on the
Corporation's financial position, results of operations or its ability to carry on any of its business
activities.
General Liability Insurance:
The Corporation is a member of the Municipal Electric Association Reciprocal Insurance Exchange
(MEARIE). MEARIE is a pooling of public liability insurance risks of many of the LDCs in Ontario.
All members of the pool are subjected to assessment for losses experienced by the pool for the
years in which they were members, on a pro -rata basis based on the total of their respective service
revenues. As at December 31, 2018, no assessments have been made.
18. Guarantees:
Kitchener Power Corp. is the guarantor for a line of credit issued by the Canadian Imperial Bank of
Commerce on behalf of Grand River Energy Solutions Corp (GRE Corp). GRE Corp is one third
owned by each of Kitchener Power Corp., Waterloo North Hydro Holding Corporation and
Cambridge & North Dumfries Energy Plus Inc.; each of which has guaranteed a maximum of $3
million in the event of default by GRE Corp.
19. Pension agreement:
The Corporation provides a pension plan for its employees through OMERS. The plan is a multi-
employer, contributory defined pension plan with equal contributions by the employer and its
employees. In 2018, the Corporation made employer contributions of $1,601 to OMERS (2017 -
$1,582). The Corporation's net benefit expense has been allocated as follows:
a) $444 (2017 - $415) capitalized as part of property, plant and equipment;
b) $1,157 (2017 - $1,167) charged to net income.
The Corporation estimates that a contribution of $1,700 to OMERS will be made during the next
fiscal year.
1-192
KITCHENER POWER CORP. - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2018
(Expressed in thousands of dollars)
20. Employee benefits:
2018 2017
Salaries, wages and benefits $ 18,592 $ 18,426
CPP and EI remittances 697 700
Contributions to OMERS 1,601 1,582
Expenses related to defined benefit plans 361 360
$ 21,251 $ 21,068
21. Related party transactions:
(a) Parent and ultimate controlling party:
The Corporation is wholly-owned by the Corporation of the City of Kitchener and the
Corporation of the Township of Wilmot. The City and the Township produce financial
statements that are available for public use.
(b) Entity with significant influence:
The Corporation of the City of Kitchener exercises significant influence over the Corporation
through its 92.25% ownership interest in the Corporation.
(c) Key management personnel:
The key management personnel of the Corporation have been defined as members of its board
of directors and executive management team members, and is summarized below.
2018 2017
Directors' fees $ 61 $ 62
Salaries and other short-term benefits 925 900
Post employment benefits 17 17
Other long-term benefits (OMERS) 77 74
$ 1,080 $ 1,053
(d) Transactions with parent:
During the year the Corporation paid management and business development services to its
parent in the amount of $ nil (2017 - $ nil)
(e) Transactions with entity with significant influence:
In the ordinary course of business, the Corporation delivers electricity to the Corporation of the
City of Kitchener. Electricity is billed to the City of Kitchener at prices and under terms approved
by the OEB.
1-193
KITCHENER POWER CORP. - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2018
(Expressed in thousands of dollars)
21. Related party transactions (continued):
(f) Transactions with ultimate parent (the City of Kitchener)
In 2018, the Corporation had the following significant transactions with its ultimate parent, a
government entity:
• Construction, contracted through Kitchener Wilmot Hydro Inc.
• Streetlight maintenance services contracted through Kitchener Energy Services Inc.
22. Financial instruments and risk management:
Fair value disclosure
Cash and cash equivalents are measured at fair value. The carrying values of receivables, and
accounts payable and accrued charges approximate fair value because of the short maturity of
these instruments. The carrying value of the customer deposits approximates fair value because
the amounts are payable on demand.
The fair value of the long term debt (senior unsecured debentures issued by the shareholders (City
of Kitchener and Township of Wilmot) approximates the carrying value due to the short term nature
of the loan.
The fair value of the long term debt (senior unsecured debentures) issued by Ontario Infrastructure
Projects Corporation at December 31, 2018 is $1,800 (2017 - $2,900). The fair value is calculated
based on the present value of future principal and interest cash flows, discounted at the current
rate of interest at the reporting date. The interest rate used to calculate fair value at December 31,
2018 was 4.28% (2017 — 4.28%).
Financial risks
The Corporation understands the risks inherent in its business and defines them broadly as
anything that could impact its ability to achieve its strategic objectives. The Corporation's exposure
to a variety of risks such as credit risk, interest rate risk, and liquidity risk, as well as related
mitigation strategies are discussed below.
(a) Credit risk:
Financial assets carry credit risk that a counterparty will fail to discharge an obligation which
could result in a financial loss. Financial assets held by the Corporation, such as accounts
receivable, expose it to credit risk. The Corporation earns its revenue from a broad base of
customers located in the City of Kitchener and the Township of Wilmot. As of December 31,
2018 one customer accounted for more than 1 % of total accounts receivable, totaling $187 (or
1.0%) out of a total accounts receivable of $18,532.
1-194
KITCHENER POWER CORP. - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2018
(Expressed in thousands of dollars)
22. Financial instruments and risk management (continued):
(a) Credit risk (continued):
The carrying amount of accounts receivable is reduced through the use of an allowance for
impairment and the amount of the related impairment loss is recognized in net income.
Subsequent recoveries of receivables previously provisioned are credited to net income. The
balance of the allowance for impairment at December 31, 2018 is $250 (2017 - $250). An
impairment loss of $183 (2017 - $155) was recognized during the year.
The Corporation's credit risk associated with accounts receivable is primarily related to
payments from distribution customers. At December 31, 2018, approximately $242 (2017 -
$210) is considered 60 days past due. The Corporation has over 96 thousand customers, the
majority of whom are residential. Credit risk is managed through collection of security deposits
from customers in accordance with directions provided by the OEB. As at December 31, 2018,
the Corporation holds security deposits in the amount of $14,300 (2017 - $14,500).
(b) Market risk:
Market risks primarily refer to the risk of loss resulting from changes in commodity prices,
foreign exchange rates, and interest rates. The Corporation currently does not have any
material commodity or foreign exchange risk. The Corporation is exposed to fluctuations in
interest rates as the regulated rate of return for the Corporation's distribution business is
derived using a complex formulaic approach which is in part based on the forecast for long-
term Government of Canada bond yields. This rate of return is approved by the OEB as part of
the approval of distribution rates
A 1% increase in the interest rate at December 31, 2018 would have increased interest
expense on the long-term debt by $18 (2017 - $29), assuming all other variables remain
constant. A 1% decrease in the interest rate would have an equal but opposite effect.
(c) Liquidity risk:
The Corporation monitors its liquidity risk to ensure access to sufficient funds to meet
operational and investing requirements. The Corporation's objective is to ensure that sufficient
liquidity is on hand to meet obligations as they fall due while minimizing interest exposure. The
Corporation has access to a $5,000 credit facility and monitors cash balances daily to ensure
that a sufficient level of liquidity is on hand to meet financial commitments as they come due.
As at December 31, 2018, no amounts had been drawn under BMO Bank of Montreal credit
facility (2017 - $ nil).
The Corporation also has a bilateral facility for $35,000 (the "LC" facility) for the purpose of
issuing letters of credit mainly to support the prudential requirements of the IESO, of which
$35,000 has been drawn and posted with the IESO (2017 - $35,000).
The majority of accounts payable, as reported on the balance sheet, are due within 30 days
1-195
KITCHENER POWER CORP. - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2018
(Expressed in thousands of dollars)
22. Financial instruments and risk management (continued):
(d) Capital disclosures:
The main objectives of the Corporation, when managing capital, are to ensure ongoing access
to funding to maintain and improve the electricity distribution system, compliance with
covenants related to its credit facilities, prudent management of its capital structure with regard
for recoveries of financing charges permitted by the OEB on its regulated electricity distribution
business, and to deliver the appropriate financial returns.
The Corporation's definition of capital includes shareholder's equity and long-term debt. As at
December 31, 2018, shareholder's equity amounts to $154,850 (2017 - $147,968) and long-
term debt amounts to $77,569 (2017 - $78,745).
23. Revenue from Contracts with Customers
The Corporation generates revenue primarily from the sale and distribution of electricity to its
customers. Other sources of revenue include performance incentive payments under CDM
programs
1-196
2018
2017
Revenue from Contracts with Customers
$
236,777
$
245,649
Other Revenue:
CDM programs
4,971
3,523
Other
1,923
1,954
Total
$
243,672
$
251,126
In the following table, revenue from contracts with customers is disaggregated by type of
customer.
2018
2017
Residential
$
89,870
$
94,073
Commercial
144,107
147,821
Large Users
1,382
1,205
Other
1,418
2,549
Total Revenue
$
236,777
$
245,649
1-196
KITCHENER POWER CORP. - CONSOLIDATED
Notes to Financial Statements
Year ended December 31, 2018
(Expressed in thousands of dollars)
24. Change in Accounting Policy
IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial Instruments
The Company has initially applied IFRS 15 Revenue from Contracts with Customers from January
1, 2018 on a retrospective basis. The following practical expedients have been used in the initial
application of this new standard:
For completed contracts, the Corporation did not restate contracts that:
(i) Began and ended within the same annual reporting period; or
(ii) Were completed at the beginning of January 1, 2017.
IFRS 15 contains a five step model that applies to contracts with customers that specifies that
revenue is recognized when or as an entity transfers control of goods or services to a customer at
the amount to which the entity expects to be entitled.
The Company has initially applied IFRS 9 Financial Instruments from January 1, 2018 on a
retrospective basis. IFRS 9 includes revised guidance on the classification and measurement of
financial instruments, including a new expected credit loss model for measuring impairment on
financial assets, and new general hedge accounting requirements.
Despite the retrospective adoption, the accounting policy change did not result in a significant
impact to the financial statements. As a result, the Company was not required to make any
adjustments to the comparative figures upon initial adoption.
The updated accounting policies have been discussed further in note 3
25. Future accounting pronouncements:
The Company is evaluating the adoption of the following new and revised standards along with
any subsequent amendments.
Leases
In January 2016, IASB issued IFRS 16 to establish principles for the recognition, measurement,
presentation, and disclosure of leases, with the objective of ensuring that lessees and lessors
provide relevant information that faithfully represents those transactions. IFRS 16 replaces IAS 17
and it is effective for annual periods beginning on or after January 1, 2019. The standard
introduces a single lessee accounting model and requires a lessee to recognize assets and
liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low
value. A lessee is required to recognize a right -of -use asset representing its right to use the
underlying asset and a lease liability representing its obligation to make lease payments. This
standard substantially carries forward the lessor accounting requirements of IAS 17, while
requiring enhanced disclosures to be provided by the lessor. Other areas of the lease accounting
model have been impacted, including the definition of a lease. Transitional provisions have been
provided. The Corporation intends to adopt IFRS 16 in its financial statements for the annual
period beginning January 1, 2019. The Corporation is assessing the impact of IFRS 16 on its
results of operations, financial position and disclosures.
1-197
2018 2017 2016 2015 2014
1. DEMOGRAPHIC STATISTICS
1.12975
1.15259
1.16901
1.18477
1.20310
Population'
255,070
252,520
246,700
239,900
236,500
Households'
97,830
96,720
94,170
92,050
90,560
Area in acres2
33,797
33,797
33,802
33,802
33,802
2. TAXABLE ASSESSMENT ($000's)
1.34000
1.39000
1.40000
1.43000
1.46000
Residential and farm3
24,878,827
23,639,290
22,414,567
21,215,652
19,990,326
Commercial and industria13
3,740,833
3,525,281
3,390,259
3,291,854
3,177,397
Total
28,619,660
27,164,571
25,804,826
24,507,506
23,167,723
3. TAX RATES
1.17984
1.19237
1.19650
1.19903
1.20656
Residential and Farm Taxable Full
1.34000
1.39000
1.50000
1.53000
1.56000
City
0.35470
0.36212
0.36742
0.37488
0.38135
Region
0.60505
0.61147
0.61359
0.61489
0.61875
School Boards
0.17000
0.17900
0.18800
0.19500
0.20300
Total
1.12975
1.15259
1.16901
1.18477
1.20310
Commercial Taxable Full
City
0.69166
0.70613
0.71647
0.73101
0.74363
Region
1.17984
1.19237
1.19650
1.19903
1.20656
School Boards
1.34000
1.39000
1.40000
1.43000
1.46000
Total
3.21150
3.28850
3.31297
3.36004
3.41019
Industrial Taxable Full
City
0.69166
0.70613
0.71647
0.73101
0.74363
Region
1.17984
1.19237
1.19650
1.19903
1.20656
School Boards
1.34000
1.39000
1.50000
1.53000
1.56000
Total
3.21150
3.28850
3.41297
3.46004
3.51019
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.
Weighted Assessment Growth
Final 2016 129%
Fi112120171 66%
`Yp F11121 2018 1 69%
5
4
3
2
1
8
018 018 101 11 13 14 15 16 17 18
Year
Cumulative Tax Rate & C:IPI
H
20
�u
� r, .��ii •. m mm
101 �.....................
08 019 10 '1'1 '12 '13 14 96 9t, 17 1�
Year
--#- City Tax Rate (%). ............ Ontarice C.PI (9+Ey
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
($000's) 2018 2017 2016 2015 2014
in..,. a..a...a
4. COLLECTION STATISTICS
43,299
39,436
38,932
31,273
37,797
Total taxes billed
423,032
406,605
394,020
379,110
368,577
Total collections
422,659
405,060
389,608
382,899
365,882
Total collections as a % of current levy
100%
100%
99%
101%
99%
Taxes receivable, net of allowance
17,826
16,878
20,598
19,617
22,706
Total receivable as a % of current levy
4%
4%
5%
5%
6%
5. CONSOLIDATED REVENUE
43,299
39,436
38,932
31,273
37,797
Taxation and user charges4
384,069
367,621
339,203
333,884
335,344
Grants
10,661
12,908
5,830
10,013
6,991
Share of net income of Kitchener Power
85,452
80,380
76,317
72,863
71,962
Corp. and its affiliates
10,104
9,348
9,593
10,121
9,793
Development charge revenue recognized
10,294
7,303
10,388
11,044
8,076
Other
34,857
15,852
21,097
25,801
21,020
Total revenue
449,985
413,032
386,111
390,863
381,225
6. CONSOLIDATED EXPENSES
Expenses by Function
General government
43,299
39,436
38,932
31,273
37,797
Protection services
48,966
47,268
45,291
44,728
42,727
Transportation services
37,022
37,805
35,100
34,566
35,328
Environmental services4
85,452
80,380
76,317
72,863
71,962
Health services
2,502
2,296
2,257
2,245
2,144
Social and family services
2,742
2,662
2,722
2,752
2,609
Recreation and cultural services
75,362
69,847
68,496
68,645
66,141
Planning and development
11,374
13,123
13,160
12,060
13,100
Gasworks
67,449
67,386
52,184
59,246
70,824
Total Expenses
374,168
360,203
334,459
328,378
342,632
Expenses by Object
Salaries, wages and employee benefits
158,659
151,980
147,224
141,941
138,259
Materials and services4
162,396
152,371
138,301
141,577
153,736
Debenture debt interest
2,881
3,180
3,534
3,869
3,740
Grants and other
6,186
5,295
4,214
3,031
4,192
Amortization
47,876
46,188
42,658
40,274
39,646
Loss/(Gain) on sale of assets
(3,830)
1,189
(1,472)
(2,314)
3,059
Total Expenses
374,168
360,203
334,459
328,378
342,632
7. ANNUAL SURPLUS
75,817
52,829
51,652
62,485
38,593
4. Water purchases and wastewater treatment surcharge had previouslybeen 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
Debt Per Capiita
NewOonstru.uction
1-200
2018
2017
2016
2015
2014
(Restated)
8. ANALYSIS OF LONG-TERM DEBT ($000's)
Gross debt issued by the municipality
71,179
77,889
84,859
93,536
102,999
Less debt recoverable from municipal
enterprises and consolidated boards
9,056
9,596
10,121
10,629
11,125
Less debt recoverable from other sources
6,571
7,252
8,587
9,870
11,105
Net debt to be repaid from property taxes
55,552
61,041
66,151
73,037
80,770
Net debt per capita ($'s)
218
242
268
304
342
Repayment of principal & interest ($000's)
13,903
14,589
14,592
14,498
14,452
Annual repayment limit ($000's)5
73,789
71,777
72,327
70,319
68,741
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 funds
104,780
98,754
88,097
77,081
47,982
Unexpended capital financing
99,849
118,172
108,099
94,927
85,939
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)
566,135
498,220
739,739
565,081
573,063
Number of building permits
2,624
2,503
3,158
2,749
2,559
Number of single family dwelling starts
303
300
840
614
504
11. NET FINANCIAL ASSETS ($000's)
221,799
220,788
214,048
194,460
187,392
5. The debt limit is based on the Financial Information Return from the
second immediate
preceding year.
Debt Per Capiita
NewOonstru.uction
1-200
12. PRINCIPAL CORPORATE TAXPAYERS
2018 Taxable Assessment Value ($000's)
DREWLO HOLDINGS INC
423,380
CF/REALTY HOLDINGS INC
254,524
ONTREA INC.
235,487
EUROPRO (KITCHENER) GP INC
100,107
ONTARIO MINISTER OF ENERGY & INFRASTRUCTURE
87,612
VOISIN DEVELOPMENTS LIMITED
80,259
THE INCC CORP
74,516
MORGUARD NAR (ONTARIO) HOLDINGS LIMITED
71,010
KITCHENER HOUSING INC
67,322
HOMESTEAD LAND HOLDINGS LIMITED
67,008
1940750 ONTARIO INC
66,867
ACTIVA HOLDINGS INC
63,937
STAMM INVESTMENTS LIMITED
61,282
CP REIT ONTARIO PROPERTIES LIMITED
51,768
STEEVES & ROZEMA ENTERPRISES LIMITED
49,441
1-201
J
Staff Repod K�WHIIN'0
Financial Services Departn7cnt www,kitchenerca
REPORT TO: Audit Committee
DATE OF MEETING: 2019-06-24
SUBMITTED BY: Margaret Fisher, Director of Procurement, 519-741-2200 ext. 7214
PREPARED BY: Adam Buchholtz, Associate Procurement Specialist, 519-741-2200 ext.
7217
WARD (S) INVOLVED: N/A
DATE OF REPORT: 2019-06-06
REPORT NO.: FIN -19-058
SUBJECT: P19-024 Audit Services
RECOMMENDATION:
That Proposal P19-024 Audit Services, be awarded to KPMG LLP, Waterloo, Ontario, at
their estimated fee of $777,600., plus H.S.T. of $101,088., for a total of $878,688., for a five
(5) year term beginning with the fiscal year ending December 31, 2019 for the Corporation
of the City of Kitchener, it's boards and enterprises, Kitchener Housing Inc., and
Kitchener Non -Profit Property Management Inc. and for a five (5) year term beginning with
the fiscal year ending May 31, 2020 for Waterloo Region Municipalities Insurance Pool;
and further;
That section 1.1 of Chapter 103 (Auditor) of the City's Municipal Code be amended to
effect the appointment of KPMG LLP as the City's Auditor.
BACKGROUND:
Under section 296(3) of the Municipal Act, an auditor shall not be appointed for a term exceeding
five (5) years. The Audit Committee appointed KPMG for the period 2014-2018 and they have
now completed their five (5) year term and an auditor needs to be appointed for the next five (5)
yearterm.
REPORT:
Proposals were advertised publicly on the City of Kitchener website. Documents were
downloaded by nine (9) interested parties and by the closing date of Friday April 5, 2019, three
(3) proposals had been received.
A listing of the responding parties follows for your reference:
Grant Thornton LLP Waterloo ON
KPMG LLP Waterloo ON
MNP LLP Waterloo ON
*** This information is available in accessible formats upon request. ***
Please call 519-741-2345 or TTY 1-866-969-9994 for assistance.
2-1
The proposal submissions were reviewed and rated by the selection committee, comprised of;
Mayor B. Vrbanovic, Chair, Audit Committee, Councillor S. Davey, Chair, Finance and Corporate
Services Committee, J. Lautenbach, Chief Financial Officer, B. Johnson, Director of Accounting,
R. LeBrun, Manager of Accounting, and C. Tasker, Internal Auditor.
The review committee met on Wednesday May 8, 2019, to discuss the ratings and come to a
decision on award.
The committee recommends awarding the project to KPMG LLP, Waterloo, Ontario.
The selection committee rated the proposal submissions on the following criteria:
• Qualifications and Company Profile including Project Manager and References
• Technical Experience and Understanding
• Methodology and Schedule
• Value Added Services
• Cost of Consultant's Fees
ALIGNMENT WITH CITY OF KITCHENER STRATEGIC PLAN:
The recommendation of this report supports the achievement of the city's strategic vision through
the delivery of core service.
FINANCIAL IMPLICATIONS:
The total 2019 audit fee is 1.8% lower than the 2018 audit fee and increases by an inflationary
amount each year (1.9 — 2.0%). Funding for the City's audit fees are provided from various
operating and enterprise account codes.
The City of Kitchener's portion of the fees is $421,600 over the five (5) year contract term. The
remainder is funded directly by the individual boards (Belmont Improvement Area Board of
Management, Kitchener Downtown Improvement Area Board, Kitchener Public Library Board,
and The Centre in the Square Inc.) as well as Kitchener Housing Inc., Kitchener Non -Profit
Property Management Inc., and the Waterloo Region Municipalities Insurance Pool.
COMMUNITY ENGAGEMENT:
INFORM — This report has been posted to the City's website with the agenda in advance of the
council / committee meeting.
ACKNOWLEDGED BY: Jonathan Lautenbach, Chief Financial Officer, Financial Services
Department
2 — 2
aI�"
41
REPORT TO: Audit Committee
DATE OF MEETING: June 24, 2019
SUBMITTED BY: Corina Tasker, Internal Auditor, (519)741-2200, ext. 7361
PREPARED BY: Corina Tasker, Internal Auditor, (519)741-2200, ext. 7361
WARD (S) INVOLVED: All
DATE OF REPORT: June 10, 2019
REPORT NO.: CAO -19-009
SUBJECT: 2nd Quarter Audit Status Report
RECOMMENDATION:
1iAA T.F. iiia..
wwwkitchen r.ca
No recommendation required. The following information is being provided as an update
and assurance on internal audit matters, in accordance with the Audit Committee Terms
of Reference.
BACKGROUND:
The following report provides a summary of the Internal Audit assurance services completed
during the period of March 2019 to June 2019. The chart below shows the audits contained in
this report.
Consulting work is also in progress on the following reviews:
• Development Services — comprehensive review with internal audit assistance being
provided for the process review component
*** This information is available in accessible formats upon request. ***
Please call 519-741-2345 or TTY 1-866-969-9994 for assistance.
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REPORT:
1. SAP Separation of Duties — Status Report
Date of original audit: March 8, 2018
Completed. March 15, 2019
Overview:
The objective of the original audit was to determine the high risk SAP separation of duties
scenarios and determine if any users have access that permits these conflicts. Users were
then contacted to determine if the access can be removed or whether the corporation will
accept the risk and try to mitigate it in some way.
High risk is defined as the ability for an individual to use their SAP access to create
transactions which would:
• Allow them to steal funds from the corporation, either individually or in collusion with
vendors / suppliers / customers
• Allow them to misrepresent the corporation's financial situation
This review uncovered several user ID's which had more access than they required for their
role. While there was no evidence of fraud, the potential is there if these separation of duty
conflicts were not removed or mitigated.
Audit Objective:
All services which have undergone an audit in the past are subject to a status update, not
sooner than one year following the original audit. The purpose of status updates are to hold
staff accountable for addressing the audit findings and to identify any areas that have not seen
significant progress.
Status Definitions:
• Complete = the recommendation has been fully implemented.
• In progress = implementation has begun.
• Not started = No work has begun yet but will in the future.
• Not required = the recommendation either does not require any action, or it is no longer
relevant and no work will be done to implement it.
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Recommendation Status:
Status
Number of recommendations
Number of original recommendations
9
Number of recommendations complete
7
Number of recommendations in progress
1
Number of recommendations not started
1
Number of recommendations not required
0
The seven recommendations which are complete relate to removing unnecessary access for
various user groups.
The one recommendation still in progress relates to creating a process to review required
access when a user changes positions within the corporation. An SAP Change Form is under
development and a process for SAP Business Solutions staff to be notified is still to be
determined.
The one recommendation not started yet was for SAP Business Solutions staff to perform an
annual check of system access to ensure no conflicts, or that conflicts are documented with
valid rationale and supporting mitigating controls. An annual check requires a number of
custom reports that would take significant effort to develop. Available automated options will be
reviewed as part of a 5 -year SAP Roadmap Strategy. This risk is being mitigated by carefully
reviewing all new roles that are created.
Conclusion:
Most of the recommendations were implemented or started immediately following the original
review. The implementation of the recommendations has had the intended effect of mitigating
separation of duties conflicts and the potential for fraud. No further follow-up is required for
this audit, although this topic will remain on the list for periodic compliance testing.
2. Employee Expenses — Status Report
Date of original audit: May 27, 2015
Completed. March 29, 2019
Overview:
The objective of the original audit was to document the employee expense processes in order
to assess whether adequate controls exist within the process. A sample of expenses was
examined to ensure compliance with Council and internal policies.
This audit found that in general the City has very sound processes and controls in place
related to employee expenses. Expenses were related to legitimate business reasons and had
the required backup to support the claims. There were no cases of fraud uncovered and only 1
instance of an employee circumventing the purchasing by-law. Staff within the Accounting
3-3
division are very diligent and skilled in looking for non-compliance with policy and identify and
prevent the majority of errors and omissions.
The main area for improvement was to consolidate all stand-alone policies into a one master
policy and instruction for employees where they can find guidance not only on the policy itself
but also on how to submit each type of expense for reimbursement.
Audit Objective:
All services which have undergone an audit in the past are subject to a status update, not
sooner than one year following the original audit. The purpose of status updates are to hold
staff accountable for addressing the audit findings and to identify any areas that have not seen
significant progress.
Status Definitions:
• Complete = the recommendation has been fully implemented.
• In progress = implementation has begun.
• Not started = No work has begun yet but will in the future.
• Not required = the recommendation either does not require any action, or it is no longer
relevant and no work will be done to implement it.
Recommendation Status:
Status
Number of recommendations
Number of original recommendations
17
Number of recommendations complete
16
Number of recommendations in progress
0
Number of recommendations not started
1
Number of recommendations not required
0
Adding a centralized Employee Expense section to KHub (staff Intranet) has helped staff
across the organization to better complete their paperwork, answer their questions and comply
with policy. Accounting staff also find the centralized repository helpful for their own review
and to direct staff questions to a specific area that is well documented. Accounting has also
noticed an improvement in the completeness and compliance of employee expenses being
submitted.
Additional enhancements and control features have been implemented for the online form for
"Parking and Mileage" to ensure all fields have been filled out correctly and a test is done to
check for duplicate submissions by staff.
Accounting also provided Expense training to staff across the organization by attending
various staff meetings to share this information. An Employee Expense course has been
3-4
offered, which has been well attended and well received. The content has also been
developed into an online, on -demand training presentation, soon to be released to the
organization.
The recommendation which has not been completed is for Internal Audit to conduct an audit of
technology hardware inventory. An audit of employee VISA statements found that some of the
expenses were for technology hardware purchases. Management was questioned regarding
the inventory tracking and physical security of these assets as they would be a desirable asset
for staff to steal (either the cardholder or other staff with access to the inventory). Due to other
audit priorities this audit has not taken place but will be placed on a future work plan.
Conclusion:
All of the recommendations assigned to Accounting were implemented. The implementation of
the recommendations has had the intended effect of improving understanding and compliance
with employee expense policies. No further follow-up is required for this audit, although this
topic will remain on the list for periodic compliance testing.
I Office of Mayor and Council — Status Report
Date of original audit: June 25, 2015
Completed: May 22, 2019
Overview:
The objective of the original audit was to ensure that the organizational structure of the division
and the individual roles and responsibilities met the requirements of the Council at that time.
It was found that in order to provide a higher level of service desired by the majority of Council,
more resources were required. It was recommended that a budget issue paper be presented
to request an additional part time constituency assistant. It was also recommended that the
division work together to create a strategy for providing more outreach services including what
that looks like, end goals, and performance measures.
Additional findings were that staff should be empowered and encouraged to anticipate Council
needs rather than waiting to be asked, and that the culture needed to shift from one of
administrative proficiency to one of value -add analysis and support. This could be done with a
shift in focus and creation of a division mission and mandate. The administrative tasks still
needed to be done, however, more emphasis was required on providing outreach, analysis of
trending issues, and helping Council implement their platforms.
Audit Objective:
All services which have undergone an audit in the past are subject to a status update, not
sooner than one year following the original audit. The purpose of status updates are to hold
staff accountable for addressing the audit findings and to identify any areas that have not seen
significant progress.
3-5
Status Definitions:
• Complete = the recommendation has been fully implemented.
• In progress = implementation has begun.
• Not started = No work has begun yet but will in the future.
• Not required = the recommendation either does not require any action, or it is no longer
relevant and no work will be done to implement it.
Recommendation Status:
Status
Number of recommendations
Number of original recommendations
8
Number of recommendations complete
2
Number of recommendations in progress
1
Number of recommendations not started
2
Number of recommendations not required
3
The main recommendation of this review, which was to add a part-time resource, was not
approved by Council at that time. Therefore the recommendations to create an outreach
strategy and to empower staff to anticipate Council needs were not started as more resources
are required in order to do that. If staff move to a proactive engagement role, core
administrative functions would be sacrificed which is not seen as feasible. .
The recommendations that are no longer required relate to training on ACR which has been
replaced by Lagan, and communicating responsibilities.
Two positive improvements that have been implemented since the review include moving from
ACR to Lagan for call and issue tracking, and adding an automated attendant to the Office of
Mayor and Council main telephone line.
While it still takes the same amount of time for staff to input cases into Lagan, efficiencies are
achieved in reporting as Lagan creates automated weekly and monthly reports. Previously
staff had to manually prepare reports quarterly with ACR. This means the information gets to
Councillors more frequently and it saves time for staff.
Calls to the Office of Mayor and Council main line are now processed by an automated
attendant during business hours, and by the Corporate Contact Centre (CCC) after-hours,
weekends and holidays. Time savings for staff are limited at this point, as it appears the
simpler calls are going to CCC, with the more time intensive calls still being handled by staff.
For these simple after-hours calls, greater customer satisfaction is achieved as customers will
speak with a live person and may have their issue resolved immediately instead of the next
day when staff answer their voicemail.
3-6
Conclusion:
Enhanced value -add services can only be provided if more resources are provided. No further
follow-up is required for this audit.
ALIGNMENT WITH CITY OF KITCHENER STRATEGIC PLAN:
This report supports the achievement of the city's strategic vision through the delivery of core
service.
FINANCIAL IMPLICATIONS:
There are no financial implications related to this report.
COMMUNITY ENGAGEMENT:
INFORM — This report has been posted to the city's website with the agenda in advance of the
council / committee meeting.
ACKNOWLEDGED BY: Dan Chapman, CAO
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