HomeMy WebLinkAboutFIN-2024-300 - 2023 Audited Consolidated Financial StatementsStaff Report
Financial Services Department www.kitchener.ca
REPORT TO: Audit Committee
DATE OF MEETING: June 24, 2024
SUBMITTED BY: Katie Fischer, Director, Financial Reporting and ERP Solutions, 519-741-
2200 ext. 4630
PREPARED BY: Greg Demacio, Manager, Financial Reporting and Analysis, 519-741-
2200 ext. 7895
WARD(S) INVOLVED: All
DATE OF REPORT: June 18, 2024
REPORT NO.: FIN -2024-300
SUBJECT: 2023 Audited Consolidated Financial Statements
RECOMMENDATION:
That the 2023 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, 2023.
• The key finding of this report is that the independent auditors have completed the audit of
the consolidated financial statements, with the exception of certain remaining outstanding
procedures as noted in the Audit Findings Report. The auditors have provided a draft
Independent Auditor's Report expressing an unqualified audit opinion based on their
completed procedures to date.
• 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 2023 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 24, 2024. 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
*** This information is available in accessible formats upon request. ***
Please call 519-741-2345 or TTY 1-866-969-9994 for assistance.
Page 33 of 254
include The Centre in the Square Inc., Kitchener Public Library, Belmont Improvement Area, and
Kitchener Downtown Improvement Area. The 2023 year-end results for the tax -based operations
and the enterprises were provided to Council in April. Please see Attachment A to this report for
a reconciliation between the non -consolidated figures provided in April 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 -2023-413 External Audit Planning Report for Fiscal Year 2023
APPROVED BY: Jonathan Lautenbach, Chief Financial Officer, Financial Services
ATTACHMENTS:
• Attachment A — Annual Surplus Reconciliation
• Attachment B — City of Kitchener Financial Report Excerpts (including the Audited
Consolidated Financial Statements) for the year ended December 31, 2023
• Attachment C — Audit Committee Presentation
• Attachment D —Audit Findings Report for the year ended December 31, 2023 (KPMG)
Page 34 of 254
Reconciliation of Operating Surplus to Consolidated Annual Surplus
Year Ended Dec
Year Ended Dec
31, 2023
31, 2022
Tax supported surplus (deficit) 3,061,315
1,234,927
Enterprise surplus (deficit) 2,747,877
6,037,951
Total operating surplus (deficit) 5,809,192
7,272,878
Consolidation
Belmont Improvement Area
3,479
(4,668)
Kitchener Downtown Improvement Area
174,425
91,733
Kitchener Public Library
(774,947)
(348,497)
The Centre in the Square
1,639,122
2,731,674
Kitchener Generation Corporation
73,735
49,318
Enova Energy Corporation
7,039,472
10,870,521
8,155,286
13,390,081
Revenues not included in operating surplus
Gain on dilution from prior interest in Kitchener Power Corp. and its affiliates
1,503,675
71,288,452
Reserve fund revenue
40,038,669
43,749,511
Contributions of tangible capital assets
22,638,316
20,157,534
Gain (loss) on sale of tangible capital assets
156,410
(1,854,020)
Other capital revenue
10,360,845
10,135,022
74, 697,916
143, 476, 499
Items in operating surplus, not in consolidated statements
Net transfers to capital and reserves 112,285,025 92,730,228
Various PSAB adjustments 4,993,282 4,099,189
117,278,307 96,829,417
COK expenses not included in operating surplus
Amortization of tangible capital assets (62,174,528) (62,634,282)
Other capital expenses (24,105,822) (21,626,744)
Change in actuarial estimate for employee future benefits (9,620) (415,195)
Reserve fund expenses (6,039,379) (4,128,026)
Other adjustments 929,494 946,479
(91,399,855) (87,857,768)
Annual surplus per consolidated financial statements 114,540,846 173,111,106
Page 35 of 254
THE CORPORATION OF THE CITY OF KITCHENER
Consolidated Statement of Financial Position
As at December 31, 2023
Non-financial assets
Tangible capital assets (Note 16)
Inventory of supplies
Prepaid expenses ullllllllllllllllllll
Accumulated surplus
1,573,660,744
4,679,711
3,354,185
1,581,694,640
$ 1,933,025,383
1,503,217,173
3,689,246
3,044,465
1,509,950,884
$ 1,818,437,014
11111
Accumulated surplus is corn ° Vo
Accumulated operating surplus ( 1,932,128,425 1,818,437,014
Accumulated remeasurement gains 896,958 -
$ 1,933,025,383 $ 1,818,437,014
The accompanying notes are an integral part of these consolidated financial statements.
Page 36 of 254
2023
2022
Financial assets
Cash and cash equivalents
$ 148,883,457 $
113,065,078
Taxes receivable (Note 3)
32,698,753
25,076,645
Trade and other accounts receivable (Note 3)
82,189,192
75,336,969
Loans receivable (Note 6)
5,445,222
5,994,236
Inventory for resale
11,193,185
9,956,554
Portfolio investments (Note 7)
235,992,016
229,381,003
Investment in Enova Energy Corporation (Note 8)
311,762,801
306,970,957
Investment in Kitchener Generation Corporation Note 9
1,625,762
1,858,014
829,790,388
767,639,456
Liabilities
Accounts payable and accrued liabilities uo,°III
IIIIII IIIIII 137,240,749
132,186,313
Deferred revenue - obligatory reserve funds Note 11
9 rY ( )
3,623,694
a
82750528
Deferred revenue -other ������������ �lluo��
8984,020
28,925,532
Municipal debt (Note 12)
IIIIII
52,615,623
57,724,950
Employee future benefits (Note 14)
54,659,910
54,650,290
Asset retirement obligations Note 15
111,335,649
102,915,713
478,459,645
459,153,326
Net financial assets
351,330,743
308,486,130
Non-financial assets
Tangible capital assets (Note 16)
Inventory of supplies
Prepaid expenses ullllllllllllllllllll
Accumulated surplus
1,573,660,744
4,679,711
3,354,185
1,581,694,640
$ 1,933,025,383
1,503,217,173
3,689,246
3,044,465
1,509,950,884
$ 1,818,437,014
11111
Accumulated surplus is corn ° Vo
Accumulated operating surplus ( 1,932,128,425 1,818,437,014
Accumulated remeasurement gains 896,958 -
$ 1,933,025,383 $ 1,818,437,014
The accompanying notes are an integral part of these consolidated financial statements.
Page 36 of 254
THE CORPORATION OF THE CITY OF KITCHENER
Consolidated Statement of Operations
For the Year Ended December 31, 2023
Revenues
Taxation
User fees and charges
Gasworks
Water, sewer and storm water
Other
Government transfers
Contributions of tangible capital assets
Investment income
Penalties and interest on taxes
Development charge revenue recognized
Share of net income of Enova Energy Corporation
(Note 8)
Gain on dilution from prior interest in Kitchener
Power Corp. and its affiliates (Note 8)
Share of net income of Kitchener Generation
Corporation (Note 9)
Other
Total revenues
2023 2023 2022
Budget
$ 153,548,049 $ 154,787,198 $ 144,746,539
102,064,852
141,449,462
44,496,515
22,497,517
22,638.316
11,
3,
38,
100,368,081
151,537,838
47,445,725
27,328,006
22,638,316
,676,514
,822,216
,591,019
95,198,877
142,570,075
40,941,682
27,203,177
20,157,534
9,748,902
4,087,007
27,600,867
,039,472 10,870,521
3,675 1,503,675
71,288,452
V35 73,735
49,318
,478 5,641,320
5,638,130
1,306 564,453,115
600,101,081
Expenses uu"
General government VIII 46,127,438 39,261,030 38,640,697
Protection services 59,714,655 58,183,464 56,434,580
Transportation services 45,041,078 42,737,500 42,718,565
Environmental services a 114,923,860 112,722,266 105,678,769
Health services 2,688,178 3,027,998 2,841,783
Social and family services 2,875,860 3272254 2,613,171
Recreation and cultural service 94,681,395 92,049,513 83,167,812
Planning and development 16,899,399 19,524,185 18,284,456
Gasworks 84,409,487 79,134,059 76,610,142
Total expenses 467,361,350 449,912,269 426,989,975
Annual surplus 87,109,956 114,540,846 173,111,106
Accumulated operating surplus, beginning of year 1,818,437,014 1,818,437,014 1,705,198,678
Adjustment on adoption of the asset retirement
obligations accounting standard - - (59,872,770)
Adjustment for accumulated other comprehensive
income of Enova Energy Corporation - (849,435) -
Accumulated operating surplus, beginning of
year, as restated (Note 2) 1,818,437,014 1,817,587,579 1,645,325,908
Accumulated operating surplus, end of year
(Note 17) $ 1,905,546,970 $ 1,932,128,425 $ 1,818,437,014
The accompanying notes are an integral part of these consolidated financial statements.
Page 37 of 254
THE CORPORATION OF THE CITY OF KITCHENER
Consolidated Statement of Remeasurement Gains
For the Year Ended December 31, 2023
The accompanying notes are an integral part of these consolidate hancial
3
Page 38 of 254
2023 2022
Accumulated remeasurement gains, beginning of year
$ - $ -
Adjustment on adoption of financial instruments accounting standard
155,664 -
Adjustment for accumulated other comprehensive income of Enova
Energy Corporation
849,435 -
Unrealized gains attributable to:
Portfolio investments in equity instruments
73,089 -
Amounts reclassified to the statement of operations:
Portfolio investments in equity instruments
(29,602) -
Other comprehensive loss of:
Enova Energy Corporation
V 151,628 -
Accumulated remeasurement gains, end of year mulllllll
um,. $ 896,958 $ -
The accompanying notes are an integral part of these consolidate hancial
3
Page 38 of 254
THE CORPORATION OF THE CITY OF KITCHENER
Consolidated Statement of Change in Net Financial Assets
For the Year Ended December 31, 2023
Annual surplus
Amortization of tangible capital assets
Acquisition of tangible capital assets
Contributions of tangible capital assets
Gain on disposals of tangible capital assets
Proceeds on disposal of tangible capital assets
Asset retirement obligations change in estimate
Acquisition of inventory of supplies
Acquisition of prepaid expenses
Consumption of inventory of supplies
Use of prepaid expenses
Net remeasurement losses
Change in net financial assets
Net financial assets, beginning of year
Adjustment on adoption of the asset retirement
obligations accounting standard
Adjustment on adoption of financial instruments
accounting standard
Net financial assets, end of vear muuilllllllllllllllllll
The accompanying notes are an
2023 2023 2022
Budget
$ 87,109,956 $
64,896,843
(112,680,129)
(22,638,316)
(265,613)
1,025,198
Illlluu��„"'°lillllllllllll
,447 939
111111 30
114,540,846
64,896,843
(105,147,345)
(22,638,316)
(265,613)
1,025,198
(8,314,338)
(7,368,168)
(2,232,682)
6,377,703
1,922,962
108,141
2,688,949
308,486,130
155,664
934,069 $ 351,330,743
financial statements.
173,111,106
65,164,133
(116,734,315)
(20,157,534)
(3,849,649)
4,494,090
(5,842,724)
(8,140,732)
(2,573,271)
8,450,687
1,505,099
95,426,890
309,588,965
(96,529,725)
308,486,130
Page 39 of 254
THE CORPORATION OF THE CITY OF KITCHENER
Consolidated Statement of Cash Flow
For the Year Ended December 31, 2023
Operating
Annual surplus
Items not involving cash
Amortization of tangible capital assets
Gain on disposals of tangible capital assets
Share of net income of government business enterprises
Gain on dilution from prior interest in Kitchener Power Corp. and its affiliates
Change in employee future benefits
(`nnfriNifinnc nffannihla nanifal accafc
2023 2022
$ 114,540,846 $ 173,111,106
64,896,843
(265,613)
(7,113,207)
(1,503,675)
9,620
/77 RIR 29 R1
65,164,133
(3,849,649)
(10,919,839)
(71,288,452)
415,195
(On 1 1;7 Fid\
Municipal debt repaid (9,483,327) (13,727,325)
Net change in cash from financing activities (5,109,327) (2,237,325)
Capital
Acquisition of tangible capital assets (103,845,971) (114,782,055)
Proceeds on disposal of tangible capital assets 1,025,198 4,494,090
Net change in cash from capital activities (102,820,773) (110,287,965)
Net change in cash and cash equivalents 35,818,379 1,808,665
Cash and cash equivalents, beginning of year 113,065,078 111,256,413
Cash and cash equivalents, end of year $ 148,883,457 $ 113,065,078
The accompanying notes are an integral part of these consolidated financial statements
Page 40 of 254
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Financial Statements
For the Year Ended December 31, 2023
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
revenues, and expenditures of those City funds an
determined to comprise a part of the aggregate
except for the City's government businesses w5
hi
The following boards, municipal ei
consolidated financial statements:
• Kitchener Public Library
• Kitchener Downtown Improvement Areo
• Belmont Improvement Area of Ma i
• The Centre in the Squa
• Waterworks Enterprise
• Gasworks Enterprise
• Sewer Surcha
• Storm Water P
• Building En
• Golf Enterpri
• Parking Enterl
All inter -organizational
,ets, lid" es, reserves, surpluses/deficits,
mental fu „ns or entities which have been
Ps based uO''on control exercised by the City
,counted for on the modified equity basis of
and utilities have been included in the
nd transactions and balances have been eliminated.
Government business enterprises
Enova Energy Corporation and Kitchener Generation Corporation 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. The City's share of other comprehensive income or loss is reported in the
Consolidated Statement of Remeasurement Gains.
iii. Accounting for region and school board transactions
The taxation, other revenue, expenditures, assets and liabilities, with respect to the operations of the
school boards and the Regional Municipality of Waterloo, are not reflected in these consolidated financial
statements.
iv. Trust funds
Trust funds and their related operations administered by the City are not consolidated (see Note 5).
Page 41 of 254
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Financial Statements
For the Year Ended December 31, 2023
1. Summary of significant accounting policies (continued)
b. Basis of accounting
Accrual basis of accounting
The consolidated financial statements are prepared using the accrual basis of accounting. The accrual
basis of accounting recognizes revenues in the period in which the transactions or events occurred that
gave rise to the revenues. Expenses are recognized in the period the goods and services are acquired
and a liability is incurred or when an external transfer is due.
ii. Cash and cash equivalents
Cash and cash equivalents include cash on hand and highly li investments with original maturity of
90 days or less as at the end of the year.
iii. Trade and other accounts receivable
Trade and other accounts receivable are reported ne III IIIIIIVi11ny allowallllnlll r doubtful accounts.
iv. Loans receivable
Illlllllll�llul����Illuu��
Loans receivable are reported net of any allowance ubtful accounts. Interest income is recorded as
it accrues. When the value of any loanr able is tified as impaired, an allowance is set up to
offset the carrying amount and any adjus incl in materials and services expense in the
period the impairment is recognized. mulllll
v. Inventory for resale Illlllllllllllllllll lullllll
Inventory for resale is value,i VIII he to of cos r net realizable value on an average cost basis.
vi. Portfolio investments
Portfolio investmen IIIIIt nts are carried at cost or amortized cost with transaction costs
added to the car value a ial gnition. Portfolio investments in equity instruments are carried at
fair value with tr ction cost pensed. Interest income is recorded as it accrues. When the value of
any portfolio inves tis id ified as impaired, the carrying amount is adjusted to the estimated
realizable amount an ments are included in investment income in the period the impairment is
recognized.
vii. Deferred revenue
Government transfers, contributions and other amounts are received from third parties pursuant to
legislation, regulation or agreement and may only be used in the conduct of certain programs, in the
completion of specific work or for the purchase of tangible capital assets. 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, the
Canada Community -Building Fund, building permits, and recreational land. 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.
Page 42 of 254
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Financial Statements
For the Year Ended December 31, 2023
1. Summary of significant accounting policies (continued)
b. Basis of accounting (continued)
viii. Employee future benefits
The contributions to a multi-employer, defined benefit pension plan are expensed when contributions are
due. The costs of 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 retirement benefits are actuarially determined using t e projected benefits method prorated
on service and management's best estimate of retirement `s of employees, salary escalation,
expected health care costs and plan investment performance bilities are actuarially determined using
discount rates that are consistent with the market rates III uality debt instruments. Any gains or
losses from changes in assumptions or experience ar ortiz ver the average remaining service
9 p p 9 9
period for active employees. muillllllllll lllllium.
ix. Contaminated sites
Contaminated sites are defined as the result of col"q
sediment of a chemical, organic, or radio 've mater
standard. This Standard relates to sites t gat in
an unexpected event resulted in contami
Consolidated Statement of Financi.aLP,osl
x. Asset retirement obli
A liability for an asset retire
retire a tangibl
legal obligatior
transaction or
will be given ul
includes all co:
financial report
ion being introduced into air, soil, water or
live organism that exceeds an environment
lPtive use and sites in productive use where
fiber 31, 2023, no liability is recorded on the
ognized at the best estimate of the amount required to
omponen thereof) at the financial statement date when there is a
retirement costs in relation to a tangible capital asset, the past
t „ability has occurred, it is expected that future economic benefits
esti ate of the amount can be made. The best estimate of the liability
ble to asset retirement activities, based on information available at the
When the cash flows an . ing required to fulfill the retirement obligation can be reasonably estimated,
a present value technique may be used to account for the obligation. When there is uncertainty about the
amount or timing of cash flows to settle the ARO, the present value technique may not be used.
Uncertainties about timing and amount to settle an ARO does not remove the obligation but will affect its
measurement.
When a liability for an asset retirement obligation is initially recognized, a corresponding asset retirement
cost is capitalized to the carrying amount of the related tangible capital asset (or component thereof). The
asset retirement cost is amortized over the useful life of the related asset. Where the obligation relates to
an asset which is no longer in service, and not providing economic benefit, the obligation is expensed
upon recognition.
At each financial reporting date, the City reviews the carrying amount of the liability. Changes to the
liability arising from revisions to either the timing or the amount of the original estimate are recognized as
an increase or decrease to the carrying amount of the related tangible capital asset.
The City continues to recognize the liability until it is settled or otherwise extinguished. Disbursements
made to settle the liability are deducted from the reported liability when they are made.
Page 43 of 254
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Financial Statements
For the Year Ended December 31, 2023
1. Summary of significant accounting policies (continued)
b. Basis of accounting (continued)
xi. Non-financial assets
Non-financial assets are not available to discharge liabilities and are held for use in the provision of
services. They have useful lives that extend beyond the current year and are not intended for sale in the
ordinary course of operations. The change in non-financial assets during the year, together with the
excess of revenues over expenses, provides the consolidated change in net financial assets for the year.
a. Tangible capital assets
Tangible capital assets are recorded at cost which includIII`IIIIamounts that are directly attributable
to acquisition, construction, development or bettermen I asset. The cost less residual value of
the tangible capital assets is amortized on a straighN� e b over their estimated useful lives as
follows: mulllllllllllu^ um.
Assets 4&orti4p6n Period
Land
Land improvements
Buildings & building improvements
Leasehold improvements
Machinery & equipn
Computer hardware
Computer software
Linear assets
Vehicles mullllll
b. Contrib
capital assets
nal cost of land is not amortized
10 to
PVdFW useful life of the improvement or the lease
term, whichever is shorter
1 to 15 years
5 years
5 to 10 years
5 to 100 years
5 to 16 years
Tangible capital a"s eived as contributions are recorded at their fair value at time of receipt
and are recorded as nue.
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 44 of 254
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Financial Statements
For the Year Ended December 31, 2023
1. Summary of significant accounting policies (continued)
b. Basis of accounting (continued)
xii. 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 reve hen transfer stipulations give rise to
a liability. Transfer revenue is recognized in the statement o erations as the stipulation liabilities are
settled. mullllll um.
Government transfers, contributions, and other amo are rec d from third parties pursuant to
legislation, regulation, or agreement and may only used in the c ct of certain programs, in the
completion of specific work, or the purchase of it able c tal asset. addition, certain user charges
and fees are collected for which the related servic u t to be performed. Revenue is recognized in
the p p urre rvices performed, or the tangible assets are
acquired.rwhen the related expenses are inc um.
Tax revenue is recognized when it 1��QWbriod for which the tax is levied. Tax revenue
reported relates to property taxes. VIII
xiii. Use of estimates
The preparation of the fina sta res management to make estimates and assumptions
that affect the reported amoun sets a iabilities, the disclosure of contingent assets and liabilities
at the date of the fin to is and the reported amounts of revenues and expenses during the
year. These esti s an su ons, including employee future benefits payable, legal claims
provisions, liabili or contami d si s, the valuation of tangible capital assets and their related useful
lives and amorti are ba on management's best information and judgment and may differ
significantly from fut ctual uIts.
In addition, the City's i III entation of PS 3280 Asset Retirement Obligations has resulted in the
requirement for management to make estimates regarding the useful lives of affected tangible capital
assets and the expected retirement costs, as well as the timing and duration of these retirement costs.
xiv. Foreign currency translation
Foreign currency transactions are translated into Canadian dollars by applying the exchange rate in
effect on the transaction date. Monetary assets and liabilities denominated in a foreign currency are
adjusted to reflect the exchange rate in effect at the financial statement date. Exchange gains and losses
are recognized directly in the statement of operations.
Page 45 of 254
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Financial Statements
For the Year Ended December 31, 2023
1. Summary of significant accounting policies (continued)
b. Basis of accounting (continued)
xv. Financial instruments
Financial instruments are recorded at fair value on initial recognition and subsequently recorded at cost
or amortized cost, except for equity investments and derivatives which are recorded at fair value.
Amortized cost is determined using the effective interest method. Financial assets measured at cost or
amortized cost are assessed for indicators of impairment at each financial statement date. Impairment
losses are recognized in the statement of operations.
Financial instruments that are subsequently measured at fvalue are classified based on the
observability of inputs as follows: '11mullllll.
• Level 1 - quoted prices (unadjusted) in active marketlV, °Illlllllluu
• Level 2 - inputs other than quoted prices includ ithin Level 1 are observable, either directly
(i.e., as prices) or indirectly (i.e., derived from es); allOP
• Level 3 - inputs that are not based on observabl et data (unobservable inputs).
The City evaluates contractual obligatio a ex'o
a of embedded derivatives and separately
measures the fair value of the derivative co o n racteristics of the derivative are not closely
related to the economic characteristics and s, ract itself.
Unrealized gains and losses fro es in fair value of financial instruments are recognized in the
statement of remeasuremen ins a losse the period they occur. Once realized, the cumulative
gain or loss is reclassified t „ sta„ fuuigp„ ations.
Change in accounti
In 2023, the City adopt a Public for AWbounting Board's new standard for the recognition, measurement,
and disclosure of a liabV
rement obligations under PS 3280 Asset Retirement Obligations. The
new standard addressesof legal obligations associated with the retirement of certain tangible
capital assets, such as val in buildings by public sector entities. Under the new standard, a
liability for an asset retireis recognized as the best estimate of the amount required to retire a
tangible capital asset when certain criteria are met as described in Note 1. b. x.
Pursuant to the recommendations of PS 3280, the change was applied retroactively using the modified
retrospective method and prior periods have been restated to reflect the liability for asset retirement obligations
as of January 1, 2022. In accordance with the provisions of this new standard, the City reflected the following
adjustments for the year ended December 31, 2022.
Tangible capital assets
Asset retirement obligations
Accumulated operating surplus, beginning of year
Materials and services
Amortization expense
2022
Before 2022
Adjustment Adjustment As Restated
$ 1,467,695,615 $
35,521,558
$ 1,503,217,173
-
(102,915,713)
(102,915,713)
(1,705,198,678)
59,872,770
(1,645,325,908)
176,455,871
(1,070,617)
175,385,254
56,628,375
8,535,758
65,164,133
Loss on disposals of tangible capital assets 1,617,558 56,244 1,673,802
Page 46 of 254
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Financial Statements
For the Year Ended December 31, 2023
2. Change in accounting policy (continued)
In 2023, the City adopted PS 1201 Financial Statement Presentation, PS 2601 Foreign Currency Translation,
PS 3041 Portfolio Investments, and PS 3450 Financial Instruments. The standards were applied prospectively
from January 1, 2023. The new standards provide comprehensive requirements for the recognition,
measurement, presentation and disclosure of financial instruments and foreign currency transactions.
Under PS 3450, all financial instruments, including derivatives, are included on the statement of financial
position and are measured either at fair value or amortized cost based on the characteristics of the instrument
and the City's accounting policy choices (see Note 1. b. xv.). In accordance with the provisions of this new
standard, the City reflected the following adjustments at January 1, 2023:
• A gain on remeasurement of $155,664 to investments and to ac ulated remeasurement gains due to
the unrealized gain of the City's investments previously classifi s held -to -maturity or available for sale
being reclassified to accumulated remeasurement gains. 11,,, ,,,,,4
• An adjustment for accumulated other comprehensive in a of Eno�0 ergy Corporation of $849,435 to
accumulated operating surplus and to accumulated re surement gain
3. Taxes and accounts receivable
Taxes receivable are reported net of a valuatio anc 0 813 112 2022 - 10 071 810. Trade and
N ( S )
other accounts receivable are reported net of a v an f $1,840,818 (2022 - $1,531,662).
4. Operations of school boards and
Further to Note 1 a) iii, the
Municipality of Waterloo are
Taxation and user ch
Share of payments in lie
Share of linear properties
Amounts reauisitioned
5. Trust funds
nal ipality of Waterloo
Cher r enues d requisitions for the school boards and the Regional
of
um„ School Boards Region Total
$ 83,383,153 $ 335,642,670 $ 419,025,823
559 3,569,552 3,570,111
45,038 126,821 171,859
$ 83.428.750 $ 339.339.043 $ 422.767.793
Trust funds administered by the City have not been included in the Consolidated Statement of Financial
Position, nor have their operations been included in the Consolidated Statement of Operations. The trust funds
under administration are comprised of cemetery perpetual care and prepaid interment funds totalling
$18,979,167 (2022 - $18,313,775).
Page 47 of 254
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Financial Statements
For the Year Ended December 31, 2023
6. Loans receivable
Loans receivable are made up of the following:
Major capital improvement loans receivable
2023 2022
$ 5,306,487 $ 5,832,783
Loans receivable with forgiveness provisions 25,396 25,396
Minor capital improvement and other loans receivable 113,339 136,057
$ 5,445,222 $ 5,994,236
Major capital improvement loans are individual loans in excess of $5 00 when issued with no forgiveness
provision built into the loan. These loans have repayment terms ra g from 10 to 12 years (2022- 10 to 12
years). All major capital improvement loans are unsecured and erest at rates ranging from 1.32% to
4.10% (2022 - 1.32% to 4.1091.). III um .
Forgivable loans are those initially offered with forgiven
category are unsecured and have repayment terms of �
15% (2022 - 1596). The balances recorded are net of
loans are 8% (2022 - 896).
Minor capital improvement and other loans recel
categories. There is a variety of terms related t,
(2022 - 1 to 5 years). The majority of these loans
others are unsecured. The interest rate, ase
7. Portfolio investments
Investments are made up of
Guaranteed investment ce
Bonds and debentures
ions built i he agreement. All loans in this
r5 years . The forgiveness provisions are
ice for forgiveness. Interest rates on these
prisI
loan receivable not fitting into the first two
payment terms ranging from 1 to 5 years
NeA the asset the loan was granted to finance, but
are 0% (2022 - 0 0).
2023
2023
2022
2022
Carrying
Market
Carrying
Market
Value
Value
Value
Value
$ 204,706,601
$ 211,372,540 $
199,795,915 $
201,778,117
30,791,793
28,799,479
29,177,482
26,282,241
Shares 493,622 493,622 407,606 434,206
$ 235,992,016 $ 240,665,641 $ 229,381,003 $ 228,494,564
Shares are carried at fair value (2022 - cost) and are Level 1 instruments in the fair value hierarchy.
8. Investment in Enova Energy Corporation
Under the provincial government's Electricity Competition Act (Bill 35), Kitchener Power Corp. ("KPC"), a
holding company, along with its wholly owned subsidiaries, including Kitchener -Wilmot Hydro Inc. ("KWHI"),
was incorporated on July 1, 2000.
On August 1, 2000, under by-laws passed by the City and the Township of Wilmot ("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 KPC and a 92.25% share in long-term notes payable by
the affiliates for the assets transferred. Certain surplus property assets and cash funds were excluded from the
transfer and turned over to the City and Wilmot.
Page 48 of 254
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Financial Statements
For the Year Ended December 31, 2023
8. Investment in Enova Energy Corporation (continued)
Mergers of the holding companies, KPC and Waterloo North Hydro Holding Corporation ("WNHC"), and the
local distribution companies, KWHI and Waterloo North Hydro Inc. ("WNHI") were approved by the Councils of
the City, Wilmot, the City of Waterloo, the Township of Woolwich, and the Township of Wellesley in 2021. A
Mergers, Amalgamations, Acquisitions and Divestitures application was filed with the Ontario Energy Board on
February 4, 2022 and approved on June 28, 2022.
The merger of KPC and WNHC closed on September 1, 2022 and the new holding company continues as
Enova Energy Corporation, a corporation amalgamated under the laws of Ontario. The City obtained a 53.39%
share of the common shares and 92.25% of the Class A special shares. As a result of the transaction, the City
recorded a gain of $71,288,452 on dilution from its prior interest in KPC. The long-term notes payable were re-
issued at the same amount and rates. Immediately following, KW �IIVand WNHI legally amalgamated on
September 1, 2022 and the new local distribution company conti as Enova Power Corp., a corporation
amalgamated under the laws of Ontario. Enova Power Corp. is 1 ,d by Enova Energy Corporation.
In April 2023, the Class A special shares were remeasured 63 per sfor post -closing adjustments. As
a result, the City recorded a gain of $1,503,675. The share re immediate eemed.
The City's investment in Enova Energy Corporation is co sellhe following:
2023 2022
Common shares 174,183,807 174,183,807
Long-term notes receivable 70,997,576 70,997,576
Share of net income and prior erio Us nts d to chan es in
p p 9
accounting policies since acquisi , net ividen 65,883,611 61,789,574
Share of other com rehensive inc si n 697,807 -
$ 311,762,801 $ 306,970,957
The Enova Energy Cor tion no re secured and bear interest at the rate of 3.23% (2022 - 3.2396).
There are no repayme ms and th is no intent to redeem the notes or the shares.
The continuity of the City'stme� Enova Energy Corporation is as follows:
�ii�lllllll������
2023
Balance, beginning of year $ 306,970,957
Gain on dilution from prior interest in Kitchener Power Corp. and its affiliates 1,503,675
Redemption of Class A special shares (1,503,675)
Share of net income for year 7,039,472
Share of other comprehensive loss for year (151,628)
Dividends received during year (2,096,000)
Balance, end of year $ 311,762,801
Page 49 of 254
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Financial Statements
For the Year Ended December 31, 2023
8. Investment in Enova Energy Corporation (continued)
2022
Balance, beginning of year
$ 231,241,809
Share of net income of Kitchener Power Corp. and its affiliates for the
The following table provides condensed financial inform
period from January 1, 2022 to August 31, 2022
6,306,210
Dividends received from Kitchener Power Corp. from January 1, 2022 to
2022
August 31, 2022
(6,429,825)
Balance, September 1, 2022
231,118,194
Gain on dilution from prior interest in Kitchener Power Corp. and its affiliates
71,288,452
Share of net income of Enova Energy Corporation for the period from uo
758,156,000
September 1, 2022 to December 31, 2022
Regulatory assets
50,638,000
4,564,311
0���
Dividends received from Enova Energy Corporation from Septe
891,032,000
876,733,000
2022 to December 31, 2022
188,476,000
-
Balance, end of year
$ 306,970,957
The following table provides condensed financial inform
III wit ° pect to Enova Energy Corporation:
$ 472,900,000
2023
2022
Financialp osition
(459,715,000)
(176,859,000)
Current assets
$ 82,238,000
$ 93,352,000
Non-current assets
758,156,000
731,509,000
Regulatory assets
50,638,000
51,872,000
Total assets
891,032,000
876,733,000
Current liabilities
188,476,000
188,649,000
Long-term debt III
110,976,000
111,032,000
Regulatory liabilities ^illl
11,346,000
14,717,000
Other liabilities
128,112,000
119,031,000
Total liabilities
438,910,000
433,429,000
Net assets
$ 452,122,000
$ 443,304,000
For the period
For the period
January 1,
September 1,
2022 to
2022 to
August 31,
December 31,
2023 2022
2022
Results of operations
Revenues
$ 472,900,000
$ 183,695,000
$ 155,208,000
Expenses
(459,715,000)
(176,859,000)
(146,659,000)
Net income
13,185,000
6,836,000
8,549,000
City's share of net income - 53.39%
$ 7,039,472
$ 6,306,210
$ 4,564,311
Page 50 of 254
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Financial Statements
For the Year Ended December 31, 2023
9. 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:
Financial position
2023
2022
Common shares
$ 162,576 $
185,801
Long-term notes receivable
1,463,186
1,672,213
Share of net income since acquisition, net of dividends
III
1,869,490
Current liabilities
1,625,762
1,858,014
Long-term debt
1,463,186
1,672,213
The notes receivable are unsecured and bear intere
0
the a of 5.01 /o. To the extent that Kitchener
Generation Corporation has positive annual cash flows aft
divvidend payment, the cash will be returned to
the City as repayment of the outstanding debt a return o
tal. The proportion to which they contribute is
90% debt, 10% equity.
Vo
The continuity of the City's investment in Kitchener n
rporation is as follows:
2023
2022
Balance beginning of year
J J Y 1111111
1 858 014
2,090,266
Share of net income for year
Dividends received durin ar
73,735
(73,735)
49,318
(49,318)
Return of capital uo
p ���illll
(23,225)
23 226
i )
Repayment of outstandi ebt
209,027
209,026
Balance, end of year
$ 1,625,762 $
1,858,014
The following table provides con sed financial information with respect to Kitchener Generation Corporation:
2023
2022
Financial position
Current assets
$ 4,478 $
11,478
Capital assets
1,625,760
1,858,012
Total assets
1,630,238
1,869,490
Current liabilities
4,476
11,476
Long-term debt
1,463,186
1,672,213
Total liabilities
1,467,662
1,683,689
Net assets
$ 162,576 $
185,801
Page 51 of 254
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Financial Statements
For the Year Ended December 31, 2023
9. Investment in Kitchener Generation Corporation (continued)
2023 2022
Results of operations
Revenues $ 389,765 $ 386,220
Expenses (316,030) (336,902)
Net income 73,735 49,318
City's share of net income - 100% $ 73,735 $ 49,318
10. Insurance pool
Accounts payable and accrued liabilities include an amount of I ;671,086 (2022 - $12,733,568) which
represents funds belonging to the Waterloo Region Municipalities ce Pool (the "Pool") and administered
by the City on behalf of the Pool's members. The members e r an a ment in 1998 to purchase property
damage and public liability insurance on a group basis and s a retaine el of risk.
Illllllllull��
The members pay an actuarially determined annual I III to fupl. insurance, prefund expected losses and
contribute to a surplus. The Pool has purchased insura to d losses above a predetermined deductible
and any losses above a predetermined total in any year.
The City's share of Pool levies is 25.04% (2022 ° and hare of the Pool's cumulative surplus as at
May 31, 2023 was $1,186,489 (2022 - $1,644,2 T s re of the Pool's cumulative surplus has not
been included in the Consolidated Statement of Fin c 1111111 os
11. Deferred revenue -obligatory res, In
Obligatory deferred revenue is
2023 2022
Development charges°'011llllll $ 55,957,838 $ 45,833,994
Canada Community -Buil and 8,043,263 10,881,638
Building 14,212,512 13,703,780
Recreational land 15,410,081 12,331,116
$ 93,623,694 $ 82,750,528
Page 52 of 254
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Financial Statements
For the Year Ended December 31, 2023
11. Deferred revenue - obligatory reserve funds (continued)
The continuity of obligatory deferred revenue is as follows:
Balance, January 1, 2023
Collections
Interest and investment
income earned
Deferred revenue recognized
Balance. December 31, 2023
Balance, January 1, 2022
Collections
Interest and investment
income earned
Deferred revenue recognized
Canada
Community -
Development Building Recreational
charges Fund Building land Total
$ 45,833,994 $ 10,881,638 $ 13,703,780 $ 12,331,116 $ 82,750,528
30,717,690 7,718,266 74,285 2,610,130 41,120,371
1,019,813
$ 9,009,268
2025
49,270
424,937
2,160,116
21,613,659
10,622,737
2028
823
43,898
32,407,321
55,957,838
8,043,2636
14,21
15,410,081
93,623,694
IIVi
46,022,757
12,707
IIIA 4,657,882
9,660,257
83,114,403
26,819,316
7,396,
-
2,896,115
37,112,103
592,789
Balance, December 31, 2022 $ 45,E
12. Municipal debt lull
The City has assumed responsibility
issued by other municipa ' e
$52,615,623 (2022 - $57 4,950).
The annual principal rep ents are:
324 """"iilllllll 294,048 189,588 1,153,749
(1,248,150) (414,844) (38,629,727
1,638 $ 13,703,780 $ 12,331,116 $ 82,750,528
payment -of principal and interest charges on certain long-term debt
of the year, the outstanding principal amount of this liability is
2024 "pllllll puu.
$ 9,009,268
2025
9,439,372
2026
9,219,468
2027
6,222,174
2028
5,147,271
2029 and thereafter
13,578,070
$ 52,615,623
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 0.75% to 5.40% (2022 - 0.30% to 5.6596). Interest
charges for 2023 relating to municipal debt totalled $1,703,950 (2022 - $1,888,318).
Page 53 of 254
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Financial Statements
For the Year Ended December 31, 2023
13. 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 2023
amounting to $12,651,041 (2022 - $11,994,340).
The latest available report for the OMERS plan was as at December 31, 2023. At that time the plan reported a
$4.2 billion actuarial deficit, based on actuarial liabilities of $136.2 billion and actuarial assets of $132.0 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, 2023, the City has no obligati n under the past service provisions of
the OMERS agreement. mui1l 1
14. Employee future benefits
The estimated liability for employee future benefits is comprill """of the follol
Sick leave benefit plan
Retirement benefits
Workplace Safety and Insurance Board
III
$
2023
21,053,287 $
24,851,723
8,754,900
54,659,910
2022
21,048,254
24,344,236
9257800
54,650,290
Significant actuarial assum do r
rNorkplace Safety and
Sick Leave and Retirement
Insurance Board
Benefits
2023
2022
2023
2022
Discount rate
4.60
5.00
4.60
5.00
Salary growth assumption
N/A
N/A
3.00
3.00
CPI increase assumptions VIII
2.50
2.50
2.50
2.50
Health care initial trend rate III
N/A
N/A
5.50
5.90
Health care ultimate trend rate
N/A
N/A
4.00
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 54 of 254
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Financial Statements
For the Year Ended December 31, 2023
14. 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 $1,774,010 (2022 - $1,953,862).
A reserve fund to provide for this liability is included in accumulated surplus, in the amount of $6,706,355 (2022
- $6,473,313).
Anticipated undiscounted payments to employees who are eligible to retire are
2024
2025
2026
2027
2027
2028 and thereafter
The actuarial valuation of the future liability
5.0096). The last actuarial valuation for this liability
The actuarial expense for the
following items:
Current period benefit
Amortization of actuar
Sick leave benefit expen°
Sick leave benefit interest
Total expenses related to sick a benefits
2
1,653,641
1,052,356
1,108,277
884,453
379,818
7,676,965
12,755,510
e JWmes a discount rate of 4.60% (2022 -
at December 31, 2023.
9,043 (2022 - $2,132,906) and is comprised of the
2023
2022
$ 1,092,378 $
1,286,234
(187,954)
276,463
904,424
1,562,697
874,619
570,209
$ 1,779,043 $
2,132,906
As at December 31, 2023, the unamortized actuarial gains were $5,210,717 (2022 - $3,761,247) and are
amortized over 11 to 13 years (2022 - 11 to 13 years).
Page 55 of 254
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Financial Statements
For the Year Ended December 31, 2023
14. Employee future benefits (continued)
b. 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
$1,260,725 (2022 - $1,185,801).
The City holds no reserve to meet this liability.
The actuarial valuation of the future liability for retirement benefits assumes a discount rate of 4.60% (2022 -
5.00%) and inflation rates for benefit premiums of 4.0% to 5.5% (2022 - 4.0% to 5.996). The last actuarial
valuation for this liability was completed at December 31, 2023. V
The actuarial expense for the current year was $1,768,212 (20 ($1,871,652) and is comprised of the
following items:
2023 2022
Current period benefit cost 830,645 1,126,425
$111111 �$
p III Ilui��
Amortization of actuarial (gains) losses (319,421) 113,028
Amortization plan improvements 332,736
Retirement benefit expense a 843,960 1,239,453
Retirement benefit interest expense 924,252 632,199
Total expenses related to retirement b $ 1,768,212 $ 1,871,652
As at December 31, 2023, the Ortiz actuari ains were $2,739,601 (2022 - $6,059,480) and are
amortized over 11 to 13 years (20 1
c. Workplace Safety an c rd
The Workplace Safety Insuranc oar SIB) administers injured worker benefits payments on behalf of
the City as a Schedule° employer. a amount of benefits paid during the year were $2,324,200 (2022 -
$2,465,700).
A reserve fund to provide fort ity is included in accumulated surplus, in the amount of $5,847,131 (2022
- $5,248,311).
The actuarial valuation of the future liability for WSIB assumes a discount rate of 4.60% (2022 - 5.0096). The
last actuarial valuation for this liability was completed at December 31, 2022.
The actuarial expense for the current year was $1,821,300 (2022 - $2,016,000) and is comprised of the
following items:
2023 2022
Current period benefit cost $ 853,400 $ 996,400
Amortization of actuarial losses 405,600 702,300
WSIB benefit expense 1,259,000 1,698,700
WSIB benefit interest expense 562,300 317,300
Total expenses related to WSIB benefits $ 1,821,300 $ 2,016,000
As at December 31, 2023, the unamortized actuarial losses were $2,151,100 (2022 - $2,296,900) and are
amortized over 13 years (2022 - 12 years).
Page 56 of 254
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Financial Statements
For the Year Ended December 31, 2023
15. Asset retirement obligations
The City's asset retirement obligations are comprised of the following:
a. Asbestos obligations
The City owns or leases several buildings that are known to have asbestos, which represents a health hazard
upon demolition or renovation of the building. The Occupational Health and Safety Regulations, 1996 outlines
the legal obligation to remove it. Following the adoption of PS 3280 Asset Retirement Obligations, the City
recognized an obligation relating to the removal of the asbestos in these buildings as estimated at January 1,
2022.
b. Underground fuel storage tanks
The City owns and operates several fuel storage tanks which repre s a risk of ground contamination due to
leaks and corrosion. The Environmental Protection Act outlines I obligation to remove the tanks and
clean up the surrounding soil. Following the adoption of P 80 Retirement Obligations, the City
recognized an obligation relating to the removal of the tanks ° the surro $g soil remediation as estimated
at January 1, 2022. u
c. Gas mains and service lines lull um. .uuillllll�lllu
The City owns and operates a network of gas rr
the city. When these assets have reached the
replacement, they are typically abandoned in pla
The Canadian Standards Associatio
maintenance, deactivation, and aba
of PS 3280 Asset Retirement Obli
mains and service lines as estimat 6
The continuity of asset
and ser1A lines that deliver gas to customers throughout
eir u life or when they have been identified for
aZ662 covers the design, construction, operation,
oil gas industry pipeline systems. Following the adoption
re nized an obligation relating to the abandonment of gas
is as follows:
Bui dings and
Leasehold
Improvements
(Asbestos)
Machinery and
Equipment
(Storage
Tanks)
Linear Assets
(Gas Mains
and Service
Lines)
Total
Balance, January 1, 2023
$ 13,073,303 $
474,072 $
89,368,338 $
102,915,713
Liabilities incurred
-
-
1,301,374
1,301,374
Liabilities settled
-
-
(1,195,776)
(1,195,776)
Change in estimate
916,961
25,928
7,371,449
8,314,338
Balance, December 31, 2023
13,990,264
500,000
96,845,385
111,335,649
Balance, January 1, 2022
11,413,762
413,893
84,702,071
96,529,726
Liabilities incurred
-
-
1,952,260
1,952,260
Liabilities settled
-
-
(917,948)
(917,948)
Change in estimate
1,659,541
60,179
3,631,955
5,351,675
Balance, December 31, 2022
$ 13,073,303 $
474,072 $
89,368,338 $
102,915,713
Page 57 of 254
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Financial Statements
For the Year Ended December 31, 2023
16. Tangible capital assets
The continuity schedule of tangible capital assets is presented in Schedule A.
Assets under construction having a value of $48,726,778 (2022 - $68,956,355) have not been amortized.
Amortization of these assets will commence when the assets are put into service.
Contributed tangible capital assets of $22,638,316 (2022 - $20,157,534) have been recognized at fair market
value at the date of contribution. The contributed assets include land rights 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 (2022 - $nil).
The amount of interest capitalized was $nil (2022 - $nil). mullllllu
17. Accumulated operating surplus
The accumulated operating surplus consists of individual
) and reserve funds as follows:
2023 2022
Total surplus
$1,503,217,173
34,773,543
306,970,957
1,858,014
(54,650,290)
(102,915,713)
1,795,782,086 1
Reserve funds set a for speci urp"Vbses by Council for:
Capital 56,854,924 61,688,848
Stabilization 49,591,194 38,734,604
Program specific III 12,199,444 11,890,075
Corporate 15 026 992 14,366,049
p >
133,672,554 126,679,576
Reserve funds set aside for specific purposes by consolidated
entities:
Kitchener Public Library 449,336 584,339
Kitchener Downtown Improvement Area Board of Management 50,000 50,000
The Centre in the Square Inc. 2,174,449 1,869,415
2,673,785 2,503,754
Total reserve funds 136,346,339 129,183,330
Accumulated operating surplus $1,932,128,425 $1,818,437,014
Page 58 of 254
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Financial Statements
For the Year Ended December 31, 2023
18. 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.
19. 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, li„Wries, and community services.
Segmented information has been presented in Schedule B by r functional classification of activities
provided, consistent with the Consolidated Statement of Operatioll
,,I I rovincially legislated requirements.
For each reported segment, revenues and expenses represe oth amo"111 that are directly attributable to the
segment and amounts that are allocated on a reasonable u
The accounting policies used in these segments are c Istell lith those followed in the preparation of the
consolidated financial statements as disclosed in Note 1. IIIIIIIIIIIIIIIIII llll�
20. Budget figures u
The budget figures reflected in these consolidate'
i is ements are those approved by Council at a
meeting on February 2, 2023. Budget have n translated to reflect Public Sector Accounting Board
standards as follows: .Ilmuillllll
Approved operating b
Adjustments ""iiIIIIII
Reserve budget revenueVsures
es
Non -tangible capital asseital budget
Consolidated entity budg
Share of net income of government business enterprises
Debt charge recoveries
Gain on diluation from prior interest in Kitchener Power Corp. and its affiliates
Contributions of tangible capital assets
Amortization of tangible capital assets
Unfunded accrual for employee future benefits
Net transfers to capital and reserve funds
2023
62,533,929
(35,178,667)
2,645,137
7,113,207
219,781
1,503,675
22,638,316
(64,896,839)
(9,620)
86,524,585
Debt principle repayments net of recoveries 4,016,452
Consolidated financial statement budget surplus $ 87,109,956
21. Financial instruments
The City is exposed to various risks through its financial instruments and continues to monitor, evaluate, and
manage these risks. The following analysis provides information about the City's risk exposure and
concentration as at December 31, 2023.
Page 59 of 254
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Financial Statements
For the Year Ended December 31, 2023
21. Financial instruments (continued)
a. Credit risk
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by
failing to discharge an obligation. The City is exposed to credit risk from its financial assets including cash and
cash equivalents, trade and other accounts receivable, loans receivable, and portfolio investments. The
carrying amounts of financial assets represent the City's maximum credit exposure. The City manages its
exposure to this risk by:
• Maintaining its funds in creditworthy organizations and financial institutions;
• Requiring minimum S&P credit rating of A- (or equivalent rating) for al portfolio investments;
• Assessing the quality of its counterparties, taking into accountcreditworthiness and reputation, past
experience and other factors; and
• Reviewing collectability and establishing allowances for d t uul acc <�I�Nopast
Accounts receivable of $4,329,678 (2022 - $2,433,049) w ore an 60 due. The City has a broad
base of customers which minimizes the concentrati f cr risk. Valuation allowances for accounts
receivable are disclosed in Note 3. There are no provisi impairment of portfolio investments or loans
receivable.
b. Liquidity risk IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII��V„„
Liquidity risk is the risk that an entity wil ncoun ulty meeting obligations associated with financial
liabilities. The City is exposed to liquid' oma unts payable and accrued liabilities and municipal debt.
The City manages its exposure to t ' isk t ugh itoring projected and actual cash flows and anticipated
investing in order to maintain suffi t fund ti obligations as they come due.
Accounts payable and accrue ' bilin eII generally due within 30 days. The annual repayment obligations for
municipal debt are disclo III 2 u
c. Market risk ullllll
Market risk is the risk tha' fair va or future cash flows of a financial instrument will fluctuate because of
changes in market prices. M t r� comprised of currency risk, interest rate risk, and other price risk.
Currency risk is the risk that the r value or future cash flows of a financial instrument will fluctuate because of
changes in foreign exchange rates. The City is not exposed to significant currency risk.
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because
of changes in market interest rates. The City manages its interest rate risk by maintaining a mix of fixed income
investments which meet the criteria outlined in the Investment Policy. The sensitivity of the cash balance to a
1% decrease in the interest rate would be a reduction in interest income of $1,993,883 for the year (2022 -
$1,590,514). The fair value of portfolio investments and municipal debt with fixed rates is directly impacted by
changes in market rates. However, the investments are measured at cost or amortized cost so there is no
impact on the operational results of the City. Municipal debt has interest rates fixed for long periods of time with
the debt intended to be repaid in accordance with the terms of the respective loans.
Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because
of changes in market prices other than those arising from interest rate risk or currency risk. Certain of the City's
investments are exposed to other price risk because they are equity indexed. A decrease in the market price of
the underlying equity instrument would result in a decrease in the unrealized gains attributable to derivatives
reported on the statement of remeasurement gains. However, it would not result in unrealized losses since the
investments are principal protected.
Page 60 of 254
THE CORPORATION OF THE CITY OF KITCHENER
Notes to the Financial Statements
For the Year Ended December 31, 2023
22. Comparative figures
Certain of the prior year's comparative figures have been reclassified to conform to the current year's
presentation.
23. Subsequent events
Financial statements are required to be adjusted for events occurring between the date of the financial
statements and the date of the auditor's 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.
Page 61 of 254
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THE CORPORATION OF THE CITY OF KITCHENER TRUST
FUNDS
Balance Sheet
As at December 31, 2023
2023 2022
Assets
Accounts receivable
$ 24,750
$ 36,485
Interest receivable
126,441
131,586
Loans receivable (Note 2)
365,160
419,968
Investments (Note 3)
Short-term
5,638,593
2,865,512
Long-term
12,824,223
14,860,224
�IIu 18,979,167
18,313,775
Fund Balance
The accompanying notes are an integral part of these financial s ents.
$18,979,167 $18,313,775
Page 66 of 254
THE CORPORATION OF THE CITY OF KITCHENER TRUST
FUNDS
Statement of Continuity
For the Year Ended December 31, 2023
2023 2022
Receipts
Perpetual care funds $ 452,541 $ 461,298
Interest earned 540,436 428,059
Other 306,202 357,198
1,299,179 1,246,555
Expenditures
Transfer to cemeteries operations 346,172 263,969
Other disbursements mullllllu 287,615 285,083
Net cha
Balance
Balance
in fund
3eginning of
end of vear
The accompanying notes a
633,787
549,052
665,392
697,503
18,313,775
17,616,272
8,979,167 $
18,313,775
Page 67 of 254
THE CORPORATION OF THE CITY OF KITCHENER TRUST
FUNDS
Notes to the Financial Statements
For the Year Ended December 31, 2023
1. Summary of significant accounting policies
These financial statements of the Corporation of the City of Kitchener Trust Funds (the "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 accW
accounting. The accrual basis of
accounting recognizes receipts as they become available and expenditures are recognized as
they are incurred and measurable as a result of receipt of gices and the creation of a legal
obligation to pay.
b. Financial instruments
Financial instruments are recorded at fair value on in
amortized cost. Amortized cost is determined using the
are recorded at cost or amortized cost, a statement of re
Financial assets measured at cost or amortiz1111111
financial statement date. Impairment losses are r gn
The Trust Funds evaluate contractuaesomlfcont ons 1
measure the fair value of the derivatient i
to the economic characteristics anduuill
2. Loans receivable
During 2019, under
Care Trust issued a
interest at 3% and w
3. Investments
Ron and s"i'Ysequentlyy recorded at cost or
nterest method. As all financial instruments
ment gains and losses has not been included.
1 for indicators of impairment at each
ment of operations.
e existence of embedded derivatives and separately
characteristics of the derivative are not closely related
tself.
vement Authority of Ontario, the Woodland Cemetery Perpetual
ion f the City of Kitchener in the amount of $575,000. The loan bears
years beginning in February 2020.
The long-term investments of $12,824,223 (2022 - $14,860,224) reported on the Balance Sheet at amortized
cost, have a market value of $12,550,055 (2022 - $14,431,282).
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 apparent from the other financial statements.
Page 68 of 254
THE CORPORATION OF THE CITY OF KITCHENER TRUST
FUNDS
Notes to the Financial Statements
For the Year Ended December 31, 2023
5. Financial instruments
The Trust Funds are exposed to various risks through their financial instruments and continue to monitor,
evaluate, and manage these risks. The following analysis provides information about the Trust Funds' risk
exposure and concentration as at December 31, 2023.
a. Credit risk
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by
failing to discharge an obligation. The Trust Funds are exposed to credit risk from their financial assets
including accounts receivable, interest receivable, loans receivable, a portfolio investments. The carrying
amounts of financial assets represent the Trust Funds' maximum cr exposure. The Trust Funds manage
their exposure to this risk by: mullll um.
• Maintaining their funds in creditworthy organizations and
• Requiring minimum S&P credit rating of A- (or equ
• Assessing the quality of their counterparties, taking
experience and other factors.
There were no provisions for impairment or
b. Market risk
Market risk is the risk that the fair
changes in market prices. Market i
Interest rate risk is the risk that
because of changes inee
mix of fixed income in
short-term investmentsfor the year (2022 - $2
The fair value of long-term
investments are measured
Trust Funds.
6. Comparative figures
investments;
their creditworthiness and reputation, past
flows of a financial instrument will fluctuate because of
Irrency risk, interest rate risk, and other price risk.
110' ure cash flows of a financial instrument will fluctuate
The Trust Funds manage their interest rate risk by maintaining a
: the criteria outlined in the Investment Policy. The sensitivity of
Pe interest rate would be a reduction in interest income of $36,909
is directly impacted by changes in market interest rates. However, the
amortized cost so there is no impact on the operational results of the
Certain of the prior year's comparative figures have been restated to conform to the current year's
presentation.
Page 69 of 254
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Financial statements of
BELMONT IMPROVEMENT AREA
BOARD OF MANAGEMENT
And Independent Auditor's Report thereon
For the year ended December 31, 2023
Page 71 of 254
11111r)ILIM
KPMG LLP
120 Victoria Street South
Suite 600
Kitchener, ON N2G OE1
Canada
Telephone 519 747 8800
Fax 519 747 8811
INDEPENDENT AUDITOR'S 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 comprise:
• the statement of financial position as at December 31, 2023
• the statement of operations for the year then ended
• the statement of change in net financial assets for the year then ended
• the statement of cash flows for the year then ended
• and notes to the financial statements, including a summary of significant accounting policies
(Hereinafter referred to as the "financial statements").
In our opinion, the accompanying financial statements present fairly, in all material respects, the
financial position of the Entity as at December 31, 2023, 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 "Auditor's Responsibilities for
the Audit of the Financial Statements" section of our Auditor's report.
We are independent of the Entity in accordance with the ethical requirements that are relevant to
our audit of the financial statements in Canada and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
1<1"i ". I...I...I '; i(,1<1 '; 1 i. ',1 i,;K! iii(,ii ii,
I „�Oai,
Page 72 of 254
11111r)ILIM
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.
Auditor's 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 Auditor's
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 73 of 254
11111r)ILIM
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 Auditor's 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 Auditor's 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.
«P
Chartered Professional Accountants, Licensed Public Accountants
Kitchener, Canada
June 5, 2024
Page 74 of 254
BELMONT IMPROVEMENT AREA BOARD OF
MANAGEMENT
Statement of Financial Position
As at December 31, 2023
2023 2022
Financial assets
Cash $ 16,409 $ 18,491
Financial liabilities
Accounts payable and accrued liabilities
4,626
12,254
Net financial assets
11,783
6,237
Non-financial assets
Tangible capital assets (Note 2)
48,811
51,030
Prepaid expenses
1,347
1,195
50,158
52,225
Net assets
61,941
58,462
Accumulated Surplus
Accumulated net revenue (deficit)
13,130
7,432
Invested in tangible capital assets
48,811
51,030
Total accumulated surplus
$ 61,941 $
58,462
The accompanying notes are an integral part of these financial statements.
Page 75 of 254
BELMONT IMPROVEMENT AREA BOARD OF
MANAGEMENT
Statement of Operations
For the Year Ended December 31, 2023
2023 2022
Revenues
Assessments $ 44,797 $ 41,890
Other revenue 9,783 48,938
54.580 90.828
Expenses
Administration
10,453
11,002
Amortization
7,225
5,382
Events
3,683
1,300
Marketing
3,187
9,599
Repairs and maintenance
25,312
29,661
Streetscaping
1,241
38,552
51,101
95,496
Net surplus (deficit) for year
3,479
(4,668)
Accumulated surplus, beginning of year
58,462
63,130
Accumulated surplus, end of year
$ 61,941 $
58,462
The accompanying notes are an integral part of these financial statements.
Page 76 of 254
BELMONT IMPROVEMENT AREA BOARD OF
MANAGEMENT
Statement of Change in Net Financial Assets
For the Year Ended December 31, 2023
2023 2022
Net surplus (deficit) for year
$ 3,479 $
(4,668)
Acquisition of tangible capital assets
(5,006)
(13,355)
Amortization of tangible capital assets
7,225
5,382
Acquisition of prepaid expenses
(152)
(139)
Change in net financial assets
5,546
(12,780)
Net financial assets, beginning of year
6,237
19,017
Net financial assets, end of year
$ 11,783 $
6,237
The accompanying notes are an integral part of these financial statements.
Page 77 of 254
BELMONT IMPROVEMENT AREA BOARD OF
MANAGEMENT
Statement of Cash Flow
For the Year Ended December 31, 2023
2023 2022
Operating
Net surplus (deficit) for year
$ 3,479 $
(4,668)
Item not involving cash
Amortization
7,225
5,382
Change in non-cash assets and liabilities
Accounts receivable
-
6,025
Prepaid expenses
(152)
(139)
Accounts payable and accrued liabilities
(7,628)
5,254
Net change in cash from operating activies
2,924
11,854
Capital
Acquisition of tangible capital assets (5,006) (13,355)
Net change in cash (2,082) (1,501)
Cash, beginning of year 18,491 19,992
Cash, end of year $ 16,409 $ 18,491
The accompanying notes are an integral part of these financial statements.
Page 78 of 254
BELMONT IMPROVEMENT AREA BOARD OF
MANAGEMENT
Notes to Financial Statements
For the Year Ended December 31, 2023
1. Summary of significant accounting policies
The financial statements of the Belmont Improvement Area Board of Management (the "Board") 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. Accrual 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.
b. Tangible capital assets
Tangible capital assets are recorded at cost which includes all amounts that are directly attributable to
acquisition, construction, development or betterment of the asset. The cost less residual value of the
tangible capital assets is amortized on a straight-line basis over their estimated useful lives as follows:
Assets Amortization Period
Machinery & equipment 5 to 15 years
Computer hardware 2 years
Tangible capital assets received as contributions are recorded at their fair value at time of receipt and are
recorded as revenue.
c. 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.
d. Financial instruments
Financial instruments are recorded at fair value on initial recognition and subsequently recorded at cost or
amortized cost. Amortized cost is determined using the effective interest method. As all financial
instruments are recorded at cost or amortized cost, a statement of remeasurement gains and losses has
not been included.
Financial assets measured at cost or amortized cost are assessed for indicators of impairment at each
financial statement date. Impairment losses are recognized in the statement of operations.
The Board evaluates contractual obligations for the existence of embedded derivatives and separately
measures the fair value of the derivative component when characteristics of the derivative are not closely
related to the economic characteristics and risks of the contract itself.
Page 79 of 254
BELMONT IMPROVEMENT AREA BOARD OF
MANAGEMENT
Notes to Financial Statements
For the Year Ended December 31, 2023
1. Summary of significant accounting policies (continued)
e. Newly adopted accounting standards
The Board adopted the following Public Sector Accounting Standards ("PS") for the year ended December
31, 2023:
PS 1201 Financial Statement Presentation
ii. PS 3041 Portfolio Investments
iii. PS 3280 Asset Retirement Obligations
iv. PS 3450 Financial Instruments
V. PS 2601 Foreign Currency Translation
The adoption of these accounting standards did not impact the financial statements of the Board.
2. Tangible capital assets
Machinery & Computer
Equipment Hardware Total
Cost
Balance, beginning of year $ 73,781 $ 1,356 $ 75,137
Additions 373 4,633 5,006
Disposals (9,237) - (9,237)
Balance, end of year 64,917 5,989 70,906
Accumulated amortization
Balance, beginning of year
(22,751)
(1,356) (24,107)
Disposals
9,237
- 9,237
Amortization expense
(6,067)
(1,158) (7,225)
Balance, end of year
(19,581)
(2,514) (22,095)
Net book value, end of year 45,336 3,475 48,811
Net book value, beginning of year $ 51,030 $ - $ 51,030
3. Related party transactions
During the year, the Board received reimbursement of $5,006 (2022 - $nil) for aquisition of tangible capital
assets from the Corporation of the City of Kitchener (the "City"), its ultimate controlling party. This is included in
other revenue on the Statement of Operations.
The Board paid operational support fees of $nil (2022 - $25,000) to the City. These are included in
streetscaping expenses on the Statement of Operations.
Page 80 of 254
BELMONT IMPROVEMENT AREA BOARD OF
MANAGEMENT
Notes to Financial Statements
For the Year Ended December 31, 2023
4. Financial instruments
The Board is exposed to various risks through its financial instruments and continues to monitor, evaluate, and
manage these risks. The following analysis provides information about the Board's risk exposure and
concentration as at December 31, 2023.
a. Credit risk
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by
failing to discharge an obligation. The Board is exposed to credit risk from its cash balance. The Board
manages its exposure to this risk by maintaining its funds in a creditworthy financial institution.
b. Liquidity risk
Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial
liabilities. The Board is exposed to liquidity risk from its accounts payable and accrued liabilities. The Board
manages its exposure to this risk through monitoring cash flows in order to maintain sufficient funds for
meeting obligations as they come due.
Concentration of risk
a. Limited counterparties
A substantial portion of the Board's revenue is derived from funding by the City. The loss of this
relationship would have a significant impact on the Board's revenue.
5. Comparative figures
Certain of the prior year's comparative figures have been restated to conform to the current year's presentation.
Page 81 of 254
Financial Statements of
KITCHENER DOWNTOWN
IMPROVEMENT AREA BOARD
OF MANAGEMENT
And Independent Auditor's Report thereon
Year ended December 31, 2023
Page 82 of 254
19111 ral
KPMG LLP
120 Victoria Street South
Suite 600
Kitchener, ON N2G OE1
Canada
Telephone 519 747 8800
Fax 519 747 8811
To the Board of Directors of Kitchener Downtown Improvement Area Board of Management
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, 2023
• 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, 2023 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 "Auditor's Responsibilities for
the Audit of the Financial Statements" section of our auditor's report.
We are independent of the Entity in accordance with the ethical requirements that are relevant to
our audit of the financial statements in Canada and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Responsibilities of Management and Those Charged with 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.
1<1 � , , I I P
Page 83 of 254
19111 ral
Page 2
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.
Auditor's 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 auditor's
report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted
in accordance with Canadian generally accepted auditing standards will always detect a material
misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken
on the basis of the financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we
exercise professional judgment and maintain professional skepticism throughout the audit.
We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due
to fraud or error, design and perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one
resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Entity's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
Page 84 of 254
19111 ral
Page 3
• Conclude on the appropriateness of management's use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Entity's ability to continue
as a going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor's 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 auditor's 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.
kAw".��r 14P
Chartered Professional Accountants, Licensed Public Accountants
Kitchener, Canada
April 4, 2024
Page 85 of 254
KITCHENER DOWNTOWN IMPROVEMENT AREA
BOARD OF MANAGEMENT
Statement of Financial Position
December 31, 2023, with comparative information for 2022
2023 2022
Financial assets
Cash $ 360,753 $ 642,649
Term deposits (note 2) 494,106 116,537
Accounts receivable 58,523 77,853
913,382 837,039
Financial liabilities:
Accounts payable and accrued liabilities 245,490 437,303
Due to the City of Kitchener (note 4) 54,814 21,606
300,304 458,909
Net financial assets 613,078 378,130
Non-financial assets:
Prepaid expenses 16,332 17,249
Tangible capital assets (note 5) 664,954 724,560
681,286 741,809
Commitments (note 3)
Accumulated surplus:
Reserve for rate stabilization
Accumulated net revenue
Invested in tangible capital assets
See accompanying notes to financial statements.
On behalf of the Board:
Director
$ 1,294,364 $ 1,119,939
50,000 $ 50,000
579,410 345,379
664,954 724,560
$ 1,294,364 $ 1,119,939
Director
Page 86 of 254
KITCHENER DOWNTOWN IMPROVEMENT AREA
BOARD OF MANAGEMENT
Statement of Revenue and Expenses and Accumulated Surplus
Year ended December 31, 2023, with comparative information for 2022
Accumulated surplus, end of year $ 1,069,939 $ 1,294,364 $ 1,119,939
See accompanying notes to financial statements.
2
Page 87 of 254
2023
2023
2022
Budget
Actual
Actual
(note 7)
Revenue:
Assessments
$ 1,467,300 $
1,485,000 $
1,379,000
Interest
-
8,599
867
Other income (note 6)
48,000
280,652
81,669
1,515,300
1,774,251
1,461,536
Expenses:
Promotions and advertising
758,000
788,500
639,669
Salaries, wages and benefits
447,000
429,556
428,782
Administration
156,800
141,660
111,435
Meetings and seminars
18,500
25,858
4,428
Safety and beautification
140,000
83,719
86,453
Member relations
7,000
3,736
8,339
Amortization
-
71,983
69,091
1,527,300
1,545,012
1,348,197
Net revenue before other items
(12,000)
229,239
113,339
Net assessment write-offs (note 4)
38,000
54,814
21,606
Annual surplus
(50,000)
174,425
91,733
Accumulated surplus, beginning of year
1,119,939
1,119,939
1,028,206
Accumulated surplus, end of year $ 1,069,939 $ 1,294,364 $ 1,119,939
See accompanying notes to financial statements.
2
Page 87 of 254
KITCHENER DOWNTOWN IMPROVEMENT AREA
BOARD OF MANAGEMENT
Statement of Changes in Net Financial Assets
Year ended December 31, 2023, with comparative information for 2022
2023 2022
Annual surplus $ 174,425 $ 91,733
Acquisition of tangible capital assets (12,377) (182,652)
Amortization of tangible capital assets 71,983 69,091
Change in prepaid expenses 917 (9,129)
Change in net financial assets 234,948 (30,957)
Net financial assets, beginning of year 378,130 409,087
Net financial assets, end of year $ 613,078 $ 378,130
See accompanying notes to financial statements.
3
Page 88 of 254
KITCHENER DOWNTOWN IMPROVEMENT AREA
BOARD OF MANAGEMENT
Statement of Cash Flows
Year ended December 31, 2023, with comparative information for 2022
2023 2022
Cash provided by (used in)
Operating activities:
Annual surplus
$ 174,425
$ 91,733
Item not involving cash:
Amortization
71,983
69,091
Changes in non-cash operating working capital:
Accounts receivable
19,330
328,222
Prepaid expenses
917
(9,129)
Accounts payable and accrued liabilities
(191,813)
8,545
Due to the City of Kitchener
33,208
(8,366)
108,050
480,096
Investing activities:
Purchase of investments
(377,569)
(867)
Acquisition of tangible capital assets
(12,377)
(182,652)
Increase (decrease) in cash
(281,896)
296,577
Cash, beginning of year
642,649
346,072
Cash, end of year $ 360,753 $ 642,649
See accompanying notes to financial statements.
4
Page 89 of 254
KITCHENER DOWNTOWN IMPROVEMENT AREA
BOARD OF MANAGEMENT
Notes to Financial Statements
Year ended December 31, 2023
Nature of operations:
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.
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 ("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 Rate
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.
5
Page 90 of 254
KITCHENER DOWNTOWN IMPROVEMENT AREA
BOARD OF MANAGEMENT
Notes to Financial Statements (continued)
Year ended December 31, 2023
1. Significant accounting policies (continued):
(b) Accrual basis of accounting:
The accrual basis of accounting recognizes revenues as they become available and
measurable; expenditures are recognized as they are incurred and measurable as a result
of receipt of goods or services and the creation of a legal obligation to pay.
(c) 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:
Maturity
Principal
Rate
January 12, 2024
$ 55,127
4.00%
March 29, 2024
55,127
3.00%
February 4, 2024
11,409
4.00%
March 26, 2024
373,185
4.50%
6
Page 91 of 254
KITCHENER DOWNTOWN IMPROVEMENT AREA
BOARD OF MANAGEMENT
Notes to Financial Statements (continued)
Year ended December 31, 2023
3. Commitments:
The Board executed a new lease agreement effective January 1, 2023. The lease expires on
December 31, 2027. The Board is committed to the following minimum payments under the
agreement:
2024
$ 54,990
2025
58,304
2026
64,325
2027
69,327
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 $54,814 (2022 - $21,606).
7
Page 92 of 254
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KITCHENER DOWNTOWN IMPROVEMENT AREA
BOARD OF MANAGEMENT
Notes to Financial Statements (continued)
Year ended December 31, 2023
6. Government grants:
Included in other income for the year ended December 31, 2023 is a transfer of $250,650 from
Government of Canada under the Tourism Relief Fund and $30,000 the Province of Ontario
under the Tourism Relief Fund Top -up program.
Included in other income for the year ended December 31, 2022 is a transfer of $20,219
received from City of Kitchener.
7. Budget figures:
The budget figures shown in the financial statements were approved by the Board at a meeting
on August 10, 2022.
8. Comparative information:
Certain comparative information has been reclassified from those previously presented to
conform to the presentation of the 2023 financial statements.
9
Page 94 of 254
Financial Statements of
KITCHENER PUBLIC LIBRARY
BOARD
And Independent Auditor's Report thereon
Year ended December 31, 2023
Page 95 of 254
19111 ral
KPMG LLP
120 Victoria Street South
Suite 600
Kitchener, ON N2G OE1
Canada
Telephone 519 747 8800
Fax 519 747 8811
To the members of Kitchener Public Library Board
Opinion
We have audited the financial statements of Kitchener Public Library Board (the Board), which
comprise:
• the statement of financial position as at December 31, 2023
• 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 Board as at December 31, 2023 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 "Auditor's Responsibilities for
the Audit of the Financial Statements" section of our auditor's report.
We are independent of the Board in accordance with the ethical requirements that are relevant to
our audit of the financial statements in Canada and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Responsibilities of Management and Those Charged with 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.
1<1 � , , I I P
Page 96 of 254
19111 ral
Page 2
In preparing the financial statements, management is responsible for assessing the Board'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
Board or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Board's financial reporting
process.
Auditor's 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 auditor's
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 Board's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
Page 97 of 254
19111 ral
Page 3
• Conclude on the appropriateness of management's use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Board's ability to continue
as a going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor's 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 auditor's report. However, future events or conditions
may cause the Board 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.
kAw".��r 14P
Chartered Professional Accountants, Licensed Public Accountants
Kitchener, Canada
March 21, 2024
Page 98 of 254
KITCHENER PUBLIC LIBRARY BOARD
Statement of Financial Position
December 31, 2023, with comparative information for 2022
2023 2022
Financial assets
Cash $ 2,362,668 $ 2,021,464
Accounts receivable 269,716 151,178
Due from City of Kitchener 885,079 83,078
Investments (note 2) 90,000 50,000
Endowment investments (note 2) 100,000 100,000
3,707,463 2,405,720
Financial liabilities
Accounts payable and accrued liabilities 1,194,179 558,934
Due to Early Literacy Alliance of Waterloo Region (note 4) 726,661 648,637
Deferred revenue (note 5) 1,237,105 513,810
3,157,945 1,721,381
Net financial assets
549,518 684,339
Non-financial assets
Tangible capital assets (note 3) 4,870,958 5,095,735
Subsequent events (note 12)
Accumulated surplus (note 9) $ 5,420,476 $ 5,780,074
See accompanying notes to financial statements.
On behalf of the Board:
Director
1
Director
Page 99 of 254
KITCHENER PUBLIC LIBRARY BOARD
Statement of Operations and Changes in Accumulated Surplus
Year ended December 31, 2023, with comparative information for 2022
See accompanying notes to financial statements.
2
Page 100 of 254
2023
2023
2022
Budget
Actual
Actual
Revenue:
Grants:
The City of Kitchener - Operating
$ 12,132,850 $
12,132,850 $
11,558,934
The City of Kitchener - Capital and
special (note 6)
-
775,085
450,352
Other (note 7)
-
226,966
70,069
Province of Ontario
306,980
306,980
306,980
Interest and miscellaneous
40,000
177,690
80,599
Rentals
96,500
125,242
79,565
Partnerships
55,000
43,962
56,568
Photocopy
40,000
55,477
40,667
Lost and damaged fees
20,000
33,017
21,926
12,691,330
13,877,269
12,665,660
Expenses:
Personnel costs (Schedule 1)
9,778,423
9,635,160
9,140,995
Resource materials
1,265,100
1,418,954
1,440,563
Equipment (Schedule 2)
387,500
947,382
953,851
Facilities costs (Schedule 3)
834,207
877,221
837,327
Required expenditures related to special
grants (note 7)
-
361,969
70,069
Expenditures related to capital and
special (note 6)
-
435,533
181,390
Administrative (Schedule 4)
248,600
386,091
268,519
Processing/bindery
80,000
95,790
44,342
Programs and publicity (Schedule 5)
87,500
66,654
68,496
General library
10,000
12,113
8,605
12,691,330
14,236,867
13,014,157
Deficiency of revenue over expenses
-
(359,598)
(348,497)
Accumulated surplus, beginning of year
5,780,074
5,780,074
6,128,571
Accumulated surplus, end of year
$ 5,780,074 $
5,420,476 $
5,780,074
See accompanying notes to financial statements.
2
Page 100 of 254
KITCHENER PUBLIC LIBRARY BOARD
Statement of Changes in Net Financial Assets
Year ended December 31, 2023, with comparative information for 2022
Deficiency of revenue over expenses
2023 2022
(359,598)
(348,497)
Acquisition of tangible capital assets (1,155,589) (1,202,805)
Amortization of tangible capital assets 1,380,366 1,400,379
(134,821) (150,923)
Change in prepaid expenses - 18,500
Change in net financial assets
Net financial assets, beginning of year
(134,821)
684,339
(132,423)
816,762
Net financial assets, end of year $ 549,518 $ 684,339
See accompanying notes to financial statements.
3
Page 101 of 254
KITCHENER PUBLIC LIBRARY BOARD
Statement of Cash Flows
Year ended December 31, 2023, with comparative information for 2022
2023 2022
Cash provided by (used in)
Operating activities:
Deficiency of revenue over expenses
$ (359,598)
$ (348,497)
Item not involving cash:
Amortization of tangible capital assets
1,380,366
1,400,379
Changes in non-cash operating working capital:
Accounts receivable
(118,538)
(5,694)
Prepaid expenses
-
18,500
Due from City of Kitchener
(802,001)
112,064
Accounts payable and accrued liabilities
635,245
(101,918)
Due to Early Literacy Alliance of Waterloo Region
78,024
81,687
Deferred revenue
723,295
111,426
1,536,793
1,267,947
Investing activities:
Purchase of investments
(40,000)
-
Capital activities:
Cash used to acquire tangible capital assets
(1,155,589)
(1,202,805)
Increase in cash
341,204
65,142
Cash, beginning of year
2,021,464
1,956,322
Cash, end of year $ 2,362,668 $ 2,021,464
See accompanying notes to financial statements.
4
Page 102 of 254
KITCHENER PUBLIC LIBRARY BOARD
Notes to Financial Statements
Year ended December 31, 2023
Kitchener Public Library Board (the "Board") was incorporated as a not-for-profit organization,
without share capital, under the laws of Ontario, and accordingly is exempt from income taxes. 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.
5
Page 103 of 254
KITCHENER PUBLIC LIBRARY BOARD
Notes to Financial Statements (continued)
Year ended December 31, 2023
1. Significant accounting policies (continued):
(c) 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.
(d) 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.
(e) 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.
(f) 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.
(g) 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
Specialty and other equipment
Computer
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.
6
Page 104 of 254
KITCHENER PUBLIC LIBRARY BOARD
Notes to Financial Statements (continued)
Year ended December 31, 2023
1. Significant accounting policies (continued):
(h) Asset retirement obligations:
An asset retirement obligation is recognized when, as at the financial reporting date, all of
the following criteria are met:
• there is a legal obligation to incur retirement costs in relation to a tangible capital
asset;
• the past transaction or event giving rise to the liability has occurred;
• it is expected that future economic benefits will be given up; and
• reasonable estimate of the amount can be made.
As of December 31, 2023, the Board did not identify or record any asset retirement
obligation.
(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.
Q) Financial instruments:
Financial instruments are recorded at fair value on initial recognition. Derivative
instruments and equity instruments that are quoted in an active market are reported at fair
value. All other financial instruments are subsequently recorded at cost or amortized cost
unless management has elected to carry the instruments at fair value.
Unrealized changes in fair value are recognized in the statement of remeasurement gains
and losses until they are realized, when they are transferred to the statement of
operations.
The Board's financial instruments include cash, accounts receivable, due from City of
Kitchener, investments, endowment investments, accounts payable and accrued liabilities,
Due to Early Literacy Alliance Waterloo Region, and deferred revenue. The carrying value
of cash, accounts receivable, due from City of Kitchener, accounts payable and accrued
liabilities, Due to Early Literacy Alliance Waterloo Region, and deferred revenue
approximate their fair values due to the short-term nature of these financial assets and
liabilities.
7
Page 105 of 254
KITCHENER PUBLIC LIBRARY BOARD
Notes to Financial Statements (continued)
Year ended December 31, 2023
1. Significant accounting policies (continued):
Q) Financial instruments (continued):
The following is a list of the Board's financial instruments and their related measurement
basis as at December 31, 2023.
Financial Assets Measurement Basis:
Cash Cost
Accounts receivable Cost
Due from City of Kitchener Cost
Investments Amortized cost
Endowment investments Amortized cost
Financial Liabilities Measurement Basis:
Accounts payable and accrued liabilities Cost
Due to Early Literacy Alliance Waterloo Region Cost
Deferred revenue Cost
As all financial instruments are measured at cost or amortized cost, there have been no re-
measurement gains or losses. Therefore, the Statement of Remeasurement Gains
(Losses) has been excluded.
Transaction costs are incremental costs directly attributable to the acquisition or issue of a
financial asset or a financial liability. Transaction costs are added to the carrying value of
the instruments when they are initially recognized.
At year end, the Board assesses whether there are any indications that a financial asset
measured at cost or amortized cost may be impaired. For purposes of impairment testing,
each individually significant asset is assessed individually; the balance of the assets are
grouped on the basis of similar credit risk characteristics. When there is an indication of
impairment, the Board determines whether a significant adverse change has occurred
during the year in the expected timing or amount of future cash flows from the financial
asset. When there has been a significant adverse change, the carrying amount of the
asset is reduced to the highest of the present value of expected cash flows; the amount
that could be realized by selling the asset; and the amount that could be realized by
exercising the Board's right to any collateral held as security.
8
Page 106 of 254
KITCHENER PUBLIC LIBRARY BOARD
Notes to Financial Statements (continued)
Year ended December 31, 2023
1. Significant accounting policies (continued):
Q) Financial instruments (continued):
When the extent of impairment decreases and the decrease can be related to an event
occurring after the impairment was recognized, the impairment is reversed to the extent of
the improvement in the year the reversal occurs.
Financial assets are assessed for impairment on an annual basis at the end of the fiscal
year if there are indicators of impairment. If there is an indicator of impairment, the Board
determines if there is a significant adverse change in the expected amount or timing of
future cash flows from the financial asset. If there is a significant adverse change in the
expected cash flows, the carrying amount of the financial asset is reduced to the highest of
the present value of the expected cash flows, the amount that could be realized from
selling the financial asset or the amount the Board expects to realize by exercising its right
to any collateral. If events and circumstances reverse in a future period, an impairment
loss will be reversed to the extent of the improvement.
(k) Adoption of new accounting standards:
Effective January 1, 2022, the Board adopted Canadian public sector accounting standard
PS 3450 — Financial Instruments and PS 2601 — Foreign Currency Translation. The
standards were adopted prospectively from the date of adoption. The new standards
provide comprehensive requirements for the recognition, measurement, presentation and
disclosure of financial instruments and foreign currency transactions.
Under PS 3450, all financial instruments, including derivatives, are included on the
statement of financial position and are measured either at fair value or amortized cost
based on the characteristics of the instrument and the Board's accounting policy choices
(see Note 1 — Significant Accounting Policies).
On January 1, 2022, the Entity adopted Canadian public sector accounting standard PS
3280 Asset Retirement Obligations. The new accounting standard addresses the reporting
of legal obligations associated with the retirement of certain tangible capital assets, such
as asbestos removal in retired buildings by public sector entities.
No significant changes were required as a result of implementing these new standards.
9
Page 107 of 254
KITCHENER PUBLIC LIBRARY BOARD
Notes to Financial Statements (continued)
Year ended December 31, 2023
2. Investments:
10
Page 108 of 254
2023
2022
Amortized cost Market
Value Amortized cost
Market Value
Investments:
Guaranteed Investment
Certificate
$ 50,000 $
51,243 $
50,000 $
50,494
Waterloo Region
Community Foundation
40,000
46,357
-
-
Endowment investments:
Guaranteed Investment
Certificate
100,000
102,508
100,000
100,997
The Guaranteed investment Certificates have a 4.75% interest rate and mature December 16,
2024.
3. Tangible capital assets:
Books and
Furniture,
Other
audio visual
fixtures and
equipment
2023
resources Computers
equipment
and vehicles
Total
Cost:
Balance, beginning of year
7,190,160 3,288,918
2,293,936
241,406
13,014,420
Additions
763,024 159,390
159,943
73,232
1,155,589
Disposals
(893,126) (475,203)
(103,074)
(78,153)
(1,549,556)
Balance, end year
7,060,058 2,973,105
2,350,805
236,485
12,620,453
Accumulated amortization:
Balance, beginning of year
4,301,073 2,288,980
1,246,112
82,520
7,918,685
Amortization
844,638 372,782
153,142
9,804
1,380,366
Disposals
(893,126) (475,203)
(103,074)
(78,153)
(1,549,556)
Balance, end of year
4,252,585 2,186,559
1,296,180
14,171
7,749,495
Net book value, end of year
2,807,473 786,546
1,054,625
222,314
4,870,958
10
Page 108 of 254
KITCHENER PUBLIC LIBRARY BOARD
Notes to Financial Statements (continued)
Year ended December 31, 2023
3. Tangible capital assets (continued):
Books and Furniture, Other
audio visual fixtures and equipment
2022 resources Computers equipment and vehicles Total
Cost:
Balance, beginning of year
7,454,995
3,147,586
2,227,307
241,406 13,071,294
Additions
739,240
353,203
110,362
- 1,202,805
Disposals
(1,004,075)
(211,871)
(43,733)
- (1,259,679)
Balance, end year
7,190,160
3,288,918
2,293,936
241,406 13,014,420
Accumulated amortization:
Balance, beginning of year 4,434,219 2,126,120 1,144,408 73,238 7,777,985
Amortization 870,929 374,731 145,437 9,282 1,400,379
Disposals (1,004,075) (211,871) (43,733) - (1,259,679)
Balance, end of year 4,301,073 2,288,980 1,246,112 82,520 7,918,685
Net book value, end of year 2,889,087 999,938 1,047,824 158,886 5,095,735
4. Due to Early Literacy Alliance of Waterloo Region:
The Board has engaged in a three year agreement with the Early Literacy Alliance of Waterloo
Region ("the Alliance") to perform administrative services for the Alliance and hold funds on
behalf of them. Thses funds will be utilized as directed by the Alliance.
11
Page 109 of 254
KITCHENER PUBLIC LIBRARY BOARD
Notes to Financial Statements (continued)
Year ended December 31, 2023
5. Deferred revenue:
The deferred revenues, reported on the statement of financial position, are made up of the
following:
6. 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 2023 included $103,998 (2022 - $101,959) for general
renovations, maintenance and upgrading of existing facilities, $443,671 (2022 - $334,070) for
communication infrastructure and technology upgrades, $30,308 (2022 - $29,714) for KPL
Accessibility Fund, $58,793 (2022 - $58,367) for resources, furniture and equipment, and
$60,000 (2022 - $nil) for customer needs survey.
The portion of these grants and previous year grants that are included in revenue in 2023 is
$775,085 (2022 - $450,352).
12
Page 110 of 254
2023
2022
Deferred capital grants
Other
$
1,210,110
26,995
$
479,825
33,985
Total deferred revenue
$
1,237,105
$
513,810
Continuity of deferred capital grants is as follows:
2023
2022
Balance, beginning of year
Receipt of infrastructure grant
Contributions realized as revenue
$
479,825
957,251
(226,966)
$
362,861
168,873
(51,909)
Balance, end of year
$
1,210,110
$
479,825
6. 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 2023 included $103,998 (2022 - $101,959) for general
renovations, maintenance and upgrading of existing facilities, $443,671 (2022 - $334,070) for
communication infrastructure and technology upgrades, $30,308 (2022 - $29,714) for KPL
Accessibility Fund, $58,793 (2022 - $58,367) for resources, furniture and equipment, and
$60,000 (2022 - $nil) for customer needs survey.
The portion of these grants and previous year grants that are included in revenue in 2023 is
$775,085 (2022 - $450,352).
12
Page 110 of 254
KITCHENER PUBLIC LIBRARY BOARD
Notes to Financial Statements (continued)
Year ended December 31, 2023
7. 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 2023, the Board received various special non-recurring grants and donations totaling
$956,250 (2022 - $163,628). The portion of these grants and previous year special grants that
are included in revenue in 2023 is $226,966 (2022 - $70,069). The remainder is included in
deferred revenue.
8. Pension plan:
The Board makes contributions to the 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 $685,464 (2022 - $606,721) for current
service on behalf of its staff.
The latest available report for the OMERS plan was as at December 31, 2023. At that time the
plan reported a $4.2 billion actuarial deficit, based on actuarial liabilities of $136.2 billion and
actuarial assets of $132 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,
2023, the Board has no obligation under the past service provisions of the OMERS agreement.
9. Accumulated surplus:
The accumulated surplus consists of surplus and reserve funds as follows:
2023 2022
Reserves set aside by the Board
Capital fund
344,460
344,460
HR fund
37,000
37,000
Inclusion fund
67,876
67,876
Improvement fund
-
135,003
Total reserves
449,336
584,339
Accumulated surplus— unrestricted
4,971,140
5,195,735
Accumulated surplus $ 5,420,476 $ 5,780,074
13
Page 111 of 254
KITCHENER PUBLIC LIBRARY BOARD
Notes to Financial Statements (continued)
Year ended December 31, 2023
10. Financial risks and concentration of risk:
(a) Market risk:
Market risk is the risk that changes in market prices, foreign exchange rates or interest
rates will affect the Board's surplus or the value of its holdings of financial instruments. The
objective of market risk management is to control market risk exposures within acceptable
parameters.
(b) Credit risk:
Credit risk is the risk that counterparties fail to perform as contracted, resulting in a
financial loss. The Board is exposed to credit risk with respect to its accounts receivable
and cash. The Board assesses, on a continuous basis, accounts receivable and provides
for any amounts that are not collectible in the allowance for doubtful accounts. The
maximum exposure to credit risk of the Board at December 31, 2023 is the carrying value
of these assets.
The carrying amount of accounts receivable is valued with consideration for an allowance
for doubtful accounts. The amount of any related impairment loss is recognized in the
statement of operations. Subsequent recoveries of impairment losses related to accounts
receivable are credited to the statement of operations. The balance of the allowance for
doubtful accounts at December 31, 2023 is $Nil (2022 - $Nil).
(c) Liquidity risk:
Liquidity risk is the risk that the Board will not be able to meet all cash outflow obligations
as they come due. The Board mitigates this risk by monitoring cash activities and expected
outflows.
Accounts payable and accrued liabilities are generally due within 60 days of receipt of an
invoice.
There have been no other significant changes from the previous period in the exposure to
risk or policies, procedures and methods used to measure the risk.
Concentration of risk:
(a) Limited counterparties:
A substantial portion of the Board's revenue is derived from funding by the City. The loss
of this relationship would have a significant impact on the Board's revenue.
14
Page 112 of 254
KITCHENER PUBLIC LIBRARY BOARD
Notes to Financial Statements (continued)
Year ended December 31, 2023
11. Comparative information
Certain comparative information have been reclassified from those previously presented to
conform to the presentation of the 2023 financial statements.
12. Subsequent events:
On January 12, 2024, the Board was notified of a Canadian Union of Public Employees
Application with the Ontario Labour Relations Board. The resulting vote concluded on January
24, 2024 determined a union will be formed. The quantification of the impact of unionization is
not estimable at this time.
15
Page 113 of 254
KITCHENER PUBLIC LIBRARY BOARD
Schedules
Year ended December 31, 2023, with comparative information for 2022
16
Page 114 of 254
2023
2022
Schedule 1 - Personnel Costs
Salaries
$
7,697,846
$
7,328,934
Pension benefits
1,066,963
960,071
Health benefits
561,228
568,800
Employment insurance
147,469
138,159
Sick leave reserve
70,000
70,000
Staff training
69,635
56,990
WSIB
22,019
18,041
$
9,635,160
$
9,140,995
Schedule 2 - Equipment
Amortization
$
535,728
$
529,451
Technology
392,461
407,008
Equipment maintenance
19,193
17,392
$
947,382
$
953,851
Schedule 3 - Facilities Costs
Facilities expenses
$
620,727
$
600,988
Main utilities
256,494
236,339
$
877,221
$
837,327
Schedule 4 - Administrative
Professional services
$
161,890
$
105,327
General business
111,249
67,036
Stationery
67,820
49,075
Insurance
21,212
20,796
Telephone
19,038
21,053
Postage and delivery
4,882
5,232
$
386,091
$
268,519
Schedule 5 - Programs and Publicity
Public programs
$
36,167
$
31,955
Promotional expenses
30,487
36,541
$
66,654
$
68,496
16
Page 114 of 254
Financial Statements of
THE CENTRE IN THE
SQUARE INC.
And Independent Auditor's Report thereon
Year ended December 31, 2023
Page 115 of 254
19111 ral
KPMG LLP
120 Victoria Street South
Suite 600
Kitchener, ON N2G OE1
Canada
Telephone 519 747 8800
Fax 519 747 8811
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 Entity), which
comprise:
• the statement of financial position as at December 31, 2023
• the statement of operations and changes in accumulated surplus for the year then ended
• the statement of remeasurement gains 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, 2023 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 "Auditor's Responsibilities for
the Audit of the Financial Statements" section of our auditor's 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.
Emphasis of Matter - Restatement of Financial Statements
We draw attention to Note 2 to the financial statements which indicates that the Entity has changed
its accounting policy for asset retirement obligations and financial instruments and has applied that
change prospectively.
Our opinion is not modified in respect to this matter.
1<1 � , , I I P
Page 116 of 254
19111 ral
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.
Auditor's 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 auditor's
report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted
in accordance with Canadian generally accepted auditing standards will always detect a material
misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken
on the basis of the financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we
exercise professional judgment and maintain professional skepticism throughout the audit.
We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due
to fraud or error, design and perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one
resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Entity's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
Page 117 of 254
19111 ral
Page 3
• Conclude on the appropriateness of management's use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Entity's ability to continue
as a going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor's 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 auditor's 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
April 23, 2024
Page 118 of 254
THE CENTRE IN THE SQUARE INC.
Statement of Financial Position
December 31, 2023, with comparative information for 2022
2023 2022
Financial assets
Cash and cash equivalents
$ 4,406,917
$ 3,352,049
Accounts receivable (note 3)
257,868
1,992,751
Interest receivable
1,045
3,965
Costs to be recovered
139,156
165,235
Investments (note 4)
1,752,607
1,527,054
Due from the City of Kitchener
32,707
-
6,590,300
7,041,054
Financial liabilities
Accounts payable and accrued liabilities 2,208,140 2,817,533
Due to City of Kitchener - 231,407
Asset retirement obligations (note 8) 201,946 -
Deferred revenue (note 9) 2,082,347 2,393,412
4,492,433 5,442,352
Net financial assets 2,097,867 1,598,702
Non-financial assets
Tangible capital assets (note 6) 17,322,559 15,636,326
Inventories (note 5) 58,059 74,673
Prepaid expenses 217,675 196,040
17,598,293 15,907,039
Net assets $ 19,696,160 $ 17,505,741
Accumulated surplus:
Operating fund activities (note 7)
Reserves - Capital (note 15)
Reserves - Sustainability (note 15)
Reserves - Restricted (note 15)
1,215,436 935,502
213,284 205,213
745,730 728,700
Invested in tangible capital assets 17,322,559 15,636,326
19,497,009 17,505,741
Accumulated remeasurement gains (losses)
See accompanying notes to financial statements.
On behalf of the Board:
199,151
$ 19,696,160 $ 17,505,741
Director Director
Page 119 of 254
THE CENTRE IN THE SQUARE INC.
Statement of Operations and Changes in Accumulated Surplus
Year ended December 31, 2023, with comparative information for 2022
2023 2023 2022
Budget Actual Actual
Revenue
Performances
$ 3,261,719 $
4,226,877
$ 2,559,785
Grants from City of Kitchener - operating
2,011,602
2,011,601
2,000,000
Grants from other governments - capital
1,622,454
744,789
1,801,926
Grant from the City of Kitchener - capital
744,931
1,439,004
1,238,851
Other revenue
412,514
803,023
490,618
Ticket surcharge (note 15)
389,400
344,472
267,818
Rent from K -W Symphony Orchestra
213,325
117,450
204,700
Sponsorships and memberships
175,575
81,526
63,423
Grants from other governments - operating
125,000
25,000
459,804
Rent - Kitchener Waterloo Art Gallery
111,618
111,618
107,222
Donations
25,000
25,872
42,113
Investment income
16,000
239,685
112,687
Lottery revenue
-
7
7,421
Gain on sale of investments
-
1,387
82,435
9,109,138
10,172,311
9,438,803
Expenses:
Salaries and wages
2,572,667
2,624,668
2,522,922
Performances
2,055,342
2,701,643
2,100,203
Amortization of tangible capital assets
1,270,000
1,262,739
1,055,000
Occupancy
790,529
711,441
706,610
Administration and box office
773,873
747,462
575,081
Marketing
98,640
61,333
64,733
Reserve expenditures (note 15)
55,000
10,988
(1,773)
Loss on sale of tangible capital assets
50,000
4,951
8,709
Sponsorship expenses
-
43,051
28,118
Capital costs (recovery)
-
12,767
-
Lottery expenses
-
-
7,796
7,666,051
8,181,043
7,067,399
Excess of revenue over expenses
1,443,087
1,991,268
2,371,404
Accumulated surplus, beginning of year
17,505,741
17,505,741
15,134,337
Accumulated surplus, end of year
$ 18,948,828 $
19,497,009
$ 17,505,741
See accompanying notes to financial statements.
2
Page 120 of 254
THE CENTRE IN THE SQUARE INC.
Statement of Changes in Net Financial Assets
Year ended December 31, 2023, with comparative information for 2022
2023 2022
Excess of revenue over expenses
$ 1,991,268
$ 2,371,404
Acquisition of tangible capital assets
(2,751,977)
(3,432,107)
Amortization of tangible capital assets
1,262,739
1,055,000
Loss on sale of tangible capital assets
4,951
11,309
506,981
5,606
Net use (acquisition) of inventories 16,614 9,033
Net use (acquisition) of prepaid expenses (21,635) 37,569
(5,021) 46,602
Increase in net financial assets
Net financial assets, beginning of year
Increase in accumulated remeasurement gain (note 2(a))
Adjustment on adoption of the asset retirement obligation
standard (note 2(b))
501,960 52,208
1,598,702 1,546,494
199,151 -
(201,946) -
Net financial assets, end of year $ 2,097,867 $ 1,598,702
See accompanying notes to financial statements.
3
Page 121 of 254
THE CENTRE IN THE SQUARE INC.
Statement of Remeasurement Gains
Year ended December 31, 2023, with comparative information for 2022
2023 2022
Accumulated remeasurement gains (losses), beginning of
year $ - $ -
Adjustment on adoption of the financial instruments standard
(note 2(a)) 155,664 -
Realized (gains) losses reclassified to statement of
operations:
Investments - Equity instruments (29,602) -
Unrealized gains (losses) attributable to:
Investments - Equity instruments 73,089 -
$ 199,151 $ -
See accompanying notes to financial statements.
4
Page 122 of 254
THE CENTRE IN THE SQUARE INC.
Statement of Cash Flows
Year ended December 31, 2023, with comparative information for 2022
2023 2022
Cash provided by (used in)
Operations:
Excess of revenue over expenses
$ 1,991,268
$ 2,371,404
Items not involving cash:
Amortization
1,262,739
1,055,000
Loss on disposal of tangible capital assets
4,951
8,709
Gain on sale of investments
(1,387)
(82,435)
Changes in non-cash operating working capital
574,289
(398,014)
3,831,860
2,954,664
Capital activities:
Cash used to acquire tangible capital assets
(2,751,977)
(3,432,107)
Cash proceeds on sale of tangible capital assets
-
2,600
(2,751,977)
(3,429,507)
Investing:
Cash used in purchasing of investments
(293,935)
(246,142)
Cash received on sale of investments
268,920
222,453
(25,015)
(23,689)
Increase (decrease) in cash and cash equivalents
1,054,868
(498,532)
Cash and cash equivalents, beginning of year
3,352,049
3,850,581
Cash and cash equivalents, end of year $ 4,406,917 $ 3,352,049
See accompanying notes to financial statements.
Page 123 of 254
THE CENTRE IN THE SQUARE INC.
Notes to Financial Statements
Year ended December 31, 2023
Nature of operations:
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.
6
Page 124 of 254
THE CENTRE IN THE SQUARE INC.
Notes to Financial Statements (continued)
Year ended December 31, 2023
1. Significant accounting policies (continued):
(c) Financial instruments:
Financial instruments are recorded at fair value on initial recognition. Derivative
instruments and equity instruments that are quoted in an active market are reported at fair
value. All other financial instruments are subsequently recorded at cost or amortized cost
unless management has elected to carry the instruments at fair value.
Unrealized changes in fair value are recognized in the statement of remeasurement gains
and losses until they are realized, when they are transferred to the statement of
operations.
Transaction costs incurred on the acquisition of financial instruments measured
subsequently at fair value are expensed as incurred. All other financial instruments are
adjusted by transaction costs incurred on acquisition and financing costs, which are
amortized using the straight-line method (or effective interest rate method).
All financial assets are assessed for impairment on an annual basis. When a decline is
determined to be other than temporary, the amount of the loss is reported in the statement
of operations and any unrealized gain is adjusted through the statement of remeasurement
gains and losses.
When the asset is sold, the unrealized gains and losses previously recognized in the
statement of remeasurement gains and losses are reversed and recognized in the
statement of operations.
The Standards require an organization to classify fair value measurements using a fair
value hierarchy, which includes three levels of information that may be used to measure
fair value:
Level 1 — Unadjusted quoted market prices in active markets for identical assets or
liabilities;
Level 2 — Observable or corroborated inputs, other than level 1, such as quoted prices for
similar assets or liabilities in inactive markets or market data for
substantially the full term of the assets or liabilities; and
Level 3 — Unobservable inputs that are supported by little or no market activity and that are
significant to the fair value of the assets and liabilities.
(d) 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.
7
Page 125 of 254
THE CENTRE IN THE SQUARE INC.
Notes to Financial Statements (continued)
Year ended December 31, 2023
1. Significant accounting policies (continued):
(e) 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
Computer
Site
5 - 100 years
3-10 years
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.
8
Page 126 of 254
THE CENTRE IN THE SQUARE INC.
Notes to Financial Statements (continued)
Year ended December 31, 2023
1. Significant accounting policies (continued):
(f) 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.
In addition, the Centre's implementation of PS3280 Asset Retirement Obligations has
resulted in the requirement for management to make estimates regarding the useful lives
of affected tangible capital assets and the expected retirement costs, as well as the timing
and duration of these retirement costs.
Actual results could differ from these estimates.
(g) Asset retirement obligation:
An asset retirement obligation is recognized when, as at the financial reporting date, all of
the following criteria are met:
— There is a legal obligation to incur retirement costs in relation to a tangible capital asset;
— The past transaction or event giving rise to the liability has occurred;
— It is expected that future economic benefits will be given up; and
— A reasonable estimate of the amount can be made.
An additional liability for the removal of asbestos in the building owned by the Centre has
also been recognized based on estimated future expenses on closure of the site and post -
closure care.
The recognition of a liability resulted in an accompanying increase to the respective
tangible capital assets. The increase to the tangible capital assets is being amortized in
accordance with the amortization accounting policies outlined in (i).
9
Page 127 of 254
THE CENTRE IN THE SQUARE INC.
Notes to Financial Statements (continued)
Year ended December 31, 2023
2. Change in accounting policy:
(a) PS 3450 — Financial Instruments and PS 2601 — Foreign Currency Translation:
On January 1, 2023, the Centre adopted Public Accounting Standards PS 3450 — Financial
Instruments and PS 2601 — Foreign Currency Translation. The standards were adopted
prospectively from the date of adoption. The new standards provide comprehensive
requirements for the recognition, measurement, presentation and disclosure of financial
instruments and foreign currency transactions.
Under PS 3450, all financial instruments, including derivatives, are included on the
statement of financial position and are measured either at fair value or amortized cost
based on the characteristics of the instrument and the Centre's accounting policy choices
(see Note 1 — Significant Accounting Policies).
In accordance with the provisions of this new standard, the Centre reflected the following
adjustments at January 1, 2023:
A gain on remeasurement of $155,664 to investments and to accumulated remeasurement
gains/(losses) due to the unrealized gain of the Centre's investments previously classified
as held -to -maturity or available for sale being reclassified to accumulated remeasurement
gains/(losses).
(b) PS 3280 - Asset Retirement Obligations:
On January 1, 2023, the Centre also adopted Public Accounting Standard PS 3280 —
Asset Retirement Obligations. The new accounting standard addresses the reporting of
legal obligations associated with the retirement of certain tangible capital assets, such as
asbestos removal in retired buildings by public sector entities. The standard was adopted
on a prospective basis at the date of adoption. Under the prospective method, the discount
rate and assumptions used on initial recognition are those as of the date of adoption of the
standard.
On January 1, 2023, the Centre recognized an asset retirement obligation relating to the
building owned by the Centre that contains asbestos. The liability was measured
prospectively as of January 1, 2023. The building has an expected useful life of 30 years
remaining.
In accordance with the provisions of this new standard, the Centre reflected the following
adjustments at January 1, 2023:
An increase in the asset retirement obligation of $201,946 with an increase of the same
amount to tangible capital assets.
10
Page 128 of 254
THE CENTRE IN THE SQUARE
INC.
Notes to Financial Statements (continued)
Year ended December 31, 2023
3. Accounts receivable:
2023
2022
Accounts receivable
$ 257,868 $
1,992,751
Allowance for doubtful accounts
_
_
$ 257,868 $
1,992,751
4. Investments:
Investments consist of:
2023
2022
Assets measured at amortized cost:
Guaranteed Investment Certificates
$ 804,252 $
768,350
Fixed income
454,733
460,952
Investments measured at fair value:
Equity instruments, quoted in an active market
493,622
297,752
$ 1,752,607 $
1,527,054
During 2023, the Centre adopted the financial instruments standard prospectively, refer to Note
2(a). 2022 investments are at amortized cost. Equity instruments, quoted in an active market
are classified as level 1 investments.
5. Inventories:
Inventories consist of the following:
2023 2022
Bar stock $ 55,213 $ 72,798
Supplies 2,846 1,875
$ 58,059 $ 74,673
11
Page 129 of 254
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THE CENTRE IN THE SQUARE INC.
Notes to Financial Statements (continued)
Year ended December 31, 2023
7. Operating fund activities:
2023 2023 2022
Budget Actual Actual
Revenue
Performances $
3,261,719 $
4,226,877 $
2,559,785
Rent - Kitchener -Waterloo Symphony
213,325
117,450
204,700
Grants from City of Kitchener
2,011,602
2,011,601
2,000,000
Grants, other governments
125,000
25,000
459,804
Donations
25,000
23,254
39,449
Investment income
16,000
173,047
71,743
Sponsorships and memberships
175,575
81,526
63,423
Rent - Kitchener -Waterloo Art Gallery
111,618
111,618
107,222
Lottery revenue
-
7
7,421
Other
412,514
803,023
490,618
6,352,353
7,573,403
6,004,165
Expenses
Performances
2,055,342
2,701,643
2,100,203
Administration and box office
773,873
747,462
575,081
Marketing
98,640
61,333
64,733
Lottery expenses
-
-
7,796
Occupancy
790,529
711,441
706,610
Salaries and wages
2,572,667
2,624,668
2,522,922
Sponsorship expenses
60,828
43,051
28,118
6,351,879
6,889,598
6,005,463
Operating fund net revenues (deficiency)
before amortization 474 683,805 (1,298)
Transfer from (to) reserve funds (note 15) (474) (683,805) 649
Transfer from City of Kitchener - - 649
14
Page 132 of 254
THE CENTRE IN THE SQUARE INC.
Notes to Financial Statements (continued)
Year ended December 31, 2023
8. Asset retirement obligations:
The Centre's asset retirement obligation consists of the below obligations:
Asbestos Obligation
The Centre owns and operates a building that is known to have asbestos, which represents a
health hazard upon demolition of the building and there is a legal obligation to remove it.
Following the adoption of PS3280 — Asset retirement obligations, the Centre recognized an
obligation relating to the removal and post-removal care of the asbestos in this building for the
year ended December 31, 2023. The building had an estimated remaining useful life of 30
years. In addition, the obligation is being recognized on a prospective basis with no discounting.
10. Economic dependence:
The Centre is economically dependent on the City of Kitchener to provide sufficient funds to
continue operations and capital projects. During the year ended December 31, 2023 the Centre
earned $4,196,043 of revenue from the City of Kitchener.
15
Page 133 of 254
Balance at
Asbestos
December 31,
removal
2023
Opening balance
$
-
$ -
Asset retirement obligation additions at adoption of
standard
201,946
201,946
Closing balance
$
201,946
$ 201,946
9. Deferred revenue:
Deferred revenue consists of the following:
2023
2022
Performances
$
1,812,483
$ 2,059,807
Gift certificates
35,327
98,233
Sponsorships
41,548
53,311
Other
180,133
171,966
Membership
12,856
10,095
$
2,082,347
$ 2,393,412
10. Economic dependence:
The Centre is economically dependent on the City of Kitchener to provide sufficient funds to
continue operations and capital projects. During the year ended December 31, 2023 the Centre
earned $4,196,043 of revenue from the City of Kitchener.
15
Page 133 of 254
THE CENTRE IN THE SQUARE INC.
Notes to Financial Statements (continued)
Year ended December 31, 2023
11. Budget:
The original budgeted figures were approved by the Board of Directors at their meeting on
January 18, 2023 and included certain expenses and offsetting recoveries on a net basis.
12. Pension agreements:
The Centre belongs to the Ontario Municipal Employees Retirement Fund ("OMERS"), which is
a multi-employer plan, on behalf of the members of its staff. This plan specifies the amount of
the retirement benefit to be received by the employees based on the length of service and rates
of pay. Because OMERS is a multi-employer pension plan, any pension plan surpluses or
deficits are the joint responsibility of Ontario municipal organizations and their employees. As a
result, The Centre does not recognize any share of the OMERS pension surplus or deficit.
The latest available report for the OMERS plan was December 31, 2023. At that time the plan
reported a $4.2 billion actuarial deficit (2022 - $6.7 billion actuarial deficit), based on actuarial
liabilities of $136.2 billion (2022 - $128.8 billion) and actuarial assets of $132 billion (2022 -
$122.1 billion). Ongoing adequacy of the current contribution rates will need to be monitored
and may lead to increased future funding requirements.
The 2023 employer portion of OMERS pension contributions was $210,986 (2022 - $163,271).
13. Financial risks:
(a) Market risk:
Market risk is the risk that changes in market prices, foreign exchange rates or interest
rates will affect the Centre's surplus or the value of its holdings of financial instruments.
The objective of market risk management is to control market risk exposures within
acceptable parameters.
16
Page 134 of 254
THE CENTRE IN THE SQUARE INC.
Notes to Financial Statements (continued)
Year ended December 31, 2023
13. Financial risks (continued):
(b) Credit risk:
Credit risk is the risk that counterparties fail to perform as contracted, resulting in a
financial loss. The Centre is exposed to credit risk with respect to its accounts receivable
and cash. The Centre assesses, on a continuous basis, accounts receivable and provides
for any amounts that are not collectible in the allowance for doubtful accounts. The
maximum exposure to credit risk of the Centre at December 31, 2023 is the carrying value
of these assets.
The carrying amount of accounts receivable is valued with consideration for an allowance
for doubtful accounts. The amount of any related impairment loss is recognized in the
statement of operations. Subsequent recoveries of impairment losses related to accounts
receivable are credited to the statement of operations. The balance of the allowance for
doubtful accounts at December 31, 2023 is $Nil (2022 - $Nil).
(c) Liquidity risk:
Liquidity risk is the risk that the Centre will not be able to meet all cash outflow obligations
as they come due. The Centre mitigates this risk by monitoring cash activities and
expected
outflows.
Accounts payable and accrued liabilities are generally due within 60 days of receipt of an
invoice.
There have been no other significant changes from the previous period in the exposure to
risk or policies, procedures and methods used to measure the risk.
(d) Interest rate risk:
The Centre does not have any interest bearing amounts payable and therefore is not
exposed to interest rate risk.
14. Comparative information:
Certain comparative information have been reclassified from those previously presented to
conform to the presentation of the 2023 financial statements.
17
Page 135 of 254
THE CENTRE IN THE SQUARE INC.
Notes to Financial Statements (continued)
Year ended December 31, 2023
15. Schedule of reserve funds:
(a) Performance Development Reserve Fund:
At the direction of the Board of Directors, transfers are made to and from the Performance
Development reserve funds.
(b) Capital Reserve Fund:
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 2023, The Centre's Board of Directors approved transfers out of the Capital Reserve
Fund for major capital asset projects of $2,953,923 (2022 - $3,432,107).
(c) Sustainability Reserve Fund:
Revenues from the Sustainability Reserve Fund come from fundraising contributions. At
the direction of the Board of Directors, funds are allocated for specific capital projects and
programming initiatives.
(d) 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.
18
Page 136 of 254
THE CENTRE IN THE SQUARE INC.
Notes to Financial Statements (continued)
Year ended December 31, 2023
15. Schedule of reserve funds (continued):
Expenses:
Professional fees
Capital costs (recovery)
- 10,988 10,988
12,767 - 12,767
Capital Sustainability
Restricted
Total Funds
Revenue:
2,550,052
8,070 17,030
2,575,152
Donations and sundry
$ - $ $
2,618 $
2,618
Grants from City of Kitchener
1,439,004
-
1,439,004
Grants, other governments and
(2,953,923)
- -
(2,953,923)
foundations
744,789
- -
744,789
Ticket surcharge
344,472
-
344,472
Investment income
34,554 8,070
24,013
66,637
Gain on investments
- -
1,387
1,387
2,562,819 8,070
28,018
2,598,907
Expenses:
Professional fees
Capital costs (recovery)
- 10,988 10,988
12,767 - 12,767
19
Page 137 of 254
12,767
- 10,988
23,755
Excess of revenue over expenses
2,550,052
8,070 17,030
2,575,152
Balance, beginning of year
935,502
205,213 728,700
1,869,415
Transfer to accumulated surplus -
tangible capital assets (note 15 (b))
(2,953,923)
- -
(2,953,923)
Transfer from operating fund
683,805
- -
683,805
$
1,215,436 $
213,283 $ 745,730 $
2,174,449
19
Page 137 of 254
THE CORPORATION OF THE CITY OF KITCHENER
GASWORKS ENTERPRISE
Statement of Operations and Accumulated Surplus
For the Year Ended December 31, 2023
2023 2023 2022
Budget
DELIVERY OPERATIONS
Gas delivery
41,928,727
40,320,864
45,018,244
Revenue
$ 44,970,993 $
45,880,933 $
43,591,449
Expenses
30,605,000
30,981,245
30,132,388
75,336
14,365,993
14,899,688
13,459,061
Other programs
Balance, end of year
$ 6,281,441 $
8,148,005 $
6,038,619
(Dispatch and rental water heaters)
Revenue
13,431
14,596,947
12,995,423
—Expenses
11,04429
11,167,104
9,196,032
1111j*0,922
3,429,843
3,799,391
Excess of revenue over exnenses
mullll 756.915
IIS"8.329.531
17.258.452
Accumulated surplus - Delivery
Balance, beginning of year
Interest revenue
Transfer to gas investment reserve
Excess of revenue over expenses
Balance. end of vear
SUPPLY OPERATIONS
Revenue
—Expenses
Excess/(deficiencv) of reJ&me over
7,272
46;"926)
16, 6,915
144.788.348
143,847,272
143,509
(15,846,926)
18,329,531
146.473.386
142,040,501
84,521
(15,536,202)
17,258,452
143,847,272
45,084,183
41,928,727
40,320,864
45,018,244
40,118,668
37,956,435
65,939
1,810,059
2,364,429
Accumulated surplus -Supp
Balance, beginning of year III
6,038,619
6,038,619
3,598,854
Interest revenue
176,883
299,327
75,336
Excess/(deficiency) of revenue over expenses
65,939
1,810,059
2,364,429
Balance, end of year
$ 6,281,441 $
8,148,005 $
6,038,619
Page 138 of 254
MANAGEMENT REPORT
Management's Responsibility for Financial Reporting
The accompanying financial statements of Kitchener Generation Corporation are the responsibility of
management and have been prepared in accordance with Canadian public sector accounting
standards. The significant accounting policies followed by Kitchener Generation Corporation are
described in the Significant Accounting Policies contained in Note 2 of the financial statements. The
preparation of financial statements necessarily involves the use of estimates based on management's
judgment, particularly when transactions affecting the current accounting period cannot be finalized
with certainty until future periods. The financial statements have been prepared within reasonable limits
of materiality and in light of information available up to June 24, 2024.
Management maintained a system of internal controls designed to p
the assets were safeguarded and that reliable information was availa
included formal policies and procedures and an organizatio
appropriate delegation of authority and segregation of responsib;' e:
KITCHENER GENERATION CORPORATION
On behalf of management,
Jonathan Lautenbacl
Chief Financial Officer
June 24, 2024
Kitchener, Canada
reasonable assurance that
a timely basis. The system
are that provided for the
Page 139 of 254
KITCHENER GENERATION CORPORATION
Statement of Financial Position
As at December 31, 2023
(Unaudited)
2023 2022
Financial assets
Accounts receivable $ 4,478 $ 11,478
4.478 11.478
Liabilities
Due to the Corporation of the City of Kitchener 4,476 11,476
Long-term debt (Note 3) 1,463,186 1,672,213
1,467,662 1,683,689
Net financial debt mullllllpu, (1,463,184) (1,672,211)
Non-financial assets
Tanaible capital assets (Note
Shareholder's equity (Note
The accompanying notes are an integral part of these financial
1,625,760
1,858,012
1,625,760
1,858,012
162,576 $
185,801
Page 140 of 254
KITCHENER GENERATION CORPORATION
Statement of Operations
For the Year Ended December 31, 2023
(Unaudited)
2023 2023 2022
Budget
Revenue
Sale of electricity $ 385,000 $ 389,765 $ 386,220
Total revenue 385.000 389.765 386.220
Expenses
Maintenance
20,000
-
10,400
Amortization of tangible capital assets
232,252
232,252
232,252
Total expenses
252,252
232,252
242,652
Surplus before interest and provision for payments -
in -lieu of corporate income taxes
1A111111111,
157,513
143,568
Interest expense
83,778
94,250
Surplus before provision for payments -in -lieu of
48
corporate income taxes
970
uo 73,735
49,318
Provision for payments -in -lieu of corporate incomelluo
taxes
-
-
-
Annual surplus
The accompanying notes are an integral part of these
1,970 $ 73,735 $ 49,318
�8
Page 141 of 254
KITCHENER GENERATION CORPORATION
Statement of Change in Net Financial Debt
For the Year Ended December 31, 2023
(Unaudited)
Annual surplus
2023 2022
73,735 $ 49,318
Change in share capital
(23,225)
(23,226)
Dividends
(73,735)
(49,318)
Amortization of tangible capital assets
232,252
232,252
Change in net financial debt
209,027
209,026
Net financial debt, beginning of year
(1,672,211)
(1,881,237)
Net financial debt, end of year
$ (1,463,184)
$ (1,672,211)
The accompanying notes a
Page 142 of 254
KITCHENER GENERATION CORPORATION
Statement of Cash Flow
For the Year Ended December 31, 2023
(Unaudited)
2023 2022
Operating
(23,226)
(209,027)
Annual surplus
$ 73,735 $
49,318
Items not involving cash
(281,570)
Amortization of tangible capital assets
232,252
232,252
Change in non-cash assets and liabilities
Trade and other accounts receivable
7,000
(3,802)
Accounts payable and accrued liabilities
(7,000)
3,802
Net chanae in cash from oneratina activities
mulllum 305.987
281.570
Financing
Change in share capital
Change in long-term debt
Dividends paid
Net change in cash from financing activities
Net change in cash and cash equivalents
Cash and cash equivalents, beginning of ye,
Cash and cash eauivalents. end of vear
The accompanying notes are an integral pqWIIMWe fin ial statements.
(23,225)
(23,226)
(209,027)
(209,026)
(73,735)
(49,318)
(305,987)
(281,570)
Page 143 of 254
KITCHENER GENERATION CORPORATION
Notes to the Financial Statements
For the Year Ended December 31, 2023
(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 s established by the Public Sector
Accounting Board of the Chartered Professional Accountants of Can �. The following is a summary of the
significant accounting policies followed in the preparation of these fiolopial statements:
a. Basis of accounting
The financial statements are prepared using thea al basis of"""" ounting. The accrual basis of
accounting recognizes revenues in the period in whi a tra actions or lents occurred that gave rise to
the revenues. Expenses are recognized in the peri e g and services are acquired and a liability is
incurred or when an external transfer is due.11lllluuuuilllllllui""
b. Tangible capital assets
Tangible capital assets are recall amounts that are directly attributable to
acquisition, construction, developset. The cost less residual value of the solar
roof asset is amortized on a straied useful life of nineteen years.
c. Revenue recognition lull 1111
The Company records revenueon the basis of regular meter readings and
estimates of energy ge INC
the end of the year.
d. Use of
The preparation of th" ancial s ments requires management to make estimates and assumptions that
affect the reported amo of is and liabilities, the disclosure of contingent assets and liabilities at the
date of the financial state and the reported amounts of revenues and expenses during the year.
These estimates and assum ions, 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.
e. Financial instruments
Financial instruments are recorded at fair value on initial recognition and subsequently recorded at cost or
amortized cost. Amortized cost is determined using the effective interest method. As all financial
instruments are recorded at cost or amortized cost, a statement of remeasurement gains and losses has
not been included.
Financial assets measured at cost or amortized cost are assessed for indicators of impairment at each
financial statement date. Impairment losses are recognized in the statement of operations.
The Company evaluates contractual obligations for the existence of embedded derivatives and separately
measures the fair value of the derivative component when characteristics of the derivative are not closely
related to the economic characteristics and risks of the contract itself.
Page 144 of 254
KITCHENER GENERATION CORPORATION
Notes to the Financial Statements
For the Year Ended December 31, 2023
(Unaudited)
2. Summary of significant accounting policies (continued)
f. Newly adopted accounting standards
The Company adopted the following Public Sector Accounting Standards ("PS") for the year ended
December 31, 2023:
i. PS 1201 Financial Statement Presentation
ii. PS 3041 Portfolio Investments
iii. PS 3280 Asset Retirement Obligations
iv. PS 3450 Financial Instruments
v. PS 2601 Foreign Currency Translation
The adoption of these accounting standards did not
3. Long-term debt
Effective January 1, 2012 the Company issued an unse
City of Kitchener. Payments are made annually iinc
rate of 5.01 % per annum. Interest paid in 2023 a
4. Tangible capital assets
Opening balance
Additions
Amortization
Disposals
nts of the Company.
le to the Corporation of the
ist is calculated at the fixed
9).
Accumulated Net Book
Cost Amortization Value
$ 4,412,784 $ (2,554,772) $ 1,858,012
(232,252) (232,252)
Ending balance $ 4,412,784 $ (2,787,024) $ 1,625,760
5. Shareholder's equity
Shareholder's equity consists of the following:
2023 2022
Share capital - common shares (Note 6) $ 162,576 $ 185,801
Retained earnings - -
$ 162,576 $ 185,801
Page 145 of 254
KITCHENER GENERATION CORPORATION
Notes to the Financial Statements
For the Year Ended December 31, 2023
(Unaudited)
6. Share capital
Authorized
Unlimited common shares
Issued
1,000 common shares
7. Financial instruments
The Company is exposed to various risks through its financial instruments and continues to monitor, evaluate,
and manage these risks. The following analysis provides information about the Company's risk exposure and
concentration as at December 31, 2023. mullllllu
a. Credit risk
Credit risk is the risk that one party to a financial insl
failing to discharge an obligation. The Company is
consists of accounts receivable from a governme
Company's maximum credit exposure. There is no
historically had no difficulty collecting.
b. Liquidity risk
ill caul financial loss for the other party by
to credit ,from its financial assets, which
tion. The""""0'�rrying amount represents the
r doubtful accounts since the Company has
Liquidity risk is the risk that an entity will enco er . meeting obligations associated with financial
liabilities. The Company is exposed uidity om its ong-term debt, which it manages by preparing
budget and cash forecasts in ord„ tain icient funds for meeting obligations as they come due.
c. Market risk
Market risk is the risk that the fa
of changes in market
risk. The Compan not ex
transactions or flo interest
impacted by change arket
rate risk as the long-te ebtt
be repaid in accordance 10
Concentration of risk
a. Limited counterparties
or future cash flows of a financial instrument will fluctuate because
k is comprised of currency risk, interest rate risk, and other price
.d ignificant market risk since it does not have foreign currency
s. T e fair value of long-term debt with a fixed interest rate is directly
est rates. However, the Company is not exposed to significant interest
an interest rate fixed for a long period of time with the debt intended to
rms of the loan.
A substantial portion of the Company's revenue is derived from Enova Power Corp. The loss of this
relationship would have a significant impact on the Company's revenue.
Page 146 of 254
Financial Statements of
Enova Energy Corporation
(Consolidated)
Year ended December 31, 2023
(Expressed in thousands of dollars)
Page 147 of 254
191,11 MIM
KPMG LLP
120 Victoria Street South
Suite 600
Kitchener, ON N2G OE1
Canada
Telephone 519 747 8800
Fax 519 747 8811
To the Shareholders of Enova Energy Corporation
Opinion
We have audited the consolidated financial statements of Enova Energy Corporation (the Entity),
which comprise:
• the consolidated statement of financial position as at December 31, 2023
• 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 material accounting
policy information
(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 at December 31, 2023, and its consolidated financial
performance and its consolidated cash flows for the year then ended in accordance with IFRS
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 "Auditor's Responsibilities for
the Audit of the Financial Statements" section of our auditor's report.
We are independent of the Entity in accordance with the ethical requirements that are relevant to our
audit of the financial statements in Canada and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
1<1"i ". I...I...I ' i ii'.^i, W(;(I 31, i -Jii,� i'iro, ii ,� :n'; i(,1<1 W( i. 01'f
I ii'�,d., „� Iai,
Page 148 of 254
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 IFRS 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 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.
Auditor's 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 auditor's 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.
• 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.
Page 149 of 254
• 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 auditor's 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 auditor's 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.
,rIAwG «a
Chartered Professional Accountants, Licensed Public Accountants
Kitchener, Canada
April 18, 2024
Page 150 of 254
ENOVA ENERGY CORPORATION
Consolidated Statement of Financial Position
As at December 31, 2023, with comparative information for 2022
(Expressed in thousands of dollars)
December 31, December 31,
Note 2023 2022
ASSETS
Current
Cash $ - $ 15,189
Accounts receivable 5 37,808 34,660
Unbilled revenue 33,477 33,366
Inventories 8,754 7,655
Prepaid expenses 2,072 2,371
Current portion of lease receivables 127 111
Total current assets $ 82,238 $ 93,352
Non-current assets
Derivative asset
396
592
Property, plant and equipment
6 598,152
570,164
Intangible assets
7 16,969
18,571
Goodwill
3 140,077
140,077
Long term portion of lease receivables
980
1,255
Deferred tax asset
1,210
528
Investments in subsidiaries
372
322
Total non-current assets $ 758,156 $ 731,509
Total assets 840,394 824,861
Regulatory deferral account debit balances 9 50,638 51,872
Total assets and regulatory deferral account debit
balances $ 891,032 $ 876,733
2
Page 151 of 254
ENOVA ENERGY CORPORATION
Consolidated Statement of Financial Position
As at December 31, 2023, with comparative information for 2022
(Expressed in thousands of dollars)
Note December 31, December 31,
2023 2022
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities
$
48,529 $
49,918
Short-term bank debt
13
4,416
-
Demand loans payable
10
118,145
117,598
Current portion of lease liabilities
17
97
97
I ncome tax payable
12
702
1,685
Current portion of deferred revenue
15
2,378
2,214
Dividends payable
14
-
5,056
Current portion of customer deposits
13
14,209
12,081
Total current liabilities
$
188,476 $
188,649
Long-term
Notes payable to shareholders
11
110,254
110,254
Long term portion of customer deposits
13
9,166
8,634
Long term portion of lease liabilities
17
722
778
Deferred revenue
15
83,395
79,177
Employee future benefits
12
8,107
7,703
Deferred tax liability
8
27,444
23,517
Total long-term liabilities
$
239,088 $
230,063
Total liabilities
427.564
418.712
Shareholders' equity
Share capital 14 326,248 326,248
Retained earnings 123,725 114,465
Accumulated other comprehensive income (loss) 12 1,307 1,591
Non -controlling interest 842 1,000
Total shareholders' equity $ 452,122 $ 443,304
Total liabilities and shareholders' equity $ 879,686 $ 862,016
Regulatory deferral account credit balances 9 1,467 6,072
Deferred taxes associated with regulatory accounts 9 9,879 8,645
Total equity, liabilities and regulatory deferral account
credit balances $ 891,032 $ 876,733
The accompanying notes are an integral part of these financial statements.
On behalf of the Board:
Rosa Lupo, Chair Tim Martin, Vice -Chair
3
Page 152 of 254
ENOVA ENERGY CORPORATION
Consolidated Statement of Comprehensive Income
For the year ended December 31, 2023, with comparative information for the period of
September 1, 2022 to December 31, 2022
(Expressed in thousands of dollars)
Note 2023 2022
REVENUES
Energy sales 15 $ 370,416 $ 114,666
Cost of energy sold 370,720 117,918
(304) (3,252)
Other operating revenue
Distribution revenue 15
Other income 15
Net operating revenue
EXPENSES
Operations and maintenance
Customer services
Administration
Amortization 6
91,475
30,483
7,570
2,554
$ 98,741 $
29,785
19,283
6,693
9,447
3,057
17,900
4,106
24,335
7,804
70,965
21,660
Other
Energy conservation program revenue (764) (2,791)
Energy conservation program expense 767 2,801
Net energy conservation programs 3 10
Finance income
16 (578)
(183)
Finance charges
16 11,404
3,085
Revaluation of Class A and B Special Shares
1,630
-
Unrealized loss (gain) on derivative
196
(953)
Net finance costs
12.652
1.949
Income before income taxes $ 15,121 $ 6,166
I ncome tax expense 8 4,229 1,195
Income for the period before movements in
regulatory deferral account balances and other
comprehensive income $ 10,892 $ 4,971
Net movement in regulatory deferral account balances
related to profit or loss and the related deferred tax
movement 9 2,135 1,518
Other comprehensive income (loss), net of taxes 12 (284) 2,211
Non -controlling interest 158 (151)
Net comprehensive income for the period $ 12,901 $ 8,549
The accompanying notes are an integral part of these financial statements.
4
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ENOVA ENERGY CORPORATION
Consolidated Statement of Changes in Equity
For the year ended December 31, 2023, with comparative information for the period of
September 1, 2022 to December 31, 2022
(Expressed in thousands of dollars)
Balance at December 31, 2022 $ 326,248 $ 1,000 $ 1,591 $ 114,465 $ 443,304
Net income and net movement in
regulatory balances - - (284) 13,185 12,901
Non -controlling interest (158) (158)
Dividends paid 14 - - (3,925) (3,925)
Balance at December 31, 2023 $ 326,248 $ 842 $ 1,307 $ 123,725 $ 452,122
The accompanying notes are an integral part of these financial statements.
5
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Accumulated
Non-
Other
Share
Controlling
Comprehensive
Retained
Note Capital
Interest
Income (loss)
Earnings
Total
Balance at September 1, 2022
$ 66,389
$ -
$ (620)
$ 108,127
$ 173,896
Shares issued related to
acquisition
3 259,859
849
-
-
260,708
Net income and net movement in
regulatory balances
-
-
2,211
6,338
8,549
Non -controlling interest
151
151
Balance at December 31, 2022 $ 326,248 $ 1,000 $ 1,591 $ 114,465 $ 443,304
Net income and net movement in
regulatory balances - - (284) 13,185 12,901
Non -controlling interest (158) (158)
Dividends paid 14 - - (3,925) (3,925)
Balance at December 31, 2023 $ 326,248 $ 842 $ 1,307 $ 123,725 $ 452,122
The accompanying notes are an integral part of these financial statements.
5
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ENOVA ENERGY CORPORATION
Consolidated Statement of Cash Flows
For the year ended December 31, 2023, with comparative information for the period of
September 1, 2022 to December 31, 2022
(Expressed in thousands of dollars)
INVESTING ACTIVITIES
Note
2023
2022
OPERATING ACTIVITIES
6
(51,246)
(18,562)
Net income
7
12,901 $
8,549
Add (deduct) charges to operations not requiring a current
84
37
cash payment:
$
(52,272) $
(18,671)
Amortization
6
25,970
8,456
Amortization of deferred revenue
(2,282)
(730)
Loss (gain) on disposal of property, plant and equipment
15
(84)
(37)
1 ncome tax expense
8
4,229
1,195
Income tax expense included in OCI
10
(103)
797
Net interest (revenue) expense on lease liabilities
10
(36)
12
Income taxes paid
(1,864)
(440)
Change in non -controlling interest
15
(158)
151
Change in investments in subsidiaries
(50)
1
Decrease in employee future benefits liability
12
404
(2,933)
Unrealized gain on derivatives
$
196
(953)
Recognition of unrealized gain on derivatives
-
(287)
Cash and cash equivalents, beginning of period
39,123
13,781
Net change in non-cash operating working capital
$
(4,416) $
15,189
Accounts receivable
(3,148)
6,522
Unbilled revenue
(111)
3,123
Inventories
(1,099)
1,460
Prepaid expenses
299
(601)
Accounts payable and accrued liabilities
(1,389)
(4,794)
Dividends payable
(5,056)
Regulatory deferral account debit balances
1,234
2,451
Regulatory deferral account credit balances
(3,371)
(3,452)
Cash provided by operating activities
$
26,482 $
18,490
INVESTING ACTIVITIES
Purchase of property, plant and equipment
6
(51,246)
(18,562)
Purchase of intangible assets
7
(1,110)
(146)
Proceeds on disposal of property, plant and equipment
84
37
Cash used in investing activities
$
(52,272) $
(18,671)
FINANCING ACTIVITIES
Proceeds on settlement of derivatives
-
6,135
Net change in customer deposits
2,660
(1,882)
Increase in demand loan payable
10
1,000
110,000
Repay ment of short-term debt
10
(453)
-
Repayment of long-term debt
10
-
(89,557)
Dividends paid
(3,925)
-
Capital contributions received
15
6,664
3,408
Payment of principal on lease assets/ liabilities
203
(12)
Net receipt (payment) of interest on lease assets / liabilities
36
(28)
Cash provided by financing activities
$
6,185 $
28,064
Net cash provided (used) during period
(19,605)
27,883
Cash and cash equivalents, beginning of period
15,189
(12,694)
Cash and cash equivalents, end of period
$
(4,416) $
15,189
The accompanying notes are an integral part of these financial statements.
6
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ENOVA ENERGY CORPORATION
Notes to Consolidated Financial Statements
For the year ended December 31, 2023, with comparative information for the period of
September 1, 2022 to December 31, 2022
(Expressed in thousands of dollars)
1. Reporting Entity
Enova Energy Corporation ("the Corporation") is wholly owned by the Cities of Kitchener and Waterloo,
and the Townships of Wellesley, Wilmot and Woolwich. The Corporation oversees the operations of
Enova Power Corp. ("EPC"), a regulated distribution company, and Enova Energy Services Inc.
("EESI"), an unregulated retail services company, and Alliance Metering Solutions Inc. ("AMS"), a
submetering service provider. The Corporation also owns 66.7% of Grand River Energy Solutions
Corp. ("GRE"), a generation and renewable energy solutions company, and 30.47% of Eyedro Green
Solutions Inc. ("Eyedro"), a privately owned company with a focus on affordable energy products.
The Corporation is located in the Regional Municipality of Waterloo. The address of the Corporation's
registered head office is 301 Victoria Street South, Kitchener, Ontario, Canada.
The financial statements are for the Corporation as at and for the period ended December 31, 2023
Legal Amalgamation
On January 12, 2022, the Corporation entered into a Merger Participation Agreement ("MPA") with
Kitchener; Wilmot; Waterloo; Woolwich; Wellesley; Kitchener Power Corp. ("KPC"); Kitchener Energy
Services Inc. ("KESI"); Kitchener -Wilmot Hydro Inc. ("KWHI"); Waterloo North Hydro Inc. ("WNHI");
Waterloo North Holding Company ("WNHC"); and AMS. KPC was the parent company of KWHI and
KESI. WNHC was the parent company of WHNI and AMS.
For accounting purposes, former KPC was deemed the acquirer under the Amalgamation Transaction.
Consequently, the opening balances in these statements are the balances of former KPC as at
September 1, 2022.
The MPA provided the terms and conditions under which WNHC and KPC would amalgamate (the
"MergeCo Amalgamation"), followed immediately by the amalgamation of the WNHI and KWHI ("LDC
Amalgamation"). The LDC Amalgamation was subject to the approval of the OEB based on a Mergers,
Acquisitions, Amalgamations and Divestitures Application ("MAADs Application") process. The
MAADs Application included a request for Ontario Energy Board ("OEB") approval for the continuation
of regulated rates and charges of the predecessor LDCs of the Corporation. On June 28, 2022, the
OEB issued a Decision and Order approving the LDC Amalgamation.
The MergeCo Amalgamation occurred on September 1, 2022 (the "closing date") and the parent
corporation continues as Enova Energy Corporation, a corporation amalgamated under the laws of
Ontario. On September 1, 2022, immediately following the MergeCo Amalgamation, WNHI legally
amalgamated with KWHI and continues as EPC, a corporation amalgamated under the laws of
Ontario. KESI changed to Enova Energy Services Inc.
7
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ENOVA ENERGY CORPORATION
Notes to Consolidated Financial Statements
For the year ended December 31, 2023, with comparative information for the period of
September 1, 2022 to December 31, 2022
(Expressed in thousands of dollars)
2. Basis of Presentation
(a) Statement of compliance
The Corporation's financial statements have been prepared following IFRS Accounting Standards
("IFRS").
The financial statements were approved by the Board of Directors of the Corporation on April 5, 2024.
(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, including those held for
trading, are measured at fair value.
(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.
(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 period in which the estimates are revised and in any future periods
affected.
Information about judgments made in applying accounting policies that have the most material effect
on the amounts recognized in these financial statements is included in the following notes:
(i) Note 4(c) — Revenue Recognition — determination of the performance obligation for
contributions from customers and the related amortization period
(ii) Note 4(e) — Capital assets (Property, plant and equipment)
(iii) Note 12 — Employee future benefits
(iv) Note 18 — Commitments and contingencies
8
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ENOVA ENERGY CORPORATION
Notes to Consolidated Financial Statements
For the year ended December 31, 2023, with comparative information for the period of
September 1, 2022 to December 31, 2022
(Expressed in thousands of dollars)
2. Basis of Presentation (continued)
(e) Rate regulation
The Corporation is regulated by the 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 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
For the distribution revenue included in electricity sales, the Corporation files a "Cost of Service"
("COS") rate application with the OEB every five 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 interveners. Rates are approved
based on this review including any required revisions.
In the intervening years, an Incentive Rate Mechanism application ("IRM") is filed. An IRM application
results in a formulaic adjustment to distribution rates 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 "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, under regulation, to remit
such amounts to these third parties, irrespective of whether the Corporation ultimately collects these
amounts from customers.
In February 2022, KWHI and WNHI filed a Mergers, Acquisitions, Amalgamations and Divestitures
("MAADs") application (the WAADs Application") with the OEB under the Handbook to Electricity
Distributor and Transmitter Consolidation (the WAADs Handbook") seeking approval for the
Amalgamation Transaction. The MAADs Application included a request for OEB approval for the
continuation of regulated rates and charges of the predecessor LDCs of the Corporation.
On June 28, 2022, the OEB issued its Decision and Order in respect of the MAADs Application. The
OEB granted the requested approvals and also approved a rebasing deferral period of 10 years,
under which the Corporation will operate individual "rate zones" (based on the continuing rates and
underlying cost structures of the predecessor LDCs).
9
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ENOVA ENERGY CORPORATION
Notes to Consolidated Financial Statements
For the year ended December 31, 2023, with comparative information for the period of
September 1, 2022 to December 31, 2022
(Expressed in thousands of dollars)
2. Basis of Presentation (continued)
(e) Rate regulation (continued)
As provided within the OEB Report of the Board: Rate -Making Associated with Distributor
Consolidation, the rate zones of the Corporation will continue on the Price Cap IR method. At its
option, Enova Energy Corporation is permitted to apply for (a) inflationary increases to rates, adjusted
for an efficiency factor; and (b) ICM rate adjustments that provide financing and recovery of
incremental discrete capital projects.
The predecessor utilities to the Corporation filed separate applications for the approval of electricity
distribution rates as follows:
• KWHI filed an annual Cost of Service Application with the OEB on April 30, 2019 for distribution
rates effective January 1, 2020 to December 31, 2020.
• WNHI filed an annual Cost of Service Application with the OEB on June 30, 2020 for distribution
rates effective January 1, 2021 to December 31, 2021.
The Corporation filed a joint application for electricity distribution rates effective January 1, 2024, with
a Decision issued on December 14, 2023 to increase both legacy rate zone distribution rates by
4.50%.
Electricity rates
The OEB sets electricity prices for low-volume consumers 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 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 markup.
10
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ENOVA ENERGY CORPORATION
Notes to Consolidated Financial Statements
For the year ended December 31, 2023, with comparative information for the period of
September 1, 2022 to December 31, 2022
(Expressed in thousands of dollars)
3. Business Combination
On September 1, 2022, KPC amalgamated with WNHC to form the Corporation. Under the Amalgamation
Transaction, shares of the former KPC and WNHC were exchanged for the voting common shares of the
Corporation. The Amalgamation Transaction was recognized as a business combination following FIRS
3, Business Combinations using the acquisition method with the former KPC deemed as the acquirer
based on its relative size compared to that of the former WNHC. The comparative information includes
the net fair value of the assets of former WNHC as at September 1, 2022; and the net assets of the former
KPC at its carrying amounts at September 1, 2022.
The aggregate purchase price was $259,859 for 2,000 common shares and 218,132 Class A special
shares which were immediately converted to 42,120 common shares in the amalgamated company. The
acquired value of WNHC's Investment in subsidiaries and associates is inclusive of $140,077 of goodwill
associated to the amalgamation of WNHI and KWHI.
The following table summarizes the estimated fair value of assets acquired and liabilities assumed at the
date of amalgamation:
11
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ENOVA ENERGY CORPORATION
Notes to Consolidated Financial Statements
For the year ended December 31, 2023, with comparative information for the period of
September 1, 2022 to December 31, 2022
(Expressed in thousands of dollars)
3. Business Combination (continued)
WNHC Acquired
Value
Accounts receivable
$ 20,264
Unbilled revenue
18,782
Inventories
5,622
Prepaid expenses
837
Derivative asset
5,848
Property, plant and equipment
267,421
Intangible assets
4,711
Deferred tax assets
197
Investment in subsidiaries and associates
1,172
Regulatory deferral account debit balances
24,555
Short term bank indebtedness
(10,529)
Accounts payable and accrued liabilities
(25,234)
I ncome tax payable
(1,427)
Dividends payable
(2,656)
Current portion of customer deposits
(3,271)
Long-term debt
(89,410)
Notes payable to shareholder
(33,292)
Long term portion of customer deposits
(3,196)
Deferred revenue
(31,312)
Employee future benefits
(4,568)
Deferred tax liability
(14,484)
Regulatory deferral account credit balances
(5,536)
Deferred taxes associated with regulatory accounts
(4,712)
$ 119,782
Goodwill 140,077
Total purchase price $ 259,859
The valuation technique used for the purchase of WNHC was the discounted cash flow ("DCF') approach.
Under the DCF approach, the expected future cash flows are discounted to their present value equivalent
using appropriate market-based risk-adjusted rates of return. The fair market value of WNHC was
determined using a discounted cash flows method with an implied valuation multiple of 1.53x regulated
rate base. Consideration of implied multiples of recent transactions in the industry was used and the
1.53x was determined to be comparable. The business enterprise value was then adjusted by redundant
assets and debt/debt equivalents to arrive at the fair market value of assets. The difference between this
fair market value and the net book value of assets as of September 1, 2022 determined goodwill.
12
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ENOVA ENERGY CORPORATION
Notes to Consolidated Financial Statements
For the year ended December 31, 2023, with comparative information for the period of
September 1, 2022 to December 31, 2022
(Expressed in thousands of dollars)
4. Material Accounting Policies
The accounting policies set out below have been applied consistently in all periods presented in these
financial statements, except where otherwise described in Note 25 — Changes in Accounting Policies.
(a) Basis of Consolidation
These consolidated financial statements include the accounts of the Corporation and its wholly
owned subsidiaries: (i) EPC; (ii) EESI; and (iii) AMS, as well as its controlling interest in GRE. The
Corporation's investment in Eyedro is accounted for in the consolidated financial statements using
the equity method of accounting.
Subsidiaries are entities controlled by the Corporation. The financial statements of the subsidiaries
are included in these consolidated financial statements from the date on which control commences
until the date on which control ceases.
Associates are investments over which the Corporation has significant influence. Significant influence
is the power to participate in the financial and operating policy decisions of the investee. Equity
accounting involves recording the investment in associates initially at cost, and adjusting the carrying
value of the investment from the date of acquisition based on the Corporation's share of the profit or
loss of the associates included in the consolidated income statement.
All significant inter -company accounts and transactions have been eliminated.
(b) Financial instruments
At initial recognition, the Corporation measures its financial assets at fair value. 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 are included in the initial measurement. 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 after their initial recognition unless the Corporation changes its
business model for managing financial assets.
Derivative assets are always classified as fair value through profit or loss on inception.
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.
13
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ENOVA ENERGY CORPORATION
Notes to Consolidated Financial Statements
For the year ended December 31, 2023, with comparative information for the period of
September 1, 2022 to December 31, 2022
(Expressed in thousands of dollars)
4. Material Accounting Policies (continued)
(c) 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 based on cyclical meter readings plus
estimated customer usage from the last meter reading date to the end of the period and represents
the amount that the Corporation has the right to bill. Revenue includes the cost of electricity supply,
distribution, and any other regulatory charges. The related cost of power is recorded based on 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.
Capital contributions
Developers are required to contribute towards the capital cost of construction of distribution assets
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 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 to 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 period when there is reasonable assurance that the program conditions
have been satisfied and the payment will be received.
14
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ENOVA ENERGY CORPORATION
Notes to Consolidated Financial Statements
For the year ended December 31, 2023, with comparative information for the period of
September 1, 2022 to December 31, 2022
(Expressed in thousands of dollars)
4. Material Accounting Policies (continued)
(c) Revenue Recognition (continued)
Solar Generation
Revenue is principally produced from the generation of solar electricity which is sold to the Ontario
Energy Market through the Independent Electricity System Operator ("IESO"). The performance
obligation for the sale of electricity is satisfied when the electricity is delivered to the Ontario Energy
Grid administered by the IESO. The value of the electricity sold to the customer is determined based
on the meter readings at the rate designated in the contract with the customer.
(d) Inventory
Inventories consist of repair parts, supplies, and materials held for future capital expansion and are
valued at lower of weighted average cost and net realizable value. Net realizable value is the
estimated selling price in the ordinary course of business, less estimated selling expenses.
(e) Property, Plant and Equipment
Property, plant and equipment ("PP&E") are measured at cost, or, where the item is transferred from
customers, its fair value, less accumulated depreciation.
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 PP&E have different useful lives, they are accounted for and depreciated
as separate items (major components) of PP&E.
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.
Depreciation is calculated on the cost basis of the asset 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 PP&E. Land
and land rights are not depreciated. Construction -in -progress assets are not depreciated until the
projects are complete and in service. Depreciation methods, useful lives, and residual values are
reviewed at each reporting date and adjusted prospectively if appropriate.
15
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ENOVA ENERGY CORPORATION
Notes to Consolidated Financial Statements
For the year ended December 31, 2023, with comparative information for the period of
September 1, 2022 to December 31, 2022
(Expressed in thousands of dollars)
4. Material Accounting Policies (continued)
(e) Property, Plant and Equipment (continued)
The estimated useful lives are as follows:
Buildings
20-50 years
Transformer and substation equipment
15-50 years
Supervisory control and data acquisition (SCADA) equipment
15 years
Distribution system
25-60 years
Meters
15-25 years
General equipment
3-10 years
Solar equipment
15-20 years
Right -of -use assets
15-20 years
Depreciation methods, useful lives, and residual values are reviewed at each reporting date and
adjusted prospectively if appropriate.
(f) Intangible assets
(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.
(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 and are not amortized. 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
Solar contracts and permits 15-20 years
Amortization methods and useful lives of all intangible assets are reviewed at each reporting
date and adjusted prospectively if appropriate.
16
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ENOVA ENERGY CORPORATION
Notes to Consolidated Financial Statements
For the year ended December 31, 2023, with comparative information for the period of
September 1, 2022 to December 31, 2022
(Expressed in thousands of dollars)
4. Material Accounting Policies (continued)
(g) Goodwill
Goodwill arising on the acquisition of subsidiaries or on amalgamation is measured at cost and
not amortized.
(h) Impairment
(i) Financial assets measured at amortized cost:
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.
(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. Goodwill and intangible assets with indefinite lives are tested; annually for
impairment; and when circumstances indicate that the carrying value may be impaired.
For impairment testing, assets are grouped 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"). Goodwill acquired in a business combination
is allocated to groups of cash -generating units ("CGUs") that are expected to benefit from the
synergies of the combination. 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 an asset's carrying amount or CGU exceeds its estimated
recoverable amount. Impairment losses are recognized in profit or loss. Impairment losses
relating to CGUs are allocated first to reduce the carrying amount of any goodwill allocated to
the CGUs and then to reduce the carrying amounts of the other assets in the CGUs on a pro -
rata basis.
Goodwill arising on the acquisition of subsidiaries is measured at cost and is not amortized.
Goodwill is tested annually for impairment.
17
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ENOVA ENERGY CORPORATION
Notes to Consolidated Financial Statements
For the year ended December 31, 2023, with comparative information for the period of
September 1, 2022 to December 31, 2022
(Expressed in thousands of dollars)
4. Material Accounting Policies (continued)
(i) 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.
0) Regulatory deferral accounts
Regulatory deferral account debit balances represent costs incurred over 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 over 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 is assessed annually
based on 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 period incurred.
Regulatory deferral accounts attract interest at OEB-prescribed rates. With the exception of the
regulatory deferral account for Pension and Other Future benefits (OPEBs), from January to March
2023 the rate was 4.73%, from April to September the rate was 4.98% and from October to December
the rate was 5.49%.
The interest rates for the regulatory OPEB account were as follows: from January to September the
rate was 5.01 % and from October to December the rate was 5.48%.
18
Page 167 of 254
ENOVA ENERGY CORPORATION
Notes to Consolidated Financial Statements
For the year ended December 31, 2023, with comparative information for the period of
September 1, 2022 to December 31, 2022
(Expressed in thousands of dollars)
4. Material Accounting Policies (continued)
(k) Employee future benefits
(i) Pension Plan
The Corporation provides a pension plan for its employees through the Ontario Municipal
Employees Retirement System ("OMERS"). OMERS is a multi-employer pension plan which
operates as the Ontario Municipal Employees Retirement Fund ("the Fund") and provides
pensions for employees of Ontario municipalities, local boards, public utilities, and school boards.
To the extent that the Fund finds itself in an underfunded position, additional contribution rates
may be assessed to participating employers and members.
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 (Note
20). The Corporation recognizes the expense related to this plan as contributions are made.
(ii) Future Benefits, other than pension
Future benefits provided by the Corporation include health, dental, and life insurance benefits.
These plans provide benefits for some of its retired employees. Future benefit expense is
recognized in the period in which the employees render the services.
Future benefits are recorded on an accrual basis. The accrued benefit obligations and current
service cost are calculated using the projected benefits method pro -rated on service and based
on assumptions that reflect management's best estimate. The current service cost for a period
is equal to the actuarial present value of benefits attributed to employees' services rendered in
the period. Gains and losses are recognized in the current period. Actuarial gains and losses
arising from defined benefit plans are recognized immediately in other comprehensive income
and reported in retained earnings.
The future health, dental, and life insurance benefits were provided to retired employees of KWHI
and WNHI as separate entities and as such, are not identical offerings. These plans have been
maintained in their original offerings.
(1) Deferred revenue and assets transferred from customers
Certain customers and developers are required to contribute towards the capital cost of construction
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.
19
Page 168 of 254
ENOVA ENERGY CORPORATION
Notes to Consolidated Financial Statements
For the year ended December 31, 2023, with comparative information for the period of
September 1, 2022 to December 31, 2022
(Expressed in thousands of dollars)
4. Material Accounting Policies (continued)
(m) 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.
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 located, 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.
(n) Interest income and interest costs
Interest income is recognized as it accrues in profit or loss, using the effective interest method.
Interest income comprises interest earned on cash and cash equivalents, and on regulatory assets.
Interest costs comprise interest expense on borrowings, finance lease obligations, customer deposits
and regulatory liabilities, and unwinding of the discount on provisions and impairment losses on
financial assets. Interest costs are recognized as an expense unless they are capitalized as part of
the cost of qualifying assets.
20
Page 169 of 254
ENOVA ENERGY CORPORATION
Notes to Consolidated Financial Statements
For the year ended December 31, 2023, with comparative information for the period of
September 1, 2022 to December 31, 2022
(Expressed in thousands of dollars)
4. Material Accounting Policies (continued)
(o) Corporate 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 current tax-exempt status of the Corporation under the Income Tax Act (Canada) and the
Corporations Tax Act (Ontario) reflects the fact that the Corporation is wholly owned by municipalities.
This tax-exempt status might be lost in a number of circumstances, including if the shareholder
(municipalities) ceases to own 90% or more of the shares or capital of the Corporation, or if a non-
government entity has rights immediately or in the future, either absolutely or contingently, to acquire
more than 10% of the shares of the Corporation.
Commencing October 1, 2001, the Corporation is required, under the Electricity Act, 1998, to make
payments in lieu of corporate taxes to the Ontario Electricity Financial Company. These payments
are calculated under the rules for computing income and other relevant amounts contained in the
Income Tax Act (Canada) and the Corporations Tax Act (Ontario) as modified by the Electricity Act,
1998 and related regulations.
As a result of becoming subject to payments in lieu of corporate income taxes ("PILs"), the
Corporation's taxation period was deemed to have ended immediately beforehand and a new
taxation period was deemed to have commenced immediately thereafter. The Corporation was
therefore deemed to have disposed of each of its assets at its then fair market value and to have
reacquired such assets at that same amount for purposes of computing its future income subject to
PILs. For purposes of certain provisions, the Corporation was deemed to be a new company and,
as a result, tax credits or tax losses not previously utilized by the Corporation would not be available
to it after the change in tax status. Essentially, the Corporation was taxed as though it had a "fresh
start" at the time of its change in tax status.
Current tax is the tax payable on the taxable income for the period, using tax rates enacted or
substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous
periods.
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 periods that are likely to be realized. Deferred tax assets and liabilities are measured
using enacted or substantively enacted rates, at the reporting date, expected to apply to taxable
income in the periods 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 period that includes the date of enactment or substantive enactment.
21
Page 170 of 254
ENOVA ENERGY CORPORATION
Notes to Consolidated Financial Statements
For the year ended December 31, 2023, with comparative information for the period of
September 1, 2022 to December 31, 2022
(Expressed in thousands of dollars)
4. Material Accounting Policies (continued)
(p) Business combinations
The Corporation accounts for business combinations using the acquisition method when control is
transferred to the Corporation. The consideration transferred in the acquisition is generally measured
at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually
for impairment. Any gain on a bargain purchase is recognized in profit or loss immediately.
Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities.
The consideration transferred does not include amounts related to the settlement of preexisting
relationships. Such amounts are generally recognized in profit or loss.
Any contingent consideration is measured at fair value at the date of acquisition. If an obligation to
pay contingent consideration that meets the definition of a financial instrument is classified as equity,
then it is not re -measured and settlement is accounted for within equity.
Otherwise, other contingent consideration is re -measured at fair value at each reporting date and
subsequent changes in the fair value of the contingent consideration are recognized in profit or loss.
5. Accounts Receivable
December 31, December 31,
22
Page 171 of 254
2023
2022
Trade receivables
$ 34,908 $
28,273
IESO receivable
1,049
2,962
Miscellaneous receivables
2,288
4,107
Allowance for bad debt
(600)
(800)
Other
163
118
Total Accounts Receivable
$ 37,808 $
34,660
22
Page 171 of 254
ENOVA ENERGY CORPORATION
Notes to Consolidated Financial Statements
For the year ended December 31, 2023, with comparative information for the period of
September 1, 2022 to December 31, 2022
(Expressed in thousands of dollars)
6. Property, Plant and Equipment
(a) Cost or deemed cost
23
Page 172 of 254
Distribution
Land &
Other Fixed
Construction
Right -of -use
Total
Equipment
Building
Assets
in Progress
assets
Balance at January 1, 2023
$
562,917
$ 53,469
$ 18,095
$ 7,797
$ 1,417
$ 643,695
Additions
43,442
245
4,463
3,096
-
51,246
Transfers
-
-
-
217
217
Disposals / retirements
(231)
-
(135)
-
-
(366)
Balance at December 31, 2023
$
606,128
$ 53,714
$ 22,423
$ 11,110
$ 1,417
$ 694,792
Distribution
Land &
Other Fixed
Construction
Right -of -use
Equipment
Building
Assets
in Progress
assets
Total
Balance at September 1, 2022
$
313,687
$ 28,575
$ 7,811
$ 4,359
$ 601
$ 355,033
Acquired value - WNHC
229,420
24,674
6,399
6,928
-
267,421
Acquired control - GRE
-
-
3,295
-
889
4,184
Additions
20,323
230
1,499
(3,490)
-
18,562
Remeasurement
-
-
-
(73)
(73)
Disposals / retirements
(513)
(10)
(909)
-
-
(1,432)
Balance at December 31, 2022
$
562,917
$ 53,469
$ 18,095
$ 7,797
$ 1,417
$ 643,695
(b) Accumulated depreciation
Distribution
Land &
Other Fixed
Construction
Right -of -use
Total
Assets
in Progress
Assets
Balance at January 1, 2023
$
66,448
$ 5,163
$ 1,846
$
$ 74
$ 73,531
Depreciation charge
18,552
1,593
3,233
97
23,475
Disposals / retirements
(231)
-
(135)
-
(366)
Adjustment
-
-
-
-
-
Balance at December 31, 2023
$
84,769
$ 6,756
$ 4,944
$
$ 171
$ 96,640
Distribution
Land &
Other Fixed
Construction
Right -of -use
Equipment
Building
Assets
in Progress
Assets
Total
Balance at September 1, 2022
$
61,017
$ 4,635
$ 1,563
$
$ 40
$ 67,255
Depreciation charge
5,944
538
1,192
34
7,708
Disposals / retirements
(513)
(10)
(909)
-
(1,432)
Balance at December 31, 2022
$
66,448
$ 5,163
$ 1,846
$
$ 74
$ 73,531
(c) Carrying amounts
Distribution
Land &
Other Fixed
Construction
Right -of -use
Equipment
Building
Assets
in Progress
Assets
Total
At December 31, 2023
$
521,359
$ 46,958
$ 17,479
$ 11,110
$ 1,246
$ 598,152
At December 31, 2022
$
496,469
$ 48,306
$ 16,249
$ 7,797
$ 1,343
$ 570,164
23
Page 172 of 254
ENOVA ENERGY CORPORATION
Notes to Consolidated Financial Statements
For the year ended December 31, 2023, with comparative information for the period of
September 1, 2022 to December 31, 2022
(Expressed in thousands of dollars)
6. Property, Plant and Equipment (continued)
(d) Security
At December 31, 2023, the Corporation had zero properties subject to a general security
agreement.
(e) Borrowing costs
During the period, borrowing costs of $ nil were capitalized as part of the cost of property, plant and
equipment.
(f) Allocation of depreciation and amortization
The depreciation of property, plant and equipment and the amortization of intangible assets have
been allocated to profit or loss as follows:
Operations and Customer General and
maintenance services administration
24
Page 173 of 254
expense
expense
expense
Amortization
Total
December 31, 2023:
Depreciation of property, plant
$
1,601
$
31
$
3
$
21,840
$
23,475
and equipment
Amortization of intangible assets
-
-
-
2,495
2,495
$
1,601
$
31
$
3
$
24,335
$
25,970
December 31, 2022:
Depreciation of property, plant
$
640
$
1
$
11
$
7,056
$
7,708
and equipment
Amortization of intangible assets
-
-
-
748
748
$
640
$
1
$
11
$
7,804
$
8,456
24
Page 173 of 254
ENOVA ENERGY CORPORATION
Notes to Consolidated Financial Statements
For the year ended December 31, 2023, with comparative information for the period of
September 1, 2022 to December 31, 2022
(Expressed in thousands of dollars)
7. Intangible Assets and Goodwill
(a) Cost or deemed cost
Computer Land FIT Work in
Software Rights Contracts Progress Total
Balance at January 1, 2023 $ 14,524 $ 1,246 $ 3,906 $ 972 $ 20,648
Additions 1,556 57 - (503) 1,110
Transfers - - - (217) (217)
Balance at December 31, 2023 $ 16,080 $ 1,303 $ 3,906 $ 252 $ 21,541
Computer Land FIT Work in
Software Rights Contracts Progress Total
Balance at September 1, 2022 $
12,062 $
8 $ - $
- $ 12,070
Acquired value - WNHC
2,394
1,199 -
1,118 4,711
Acquired control - GRE
-
- 3,906
- 3,906
Additions
253
39 -
(146) 146
Disposals / retirements
(185)
- -
- (185)
Balance at December 31, 2022 $
14,524 $
1,246 $ 3,906 $
972 $ 20,648
(b) Accumulated amortization
25
Page 174 of 254
Computer
Software
Land
Rights
FIT
Contracts
Work in
Progress
Total
Balance at January 1, 2023
Amortization charge
$ 1,962
2,173
$
8
-
$
107
322
$ -
-
$
2,077
2,495
Balance at December 31, 2023
$ 4,135
$
8
$
429
$ -
$
4,572
Computer
Software
Land
Rights
FIT
Contracts
Work in
Progress
Total
Balance at September 1, 2022
Amortization charge
Disposal/retirements
$ 1,506
641
(185)
$
8
-
-
$
-
107
$ -
-
$
1,514
748
(185)
Balance at December 31, 2022
$ 1,962
$
8
$
107
$ -
$
2,077
(c) Carrying amounts
Computer
Software
Land
Rights
FIT
Contracts
Work in
Progress
Total
At December 31, 2023
At December 31, 2022
$ 11,945
$ 12,562
$
$
1,295
1,238
$
$
3,477
3,799
$ 252
$ 972
$
$
16,969
18,571
25
Page 174 of 254
ENOVA ENERGY CORPORATION
Notes to Consolidated Financial Statements
For the year ended December 31, 2023, with comparative information for the period of
September 1, 2022 to December 31, 2022
(Expressed in thousands of dollars)
8. Income Tax Expense
Current period
Adjustment for prior periods
Deferred
2023 2022
$ 949 $ 1,268
(68) 156
3,348 (229
Income tax expense $ 4,229 $ 1,195
Reconciliation of effective tax rate:
Income from operations before income taxes $
Statutory Canadian federal and provincial income tax rate
Expected taxes on income
Changes in income taxes resulting from
2023 2022
15,121 $ 6,166
26.50% 26.50%
$ 4,007 $ 1,634
Permanent differences 26 6
Other temporary differences 264 (650)
Adjustment for prior periods (68) 205
$ 222 $ (439)
Income tax expense $ 4,229 $ 1,195
Significant components of the Corporation's deferred tax balances are as follows:
December 31, December 31,
2023 2022
Deferred tax assets (liabilities):
Plant and equipment
Deferred revenue
Employee future benefits
Non -vested sick leave
Unrealized gain on derivatives
Allowance for doubtful accounts
Other
$ (52,946) $
(48,572)
22,730
21,569
2,148
2,041
327
340
54
(157)
(6)
212
1,459
1,050
$ (26,234) $ (23,517)
Regulatory deferred tax asset $ 37,278 $ 32,624
Deferred taxes associated with regulatory accounts (9,879) (8,645)
26
Page 175 of 254
ENOVA ENERGY CORPORATION
Notes to Consolidated Financial Statements
For the year ended December 31, 2023, with comparative information for the period of
September 1, 2022 to December 31, 2022
(Expressed in thousands of dollars)
8. Income Tax Expense (continued)
In 2022, the legacy WNHI entity underwent a PILs audit from the Ministry of Finance (the "Ministry")
for the taxation years of 2017 and 2018. The audit resulted in two significant adjustments. The
following items were previously accrued as uncertain tax treatments and remain so at December 31,
2023:
CCA classification of meters
The Ministry disagreed with WNHI's assessment that these assets should be reported under Class 8
and made an adjustment to move the assets to Class 47. This is a similar adjustment that was made
to taxations years 2013 to 2016 which were audited in previous periods. WNHI made an accrual in
fiscal year 2022 to accrue future adjustments for the years 2017 to 2020. The accrual for unaudited
years has been recorded in income taxes payable as a contingent liability. WNHI issued a joint court
appeal with KWHI to overrule the decision with other distributors in Ontario who had similar
adjustments made. The appeal remains unresolved as of the date of these statements.
Disallowed interest expense to the parent company
The Ministry determined that the amount of interest paid during 2017 and 2018 to WNHC exceeded
a reasonable amount. Therefore, the Ministry adjusted the interest expense allowable to the OEB-
deemed rate that was applicable during the period of 4.54%. WNHI appealed the decision through a
Notice of Objection which remains unresolved as of the date of these statements. An amount
anticipated to be disallowed in future audits for the taxation years of 2019 to 2022 has been recorded
in income taxes payable as an uncertain tax treatment.
27
Page 176 of 254
ENOVA ENERGY CORPORATION
Notes to Consolidated Financial Statements
For the year ended December 31, 2023, with comparative information for the period of
September 1, 2022 to December 31, 2022
(Expressed in thousands of dollars)
9. Regulatory Deferral Account Balance
The following is a reconciliation of the carrying amount for each class of regulatory deferral account
balances:
Balances
Transfer
Recovery /
2023
arising in the
between
Recovery /
2023
reversal
Opening
Acquired
period
accounts
reversal
Ending
period (years)
Regulatory deferral account debit balances
Group 1 accounts
$ 18,164
$
$ 1,750 $
(4,467)
$ (3,447) $
12,000
Note 1
Regulatory asset recovery account
778
-
(778)
-
Note 1
Deferred tax asset
32,624
4,654
-
37,278
Note 2
Other regulated accounts
306
1,054
1,360
5 - 9 years
Total amount related to
regulatory deferral account
$ 51,872
$
$ 7,458 $
(5,245)
$ (3,447) $
50,638
debit balances
Balances
Transfer
Recovery /
2023
arising in the
between
Recovery /
2023
reversal
Opening
Acquired
period
accounts
reversal
Ending
period (years)
Regulatory deferral account credit balances
Group 1 accounts
$ 5,504
$
$ 825 $
(4,467)
$ (1,006) $
856
Note 1
Regulatory asset recovery account
-
(3,445)
(778)
4,251
28
Note 1
Other regulated accounts
568
15
-
583
5 - 9 years
Total amount related to
regulatory deferral account
$ 6,072
$
$ (2,605) $
(5,245)
$ 3,245 $
1,467
credit balances
Balances
Transfer
Recovery /
2022
arising in the
between
Recovery /
2022
reversal
Opening
Acquired
period
accounts
reversal
Ending
period (years)
Regulatory deferral account debit balances
Group 1 accounts
$ 10,931
$ 6,727
$ (4) $
510
$ - $
18,164
Note 1
Regulatory asset recovery account
3,303
(56)
-
-
(2,469)
778
Note 1
Deferred tax asset
15,398
17,785
(559)
32,624
Note 2
Other regulated accounts
136
99
71
-
306
5 - 9 years
Total amount related to
regulatory deferral account
$ 29,768
$ 24,555
$ (492) $
510
$ (2,469) $
51,872
debit balances
Balances Transfer Recovery /
2022 arising in the between Recovery / 2022 reversal
Opening Acquired period accounts reversal Ending period (years)
Regulatory deferral account credit balances
Group 1 accounts $ 2,868 $ 5,534 $ (3,408) $ 510 $ $ 5,504 Note 1
Regulatory asset recovery account - - - - Note 1
Other regulated accounts 562 2 4 568 5 - 9 years
Total amount related to
regulatory deferral account $ 3,430 $ 5,536 $ (3,404) $ 510 $ $ 6,072
credit balances
2023 2022
Movements in regulatory accounts
Net change in regulatory deferral account debit and credit balances $ 3,371 $ 443
Less movement related to the balance sheet
Change in regulatory asset associated with deferred tax liability (4,654) 559
Deferred income tax 3,421 -
Deferred revenue (3) 516
Net movement in regulatory deferral account balances related to profit or loss and the related deferral tax
movement $ 2,135 $ 1,518
28
Page 177 of 254
ENOVA ENERGY CORPORATION
Notes to Consolidated Financial Statements
For the year ended December 31, 2023, with comparative information for the period of
September 1, 2022 to December 31, 2022
(Expressed in thousands of dollars)
9. Regulatory Deferral Account Balance (continued)
Note 1: The Corporation has been approved for collection of these amounts in its 2023 filings for
2024 rates.
Note 2: The Corporation has not sought approval for the disposition of this amount as changes in
underlying assumptions may reduce the amounts recorded in the account. Enova may seek refunds
in the future.
WIN: , MIT -14T
On October 27, 2022, Enova Energy Corporation entered into a credit agreement with Bank of
Montreal ("BMO") whereby all outstanding credit facilities previously provided by CIBC were
transferred to BMO. This included an operating line of credit for legacy WNHI ($15,000) as well as
the consolidated long-term debt and related swap. As a result, the debt was re -issued under BMO
and the swap agreement was terminated on November 2, 2022. The value of the terminated swap,
less applicable fees, was $6,135.
The BMO credit facility is for a total of $200,000. The Corporation has borrowed $110,000 as a
demand loan, with a variable interest rate (CDOR + 0.8%). The loan has been classified as current
as there are no defined repayment terms and the Corporation does not have the unconditional right
to refinance. In December 2023, an additional amount of $1,000,000 was borrowed on a short-term
basis from BMO.
In March 2022, the Corporation entered into an amended Credit Facility Agreement ("Credit Facility")
with a Canadian Chartered Bank. The Credit Facility is a demand revolving credit facility, which
provides funding for: (i) up to $11,700 for capital expenditures; and (ii) $1,800 US for interest rate
hedging. Loans advanced under the credit facility are amortized on a mortgage style basis over a
period which sit he lesser of: (a) 20 years; or (b) the length of the revenue contract underlying the
asset. Interest on the loan(s) are at Prime or Bankers acceptances plus 1 %.
As of December 31, 2023, the Corporation had the following loans outstanding under the Credit
Facility:
Swap Monthly
Bank loans Rate Payments Term 2023 2022
CIBC Term loan 1
4.205%
$ 30.00
August 15, 2035
$
3,159
$
3,365
CIBC Term loan 2
3.845%
$ 18.00
December 21, 2034
$
1,793
$
1,922
CIBC Term loan 3
2.510%
$ 11.00
July 31, 2040
$
1,680
$
1,759
CIBC Term loan 4
2.365%
$ 4.00
July 31, 2035
$
513
$
552
BMO Demand Loan
variable
N/A
undefined
$
110,000
$
110,000
BMO Line of Credit
variable
N/A
undefined
$
1,000
$
-
$
118,145
$
117,598
29
Page 178 of 254
ENOVA ENERGY CORPORATION
Notes to Consolidated Financial Statements
For the year ended December 31, 2023, with comparative information for the period of
September 1, 2022 to December 31, 2022
(Expressed in thousands of dollars)
10. Bank Debt (continued)
The aggregate amount of expected principal repayments required under the Credit Facility are
as follows:
2024
$ 470
$ 453
2025
487
470
2026
505
487
2027
526
505
2028
544
526
Thereafter
4,613
5,157
Undefined
111,000
110,000
$ 118,145
$ 117,598
Interest rate swaps
The Corporation has entered into interest swap agreements with a Canadian chartered bank for the
purpose of eliminating the risk of fluctuating interest rates and removing the economic impact of
interest rate volatility on its debt. The swap instruments result in the Corporation receiving interest at
the 30 -day banker' acceptance floating rate and require the Corporation to pay the fixed rate in the
swap instrument
The term of each individual swap instrument matches the amortization period of the corresponding
bank loan although, each instrument can be terminated in 30 days, due to the Credit Facility being a
demand revolving bank loan.
The swaps have a put provision whereby on the five-year anniversary of each swap, either party can
unilaterally elect to terminate the contract requiring a cash payment upon settlement based on the
fair value of the swap instrument on that date.
FIRS requires the Corporation to determine and record the fair value of its interest rate swap
agreements in the Statement of Financial Position, with changes in fair values being recorded in
unrealized gains (losses) from interest rate swaps in the Statement of Comprehensive Income (Loss).
As a result, the Corporation has recorded interest rate swap assets of $396 (2022 - $592) and
recognized a corresponding unrealized loss on interest rate swaps of $196 (2022 — ($953)).
There is no impact on current PILs. Over the term of the debt, the non-cash charges and assets are
expected to reverse into income.
30
Page 179 of 254
ENOVA ENERGY CORPORATION
Notes to Consolidated Financial Statements
For the year ended December 31, 2023, with comparative information for the period of
September 1, 2022 to December 31, 2022
(Expressed in thousands of dollars)
11. Notes Payable to Shareholder
2023 2022
Senior unsecured debentures:
City of Kitchener
$ 70,998 $
70,998
City of Waterloo
27,404
27,404
Township of Woolwich
3,355
3,355
Township of Wilmot
5,965
5,965
Township of Wellesley
2,532
2,532
Total shareholder debt
$ 110,254 $
110,254
Note (a) Effective August 1, 2000, KWHI incurred unsecured promissory notes payable to the
Corporation of the City of Kitchener and the Corporation of the Township of Wilmot, which
have an interest rate of 3.23% per annum. Interest is payable in quarterly installments,
in arrears, on March 31, June 30, September 30, and December 31. On September 1,
2022, these notes payable were re -issued at the same amount and rates under Enova
Energy Corporation
Note (b) The former WNHC held senior and junior long-term notes payable with its legacy
shareholders. The notes were amalgamated and replaced with a single note for each
shareholder as of September 1, 2022 with the same terms, including interest rate
payable, as the notes to the City of Kitchener and the Township of Wilmot.
31
Page 180 of 254
ENOVA ENERGY CORPORATION
Notes to Consolidated Financial Statements
For the year ended December 31, 2023, with comparative information for the period of
September 1, 2022 to December 31, 2022
(Expressed in thousands of dollars)
12. Employee Future Benefits
The Corporation pays certain medical and life insurance benefits on behalf of some of its retired
employees. These benefits are provided through group -defined benefit plans. There are two
defined benefit plans for the retirees of the legacy companies. A full actuarial valuation of the plans
was performed As at December 31, 2023. The Corporation recognizes these post-retirement costs
in the period in which employees' services were rendered. The accrued benefit liability at December
31, 2023 is $8,107 and includes both legacy plans.
Changes in the present value of the aggregate defined benefit unfunded obligation and the
aggregate accrued benefit liability are as follows:
Components of net benefit expense recognized are a follows:
2023 2022
Current service cost $ 228 $ 134
Interest cost 374 130
Net benefit expense recognized $ 602 $ 264
Actuarial losses recognized in other comprehensive income
2023 2022
Cumulative amount at beginning of period $ 1,591 $ (620)
Recognized during the period (net of tax) (284) 2,211
Cumulative amount at end of period $ 1,307 $ 1,591
32
Page 181 of 254
2023
2022
Accrued benefit obligation
Balance, beginning of period
$ 7,703
$ 10,637
Current service cost
228
134
Interest cost
374
130
Benefits Paid
(585)
(189)
Actuarial gains recognized in other
comprehensive income
387
(3,009)
Accrued benefit liability, end of period
$ 8,107
$ 7,703
Components of net benefit expense recognized are a follows:
2023 2022
Current service cost $ 228 $ 134
Interest cost 374 130
Net benefit expense recognized $ 602 $ 264
Actuarial losses recognized in other comprehensive income
2023 2022
Cumulative amount at beginning of period $ 1,591 $ (620)
Recognized during the period (net of tax) (284) 2,211
Cumulative amount at end of period $ 1,307 $ 1,591
32
Page 181 of 254
ENOVA ENERGY CORPORATION
Notes to Consolidated Financial Statements
For the year ended December 31, 2023, with comparative information for the period of
September 1, 2022 to December 31, 2022
(Expressed in thousands of dollars)
12. Employee Future Benefits (continued)
The significant actuarial assumptions used in the
valuation are as follows (weighted average):
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:
1% increase in trend rate
1% decrease in trend rate
2023 2022
$ 466 $ 375
(394) (320)
33
Page 182 of 254
2023
2022
General inflation:
Changes in the Consumer Price Index
3.00%
3.00%
Accrued obligation:
Discount rate
4.65%
5.05%
Salary increases
3.00%
4.00%
Benefit cost for the period:
Age
Withdrawal rate
18-29
2.75%
2.75%
30-34
2.20%
2.20%
35-39
1.65%
1.65%
40-49
1.40%
1.40%
50-54
1.20%
1.20%
Assumed health care cost trend rates:
Initial health care cost trend rate
Health
4.70%
4.70%
Dental
4.90%
4.90%
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:
1% increase in trend rate
1% decrease in trend rate
2023 2022
$ 466 $ 375
(394) (320)
33
Page 182 of 254
ENOVA ENERGY CORPORATION
Notes to Consolidated Financial Statements
For the year ended December 31, 2023, with comparative information for the period of
September 1, 2022 to December 31, 2022
(Expressed in thousands of dollars)
13. Customer Deposits 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 under 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.
Customer deposits comprise:
Current
Customer deposits
Contruction deposits
Performance bond
2023 2022
$ 1,819 $ 1,731
12,190 10,150
200 200
$ 14,209 $ 12,081
Long-term
I ESO deposit for energy conservation programs 1,158 1,158
Customer deposits - long-term 8,008 7,476
$ 9,166 $ 8,634
34
Page 183 of 254
ENOVA ENERGY CORPORATION
Notes to Consolidated Financial Statements
For the year ended December 31, 2023, with comparative information for the period of
September 1, 2022 to December 31, 2022
(Expressed in thousands of dollars)
14. Share Capital
Authorized
Unlimited
Common shares
None
Class A special shares
None
Class B special shares
Issued
100,000 Common shares $
- Class A special shares
- Class B common shares
2023 2022
326,248 $ 326,248
100,000 Total Shares $ 326,248 $ 326,248
Common shares are issued as follows:
• 53,390 are issued to the Corporation of the City of Kitchener
• 30,830 shares are issued to the Corporation of the City of Waterloo
• 8,510 shares are issued to the Corporation of the Township of Woolwich
• 4,490 shares are issued to the Corporation of the Township of Wilmot
• 2,780 shares are issued to the Corporation of the Township of Wellesley
Class A special shares were issued as follows:
• 9,225 shares are issued to the Corporation of the City of Kitchener
• 775 shares are issued to the Corporation of the Township of Wilmot
Class B special shares were issued as follows:
• 7,320 shares are issued to the Corporation of the City of Waterloo
• 2,020 shares are issued to the Corporation of the Township of Woolwich
• 660 shares are issued to the Corporation of the Township of Wellesley
The special shares were issued as part of the Amalgamation Transaction on September 1, 2022 to
effect post -closing adjustments provided for in corresponding agreements. In April 2023, the shares
were revalued as follows:
• Class A shares were revalued to $0.163 per share amounting to $1,630 total
• Class B shares were revalued to $0.000001 per share amounting to $0 total
The shares were redeemed and then immediately cancelled.
35
Page 184 of 254
ENOVA ENERGY CORPORATION
Notes to Consolidated Financial Statements
For the year ended December 31, 2023, with comparative information for the period of
September 1, 2022 to December 31, 2022
(Expressed in thousands of dollars)
14. Share Capital (continued)
Dividends
The holders of the common shares are entitled to receive dividends as declared from time to time.
The Corporation had $5,056 in dividends payable carried forward from prior periods which were paid
during the period. The Corporation paid an additional $3,925 in dividends during the period.
15. Revenue
2023 2022
Revenue from contracts with customers $ 461,891 $ 145,149
Other revenue
Specific service charges
2,532
843
Deferred revenue
2,282
730
Scrap sales
468
100
Net gain (loss) on disposal of capital
assets
84
37
Non -Utility operations
1,869
339
Retailer services
70
13
Sundry
215
206
Net realized gain on derivatives
-
287
Income from subsidiaries
50
(1)
Total other revenue $
7,570 $
2,554
Total revenues $ 469,461 $ 147,703
In the following table, revenue from contracts with customers is disaggregated by type of customer.
Residential $ 184,347 $ 58,419
Commercial 258,247 80,470
Large users 11,337 3,898
Other 7,960 2,362
$ 461,891 $ 145,149
36
Page 185 of 254
ENOVA ENERGY CORPORATION
Notes to Consolidated Financial Statements
For the year ended December 31, 2023, with comparative information for the period of
September 1, 2022 to December 31, 2022
(Expressed in thousands of dollars)
15. Revenue (continued)
In the following table, deferred revenues are broken down by contributions received and revenues
recognized:
2023 2022
Balance, beginning of period $ 81,391 $ 47,401
Acquired value - 31,312
Capital contributions received 6,664 3,408
Deferred revenue recognized (2,282) (730)
Balance, end of period $ 85,773 $ 81,391
Current portion $ 2,378 $ 2,214
Long-term portion 83,395 79,177
Total Deferred Revenues $ 85,773 $ 81,391
16. Interest Income and Expense
37
Page 186 of 254
2023
2022
Interest income on bank deposits
$
(499)
$ (183)
Interest income on capital lease
(79)
-
$
(578)
$ (183)
Interest on shareholder debt
3,553
1,188
Interest expense on demand loans payable
6,588
1,728
Interest expense on short tem debt
672
27
Interest expense on deposits
548
130
Interest expense on capital lease
43
12
Interest expense other
-
-
$
11,404
$ 3,085
Net interest cost
$
10,826
$ 2,902
37
Page 186 of 254
ENOVA ENERGY CORPORATION
Notes to Consolidated Financial Statements
For the year ended December 31, 2023, with comparative information for the period of
September 1, 2022 to December 31, 2022
(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 6). 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 2023 2022
Less than one year $ 97 $ 97
One - five years 393 490
More than five years 568 570
Total undiscounted lease liabilities at period end $ 1,058 $ 1,157
Interest included on the liabilities included in the
statement of financial position at December 31 (239) (282)
Lease Liabilities - current $ 97 $ 97
Lease Liabilities - non-current $ 722 $ 778
38
Page 187 of 254
ENOVA ENERGY CORPORATION
Notes to Consolidated Financial Statements
For the year ended December 31, 2023, with comparative information for the period of
September 1, 2022 to December 31, 2022
(Expressed in thousands of dollars)
18. Commitments and Contingencies
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 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
periods in which they were members, on a pro -rata basis based on the total of their respective service
revenues. As at December 31, 2023, no assessments have been made.
On November 12, 2023 the Corporation experienced a theft of inventory at one of the service
locations. The total cost of inventories lost as well as the related expenses of repairing damaged
property and recovering the stolen items has been recorded in Operations and maintenance expense
in the statement of comprehensive income ($164 total). The Corporation has initiated a claim from
MEARIE for the total replacement value of the lost items and the related expenses. The claim is still
outstanding as of the date of these statements and collection is uncertain and therefore, no receivable
has been recorded on the statements as of December 31, 2023.
19. Guarantees
The Corporation is the guarantor for a line of credit issued by the Canadian Imperial Bank of
Commerce on behalf of GRE. GRE is two-thirds owned by the Corporation and one-third owned by
Cambridge & North Dumfries Energy Plus Inc.; each of which has guaranteed a maximum of $12
million and $6 million, respectively, in the event of default by GRE.
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. From January 1, 2023 to December 31, 2023, the Corporation made employer
contributions of $2,985 to OMERS and estimates contributions of $2,947 in 2024. In total, the OMERS
pension fund has net assets of $130,400,000 and accrued obligations of $134,600,000 for a deficit
of $4,200,000. The Corporation's net benefit expense has been allocated as follows:
(a) $895 capitalized as part of labour in PP&E and
(b) $2,090 recorded as an expense against net income.
39
Page 188 of 254
ENOVA ENERGY CORPORATION
Notes to Consolidated Financial Statements
For the year ended December 31, 2023, with comparative information for the period of
September 1, 2022 to December 31, 2022
(Expressed in thousands of dollars)
21. Employee Benefits
2023 2022
Salary, wages and benefits $
36,919 $
11,399
CPP and EI remittances
1,497
142
Contributions to OMERS
2,985
969
Expenses related to employee future benefits
602
264
Total employee expenditures $
42,003 $
12,774
Employee costs capitalized
10,117
2,973
Employee costs in Operations, Maintenance, Customer
Service and Administration expenses $
31,886 $
9,801
22. Related Party Transactions
(a) Parent and ultimate controlling party
The Corporation is wholly owned by the Cities of Kitchener and Waterloo, and the Townships of
Wilmot, Wellesley and Woolwich. The Cities and the Townships produce financial statements that
are available for public use.
(b) Entity with significant influence
The Cities of Kitchener and Waterloo control and exercise significant influence over the Corporation
through their indirect ownership interest in the Corporation of 53.4% and 30.8% respectively.
(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 are summarized below:
2023 2022
Directors' fees $ 568 $ 70
Executive compensation and benefits 2,581 683
$ 3,149 $ 753
(d) Transactions with entities with significant influence
In the ordinary course of business, the Corporation may issue dividends to the shareholders.
40
Page 189 of 254
ENOVA ENERGY CORPORATION
Notes to Consolidated Financial Statements
For the year ended December 31, 2023, with comparative information for the period of
September 1, 2022 to December 31, 2022
(Expressed in thousands of dollars)
22. Related Party Transactions (continued)
(e) Transactions with ultimate shareholders (the Cities and Townships)
In 2023 the Corporation had the following significant transactions with its ultimate shareholders, all
of which are government entities:
The Corporation delivers electricity to the Cities of Kitchener and Waterloo and the Townships of
Wellesley, Wilmot and Woolwich and its related organizations throughout the period for their
electricity needs. Electricity delivery charges are at prices and under terms approved by the OEB.
The Corporation also provides the following services to the Cities of Kitchener and Waterloo and the
Townships of Wellesley, Wilmot and Woolwich:
• streetlight maintenance services
• streetlight construction services
For the City of Kitchener and the Township of Wilmot, these services are contracted through Enova
Energy Services Inc. The Corporation conducted transactions with related parties during the period
ended December 31, 2023. These transactions are in the normal course of operations and are
measured at fair value.
23. Financial Instruments and Risk Management
Fair value disclosure
Cash and cash equivalents are measured at fair value. The carrying value of receivables, unbilled
energy receivable, accounts payable, and accrued charges approximate fair value due to the short
maturity of these instruments. The carrying value of the customer deposits approximates fair value
since the amounts are payable on demand.
The Corporation's activities provide for a variety of risks, particularly credit risk, market risk, and
liquidity risk.
The fair value of the bank debt approximates its carrying value due to the short maturity and/or the
variable interest rates.
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 Cities of Kitchener and Waterloo, and the Townships of Wellesley,
Wilmot and Woolwich. No single customer accounts for a balance over 3.26% of total accounts
receivable.
41
Page 190 of 254
ENOVA ENERGY CORPORATION
Notes to Consolidated Financial Statements
For the year ended December 31, 2023, with comparative information for the period of
September 1, 2022 to December 31, 2022
(Expressed in thousands of dollars)
23. Financial Instruments and Risk Management (continued)
Financial risks (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 expected credit losses at December 31, 2023 is $600 (2022 - $800).
The Corporation's credit risk associated with accounts receivable is primarily related to payments
from distribution customers. At December 31, 2023, approximately $1,574 is considered 60 days
past due. The Corporation has over 160,000 customers, the majority of whom are residential.
Credit risk is managed through collection of security deposits from customers under directions
provided by the OEB. As at December 31, 2023, the Corporation holds security deposits in the
amount of $9,827.
(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. The Corporation's bank debt as of December 31, 2023 is at a variable
interest rate.
(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 $45,000 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, 2023, $4,416 (2022 - $nil) had been drawn under BMO's $45,000 operating
credit facility.
In 2023 the Corporation was assigned an Issuer Rate of A, Stable, from DBRS Limited. The
Corporation's financial risk profile is reasonable with key metrics supporting the "A" rating.
The Corporation also has a bilateral facility for $5,000 (the "LC" facility) to issue letters of credit
mainly to support the prudential requirements of the IESO of which the $5,000 has been drawn
and posted with the IESO.
The majority of accounts payable, as reported on the balance sheet, are due within 30 days
42
Page 191 of 254
ENOVA ENERGY CORPORATION
Notes to Consolidated Financial Statements
For the year ended December 31, 2023, with comparative information for the period of
September 1, 2022 to December 31, 2022
(Expressed in thousands of dollars)
23. Financial Instruments and Risk Management (continued)
(d) Capital disclosures
The main objectives of the Corporation, when managing capital, are to ensure ongoing access
to funding to maintain and improve the electricity distribution system, compliance with covenants
related to its credit facilities, prudent management of its capital structure with regard for
recoveries of financing charges permitted by the OEB on its regulated electricity distribution
business, and to deliver the appropriate financial returns.
The Corporation's definition of capital includes shareholder's equity and long-term debt. As at
December 31, 2023, shareholder's equity amounts to $452,122 (2022 - 443,304) and long-term
debt including shareholder debt amounts to $110,254 (2022 - $110,254).
24. Comparative Figures
Certain comparative figures have been reclassified to conform with the current year's presentation.
25. Changes in Accounting Policies
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, 2023:
Definition of Accounting Estimate (amendments to IAS 8)
ii. Disclosure of Accounting Policies (amendments to IAS 1 and IFRS Practice Statement 2)
iii. Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction and
Amendments to IAS 12 Income Taxes
The amendments and clarifications did not have a material impact on the financial statements.
26. Future Changes in Accounting Policy and Disclosures
The following new and amended standards are effective for annual periods beginning after January
1, 2024 and earlier application is permitted. The Corporation has not early adopted any of these
new and amended standards and does not expect that they will have a significant impact on the
Corporation's financial statements when become effective.
Classification of Liabilities as Current or Non -Current (Amendments to IAS 1);
ii. Non-current Liabilities with Covenants (Amendments to IAS 1);
iii. Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7);
iv. Lease Liability in a Sale and Leaseback (Amendments to IFRS 16);
V. Lack of Exchangeability (Amendments to IAS 21).
43
Page 192 of 254
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KPMG LLP
120 Victoria Street South
Suite 600
Kitchener, ON N2G OE1
Canada
Tel 519-747-8800
Fax 519-747-8811
To the Mayor and Members of Council, Inhabitants and 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 of the financial position as at December 31, 2023
• the consolidated statement of operations for the year then ended
• the consolidated statement of remeasurement gains for the year then ended
• the consolidated statement of change in net financial assets for the year then ended
• the consolidated statement of cash flow 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,
2023, and its consolidated results of operations, its consolidated remeasurement gains, 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
"Auditor's Responsibilities for the Audit of the Consolidated Financial Statements"
section of our auditor's report.
We are independent of the Entity in accordance with the ethical requirements that are
relevant to our audit of the consolidated financial statements in Canada and we have
fulfilled our other ethical responsibilities in accordance with these requirements.
IVI(1 I I I'mi0inkill'i InIkA Ii 11JIIIly I -m hl ,I ire x110 ii iO11 jor 11111 1,11 [ho KI IVIG ,rI, ilj;fl 111 1 uvio r-on,)oI1[
iiia^rril�;i lull M1"Pili Mln:{ wiRVr I,I IVIG 111[orimh( iml L...IInI[ n) M -I Im[o I �IIii 1-wiv Iirruloni I wwli m[oo
Page 237 of 254
Page 2
We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Emphasis of Matter - comparative information
We draw attention to Note 2 to the financial statements ("Note 2"), which explains that
certain comparative information presented for the year ended December 31, 2022 has
been restated.
Note 2 explains the reason for the restatement and also explains the adjustments that
were applied to restate certain comparative information.
Our opinion is not modified in respect of this matter.
Other Matter - Comparative Information
As part of our audit of the financial statements for the year ended December 31, 2023, we
also audited the adjustments that were applied to restate certain comparative information
presented for the year ended December 31, 2022 and as at January 1, 2022.
In our opinion, such adjustments are appropriate and have been properly applied.
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 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.
Auditor's 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 auditor's report that includes our opinion.
Page 238 of 254
Page 3
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.
• 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 auditor's 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 auditor's 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 239 of 254
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
DRAFT
Page 240 of 254
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KPMG LLP
120 Victoria Street South, Suite 600
Kitchener, ON
N2G OE1
[date]
Ladies and Gentlemen:
We are writing at your request to confirm our understanding that your audit was for the
purpose of expressing an opinion on the consolidated financial statements (hereinafter
referred to as "financial statements") of The Corporation of the City of Kitchener ("the
Entity") as at and for the period ended December 31, 2023.
We confirm that the representations we make in this letter are in accordance with the
definitions as set out in Attachment I to this letter.
We confirm that, to the best of our knowledge and belief, having made such inquiries as
we considered necessary for the purpose of appropriately informing ourselves:
GENERAL:
1) We have fulfilled our responsibilities, as set out in the terms of the audit
engagement letter dated December 18, 2022 for:
a) the preparation and fair presentation of the financial statements and believe that
these financial statements have been prepared and present fairly in accordance
with the relevant financial reporting framework
b) providing you with all relevant information, such as all financial records and related
data, including the names of all related parties and information regarding all
relationships and transactions with related parties, and complete minutes of
meetings, or summaries of actions of recent meetings for which minutes have not
yet been prepared, of shareholders, board of directors and committees of the board
of directors that may affect the financial statements, and access to such relevant
information
c) such internal control as management determined is necessary to enable the
preparation of financial statements that are free from material misstatement,
whether due to fraud or error
Page 243 of 254
d) ensuring that all transactions have been recorded in the accounting records and
are reflected in the financial statements.
INTERNAL CONTROL OVER FINANCIAL REPORTING:
2) We have communicated to you all deficiencies in the design and implementation or
maintenance of internal control over financial reporting of which management is
aware.
FRAUD & NON-COMPLIANCE WITH LAWS AND REGULATIONS:
3) We have disclosed to you:
a) the results of our assessment of the risk that the financial statements may be
materially misstated as a result of fraud
b) all information in relation to fraud or suspected fraud that we are aware of and that
affects the Entity and involves: management, employees who have significant roles
in internal control, or others, where the fraud could have a material effect on the
financial statements
c) all information in relation to allegations of fraud, or suspected fraud, affecting the
Entity's financial statements, communicated by employees, former employees,
analysts, regulators, or others
d) all known instances of non-compliance or suspected non-compliance with laws and
regulations, including all aspects of contractual agreements, whose effects should
be considered when preparing financial statements
e) all known actual or possible litigation and claims whose effects should be
considered when preparing the financial statements
COMMITMENTS & CONTINGENCIES:
4) There are no:
a) other liabilities that are required to be recognized and no other contingent assets or
contingent liabilities that are required to be disclosed in the financial statements in
accordance with the relevant financial reporting framework, including liabilities or
contingent liabilities arising from illegal acts or possible illegal acts, or possible
violations of human rights legislation
b) guarantees, whether written or oral, under which the Entity is contingently liable.
Page 244 of 254
SUBSEQUENT EVENTS:
5) All events subsequent to the date of the financial statements and for which the
relevant financial reporting framework requires adjustment or disclosure in the
financial statements have been adjusted or disclosed.
RELATED PARTIES:
6) We have disclosed to you the identity of the Entity's related parties.
7) We have disclosed to you all the related party relationships and
transactions/balances of which we are aware.
8) All related party relationships and transactions/balances have been appropriately
accounted for and disclosed in accordance with the relevant financial reporting
framework.
ESTIMATES:
9) Measurement methods and significant assumptions used by us in making
accounting estimates, including those measured at fair value, are reasonable.
GOING CONCERN:
10) We have provided you with all relevant information regarding all of the key risk
factors, assumptions and uncertainties of which we are aware that are relevant to
the Entity's ability to continue as a going concern.
Page 245 of 254
MISSTATEMENTS:
We approve the corrected misstatements identified by you during the audit described in
Attachment II.
NON -SEC REGISTRANTS OR NON -REPORTING ISSUERS:
11) We confirm that the Entity is not a Canadian reporting issuer (as defined under any
applicable Canadian securities act) and is not a United States Securities and
Exchange Commission ("SEC') Issuer (as defined by the Sarbanes-Oxley Act of
2002). We also confirm that the financial statements of the Entity will not be
included in the consolidated financial statements of a Canadian reporting issuer
audited by KPMG or an SEC Issuer audited by any member of the KPMG
organization.
Yours very truly,
Jonathan Lautenbach, Treasurer
Katie Fischer, Director, Financial Reporting and ERP Solutions
cc: Audit Committee
Page 246 of 254
Attachment I — Definitions
MATERIALITY
Certain representations in this letter are described as being limited to matters that are
material. Misstatements, including omissions, are considered to be material if they,
individually or in the aggregate, could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial statements. Judgments about
materiality are made in light of surrounding circumstances, and are affected by the size or
nature of a misstatement, or a combination of both.
FRAUD & ERROR
Fraudulent financial reporting involves intentional misstatements including omissions of
amounts or disclosures in financial statements to deceive financial statement users.
Misappropriation of assets involves the theft of an entity's assets. It is often accompanied
by false or misleading records or documents in order to conceal the fact that the assets are
missing or have been pledged without proper authorization.
An error is an unintentional misstatement in financial statements, including the omission of
an amount or a disclosure.
RELATED PARTIES
In accordance with public sector accounting standards related party is defined as:
• A related party exists when one party has the ability to exercise control or shared
control over the other. Two or more parties are related when they are subject to
common control or shared control. Related parties also include key management
personnel and close family members.
In accordance with public sector accounting standards a related party transaction is
defined as:
A related party transaction is a transfer of economic resources or obligations
between related parties, or the provision of services by one party to a related party.
These transfers are related party transactions whether or not there is an exchange
of considerations or transactions have been given accounting recognition. The
parties to the transaction are related prior to the transaction. When the relationship
arises as a result of the transaction, the transaction is not one between related
parties.
Page 247 of 254
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