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HomeMy WebLinkAboutFIN-20-045 - 2019 Audited Consolidated Financial StatementsREPORT TO:Audit Committee DATE OF MEETING:June22, 2020 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:May 28, 2020 REPORT NO.:FIN-20-045 SUBJECT:2019Audited Consolidated Financial Statements ___________________________________________________________________________ RECOMMENDATION: That the 2019Audited Consolidated Financial Statements of the Cityof Kitchener be approved. BACKGROUND: Staff is pleased to submit the 2019Audited Consolidated Financial Statements of the Cityof Kitchener. Financial statement highlights have been included as Appendix A. Representatives of the City(virtually) to discuss theirAudit 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 theSquare Inc., Kitchener Public Library, Belmont Improvement Area, and Kitchener Downtown Improvement Area. Please see Appendix Bto this report for a reconciliation between the non-consolidated results for the tax-based operations and the enterprises and the Audited Consolidated Financial Statements.Please note that the full annual report is being finalized and will be provided to Council at a later date before being posted to the City ALIGNMENT WITH CITYOF KITCHENER STRATEGIC PLAN: The recommendation of this report supports the achievement of the City 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. 5 - 1 COMMUNITY ENGAGEMENT: INFORM This report has been posted to the Cityagenda in advance of the council / committee meeting.The audited financial statements will be posted on the Citywebsite 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: The Corporation of the Cityof Kitchener consolidated financial statementsfor the year ended December 31, 2019 Financial statements for the year ended December 31, 2019 for the following entities: o The Corporation of the Cityof Kitchener Trust Funds o Belmont Improvement Area Board of Management o Kitchener Downtown Improvement Area Board of Management o Kitchener Public Library o The Centre in the Square Inc. o The Corporation of the Cityof Kitchener Gasworks Enterprise o Kitchener Generation Corporation o Kitchener Power Corp. Audit Findings Report for the year ended December 31, 2019(KPMG) ACKNOWLEDGED BY: Jonathan Lautenbach, Chief Financial Officer, Financial Services 5 - 2 Appendix AFinancial Statement Discussion and Analysis 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 City 5 - 3 CONSOLIDATED STATEMENT OF FINANCIAL POSITION The Consolidated Statement of Financial Position highlights four key figures that together describe the financial position of a government: 1) cash resources, 2) net financial asset position, 3) non-financial assets that are normally held for service provision such as tangible capital assets, and 4) accumulated surplus (deficit). The statement is used to evaluate the City commitments. The Cityt balance is $254 million, an increase of $33 million from 2018. 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 .%4 &).!.#)!, !33%43 Cash and cash equivalents The City-term investments to meet ongoing cash requirements. The cash position has increased to $75 million from $43 million in 2018. The Consolidated Statement of Cash Flows summarizes the sources and uses of cash in both 2019 and 2018. The increase in cash held relates to growth in the City year. The interest rate on the City-term investment products at yearend so excess funds were held in the bank account rather than purchasing investments. 5 - 4 Taxes receivable The increase in Taxes receivable at yearend to $22 million from $19 million in 2018 is due to a larger amount of supplementary taxes being processed and billed just before yearend. A larger number of customers were granted instalment arrangements that allow them to pay their tax bill in smaller increments over a longer period. Some significant tax customers paid their 2019 tax bills in January 2020. 4!8%3 2%#%)6!",% !3 ! 0%2#%.4 /& #522%.4 LEVY Trade and other accounts receivable The amount in Trade and other accounts receivable has decreased to $35 million from $38 million in 2018. The 2018 balance included a sizable receivable that normally is cleared out before yearend but due to staff changeover at that entity, it was not closed out before yearend. The balance receivable from that entity has returned to a near zero balance in 2019. Loans Receivable Loans receivable have decreased to $6 million from $7 million in 2018. This is consistent with the fact that the City did not issue any new loans in 2019 and continues to collect these amounts in line with the pre-set repayment terms. 5 - 5 Inventory for resale The City holds certain inventory items for resale (normally this is related primarily to the Gasworks enterprise). This inventory has increased to $13 million from $8 million in 2018 due to certain parcels of land meeting the requirement to be classified as available for sale rather than being part of tangible capital assets. 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. Investment in Kitchener Power Corp. & Kitchener Generation Corporation The City Corporation is made up of the Cityn less dividends received. See Notes 7 and 8 to the Consolidated Financial Statements for further details. Deferred revenue obligatory reserve funds There is a requirement to defer specific funding until those funds have been spent on eligible projects. The increase in deferred revenue obligatory reserve funds to $46 million from $35 million in 2018 is primarily due to much higher collections of development charges and the amount of Federal Gas Tax grants received more than doubling in 2019 compared to 2018. Please see Note 10 to the financial statements which provides greater detail regarding activity in both years. Deferred Revenue Other Certain user fees and charges are collected for which the related services have yet to be performed. These are recorded under the classification Deferred revenue - other. Deferred revenue - other has increased by $2 million to $26 million in 2019. The increase relates to funds contributed by developers to move up the timing of capital projects. These funds will be returned by way of a reduction in the amount of development charges collected in the future from these developers. 5 - 6 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) -5.)#)0!, $%"4 The City must comply with annual debt and financial obligations limits as outlined in Ontario Regulation 403/02. The Province provides the City with an Annual Repayment Limit that caps overall debt charges to 25% of the Cityte a responsible approach to debt management, the City has established its own debt limits as follows: Tax supported debt charges will be limited to 10% of the City Rate supported debt charges will be limited to 10% of the City supported revenues Capital Pool debt charges will not increase by more than 5% annually 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 innovation, entrepreneurship, and a sought-after urban lifestyle. 5 - 7 Municipal debt has decreased to $64 million from $71 million in 2018. The change in debt is a result of new debt issuance of $4.1 million offset by repayment of $11.3 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 $49 million in 2018 to $51 million in 2019. The increase relates to rising cost of benefits and additional coverages introduced by WSIB as well as a decrease in the interest rate used. 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 2 to 100 years. During 2019, the City acquired $116 million in tangible capital assets (2018 - $122 million). Amortization of assets was $50 million (2018 - $48 million). Refer to Note 14 and Schedule A of the Consolidated Financial Statements for a detailed breakdown of tangible capital asset activity for 2019 and 2018. The net book value of tangible capital assets at December 31, 2019 is $1.24 billion, up from $1.19 billion in 2018. 4!.')",% #!0)4!, !33%43 "9 !33%4 490% Linear Assets $695M ($663M) Assets under construction $66M ($45M) Land$200M ($194M) Vehicles$16M ($17M) Computer Hardware & Software$21M ($22M) Leasehold Improvements Land Improvements $2M ($2M) Buildings $42M ($36M) Machinery and Equipment $174M ($181M) $26M ($25M) 5 - 8 Accumulated surplus The City- $1.41 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. Reserve funds Reserve funds are included as part of accumulated surplus and these balances are disclosed in Note 15 to the financial statements. Reserve fund balances have increased during 2019 to $85 million (2018 - $70 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 ensure the reserves continue to support the financial goals and serve the highest priority needs of the City and its citizens. 2%3%26% &5.$3 5 - 9 CONSOLIDATED STATEMENT OF OPERATIONS 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 2.53%. 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 2019 operations was 2.25%. 2%6%.5% "9 490% 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. Gasworks revenue was $6 million higher than budget due to greater volume of gas used by the City customers compared to budget and due to some recoveries from the Region of Waterloo related to work done on gas infrastructure at the time of the light rail transit work. The decrease from 2018 of $6 million is primarily attributable to the fact that there were nine months of the cap and trade program in 2018. The program was eliminated on Oct 1, 2018, so there were no comparable revenues in 2019. The decrease from 2018 is also consistent with the reduction in rates. 5 - 10 Water, sewer & storm water revenue is $8 million greater than in 2018 due to the approved increases in the user fee rates charged for these services in addition to greater water consumption by the City customers. The increased consumption explains why revenue has exceeded budget by $5 million. Other user fees are greater than budget and prior year as a result of obligatory revenues previously deferred being recognized in 2019 as work on a significant park began. The revenue of the local boards were also higher than last year and budget. Grant revenue exceeds budget and prior year due to the introduction of some new grants after the budget had been approved and due to the additional influx of Federal Gas Tax Funds in 2019 most of which will be earned in future years as the eligible projects are completed. 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 is higher for 2019 compared to 2018 primarily due to significantly larger amounts of contributed assets to the City. The timing of asset contributions is not something the City controls. These revenue exceeded budget due to the timing of expenditures in development charge funded projects. The revenue was budgeted in earlier years, but only met the requirements to be earned within 2019. %80%.3%3 "9 &5.#4)/. Millions $100 $80 $60 $40 $20 $- GeneralProtectionTransport-Environ-RecreationOtherGasworks governmentservicesationmental& cultural servicesservicesservices 2019 Budget20192018 5 - 11 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. Transportation services expenses are $3 million higher than budget related to the write-off of streetlights that were replaced in the LED light replacement. It was more cost effective to replace the entire network of streetlights at once rather than doing it piecemeal as the lights reached the end of their useful lives. The cost of this project is being recovered through the reduced electricity bills resulting from the higher efficiency LED bulbs. Expenses in this area exceed prior year due to the streetlight write-off and higher maintenance costs including the pilot project for clearing sidewalks in a portion of the City, an increase in multi-use trails being maintained through the winter, and new provincial standards around maintenance of sidewalks. Environmental services expenses are $6 million higher than in 2018 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 Citys. Amortization of linear assets has also increased due to greater tangible capital asset additions in recent years. Recreation and cultural services expenses are $3 million higher in 2019 than 2018 due to higher expenses at the Centre in the Square and increased amortization due to greater tangible capital asset additions in recent years. services, and Planning and development. The expenses in this function are $5 million higher than budget due to the expenses in the budget being offset by expected proceeds on the sale of certain parcels of land. These sales were not finalized in 2019, so the proceeds are not offsetting expenses. Gasworks expenses are $8 million less than in 2018 primarily related to the fact that there were nine months of the cap and trade program in 2018. The program was eliminated on Oct 1, 2018, so there were no comparable allowance purchases in 2019. 5 - 12 %80%.3%3 "9 490% Materials and services $162M ($162M) Debenture debt interest $3M ($3M) Grants and other $4M ($6M) Amortization $49M ($48M) Loss/(Gain) on sale of assets $5M (-$4M) Salaries, wages and employee benefits $164M ($159M) CONSOLIDATED STATEMENT OF CHANGE IN NET FINANCIAL ASSETS 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. CONSOLIDATED STATEMENT OF CASH FLOW 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. 5 - 13 Appendix B Annual Surplus Reconciliation Year-end operating results are provided in report FIN-20-022 that is also included on the June 22, 2020 Special Council Agenda. The annual surplus presented in the Audited Consolidated Financial Statements reconciles to the Cityof Kitcheneryear-end results as follows: 5 - 14 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 Mayor and Members of Council, Inhabitants and Ratepayers of he Mayor and Members of Council, Inhabitants and Ratepayers of he Mayor and Members of Council, Inhabitants and Ratepayers of the Corporation of the City of Kitchener Opinion T We have audited the consolidated financial statements ofWe have audited the consolidated financial statements ofWe have audited the consolidated financial statements ofthe Corporation of the City of Kitchener(the Entity), which comprise:(the Entity), which comprise:(the Entity), which comprise: the consolidated statement of statement of the the the financial positionfinancial positionfinancial positionas at December 31, 2019 F the consolidated statement of statement of statement of operationsoperationsoperationsfor the year then endedfor the year then ended the consolidated the consolidated the consolidated statement of change in net financial assetsstatement of change in net financial assetsstatement of change in net financial assetsfor the year then ended A the consolidated the consolidated the consolidated statement of cash flowsstatement of cash flowsstatement of cash flowsfor the year then ended and notes to the and notes to the and notes to the consolidated consolidated consolidated financial statements, including a summary of significant accounting policiesaccounting policiesaccounting policies R (Hereinafter referred to as the “(Hereinafter referred to as the “(Hereinafter referred to as the “consolidated financial statements”). In our opinion, the acconion, the acconion, the accompanying consolidated financial statements present fairly, in all material respects, thematerial respects, thematerial respects, the D consolidated financial positionof the Entity as at December 31, 2019, and its consolidated results of operations, its changes in consolidated net financial assets, and its consolidated cash flowsfor the year then ended in accordance with Canadian public sector accounting standards. Basis for Opinion We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the “Auditors’ Responsibilities for the Audit of theConsolidatedFinancial Statements” section of our auditors’report. KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. KPMG Canada provides services to KPMG LLP. 1 5 - 15 Page 2 We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of theconsolidatedfinancial statements in Canada and we have fulfilled our otherethicalresponsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of Management and Those Charged with Governance Responsibilities of Management and Those Charged with Governance Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of the preparation and fair presentation of the preparation and fair presentation of the consolidated financial statementsin accordance with Canadian public sector accounting standardsCanadian public sector accounting standardsCanadian public sector accounting standardsand for such internal control as management determines is necessary to enable the for such internal control as management determines is necessary to enable the for such internal control as management determines is necessary to enable the preparation ofconsolidatedfinancial statementsfinancial statementsfinancial statementsthat arethat arethat arefree from material misstatement, free from material misstatement, T whether due to fraud orerror. In preparing the consolidated consolidated financial statements, management is responsible for financial statements, management is responsible for financial statements, management is responsible for assessing the Entity’s ability to continue as a going concern, disclosing as applicable, assessing the Entity’s ability to continue as a going concern, disclosing as applicable, assessing the Entity’s ability to continue as a going concern, disclosing as applicable, F matters related to going concern and using the going concern basis of accountmatters related to going concern and using the going concern basis of accountmatters 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 management either intends to liquidate the Entity or to cease operations, or has no realistic management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so.alternative but to do so.alternative but to do so. A Those charged with governance are responsible for overseeing the Entity’s financial Those charged with governance are responsible for overseeing the Entity’s financial Those charged with governance are responsible for overseeing the Entity’s financial reporting process.reporting process.reporting process. R AuditorsAuditorsAuditors’ ’ ResponsibiliResponsibiliResponsibilities for the Audit of theties for the Audit of theConsolidated Financial StatementsStatementsStatements Our objectives are to obtain reasonable assurance about whether theOur objectives are to obtain reasonable assurance about whether theOur objectives are to obtain reasonable assurance about whether theconsolidated D financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue anauditors’report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of theconsolidatedfinancial statements. As part of anaudit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout theaudit. 2 5 - 16 Page 3 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 The risk of not detecting a material misstatement resulting from fraud is higher than for 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, one resulting from error, as fraud may involve collusion, forgery, intentional omissions, one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.misrepresentations, or the override of internal control.misrepresentations, or the override of internal control. Obtain an understanding of internalcontrol relevant to thecontrol relevant to thecontrol relevant to theaudit in order to design audit audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of procedures that are appropriate in the circumstances, but not for the purpose of 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. expressing an opinion on the effectiveness of the Entity's internal control. expressing an opinion on the effectiveness of the Entity's internal control. T Evaluate the appropriateness of accounting policies used and the reasonableness of Evaluate the appropriateness of accounting policies used and the reasonableness of Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.accounting estimates and related disclosures made by management.accounting estimates and related disclosures made by management. Conclude on the appropriateness of management's use of the going concern basis of Conclude on the appropriateness of management's use of the going concern basis of Conclude on the appropriateness of management's use of the going concern basis of F accounting and, based on the audit evidence obtained, whether a mataccounting and, based on the audit evidence obtained, whether a mataccounting 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 exists related to events or conditions that may cast significant doubt on the Entity's 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, ability to continue as a going concern. If we conclude that a material uncertainty exists, ability to continue as a going concern. If we conclude that a material uncertainty exists, A we are required to draw attention in our we are required to draw attention in our we are required to draw attention in our auditors’ report tothe related disclosures in the consolidated consolidated consolidated financial statements or, if such disclosures are inadequate, to modify our financial statements or, if such disclosures are inadequate, to modify our 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 opinion. Our conclusions are based on the audit evidence obtained up to the date of opinion. Our conclusions are based on the audit evidence obtained up to the date of R our auditors’ our auditors’ our auditors’ report. However, future events or conditions may cause the Entity to report. However, future events or conditions may cause the Entity to report. However, future events or conditions may cause the Entity to cease to continue as a going concern.cease to continue as a going concern.cease to continue as a going concern. Evaluate the overall presentation, structure and content of the Evaluate the overall presentation, structure and content of the Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether thestatements, including the disclosures, and whether thestatements, including the disclosures, and whether theconsolidated financial D statements represent the underlying transactions and events in a manner that achieves fair presentation. Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during ouraudit. 3 5 - 17 Page 4 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 consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. Chartered Professional Accountants, Licensed Public AccountantsChartered Professional Accountants, Licensed Public AccountantsChartered Professional Accountants, Licensed Public Accountants Waterloo, Canada T June 22, 2020 F A R D 4 5 - 18 TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD 5 5 - 19 TTTTTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAAAAA RRRRRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDDDDD 6 5 - 20 TTTTTTTTTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAAAAAAAAA RRRRRRRRRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDDDDDDDDD 7 5 - 21 TTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAA RRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDD 8 5 - 22 T F A R D 9 5 - 23 T F A R D 10 5 - 24 T F A R D 11 5 - 25 TTTTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAAAA RRRRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDDDD 12 5 - 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33 TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD 20 5 - 34 TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD 21 5 - 35 TTTTTTTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAAAAAAA RRRRRRRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDDDDDDD 22 5 - 36 T F A R D 23 5 - 37 TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA 24 RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD 5 - 38 TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA 25 RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD 5 - 39 TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA 26 RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD 5 - 40 TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA 27 RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD 5 - 41 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 Mayor and Members of Council, Inhabitants and Ratepayers of The Corporation of he Mayor and Members of Council, Inhabitants and Ratepayers of The Corporation of he Mayor and Members of Council, Inhabitants and Ratepayers of The Corporation of the City of Kitchener Opinion We have audited the financial statements of We have audited the financial statements of We have audited the financial statements of The Trust Funds of the Corporation of the City The Trust Funds of the Corporation of the City The Trust Funds of the Corporation of the City of Kitchener(the Entity), which comprise:(the Entity), which comprise:(the Entity), which comprise: the balance sheetas at December 31, 201as at December 31, 201as at December 31, 201999 the statement of continuitycontinuitycontinuityfor the year then endedfor the year then endedfor the year then ended and notes to the and notes to the and notes to the financial statements, including a summary of significantfinancial statements, including a summary of significantfinancial statements, including a summary of significant accountingpoliciespoliciespolicies (Hereinafter referred to as the “financial s(Hereinafter referred to as the “financial s(Hereinafter referred to as the “financial statements”). In our opinion, the accompanying financial statements present fairly opinion, the accompanying financial statements present fairly opinion, the accompanying financial statements present fairly, in all material respects, therespects, therespects, thebalance sheetbalance sheetbalance sheetof the Entity as at December 31, 2019, and the statement of continuityfor the year then ended in accordance with Canadian publifor the year then ended in accordance with Canadian publifor 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. KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. KPMG Canada provides services to KPMG LLP. 1 5 - 42 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 statementsin accordance with Canadian public sector accounting standardsand for such internal control as management determines is necessary to enable the preparation of financial statementsthat arefree from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the In preparing the financial statements, management is responsible for assessing the In preparing the financial statements, management is responsible for assessing the Entity’s ability to continue as a going concern, disclosing as applicable, matters related to Entity’s ability to continue as a going concern, disclosing as applicable, matters related to 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 going concern and using the going concern basis of accounting unless management either 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 intends to liquidate the Entity or to cease operations, or has no realistic alternative but to intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so. Those charged with governance are Those charged with governance are responsible for overseeing the Entity’s financial responsible for overseeing the Entity’s financial responsible for overseeing the Entity’s financial reporting process. Auditors’ Responsibilities for the Audit of the Financial StatementsResponsibilities for the Audit of the Financial StatementsResponsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from mateas a whole are free from mateas a whole are free from material misstatement, whether due to fraud or error, and to issue rial misstatement, whether due to fraud or error, and to issue rial misstatement, whether due to fraud or error, and to issue an auditors’report that includes our opinion. report that includes our opinion. report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit Reasonable assurance is a high level of assurance, but is not a guarantee that an audit Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted conducted in accordance with Canadian generally accepted conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. detect a material misstatement when it exists. detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or Misstatements can arise from fraud or error and are considered material if, individually or Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of thefinancial statements. As part of anaudit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout theaudit. We also: Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. 2 5 - 43 Page 3 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 theaudit 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.accounting estimates and related disclosures made by management.accounting estimates and related disclosures made by management. Conclude on the appropriateness of management's use of the going concern basis of Conclude on the appropriateness of management's use of the going concern basis of 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 audit evidence obtained, whether a material uncertainty audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Entity's exists related to events or conditions that may cast significant doubt on the Entity's 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, ability to continue as a going concern. If we conclude that a material uncertainty exists, ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our w attention in our w attention in our auditorsauditorsauditors’’report to the related disclosures in the report to the related disclosures in the T financial statements or, if such disclosures are inadequate, to modify our opinion. Our financial statements or, if such disclosures are inadequate, to modify our opinion. Our 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 conclusions are based on the audit evidence obtained up to the date of 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 report. However, future events or conditions may cause the Entity to cease to continue report. However, future events or conditions may cause the Entity to cease to continue F as a going concern. Evaluate the overall presentation, structure and content of the financial statements, Evaluate the overall presentation, structure and content of the financial statements, Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent thincluding the disclosures, and whether the financial statements represent thincluding the disclosures, and whether the financial statements represent th A e underlying transactions and events in a manner that achieves fair presentation.underlying transactions and events in a manner that achieves fair presentation.underlying transactions and events in a manner that achieves fair presentation. Communicate with those charged with governance regarding, among other matters, Communicate with those charged with governance regarding, among other matters, Communicate with those charged with governance regarding, among other matters, the planned scope and timing of thethe planned scope and timing of thethe planned scope and timing of theaudit and significant audit findings, including any R signifisignifisignificant deficiencies in internal control that we identify during ourcant deficiencies in internal control that we identify during ourcant deficiencies in internal control that we identify during ouraudit. D Chartered Professional Accountants, Licensed Public Accountants Waterloo, Canada June 22, 2020 3 5 - 44 TTTTTTTTT FFFFFFFFF AAAAAAAAA RRRRRRRRR DDDDDDDDD 4 5 - 45 TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD 5 5 - 46 T F A R D 6 5 - 47 TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA 7 RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD 5 - 48 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 the Belmont Improvement Area Board of Managementbers of the Belmont Improvement Area Board of Managementbers of the Belmont Improvement Area Board of Management Opinion T We have audited the financial statements of Belmont Improvement Area Board of We have audited the financial statements of Belmont Improvement Area Board of We have audited the financial statements of Belmont Improvement Area Board of Management (the Entity), which comprise:Management (the Entity), which comprise:Management (the Entity), which comprise: the statement of financial posistatement of financial posistatement of financial position tion tion as at December 31, 201as at December 31, 201as at December 31, 2019 F the statement of revenue and expenses and accumulated surplusrevenue and expenses and accumulated surplusrevenue and expenses and accumulated surplusfor the year then ended A the statement of changes in net financial assetsstatement of changes in net financial assetsstatement of changes in net financial assetsfor the year then ended and notes to the and notes to the and notes to the financial statements, including a summary of signifinancial statements, including a summary of signifinancial statements, including a summary of significant accounting policiesaccounting policiesaccounting policies R (Hereinafter referred to as the “financial statements”).(Hereinafter referred to as the “financial statements”).(Hereinafter referred to as the “financial statements”). In our opinion, the accompanying financial statements present fairly opinion, the accompanying financial statements present fairly opinion, the accompanying financial statements present fairly, in all material respects, thefinancial position of the Entity as at financial position of the Entity as at financial position of the Entity as at December 31, 2019, and its results of D operations,andits changes in net financial assetsfor the year then ended in accordance with Canadian public sector accounting standardsrelevant to preparing such a financial statement. 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. 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. 8 5 - 49 Page 2 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statementsin accordance with Canadian public sector accounting standardsand for such internal control as management determines is necessary to enable the preparation of internal control as management determines is necessary to enable the preparation of internal control as management determines is necessary to enable the preparation of financial statementsthat arefree from material misstatement, whether due to fraud or free from material misstatement, whether due to fraud or free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the In preparing the financial statements, management is responsible for assessing the In preparing the financial statements, management is responsible for assessing the Entity’s ability to continue as a going concern, disclosing as applicable, matters related to Entity’s ability to continue as a going concern, disclosing as applicable, matters related to 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 going concern and using the going concern basis of accounting unless management either going concern and using the going concern basis of accounting unless management either T intends to liquidate the Entity or to cease operations, or has no realistic alternative but to intends to liquidate the Entity or to cease operations, or has no realistic alternative but to 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 Those charged with governance are responsible for overseeing the Entity’s financial Those charged with governance are responsible for overseeing the Entity’s financial F reporting process. Auditors’ ResponsibilitiResponsibilitiResponsibilities for the Audit of the Financial Statementses for the Audit of the Financial Statementses for the Audit of the Financial Statements A Our objectives are to obtain reasonable assurance about whether the financial statements Our objectives are to obtain reasonable assurance about whether 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 as a whole are free from material misstatement, whether due to fraud or error, and to issue as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditorsan auditorsan auditors’’report that includes our opinion. report that includes our opinion. report that includes our opinion. R Reasonable assurance is a high level of assurance, but is not a guarantee that an audit Reasonable assurance is a high level of assurance, but is not a guarantee that an audit 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 conducted in accordance with Canadian generally accepted auditing standards will always conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. detect a material misstatement when it exists. detect a material misstatement when it exists. D Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of thefinancial statements. As part of anaudit in accordancewith Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout theaudit. We also: Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. 9 5 - 50 Page 3 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 theaudit 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 Evaluate the appropriateness of accounting policies used and the reasonableness of Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.accounting estimates and related disclosures made by management.accounting estimates and related disclosures made by management. Conclude on the appropriateness of management's use of the going concern basis of Conclude on the appropriateness of management's use of the going concern basis of 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 accounting and, based on the audit evidence obtained, whether a material uncertainty 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 exists related to events or conditions that may cast significant doubt on the Entity's 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, ability to continue as a going concern. If we conclude that a material uncertainty exists, ability to continue as a going concern. If we conclude that a material uncertainty exists, T we are required to draw attention in our we are required to draw attention in our we are required to draw attention in our auditors’ auditors’ auditors’ report to the related disclosures in the report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our financial statements or, if such disclosures are inadequate, to modify our opinion. Our 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 conclusions are based on the audit evidence obtained up to the date of our conclusions are based on the audit evidence obtained up to the date of our auditors’ F report. However, future events or conditions may cause the Entity to cease to continue report. However, future events or conditions may cause the Entity to cease to continue report. However, future events or conditions may cause the Entity to cease to continue as a going concern.as a going concern.as a going concern. Evaluate the overall presentation, structure and content of the financial statements, Evaluate the overall presentation, structure and content of the financial statements, Evaluate the overall presentation, structure and content of the financial statements, A including the disclosures, and whether the financial statements represent the including the disclosures, and whether the financial statements represent the including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.underlying transactions and events in a manner that achieves fair presentation.underlying transactions and events in a manner that achieves fair presentation. CommunicateCommunicateCommunicatewith those charged with governance regarding, among other matters, with those charged with governance regarding, among other matters, with those charged with governance regarding, among other matters, R the planned scope and timing of the audit and significant audit findings, including any the planned scope and timing of the audit and significant audit findings, including any the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during oursignificant deficiencies in internal control that we identify during oursignificant deficiencies in internal control that we identify during ouraudit. D Chartered Professional Accountants, Licensed Public Accountants Waterloo, Canada June 22, 2020 10 5 - 51 TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD 11 5 - 52 TTTTTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAAAAA RRRRRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDDDDD 12 5 - 53 TTTTTTT FFFFFFF AAAAAAA RRRRRRR DDDDDDD 13 5 - 54 TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD 14 5 - 55 INDEPENDENT AUDITORS’ REPORT Opinion We have audited the financial statements of Kitchener Downtown Improvement Area Board of Management (the “Entity”), which comprise: the statement of financial position as atDecember 31, 2019 the statement of revenue and expenses and accumulated surplusfor the year then ended the statement of changes in net financial assets for the year then endedthe statement of changes in net financial assets for the year then endedthe statement of changes in net financial assets for the year then ended the statement of cash flows for the year then endedthe statement of cash flows for the year then endedthe statement of cash flows for the year then ended and notes to the financial statements, including a summary of significantand notes to the financial statements, including a summary of significantand notes to the financial statements, including a summary of significant accounting policies T (Hereinafter referred to as the “financial statements”).(Hereinafter referred to as the “financial statements”).(Hereinafter referred to as the “financial statements”). In our opinion, the accompanying financial statements present fairly, in all In our opinion, the accompanying financial statements present fairly, in all In our opinion, the accompanying financial statements present fairly, in all F material respects, the financial position of the Entitymaterial respects, the financial position of the Entitymaterial respects, the financial position of the Entityas atDecember 31, 2019, and its results of operations, its changes in net financial assets and its cash flows and its results of operations, its changes in net financial assets and its cash flows 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 for the year then ended in accordance with Canadian public sector accounting for the year then ended in accordance with Canadian public sector accounting A standards.standards.standards. Basis for OpinionBasis for OpinionBasis for Opinion We conducted our audit in accordance with Canadian generally accepted auditing We conducted our audit in accordance with Canadian generally accepted auditing We conducted our audit in accordance with Canadian generally accepted auditing R standards. Our responsibilities under those standards are further described in standards. Our responsibilities under those standards are further described in standards. Our responsibilities under those standards are further described in the “the “the “Auditors’Auditors’Auditors’ResponResponResponsibilities for the Audit of the Financial Statements” section of our auditors’section of our auditors’section of our auditors’report. D We are independent of the Entityin accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada and we have fulfilledour 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. 15 5 - 56 Page 2 Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with Canadian public sector accounting standards and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the 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 eitherintends to liquidate the Entityor to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the EntityThose charged with governance are responsible for overseeing the EntityThose charged with governance are responsible for overseeing the Entity’s financial reporting process. Auditors’ Responsibilities for the Audit of the Financial Auditors’ Responsibilities for the Audit of the Financial Auditors’ Responsibilities for the Audit of the Financial Statements T Our objectives are to obtain reasonable assurance about whether the financial Our objectives are to obtain reasonable assurance about whether the financial Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud statements as a whole are free from material misstatement, whether due to fraud statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’or error, and to issue an auditors’or error, and to issue an auditors’report that includes our opinion. report that includes our opinion. report that includes our opinion. F Reasonable assurance is a high level of assurance, but is not a guarantee that an Reasonable assurance is a high level of assurance, but is not a guarantee that an Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing audit conducted in accordance with Canadian generally accepted auditing audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. standards will always detect a material misstatement when it exists. standards will always detect a material misstatement when it exists. A Misstatements can arise from fraud or error and are considered material if, Misstatements can arise from fraud or error and are considered material if, Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence individually or in the aggregate, they could reasonably be expected to influence individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of thethe economic decisions of users taken on the basis of thethe economic decisions of users taken on the basis of thefinancial statements. R As part of anAs part of anAs part of anaudit in accordance with Canadian generally accepted auditing audit in accordance with Canadian generally accepted auditing audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional standards, we exercise professional judgment and maintain professional standards, we exercise professional judgment and maintain professional skepticism throughout theskepticism throughout theskepticism throughout theaudit. D Wealso: 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 providea 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 theaudit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion onthe effectiveness of the Entity's internal control. 16 5 - 57 Page 3 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 EntityHowever, future events or conditions may cause the EntityHowever, future events or conditions may cause the Entityto cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financialEvaluate the overall presentation, structure and content of the financialEvaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statementsstatements, including the disclosures, and whether the financial statementsstatements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achievesent the underlying transactions and events in a manner that achievesent the underlying transactions and events in a manner that achieves fair presentation. T Communicate with those charged with governance regarding, among otherCommunicate with those charged with governance regarding, among otherCommunicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant auditmatters, the planned scope and timing of the audit and significant auditmatters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that wefindings, including any significant deficiencies in internal control that wefindings, including any significant deficiencies in internal control that we F identify during ouridentify during ouridentify during ouraudit.audit.audit. A ChartChartChartered Professional Accountants, Licensed Public Accountantsered Professional Accountants, Licensed Public Accountantsered Professional Accountants, Licensed Public Accountants R WaterWaterWaterloo, Canadaloo, Canadaloo, Canada Date D 17 5 - 58 KITCHENER DOWNTOWN IMPROVEMENT AREA BOARD OF MANAGEMENT Statement of Financial Position Year ended December 31, 2019, with comparative informationfor 2018 20192018 (Restated See note 6) Financial Assets Cash$ 263,352 $ 251,964 Term deposits (note 2) 113,712112,886 Accounts receivable75,42630,222 Prepaid expenses10,8176,399 463,307401,471 Financial Liabilities Accounts payable and accrued charges92,68392,683122,203 Due to the City of Kitchener (note 4)184,312184,312184,31275,018 276,995276,995276,995197,221 TTTTTT Net financial assets186,312204,250 Non-Financial Assets FFFFFF Tangible capital assets(note 5) 30,68844,254 Net assets$ 217,000 $ 248,504 AAAAAA Accumulated SurplusAccumulated SurplusAccumulated Surplus Reserve for rate stabilizationve for rate stabilizationve for rate stabilization$ 50,000 $ 50,000 RRRRRR Accumulated net revenueAccumulated net revenueAccumulated net revenue136,312154,250 Invested in tangible capital Invested in tangible capital Invested in tangible capital assetsassetsassets30,68844,254 Total accumulated surplus$ 217,000 $ 248,504 DDDDDD See accompanying notes to financial statements. On behalf of the Board: ______________________________ Director ______________________________ Director 18 5 - 59 KITCHENER DOWNTOWN IMPROVEMENT AREA BOARD OF MANAGEMENT Statement of Revenue and Expenses and Accumulated Surplus Year ended December 31, 2019, with comparative informationfor 2018 BudgetActualActual 201920192018 (Restated See note 6) Revenue: Assessments$ 1,379,000 $ 1,379,000 $ 1,279,000 Interest-833755 Other income10,000 25,585246 1,389,0001,405,4181,280,001 Expenses: Promotions and advertising511,000511,000511,000435,582299,237 Salaries, wages and benefits397,767397,767397,767406,341364,350 Administration111,133111,133111,133106,106,604100,532 Meetingsand seminars11,60011,60011,6007,9207,92017,390 Safety and beautification185,000185,000185,000 2 241,59441,594 193,983 Member relations17,50017,50017,500 11,15314,878 Amortization10,00010,00010,00014,17517,572 TTTTTT Downtown Improvement Project--29,24154,544 Queen Street Project100,000100,000100,000100,000100,000 1,344,0001,344,0001,344,0001,352,6101,162,486 FFFFFF Net revenuebefore other items45,00045,00045,000 52,808117,515 Net assessment write-offs (note 4) 4) 4) 45,00084,31275,018 AAAAAA Net revenue(loss)-(31,504)42,497 Accumulated surplus, beginning of year, beginning of year, beginning of year289,161 248,504206,007 RRRRRR Accumulated surplusAccumulated surplusAccumulated surplus, end of year, end of year, end of year$ 289,161 $ 217,000 $ 248,504 See accompanying notes to financial statements.See accompanying notes to financial statements.See accompanying notes to financial statements. DDDDDD 19 5 - 60 KITCHENER DOWNTOWN IMPROVEMENT AREA BOARD OF MANAGEMENT Statement of Changes in Net Financial Assets Year ended December 31, 2019, with comparative informationfor 2018 20192018 (Restated See note 6) Net revenue(loss)$ (31,504) $ 42,497 Acquisition of tangible capital assets(609)(3,993) Amortization of tangible capital assets14,17517,572 Change in net financial assets(17,938) 56,076 Net financial assets, beginning of year204,250148,174 Net financial assets, end of year$ $ $ 186,186,312 $ 204,250 See accompanying notes to financial statements. TTTT FFFF AAAA RRRR DDDD 20 5 - 61 KITCHENER DOWNTOWN IMPROVEMENT AREA BOARD OF MANAGEMENT Statement of Cash Flows Year ended December 31, 2019, with comparative informationfor 2018 20192018 (Restated See note 6) Cash provided by (used in): Operating activities: Net revenue(loss)$ (31,504) $ 42,497 Item not involving cash: Amortization14,17517,572 Changes in non-cash assets and liabilities: Accounts receivable(45,204) 4,768 Prepaid expenses(4,418) 527 Accounts payable and accrued liabilities((29,52029,520) 44,214 Due to theCity of Kitchener109,294109,29440,657 Cash from operating activities12,82312,823150,235 Investing activities: Acquisition of tangible capital assets(609)(3,993) TTTTTT Purchase of investments(826)(751) Cash used in investing activities(1,435)(4,744) Increase in cash11,388145,491 FFFFFF Cash,beginning of year251,964106,473 Cash,end of year$ 263,352 $ 251,964 AAAAAA See accompanying notes to financial statements.See accompanying notes to financial statements.See accompanying notes to financial statements. RRRRRR DDDDDD 21 5 - 62 KITCHENER DOWNTOWN IMPROVEMENT AREA BOARD OF MANAGEMENT Notes to Financial Statements Year ended December 31, 2019 1.Summary of significant accounting policies: Kitchener Downtown Improvement Area Board of Management (the “Board”) is established for the main purpose of revitalizing the Central Business District of the City of Kitchener. It is designated as a Business Improvement Area(BIA) through the Ontario Municipal Act and a City of Kitchener by-law enacted in 1977. Thefinancial statements of the Board are the representation of management and have been prepared in accordance with Canadian generally accepted accounting principles for localprepared in accordance with Canadian generally accepted accounting principles for localprepared in accordance with Canadian generally accepted accounting principles for local governments, as recommended by the Public Sector Accounting Board (PSAB) of the Cgovernments, as recommended by the Public Sector Accounting Board (PSAB) of the Cgovernments, as recommended by the Public Sector Accounting Board (PSAB) of the Chartered Professional Accountantsof Canada. Since precise determination of many assets and liabilities is. Since precise determination of many assets and liabilities is. Since precise determination of many assets and liabilities is dependent upon future events, the preparation of periodic financial statements necessarilydependent upon future events, the preparation of periodic financial statements necessarilydependent upon future events, the preparation of periodic financial statements necessarily involves the use of estimates and approximations. These have been made using carefulinvolves the use of estimates and approximations. These have been made using carefulinvolves the use of estimates and approximations. These have been made using careful judgment. TTTT (a)Tangible capitalassets: Tangible capital assets are recorded at cost which includes amounts that are directlyTangible capital assets are recorded at cost which includes amounts that are directlyTangible capital assets are recorded at cost which includes amounts that are directly FFFF attributable to acquisition, construction, development or betterment of the asset. The cost,attributable to acquisition, construction, development or betterment of the asset. The cost,attributable to acquisition, construction, development or betterment of the asset. The cost, less residual value, of the tangible capital assets, excluding land and landfill sites, areless residual value, of the tangible capital assets, excluding land and landfill sites, areless residual value, of the tangible capital assets, excluding land and landfill sites, are amortized on a straight-line basis over their estimated useful lives as follows:line basis over their estimated useful lives as follows:line basis over their estimated useful lives as follows: AAAA AssetUseful Life - Years Computers4 years Furniture and fixturesFurniture and fixturesFurniture and fixtures7 years RRRR Leasehold improvementsLeasehold improvementsLeasehold improvements7 years Event equipmentent equipmentent equipment10 years DDDD Annual amortization is charged in the year of acquisition and in the year of disposal. Assets under construction are not amortized until the asset is available for productive use. Tangible capital assets received as contributions are recorded at their fair value at the date of receipt and also are recorded as revenue. (b)Accrual basis of accounting: The accrual basis of accounting recognizes revenues as they become available and measurable; expenditures are recognized as they are incurred and measurable as a result of receipt of goods or services and the creation of a legal obligation to pay. 22 5 - 63 KITCHENER DOWNTOWN IMPROVEMENT AREA BOARD OF MANAGEMENT Notesto Financial Statements, continued Year ended December 31, 2019 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 anannually established rate per business. Revenue is recognized when assessed. Other revenues are recorded upon sale of goods or provision of service when collection isOther revenues are recorded upon sale of goods or provision of service when collection isOther revenues are recorded upon sale of goods or provision of service when collection is reasonably assured. 2.Term deposits: TTTTT The term deposits consist of the following: PrincipalMaturityMaturityMaturityRate FFFFF $ 10,851March 29, 2020March 29, 2020March 29, 20201.50% 50,886 March 28, 2020March 28, 2020March 28, 20201.30% 51,975March 3, 2020March 3, 2020March 3, 20201.20% AAAAA 3.Commitments:Commitments:Commitments: RRRRR During 2016, the Boardhe Boardhe Boardexecuted a new lease agreementexecuted a new lease agreementexecuted a new lease agreement. The lease expires onJune 30, 2021. The Board is committed to the following minimum paymentsThe Board is committed to the following minimum paymentsThe Board is committed to the following minimum paymentsunder the agreement: DDDDD 2020$ 35,539 2021 17,769 4.City of Kitchener: The Boardreceives assessment income from the Cityof Kitchener for its operations. During the year, assessment write-offs were incurred for $84,312 (2018 - $75,018). 23 5 - 64 - Net year 1,376 end of 10,82618,48630,688 book value, $ 8 $ year 3,498 end of 25,772 115,13 amortization, Accumulated $ $ - 2,5394,89156,1796,74529,689 14,175 Amortization -- - Deletions $ -$ $ -$ - Net 3,915 of yearof year15,10825,23144,254 beginningbeginning book value,book value, TTTTTT $ $ $ 3,4983,498 of yearof yearof year23,23323,23323,23351,28851,28822,944 100,963 umulatedumulatedumulated beginningbeginningbeginning FFFFFF amortization,amortization,amortization, Acc $ $ $ e, yearyearyear 3,4983,4983,498 end of 27,14827,14827,14867,00567,00567,00548,17548,17548,175 AAAAAA 145,826145,826145,826 Balanc 24 - - - - - - - Write downs RRRRRR - - - DDDDDD Transfers Disposals/ $ -$-$ $ -$-$ $ -$-$ MPROVEMENT AREA BOARD OF MANAGEMENT - - 609609 Additions $ -$-$-$ $ 3,498 27,14866,39648,175 balance 145,217 Opening $ $ 2019 ecember 31, equipment ture mprovements i Tangible capital assets:ComputersFurniLeaseholdEvent KITCHENER DOWNTOWN I Notes to Financial Statements, continuedYear ended D5. 5 - 65 KITCHENER DOWNTOWN IMPROVEMENT AREA BOARD OF MANAGEMENT Notes to Financial Statements, continued Year ended December 31, 2019 6.Restating comparative information –due to the City of Kitchener: During theyear ended December 31, 2019, management identified an immaterial prior period misstatement relating to thenet assessment write-off adjustment for 2018 which was received in February, 2020. As a result, net assessment write-off for the year ended December 21, 2018 and accumulated surplus and due to the City of Kitchener as at December 31, 2018 were understated by $40,657. Management has reflected the net assessment write-off adjustment pertaining to 2018 in the comparative figures. T F A R D 25 5 - 66 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 end of December 31, 2019 the statement of operations and changes in accumulated surplus for the year then ended the statement of changes in net financial assets for the year then ended the statement of cash flows 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 end of December 31, 2019, 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. 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 InternationalŽ), a Swiss entity. KPMG Canada provides services to KPMG LLP. 26 5 - 67 Page 2 Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with Canadian public sector accounting standards and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the 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 financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of thefinancial statements. As part of anaudit 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. 27 5 - 68 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 causethe 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 ouraudit. Chartered Professional Accountants, Licensed Public Accountants Waterloo, Canada April 15, 2020 28 5 - 69 KITCHENER PUBLIC LIBRARY Statement of Financial Position December 31, 2019, with comparative information for 2018 20192018 Financial assets Cash$ 1,174,596 $ 1,698,526 Accounts receivable 165,351 117,848 Due from City of Kitchener 116,781 281,631 Investments50,00050,000 Endowment investments 100,000 100,000 Total financial assets 1,606,728 2,248,005 Financial liabilities Accounts payable and accrued liabilities 483,797 866,418 Deferred revenue 641,506 900,200 1,125,303 1,766,618 Net financial assets 481,425481,387 Non-financial assets Tangible capital assets (note 2) 5,364,961 5,712,999 Subsequent events (note 7) Accumulated surplus (note 6) $ 5,846,386 $ 6,194,386 See accompanying notes to financial statements. On behalf of the Board: Director Director 29 5 - 70 KITCHENER PUBLIC LIBRARY Statement of Operations and Accumulated Surplus Year ended December 31, 2019, with comparative information for 2018 Budget 2019 Actual 2019 Actual 2018 Revenues: Grants: The City of Kitchener – Operating $ 11,039,863 $ 11,039,863 $ 10,823,395 -771,687643,403 The City of Kitchener – Capital and Special The City of Kitchener – Special -562,451115,571 Province of Ontario 286,755 286,755286,755 Fines223,000206,613 222,261 Interest and miscellaneous 44,000 59,237 51,850 Photocopy43,00045,66544,305 Room rental 38,000 35,428 39,500 Partnerships29,00029,40129,202 Total revenue 11,703,618 13,037,100 12,256,242 Expenses: Personnel costs (schedule 1)9,031,5008,922,0948,717,515 Resource materials 394,7001,459,0241,471,942 Facilities costs (schedule 4) 802,068 852,639 807,055 Equipment (schedule 2) 268,500 706,897 711,202 Required expenditures related to special grants (note 4) -562,451115,571 475,048417,266 Expenditures related to capital and special (note 3) 813,200 Administrative (schedule 3) 192,300 209,470214,248 Processing/bindery115,000118,887114,224 Programs and publicity (schedule 5) 76,500 72,763 90,428 General library equipment 9,8505,827 9,362 Total expenses 11,703,618 13,385,100 12,668,813 Excess of expenses over revenue-(348,000)(412,571) Accumulated surplus, beginning of year 6,194,386 6,194,3866,606,957 Accumulated surplus, end of year$ 6,194,386 $ 5,846,386 $ 6,194,386 See accompanying notes to financial statements. 30 5 - 71 KITCHENER PUBLIC LIBRARY Statement of Change in Net Financial Assets Year ended December 31, 2019, with comparative information for 2018 20192018 Excess of expenses over revenue $ (348,000) $ (412,571) Acquisition of tangible capital assets (1,084,430) (1,092,817) Amortization of tangible capital assets 1,423,468 1,505,421 Increase in net financial assets 3833 Net financial assets, beginning of year 481,387481,354 Net financial assets, end of year $481,425 $ 481,387 See accompanying notes to financial statements. 31 5 - 72 KITCHENER PUBLIC LIBRARY Statement of Cash Flows Year ended December 31, 2019, with comparative information for 2018 20192018 Operating activities: Excess of expenses over revenue$(348,000)$(412,571) Item not involving cash: Amortization of tangible capital assets 1,432,468 1,505,421 Changes in non-cash operating working capital Accounts receivable (47,503) (51,169) Prepaid expenses -25,325 Due from City of Kitchener 164,850 (135,367) Accounts payable and accrued liabilities(382,621)384,391 Deferred revenue (258,694) 141,767 Cash provided by operating activities 560,500 1,457,797 Capital activities: Cash used to acquire tangible capital assets (1,084,430)(1,092,817) Increase (decrease) in cash (523,930) 364,980 Cash, beginning of year 1,698,5261,333,546 Cash, end of year $ 1,174,596 $ 1,698,526 See accompanying notes to financial statements. 32 5 - 73 KITCHENER PUBLIC LIBRARY Notes to Financial Statements Year ended December 31, 2019 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. 1.Significant accounting policies: 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. (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)Revenuerecognition: Revenues are recognized in the period in which the transactions or events occurred that gave rise to the revenues. All revenues are recorded on an accrual basis, except when the accruals cannot be determined with a reasonable degree of certainty or when their estimation is impracticable. Government transfers are recognized as revenues when the transfer is authorized and any eligibility criteria are met, except to the extent that transfer stipulations give rise to an obligation that meets the definition of a liability. Transfers are recorded as deferred revenue when transfer stipulations give rise to a liability. Transfer revenue is recognized in the statement of operations as the stipulation liabilities are settled. 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 the purchase of tangible capital asset. In addition, certain user charges and fees are collected for which the related services have yet to be performed. Revenue is recognized in the period when the related expenses are incurred, services performed, or the tangible assets are acquired. 33 5 - 74 KITCHENER PUBLIC LIBRARY Notes to Financial Statements, continued Year ended December 31, 2019 1.Significant accounting policies (continued): (c)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. (d)Endowmentinvestments: 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. (e)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: AssetRate Furniture, fixtures and equipment 10 - 30 years Other equipment and vehicle 8 years Computers3 - 10 years Books and audio visual equipment 2 - 10 years (f)Deferred revenue: Deferred revenue represents unspent funds subject to external restrictions as to how the funds are disbursed. These amounts are subsequently included in revenue when the related expenditures are made. 34 5 - 75 Total 7,427,5231,432,4687,623,732 -(1,236,259)-(1,236,259) 734 68,14868,882 108,462 12,988,693 (22,077)(22,077) 785,565142,207 905,695 2,085,656 Furniture, fixtures Other equipment (45,908)(45,908) 280,061 35 2,684,395 $ 731,422 $ 1,179,961 $ 38,580 $ 5,364,961 103 $ 2,565,456 $ 2,045,157 $ 70,806 $ 13,140,522 696,1821,952,973413,998 8,110,1804,854,9901,718,8201,009,4664,3, (1,168,274)(1,168,274) $ visual resources Computers and equipment and vehicle Books and audio 2.Tangible capital assets:2019CostBalance, beginning of year $ 8,459,Additions 819,351 164,817 62,576 37,656 1,084,430 DisposalsBalance, end year Accumulated amortization Balance, beginning of year AmortizationDisposalsBalance, end of year Net book value, end of year KITCHENER PUBLIC LIBRARY Notes to Financial Statements, continued Year ended December 31, 2019 5 - 76 Total 7,087,9821,505,4217,427,523 -1,092,817- (1,165,880)-(1,165,880) 3,151 70,806 13,140,52264,99768,148 - (36,740) 679,479 142,826785,565 2,045,157 Furniture, fixtures Other equipment (25,607) 306,083 36 2,565,456 $ 846,636 $ 1,259,592 $ 2,658 $ 5,712,999 031 $ 2,386,426 $ 2,065,322 $ 70,806 $ 13,213,585 854,9901,718,820604,113 8,459,1034,905,1621,438,3441,053,3614,3, (1,103,533) (25,607) (1,103,533) $ visual resources Computers and equipment and vehicle Books and audio 2.Tangible capital assets (continued):2018CostBalance, beginning of year $ 8,691,Additions 871,605 204,637 16,575 DisposalsBalance, end year Accumulated amortization Balance, beginning of year AmortizationDisposalsBalance, end of year Net book value, end of year KITCHENER PUBLIC LIBRARY Notes to Financial Statements, continued Year ended December 31, 2019 5 - 77 KITCHENER PUBLIC LIBRARY Notes to Financial Statements, continued Year ended December 31, 2019 3.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 2019 included $96,000 (2018 - $94,000) for general renovations, maintenance and upgrading of existing facilities, $290,251 (2018 - $284,207) for communication infrastructure and technology upgrades, $28,000 (2018 - $28,000) for KPL Accessibility Fund, $200,000 for the library automation system (2018 - $500,000), $nil for a customer needs survey (2018 - $50,874) and $4,508,159 (2018 - $nil) for the southwest community library. The portion of these grants and previous year grants that are included in revenue in 2019, is $771,687 (2018 - $643,403). 4.Specialgrants: As directed by the funding agency or terms of any applicable agreements, expenditures are made to finance, in whole or in part, capital items, replacements and maintenance projects. In 2019, the Board received various special non-recurring grants and donations totaling $310,689 (2018 - $257,338). The portion of these grants and previous year special grants that are included in revenue in 2019 is $562,451 (2018 - $115,571). The remainder is included in deferred revenue. 5.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 $618,799 (2018 - $615,348) forcurrent service on behalf of its staff. 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 Board has no obligation under the past service provisions of the OMERS agreement. 37 5 - 78 KITCHENER PUBLIC LIBRARY Notes to Financial Statements, continued Year ended December 31, 2019 6.Accumulated surplus: The accumulated surplus consists of surplus and reserve funds as follows: 20192018 Invested in tangible capital assets $ 5,364,761 $ 5,712,999 Endowment investments 100,000 100,000 Reserves set aside by the Board: Capital fund 344,460 344,260 HR fund 37,000 37,000 Total reserves 381,460 381,260 Surplus165127 $ 5,846,386 $ 6,194,386 7.Subsequent events: Subsequent to December 31, 2019 the COVID-19 outbreak was declared a pandemic by the World Health Organization. The situation is dynamic and the ultimate duration and magnitude of the impact on the economy and the financial effect on the Library’s business is not known at this time. These impacts could include potential future decreases in revenue or the profitability of ongoing operations. 38 5 - 79 KITCHENER PUBLIC LIBRARY Schedules of Expenses Year ended December 31, 2019, with comparative information for 2018 20192018 Schedule 1 – Personnel Salaries$7,296,398$7,104,484 Pension benefits 916,484900,269 Health benefits 441,813445,941 Employment insurance 136,883 134,779 Sick leave reserve 70,00070,000 Staff training 37,38737,909 WSIB23,12924,133 $ 8,922,094 $ 8,717,515 Schedule 2 – Equipment Amortization$423,002$452,060 Technology269,618240,380 Equipment maintenance 14,27718,762 $ 711,202 $ 706,897 Schedule 3 – Administrative General business $ 61,254 $ 60,531 Stationery55,85752,490 Professional services 50,50752,448 Insurance19,59619,212 Telephone15,43923,156 Postage and delivery 6,8176,411 $ 209,470 $ 214,248 Schedule 4 – Facilities Facilities expenses $ 488,384 $ 463,425 Main utilities 264,002 253,286 Country Hills building 54,174 43,673 Forest Heights utilities 22,959 24,137 Pioneer Park building 22,525 21,188 Grand River Stanley Park building 595 1,346 $ 852,639 $ 807,055 Schedule 5 – Programs and Publicity Promotional$44,697$49,023 Public programs 28,06641,405 $ 72,763 $ 90,428 39 5 - 80 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 Directors 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: the statement of financial position as at end of December 31, 2019 the statement of operations for the year then ended the statement of change in net financial assets for the year then ended the statement of cash flows 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 Centre as at end of December 31, 2019, 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 Centre 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 InternationalŽ), a Swiss entity. KPMG Canada provides services to KPMG LLP. 40 5 - 81 Page 2 Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with Canadian public sector accounting standards and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Centre’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 Centre or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Centre’s financial reporting process. 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 thefinancial statements. As part of anaudit 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. 41 5 - 82 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 Centre'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 Centre'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 Centre 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 ouraudit. Chartered Professional Accountants, Licensed Public Accountants Waterloo, Canada March 26, 2020 42 5 - 83 THE CENTRE IN THE SQUARE INC. Statement of Financial Position December 31, 2019, with comparative information for 2018 20192018 Net Assets Financial assets: Cash$ 3,463,348 $ 4,789,533 Due from The City of Kitchener151,85392,754 Accounts receivable 209,396123,419 Interest receivable 2,2182,042 Costs to be recovered 197,541 308,546 Investments (note 2) 1,436,372 1,389,705 Total financial assets 5,460,728 6,705,999 Financial liabilities: Accounts payable and accrued liabilities 1,541,044 3,060,393 Deferred revenue (note 3) 2,103,2612,321,923 3,644,305 5,382,316 Net financial assets 1,816,4231,323,683 Non-financial assets: Tangible capital assets (note 4) 13,027,54912,622,446 Inventories (note 5) 80,32981,868 Prepaid expenses 271,211250,136 13,379,089 12,954,450 Net assets $ 15,195,512 $ 14,278,133 Accumulated Surplus Operating fund activities (note 6) $ -$- Reserves - Capital (notes 7 and 12) 1,362,582878,852 Reserves - Performance Development (note 8) -- Reserves - Sustainability (notes 8 and 12) 199,068206,863 Reserves - Restricted (notes 9 and 12) 606,313 569,972 Invested in tangible capital assets 13,027,549 12,622,446 Subsequent events (note 11) Accumulated surplus $ 15,195,512 $ 14,278,133 See accompanying notes to financial statements. On behalf of the Board: Director Director 43 5 - 84 THECENTRE IN THE SQUARE INC. Statement of Operations Year ended December 31, 2019, with comparative information for 2018 Budget 2019 Actual 2019 Actual 2018 Revenues: Performances $ 7,513,400 $ 7,772,959 $ 7,659,122 Rent - Kitchener-Waterloo Symphony 102,485 203,210 102,485 Capital reserve fund surcharge (note 7) 316,800 432,917 357,438 Grants from The City of Kitchener - Operating 2,000,000 2,000,000 2,000,000 Grants from The City of Kitchener - Capital 1,560,492 925,984 1,101,258 Grants from other governments - Operating 45,000 45,000 51,700 Grants from other governments - Capital -248,127285,025 Donations2,00026,72716,888 Investment income 48,000 118,74694,003 Sponsorships and memberships 142,722 74,90185,921 Rent - Kitchener-Waterloo Art Gallery 101,100 101,10099,185 Lottery revenue -7,4939,822 Other198,000677,281508,243 Gain (loss) on investments -21,321(924) Total revenue 12,029,999 12,655,766 12,370,166 Expenses: Direct: Performances6,415,8856,946,1116,736,435 Operating: Administration530,000553,187531,002 Marketing105,000100,406130,685 Lottery expenses -7,3489,892 Occupancy850,000778,740 809,763 Salaries and wages 2,837,4843,419,9553,017,662 Recoveries - performances (593,978) (1,248,149) (1,015,340) Amortization800,000934,191920,168 Write down of tangible capital assets 150,000 190,865 158,340 Reserves expenditures (note 12) 20,000 55,733 21,603 Total expenses 11,114,391 11,738,387 11,320,210 Excess of revenue over expenses915,608917,3791,049,956 Accumulated surplus, beginning of year 14,278,13314,278,13313,228,177 Accumulated surplus, end of year$ 15,193,741 $ 15,195,512 $ 14,278,133 See accompanying notes to financial statements. 44 5 - 85 THE CENTRE IN THE SQUARE INC. Statement of Change in Net Financial Assets Year ended December 31, 2019, with comparative information for 2018 20192018 Excess of revenue over expenses$917,379$1,049,956 Acquisition of tangible capital assets (1,530,159) (1,743,293) Amortization of tangible capital assets 934,191 920,168 Write-down of tangible capital assets 190,865 158,340 512,276385,171 Net use (acquisition) of inventories 1,539(20,110) Net acquisition of prepaid expenses (21,075)(25,446) (19,536) (45,556) Increase in net financial assets 492,740339,615 Net financial assets, beginning of year 1,323,683984,068 Net financial assets, end of year $1,816,423 $ 1,323,683 See accompanying notes to financial statements. 45 5 - 86 THE CENTRE IN THE SQUARE INC. Statement of Cash Flows Year ended December 31, 2019, with comparative information for 2018 20192018 Operating activities: Excess of revenue over expenses$917,379$1,049,956 Items not involving cash: Amortization934,191920,168 Write down of tangible capital assets 190,865158,340 Change in non-cash operating working capital (1,791,794) 983,980 Cash provided by operating activities 250,641 3,112,444 Capital activities: Cash used to acquire tangible capital assets (1,530,159)(1,743,293) Investing activities: Investments(46,667)(18,197) Increase (decrease) in cash (1,326,185) 1,350,954 Cash, beginning of year 4,789,5333,438,579 Cash, end of year $3,463,348 $ 4,789,533 See accompanying notes to financial statements. 46 5 - 87 THE CENTRE IN THE SQUARE INC. Notes to Financial Statements Year ended December 31, 2019 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, is amortized on a straight- line basis over their estimated useful lives as follows: AssetRate Buildings 5 - 100 years Equipment4 - 50 years Computers3 - 10 years Software3years Site2 - 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. 47 5 - 88 THECENTRE IN THE SQUARE INC. Notes to Financial Statements, continued Year ended December 31, 2019 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)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.Investments: Investments consist of: Carrying value MarketCarrying value Market 2019201920182018 Cash$ 11,793 $ 11,793 $ 2,321 $ 2,321 GICs788,417788,417774,645774,645 Bonds357,338358,257328,429 324,446 Shares 278,824 450,887 284,310 413,328 $ 1,436,372 $ 1,609,354 $ 1,389,705 $ 1,514,740 3.Deferred revenue: Deferred revenue consists of the following: 20192018 Sponsorships$ 19,116 $ 24,000 Performances 1,991,661 2,081,308 Gift certificates 45,70138,710 Membership7,1656,540 Other39,618171,365 $ 2,103,261 $ 2,321,923 48 5 - 89 - Total 934,191 (252,968) ---10,082,150 Workin Progress - (129,902) Site 82,473 (11,201) 775,061 Software 586) -(11,201)(7,330) (443,833) 996) - 29,149 -31,541 $ -$ 1,015,168 $ 412,704 $ 13,027,549 (58, 206,052 154,781 1,790,229 412,704 23,109,699 $ 245,548 $ 154,781 $ 1,731,398 $ 140,732 $ 22,023,373 Computers 49 - - - 491 204,358 154,781 703,789 -9,400,927 Equipment (56,555)(126,216) Buildings 4,924,994 4,052,803 174,511 154,781 -812,614218,219 20,090 -70,032409,204 1,530,159 -(195,956)(169,760) (59,-129,902-4,519,5083,818,-462,041360,528 -- Land 975,300 12,827,961 6,742,672 $ 975,300 $ 7,902,967 $ 2,689,869 $ CENTRE IN THE SQUARE INC. of year 4.Tangible capital assets:2019CostBalance, beginning of year $ 975,300 $ 12,081,401 $ 6,694,213 AdditionsDisposalsTransfersCost, end year Accumulated amortization Balance, beginningAmortizationDispo salsAccumulated amortization, end of year Net book value, end of year THE Notes to Financial Statements, continued Year ended December 31, 2019 5 - 90 - Total 920,168 (1,266,201)(1,107,861) ----9,400,927 Workin Progress 719 $ 2,078,255 $ 21,546,281 Site 80,099 703,789 (471,723)(367,665) - 35,040 (2,078,255) (1,068)(1,068) Software - 33,941 -41,190 $ -$ 1,027,609 $ 140,732 $ 12,622,446 $ 227,344 $ 155,849 $ 2,031, Computers 50 - 708 170,417 155,849 991,355 -9,588,620 Equipment (552,722)(186,406) - Buildings 4,519,508 3,818,491 204,358 154,781 -981,118466,877 18,204 -136,362140,732 1,743,293 -(604,505)(188,905) --2,043,215-4,627,2913,643,-444,939361,189 - Land 975,300 12,081,401 6,694,213 245,548 154,781 1,731,398 140,732 22,023,373 $ 975,300 $ 7,561,893 $ 2,875,722 $ CENTRE IN THE SQUARE INC. of year 4.Tangible capital assets (continued):2018CostBalance, beginning of year $ 975,300 $ 9,661,573 $ 6,416,241 AdditionsDisposalsTransfersCost, end year Accumulated amortization Balance, beginningAmortizationDisposalsAccumulated amortization, - end of year Net book value, end of year THE Notes to Financial Statements, continued Year ended December 31, 2018 5 - 91 THECENTRE IN THE SQUARE INC. Notes to Financial Statements, continued Year ended December 31, 2019 5.Inventories: Inventories consist of the following: 20192018 Bar stock $ 75,175 $ 76,594 Supplies5,1545,274 $ 80,329 $ 81,868 6.Operating fund activities: Budget Actual Actual 201920192018 Revenues: Performances$ 7,513,400 $ 7,772,959 $ 7,659,122 Rent - Kitchener-Waterloo Symphony102,485 203,210 102,485 Grants from The City of Kitchener 2,000,000 2,000,000 2,000,000 Grants, other Governments and Foundations 45,000 45,000 51,700 Donations-24,32914,491 Investment income 42,000 74,797 59,764 Sponsorships and memberships 142,722 74,90185,921 Rent - Kitchener-Waterloo Art Gallery 101,100 101,100 99,185 Lottery revenue -7,4939,822 Other 198,000 677,281 508,243 Total revenue 10,144,707 10,981,070 10,590,733 Current fund expenditures: Direct: Performances 6,415,885 6,946,111 6,736,435 Operating: Administration 530,000 553,187 531,002 Marketing 105,000 100,406 130,685 Lottery expenses -7,3489,892 Occupancy850,000 778,740 809,763 Salaries and wages 2,837,484 3,419,955 3,017,662 Recoveries - performances (593,978) (1,248,149) (1,015,340) Total current fund expenditures10,144,391 10,557,598 10,220,099 Operating fund net revenues before amortization 316 423,472 370,634 Transfer to reserve funds (316)(423,472)(370,634) Transfer to The City of Kitchener -- - Fund balances, end of year $ -$-$- 51 5 - 92 THECENTRE IN THE SQUARE INC. Notes to Financial Statements, continued Year ended December 31, 2019 7.Capital Reserve Fund Surcharge: The Capital Reserve Fund represents the collection of a surcharge from the 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 2019, the Centre’s Board of Directors approved transfers out of the Capital Reserve Fund for major capital asset projects of $1,530,159 (2018 - $1,743,293). 8.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 2019, The Centre’s Board of Directors approved the transfer of the funds to the Sustainability Fund of $nil (2018 - $nil) from the operating fund. 9.RestrictedFund: 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 forcapital requirements, special projects and/or new programming initiatives that help further The Centre’s mandate. 10.2019budget: The original budgeted figures were approved by the Board of Directors at their meeting in August 2018 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. 11.Subsequentevents: Subsequent to December 31, 2019, the COVID-19 outbreak was declared a pandemic by the World Health Organization and has had a significant financial, market and social dislocating impact. At the time of approval of these financial statements, the entity has experienced the following indicators of financial implications and undertaken the following activities in relation to the COVID-19 pandemic. Experienced temporary declines in the fair value of investments and investment income Postponement or cancellation of events starting March 14, 2020 Closure of all facilities from March 24, 2020 to the date of the auditors’ report based on public health recommendations Temporary layoff of non-essential employees At this time these factors present uncertainty over future cash flows, may cause significant changes to the assets or liabilities and may have a significant impact on future operations. An estimate of the financial effect is not practicable at this time. 52 5 - 93 THECENTRE IN THE SQUARE INC. Notes to Financial Statements, continued Year ended December 31, 2019 12.Schedule of reserve funds: PerformanceTotal DevelopmentCapitalSustainabilityRestrictedFunds Revenue: Donations and sundry $ -$-$-$2,398 $ 2,398 Grants from The City -925,984- - 925,984 of Kitchener Grants from the other governments -248,127- - 248,127 Ticket surcharge -432,917- - 432,917 Investment income -18,0953,223 22,631 43,949 Loss on investments -- - 21,321 21,321 Total revenue -1,625,1233,223 46,350 1,674,696 Expenses: Professional fees - - 11,018 10,009 21,027 Capital costs -34,706- - 34,706 Total expenses -34,70611,018 10,009 55,733 Excess of revenue over expenses-1,590,417 (7,795) 36,341 1,618,963 Transfer to accumulated surplus - tangible capital assets -(1,530,159)- -(1,530,159) Other transfers -423,472- - 423,472 Balance, beginning of year -878,852206,863 569,972 1,655,687 Balance, end of year $ -$1,362,582 $ 199,068 $ 606,313 $ 2,167,963 . 53 5 - 94 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 Mayor and Members of Council, Inhabitants and Ratepayers of The Corporation of he Mayor and Members of Council, Inhabitants and Ratepayers of The Corporation of he Mayor and Members of Council, Inhabitants and Ratepayers of The Corporation of the City of Kitchener Opinion T We have audited the financial statements of the Corporation of the City of KitchenerWe have audited the financial statements of the Corporation of the City of KitchenerWe have audited the financial statements of the Corporation of the City of Kitchener Gasworks Enterprise(theEntity), which comprise:Entity), which comprise:Entity), which comprise: F the statement of operations and accumulated surplusthe statement of operations and accumulated surplusthe statement of operations and accumulated surplusfor the year ended December 31, 2019December 31, 2019December 31, 2019 (Hereinafter referred to as the “financial statements”).(Hereinafter referred to as the “financial statements”).(Hereinafter referred to as the “financial statements”). A In our opinion, the accompanying financial statements present opinion, the accompanying financial statements present opinion, the accompanying financial statements presents fairly, in all material respects, respects, respects, the statement of the statement of the statement of operations and accumulated surplus for the year ended operations and accumulated surplus for the year ended December 31, 201December 31, 201December 31, 201999in accordance with Canadian public sector accounting standardsin accordance with Canadian public sector accounting standardsin accordance with Canadian public sector accounting standards R relevant to preparing such a financial statementrelevant to preparing such a financial statementrelevant to preparing such a financial statement. Basis for OpinionBasis for OpinionBasis for Opinion D 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 ethicalresponsibilities 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. 54 5 - 95 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 statementsin accordance with Canadian public sector accounting standardsand for such internal control as management determines is necessary to enable the preparation of financial statementsthat arefree from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the In preparing the financial statements, management is responsible for assessing the In preparing the financial statements, management is responsible for assessing the Entity’s ability to continue as a going concern, disclosing as applicable, matters related to Entity’s ability to continue as a going concern, disclosing as applicable, matters related to 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 going concern and using the going concern basis of accounting unless management 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 either intends to liquidate the Entity or to cease operations, or has no realistic alternative either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so. T Those charged with governance are responsible for overseeing the Entity’s financial Those charged with governance are responsible for overseeing the Entity’s financial Those charged with governance are responsible for overseeing the Entity’s financial reporting process. F Auditors’ Responsibilities for the Audit of the Financial StatementsResponsibilities for the Audit of the Financial StatementsResponsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements A as a whole are free from material misstatement, whether due to fraud or error, and to as a whole are free from material misstatement, whether due to fraud or error, and to as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditorsauditorsauditors’’report that includes our opinion. report that includes our opinion. report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit Reasonable assurance is a high level of assurance, but is not a guarantee that an audit Reasonable assurance is a high level of assurance, but is not a guarantee that an audit R conducted in accordance with Canadian generally accepted auditing standards will always conducted in accordance with Canadian generally accepted auditing standards will always conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it edetect a material misstatement when it edetect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or Misstatements can arise from fraud or error and are considered material if, individually or Misstatements can arise from fraud or error and are considered material if, individually or D in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of thefinancial statements. As part of anaudit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout 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. 55 5 - 96 Page 3 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 theaudit 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 ofEvaluate the appropriateness of accounting policies used and the reasonableness ofEvaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.accounting estimates and related disclosures made by management.accounting estimates and related disclosures made by management. Conclude on the appropriateness of management's use of the going concern basis ofConclude on the appropriateness of management's use of the going concern basis ofConclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertaintyaccounting and, based on the audit evidence obtained, whether a material uncertaintyaccounting and, based on the audit evidence obtained, whether a material uncertainty exists relatedto events or conditions that may cast significant doubt on the Entity'sto events or conditions that may cast significant doubt on the Entity'sto 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,ability to continue as a going concern. If we conclude that a material uncertainty exists,ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our we are required to draw attention in our we are required to draw attention in our auditors’ auditors’ auditors’ report to the related disclosures in thereport to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Ourfinancial statements or, if such disclosures are inadequate, to modify our opinion. Ourfinancial 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 conclusions are based on the audit evidence obtained up to the date of 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 contireport. However, future events or conditions may cause the Entity to cease to contireport. However, future events or conditions may cause the Entity to cease to continue as a going concern.as a going concern.as a going concern. Evaluate the overall presentation, structure and content of the financial statements,Evaluate the overall presentation, structure and content of the financial statements,Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent theincluding the disclosures, and whether the financial statements represent theincluding the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair prunderlying transactions and events in a manner that achieves fair prunderlying transactions and events in a manner that achieves fair presentation. Communicate with those charged with governance regarding, among other matters,Communicate with those charged with governance regarding, among other matters,Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including anythe planned scope and timing of the audit and significant audit findings, including anythe planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during oursignificant deficiencies in internal control that we identify during oursignificant deficiencies in internal control that we identify during ouraudit. Chartered Professional Accountants, Licensed Public Accountants Waterloo, Canada June, 2020 56 5 - 97 TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD 57 5 - 98 TTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAA RRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDD 58 5 - 99 MANAGEMENT REPORT Management’s Responsibility for Financial Reporting The accompanying financial statements of Kitchener Generation Corporation are the responsibility of management and have been prepared in accordance with Canadian public sector accounting standards. The significant accounting policies followed by Kitchener Generation Corporation are described in the Significant Accounting Policies contained in Note 2 of the financial statements. The preparation of financial statements necessarilyinvolves the use of estimates based on management’s judgment, particularly when transactions affecting the current accounting period cannot be finalized with certainty until future periods. The financial statements have been prepared within reasonable limits of materiality and in light of information available up to June 22, 2020. Management maintained a system of internal controls designed to provide reasonable assurance that Management maintained a system of internal controls designed to provide reasonable assurance that Management maintained a system of internal controls designed to provide reasonable assurance that the assets were safeguarded and that reliable information was available on a timely basis. The system the assets were safeguarded and that reliable information was available on a timely basis. The system the assets were safeguarded and that reliable information was available on a timely basis. The system included formal policies and procedures and an organizational structure that provided for the included formal policies and procedures and an organizational structure that provided for the included formal policies and procedures and an organizational structure that provided for the appropriate delegation of authority and segregation of responsibilities. appropriate delegation of authority and segregation of responsibilities. appropriate delegation of authority and segregation of responsibilities. KITCHENER GENERATION CORPORATION On behalf of management, T F Jonathan Lautenbach, CPA, CGA Chief Financial Officer and City TreasurerChief Financial Officer and City TreasurerChief Financial Officer and City Treasurer A June 22, 2020 Kitchener, Canada R D 59 5 - 100 TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD 60 5 - 101 TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD 61 5 - 102 62 5 - 103 TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT FFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFF AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR DDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD 63 5 - 104 T F A R D 64 5 - 105 T F A R D 65 5 - 106 66 5 - 107 67 5 - 108 68 5 - 109 69 5 - 110 70 5 - 111 71 5 - 112 72 5 - 113 73 5 - 114 74 5 - 115 75 5 - 116 76 5 - 117 77 5 - 118 78 5 - 119 79 5 - 120 80 5 - 121 81 5 - 122 82 5 - 123 83 5 - 124 84 5 - 125 85 5 - 126 86 5 - 127 87 5 - 128 88 5 - 129 89 5 - 130 90 5 - 131 91 5 - 132 92 5 - 133 93 5 - 134 94 5 - 135 95 5 - 136 96 5 - 137 97 5 - 138 98 5 - 139 99 5 - 140 100 5 - 141 101 5 - 142 102 5 - 143 ded 5 2020 for the audit committee Meeting 2 Corporation of , 2020 June 22 Prepared May onkpmg.ca/audit The the City of Kitchener Audit Findings Reportfor the year enDecember 31, 2019 Chartered Professional Accountants, Licensed Public Accountants 5 - 144 12789 12 101113 JUSTMENTS S CLOSURE EMENT CES AND CORRECTED AD DIT PRESENTATION AND DIS LTS ALITY AND RISK MANAG OACH Audit Findings Report Table of contents EXECUTIVE SUMMARYAUDIT RISKS AND RESUAUDIT APPRTECHNOLOGY IN THE AUFINANCIAL STATEMENT UNCORRECTED DIFFERENAPPENDICESAPPENDIX 1: OTHER REQUIRED COMMUNICATIONAPPENDIX 2: AUDIT QU 5 - 145 1 | es, Page ing policies and practices your review of the results of our audit of the consolidated , in deficiencies Significant accountUncorrected differences There have been no initial selections of, or changes to, significant accounting policies and practices to bring to your attention.We concur with management’s assertion that any uncorrected audit differenc Control We did not identify any control deficiencies that we determined to be significant deficiencies in internal control over financial reporting. individually and in aggregate, are not material to the financial statements. This Audit Findings Report builds on the Audit Plan we presented to the audit remaining any is to assist you, as a member of the audit committee ’s approval of the financial statements he audit committee t 1 Council completed the audit of the consolidated financial e have w , Audit Findings Report , 2020 . 25 May Completing our discussions with Obtaining evidence of the Obtaining a signed management representation letterReceipt of legal letters Changes from the Audit Plan Finalizing the Audit This Audit Findings Report should not be used for any other purpose or by anyone other than the audit committee. KPMG shall have no responsibility or liability for loss or damages or claims, if any, Executive summary Purpose of this report The purpose of this Audit Findings Reportfinancial statements as at and for the year ended December 31, 2019.committee There have been no significant changes regarding our audit from the Audit Planning Report previously presented to you.As ofstatements, with the exception of certain remaining procedures, which include amongst others:We will update the audit committee, and not solely the Chair, on significant matters, if any, arising from the completion of the audit, including the completion of the above procedures. Our auditors’ report will be dated upon the completion of procedures. 1 to or by any third party as this Audit Findings Report has not been prepared for, and is not intended for, and should not be used by, any third party or for any other purpose. – – – – 5 - 146 profit enterprises - grants, and is not subject to complexity or government off or “channel” stuffing would be utilized to perpetrate fraud - fees, and from The presumed fraud risk is ordinarily associated with forThe majority of revenue is calculated based on MPAC data, approved utility rates Why is it significant?This is a presumed fraud risk. However, the audit team has rebutted this presumption due to the following reasons: ——and userjudgement at the reporting level; and KPMG does not believe that the use of inappropriate cut Fraud Risk from Revenue Recognition significant findings ant risks identified. Significant Risk 1 Significant financial reporting risk Fraud risk from revenue recognition Our response and Not Applicable Audit risks and results We highlight our significant findings in respect of significant financial reporting risks as identified in our discussion with you in the Audit Plan, as well as any additional signific 5 - 147 ctivities. is a presumed fraud risk. We have not identified any specific additional risks of in professional standards to address this risk. These procedures include testing of Why is it significant?This management override relating to this audit. Fraud risk from management override of controls rmed various substantive based procedures examining journal entries that were being posted to the general ledger. Significant Risk ues were identified in our testing performed. 2 Significant financial reporting risk Fraud risk from management override of controls Our response and significant findings As the risk is not rebuttable, our audit methodology incorporates the required proceduresjournal entries and other adjustments, performing a retrospective review of estimates and evaluating the business rationale of significant unusual transactions.KPMG perfoJournal entries were selected using various criteria to identify journal entries that could possibly be related to override aNo iss Audit risks and results 5 - 148 related” project. - Why are we focusing here?Revenue recognized from the Development Charge Reserve Fund is subject to judgement as capital projects must be development in nature by ensuring the expenditure meets the criteria as a “growth Obligatory Reserve Funds Revenue and Deferred Revenue findings focus controls around the recording of revenues/cash receipts Other area of focus TestedObtained management’s continuity schedule for deferred development charges and ensured the spreadsheet was accurate Vouched a sample of development charges collected from developers during the current fiscal yearPerformed substantive testing over amounts being recognized as revenue ur response and significant 3 Other area of Obligatory Reserve Funds Revenue and Deferred Revenue O———— Audit risks and results Significant findings from the audit regarding other areas of focus are as follows:KPMG did not find any issues through our testing. 5 - 149 be reasonable, and consistent with similar term borrowing rates Estimates and judgements used by managementComplexity of the accounting guidance -- Why are we focusing here? considered to %, 3.00 of 19 We believe management’s process for identifying critical accounting estimates is considered adequate. . in 20 (Actuarial Consultant) in our audit of the accounts and disclosures. employment benefits - Post Mondelis Actuarial issues identified through our audit procedures with management’s actuarial specialists d used in calculating the employee future benefits any the reasonableness of assumptions used, and find the appropriateness of the underlying data, including employee populations ed used the work of the Other area of focus employment benefits CommunicateManagement’s process for identification and making accounting estimates are consistent with prior year.AssessTestedDiscount rateEnsured the note disclosure was complete and accurate based on actuary reports. We ur response and significant findings 4 Other area of focus Post-O——————— Audit risks and results Significant findings from the audit regarding other areas of focus are as follows:KPMG did not 5 - 150 Significance of the account balancesRisk of error in inappropriately recognizing costs as either capital or operating -- Why are we focusing here? Tangible Capital Assets (TCA) Other area of focus Substantive test of details approach, vouching samples of additions and retirements in fiscal 2019Review of expense accounts to ensure that items related to tangible capital assets were not inappropriately expensed in 2019Recalculation of amortization expenses performed ur response and significant findings 5 Other area of focus Tangible Capital Assets (TCA)O——— Audit risks and results Significant findings from the audit regarding other areas of focus are as follows:KPMG did not find any issues identified through our audit procedures. 5 - 151 and budgeted tax rates s to ensure proper revenue recognition criteria was followed. To ensure the transfers were authorized and Confirmation of details with investment managersPerformed a substantive analytical procedure using MPAC dataAnalytical procedures were performed comparing current year’s revenues on a disaggregated basis to the current year budget and the prior year, adjusting for known changes in assumptionsSubstantive procedures performed to test the existence and accuracy of expenses Testing the completeness, existence, and accuracy of yearend accruals, most notably those that contain areas of estimate of judgmentReviewed agreementall eligibility criteria and any stipulations were met. Performed test of details on significant transfers audit procedures on the above noted areas of focus Our audit approach and findings——————— our through issues Other areas of focus Investments and related incomeTaxation RevenueUser Fees and Service Charge RevenueExpensesGovernment Transfers Audit approach KPMG did not find any 5 - 152 of the audit. system at the Organization. This tool was Our results and insights Our KAAP tool was utilized to facilitate a direct extraction of all journal entries from the SAPsuccessful in extracting the large data from the system so we can efficiently test journal entries of the audit where Technology and D&A routines were used Areas Tool Data Extraction & Analytics Tools Technology in the audit As previously communicated in our Audit Planning Report, we have utilized technology to enhance the quality and effectiveness 5 - 153 . City letter. relevant financial reporting framework. City’s The form, arrangement and content of the financial statements are appropriate for the size, scope and industry segment of theNo concerns at this time regarding future implementation. following: t not yet effective Form, arrangement, and content of the financial statementsApplication of accounting pronouncements issued bu Financial statement presentation and disclosure The presentation and disclosure of the financial statements are, in all material respects, in accordance with the Misstatements, including omissions, if any, related to disclosure or presentation items are in the management representation We also highlight the 5 - 154 . that all identified differences be corrected. We have already made this request of audit committee adjustments. the Uncorrected differences and Corrected Adjustments Differences and adjustments include disclosure differences and Professional standards require that we request of management and management.Uncorrect ed differences We concur with management’s representation that the differences are not material to the financial statements. Accordingly, the differences have no effect on our auditors’ report Corrected adjustments We did not identify any adjustments that were communicated to management and subsequently corrected in the financial statements. 5 - 155 Appendices Content Appendix 1: Required communications Appendix 2: Audit Quality and Risk Management 5 - 156 of the management a copy ion letter are provided to The audit committee. Management Management representation letter In accordance with professional standards, representathave provided you with a copy of the representation letter for the audit of the financial statements. Appendix 2 Other Required Communications accordance with professional standards, there are a number of communications that are required during the course of and upon completion of Auditor’s report The conclusion of our audit is set out in our draft auditors’ report attached to the draft financial statements Audit quality Audit Quality (AQ) is at the core of everything we do at KPMG. provides more information on AQ. Appendix 1: In our audit. These include: 5 - 157 . . objectivity, integrity for more information including and gram summarizes the key opinion. Audit Quality and Transparency report Executed consistently, in line with the requirements and intent of applicable professional standards within a strong system of quality controls and All of our related activities are undertaken in an environment of the utmost level of independence, ethics, What do we mean by audit quality?Audit Quality (AQ) is at the core of everything we do at KPMG. We believe that it is not just about reaching the right opinion, but how we reach thatWe define ‘audit quality’ as being the outcome when audits are: Our AQ Framework summarises how we deliver AQ. Visit our Audit Quality Resources pageaccess to our – – Industry technical definition standards excellence Performing with our AQ professional aligned with audits in line Methodology expertise and clients tools and leadership technology Associating Smart audit Transparency with the right Governance and Audit Quality Framework and candid Code of including specialists Honest and Appropriately independence qualified team, conduct, ethics communication Appendix 2: Audit Quality and Risk Management KPMG maintains a system of quality control designed to reflect our drive and determination to deliver independent, unbiased advice and opinions, and also meet the requirements of Canadian professional standards.Quality control is fundamental to our business and is the responsibility of every partner and employee. The following diaelements of our quality control system. 5 - 158 All rights reserved. International Cooperative (“KPMG International”). kpmg.ca/audit KPMG LLP, an Audit, Tax and Advisory firm (kpmg.ca) and a Canadian limited liability partnership established under the laws of Ontario, is the Canadian member firm of KPMG KPMG member firms around the world have 174,000 professionals, in 155 countries.The independent member firms of the KPMG network are affiliated with KPMG International, a Swiss entity. Each KPMG firm is a legally distinct and separate entity, and describes itself as such.© 2019 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated withKPMG International Cooperative (“KPMG International”), a Swiss entity. 5 - 159