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HomeMy WebLinkAboutAudit Agenda - 2022-06-201 KiTc�ivER Audit Committee Agenda Monday, June 20, 2022, 1:30 p.m. - 2:30 p.m. Electronic Meeting Beginning March 1, 2022, the City of Kitchener has aligned with provincial changes to COVID-19 restrictions and City Hall is now open for in person services, but appointments are still being encouraged. The City remains committed to safety of our patrons and staff and continue to facilitate electronic meeting participation for members of the public. Those people interested in participating in this meeting can register to participate electronically by completing the online delegation registration form at www.kitchener.ca/delegation or via email at delegation (a)kitchener.ca. For those who are interested in accessing the meeting live -stream video it is available at www.kitchener.ca/watchnow. Please refer to the delegations section on the agenda below for registration deadlines. Written comments will be circulated prior to the meeting and will form part of the public record. *Accessible formats and communication supports are available upon request. If you require assistance to take part in a city meeting or event, please call 519-741-2345 or TTY 1-866-969-9994.* Chair: Mayor B. Vrbanovic Pages 1. Commencement 2. Delegations Pursuant to Council's Procedural By-law, delegations are permitted to address the Committee for a maximum of five (5) minutes. Delegates must register by 12:30pm on June 20, 2022, in order to participate electronically. 3. Delegations 3.1. Item 4.1 - Matthew Betik and Courtney Cheal, KPMG 4. Discussion Items 4.1. 2021 Audited Consolidated Financial Statements, FIN -2022-316 3 5. Information Items 6. Adjournment Sarah Goldrup Committee Administrator Page 2 of 181 Staff Report r NJ :R Financia( Services Department www.kitchener.ca REPORT TO: Audit Committee DATE OF MEETING: June 20, 2022 SUBMITTED BY: Greg Demacio, Manager, Financial Reporting and Analysis, 519-741-2200 ext. 7895 PREPARED BY: Greg Demacio, Manager, Financial Reporting and Analysis, 519-741-2200 ext. 7895 WARD(S) INVOLVED: All DATE OF REPORT: June 14, 2022 REPORT NO.: FIN -2022-316 SUBJECT: 2021 Audited Consolidated Financial Statements RECOMMENDATION: That the 2021 Audited Consolidated Financial Statements of the Corporation of the City of Kitchener be approved. REPORT HIGHLIGHTS: • The purpose of this report is to present the Corporation of the City of Kitchener's consolidated financial statements for the year ended December 31, 2021. • The key finding of this report is that the independent auditors have provided a clean audit opinion on the Corporation of the City of Kitchener's consolidated financial statements as at December 31, 2021 and for the year then ended. • There are no financial implications associated with this report. • Community engagement included having this report posted to the City's website with the agenda in advance of the committee meeting. • This report supports the delivery of core services. BACKGROUND: Staff is pleased to submit the 2021 Audited Consolidated Financial Statements of the Corporation of the City of Kitchener. A presentation of financial highlights for the year will be given at the Audit Committee meeting on June 20, 2022. Representatives of the City's external auditors will also be in attendance to discuss the Audit Findings Report. REPORT: The consolidated financial statements are prepared in accordance with Canadian generally accepted accounting principles for local governments as established by the Public Sector Accounting Board of the Chartered Professional Accountants of Canada. These financial statements are prepared on a full accrual basis and combine the results of the tax -based operations, enterprises, local boards, capital activity, and reserve fund activities. Local boards include The Centre in the Square Inc., Kitchener Public Library, Belmont Improvement Area, and Kitchener Downtown Improvement Area. The 2021 year-end results for the tax -based operations *** This information is available in accessible formats upon request. *** Please call 519-741-2345 or TTY 1-866-969-9994 for assistance. Page 3 of 181 and the enterprises were provided to Council in March. Please see Appendix A to this report for a reconciliation between the non -consolidated figures provided in March and the Audited Consolidated Financial Statements. STRATEGIC PLAN ALIGNMENT: This report supports the delivery of core services. FINANCIAL IMPLICATIONS: Capital Budget — The recommendation has no impact on the Capital Budget. Operating Budget — The recommendation has no impact on the Operating Budget. COMMUNITY ENGAGEMENT: INFORM — This report has been posted to the City's website with the agenda in advance of the council / committee meeting. PREVIOUS REPORTS/AUTHORITIES: • FIN -2021-51 External Audit Planning Report for Fiscal Year 2021 APPROVED BY: Jonathan Lautenbach, Chief Financial Officer, Financial Services ATTACHMENTS: • Appendix A — Annual Surplus Reconciliation • Appendix B — City of Kitchener Financial Report excerpts (including the Audited Consolidated Financial Statements) for the year ended December 31, 2021 • Appendix C —Audit Committee Presentation • Appendix D — Audit Findings Report for the year ended December 31, 2021 (KPMG) Page 4 of 181 Appendix A — Annual Surplus Reconciliation Year-end results were provided previously in report FIN -2022-130 included on the March 21, 2022 Council Agenda. The annual surplus presented in the Audited Consolidated Financial Statements reconciles to the City of Kitchener year-end results as follows: Year Ended Dec 31, Year Ended Dec 31, 2021 2420 Tax supported surplus (deficit) (4,651,262) (5,060,544) Enterprise surplus (deficit) 3,258,158 6;083,746 Total operating surplus (deficit) (1,393,104) 1,023,202 Consolidation Belmont Improvement Area 7,222 15,986 Kitchener Downtown Improvement Area 773,160 38,046 Kitchener Public Library (199,715) 481,900 The Centre in the Square (105,580) 44,405 Kitchener Generation Corporation 64,114 61,402 Kitchener Power Corp. and its Affiliates 10,327,388 9;629,978 Net transfers to capital and reserves 10,866,589 10;271,717 Revenues not included in operating surplus Reserve fund revenue 42,290,841 37;241,902 Contributions of tangible capital assets 23,914,606 19;856,345 Gain (loss) on sale of tangible capital assets (102,564) 2;056,720 Other capital revenue 9,301,408 6;427,517 75, 404,291 65.582,484 Items in operating surplus, not in consolidated statements Net transfers to capital and reserves 89,251,020 90.419,006 "carious PSAB adjustments 4,438,141 5.982,429 93, 689,161 96,401,435 COIL expenses not included in operating surplus Amortization of tangible capital assets (53,172,804) (49.392,246) Other capital expenses (17,977,556) (17,885,884) Change in actuarial estimate for employee future benefits 26,656 (2,772,793) Reserve fund expenses (1,915,486) (4,834,128) (73,039,191) (74,885,050) Annual surplus per consolidated financial statements 105,527,746 98,393,787 Page 5 of 181 KPMG LLP 120 Victoria Street South Suite 600 Kitchener, ON N2G OE1 Canada Tel 519-747-8800 Fax 519-747-8811 INDEPENDENT AUDITORS' REPORT To the Mayor and Members of Council, Inhabitants Ratepayers of the Corporation of the City of Kitchener Opinion We have audited the consolidated financial statements of the Corporation of the City of Kitchener (the Entity), which comprise: • the consolidated statement ore -financial position as at December 31, 2021 • the consolidated statement of operations for the year then ended • the consolidated statement of change in net financial assets for the year then ended • the consolidated statement of cash flows for the year then ended • and notes to the consolidated financial statements, including a summary of significant accounting policies (Hereinafter referred to as the "consolidated financial statements"). In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Entity as at December 31, 2021, and its consolidated results of operations, its changes in consolidated net financial assets, and its consolidated cash flows for the year then ended in accordance with Canadian public sector accounting standards. Basis for Opinion We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the "Auditors' Responsibilities for the Audit of the Consolidated Financial Statements" section of our auditors' report. KPMG LLP, an Ontario limited liability partnership and member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. KPMG Canada provides services to KPMG LLP. Page 6 of 181 Page 2 We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with Canadian public sector accounting standards and for such internal control as management determines is necessary to enable the preparation of consolidated financial staVentst are free from material misstatement, whether due to fraud or error. In preparing the consolidated ts, 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 Xance—M responsible for overseeing the Entity's financial reporting process. �. Auditors' Responsibilities for the Audit of the Consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the consolidated financial statements. As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. Page 7 of 181 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 one resulting from error, as fraud may involve coll forgery, intentional omissions, misrepresentations, or the override of internal c I. • Obtain an understanding of internal cont r elevant to the audit in order to design audit procedures that are appropriate i circumstances, but not for the purpose of expressing an opinion on the effectiv ss of the Entity's internal control. • Evaluate the appropriateness of acco ting 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 consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Entity to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Page 8 of 181 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 Accountants Kitchener, Canada N/ Page 9 of 181 THE CORPORATION OF THE CITY OF KITCHENER Consolidated Statement of Financial Position As at December 31, 2021 Non-financial assets Tangible capital assets (Note 14) 1,389,634,219 1,324,000,850 Inventory of supplies 3,999,201 3,518,415 Prepaid expenses 1,976,293 1,865,594 1,395,609,713 1,329,384,859 Accumulated surplus (N . 15) $ 1,705,198,678 $ 1,599,670,932 The accompanying notes are an integral part of these consolidated financial statements. Page 10 of 181 2021 2020 Financial assets Cash and cash equivalents $ 111,256,413 $ 140,456,509 Taxes receivable (Note 2) 22,423,158 22,376,508 Trade and other accounts receivable (Note 2) 51,703,849 34,441,122 Loans receivable (Note 5) 6,126,258 6,289,834 Inventory for resale 13,728,401 13,698,269 Investments (Note 6) 219,049,058 129,817,073 Investment in Kitchener Power Corp. and its affiliates (Note 7) 231,241,809 224,960,021 Investment in Kitchener Generation Corporation Note 8 2,090,266 2,316,914 657,619,212 574,356,250 Liabilities Accounts payable and accrued liabilities 107,995,570 106,127,746 Deferred revenue - obligatory reserve funds (Note 10) 83,114,403 60,677,659 Deferred revenue - other 42,722,904 20,263,897 Municipal debt (Note 11) 59,962,275 62,739,124 Employee future benefits Note 13 54,235,095 54,261,751 348,030,247 304,070,177 Net financial assets 309,588,965 270,286,073 Non-financial assets Tangible capital assets (Note 14) 1,389,634,219 1,324,000,850 Inventory of supplies 3,999,201 3,518,415 Prepaid expenses 1,976,293 1,865,594 1,395,609,713 1,329,384,859 Accumulated surplus (N . 15) $ 1,705,198,678 $ 1,599,670,932 The accompanying notes are an integral part of these consolidated financial statements. Page 10 of 181 THE CORPORATION OF THE CITY OF KITCHENER Consolidated Statement of Operations For the Year Ended December 31, 2021 The accompanying notes are an integral part of these consolidated financial statements. Page 11 of 181 2021 2021 2020 Budget Revenue Taxation $ 138,786,859 $ 137,949,043 $ 135,010,285 User fees and charges Gasworks 79,549,186 79,803,582 77,964,599 Water, sewer and storm water 131,507,687 138,271,884 136,073,048 Other 41,958,305 32,205,632 29,520,236 Grants 29,694,387 23,919,824 31,767,318 Contributions of tangible capital assets 23,914,606 23,914,606 19,856,345 Investment income 9,615,51 6,577,326 7,936,940 Penalties and interest on taxes 3,286, 3,783,814 2,925,246 Development charge revenue recognized 17,24,!0 21,836,143 9,582,100 Share of net income of Kitchener Power Corp. and its affiliates (Note 7) 8,563 10,327,388 9,629,978 Share of net income of Kitchener Generation <*4,603 Corporation (Note 8)- 64,114 61,402 Other 3,549,562 2,215,377 Total revenue 89,1 MV36 482,202,918 462,542,874 Expenses General government 43,535,130 34,604,817 33,744,592 Protection services 53,342,592 56,441,084 55,408,373 Transportation services 42,440,748 39,002,183 38,266,483 Environmental services 103,632,608 99,840,274 98,325,470 Health services 3,080,205 3,842,758 2,315,444 Social and family service 2,749,117 2,234,620 2,322,018 Recreation and cultural sere s 78,237,482 69,607,865 64,481,190 Planning and development 9,643,901 11,777,358 12,608,810 Gasworks 60,812,038 59,324,213 56,676,707 Total expenses 397,473,821 376,675,172 364,149,087 Annual surplus 91,630,115 105,527,746 98,393,787 Accumulated surplus, beginning of year 1,599,670,932 1,599,670,932 1,501,277,145 Accumulated surplus, end of year (Note 15) $ 1,691,301,047 $ 1,705,198,678 $ 1,599,670,932 The accompanying notes are an integral part of these consolidated financial statements. Page 11 of 181 THE CORPORATION OF THE CITY OF KITCHENER Consolidated Statement of Change in Net Financial Assets For the Year Ended December 31, 2021 2021 2021 2020 Budget Annual surplus $ 182,225,281 $ 105,527,746 $ 98,393,787 Amortization of tangible capital assets 55,588,593 55,588,593 51,792,737 Acquisition of tangible capital assets (125,050,386) (122,238,702) (135,189,619) Gain on disposals of tangible capital assets (900,085) (900,085) (233,773) Proceeds on disposal of tangible capital assets 1,916,825 1,916,825 1,266,043 Acquisition of inventory of supplies - (7,155,383) (6,692,694) Acquisition of prepaid expenses - (1,906,707) (887,281) Consumption of inventory of supplies - 6,674,597 6,588,807 Use of prepaid expenses - 1,796,008 777,248 Change in net financial assets 113,780,228 39,302,892 15,815,255 Net financial assets, beginning of year 270,286,073 270,286,073 254,470,818 Net financial assets, end of year $ 384,066,301 $ 309,588,965 $ 270,286,073 The accompanying notes are an integral part of these consolidated financial statements. INIMbN, Page 12 of 181 THE CORPORATION OF THE CITY OF KITCHENER Consolidated Statement of Cash Flow For the Year Ended December 31, 2021 Investing 2021 2020 Operating 4,045,600 3,858,100 Annual surplus $ 105,527,746 $ 98,393,787 Items not involving cash (89,231,985) 52,679,506 Amortization of tangible capital assets 55,588,593 51,792,737 Gain on disposals of tangible capital assets (900,085) (233,773) Share of net income of Kitchener Power Corp. and its affiliates (10,327,388) (9,629,978) Share of net income of Kitchener Generation Corporation (64,114) (61,402) Change in employee future benefits (26,656) 2,772,793 Contributions of tangible capital assets (23,914,606) (19,856,345) Change in non-cash assets and liabilities (98,324,096) (115,333,274) Taxes receivable (46,650) (779,868) Trade and other accounts receivable (17,262,727) 692,311 Loans receivables 163,576 164,942 Inventory for resale (30,132) (939,931) Inventory of supplies (480,786) (103,887) Prepaid expenses (110,699) (110,033) Accounts payable and accrued liabilities 1,867,824 (7,820,963) Deferred revenue - obligatory reserve funds 22,436,744 15,148,192 Deferred revenue - other 22,459,007 (5,405,314) Net change in cash from operating activities 154,879,647 124,023,268 Investing Dividends received from Kitchener Power Corp. 4,045,600 3,858,100 Debt and equity payments received from Kitchener Generation Corporation 290,762 293,654 Net disposal (acquisition) of investments (89,231,985) 52,679,506 Net change in cash from investing activities (84,895,623) 56,831,260 Financing Municipal debt issued 8,069,000 9,554,000 Municipal debt repaid (10,845,849) (10,807,889) Net change in cash from financing activities (2,776,849) (1,253,889) Capital Acquisition of tangible capital assets (98,324,096) (115,333,274) Proceeds on disposal of tangible capital assets 1,916,825 1,266,043 Net change in cash from capital activities (96,407,271) (114,067,231) Net change in cash and cash equivalents (29,200,096) 65,533,408 Cash and cash equivalents, beginning of year 140,456,509 74,923,101 Cash and cash equivalents, end of year $ 111,256,413 $ 140,456,509 The accompanying notes are an integral part of these consolidated financial statements. Page 13 of 181 THE CORPORATION OF THE CITY OF KITCHENER Notes to the Consolidated Financial Statements For the Year Ended December 31, 2021 On June 9, 1912 the village of Berlin was officially designated a city. The Corporation of the City of Kitchener (the "City") was created in 1916 when Berlin changed its name to Kitchener. The City operates as a lower tier government in the Province of Ontario, Canada. The City provides municipal services such as fire protection, public works, gas distribution, urban planning, recreation and cultural services and other general government services. 1. Summary of significant accounting policies These consolidated financial statements of the City have been prepared by management in accordance with Canadian generally accepted accounting principles for local governments as established by the Public Sector Accounting Board of the Chartered Professional Accountants of Canada. The following is a summary of the significant accounting policies followed in the preparation of these financial statements: a. Basis of consolidation Consolidated entities These consolidated financial statements reflect the assets, liabilities, reserves, surpluses/deficits, revenues, and expenditures of those City funds and governmental functions or entities which have been determined to comprise a part of the aggregate City operations based upon control exercised by the City except for the City's government businesses which are accounted for on the modified equity basis of accounting. The following boards, municipal enterprises and utilities have been included in the consolidated financial statements: • Kitchener Public Library • Kitchener Downtown Impro rea Board of Management • Belmont Improvement A oar f Management • The Centre in the Squ C. • Waterworks Enterprise • Gasworks Enterprise • Sewer Surcharge Enter • Storm Water Managemen terprise • Building Enterprise • Golf Enterprise • Parking Enterprise All inter -organizational and inter -fund transactions and balances have been eliminated. Government business enterprises Kitchener Generation Corporation and Kitchener Power Corp. and its affiliates are not consolidated but are accounted for on the modified equity basis which reflects the City of Kitchener's investment in the enterprises and its share of net income since acquisition. Under the modified equity basis, the enterprises' accounting principles are not adjusted to conform to those of the City, and inter - organizational transactions and balances are not eliminated. iii. Accounting for region and school board transactions The taxation, other revenue, expenditures, assets and liabilities, with respect to the operations of the school boards and the Regional Municipality of Waterloo, are not reflected in these consolidated financial statements. Page 14 of 181 THE CORPORATION OF THE CITY OF KITCHENER Notes to the Consolidated Financial Statements For the Year Ended December 31, 2021 1. Summary of significant accounting policies (continued) a. Basis of consolidation (continued) iv. Trust funds Trust funds and their related operations administered by the City are not consolidated (see Note 4). b. Basis of accounting Accrual basis of accounting The consolidated financial statements are prepared using the accrual basis of accounting. The accrual basis of accounting recognizes revenues in the period in which the transactions or events occurred that gave rise to the revenues. Expenses are recognized in the period the goods and services are acquired and a liability is incurred or when an external transfer Vie. ii. Cash and cash equivalents Cash and cash equivalents include cash on hand an hly liquid investments with original maturity of 90 days or less as at the end of the year. Trade and other acc Trade and other accounts iv. Loans receivable allowance for doubtful accounts. Loans receivable are reported net of any allowance for doubtful accounts. Interest income is recorded as it accrues. When the value of any loan receivable is identified as impaired, an allowance is set up to offset the carrying amount and any adjustments are included in materials and services expense in the period the impairment is recognized. v. Inventory for resale Inventory for resale is valued at the lower of cost or net realizable value on an average cost basis. vi. Investments Portfolio investments are carried at cost, net of accumulated amortization on premiums and discounts. Premiums and discounts are amortized on a straight line basis over the term to maturity. Interest income is recorded as it accrues. When the value of any portfolio investment is identified as impaired, the carrying amount is adjusted to the estimated realizable amount and any adjustments are included in investment income in the period the impairment is recognized. Page 15 of 181 THE CORPORATION OF THE CITY OF KITCHENER Notes to the Consolidated Financial Statements For the Year Ended December 31, 2021 1. Summary of significant accounting policies (continued) b. Basis of accounting (continued) vii. Deferred revenue Government transfers, contributions and other amounts are received from third parties pursuant to legislation, regulation or agreement and may only be used in the conduct of certain programs, in the completion of specific work or for the purchase of tangible capital assets. A requirement of the Public Sector Accounting Board of the Chartered Professional Accountants of Canada is that obligatory reserves be reported as deferred revenue. Obligatory reserves include development charges, recreational lands, building permits and gas tax funding. In addition, certain user charges and fees are collected for which the related services have yet to be performed. These are recorded under the classification Deferred revenue - other. Revenue is recognized in the period when the related expenses are incurred, services performed or the tangible capital assets are acquired. viii. Employee future benefits The contributions to a multi-employer, defined benefit pension plan are expensed when contributions are due. The costs of post-retirement benefits are recognized when the event that obligates the City occurs. Costs include projected future income payments, health care continuation costs and fees paid to independent administrators of these plans, calculated on a present value basis. The costs of post-retirement benefits are actuarially determined using the projected benefits method prorated on service and management's best estimate of retirement ages of employees, salary escalation, expected health care costs and plan investment performance. Liabilities are actuarially determined using discount rates that are consistent with the market rates of high quality debt instruments. Any gains or losses from changes in assumptions or experience are amortized over the average remaining service period for active employees. ix. Contaminated sites Contaminated sites are defined as the result of contamination being introduced into air, soil, water or sediment of a chemical, organic, or radioactive material or live organism that exceeds an environment standard. This Standard relates to sites that are not in productive use and sites in productive use where an unexpected event resulted in contamination. As of December 31, 2021, no liability is recorded on the Consolidated Statement of Financial Position. x. Non-financial assets Non-financial assets are not available to discharge liabilities and are held for use in the provision of services. They have useful lives that extend beyond the current year and are not intended for sale in the ordinary course of operations. The change in non-financial assets during the year, together with the excess of revenues over expenses, provides the consolidated change in net financial assets for the year. Page 16 of 181 THE CORPORATION OF THE CITY OF KITCHENER Notes to the Consolidated Financial Statements For the Year Ended December 31, 2021 1. Summary of significant accounting policies (continued) b. Basis of accounting (continued) x. Non-financial assets (continued) a. Tangible capital assets Tangible capital assets are recorded at cost which includes all amounts that are directly attributable to acquisition, construction, development or betterment of the asset. The cost less residual value of the tangible capital assets is amortized on a straight-line basis over their estimated useful lives as follows: Assets Amortization Period Land Land Improvements Buildings & building improvements Leasehold improvements Machinery & equipment Computer hardware Computer software Linear assets Vehicles b. Contributions of tangible capital The original cost of land is not amortized 10 to 100 years 15 to 50 years Over the useful life of the improvement or the lease term, whichever is shorter 1 to 20 years Ffo 10 years 5 to 100 years 5 to 16 years Tangible capital assets received as contributions are recorded at their fair value at time of receipt and are recorded as revenue. c. Leases Leases are classified as capital or operating leases. Leases which transfer substantially all the risks and benefits incidental of ownership are accounted for as capital leases. All other leases are accounted for as operating leases and the related lease payments are recorded as expenses when incurred. d. Inventory of supplies Inventories held for consumption are recorded at the lower of cost and replacement cost. e. Works of art and cultural and historic assets Works of art and cultural and historic assets are not recorded as assets in these financial statements. Page 17 of 181 THE CORPORATION OF THE CITY OF KITCHENER Notes to the Consolidated Financial Statements For the Year Ended December 31, 2021 1. Summary of significant accounting policies (continued) b. Basis of accounting (continued) xi. Revenue recognition 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 tincurred, services performed, or the tangible assets are acquired. Tax revenue is recognized when it is auth*period for which the tax is levied. Tax revenue reported relates to property taxes xii. Use of estimates The preparation of the finance ments-Muires management to make estimates and assumptions that affect the reported amounts dWsets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. These estimates and assumptions, including employee future benefits payable, legal claims provisions, liability for contaminated sites, the valuation of tangible capital assets and their related useful lives and amortization are based on management's best information and judgment and may differ significantly from future actual results. 2. Taxes and accounts receivable Taxes receivable are reported net of a valuation allowance of $9,321,997 (2020 - $8,569,879). Trade and other accounts receivable are reported net of a valuation allowance of $1,283,294 (2020 - $1,373,767). Page 18 of 181 THE CORPORATION OF THE CITY OF KITCHENER Notes to the Consolidated Financial Statements For the Year Ended December 31, 2021 3. Operations of school boards and the Regional Municipality of Waterloo Further to Note 1 a) iii, the taxation, other revenues and requisitions for the school boards and the Regional Municipality of Waterloo are comprised of the following: School Region Total Boards Taxation and user charges $ 79,625,896 $ 285,467,443 $ 365,093,339 Share of payments in lieu of taxes 559 3,034,627 3,035,186 Share of linear properties 45.880 124.922 170.802 Amounts requisitioned $ 79,672,335 $ 288,626,992 $ 368,299,327 4. Trust funds Trust funds administered by the City have not been incl d in the Consolidated Statement of Financial Position, nor have their operations been included in the C <tuale d Statement of Operations. The trust funds under administration are comprised of cemetery p and prepaid interment funds totalling $17,616,272 (2020 - $16,786,440). 5. Loans receivable Loans receivable are made up of the following: 2021 2020 Major capital improvement loans receivable �� $ 5,929,891 $ 6,062,000 Loans receivable with forgiveness provisions 25,396 25,396 Minor capital improvement and other loans receivable 170,971 202,438 $ 6,126,258 $ 6,289,834 Major capital improvement loans are individual loans in excess of $500,000 when issued with no forgiveness provision built into the loan. These loans have repayment terms ranging from 10 to 12 years (2020 - 10 to 12 years). All major capital improvement loans are unsecured and bear interest at rates ranging from 1.32% to 1.58% (2020 - 1.32% to 1.5896). Forgivable loans are those initially offered with forgiveness provisions built into the agreement. All loans in this category are unsecured and have repayment terms of 5 years (2020 - 5 years). The forgiveness provisions range from 15% to 15% (2020 - 15% to 1596). The balances recorded are net of the allowance for forgiveness. Interest rates on these loans range from 8% to 8% (2020 - 8% to 896). Minor capital improvement and other loans receivable comprise any loan receivable not fitting into the first two categories. There is a variety of terms related to these loans with payment terms ranging from 1 to 5 years (2020 - 1 to 5 years). The majority of these loans are secured by the asset the loan was granted to finance, but others are unsecured. The interest rates on these loans range from 0% to 0% (2020 - 0% to 096). Page 19 of 181 THE CORPORATION OF THE CITY OF KITCHENER Notes to the Consolidated Financial Statements For the Year Ended December 31, 2021 6. Investments Investments are made up of the following: 2021 2021 2020 2020 Cost Market Cost Market Value Value Guaranteed investment certificates $ 186,525,161 $ 188,613,269 $ 116,027,115 $ 116,641,471 Bonds and debentures 32,242,655 31,993,486 13,502,281 13,713,173 Shares 281,242 564,401 287,677 482,693 $ 219,049,058 $ 221,171,156 $ 129,817,073 $ 130,837,337 7. Investment in Kitchener Power Corp. and its Affiliates + Under the provincial government's Electricity Competition (Bill 35), Kitchener Power Corp., a holding company, along with its wholly owned subsidiaries, includin itch ner-Wilmot Hydro Inc., was incorporated on July 1, 2000. On August 1, 2000, under by-laws passed by the City and the Township of Wilmot, the net assets of the former Hydro -Electric Commission of Kitchener -Wilmot were transferred to the new corporation. The City took back a 92.25% share in the common shares of Kitchener Power Corp. and a 92.25% share in long-term notes payable by the affiliates for the assets transferred. Certain surplus property assets and cash funds were excluded from the transfer and turned over to the City a e Township. The investment is comprised of the wing: 2021 2020 Kitchener Power Corp. common s $ 61,244,208 $ 61,244,208 Kitchener -Wilmot Hydro Inc. long -ter ote eceivable 70,997,576 70,997,576 Share of net income and prior period 'ustments due to changes in accounting policies since acquisitio , net of dividends 99,000,025 92,718,237 $ 231,241,809 $ 224,960,021 The Kitchener -Wilmot Hydro Inc. notes are unsecured and bear interest at the rate of 3.23% (2020 - 3.2396). There are no repayment terms and there is no intent to redeem the notes or the shares. Page 20 of 181 THE CORPORATION OF THE CITY OF KITCHENER Notes to the Consolidated Financial Statements For the Year Ended December 31, 2021 7. Investment in Kitchener Power Corp. and its Affiliates (continued) The following table provides condensed financial information with respect to Kitchener Power Corp.: 2021 2020 Current assets $ 46,263,000 $ 56,044,000 Non-current assets 291,824,000 276,709,000 Regulatory assets 25,396,000 19,661,000 Total assets 363,483,000 352,414,000 Current liabilities 42,578,000 47,790,000 Long-term debt 76,963,000 76,963,000 Regulatory liabilities 4,543,000 4,496,000 Other liabilities 64,813,000 55,944,000 Total liabilities 188,897,000 185,193,000 Net assets 174,586,000 167,221,000 Results of operations Revenues 257,588,000 293,231,000 Expenses (246,393,000) (282,792,000) Net income lip, 11,195,000 10,439,000 City's share of net income - 92.25% $ 10,327,388 $ 9,629,978 Mergers of the holding companies, Kitchener Power Corp. and Waterloo North Hydro Holding Corporation and the local distribution companies, Kitchener -Wilmot Hydro Inc. and Waterloo North Hydro Inc. were proposed in 2021. The proposals have been agreed to by the City of Kitchener and Township of Wilmot Councils. A Mergers, Amalgamations, Acquisitions and Divestitures application was filed on February 4, 2022 seeking permission from the Ontario Energy Board to proceed with the proposed merger. 8. Investment in Kitchener Generation Corporation Under the provincial government's Business Corporation Act, Kitchener Generation Corporation was incorporated on December 9, 2011. Effective January 1, 2012, the City transferred the solar roof asset constructed on the surface of the Kitchener Operations Facility to Kitchener Generation Corporation in exchange for 100% of its common shares and interest bearing debt. The investment in Kitchener Generation Corporation is comprised of the following: 2021 2020 Kitchener Generation Corporation common shares $ 209,027 $ 232,444 Kitchener Generation Corporation long-term notes receivable 1,881,239 2,091,995 Share of net income since acquisition, net of dividends - (7,525) $ 2,090,266 $ 2,316,914 The notes receivable are unsecured and bear interest at the rate of 5.01%. To the extent that Kitchener Generation Corporation has positive annual cash flows after any dividend payment, the cash will be returned to the City as repayment of the outstanding debt and return of capital. The proportion to which they contribute is Page 21 of 181 THE CORPORATION OF THE CITY OF KITCHENER Notes to the Consolidated Financial Statements For the Year Ended December 31, 2021 8. Investment in Kitchener Generation Corporation (continued) 90% debt, 10% equity. The following table provides condensed financial information with respect to Kitchener Generation Corporation: 2021 2020 Current assets $ 7,676 $ 10,746 Capital assets 2,090,264 2,322,516 Total assets 2,097,940 2,333,262 Current liabilities Long-term debt Total liabilities Net assets Results of operations Revenues Expenses Net income Citv's share of net income -100% 9. Insurance pool 7,674 16,348 1,881,239 2,091,995 1,888,913 2,108,343 209,027 224,919 401,175 414,384 (337,061) (352,982 64,114 61,402 $ 64,114 $ 61,402 Accounts payable and accrued liabilities include arfi amount of $10,581,610 (2020 - $11,585,331) which represents funds belonging to the Waterloo Region Municipalities Insurance Pool (the "Pool") and administered by the City on behalf of the Pool's members. The members entered an agreement in 1998 to purchase property damage and public liability insurance on a group basis and share a retained level of risk. The members pay an actuarially determined annual levy to fund insurance, prefund expected losses and contribute to a surplus. The Pool has purchased insurance to fund losses above a predetermined deductible and any losses above a predetermined total in any year. The City's share of Pool levies is 23.02% (2020 - 24.389,o) and its share of the Pool's cumulative surplus as at May 31, 2021 was $1,805,325 (2020 - $2,088,790). The City's share of the Pool's cumulative surplus has not been included in the Consolidated Statement of Financial Position. 10. Deferred revenue -obligatory reserve funds Obligatory deferred revenue is comprised of the following: 2021 2020 Development charges $ 46,022,757 $ 35,029,877 Federal gas tax 12,773,507 6,302,509 Building 14,657,882 13,818,330 Recreational land 9,660,257 5,526,943 $ 83,114,403 $ 60,677,659 Page 22 of 181 THE CORPORATION OF THE CITY OF KITCHENER Notes to the Consolidated Financial Statements For the Year Ended December 31, 2021 10. Deferred revenue - obligatory reserve funds (continued) The continuity of obligatory deferred revenue is as follows: Development Federal gas Recreational charges tax Building land Total Balance, January 1, 2021 $ 35,029,877 $ 6,302,509 $ 13,818,330 $ 5,526,943 $ 60,677,659 Collections 32,829,023 14,507,301 704,789 4,128,995 52,170,108 Interest earned - 89,115 144,637 87,161 320,913 Deferred revenue recognized (21,836,143) (8,125,418) (9,874) (82,842) (30,054,277) Balance, December 31, 2021 46,022,757 12,773,507 14,657,882 9,660,257 83,114,403 Balance, January 1, 2020 20,330,610 10,135,140 12,484,064 2,579,653 45,529,467 Collections 24,281,367 7,075,077 1,186,275 2,917,044 35,459,763 Interest earned - 92,729 198,872 44,872 336,473 Deferred revenue recognized (9,582,100) (11,000,437) (50,881) (14,626) (20,648,044) Balance, December 31, 2020 $ 35,029,877 .$ 6,302,509 $ 13,818,330 $ 5,526,943 $ 60,677,659 11. Municipal debt The City has assumed responsibility for the paymer issued by other municipalities. At end of the $59,962,275 (2020 - $62,739,12 4) The annual principal repayments are' )rincipal and interest charges on certain long-term debt r, the outstanding principal amount of this liability is 2022 $ 13,727,325 2023 NV#1 8,490,328 2024 7,641,268 2025 8,016,372 2026 7,742,468 2027 and thereafter 14,344,514 $ 59,962,275 The annual principal and interest payments required to service the municipal debt are within the annual debt repayment limit prescribed by the Ontario Ministry of Municipal Affairs and Housing. The municipal debt carries interest rates ranging from 0.30% to 5.65% (2020 - 0.45% to 6.4096). Interest charges for 2021 relating to municipal debt totalled $1,603,561 (2020 - $2,286,127). Page 23 of 181 THE CORPORATION OF THE CITY OF KITCHENER Notes to the Consolidated Financial Statements For the Year Ended December 31, 2021 12. Pension plan The City makes contributions to the Ontario Municipal Employees' Retirement System (OMERS), which is a multi-employer plan, on behalf of its staff. The plan is a defined benefit plan which specifies the amount of the retirement benefit to be received by the employees based on the length of service and rates of pay. Employee contributions are matched by the City. Contributions were required on account of current service in 2021 amounting to $11,460,767 (2020 - $11,469,111). The latest available report for the OMERS plan was as at December 31, 2021. At that time the plan reported a $3.1 billion actuarial deficit, based on actuarial liabilities of $120.8 billion and actuarial assets of $117.7 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, 2021, the City has no obligation under the past service provisions of the OMERS agreement. 13. Employee future benefits The estimated liability for employee future benefits is compri,,zj&of the folio g: 2021 2020 Sick leave benefit plan $ 20,869,210 $ 21,261,308 Post-retirement benefits 23,658,385 22,662,843 Future payments to WSIB 9,707,500 10,337,600 $ 54,235,095 $ 54,261,751 Significant actuarial assum IF Workplace Safety Insurance Sick Leave & Post- Ahk Board Retirement Benefits 4z Wqw 2021 2020 2021 2020 Discount rate 2.75 2.25 2.75 2.25 Salary growth assumptions N/A N/A 3.00 3.00 CPI increase assumptions 2.00 2.00 2.50 2.50 Health care initial trend rate N/A N/A 5.90 5.90 Health care ultimate trend rate N/A N/A 4.50 4.50 Dental care initial trend rate N/A N/A 4.00 4.00 Dental care ultimate trend rate N/A N/A 4.00 4.00 Page 24 of 181 THE CORPORATION OF THE CITY OF KITCHENER Notes to the Consolidated Financial Statements For the Year Ended December 31, 2021 13. Employee future benefits (continued) a. Sick leave benefit plan Under the sick leave benefit plan, unused sick leave can accumulate and certain employees may become entitled to cash payments when they leave the City's employment. The amount of benefits paid during the year were $2,550,997 (2020 - $1,831,663). A reserve fund to provide for this liability is included in accumulated surplus, in the amount of $6,332,903 (2020 - $5,432,999). Anticipated undiscounted payments to employees who are eligible to retire are: 2022 40$ 3,666,906 2023 1,451,776 2024 942,433 2025 1,009,754 2026 1,003,204 2027 and thereafter 6,234,125 IL $ 14,308,198 The actuarial valuation of the future liability fo eav assumes a discount rate of 2.75% (2020 - 2.25%). The last actuarial valuation for this liability w completed at December 31, 2020. The actuarial expense for the curr ar was 1158,899 (2020 - $2,458,955) and is comprised of the following items: 2021 2020 Current period benefit cost $ 1,324,175 $ 1,244,705 Amortization of actuarial fosse 339,204 568,042 Sick leave benefit expense 1,663,379 1,812,747 Sick leave benefit interest expense 495,520 646,208 Total expenses related to sick leave benefits $ 2,158,899 $ 2,458,955 As at December 31, 2021, the unamortized actuarial gains (losses) were $443,601 (2020 - $(713,059)) and are amortized over 11 to 13 years (2020 - 11 to 13 years). Page 25 of 181 THE CORPORATION OF THE CITY OF KITCHENER Notes to the Consolidated Financial Statements For the Year Ended December 31, 2021 13. Employee future benefits (continued) b. Post-retirement benefits The City pays certain health, dental and life insurance benefits on behalf of its retired employees up to the age of 65 if they have at least ten years of service with the City. The amount of benefits paid during the year were $1,257,388 (2020 - $1,168,498). The City holds no reserve to meet this liability. The actuarial valuation of the future liability for post-retirement benefits assumes a discount rate of 2.75% (2020 - 2.25%) and inflation rates for benefit premiums of 4.0% to 5.9% (2020 - 3.0% to 4.59'0). The last actuarial valuation for this liability was completed at December 31, 2020. The actuarial expense for the year was $2,252,930 (2020 - $2, 734, 7d is comprised of the following items: 1W 2021 2020 Current period benefit cost $ 1,199,344 $ 1,219,537 Amortization of actuarial losses 516,731 766,915 Post-retirement benefit expense 1,716,075 1,986,452 Post-retirement benefit interest expense 536,855 748,347 Total expenses related topost-retirement benefit $ 2,252,930 $ 2,734,799 As at December 31, 2021, the unamorti actuarial gains (losses) were $1,202,863 (2020 - $(626,736)) and are amortized over 11 to 13 years (20 13 yea). c. WSIB The Workplace Safety and Insurance B d (WSIB) administers injured worker benefits payments on behalf of the City as a Schedule 2 employer. The amount of benefits paid during the year were $2,366,600 (2020 - $1,872,600). A reserve fund to provi this Iiabil is included in accumulated surplus, in the amount of $4,789,470 (2020 - $3,607,523). The actuarial valuation of the future liability for WSIB assumes a discount rate of 2.75% (2020 - 2.2596). The last actuarial valuation for this liability was completed at December 31, 2019. The actuarial expense for the current year was $1,736,500 (2020 - $2,451,800) and is comprised of the following items: 2021 2020 Current period benefit cost $ 912,400 $ 926,100 Amortization of actuarial losses 573,800 960,200 WSIB benefit expense 1,486,200 1,886,300 WSIB benefit interest expense 250,300 565,500 Total expenses related to WSIB benefits $ 1,736,500 $ 2,451,800 As at December 31, 2021, the unamortized actuarial losses were $2,066,000 (2020 - $1,059,300) and are amortized over 12 years (2020 - 12 years). Page 26 of 181 THE CORPORATION OF THE CITY OF KITCHENER Notes to the Consolidated Financial Statements For the Year Ended December 31, 2021 14. Tangible capital assets The continuity schedule of tangible capital assets is presented in Schedule A. Assets under construction having a value of $53,812,220 (2020 - $53,677,837) have not been amortized. Amortization of these assets will commence when the assets are put into service. Contributed tangible capital assets of $23,914,606 (2020 - $19,856,345) have been recognized at fair market value at the date of contribution. The contributed assets include land right of way as well as developer created linear assets such as water, sanitary, storm, and road assets. The write-down of tangible capital assets during the year was $nil (2020 - $36,275). The amount of interest capitalized was $nil (2020 - $nil). 15. Accumulated surplus The accumulated surplus consists of individual fund surpluseWeficits) and reserve funds as follows: 2021 2020 Surplus: Invested in tangible capital assets $1,389,634,219 $1,324,000,850 Other 18,815,880 4,099,661 Equity in Kitchener Power Corp. and its affiliates 231,241,809 224,960,021 Equity in Kitchener Generation Corporation 2,090,266 2,316,914 Employee future benefits (unfunded) r (54,235,095) (54,261,751) Total surplus 1,587,547,079 1,501,115,695 Reserve funds set aside for specific purposes by Council for: Capital 53,324,641 35,604,598 Stabilization 37,986,430 39,039,907 Program specific 10,059,829 9,884,795 Corporate 13,631,628 11,091,825 115,002,528 95,621,125 Reserve funds set aside for specific purposes by consolidated entities: Kitchener Public Library 735,262 942,293 Kitchener Downtown Improvement Area Board of Management 50,000 50,000 The Centre in the Square Inc. 1,863,809 1,941,819 2,649,071 2,934,112 Total reserve funds 117,651,599 98,555,237 Accumulated surplus $1,705,198,678 $1,599,670,932 Page 27 of 181 THE CORPORATION OF THE CITY OF KITCHENER Notes to the Consolidated Financial Statements For the Year Ended December 31, 2021 16. Contingent liabilities Legal actions have been undertaken against the City relating to a number of contract disputes and other matters. The outcome of these actions is not presently determinable. It is management's opinion that the City's insurance will adequately cover any potential liability arising from these contract disputes and other matters. Should any liability be determined and not covered by insurance it will be recognized in the period when it is determined. 17. Segmented information The City of Kitchener is a diversified municipal government institution that provides a wide range of services to its citizens, including fire, roads, water, sewer, storm sewer, gasworks, libraries, and community services. Segmented information has been presented in Schedule B by major functional classification of activities provided, consistent with the Consolidated Statement of Operations and provincially legislated requirements. For each reported segment, revenues and expenses represent both amounts that are directly attributable to the segment and amounts that are allocated on a reasonable basis. The accounting policies used in these segments are c iste h those followed in the preparation of the consolidated financial statements as disclosed in Note 1. 18. Budget figures The budget figures reflected in these consolidate a 71'We those approved by Council at a meeting on January 18, 2021. Budget figures haveanslalWo reflect Public Sector Accounting Board standards. 19. Comparative figures Certain of the prior year's compar311111111111111IFfigures have been reclassified to conform to the current year's presentation. A 20. Impact of COVID-19 On March 11, 2020, the Id Healy Organization declared the Coronavirus Disease of 2019 (COVID-19) outbreak a pandemic. ThisNir d in significant financial, market and societal impacts in Canada and around the world. a. Current year transactions: At the time of approval of these financial statements, the City has experienced the following in relation to the pandemic: • Reduced revenue due to mandatory facility closures, event cancellations and reduced capacity in programs that continued • Decreased demand for parking at City run parking facilities as many people were forced to work from home • Reduced investment income as interest rates were lowered globally to help stabilize economic conditions • Increased investment in technology infrastructure to support mandatory work from home measures • Increased Personal Protective Equipment (PPE) costs for staff who are not able to effectively work from home Page 28 of 181 THE CORPORATION OF THE CITY OF KITCHENER Notes to the Consolidated Financial Statements For the Year Ended December 31, 2021 20. Impact of COVID-19 pandemic: (continued) a. Current year transactions: (continued) The following actions were undertaken to mitigate some of the negative implications of the pandemic: • Transitioned hundreds of non-essential staff to Infectious Disease Emergency Leave (IDEL) on a temporary basis to offset reduced revenues • Received additional grant revenue as the Federal and Provincial governments introduced transfer payments to municipalities to help them deal with the financial implications of the pandemic b. Subsequent events related to COVID-19: Financial statements are required to be adjusted for events occurring between the date of the financial statements and the date of the auditors' report which provide additional evidence relating to conditions that existed as at year end. Management completed this assessment and did not identify any such adjustment. The ultimate duration and magnitude of the COVID-19 pandemic's impact on the City's operations and financial position is not known at this time. There remains uncertainty over the resumption of in-person activities and services for the upcoming year. These impacts could include a decline in future cash flows, changes to the value of assets and liabilities, and the use of accumulated surplus to sustain operations. An estimate of the financial effect of the pandemic on the City is notI&AUJIFpble at this time. 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X E y0 R p C W H (J � a 0 0 0 U - F 0 U) � W J F jlvirf�i M -m-1 KPMG LLP 120 Victoria Street South Suite 600 Kitchener, ON N2G OE1 Canada Tel 519-747-8800 Fax 519-747-8811 INDEPENDENT AUDITORS' REPORT To the Mayor and Members of Council, Inhabitar is and Ratepayers of The Corporation of the City of Kitchener Opinion We have audited the financial statements e Trust Funds of the Corporation of the City of Kitchener (the Entity), wh rise: • the balance sheet as at Dece r • the statement of continuity for thq&ear then ended • and notes to the financial sta LVs, including a summary of significant accounting policies MW (Hereinafter referred to as the "financial statements"). In our opinion, the accompanying financial statements present fairly, in all material respects, the balance sheet of the Entity as at December 31, 2021, and the statement of continuity for the year then ended in accordance with Canadian public sector accounting standards. Basis for Opinion We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in 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, an Ontario limited liability partnership and member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. KPMG Canada provides services to KPMG LLP. Page 34 of 181 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 bgkis of accounting unless management either intends to liquidate the Entity or to cease ations, or has no realistic alternative but to do so. Those charged with governance are resp le for overseeing the Entity's financial reporting process. Auditors' Responsibilities for the Audit of the Financial Statements Our objectives are t tain reasonable assurance about whether the financial statements as a whole are fr om material misstatement, whether due to fraud or error, and to issue an auditors' hat includes our opinion. Reasc condu detect is a high level of assurance, but is not a guarantee that an audit ;e with Canadian generally accepted auditing standards will always itement when it exists. Misstatements cWarise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. Page 35 of 181 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 the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity's internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Entity's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Entity to cease to con a as a going concern. • Evaluate the ove pre tation, structure and content of the financial statements, including the 4 isclosures,—and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • Com cate` with those charged with governance regarding, among other matters, th nned scope and timing of the audit and significant audit findings, including any signi t deficiencies in internal control that we identify during our audit. Chartered Professional Accountants, Licensed Public Accountants Kitchener, Canada Page 36 of 181 THE CORPORATION OF THE CITY OF KITCHENER TRUST FUNDS Balance Sheet As at December 31, 2021 2021 2020 Assets Accounts receivable $ 47,141 $ 58,299 Interest receivable 140,846 170,577 Loans receivable (Note 2) 473,180 524,842 Investments (Note 3) Short-term 1,528,320 520,828 Long-term 15,426,785 15,511,894 17,616,272 16,786,440 Fund Balance The accompanying notes are an integral part of these financial s ents. 7,616,272 $16,786,440 Page 37 of 181 THE CORPORATION OF THE CITY OF KITCHENER TRUST FUNDS Statement of Continuity For the Year Ended December 31, 2021 2021 2020 Receipts Perpetual care funds Interest earned Other $ 559,284 $ 421,771 111,157 434,431 434,240 65,617 1,092,212 934,288 Expenditures Transfer to cemeteries operations 262,380 267,255 262,380 267,255 Net chan a in fund 829,832 667,033 Balance, beginning of year 16,786,440 16,119,407 Balance, end of year $ 17,616,272 $ 16,786,440 The accompanying notes are an integral part of these financi Page 38 of 181 THE CORPORATION OF THE CITY OF KITCHENER TRUST FUNDS Notes to the Financial Statements For the Year Ended December 31, 2021 1. Summary of significant accounting policies These financial statements of the Corporation of the City of Kitchener Trust Funds have been prepared in accordance with Canadian generally accepted accounting principles for public sector entities as established by the Public Sector Accounting Board of the Chartered Professional Accountants of Canada. The following is a summary of the significant accounting policies followed in the preparation of these financial statements: a. Basis of accounting Sources of financing and expenditures are reported on the accrual basis of accounting. The accrual basis of accounting recognizes receipts as they become available and measurable; expenditures are recognized as they are incurred and measurable as a result of receipt of goods or services and the creation of a legal obligation to pay. 2. Loans receivable During 2019, under authorization of the Bereavement Authority of Ontario, the Woodland Cemetery Perpetual Care Trust issued a loan to the Corporation of the City of Kitchener in the amount of $575,000. The loan bears interest at 3% and will be repaid over ten years beginning in February 2020. 3. Investments The long-term investments of $15,426,785 (2020 - $15,511,894) reported on the Balance Sheet at cost, have a market value of $15,963,621 (2020 - $16,183,064). 4. Statement of cash flow A separate statement of cash flow is not presented, since cash flows from operating, investing, and financing activities are readily appat from the of r financial statements. Page 39 of 181 v / Z LL v / F- LU Z LU 2 U F— Y LL O} F— L) W 2 H LL O� LCM� Z CD N OM Q E v O 00, a U � O � i LU m 2 � L V) LL 7 N 0 al y V� 7 R w 7 C. al a -o M N R N R � m E 0 le le CO M O M le— let.- M OI N M W M O M M h I -- N&0 NM M O co M W O— N - N� �D O le co M M r N le M N M -e co h r vl> M le N N N M le M N h M h N 00 M h 00 h— O M M M N co co O h o M N M O M r F cD N r N O r NI co N MN T N M N h M h Wr N 'N O N a M M M N l r M r N r � ER T h M M CD O co O n N T r r � M M M N— W M O M le— le h M M M W N co M W W M— M W T N T cD O M n cD M cD M O M co h co co M W O — N — W M CD CD co W M r N le M N i i 7 C O N O N a3 N LL N N N C E N N N W O U a) U U 21 U 'F U� o R o-o�' � �,E>� a) N- 7 2 Q N N al N a) 'V Q O O D U Q. 0 >0 W 'O > a E 2 LL ICU: O J> d > m> (n U LL LL J W (D W W d co O O KPMG LLP 120 Victoria Street South Suite 600 Kitchener, ON N2G OE1 T 519-747-8800 F 519-747-8811 INDEPENDENT AUDITORS' REPORT To the Members of the Belmont Improvement Area Board of Management Opinion We have audited the financial statements of Belmont Improvement Area Board of Management (the Entity), which compri • the statement of financial position as ecern 31, 2021 • the statement of revenue nit expenses accumulated surplus for the year then ended • the statement of changes in net financial assets for the year then ended • and notes to the financial statements, including a summary of significant accounting policies (Hereinafter referred to as the "financial statements"). In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Entity as at December 31, 2021, and its results of operations, and its changes in net financial assets for the year then ended in accordance with Canadian public sector accounting standards relevant 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, an Ontario limited liability partnership and member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. KPMG Canada provides services to KPMG LLP. Page 41 of 181 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 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 governancre onsible for overseeing the Entity's financial reporting process. Auditors' Responsibilities fo a Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free fron atenal misstatement, whether due to fraud or error, and to issue an auditors' report thcludes our opinion. Reasonable assurance `is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. Page 42 of 181 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 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. Ifconclude that a material uncertainty exists, we are required to draw attentio in our auditors' report to the related disclosures in the financial statements orif such disclosures are inadequate, to modify our opinion. Our conclusions are ba on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Entity to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Chartered Professional Accountants, Licensed Public Accountants Kitchener, Canada Page 43 of 181 BELMONT IMPROVEMENT AREA BOARD OF MANAGEMENT Statement of Financial Position As at December 31, 2021 2021 2020 Financial assets Cash $ 19,992 $ 16,757 Accounts receivable 6,025 - 26,017 16,757 Financial liabilities Accounts payable and accrued liabilities 7,000 8,355 Net financial assets (liabilities) 19.017 8.402 Non-financial assets Tangible capital assets 43,057 46,588 Prepaid expenses 1,056 918 44113 47,506 Net assets 63,130 55,908 Accumulated Surplus Accumulated net revenue (deficit) 20,073 9,320 Invested in tangible capital assets 43,057 46,588 Total accumulated surplus $ 63,130 $ 55,908 The accompanying notes are an integ finalWal statements. Page 44 of 181 BELMONT IMPROVEMENT AREA BOARD OF MANAGEMENT Statement of Revenue and Expenses and Accumulated Surplus For the Year Ended December 31, 2021 2021 2020 Revenue Assessments $ 40,670 $ 40,616 Grants 18,000 12,850 Other revenue 5,840 2,336 64,510 55,802 Expenses Streetscaping 15,277 1,081 Audit 1,808 1,808 Summer maintenance - 147 Insurance 2,129 1,895 Winter maintenance 16,127 14,370 Advertising 12,485 10,581 Miscellaneous 5,028 5,616 Amortization 4,434 4,319 57,288 39,817 Net surplus (deficit) for year 7,222 15,985 Accumulated surplus, beginning of year 55,908 39,923 Accumulated surplus, end of year $ 63,130 $ 55,908 The accompanying notes are an integral part of these financial statements. Page 45 of 181 BELMONT IMPROVEMENT AREA BOARD OF MANAGEMENT Statement of Change in Net Financial Assets For the Year Ended December 31, 2021 Net surplus (deficit) for year Acquisition of tangible capital assets Amortization of tangible capital assets 2021 2020 7,222 $ 15,985 (903) (1,356) 4,434 4,319 Acquisition of prepaid expenses (138) (77) Change in net financial assets 10,615 18,871 Net financial assets, beginning of year 8,402 (10,469) Net financial assets (liabilities), end of vear $ 19,017 $ 8,402 The accompanying notes are an integral part of these financial 54 Page 46 of 181 BELMONT IMPROVEMENT AREA BOARD OF MANAGEMENT Notes to Financial Statements For the Year Ended December 31, 2021 1. Summary of significant accounting policies The financial statements of the Belmont Improvement Area Board of Management have been prepared by management in accordance with Canadian generally accepted accounting principles for local governments as established by the Public Sector Accounting Board of the Chartered Professional Accountants of Canada. Since precise determination of many assets and liabilities is dependent upon future events, the preparation of periodic financial statements necessarily involves the use of estimates and approximations. These have been made using careful judgment. The following is a summary of the significant accounting policies followed in the preparation of these financial statements: a) Tangible capital assets Tangible capital assets are recorded at cost which includes all amounts that are directly attributable to acquisition, construction, development or betterment of the asset. The cost less residual value of the tangible capital assets is amortized on a straight-line basis over their estimated useful lives as follows: Assets Amortization Period Machinery & equipment Computer hardware Tangible capital assets received as contri recorded as revenue. b) Accrual basis of accounting 5 to 15 years at their fair value at time of receipt and are The financial statements are prepared using.,pfe accrual basis of accounting. The accrual basis of accounting recognizes revenues in the period in which the transactions or events occurred that gave rise to the revenues. Expenses are recognized in the period the goods and services are acquired and a liability is incurred Page 47 of 181 BELMONT IMPROVEMENT AREA BOARD OF MANAGEMENT Notes to Financial Statements For the Year Ended December 31, 2021 2. Tangible capital assets Machinery & Computer Equipment Hardware Total Cost Balance, beginning of year $ 59,523 $ 1,356 $ 60,879 Additions 903 - 903 Balance, end of year 60,426 1,356 61,782 Accumulated amortization Balance, beginning of year (13,952) (339) (14,291) Disposals - - - Amortization expense (3,756) (678) (4,434) Balance end of year (17,708) (1,017) (18,725) Net book value end of year 42,718 339 43,057 Net book value, beginning of year ^ $ 45,571 $ 1,017 $ 46,588 3. Statement of cash flow A separate statement of cash flow is not presented, since cash flows from operating, investing and financing activities are readily apparent from the other financial statements. Page 48 of 181 KPMG LLP 120 Victoria Street South Suite 600 Kitchener ON N2G OE1 Canada Tel 519-747-8800 Fax 519-747-8811 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 at December 31, 2021 • the statement of revenue and expenses and 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 December 31, 2021, 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, an Ontario limited liability partnership and member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. KPMG Canada provides services to KPMG LLP. Page 49 of 181 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 the financial statements. As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Page 50 of 181 Page 3 • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity's internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Entity's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Entity to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Chartered Professional Accountants, Licensed Public Accountants Kitchener, Canada June 2, 2022 Page 51 of 181 KITCHENER DOWNTOWN IMPROVEMENT AREA BOARD OF MANAGEMENT Statement of Financial Position Year ended December 31, 2021, with comparative information for 2020 Financial Liabilities Accounts payable and accrued charges 428,758 190,025 Due to the City of Kitchener (note 4) 29,972 107,997 458,730 298,022 Net financial assets 417,207 288,572 Non -Financial Assets Tangible capital assets (note 5) 610,999 21,450 Net assets $ 1,028,206 $ 310,022 Accumulated Surplus Reserve for rate stabilization $ 50,000 $ 50,000 Accumulated net revenue 367,207 238,572 Invested in tangible capital assets 610,999 21,450 I mpact of COVI D-19 (note 9) Total accumulated surplus $ 1,028,206 $ 310,022 See accompanying notes to financial statements On behalf of the Board: Director Director 1 Page 52 of 181 2021 2020 (Recast See note 8) Financial Assets Cash $ 346,072 $ 429,461 Term deposits (note 2) 115,670 114,921 Accounts receivable 406,075 32,391 Prepaid expenses 8,120 9,821 875,937 586,594 Financial Liabilities Accounts payable and accrued charges 428,758 190,025 Due to the City of Kitchener (note 4) 29,972 107,997 458,730 298,022 Net financial assets 417,207 288,572 Non -Financial Assets Tangible capital assets (note 5) 610,999 21,450 Net assets $ 1,028,206 $ 310,022 Accumulated Surplus Reserve for rate stabilization $ 50,000 $ 50,000 Accumulated net revenue 367,207 238,572 Invested in tangible capital assets 610,999 21,450 I mpact of COVI D-19 (note 9) Total accumulated surplus $ 1,028,206 $ 310,022 See accompanying notes to financial statements On behalf of the Board: Director Director 1 Page 52 of 181 KITCHENER DOWNTOWN IMPROVEMENT AREA BOARD OF MANAGEMENT Statement of Revenue and Expenses and Accumulated Surplus Year ended December 31, 2021, with comparative information for 2020 Budget Actual Actual 2021 2021 2020 (note 7) (Recast 398,447 See note 8) Revenue Assessments $ 1,379,000 $ 1,379,000 $ 1,379,000 Interest - 749 1,250 Other income 265,000 372,885 15,856 1,644,000 1,752,634 1,396,106 Expenses Promotions and advertising 667,000 380,610 278,867 Salaries, wages and benefits 434,500 398,447 362,005 Administration 121,198 90,670 87,818 Meetings and seminars 600 183 1,371 Safety and beautification 342,000 82,276 54,825 Member relations 7,000 7,388 297,585 Amortization - 44,904 12,616 Queen Street Project - - 100,000 1,572,298 1,004,478 1,195,087 Net revenue before other items 71,702 748,156 201,019 Net assessment write-offs (note 4) 45,000 29,972 107,997 Annual surplus 26,702 718,184 93,022 Accumulated surplus, beginning of year 310,022 310,022 217,000 Accumulated surplus, end of year $ 336,724 $ 1,028,206 $ 310,022 See accompanying notes to financial statements. Page 53 of 181 KITCHENER DOWNTOWN IMPROVEMENT AREA BOARD OF MANAGEMENT Statement of Changes in Net Financial Assets Year ended December 31, 2021, with comparative information for 2020 Annual surplus Acquisition of tangible capital assets Amortization of tangible capital assets 2021 2020 (Recast See note 8) $ 718,184 $ 93,022 (634,453) (3,378) 44,904 12,616 Change in net financial assets 128,635 102,260 Net financial assets, beginning of year 288,572 186,312 Net financial assets, end of year $ 417,207 $ 288,572 See accompanying notes to financial statements. 3 Page 54 of 181 KITCHENER DOWNTOWN IMPROVEMENT AREA BOARD OF MANAGEMENT Statement of Cash Flows Year ended December 31, 2021, with comparative information for 2020 2021 2020 (Recast See note 8) Cash provided by (used in): Operating activities Annual surplus $ 718,184 $ 93,022 Item not involving cash: Amortization 44,904 12,616 Changes in non-cash assets and liabilities: Accounts receivable (373,684) 43,035 Prepaid expenses 1,701 996 Accounts payable and accrued liabilities 238,733 97,342 Due to the City of Kitchener (78,025) (76,315) Cash from operating activities 551,813 170,696 Investing activities: Acquisition of tangible capital assets (634,453) (3,378) Purchase of investments (749) (1,209) Cash used in investing activities (635,202) (4,587) Increase (decrease) in cash (83,389) 166,109 Cash, beginning of year 429,461 263,352 Cash, end of year $ 346,072 $ 429,461 See accompanying notes to financial statements. Page 55 of 181 KITCHENER DOWNTOWN IMPROVEMENT AREA BOARD OF MANAGEMENT Notes to Financial Statements Year ended December 31, 2021 1. Summary of significant accounting policies: Kitchener Downtown Improvement Area Board of Management (the "Board") is established for the main purpose of revitalizing the Central Business District of the City of Kitchener. It is designated as a Business Improvement Area (BIA) through the Ontario Municipal Act and a City of Kitchener by-law enacted in 1977. The financial statements of the Board are the representation of management and have been prepared in accordance with Canadian generally accepted accounting principles for local governments, as recommended by the Public Sector Accounting Board (PSAB) of the 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 and landfill sites, are amortized on a straight-line basis over their estimated useful lives as follows: Asset Useful Life - Years Computers 4 years Furniture and fixtures 7 years Leasehold improvements 7 years Event equipment 10 years Patio equipment 5 - 12 years Structures 5 years Annual amortization is charged in the year of acquisition and in the year of disposal. Assets under construction are not amortized until the asset is available for productive use. Tangible capital assets received as contributions are recorded at their fair value at the date of receipt and also are recorded as revenue. (b) Accrual basis of accounting: 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. 5 Page 56 of 181 KITCHENER DOWNTOWN IMPROVEMENT AREA BOARD OF MANAGEMENT Notes to Financial Statements, continued Year ended December 31, 2021 1. Summary of significant accounting policies (continued): (c) Revenue recognition: Revenues are recognized as follows: The Board Assessment revenue is recorded on an annual basis using the proportionate share of the total number of businesses for the year and an annually established rate per business. Revenue is recognized when assessed. Other revenues are recorded upon sale of goods or provision of service when collection is reasonably assured. 2. Term deposits: The term deposits consist of the following: Principal Maturity Rate $ 10,908 May 5, 2021 0.20% 51,622 March 30, 2022 0.20% 52,391 April 14, 2021 0.30% 3. Commitments: During 2021, the Board executed a new lease agreement. The lease expires on June 30, 2026. The Board is committed to the following minimum payments under the agreement: 2022 $ 35,539 2023 35,539 2024 35,539 2025 35,539 2026 17,769 4. City of Kitchener: The Board receives assessment income from the City of Kitchener for its operations. During the year, assessment write-offs were incurred for $29,972 (2020 - $107,997). 6 Page 57 of 181 F— z 5W �W V a z a LL O a O W a W a F - z LU 2 LU O a z 070 7 z 0 O U � ON Q � N E� � M (B N LU U) z g W U (6 0l S VLL N 0 L N L Z i H, N N O (6 '6 >, V 00 OCl) O I 0) Z O 0) 00 LO M M j N N V W 00 O LO O n ER 0 0 (0 N 1) O V Cl) N N O N V (O M M V O M N E p O U E Q (6 ER O M I co N — N M (O O M N E Q61) N .2 I I I I I I 0 0) 0) (0 M I I I O M M C Y � M (O � O N 0-0 U3 0) 00 I I a) o c rn _ M O rn V M V �, D ME w P- O M (O E O N (O M 0-0 Qm 6-1 616 (p '6 00 O (n O 00 (n O N N M >, N O M M 00 N m (O V N N Q � (n � 0 ~ I I I M r O (n M N O -aN Q O EFp, C U N O 0) � I I 'E C (n O V r Q N O CY)(0 M 06 O-0 ER N � E � E E E E _CL D N 0)> O a O N Q E E 0) !? E c N O 0 U (6.— 0) li -i w d (n O LO V N ER LO r N O Cl) 00 M N V M O K3 O N O V efl rl- co O co LO KITCHENER DOWNTOWN IMPROVEMENT AREA BOARD OF MANAGEMENT Notes to Financial Statements, continued Year ended December 31, 2021 5. Government grants: During the year the Board received funding from the Canadian Urban Institute under three separate funding agreements as follows: (a) $29,135 for the planned enhancements and additions to the Downtown Kitchener Art Walk. (b) $89,500 for the 2021 Holiday program. (c) $250,000 for the planned enhancements and startup costs expected with patio program. Of the amounts received, $368,635 has been recognized as revenue in the current period as a component of Other income. 7. Budget figures: The budget figures shown in the financial statements were approved by the Board of Kitchener Downtown Improvement Area Board of Management at a meeting on November 25, 2020. 8. Recasting comparative information — accounts payable: During the year ended December 31, 2021, management identified an immaterial prior period error relating to a vendor issuing duplicate invoices for the same service period which management was notified in June, 2021. As a result, the change has been recorded retroactively and, accordingly the comparative financial statements have been recast as follows: Increase (Decrease) Statement of Financial Position Accounts receivable (6,072) Accounts payable and accrued charges (61,048) Accumulated net revenue (54,976) Statement of Revenue and Expenses and Accumulated Surplus Promotions and advertising (32,919) Safety and beautification (22,057) Annual surplus 54,976 8 Page 59 of 181 KITCHENER DOWNTOWN IMPROVEMENT AREA BOARD OF MANAGEMENT Notes to Financial Statements, continued Year ended December 31, 2021 9. Impact of COVID-19 pandemic: On March 11, 2020, the World Health Organization declared the Coronavirus (COVID-19) outbreak a pandemic. This has resulted in significant financial, market and societal impacts in Canada and around the world. During the year, the Board has experienced the following in relation to the pandemic: — Mandatory working from home requirements for those able to do so The situation is evolving and the ultimate duration and magnitude of the impact on the economy is not known at this time. The outbreak has not had any material impacts on the operation of the Board to date, and management does not expect any material impacts given the nature and scope of the business, and management will continue to actively monitor the situation. 9 Page 60 of 181 KPMG LLP 115 King Street South 2nd Floor Waterloo ON N2J 5A3 Canada Tel 519-747-8800 Fax 519-747-8830 INDEPENDENT AUDITORS' REPORT To the members of Kitchener Public Library Opinion We have audited the financial statements of Kitchener Public Library (the Entity), which comprise: • the statement of financial position as at December 31, 2021 • 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 December 31, 2021, and its results of operations and changes in accumulated surplus, 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, an Ontario limited liability partnership and member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. KPMG Canada provides services to KPMG LLP. Page 61 of 181 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 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 the financial statements. As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity's internal control. Page 62 of 181 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 Entity to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. kAWG «o Chartered Professional Accountants, Licensed Public Accountants Waterloo, Canada March 17, 2022 Page 63 of 181 KITCHENER PUBLIC LIBRARY Statement of Financial Position December 31, 2021, with comparative information for 2020 Financial assets Cash Accounts receivable Due from City of Kitchener Investments Endowment investments Total financial assets Financial liabilities Accounts payable and accrued liabilities Due to Early Literacy Alliance of Waterloo Region Deferred revenue Net financial assets 2021 $ 1,956,322 153,690 195,142 50,000 100,000 2020 $ 1,896,092 324,053 137,924 50,000 100,000 2,455,154 2,508,069 669,058 758,751 566,950 300,000 402,384 415,663 1,638,392 816,762 1,474,414 1,033,655 Non-financial assets Tangible capital assets (note 2) 5,293,309 5,285,676 Prepaid expenses 18,500 8,955 5,311,809 5,294,631 Impact of COVID-19 pandemic (note 7) Accumulated surplus (note 6) $ 6,128,571 $ 6,328,286 See accompanying notes to financial statements. On behalf of the Board: Director Director Page 64 of 181 KITCHENER PUBLIC LIBRARY Statement of Operations and Changes in Accumulated Surplus Year ended December 31, 2021, with comparative information for 2020 Revenues: Grants: The City of Kitchener - Operating The City of Kitchener - Capital and special (note 3) The City of Kitchener - special (note 4) Province of Ontario Fines Interest and miscellaneous Photocopy Rentals Partnerships Budget 2021 Actual 2021 Actual 2020 $ 11,410,596 $ 11,410,596 $ 11,297,620 - 684,727 505,315 - 211,571 54,473 286,755 306,980 306,980 44,000 13,871 59,180 60,000 17,163 330,890 43,000 14,745 18,695 39,000 18,122 7,876 55,000 53,079 50,032 Total revenue 11,938,351 12,730,854 12,631,061 Expenses Personnel costs (schedule 1) 9,282,300 8,802,392 8,078,108 Resource materials 1,207,900 1,453,870 1,514,742 Facilities costs (schedule 4) 808,327 859,892 896,012 Equipment (schedule 2) 366,500 901,830 862,586 Required expenditures related to special grants (note 4) - 211,571 54,473 Expenditures related to capital and special (note 3) - 288,674 310,944 Administrative (schedule 3) 214,974 248,878 216,674 Processing/bindery 105,000 79,240 92,553 Programs and publicity (schedule 5) 76,500 72,196 63,914 General library equipment 9,850 12,026 59,155 Total expenses 12,071,351 12,930,569 12,149,161 Excess (deficiency) of revenue over expenses (133,000) (199,715) 481,900 Accumulated surplus, beginning of year 6,328,286 5,846,386 Accumulated surplus, end of year $ 6,128,571 $ 6,328,286 See accompanying notes to financial statements. Page 65 of 181 KITCHENER PUBLIC LIBRARY Statement of Change in Net Financial Assets Year ended December 31, 2021, with comparative information for 2020 See accompanying notes to financial statements. Page 66 of 181 2021 2020 Excess (deficiency) of revenue over expenses $ (199,715) $ 481,900 Acquisition of tangible capital assets (1,388,350) (1,275,551) Amortization of tangible capital assets 1,380,717 1,354,836 (207,348) 561,185 Change in prepaid expenses (9,545) (8,955) Change in net financial assets (216,893) 552,230 Net financial assets, beginning of year 1,033,655 481,425 Net financial assets, end of year $ 816,762 $ 1,033,655 See accompanying notes to financial statements. Page 66 of 181 KITCHENER PUBLIC LIBRARY Statement of Cash Flows Year ended December 31, 2021, with comparative information for 2020 2021 2020 Operating activities Excess (deficiency) of revenue over expenses $ (199,715) $ 481,900 Item not involving cash: Amortization of tangible capital assets 1,380,717 1,354,836 Changes in non-cash operating working capital Accounts receivable 170,363 (158,702) Prepaid expenses (9,545) (8,955) Due from City of Kitchener (57,218) (21,143) Accounts payable and accrued liabilities (89,693) 274,954 Due to Early Literacy Alliance of Waterloo Region 266,950 300,000 Deferred revenue (13,279) (225,843) Cash provided by operating activities 1,448,580 1,997,047 Capital activities: Cash used to acquire tangible capital assets (1,388,350) (1,275,551) Increase in cash 60,230 721,496 Cash, beginning of year 1,896,092 1,174,596 Cash, end of year $ 1,956,322 $ 1,896,092 See accompanying notes to financial statements. Page 67 of 181 KITCHENER PUBLIC LIBRARY Notes to Financial Statements Year ended December 31, 2021 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. The following is a summary of the significant accounting policies followed in the preparation of these financial statements. (a) Basis of accounting: The Board follows the accrual method of accounting for revenues and expenses. Revenues are normally recognized in the year in which they are earned and measurable. Expenses are recognized as they are incurred and measurable as a result of receipt of goods or services and/or the creation of a legal obligation to pay. (b) Revenue recognition: 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 assets. In addition, certain user charges and fees are collected for which the related services have yet to be performed. Revenue is recognized in the period when the related expenses are incurred, services performed, or the tangible assets are acquired. (c) Investments and investment income: 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. Investment income is reported as revenue in the period earned. Page 68 of 181 KITCHENER PUBLIC LIBRARY Notes to Financial Statements, continued Year ended December 31, 2021 1. Significant accounting policies (continued): (d) Endowment investments and income: Endowment investments received are recorded as financial assets which have the principal restricted for use. 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. 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) 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. (f) Employee future benefits: The costs of multi-employer defined contribution pension plan benefits, such as the Ontario Municipal Employees Retirement System ("OMERS") pensions, are the employer's contributions due to the plan in the period. (g) Non-financial assets: Non financial assets are not available to discharge existing liabilities and are held for use in the provision of services. They have useful lives extending beyond the current year. (h) Tangible capital assets: Tangible capital assets are recorded at cost which includes amounts that are directly attributable to acquisition, construction, development or betterment of the asset. The cost, less residual value, of the tangible capital assets, excluding land, are amortized on a straight- line basis over their estimated useful lives as follows: Asset Rate Furniture, fixtures and equipment Other equipment and vehicle Computers Books and audio visual resources 10 - 30 years 8 years 3 - 10 years 2 - 10 years Annual amortization is charged in the year of acquisition and in the year of disposal. Assets under construction are not amortized until the asset is available for productive use. Tangible capital assets received as contributions are recorded at their fair value at the date of receipt and also are recorded as revenue. Page 69 of 181 KITCHENER PUBLIC LIBRARY Notes to Financial Statements, continued Year ended December 31, 2021 1. Significant accounting policies (continued): (i) Use of estimates: The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the period. Significant estimates include assumptions used in estimating provisions for accrued liabilities and useful lives of tangible capital assets. Actual results could differ from these estimates. 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KITCHENER PUBLIC LIBRARY Notes to Financial Statements, continued Year ended December 31, 2021 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 2021 included $99,960 (2020 - $98,000) for general renovations, maintenance and upgrading of existing facilities, $327,517 (2020 - $345,644) for communication infrastructure and technology upgrades, $29,131 (2020 - $28,560) for KPL Accessibility Fund, $57,222 for resources, furniture and equipment (2020 - $111,100) and $4,739,897 (2020 - $954,000) for the southwest community library. The portion of these grants and previous year grants that are included in revenue in 2021 is $684,727 (2020 - $505,315). 4. Special grants: 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 2021, the Board received various special non-recurring grants and donations totaling $197,139 (2020 - $124,579). The portion of these grants and previous year special grants that are included in revenue in 2021 is $211,571 (2020 - $54,473). 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 $607,866 (2020 - $599,262) for current service on behalf of its staff. The latest available report for the OMERS plan was as at December 31, 2021. At that time the plan reported a $3.1 billion actuarial deficit, based on actuarial liabilities of $119.3 billion and actuarial assets of $116.2 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, 2021, the Board has no obligation under the past service provisions of the OMERS agreement. Page 73 of 181 KITCHENER PUBLIC LIBRARY Notes to Financial Statements, continued Year ended December 31, 2021 6. Accumulated surplus: The accumulated surplus consists of surplus and reserve funds as follows: 2021 2020 Invested in tangible capital assets $ 5,293,309 $ 5,285,676 Endowment investments 100,000 100,000 Reserves set aside by the Board: Capital fund 344,460 344,460 HR fund 37,000 37,000 Inclusion fund 199,361 253,000 Improvement fund 154,441 307,833 Total reserves 735,262 942,293 Accumulated surplus - unrestricted — 317 Accumulated surplus $ 6,128,571 $ 6,328,286 7. Impact of COVID-19 pandemic: On March 11, 2020, the World Health Organization declared the Coronavirus COVI D-19 (COVI D- 19) outbreak a pandemic. The pandemic resulted in significant financial, market and societal impacts in Canada and around the world. The ultimate duration and magnitude of the COVID-19 pandemic's impact on the Board's operations and financial position is not known at this time. These impacts could include a decline in future cash flows, changes to the value of assets and liabilities, and the use of accumulated surplus to sustain operations. An estimate of the financial effect of the pandemic on the Board is not practicable at this time. 8. Comparative information: The financial statements have been reclassified, where applicable, to conform to the presentation used in the current year. The changes do not affect prior year's excess of revenue over expenses. Page 74 of 181 KITCHENER PUBLIC LIBRARY Schedules of Expenses Year ended December 31, 2021, with comparative information for 2020 Schedule 3 - Administrative Professional services $ 99,521 2021 General business 2020 Schedule 1 - Personnel Stationery 40,365 52,225 Telephone Salaries $ 7,069,060 $ 6,527,373 Pension benefits 6,337 930,365 875,506 Health benefits 468,940 $ 216,674 428,386 Employment insurance 130,852 115,830 Sick leave reserve 70,000 70,000 Staff training 114,536 44,097 WSIB 18,639 16,916 $ 8,802,392 $ 8,078,108 Schedule 2 - Equipment Amortization $ 487,610 $ 419,874 Technology 405,353 435,351 Equipment maintenance 8,867 7,361 $ 901,830 $ 862,586 Schedule 3 - Administrative Professional services $ 99,521 $ 77,210 General business 60,771 44,683 Stationery 40,365 52,225 Telephone 21,495 16,718 Insurance 20,389 19,988 Postage and delivery 6,337 5,850 $ 859,892 $ 896,012 $ 248,878 $ 216,674 Schedule 4 - Facilities Facilities expenses $ 516,310 $ 572,142 Main utilities 228,337 236,437 Country Hills building 49,357 50,076 Forest Heights utilities 37,272 25,457 Pioneer Park building 19,018 11,773 Grand River Stanley Park building 9,598 127 $ 859,892 $ 896,012 Schedule 5 - Programs and Publicity Promotional $ 43,005 $ 30,831 Public programs 29,191 33,083 $ 72,196 $ 63,914 Page 75 of 181 1131"rij, min 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 December 31, 2021 • 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 Centre as at December 31, 2021, and its results of operations and changes in accumulated surplus, 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, an Ontario limited liability partnership and member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. Page 7 V Of p (J KPMG Canada provides services to KPMG LLP. 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 the financial statements. As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Page 77 of 181 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 our audit. j4YW,1- Z4*0 Chartered Professional Accountants, Licensed Public Accountants Waterloo, Canada March 17, 2022 Page 78 of 181 THE CENTRE IN THE SQUARE INC. Statement of Financial Position December 31, 2021, with comparative information for 2020 Net financial assets 2021 2020 Net Assets Financial assets: 13,270,528 13,298,098 Cash $ 3,850,581 $ 1,323,322 Due from City of Kitchener 48,488 47,410 Accounts receivable (note 2) 358,470 65,464 Interest receivable 2,254 1,696 Costs to be recovered 122,105 75,700 Investments (note 3) 1,420,930 1,403,623 Total financial assets 5,802,828 2,917,215 Financial liabilities: - - Accounts payable and accrued liabilities 1,537,203 442,118 Deferred revenue (note 4) 2,719,131 718,750 Invested in tangible capital assets 4,256,334 1,160,868 Net financial assets 1,546,494 1,756,347 Non-financial assets: Tangible capital assets (note 5) 13,270,528 13,298,098 Inventories (note 6) 83,706 57,568 Prepaid expenses 233,609 127,904 13,587,843 13,483,570 Net assets $ 15,134,337 $ 15,239,917 Accumulated Surplus Operating fund activities (note 7) $ - $ - Reserves - Capital (notes 8 and 12) 1,032,161 1,128,872 Reserves - Performance Development (note 12) - - Reserves - Sustainability (notes 10 and 12) 202,230 201,271 Reserves - Restricted (notes 10 and 12) 629,418 611,676 Invested in tangible capital assets 13,270,528 13,298,098 Impact of COVID-19 pandemic (note 13) Accumulated surplus $ 15,134,337 $ 15,239,917 See accompanying notes to financial statements. On behalf of the Board: Director Director Page 79 of 181 THE CENTRE IN THE SQUARE INC. Statement of Operations and Changes in Accumulated Surplus Year ended December 31, 2021, with comparative information for 2020 Budget 2021 Actual 2021 Actual 2020 Revenues: Performances $ 1,824,918 $ 771,978 $ 1,208,630 Rent - Kitchener -Waterloo Symphony - 71,625 173,325 Capital reserve fund surcharge (note 8) 316,800 45,147 113,260 Grants from City of Kitchener - Operating 2,000,000 2,000,000 2,000,000 Grants from City of Kitchener - Capital 1,744,175 602,908 618,177 Grants from other governments - Operating - 700,971 739,223 Grants from other governments - Capital 929,325 160,202 - Donations 8,000 15,223 17,697 Investment income 18,000 35,828 58,495 Sponsorships and memberships 103,268 26,799 55,529 Rent - Kitchener -Waterloo Art Gallery 105,120 105,120 103,020 Lottery revenue - 42,951 2,885 Other 137,000 177,779 200,437 Gain (loss) on investments - 2,026 (11,659) Total revenue 7,186,606 4,758,557 5,279,019 Expenses: Direct: Performances 824,579 674,535 971,427 Unrecoverable (recovery) performance costs - (2,126) 189,749 Operating: Administration 550,462 433,932 393,921 Marketing 105,000 51,611 36,418 Lottery expenses - 41,568 2,751 Occupancy 790,000 472,700 546,829 Salaries and wages 2,375,476 2,116,580 1,974,461 Amortization 1,000,000 985,732 1,028,720 Write down of tangible capital assets 50,000 50,108 36,275 Reserves expenditures (note 12) 55,000 39,497 54,063 Total expenses 5,750,517 4,864,137 5,234,614 Excess (deficiency) of revenue over expenses 1,436,089 (105,580) 44,405 Accumulated surplus, beginning of year 15,239,917 15,195,512 Accumulated surplus, end of year $ 15,134,337 $ 15,239,917 See accompanying notes to financial statements. Page 80 of 181 THE CENTRE IN THE SQUARE INC. Statement of Changes in Net Financial Assets Year ended December 31, 2021, with comparative information for 2020 See accompanying notes to financial statements. Page 81 of 181 2021 2020 Excess (deficiency) of revenue over expenses $ (105,580) $ 44,405 Acquisition of tangible capital assets (1,008,270) (1,335,544) Amortization of tangible capital assets 985,732 1,028,720 Write-down of tangible capital assets 50,108 36,275 (78,010) (226,144) Net use (acquisition) of inventories (26,138) 22,761 Net use (acquisition) of prepaid expenses (105,705) 143,307 (131,843) 166,068 Decrease in net financial assets (209,853) (60,076) Net financial assets, beginning of year 1,756,347 1,816,423 Net financial assets, end of year $ 1,546,494 $ 1,756,347 See accompanying notes to financial statements. Page 81 of 181 THE CENTRE IN THE SQUARE INC. Statement of Cash Flows Year ended December 31, 2021, with comparative information for 2020 2021 2020 Operating activities Excess (deficiency) of revenue over expenses $ (105,580) $ 44,405 Items not involving cash: Amortization 985,732 1,028,720 Write down of tangible capital assets 50,108 36,275 Change in non-cash operating working capital 2,622,576 (1,946,631) Cash provided by (used in) operating activities 3,552,836 (837,231) Capital activities Cash used to acquire tangible capital assets (1,008,270) (1,335,544) Investing activities: Cash provided by (used in) (purchasing)/sale of investments (17,307) 32,749 Increase (decrease) in cash 2,527,259 (2,140,026) Cash, beginning of year 1,323,322 3,463,348 Cash, end of year $ 3,850,581 $ 1,323,322 See accompanying notes to financial statements. Page 82 of 181 THE CENTRE IN THE SQUARE INC. Notes to Financial Statements Year ended December 31, 2021 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. (a) Basis of accounting: The Centre follows the accrual method of accounting for revenues and expenses. Revenues are normally recognized in the year in which they are earned and measurable. Expenses are recognized as they are incurred and measurable as a result of receipt of goods or services and/or the creation of a legal obligation to pay. (b) Revenue recognition: 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. 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 assets. In addition, certain user charges and fees are collected for which the related services have yet to be performed. Revenue is recognized in the period when the related expenses are incurred, services performed, or the tangible assets are acquired. (c) 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. Page 83 of 181 THE CENTRE IN THE SQUARE INC. Notes to Financial Statements, continued Year ended December 31, 2021 1. Significant accounting policies (continued): (d) Non-financial assets: Non financial assets are not available to discharge existing liabilities and are held for use in the provision of services. They have useful lives extending beyond the current year. (i) 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: Asset Rate Buildings 5 - 100 years Equipment 4 - 50 years Computers 3 - 10 years Software 3 years Site 2 - 50 years Annual amortization is charged in the year of acquisition and in the year of disposal. Assets under construction are not amortized until the asset is available for productive use. Tangible capital assets received as contributions are recorded at their fair value at the date of receipt and also are recorded as revenue. (ii) 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. (e) Use of estimates: The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the period. Significant estimates include assumptions used in estimating provisions for accrued liabilities and useful lives of tangible capital assets. Actual results could differ from these estimates. Page 84 of 181 THE CENTRE IN THE SQUARE INC. Notes to Financial Statements, continued Year ended December 31, 2021 2. Accounts receivable: Page 85 of 181 2021 2020 Accounts receivable $ 358,470 $ 282,475 Allowance for doubtful accounts - (217,011) $ 358,470 $ 65,464 3. Investments: Investments consist of: Carrying value Market Carrying value Market 2021 2021 2020 2020 Cash $ 28,735 $ 28,735 $ 26,481 $ 26,481 GICs 756,185 756,185 752,873 752,873 Bonds 354,768 353,727 336,592 343,354 Shares 281,242 564,401 287,677 482,693 $ 1,420,930 $ 1,703,048 $ 1,403,623 $ 1,605,401 4. Deferred revenue: Deferred revenue consists of the following: 2021 2020 Performances $ 2,496,475 $ 630,444 Gift certificates 89,560 53,911 Sponsorships 50,756 28,705 Other 80,483 5,367 Membership 1,857 323 $ 2,719,131 $ 718,750 Page 85 of 181 U Z �w I.L a V+ 70 N W .Z3 C 2z5 O U Uj N Zt N W N M Z cu CU U U N W (a 0 C U 7C3 Cu O 7C3 W U N L H Z ic u Y (I L L O C M -tOa -t CONN Cfl 00 M Il- M, N C'M C') r,- O N r N p I� O I� In M00� OLOLr OC) 0 0 - In 0 00 p 00 Il- OOr I� COOr It N M r It O Cl) N N r r r to H} N r N r 0 ' r 0 , , , , O CY) 'IT CY) It Cl) In M LO LO V} 6} r O O I- LO N 00 M 00 It Cfl , O �O LO CO O Cfl � LO O Cc) O 00 00 It 00 N Cfl 00 M 00 O O Cf3 (a O Lo r O i Lo O O ' ' LO N 00 'IT Cfl O O '1 N Lf N O LO LO N LO N N LO N r M r V} 60 O00 LO O MN LO It r 00 ' Cl) Cl) 'IT O , Cl) O M Cfl Cfl r O M M 00 Or O 00 N� O � rN N Cc) ON M M N N N N V} V} rc) M Mr --r It O m M ' m N Cl) O Il- N I�OO Cfl OP,- O � Cl) CO M Il r 00 Cl) In 0') Nt O Ln 00 Cl) O O M M I� 60 �rnrn� r r-- 0-) O 000"T1l r OItCl) O r O N Cfl � CA N N I-COMO O CA(ON 'T Cfl M r 0 Il- N �� Cc) O N C\[ Co 00 rte.. LO N M M 00 Cf} f!} OO O CO Cl) co LO LO LO O O O Vy 60 O cu o N '- 70 N 0) O 0) i C E E N C LC cu Q) L N Q) � 0) _0 co (U N 2 N cu L U) cu -0 L (n cu %� % L (Ucu (CCu '��NCB 70 O N N co O L C to V 9 O O CZ 7 C O O cB -,.cn cu O U co E .L U N Um <(5 U Qm Q0 Q Z co 0 m co 0) m 0- U Z �W I.L a V+ 70 N W .Z3 C 2z5 O U Uj N Zt N W N M Z C6 CU U U N W Ca 0 U� O 7C3 W U L Ca Z i M rn-tG 0-)-tO (C In r O Lo N O M 'i M Lo M r N Cf3 "T N 7 O r , C r- rn r N O T � MO � V} Cf3 �Lnrnr M LO ' r r 00 CO C N �T LO O , O r O O O r N try N N Cl) I l- 'IT N C9 r O N O Cn 'T O Cn r LO O V} OD (D ONMC" CY) OO Lf) a r- O "T NOOOCX 0OMNC" N Cf} O O , , i M LO r CA Vy 0) c .E C 0) N L +, c o 0 0 N 0-6 S? C O Cts .� Um QEF It 00� M In N M r � co Cl) N 00 V O 00 N O O O O Lo M O r N r m C� I O CY) ' M M C0 00 O O r M O In C9 CO 00 r• M 00 r O r O O O 00 00 'IT O r N CO O ' N — I LO LO r ,T C9 N r M , 00 LO 'IT C0 "T 00 r- N N r M "T ( n O O Cl) O r 00 C0 00 M N It L LO (A On O Cl) — r- � t 00 I r CA Lf) O r 'IT C9N M N O In N O LO N M ' — O O , , , Cl) LO r - O r_ cu N O 0) Ec m E L Cu — cu -0 L} CU CU (� N E 1p 3o O to V CII O O C1 Ln_ U Qm Q0 Cl) O LO O O O r It L LO It OO N It L N Cl) O N O N 00 N C0 IZ LO Cl) r- O r - C N 00 O O 00 O N Cl) N O O O Cl) ka It 00 L It Cl) O rn r - LO N to M r 00 M Cl) C0 N O r - N ka r- 00 O r - LO O 00 ol� O O M LO r - O to co O ti co 0) (6 0- THE CENTRE IN THE SQUARE INC. Notes to Financial Statements, continued Year ended December 31, 2021 6. Inventories: Inventories consist of the following: Performances 824,579 2021 2020 Bar stock $ 82,782 $ 55,388 Supplies 924 2,180 Administration $ 83,706 $ 57,568 7. Operating fund activities: 105,000 51,611 36,418 Lottery expenses Budget Actual Actual Occupancy 2021 2021 2020 Revenues: 2,375,476 2,116,580 1,974,461 Performances $ 1,669,158 $ 771,978 $ 1,208,630 Rent - Kitchener -Waterloo Symphony - 71,625 173,325 Grants from City of Kitchener 2,000,000 2,000,000 2,000,000 Grants, other governments - 700,971 739,223 Donations 6,000 12,961 15,474 Investment income 15,999 6,560 21,149 Sponsorships and memberships 103,268 26,799 55,529 Rent - Kitchener -Waterloo Art Gallery 105,120 105,120 103,020 Lottery revenue - 42,951 2,885 Other 137,000 177,779 200,437 Total revenue 4,036,545 3,916,744 4,519,672 Expenditures: Direct: Performances 824,579 674,535 971,427 Unrecoverable (recovery) performance costs - (2,126) 189,749 Operating: Administration 550,462 433,932 393,921 Marketing 105,000 51,611 36,418 Lottery expenses - 41,568 2,751 Occupancy 790,000 472,700 546,829 Salaries and wages 2,375,476 2,116,580 1,974,461 Total expenditures 4,645,517 3,788,800 4,115,556 Operating fund net revenues (deficiency) before amortization Transfer from (to) reserve funds Transfer from City of Kitchener (608,972) 127,944 404,116 304,486 (127,944) (404,116) 304,486 - - Fund balances, end of year $ - $ - $ - Page 88 of 181 THE CENTRE IN THE SQUARE INC. Notes to Financial Statements, continued Year ended December 31, 2021 8. 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 2021, The Centre's Board of Directors approved transfers out of the Capital Reserve Fund for major capital asset projects of $1,008,270 (2020 - $1,335,544). 9. Economic dependence: The Centre is economically dependent on the City of Kitchener during the pandemic to provide sufficient funds to continue operations and capital projects. 10. Restricted Fund: The Restricted Fund was set up by the Board of Directors of The Centre in 2000 by a transfer of investments from the Sustainability Reserve Fund in accordance with the Restricted Fund Policy. Income from this fund is to be used for capital requirements, special projects and/or new programming initiatives that help further The Centre's mandate. 11. 2021 budget: The original budgeted figures were approved by the Board of Directors at their meeting on August 18, 2020 and included certain expenses and offsetting recoveries on a net basis. Page 89 of 181 THE CENTRE IN THE SQUARE INC. Notes to Financial Statements, continued Year ended December 31, 2021 12. Schedule of reserve funds: Performance Total Development Capital Sustainability Restricted Funds Revenue: Donations and sundry $ - $ - $ - $ 2,262 $ 2,262 Grants from City of Kitchener - 602,908 - - 602,908 Grants, other governments and foundations - 160,202 - - 160,202 Ticket surcharge - 45,147 - - 45,147 Investment income - 4,058 959 24,251 29,268 Gain on investments - - - 2,026 2,026 Total revenue - 812,315 959 28,539 841,813 Expenses: Professional fees - - - 10,797 10,797 Capital costs - 28,700 - - 28,700 Total expenses - 28,700 - 10,797 39,497 Excess of revenue over expenses - 783,615 959 17,742 802,316 Transfer to accumulated surplus - tangible capital assets - (1,008,270) - - (1,008,270) Transfer from operating - 127,944 - - 127,944 Balance, beginning of year - 1,128,872 201,271 611,676 1,941,819 Balance, end of year $ - $ 1,032,161 $ 202,230 $ 629,418 $ 1,863,809 Page 90 of 181 THE CENTRE IN THE SQUARE INC. Notes to Financial Statements, continued Year ended December 31, 2021 13. Impact of COVID-19 pandemic: On March 11, 2020, the World Health Organization declared the Coronavirus COVI D-19 (COVI D- 19) outbreak a pandemic. The pandemic has resulted in significant financial, market and societal impacts in Canada and around the world. For the year ended December 31, 2021 there was $700,971 (2020 - $734,223) in Canadian Emergency Wage Subsidy recorded in Grants from other governments — Operating. The ultimate duration and magnitude of the COVID-19 pandemic's impact on The Centre's operations and financial position are not known at this time. These impacts could include a decline in future cash flows, changes to the value of assets and liabilities, and the use of accumulated surplus to sustain operations. An estimate of the financial effect of the pandemic on The Centre is not practicable at this time. 14. Comparative information: The financial statements have been reclassified, where applicable, to conform to the presentation used in the current year. The changes do not affect prior year's excess of revenue over expenses. Page 91 of 181 KPMG LLP 120 Victoria Street South Suite 600 Kitchener, ON N2G OE1 Canada Tel 519-747-8800 Fax 519-747-8811 INDEPENDENT AUDITORS' REPORT To the Mayor and Members of Council, Inhabitants and Ratepayers of The Corporation of the City of Kitchener Opinion We have audited the financial statements of the Corporation of the City of Kitchener Gasworks Enterprise (the Entity),hWhich comprise: • the statement of operations M ONqmulated surplus for the year ended December 31, 2021 (Hereinafter referred to as the "fina al statements"). In our opinion, the accompanying financial statements presents fairly, in all material respects, the statement of operations and accumulated surplus for the year ended December 31, 2021 in accordance with Canadian public sector accounting standards relevant 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. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. KPMG LLP, an Ontario limited liability partnership and member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. KPMG Canada provides services to KPMG LLP. Page 92 of 181 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 res ible for overseeing the Entity's financial reporting process. z Auditors' Responsibilities r it of the Financial Statements Our objectives are to obt in re nable assurance about whether the financial statements as a whole ar terial misstatement, whether due to fraud or error, and to issue a auditors' report that includes our opinion. Reasona a assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. Page 93 of 181 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 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 accounting estimates and related disclosure the reasonableness of ment. Conclude on the appropriateness of manage 't e of the going concern basis of accounting and, based on the audit eviderame obtaine ether a material uncertainty exists related to events or conditions that may cast si ant doubt on the Entity's ability to continue as a going concern. If e conclude that a material uncertainty exists, we are required to draw attention our auditors' report to the related disclosures in the financial statements orf such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Entity to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Chartered Professional Accountants, Licensed Public Accountants Kitchener, Canada Page 94 of 181 THE CORPORATION OF THE CITY OF KITCHENER GASWORKS ENTERPRISE Statement of Operations and Accumulated Surplus For the Year Ended December 31, 2021 2021 2021 2020 Budget DELIVERY OPERATIONS Gas delivery 29,350,224 28,546,577 27,955,741 Revenue $ 39,430,431 $ 39,422,933 $ 40,256,973 Expenses 22,152,850 22,115,361 22,209,045 Transfer to gas investment reserve 17,277,581 17,307,572 18,047,928 Other programs 20,201,144 21,489,029 21,840,998 (Customer service, rental water heaters & financing) 189.746.831 191.004.746 184,701,184 Revenue 11,025,96 11,783,442 11,277,813 Expenses 8,102,39 7,601,985 7,484,743 3.563 4.181.457 3.793.070 Dispatch Revenue e65,11 86 606,280 620,898 Ex enses 86 606,280 620,898 Excess of revenue over expenses ` _'qjkMaQ�,144 21,489,029 21,840,998 Accumulated surplus - Delivery 29,350,224 28,546,577 27,955,741 Balance, beginning of year 184,701,184 184,701,184 177,700,742 Interest revenue 76,074 46,104 92,358 Transfer to gas investment reserve (15,231,571) (15,231,571) (14,932,914) Excess of revenue over expewars, 20,201,144 21,489,029 21,840,998 Balance, end of vear 189.746.831 191.004.746 184,701,184 SUPPLY OPERATIONS `I Revenue Page 95 of 181 29,350,224 28,546,577 27,955,741 Expenses 30,700,354 29,232,320 27,190,035 Excess/(deficiency) of revenue over expenses (1,350,130) (685,743) 765,706 Accumulated surplus - Supply Balance, beginning of year 4,239,900 4,239,900 3,419,298 Interest revenue 76,873 44,697 54,896 Excess/(deficiency) of revenue over expenses (1,350,130) (685,743) 765,706 Balance, end of year $ 2,966,643 $ 3,598,854 $ 4,239,900 Page 95 of 181 MANAGEMENT REPORT Management's Responsibility for Financial Reporting The accompanying financial statements of Kitchener Generation Corporation are the responsibility of management and have been prepared in accordance with Canadian public sector accounting standards. The significant accounting policies followed by Kitchener Generation Corporation are described in the Significant Accounting Policies contained in Note 2 of the financial statements. The preparation of financial statements necessarily involves the use of estimates based on management's judgment, particularly when transactions affecting the current accounting period cannot be finalized with certainty until future periods. The financial statements have been prepared within reasonable limits of materiality and in light of information available up to June 20, 2022. Management maintained a system of internal controls designed to provide reasonable assurance that the assets were safeguarded and that reliable information was available on a timely basis. The system included formal policies and procedures and an organizational structure that provided for the appropriate delegation of authority and segregation of responsibilities. KITCHENER GENERATION CORPORATION On behalf of management, Jonathan Lautenbacl Chief Financial Officer June 20, 2022 Kitchener, Canada Page 96 of 181 KITCHENER GENERATION CORPORATION Statement of Financial Position As at December 31, 2021 (Unaudited) 2021 2020 Financial assets Accounts receivable $ 7,676 $ 10,746 7,676 10,746 Liabilities Due to the Corporation of the City of Kitchener 7,674 16,348 Long-term debt (Note 3) 1,881,239 2,091,995 1,888,913 2,108,343 Net financial debt (1,881,237) (2,097,597) Non-financial assets Tangible capital assets (Note 4) 2,090,264 2,322,516 2,090,264 2,322,516 Accumulated surplus (Note 5) $ 209,027 $ 224,919 The accompanying notes are an integral part of these financial stqWfTents. Page 97 of 181 KITCHENER GENERATION CORPORATION Statement of Operations For the Year Ended December 31, 2021 (Unaudited) 2021 2021 2020 Budget Revenue Sale of electricity $ 385,000 $ 401,175 $ 414,384 Total revenue 385,000 401,175 414,384 Expenses Maintenance 35,000 - 2,680 Amortization of tangible capital assets 232,252 232,252 232,252 Total expenses 267,252 - 232,252 234,932 Surplus before interest and provision for payments - in -lieu of corporate income taxes 117,74 168,923 179,452 Interest expense 1 00809C 104,809 118,050 Surplus before provision for payments -in -lieu of corporate income taxes 12 939 64,114 61,402 Provision for payments -in -lieu of corporate income taxes - - - Annual surplus A,$2,939 $ 64,114 $ 61,402 The accompanying notes are an integral part of these financial statements. Page 98 of 181 KITCHENER GENERATION CORPORATION Statement of Change in Net Financial Debt For the Year Ended December 31, 2021 (Unaudited) Annual surplus 2021 2020 64,114 $ 61,402 Change in share capital (23,417) (29,365) Dividends (56,589) - Amortization of tangible capital assets 232,252 232,252 Change in net financial debt 216,360 264,289 Net financial debt, beginning of year (2,097,597) (2,361,886) Net financial debt, end of year $ (1,881,237) $ (2,097,597) The accompanying notes are an integral part of these financial statement Page 99 of 181 KITCHENER GENERATION CORPORATION Statement of Cash Flow For the Year Ended December 31, 2021 (Unaudited) 2021 2020 Operating Annual surplus $ 64,114 $ 61,402 Items not involving cash Amortization of tangible capital assets 232,252 232,252 Change in non-cash assets and liabilities Trade and other accounts receivable 3,070 (2,298) Accounts payable and accrued liabilities (8,674) 2,298 Net change in cash from operating activities 290,762 293,654 Financing Change in share capital (23,417) (29,365) Change in long-term debt (210,756) (264,289) Dividends paid (56,589)Net change in cash from financing activities (290,762) 293,654 Net change in cash and cash equivalents - - Cash and cash equivalents, beginning of y2ar - - Cash and cash equivalents, end of vear $ - $ - The accompanying notes a i nts. Page 100 of 181 KITCHENER GENERATION CORPORATION Notes to the Financial Statements For the Year Ended December 31, 2021 (Unaudited) 1. Incorporation On December 9, 2011 Kitchener Generation Corporation (the Company) was incorporated under the Business Corporations Act (Ontario). Effective January 1, 2012, the Corporation of the City of Kitchener transferred the solar roof asset constructed on the surface of the Kitchener Operations Facility to the Company in exchange for 100% of the Company's common shares and interest bearing debt. 2. Summary of significant accounting policies These financial statements of the Company have been prepared by management in accordance with Canadian generally accepted accounting principles for public sector entities as established by the Public Sector Accounting Board of the Chartered Professional Accountants of Canada. The following is a summary of the significant accounting policies followed in the preparation of these financial statements: a. Basis of accounting The financial statements are prepared using the accrual basis of accounting. The accrual basis of accounting recognizes revenues in the period in which the transactions or events occurred that gave rise to the revenues. Expenses are recognized in the period the goods and services are acquired and a liability is incurred or when an external transfer is due. b. Tangible capital assets Tangible capital assets are recorded at cost ch in s a I amounts that are directly attributable to acquisition, construction, development o ,66gt,erment of the asset. The cost less residual value of the solar roof asset is amortized on a straight-line bg&IWTMts estimated useful life of nineteen years. c. Revenue recognition t The Company records revenue from th a of elec ricity on the basis of regular meter readings and estimates of energy generation since the las ete ding to the end of the year. d. Use of estimates The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. These estimates and assumptions, including the valuation of tangible capital assets and their related useful lives and amortization are based on management's best information and judgment and may differ significantly from future actual results. 3. Long-term debt Effective January 1, 2012 the Company issued an unsecured promissory note payable to the Corporation of the City of Kitchener. Payments are made annually including interest and principal. Interest is calculated at the fixed rate of 5.01 % per annum. Interest paid in 2021 amounted to $104,809 (2020 - $118,050). Page 101 of 181 KITCHENER GENERATION CORPORATION Notes to the Financial Statements For the Year Ended December 31, 2021 (Unaudited) 4. Tangible capital assets Accumulated Net Book Cost Amortization Value Opening balance $ 4,412,784 $ (2,090,268) $ 2,322,516 Additions - - - Amortization - (232,252) (232,252) Disposals - - - Ending balance $ 4,412,784 $ (2,322,520) $ 2,090,264 5. Accumulated surplus The accumulated surplus consists of the following: 2021 2020 Share capital - common shares (Note 6) $ 209,027 $ 232,444 Retained earnings t!%A - 7,525 $ 209,027 $ 224,919 6. Share capital Authorized Unlimited common shnroc Issued 1,000 common shares Page 102 of 181 -1 if "M 1� I KPMG LLP 115 King Street South 2nd Floor Waterloo ON N2J 5A3 Canada Tel 519-747-8800 Fax 519-747-8830 INDEPENDENT AUDITORS' REPORT To the Shareholders of Kitchener Power Corp. Opinion We have audited the consolidated financial statements of Kitchener Power Corp. (the Entity), which comprise: • the consolidated statement of financial position as at December 31, 2021 • the consolidated statement of comprehensive income for the year then ended • the consolidated statement of changes in equity for the year then ended • the consolidated statement of cash flows for the year then ended • and notes to the consolidated financial statements, including a summary of significant accounting policies (Hereinafter referred to as the "financial statements"). In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated financial position of the Entity as December 31, 2021, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS). Basis for Opinion We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the "Auditors' Responsibilities for the Audit of the Financial Statements" section of our auditors' report. We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. KPMG LLP, an Ontario limited liability partnership and member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. KPMG Canada provides services to KPMG LLP. Page 103 of 181 -1 if 10 1� I Page 2 Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards (IFRS), and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management is responsible for assessing the Entity's ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Entity's financial reporting process. Auditors' Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the consolidated financial statements. As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Page 104 of 181 -1 if "M 1� I Page 3 • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity's internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Entity's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Entity to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group Entity to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. kAWG «P Chartered Professional Accountants, Licensed Public Accountants Waterloo, Canada April 11, 2022 Page 105 of 181 KITCHENER POWER CORP. Consolidated Statement of Financial Position As at December 31, 2021, with comparative information for 2020 (Expressed in thousands of dollars) Regulatory deferral account debit balances 10 25,396 19,661 Total assets and regulatory assets $ 363,483 $ 352,414 Page 106 of 181 Note 2021 2020 Assets Current assets Cas h 4 $ 6,079 $ 6,861 Accounts receivable 5 21,287 15,709 Unbilled revenue 14,705 29,865 Inventory 6 3,080 2,458 Prepaid expenses 1,082 1,146 Income taxes receivable 30 5 Total current assets 46,263 56,044 Non-current assets: Property, plant and equipment 7 279,444 267,581 Intangible assets 8 11,185 8,079 Deferred tax assets 9 302 211 Investment in subsidiaries and associates 893 838 Total non-current assets 291,824 276,709 Total assets 338,087 332,753 Regulatory deferral account debit balances 10 25,396 19,661 Total assets and regulatory assets $ 363,483 $ 352,414 Page 106 of 181 KITCHENER POWER CORP. Consolidated Statement of Financial Position Year ended December 31, 2021, with comparative information for 2020 (Expressed in thousands of dollars) Non-current liabilities: Note 2021 2020 Liabilities and Shareholder's Equity 76,963 76,963 Current liabilities: 12 6,012 5,937 Accounts payable and accrued liabilities $ 32,821 $ 37,744 Income taxes payable 17 - 32 Current portion of lease liabilities 17 42 - Current portion customer deposits 13 8,530 8,945 Current portion of deferred revenue 1,185 1,069 Total current liabilities 42,578 47,790 Non-current liabilities: Long-term debt 11 76,963 76,963 Employee future benefits 12 6,012 5,937 Long-term customer deposits 13 5,675 5,833 Long-term portion of lease liabilities 17 556 - Deferred revenue 44,451 39,759 Deferred tax liablilty 9 8,675 4,415 Total non-current liabilities 142,332 132,907 Total liabilities 184,910 180,697 Shareholder's equity: Share capital - common shares 14 66,389 66,389 Retained earnings 108,261 101,452 Accumulated other comprehensive loss -620 -620 Total shareholder's equity 174,030 167,221 Total liabilities and shareholder's equity 358,940 347,918 Regulatory deferral account credit balances 10 779 2,276 Deferred taxes associated with regulatory accounts 3,764 2,220 Impact of COVID-19 pandemic 27 Total equity, liabilities and shareholder's equity $ 363,483 $ 352,414 The accompanying notes are an integral part of these financial statements. On behalf of the Board: Director Director Page 107 of 181 KITCHENER POWER CORP. Consolidated Statement of Comprehensive Income Year ended December 31, 2021, with comparative information for 2020 (Expressed in thousands of dollars) Total comprehensive income for the year $ 11,195 $ 10,439 The accompanying notes are an integral part of these financial statements. Page 108 of 181 Note 2021 2020 Energy sales $ 205,727 $ 239,962 Cost of energy sold 208,472 245,909 (2,745) (5,947) Other operating revenue Distribution sales 45,033 42,690 Other income 15 3,319 2,873 Net operating revenue 45,607 39,616 Expenses: Operations and maintenance 11,552 11,405 Customer services 5,674 5,313 Administration 6,452 5,542 Amortization 10,977 10,022 34,655 32,282 Other Energy conservation program revenue (1,262) (727) Energy conservation program expense 1,277 713 Net energy conservation programs 15 (14) Finance income 16 (39) (132) Finance charges 16 2,509 2,981 Net finance costs 2,470 2,849 Income before income taxes 8,467 4,499 Income tax expense 9 (520) 907 Income for the year before movements in regulatory deferral account balances 8,987 3,592 Net movement in regulatory deferral account balances related to profit or loss and the related deferred tax movement 10 2,208 6,847 Income for the year and net movements in regulatory deferral account balances 11,195 10,439 Total comprehensive income for the year $ 11,195 $ 10,439 The accompanying notes are an integral part of these financial statements. Page 108 of 181 KITCHENER POWER CORP. Consolidated Statement of Changes in Equity Year ended December 31, 2021, with comparative information for 2020 (Expressed in thousands of dollars) The accompanying notes are an integral part of these financial statements. Page 109 of 181 Accumulated Share capital other Retained Total comprehensive earnings income (loss) Balance at January 1, 2020 $ 66,389 $ (620) $ 95,195 $ 160,964 Net income before other comprehensive income (loss) - - 10,439 10,439 Dividends - - (4,182) (4,182) Balance at December 31, 2020 66,389 (620) 101,452 167,221 Net income before other comprehensive income (loss) - - 11,195 11,195 Dividends - - (4,386) (4,386) Balance at December 31, 2021 $ 66,389 $ (620) $ 108,261 $ 174,030 The accompanying notes are an integral part of these financial statements. Page 109 of 181 KITCHENER POWER CORP. Consolidated Statement of Cash Flows Year ended December 31, 2021, with comparative information for 2020 (Expressed in thousands of dollars) Cash flows from investing activities: Proceeds on disposals of property, plant and equipment 2021 2020 Cash flows from operating activities. - (500) Total comprehensive income for the year $ 11,195 $ 10,439 Adjustments to reconcile net income to cash provided by (used in) operations: (3,733) (4,565) Amortization 11,690 10,752 Amortization of deferred revenue (1,140) (1,016) Gain on disposal of property, plant and equipment (51) (149) Income tax expense (520) 907 Income taxes paid 353 (816) Interest on Lease Liability 24 - Income from subsidiaries and associates (55) 425 Increase decrease in employee future benefits 75 77 21,571 20,619 Change in non-cash operating working capital: Accounts receivable (5,580) 1,802 Unbilled revenue 15,159 (2,216) Inventory (622) (134) Prepaid expenses 64 201 Accounts payable and accrued liabilities (4,923) 7,683 Other current liabilities (299) (303) Change in regulatory debit balances (5,735) (10,261) Change in regulatory credit balances 47 654 Change in deferred tax 4,282 1,900 Net cash from operating activities 23,964 19,945 Cash flows from investing activities: Proceeds on disposals of property, plant and equipment 370 151 Investments in subsidiaries and associates - (500) Purchase of property, plant and equipment (22,644) (21,356) Purchase of intangible assets (3,733) (4,565) Net cash used in investing activities (26,007) (26,270) Cash flows from financing activities: Net change in customer deposits (158) (355) Dividends paid out (4,386) (4,182) Change in contributed capital received 5,832 4,390 Repayment of long-term debt - (607) Payment of lease liability (27) - Net cash from financing activities 1,261 (754) Change in cash and cash equivalents (782) (7,079) Cash and cash equivalents, beginning of year 6,861 13,940 Cash and cash equivalents, end of year $ 6,079 $ 6,861 The accompanying notes are an integral part of these financial statements. Page 110 of 181 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 1. Reporting entity: Kitchener Power Corp. (the "Corporation") is a holding company for the affiliate companies, Kitchener -Wilmot Hydro Inc. and Kitchener Energy Services Inc., and is itself wholly owned by the Corporation of the City of Kitchener and the Corporation of the Township of Wilmot. The Corporation oversees the operations of Kitchener -Wilmot Hydro Inc., a regulated distribution company, and Kitchener Energy Services Inc., an unregulated retail services company. The Corporation also owns 33% of Grand River Energy Solutions Corp. (GRE), a generation and renewable energy solutions company. It is located in the City of Kitchener. The address of the Corporation's registered office is 301 Victoria Street South, Kitchener, Ontario, Canada. The financial statements are for the Corporation as at and for the year ended December 31, 2021. Mergers of the holding companies, Kitchener Power Corp. and Waterloo North Hydro Holding Corporation and the local distribution companies, Kitchener -Wilmot Hydro Inc. and Waterloo North Hydro Inc. were proposed in 2021. The proposals have been agreed to by the City of Kitchener and Township of Wilmot councils. A Mergers, Amalgamations, Acquisitions and Divestitures (MAADs) application was filed on February 4, 2022 seeking permission from the Ontario Energy Board ("OEB") to proceed with the proposed merger. 2. Basis of presentation: (a) Statement of compliance: The Corporation's financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS"). The financial statements were approved by the Board of Directors on March 25, 2022. (b) Basis of measurement: The financial statements have been prepared on the historical cost basis except for the following: (i) Where held, financial instruments at fair value through profit or loss (ii) Contributed assets are initially measured at fair value. The methods used to measure fair values are discussed further in note 23. (c) Functional and presentation currency: These financial statements are presented in Canadian dollars, which is the Corporation's functional currency. All financial information presented in Canadian dollars has been rounded to the nearest thousand. Page 111 of 181 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 2. Basis of presentation (continued): (d) Use of estimates and judgments: The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses and disclosure of contingent assets and liabilities. Actual results may differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the year in which the estimates are revised and in any future periods affected. Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in these financial statements is included in the following notes: i) Note 3(b) — Determination of the performance obligation for contributions from customers and the related amortization period ii) Note 7 — Property, plant and equipment iii) Note 9 — Deferred tax assets iv) Note 12 — Employee future benefits v) Note 18 — Commitments and contingencies (e) Rate regulation: The Corporation is regulated by the Ontario Energy Board ("OEB"), under the authority granted by the Ontario Energy Board Act, 1998. Among other things, the OEB has the power and responsibility to approve or set rates for the transmission and distribution of electricity, providing continued rate protection for electricity consumers in Ontario, and ensuring that transmission and distribution companies fulfill obligations to connect and service customers. The OEB may also prescribe license requirements and conditions of service to local distribution companies ("LDCs"), such as the Corporation, which may include, among other things, record keeping, regulatory accounting principles, separation of accounts for distinct businesses, and filing and process requirements for rate setting purposes. Rate setting: Distribution revenue and electricity rates The OEB sets electricity prices for low-volume consumers twice each year based on an estimate of how much it will cost to supply the province with electricity for the next year. All low volume customers without a contract with an energy retailer are charged the OEB mandated rate for electricity. If a customer (regardless of volume) has a retailer agreement, then retailer rates are charged instead. All remaining consumers pay the market price for electricity. The Page 112 of 181 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 2. Basis of presentation (continued): (e) Rate regulation (continued): Corporation is billed for the cost of the electricity that its customers use and passes this cost on to the customer at cost without a mark-up. For the distribution revenue included in electricity sales, the Corporation files a "Cost of Service" ("COS") rate application with the OEB every four years where rates are determined through a review of the forecasted annual amount of operating and capital expenses, debt and shareholder's equity required to support the Corporation's business. The Corporation estimates electricity usage and the costs to service each customer class to determine the appropriate rates to be charged to each customer class. The COS application is reviewed by the OEB and intervenors and rates are approved based upon this review, including any revisions resulting from that review. In the intervening years, an Incentive Rate Mechanism application ("IRM") is filed. An IRM application results in a formulaic adjustment to distribution rates that were set under the last COS application. The previous year's rates are adjusted for the annual change in the Gross Domestic Product Implicit Price Inflator for Final Domestic Demand ("GDP IPI -FDD") net of a productivity factor and a "stretch factor" determined by the relative efficiency of an electricity distributor. As a licensed distributor, the Corporation is responsible for billing customers for electricity generated by third parties and the related costs of providing electricity service, such as transmission services and other services provided by third parties. The Corporation is required, pursuant to regulation, to remit such amounts to these third parties, irrespective of whether the Corporation ultimately collects these amounts from customers. The Corporation filed a COS application on April 30, 2019 for rates effective January 1, 2020 to December 31, 2020. The GDP IPI -FDD for 2021 is 3.3%, the Corporation's productivity factor is 0% and the stretch factor is 0.15%, resulting in a net adjustment of 3.15% to the previous year's rates. Electricity rates were impacted by the COVID-19 pandemic, distribution rates were unaffected, which has been discussed further in Note 27. (f) Investments Investments in subsidiary companies, associates and other long-term investments are accounted for by the equity method. Dividends received are recorded as a reduction of the carrying value of these investments. Page 113 of 181 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 3. Significant accounting policies: The accounting policies set out below have been applied consistently in all years presented in these financial statements unless otherwise indicated. (a) Financial instruments: At initial recognition, the Company measures its financial assets at fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss. Subsequent measurement of the financial asset depends on the classification determined on initial recognition. Financial assets are classified as either amortized cost, fair value through other comprehensive income or fair value through profit or loss, depending on its business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. Financial assets are not reclassified subsequent to their initial recognition, unless the Company changes its business model for managing financial assets. Financial liabilities are initially measured at fair value, net of transaction costs incurred. They are subsequently carried at amortized cost using the effective interest rate method; any difference between the proceeds (net of transaction costs) and the redemption value is recognized as an adjustment to interest expense over the period of the borrowings. The Corporation has not entered into derivative instruments. Hedge accounting has not been used in the preparation of these financial statements. Cash equivalents include short-term investments with maturities of three months or less when purchased. (b) Revenue recognition: Sale and distribution of electricity The performance obligations for the sale and distribution of electricity are recognized over time using an output method to measure the satisfaction of the performance obligation. The value of the electricity services transferred to the customer is determined on the basis of cyclical meter readings plus estimated customer usage since the last meter reading date to the end of the year and represents the amount that the Corporation has the right to bill. Revenue includes the cost of electricity supplied, distribution, and any other regulatory charges. The related cost of power is recorded on the basis of power used. For customer billings related to electricity generated by third parties and the related costs of providing electricity service, such as transmission services and other services provided by third parties, the Corporation has determined that it is acting as a principal for these electricity charges and, therefore, has presented electricity revenue on a gross basis. Page 114 of 181 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 3. Significant accounting policies (continued): (b) Revenue recognition (continued): Capital contributions Developers are required to contribute towards the capital cost of construction of distribution assets in order to provide ongoing service. The developer is not a customer and therefore the contributions are scoped out of IFRS 15 Revenue from Contracts with Customers. Cash contributions, received from developers are recorded as deferred revenue. When an asset other than cash is received as a capital contribution, the asset is initially recognized at its fair value, with a corresponding amount recognized as deferred revenue. The deferred revenue, which represents the Corporation's obligation to continue to provide the customers access to the supply of electricity, is amortized to income on a straight-line basis over the useful life of the related asset. Certain customers are also required to contribute towards the capital cost of construction of distribution assets in order to provide ongoing service. These contributions fall within the scope of IFRS 15 Revenue from Contracts with Customers. The contributions are received to obtain a connection to the distribution system in order receive ongoing access to electricity. The Corporation has concluded that the performance obligation is the supply of electricity over the life of the relationship with the customer which is satisfied over time as the customer receives and consumes the electricity. Revenue is recognized on a straight-line basis over the useful life of the related asset. Other revenue Revenue earned from the provision of services is recognized as the service is rendered. Government grants and the related performance incentive payments under CDM programs are recognized as revenue in the year when there is reasonable assurance that the program conditions have been satisfied and the payment will be received. (c) Inventory: Inventory, comprising material and supplies, the majority of which is consumed by the Corporation in the provision of its services, is valued at the lower of cost and net realizable value, with cost being determined on a weighted average cost basis, and includes expenditures incurred in acquiring the material and supplies and other costs incurred in bringing them to their existing location and condition. Net realizable value is the estimated selling price in the ordinary course of business, less estimated selling expenses. (d) Property, plant and equipment: Items of property, plant and equipment ("PP&E") used in rate -regulated activities and acquired prior to January 1, 2015 are measured at deemed cost established on the transition date, less accumulated depreciation. All other items of PP&E are measured at cost, or, where the item is transferred from customers, its fair value, less accumulated depreciation. Consistent with IFRS 1, the Corporation elected to use the carrying amount as previously Page 115 of 181 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 3. Significant accounting policies (continued): (d) Property, plant and equipment (continued): determined under Canadian GAAP as the deemed cost at January 1, 2015, the transition date to IFRS. Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self -constructed assets includes the cost of materials, direct labour, and any other costs directly attributable to bringing the asset to a working condition for its intended use. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Gains and losses on the disposal of an item of PP&E are determined by comparing the proceeds from disposal, if any, with the carrying amount of the item of PP&E and are recognized net within other income in profit or loss. Major spare parts and standby equipment are recognized as items of PP&E. The cost of replacing a part of an item of property, plant and equipment is recognized in the net book value of the item if it is probable that the future economic benefits embodied within the part will flow to the Corporation and its cost can be measured reliably. In this event, the replaced part of property, plant and equipment is written off, and the related gain or loss is included in profit or loss. The costs of the day-to-day servicing of property, plant and equipment are recognized in profit or loss as incurred. Depreciation is calculated over the depreciable amount and is recognized in profit or loss on a straight-line basis over the estimated useful life of each part or component of an item of property, plant and equipment. The depreciable amount is cost. Land is not depreciated. Construction -in -progress assets are not amortized until the projects are complete and in service. The estimated useful lives are as follows: Buildings 20-50 years Transformer station equipment 15-50 years Distribution station equipment 15-50 years Distribution system 25-60 years Meters 15-25 years SCADA equipment 15 years Other capital assets 3-10 years Depreciation methods, useful lives, and residual values are reviewed at each reporting date and adjusted prospectively if appropriate. Page 116 of 181 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 3. Significant accounting policies (continued): (e) Intangible assets (continued): (i) Computer software: Computer software that is acquired or developed by the Corporation, including software that is not integral to the functionality of equipment purchased which has finite useful lives, is measured at cost less accumulated amortization and accumulated impairment losses. (ii) Land rights: Payments to obtain rights to access land ("land rights") are classified as intangible assets. These include payments made for easements, right of access and right of use over land for which the Corporation does not hold title. Land rights are measured at cost less accumulated amortization and accumulated impairment losses. (iii) Amortization: Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use. The estimated useful lives are: Computer software 3-10 years Land rights 100 years Amortization methods and useful lives of all intangible assets are reviewed at each reporting date and adjusted prospectively if appropriate. (f) Impairment: (i) Financial assets: A loss allowance for expected credit losses on financial assets measured at amortized cost is recognized at the reporting date. The loss allowance is measured at an amount equal to the lifetime expected credit losses for the asset. Page 117 of 181 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 3. Significant accounting policies (continued): (f) Impairment (continued): (ii) Non-financial assets: The carrying amounts of the Corporation's non-financial assets, other than inventories and deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the "cash -generating unit"). The recoverable amount of an asset or cash -generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is recognized if the carrying amount of an asset or its cash -generating unit exceeds its estimated recoverable amount. Impairment losses are recognized in profit or loss. An impairment loss in respect of goodwill is not reversed. For assets other than goodwill, impairment recognized in prior periods is assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. (g) Provisions: A provision is recognized if, as a result of a past event, the Corporation has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Page 118 of 181 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 3. Significant accounting policies (continued): (h) Regulatory deferral accounts: Regulatory deferral account debit balances represent costs incurred in excess of amounts billed to the customer at OEB approved rates. These amounts have been accumulated and deferred in anticipation of their future recovery in electricity distribution rates. Regulatory deferral account credit balances represent amounts billed to the customer at OEB approved rates in excess of costs incurred by the Corporation. Regulatory deferral account debit balances are recognized if it is probable that future billings in an amount at least equal to the capitalized cost will result from inclusion of that cost in allowable costs for rate -making purposes. The offsetting amount is recognized in profit and loss. The debit balance is reduced by the amount of customer billings as electricity is delivered to the customer and the customer is billed at rates approved by the OEB for the recovery of the capitalized costs. Regulatory deferral account credit balances are recognized if it is probable that future billings in an amount at least equal to the credit balance will be reduced as a result of rate -making activities. The offsetting amount is recognized in profit and loss. The credit balance is reduced by the amounts returned to customers as electricity is delivered to the customer at rates approved by the OEB for the return of the regulatory account credit balance The probability of recovery or repayment of the regulatory account balances are assessed annually based upon the likelihood that the OEB will approve the change in rates to recover or repay the balance. Any resulting impairment loss is recognized in profit and loss in the year incurred. Regulatory deferral accounts attract interest at OEB prescribed rates. With the exception of Pension and OEB Forecast Accrual accounts (OPEBs), the rate for 2021 was 0.57%. Prior year rates from January to June 2020 were 2.18%, July to December 2020 were 0.57%. In 2021, OPEB rates were 2.03% for the period January to March, and 2.29% for the period April to December. In 2020, OPEBs were 2.88% for the period January to March, 2.48% for the period April to September and 2.03% for the period October to December. Page 119 of 181 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 3. Significant accounting policies (continued): (i) Employee future benefits: (i) Pension plan: The Corporation provides a pension plan for all its full-time employees through Ontario Municipal Employees Retirement System ("OMERS"). OMERS is a multi-employer pension plan which operates as the Ontario Municipal Employees Retirement Fund ("the Fund"), and provides pensions for employees of Ontario municipalities, local boards and public utilities. The Fund is a contributory defined benefit pension plan, which is financed by equal contributions from participating employers and employees, and by the investment earnings of the Fund. To the extent that the Fund finds itself in an under -funded position, additional contribution rates may be assessed to participating employers and members. OMERS is a defined benefit plan. However, as OMERS does not segregate its pension asset and liability information by individual employers, there is insufficient information available to enable the Corporation to directly account for the plan. Consequently, the plan has been accounted for as a defined contribution plan. Obligations for contributions to defined contribution pension plans are recognized as an employee benefit expense in net income when they are due. (ii) Post -employment benefits, other than pension: The Corporation provides some of its retired employees with life insurance and medical benefits beyond those provided by government sponsored plans. The cost of these benefits is expensed as earned by employees through employment service. The accrued benefit obligations and the current service costs are actuarially determined by applying the projected unit credit method and reflect management's best estimate of certain underlying assumptions. Actuarial gains and losses arising from defined benefit plans are recognized immediately in other comprehensive income and reported in retained earnings. When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognized in net income on a straight-line basis over the average period until the benefits become vested. In circumstances where the benefits vest immediately, the expense is recognized immediately in net income. Page 120 of 181 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 3. Significant accounting policies (continued): Q) Deferred revenue and assets transferred from customers: Certain customers and developers are required to contribute towards the capital cost of construction in order to provide ongoing service. When an asset is received as a capital contribution, the asset is initially recognized at its fair value, with the corresponding amount recognized as deferred revenue. Deferred revenue represents the Corporation's obligation to continue to provide customers access to the supply of electricity and is amortized to income on a straight-line basis over the economic useful life of the acquired or contributed asset, which represents the period of ongoing service to the customer. (k) Leased assets: At inception of a contract, the Corporation assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Corporation assess whether: (a) The contract involves the use of an identified asset — this may be specified explicitly or implicitly and should be physically distinct or represent substantially all the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified; (b) The Corporation has the right to obtain substantially all the economic benefits from the use of the asset throughout the period of use; and (c) The Corporation has the right to direct the use of the asset. The Corporation has this right when it has the decision-making rights that are most relevant to changing how and for what purpose the asset is used. In rare cases where the decision about how and for what purpose the asset is used is predetermined, the Corporation has the right to direct the use of the asset if either the Corporation has the right to operate the asset, or the Corporation designed the asset in a way that predetermines how and for what purpose it will be used. The Corporation recognizes a right -of -use asset and a lease liability at the lease commencement date. The right -of -use asset is initially measured at cost, which comprises the initial amount of the lease liability, adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or the site on which it is locate, less any lease incentives received. The right -of -use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right -of -use asset or the end of the lease term. The estimated useful life of a right -of -use asset is determined on the same basis as those for property, plant and equipment. In addition, the right -of -use asset is periodically reduced by impairment losses, if any, and adjusted for certain re -measurements of the lease liability. Page 121 of 181 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 3. Significant accounting policies (continued): (1) Finance income and finance costs: Finance income is recognized as it accrues in profit or loss, using the effective interest method. Finance income comprises interest earned on cash and cash equivalents and on regulatory assets. Finance charges comprise interest expense on borrowings, finance lease obligations, regulatory liabilities and unwinding of the discount on provisions and impairment losses on financial assets. Finance costs are recognized as an expense unless they are capitalized as part of the cost of qualifying assets. (m) Income taxes: The income tax expense comprises current and deferred tax. Income tax expense is recognized in profit or loss except to the extent that it relates to items recognized directly in equity, in which case, it is recognized in equity. The Corporation is currently exempt from taxes under the Income Tax Act (Canada) and the Ontario Corporations Tax Act (collectively the "Tax Acts"). Under the Electricity Act, 1998, the Corporation makes payments in lieu of corporate taxes to the Ontario Electricity Financial Corporation ("OEFC"). These payments are calculated in accordance with the rules for computing taxable income and taxable capital and other relevant amounts contained in the Income Tax Act (Canada) and the Corporations Tax Act (Ontario) as modified by the Electricity Act, 1998, and related regulations. Prior to October 1, 2001, the Corporation was not subject to income or capital taxes. Payments in lieu of taxes are referred to as income taxes. Current tax is the tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognized using the balance sheet method. Under this method, deferred income taxes reflect the net tax effects of temporary differences between the tax basis of assets and liabilities and their carrying amounts for accounting purposes, as well as for tax losses available to be carried forward to future years that are likely to be realized. Deferred tax assets and liabilities are measured using enacted or substantively enacted tax rates, at the reporting date, expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the year that includes the date of enactment or substantive enactment. Page 122 of 181 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 4. Cash: 2021 2020 Cash $ 6,079 $ 6,861 5. Accounts receivable: 2021 2020 Customer and other trade receivables $ 21,027 $ 15,667 Trade receivables from related parties 260 42 $ 21,287 $ 15,709 6. Inventory: The amount of inventories consumed by the Corporation and recognized as an expense during 2021 was $373 (2020 - $279). 7. Property, plant and equipment: (a) Cost or deemed cost: Page 123 of 181 Land and Distribution Other fixed construction- Right -of -use buildings equipment assets in -progress assets Total Balance at January 1, 2021 $ 26,433 $ 277,793 $ 9,992 $ 5,837 $ - 320,055 Transfer to Intangible Assets 1,380 2,316 1,099 17,849 601 23,245 Transfers 692 19,982 28 (20,702) - - Disposals/Retirements (65) 11 (3,683) (230) - (3,967) Balance at December 31, 2021 $ 28,440 $ 300,102 $ 7,436 $ 2,754 $ 601 $ 339,333 Land and Distribution Other fixed construction- Right -of -use buildings equipment assets in -progress assets Total Balance at January 1, 2020 $ 24,729 $ 260,009 $ 9,723 $ 5,487 $ 299,948 Additions 1,709 17,846 1,451 350 21,356 Disposals/Retirements (5) (62) (1,182) - (1,249) Balance at December 31, 2020 $ 26,433 $ 277,793 $ 9,992 $ 5,837 $ $ 320,055 Page 123 of 181 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 7. Property, plant and equipment (continued): (b) Accumulated depreciation: Land and Distribution Other fixed construction- Right -of -use buildings equipment assets in -progress assets Total Balance at January 1, 2021 $ 3,429 $ 46,021 $ 3,024 $ $ 52,474 Depreciation charge 758 8,818 1,467 20 11,063 Disposals/Retirements (65) 11 (3,594) (3,648) Balance at December 31, 2021 $ 4,122 $ 54,850 $ 897 $ $ 20 59,889 Land and Distribution Other fixed construction- Right -of -use buildings equipment assets in -progress assets Total Balance at January 1, 2020 $ 2,718 $ 37,766 $ 2,853 $ $ 43,337 Depreciation charge 716 8,317 1,351 10,384 Disposals/Retirements (5) (62) (1,180) (1,247) Balance at December 31, 2020 $ 3,429 $ 46,021 $ 3,024 $ $ 52,474 (c) Carrying amounts: Land and Distribution Other fixed construction- Right -of -use buildings equipment assets in -progress assets Total At December 31, 2021 $ 24,318 $ 245,252 $ 6,539 $ 2,754 $ 581 279,444 At December 31, 2020 $ 23,004 $ 231,772 $ 6,968 $ 5,837 $ - 267,581 (d) Leased plant and equipment: In May 2021, the Corporation entered into a lease agreement with Grand River Energy Solutions Corp., an associated company, for the construction and lease of solar PV roof -top equipment located at the Corporation's registered office. A right -of -use asset and corresponding lease liability of $601 were recorded. (e) Security: At December 31, 2021, the Corporation had zero properties subject to a general security agreement. (f) Borrowing costs: During the year, borrowing costs of $ nil (2020 - $ nil) were capitalized as part of the cost of property, plant and equipment. Page 124 of 181 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 7. Property, plant and equipment (continued): (g) Allocation of depreciation and amortization: The depreciation of property, plant and equipment and the amortization of intangible assets has been allocated to profit or loss as follows: Operations Customer Energy and services Administration conservation Other Total maintenance expense expense expense expense December 31, 2021: Depreciation of property, plant and equipment $ 702 $ 9 $ $ 2 $ 10,350 $ 11,063 Amortization of intangible assets - 627 627 $ 702 $ 9 $ $ 2 $ 10,977 $ 11,690 Operations Customer Energy and services Administration conservation Other Total maintenance expense expense expense expense December 31, 2020: Depreciation of property, plant and equipment $ 717 $ 6 $ $ 7 $ 9,654 $ 10,384 Amortization of intangible assets - 368 $ 368 $ 717 $ 6 $ $ 7 $ 10,022 $ 10,752 8. Intangible assets: (a) Cost or deemed cost Included within Computer Software is $250 (2020 - $7,433) of intangible assets under development. Page 125 of 181 Computer Land Software Rights Total Balance at January 1, 2021 $ 10,938 $ 8 $ 10,946 Additions 3,733 - 3,733 Disposals (2,833) - (2,833) Balance at December 31, 2021 $ 11,838 $ 8 $ 11,846 Balance at January 1, 2020 $ 6,373 $ 8 $ 6,381 Transfers in from CIP 4,565 - 4,565 Balance at December 31, 2020 $ 10,938 $ 8 $ 10,946 Included within Computer Software is $250 (2020 - $7,433) of intangible assets under development. Page 125 of 181 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 8. Intangible assets (continued): (b) Accumulated amortization: Computer Land Software Rights Total Balance at January 1, 2021 $ 2,859 $ 8 $ 2,867 Additions 627 - 627 Disposals (2,833) - (2,833) Balance at December 31, 2021 $ 653 $ 8 $ 661 Balance at January 1, 2020 $ 2,491 $ 8 $ 2,499 Additions 368 - 368 Balance at December 31, 2020 $ 2,859 $ 8 $ 2,867 (c) Carrying amounts: Computer Land Software Rights Total At December 31, 2021 $ 11,185 $ - $ 11,185 At December 31, 2020 $ 8,079 $ - $ 8,079 Page 126 of 181 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 9. Income tax expense: Current tax expense: Page 127 of 181 2021 2020 Current period $ 291 $ 1,297 Adjustment for prior periods (700) (332) $ (409) $ 965 Deferred tax expense: 2021 2020 Original & reversal of temporary differences $ (20) $ (21) Recognition of previously unrecognized tax losses (91) (38) $ (111) $ (59) Reconciliation of effective tax rate: 2021 2020 Total comprehensive income for the year $ 11,195 $ 10,439 Total income tax expense (520) 907 Comprehensive income before income taxes 10,675 11,346 Income tax using the Corporation's statutory tax rate of 26.5% 2,829 3,007 Temporary differences not benefitted (2,649) (1,768) Under (over) provided in prior periods (700) (332) $ (520) $ 907 Significant components of the Corporation's deferred tax balances are as follows: 2021 2020 Deferred tax assets (liabilities): Plant and equipment $ (22,536) $ (16,989) Non -vested sick leave 168 168 Employee benefits 1,593 1,573 Intangible assets 7 7 Loss carry -forward 295 204 Ontario refundable tax credits 6 14 Deferred revenue - contributed capital 12,094 10,819 $ (8,373) $ (4,204) Page 127 of 181 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) Regulatory deferral account balance: The following is a reconciliation of the carrying amount for each class of regulatory deferral account balances: Remaining recovery/ Balances reversal arising in the Recovery/ period 2020 period Reversal Other 2021 (vears) Regulatory deferral account debit balances Group 1 deferred accounts $ 8,716 $ (1,174) $ 1,657 $ 231 $ 9,430 Note 1, Note 3 Regulatory asset recovery account 773 281 (232) - 822 Note 1 Deferred tax asset 8,375 5,826 - 14,201 Note 2 LRAM 1,728 874 (1,728) 874 1 Other 69 - - - 69 Note 2 Total amount related to regulatory deferral account debit balances $ 19,661 $ 5,807 $ (303) $ 231 $ 25,396 Remaining recovery/ Balances reversal arising in the Recovery/ period 2020 period Reversal Other 2021 (years) Regulatory deferral account credit balances Group 1 deferred accounts 1,718 (976) (754) 230 218 Note 1 Other 558 3 - - 561 3 Year Total amount related to regulatory deferral account credit balances 2,276 (973) (754) 230 779 2021 2020 Movements in regulatory accounts Net change in regulatory deferral account debit and credit balances 7,232 10,292 Less movement related to the balance sheet Deferred income tax (5,826) (2,585) Deferred revenue 802 (860) Amounts moved to property, plant, equipment - - Net movement in regulatory deferral account balances related to profit or loss and the related deferral tax movement 2,208 6,847 Note 1 KWHI has been approved for collection of these amounts in its 2021 filing for 2022 rates. Page 128 of 181 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 10. Regulatory deferral account balance (continued): Note 2 KWHI has not sought approval for the disposition of this amount as changes in underlying assumptions may reduce the amounts recorded in the account. KWHI may seek refunds in the future Note 3 In December 2020, KWHI was informed that beginning June 2015 charges were not included in the monthly power bill for one delivery point for Transmission Network Charges. KWHI has accrued a payable of $6 million, offset by a regulatory asset. These monies will be collected through an OEB approved rate rider in 2022 Note 4 COVID-19 Emergency Deferral The COVID-19 emergency deferral account comprises of four sub -accounts established to track incremental costs and lost revenues related to the COVID-19 pandemic: (i) Impacts from Complying with Government/OEB-initiated Customer Relief Programs, (ii) Bad Debt, (iii) Capital Related Revenue Requirement Impacts, and (iv) Other Costs and Savings. June 17, 2021, the OEB Staff released their report on the COVID-19 deferral accounts which introduces certain criteria to that need to be satisfied for amounts to be eligible for recovery. $69 has been recorded in the COVID-19 Emergency Deferral Account as at December 31, 2021 (2020 - $69). 11. Long-term debt: Effective August 1, 2000, the Corporation incurred unsecured promissory notes payable to the City of Kitchener and the Township of Wilmot and have an interest rate of 3.23% per annum. Interest is payable in quarterly installments, in arrears, on March 31St, June 30th, September 30th and December 31 St 2021 2020 Senior unsecured debentures: City of Kitchener $ 70,998 $ 70,998 Township of Wilmot 5,965 5,965 Senior unsecured debentures, net proceeds $ 76,963 $ 76,963 Less: current portion of long-term debt $ - $ - Total long-term debt $ 76,963 $ 76,963 12. Employee future benefits: The Corporation pays certain medical and life insurance benefits on behalf of some of its retired employees. The Corporation recognizes these post-retirement costs in the period in which employees' services were rendered. The accrued benefit liability at December 31, 2021 of $6,012 was based on an actuarial valuation completed in 2020 using a discount rate of 3.1% (3.1% in 2020). Page 129 of 181 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 12. Employee future benefits (continued): Changes in the present value of the defined benefit unfunded obligation and the accrued benefit liability: 2021 2020 Defined benefit obligation, beginning of year Current service cost Interest cost Benefits paid during the year $ 5,937 191 180 (296) $ 5,858 192 178 (291) Accrued benefit liability, end of year $ 6,012 $ 5,937 Components of net benefit expense recognized are as follows: 2021 2020 Current service cost Interest cost $ 191 180 $ 192 178 Net benefit expense recognized $ 371 $ 370 Actuarial losses recognized in other comprehensive income: 2021 2020 Cumulative amount at January 1 Cumulative amount at December 31 $ $ (620) (620) $ (620) $ (620) Page 130 of 181 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 12. Employee future benefits (continued): The significant actuarial assumptions used in the valuation are as follows (weighted average): 2021 2020 Accrued benefit obligation: Discount rate 3.1% 3.1% Benefit cost for the year: Age Withdrawal rate 18-29 3.50% 3.50% 30-34 2.00% 2.00% 35-39 1.7% 1.7% 40-49 1.3% 1.3% 50-54 1.0% 1.0% Assumed health care cost trend rates: Initial health care cost trend rate Health 4.7% 4.4% Dental 4.9% 4.7% The approximate effect on the accrued benefit obligation of the entire plan and the estimated net benefit expense of the entire plan if the health care trend rate assumption was increased or decreased by 1 %, and all other assumptions were held constant, is as follows: Benefit Periodic Obligation Benefit Cost 1% increase in health care trend rate $ 218 $ 27 1% decrease in health care trend rate $ (196) $ (23) Page 131 of 181 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 12. Employee future benefits (continued): The main actuarial assumptions utilized for the valuation are as follows: General inflation - future general inflation levels, as measured by the changes in the Consumer Price Index, were assumed at 2% in 2021, and thereafter (2020 - 2%). Discount (interest) rate - the discount rate used to determine the present value of future liabilities and the expense for the year ended December 31, 2021, was 3.1% (2020 — 3.1 %). Salary levels - future general salary and wage levels were assumed to increase at 3.3% (2020 - 3.3%) per annum. Medical costs - medical costs were assumed to be 4.7% for 2021 (4.4% for 2020) Dental costs - dental costs were assumed to be 4.9% for 2021 (4.7% for 2020) 13. Customer and IESO deposits: Customer deposits represent cash deposits from electricity distribution customers and retailers, as well as construction deposits. Deposits from electricity distribution customers are refundable to customers who demonstrate an acceptable level of credit risk as determined by the Corporation in accordance with policies set out by the OEB or upon termination of their electricity distribution service. Construction deposits represent cash prepayments for the estimated cost of capital projects recoverable from customers and developers. Upon completion of the capital project, these deposits are transferred to deferred revenue. The Corporation delivers conservation and demand management programs for its customers on behalf of the IESO. Prepayments received from the IESO have been recorded and will be transferred to revenue as programs are delivered and the revenue is earned. The deposits comprise: 2021 2020 Customer deposits $ 5,623 $ 6,424 Construction deposits 7,424 7,196 IESO deposit for energy conservation programs 1,158 1,158 Total customer and IESO deposits $ 14,205 $ 14,778 Page 132 of 181 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 14. Share capital: 2021 2020 Authorized: Unlimited number of common shares Issued: 20,000 common shares $ 66,389 $ 66,389 Dividends: The holders of the common shares are entitled to receive dividends as declared from time to time. The Corporation paid aggregate dividends in the year on common shares of $4,386 (2020 - $4,182). 15. Other operating revenue: Other income comprises: Page 133 of 181 2021 2020 Specific service charges $ 1,748 $ 1,875 Deferred revenue 1,140 1,016 Scrap sales 187 101 Net gain on disposal of capital assets 51 149 Non -Utility Operation 4 - Retailer services 39 48 Sundry 150 (316) Total other income $ 3,319 $ 2,873 16. Finance income and expense: 2021 2020 Interest income on bank deposits $ 39 $ 132 Finance income 39 132 Interest expense on long-term debt 2,472 2,496 Interest expense (recovery) on short-term debt (256) 271 Interest expense on BMO Letter of Credit 123 123 Interest expense on deposits 35 91 Interest expense on capital lease 24 - Other 111 - 2,509 2,981 Net finance costs recognized in profit or loss $ 2,470 $ 2,849 Page 133 of 181 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 17. Lease Liabilities: The Corporation has entered into a lease agreement for solar PV roof -top equipment representing right - of -use assets (note 7). The right -of -use assets are recognized at the present value of the minimum lease payments, plus any extensions estimated to be exercised, with the corresponding equivalent lease liability recognized. The Corporation has determined the lease terms based on all available information as at the reporting date. Maturity Analysis - contractual undiscounted cash flows 2021 2020 Less than one year $ One to five years More than five years 42 $ - 228 - 799 - Total undiscounted lease liabilities at December 31, 2021 1,069 - Interest included on the liabilities included in the statement of financial position at December 31, 2021 (471) - Lease Liabilities - current 42 - Lease Liabilities - non-current $ 556 $ - 18. Commitments and contingencies: Contractual Obligations KWHI entered into a lease agreement with Grand River Energy Solutions Corp for a rooftop solar PV system (see note 17 for details). General From time to time, the Corporation is involved in various litigation matters arising in the ordinary course of its business. The Corporation has no reason to believe that the disposition of any such current matter could reasonably be expected to have a materially adverse impact on the Corporation's financial position, results of operations or its ability to carry on any of its business activities. General Liability Insurance: The Corporation is a member of the Municipal Electric Association Reciprocal Insurance Exchange (MEARIE). MEARIE is a pooling of public liability insurance risks of many of the LDCs in Ontario. All members of the pool are subjected to assessment for losses experienced by the pool for the years in which they were members, on a pro -rata basis based on the total of their respective service revenues. As at December 31, 2021, no assessments have been made. Page 134 of 181 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 19. Guarantees: Kitchener Power Corp. is the guarantor for a line of credit issued by the Canadian Imperial Bank of Commerce on behalf of Grand River Energy Solutions Corp. (GRE Corp). GRE Corp. is one third owned by each of Kitchener Power Corp., Waterloo North Hydro Holding Corporation and Cambridge & North Dumfries Energy Plus Inc.; each of which has guaranteed a maximum of $6 million in the event of default by GRE Corp. 20. Pension agreement: The Corporation provides a pension plan for its employees through OMERS. The plan is a multi- employer, contributory defined pension plan with equal contributions by the employer and its employees. In 2021, the Corporation made employer contributions of $1,681 to OMERS (2020 - $1,723). The Corporation's net benefit expense has been allocated as follows: a) $439 (2020 - $449) capitalized as part of property, plant and equipment; b) $1,242 (2020 - $1,274) charged to net income. The Corporation estimates that a contribution of $1,721 to OMERS will be made during the next fiscal year. Page 135 of 181 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 21. Employee benefits: 2021 2020 Salaries, wages and benefits $ 19,657 $ 19,684 CPP and EI remittances 782 732 Contributions to OMERS 1,681 1,723 Expenses related to defined benefit plans 371 370 $ 22,491 $ 22,509 22. Related party transactions: (a) Parent and ultimate controlling party: The Corporation is wholly-owned by the Corporation of the City of Kitchener and the Corporation of the Township of Wilmot. The City and the Township produce financial statements that are available for public use. (b) Entity with significant influence: The Corporation of the City of Kitchener exercises significant influence over the Corporation through its 92.25% ownership interest in the Corporation. (c) Key management personnel: The key management personnel of the Corporation have been defined as members of its board of directors and executive management team members and is summarized below. 2021 2020 Directors' fees $ 93 $ 67 Salaries and other short-term benefits 1,106 1,061 Post employment benefits 20 19 Other long-term benefits (OMERS) 91 90 $ 1,310 $ 1,237 (d) Transactions with parent: During the year the Corporation paid management and business development services to its parent in the amount of $ nil (2020 - $ nil) (e) Transactions with entity with significant influence: In the ordinary course of business, the Corporation delivers electricity to the Corporation of the City of Kitchener. Electricity is billed to the City of Kitchener at prices and under terms approved by the OEB. Page 136 of 181 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 22. Related party transactions (continued): (f) Transactions with ultimate parent (the City of Kitchener) In 2021, the Corporation had the following significant transactions with its ultimate parent, a government entity: • Construction, contracted through Kitchener Wilmot Hydro Inc. • Streetlight maintenance services contracted through Kitchener Energy Services Inc. • Pre -merger costs paid by the City of Kitchener on behalf of KWHI and reimbursed in 2022 23. Financial instruments and risk management: Fair value disclosure Cash and cash equivalents are measured at fair value. The carrying values of receivables, and accounts payable and accrued charges approximate fair value because of the short maturity of these instruments. The carrying value of the customer deposits approximates fair value because the amounts are payable on demand. The fair value of the long term debt (senior unsecured debentures issued by the shareholders (City of Kitchener and Township of Wilmot) approximates the carrying value due to the short term nature of the loan. Financial risks The Corporation understands the risks inherent in its business and defines them broadly as anything that could impact its ability to achieve its strategic objectives. The Corporation's exposure to a variety of risks such as credit risk, interest rate risk, and liquidity risk, as well as related mitigation strategies are discussed below. (a) Credit risk: Financial assets carry credit risk that a counterparty will fail to discharge an obligation which could result in a financial loss. Financial assets held by the Corporation, such as accounts receivable, expose it to credit risk. The Corporation earns its revenue from a broad base of customers located in the City of Kitchener and the Township of Wilmot. As of December 31, 2021, no customers accounted for more than 1 % of total accounts receivable, $21,287. Page 137 of 181 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 23. Financial instruments and risk management (continued): (a) Credit risk (continued): The carrying amount of accounts receivable is reduced through the use of an allowance for impairment and the amount of the related impairment loss is recognized in net income. Subsequent recoveries of receivables previously provisioned are credited to net income. The balance of the allowance for impairment at December 31, 2021 is $250 (2020 - $500). The allowance was decreased due to an expected decrease in Covid-19 related bad debt. An impairment gain of $127 (2020 loss of $793) was recognized during the year. This is due to lower than expected bad debt related to COVID-19 and a reduction of the allowance for bad debt from $500 to $250 resulting from the lessening of economic impacts caused by the pandemic The Corporation's credit risk associated with accounts receivable is primarily related to payments from distribution customers. At December 31, 2021, approximately $112 (2020 - $314) is considered 60 days past due. The Corporation has over 100 thousand customers, the majority of whom are residential. Credit risk is managed through collection of security deposits from customers in accordance with directions provided by the OEB. As at December 31, 2021, the Corporation holds security deposits in the amount of $14,205 (2020 - $14,778). (b) Market risk: Market risks primarily refer to the risk of loss resulting from changes in commodity prices, foreign exchange rates, and interest rates. The Corporation currently does not have any material commodity or foreign exchange risk. The Corporation is exposed to fluctuations in interest rates as the regulated rate of return for the Corporation's distribution business is derived using a complex formulaic approach which is in part based on the forecast for long- term Government of Canada bond yields. This rate of return is approved by the OEB as part of the approval of distribution rates. The Corporation does not hold any long-term debt that is subject to market rates. Consequently a 1 % increase or decrease in the interest rate at December 31, 2021 would have no financial impact. (c) Liquidity risk: The Corporation monitors its liquidity risk to ensure access to sufficient funds to meet operational and investing requirements. The Corporation's objective is to ensure that sufficient liquidity is on hand to meet obligations as they fall due while minimizing interest exposure. The Corporation has access to a $35,000 credit facility and monitors cash balances daily to ensure that a sufficient level of liquidity is on hand to meet financial commitments as they come due. As at December 31, 2021, no amounts had been drawn under Bank of Montreal credit facility (2020 - $ nil). The Corporation also has a bilateral facility for $35,000 (the "LC" facility) for the purpose of issuing letters of credit mainly to support the prudential requirements of the IESO, of which $35,000 has been drawn and posted with the IESO (2019 - $35,000). The majority of accounts payable, as reported on the balance sheet, are due within 30 days. Page 138 of 181 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 23. Financial instruments and risk management (continued): (c) Liquidity risk (continued): The Company's currently available liquidity is also expected to be sufficient to address any reasonably foreseeable impacts that the COVID-19 pandemic may have on the Company's cash requirements. (d) Capital disclosures: The main objectives of the Corporation, when managing capital, are to ensure ongoing access to funding to maintain and improve the electricity distribution system, compliance with covenants related to its credit facilities, prudent management of its capital structure with regard for recoveries of financing charges permitted by the OEB on its regulated electricity distribution business, and to deliver the appropriate financial returns. The Corporation's definition of capital includes shareholder's equity and long-term debt. As at December 31, 2021, shareholder's equity amounts to $174,830 (2020 - $167,221) and long- term debt amounts to $76,963 (2020 - $76,963). 24. Revenue from Contracts with Customers The Corporation generates revenue primarily from the sale and distribution of electricity to its customers. Other sources of revenue include performance incentive payments under CDM programs. Page 139 of 181 2021 2020 Revenue from Contracts with Customers $ 252,110 $ 284,230 Other Revenue: CDM programs 1,262 727 Other 2,007 1,426 Total $ 255,379 $ 286,383 In the following table, revenue from contracts with customers is disaggregated by type of customer. 2021 2020 Residential $ 111,252 $ 127,780 Commercial 137,661 153,515 Large Users 1,565 1,346 Other 1,632 1,589 Total Revenue $ 252,110 $ 284,230 Page 139 of 181 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 25. Change in Accounting Policy The International Accounting Standards Board (IASB) has issued the following Standards, Interpretations and Amendments to Standards that were adopted by the Corporation effective January 1, 2021: a) Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS9, IAS 39, IFRS 7, IFRS 4, and IFRS 16) b) COVID-19 Related Rent Concessions (Amendment to IFRS 16) The amendments and clarifications did not have an impact on the financial statements. 26. Future accounting pronouncements: At the date of authorization of these financial statements, several new, but not yet effective, Standards and amendments to existing Standards, and Interpretations have been published by the IASB. None of these Standards or amendments to existing Standards have been adopted early by the Company and it is still to be determined if any will have a material impact on the Company's financial statements. (a) Property, Plant and Equipment - Proceeds before Intended Use (Amendments to IAS 16) On May 14, 2020, the IASB issued Property, Plant and Equipment - Proceeds before Intended Use (Amendments to IAS 16). The amendments clarify that proceeds from selling items before the related item of Property, Plant and Equipment is available for use should be recognized in profit or loss, together with the cost of producing those items. The amendments are effective for annual periods beginning on or after January 1, 2022. Early adoption is permitted. (b) Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37) On May 14, 2020, the IASB issued Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37). This amendment clarifies which costs are included as a cost of fulfilling a contract when determining whether a contract is onerous. The amendments are effective for annual periods beginning on or after January 1, 2022 and apply to contracts existing at the date when the amendments are first applied. Early adoption is permitted. Page 140 of 181 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 26. Future accounting pronouncements (continued): (c) Annual Improvements to IFRS Standards 2018 -2020 On May 14, 2020, the IASB issued Annual Improvements to IFRS Standards 2018 -2020. The amendments are effective for annual periods beginning on or after January 1, 2022. Early adoption is permitted. I FRS 9 Financial Instruments Clarifies which fees are included for the purpose of performing the '10 per cent test' for derecognition of financial liabilities. I FRS 16 Leases Removes the illustration of payments from the lessor relating to leasehold improvements. The impact of adoption of these improvements is not expected to have an impact on the business. (d) Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) On February 12, 2021, the IASB issued amendments to IAS 1 Presentation of Financial Statements and an update to IFRS Practice Statement 2 Making Materiality Judgements to help companies provide useful accounting policy disclosures. The key amendments to IAS 1 include a requirement for companies to disclose their material accounting policies rather than their significant accounting policies; clarifying that accounting policies related to immaterial transactions, other events or conditions are themselves immaterial and as such need not be disclosed; and clarifying that not all accounting policies that relate to material transactions, other events or conditions are themselves material to a company's financial statements. The amendments are effective for annual periods beginning on or after January 1, 2023. Early adoption is permitted. (e) Definition of Accounting Estimate (Amendments to IAS 8) On February 12, 2021, the IASB issued Definition of Accounting Estimates (Amendments to IAS8). The amendments introduce a new definition for accounting estimates, clarifying that they are monetary amounts in the financial statements that are subject to measurement uncertainty. The amendments also clarify the relationship between accounting policies and accounting estimates by specifying that a company develops an accounting estimate to achieve the objective set out by an accounting policy. The amendments are effective for annual periods beginning on or after January 1, 2023. Early adoption is permitted. Page 141 of 181 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 27. Impact of COVID-19 pandemic: On March 11, 2020, the World Health Organization declared that the COVID-19 outbreak was a global pandemic. In response, the Ontario Government implemented a number of emergency orders and/or other legislation to address the COVID related risks and support customers. On March 25, 2020, the OEB established a deferral account for regulatory balances to record the costs of changes to billing systems resulting from the Ontario Government's TOU emergency order, other incremental costs and lost revenues associated with the COVID-19 pandemic. On June 17, 2021, the OEB Staff released their report on the COVID-19 deferral accounts which introduces certain criteria to that may need to be satisfied for amounts to be eligible for recovery. On December 22, 2020, the Ontario Government amended O. Reg. 95/05 Classes of Consumers and Determination of Rates, setting both the TOU rates for on -peak, mid -peak, and off-peak and tiered rates at the TOU off-peak rate of 8.5 cents per kWh. That regulatory amendment was effective through February 22, 2021. On February 23, 2021, residential and small business customers resumed paying TOU and tiered pricing under the RPP at prices that were set by the OEB. In light of the COVID-19 pandemic, new stay at home measures were introduced in Ontario on April 8, 2021 and the OEB ordered a ban on issuing disconnection notices to residential customers until May 6, 2021, which was extended until June 2, 2021. The Corporation extended its ban on disconnecting residential and low volume customers until the transition back into the OEB's annual recurring winter disconnection ban on November 15, 2020. On June 17, 2021, the OEB issued its report on the Regulatory Treatment of Impacts Arising from the COVID-19 Emergency. The Corporation has assessed the balances recorded in the deferral account and has made no changes as a result of the report. The financial impacts of COVID have been reflected in the financial statements. While the pandemic has resulted in incremental operating costs and lost revenues, the Company has evaluated the impact on the financial results as at and for the year ended December 31, 2021 and has determined that there was no material impact. The Company continues to monitor and assess the impact of COVID to the Company's financial results and operations. Potential adverse impacts of the pandemic include, but are not limited to changes in cash flows, working capital and debt requirements. 28. Comparative Figures: Certain comparative figures have been reclassified for conform with the current period's presentation. 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