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HomeMy WebLinkAboutFIN-2025-289 - 2024 Audited Consolidated Financial StatementsStaff Report r NJ :R Financia( Services Department www.kitchener.ca REPORT TO: Audit Committee DATE OF MEETING: June 23, 2025 SUBMITTED BY: Katie Fischer, Director, Financial Reporting and ERP Solutions 519-904- 9354 PREPARED BY: Greg Demacio, Manager, Financial Reporting and Analysis, 519-904- 9353 WARD(S) INVOLVED: All DATE OF REPORT: June 17, 2025 REPORT NO.: FIN -2025-289 SUBJECT: 2024 Audited Consolidated Financial Statements RECOMMENDATION: That the 2024 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, 2024. • 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 2024 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 23, 2025. 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 3 of 216 include The Centre in the Square Inc., Kitchener Public Library, Belmont Improvement Area, and Kitchener Downtown Improvement Area. The 2024 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 -2024-517 External Audit Planning Report for Fiscal Year 2024 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, 2024 • Attachment C — Audit Committee Presentation • Attachment D —Audit Findings Report for the year ended December 31, 2024 (KPMG) Page 4of216 Reconciliation of Operating Surplus to Consolidated Annual Surplus COK expenses not included in operating surplus Amortization of tangible capital assets Year Ended Dec Year Ended Dec Other capital expenses 31, 2024 31, 2023 Tax supported surplus (deficit) 1,930,245 3,061,315 Enterprise surplus (deficit) 8,208,474 2,747,877 Total operating surplus (deficit) 10,138,719 5,809,192 Consolidation 7,991,170 8,155,286 Revenues not included in operating surplus 143,846,392 114,540,846 Gain on dilution from prior interest in Kitchener Power Corp. and its affiliates - 1,503,675 Reserve fund revenue 38,000,775 40,038,669 Contributions of tangible capital assets 29,092,663 22,638,316 Gain (loss) on sale of tangible capital assets 1,238,348 156,410 Other capital revenue 24,052,952 10,360,845 92,384,738 74,697,916 Items in operating surplus, not in consolidated statements Net transfers to capital and reserves 118,632,152 112,285,025 Various PSAB adjustments 13,233,465 4,993,282 131,865,617 117, 278, 307 COK expenses not included in operating surplus Amortization of tangible capital assets (63,715,961) (62,174,528) Other capital expenses (29,175,473) (24,105,822) Change in actuarial estimate for employee future benefits (554,590) (9,620) Reserve fund expenses (5,127,626) (6,039,379) Other adjustments 39,798 929,494 (98,533,852) (91,399,855) Annual surplus per consolidated financial statements 143,846,392 114,540,846 Page 5 of 216 THE CORPORATION OF THE CITY OF KITCHENER Consolidated Statement of Financial Position As at December 31 2024 2023 Financial assets 145,588,687 133,760,179 Cash and cash equivalents $ 112,312,523 $ 148,883,457 Taxes receivable (Note 3) 43,887,598 32,698,753 Trade and other accounts receivable (Note 3) 115,307,653 82,181,763 Loans receivable (Note 6) 4,838,856 5,445,222 Inventory for resale 8,021,989 11,193,185 Portfolio investments (Note 7) 316,768,217 235,992,016 Investment in Enova Energy Corporation (Note 8) 313,240,059 311,762,801 Investment in Kitchener Generation Corporation (Note 9) 1,393,510 1,625,762 915,770,405 829,782,959 Liabilities Accounts payable and accrued liabilities 145,588,687 133,760,179 Deferred revenue - obligatory reserve funds (Note 12) 96,731,588 93,623,694 Deferred revenue - other 60,787,517 32,457,161 Municipal debt (Note 13) 79,263,355 52,615,623 Employee future benefits (Note 15) 55,214,500 54,659,910 Asset retirement obligations Note 16 117,632,840 111,335,649 555,218,487 478,452,216 Net financial assets 360,551,918 351,330,743 Non-financial assets Tangible capital assets (Note 17) 1,709,533,110 1,573,660,744 Inventory of supplies 4,751,965 4,679,711 Prepaid expenses 2,835,716 3,354,185 1,717,120,791 1,581,694,640 Accumulated surplus $ 2,077,672,709 $ 1,933,025,383 Accumulated surplus is comprised of: Accumulated operating surplus (Note 18) 2,075,974,817 1,932,128,425 Accumulated remeasurement gains 1,697,892 896,958 $ 2,077,672,709 $ 1,933,025,383 The accompanying notes are an integral part of these consolidated financial statements. Page 6of216 THE CORPORATION OF THE CITY OF KITCHENER Consolidated Statement of Operations For the Year Ended December 31 2024 2024 2023 Budget Revenues Taxation $ 163,552,328 $ 165,017,634 $ 154,786,170 User fees and charges 63,017,092 63,930,796 58,165,898 Gasworks 100,667,988 91,277,760 100,368,081 Water, sewer and storm water 155,931,863 173,027,734 151,643,441 Other 48,642,436 51,067,350 47,329,872 Government transfers (Note 19) 38,677,857 38,074,540 27,328,006 Contributions of tangible capital assets 29,240,620 29,240,620 22,638,316 Investment income 13,653,625 25,589,268 19,676,514 Penalties and interest on taxes 4,194,262 6,340,366 4,822,216 Development charge revenue recognized 22,3 52,331,655 473,166,614 21,591,019 Share of net income of Enova Energy Corporation 95,463,633 143,846,392 114,540,846 (Note 8) 1,932,128,425 1,932,128,425 7,039,472 Gain on dilution from prior interest in Kitchener <,664,66N87,664,668 Power Corp. and its affiliates (Note 8) - - 1,503,675 Share of net income of Kitchener Generation Corporation (Note 9)144 it 43,144 73,735 Other , 01 7,338,267 5,883,943 Total revenues 590,T27,147 617,013,006 564,684,460 Expenses General government 46,253,290 43,838,560 39,784,940 Protection services 63,017,092 63,930,796 58,165,898 Transportation services 48,801,094 42,139,908 41,367,054 Environmental services 122,614,052 120,906,421 112,720,855 Health services 3,277,688 3,407,206 3,045,497 Social and family services 3,711,334 3,712,132 3,553,018 Recreation and cultural services 104,647,636 104,789,332 93,336,377 Planning and development 20,995,951 20,654,253 19,363,159 Gasworks 81,645,377 69,788,006 78,806,816 Total expenses 494,963,514 473,166,614 450,143,614 Annual surplus 95,463,633 143,846,392 114,540,846 Accumulated operating surplus, beginning of year 1,932,128,425 1,932,128,425 1,817,587,579 Accumulated operating surplus, end of year (Note 18) $ 2,027,592,058 $ 2,075,974,817 $ 1,932,128,425 The accompanying notes are an integral part of these consolidated financial statements. Page 7 of 216 THE CORPORATION OF THE CITY OF KITCHENER Consolidated Statement of Remeasurement Gains For the Year Ended December 31 2024 2023 Accumulated remeasurement gains, beginning of year $ 896,958 $ - 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 88,416 73,089 Derivatives 752,400 - Amounts reclassified to the statement of operations: Portfolio investments in equity instruments (30,272) (29,602) Other comprehensive loss of: Enova Energy Corporation (9,610) (151,628) Accumulated remeasurement gains, end of year $ 1,697,892 $ 896,958 The accompanying notes are an integral part of these consolidated financial statements. Page 8 of 216 THE CORPORATION OF THE CITY OF KITCHENER Consolidated Statement of Change in Net Financial Assets For the Year Ended December 31 2024 2024 2023 Budget Annual surplus $ 95,463,633 $ 143,846,392 $ 114,540,846 Amortization of tangible capital assets 66,322,533 66,322,533 64,896,843 Acquisition of tangible capital assets (125,400,465) (167,299,808) (103,845,971) Contributions of tangible capital assets (29,240,620) (29,240,620) (22,638,316) Gain on disposals of tangible capital assets (1,634,833) (1,634,833) (265,613) Proceeds on disposal of tangible capital assets 3,311,348 3,311,349 1,025,198 Asset retirement obligations incurred - (3,486,535) (1,301,374) Asset retirement obligations change in estimate - (3,844,452) (8,314,338) Acquisition of inventory of supplies - (6,605,390) (7,368,168) Acquisition of prepaid expenses - (1,659,042) (2,232,682) Consumption of inventory of supplies - 6,533,136 6,377,703 Use of prepaid expenses - 2,177,511 1,922,962 Net remeasurement gains (losses) - 800,934 (108,141) Change in net financial assets 8,821,596 9,221,175 42,688,949 Net financial assets, beginning of year 351,330,743 351,330,743 308,486,130 Adjustment on adoption of financial instruments accounting standard - - 155,664 Net financial assets, end of year $ 360,152,339 $ 360,551,918 $ 351,330,743 The accompanying notes are an integral part of these consolidated financial statements. Page 9 of 216 THE CORPORATION OF THE CITY OF KITCHENER Consolidated Statement of Cash Flow For the Year Ended December 31 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 Contributions of tangible capital assets Change in non-cash assets and liabilities Taxes receivable Trade and other accounts receivable Loans receivable Inventory for resale Inventory of supplies Prepaid expenses Accounts payable and accrued liabilities Deferred revenue - obligatory reserve funds 2024 2023 $ 143,846,392 $ 114,540,846 66,322,533 64,896,843 (1,634,833) (265,613) (7,707,812) (7,113,207) - (1,503,675) 554,590 9,620 (29,240,620) (22,638,316) (11,188,845) (7,622,108) (33,125,890) (6,851,758) 606,366 549,014 3,171,196 (1,236,631) (72,254) (990,465) 518,469 (309,720) 11,828,508 1,580,830 3,107,894 10,873,166 Deferred revenue - other 28,330,356 3,531,629 Asset retirement obligations settled (1,033,796) (1,195,776) Net change in cash from operating activities 174,282,254 146,254,679 Investing Proceeds from redemptions of portfolio investments Portfolio investments purchased 111,854,199 189,885,191 (191,819,856) (196,297,053) Debt and equity payments received from government business enterprises 6,453,196 3,905,662 Net change in cash from investing activities (73,512,461) (2,506,200) Financing Municipal debt issued Municipal debt repaid 35,657,000 (9,009,268) 4,374,000 (9,483,327) Net change in cash from financing activities 26,647,732 (5,109,327) Capital Acquisition of tangible capital assets Proceeds on disposal of tangible capital assets (167,299,808) 3,311,349 (103,845,971) 1,025,198 Net change in cash from capital activities (163,988,459) (102,820,773) Net change in cash and cash equivalents Cash and cash equivalents, beginning of year (36,570,934) 148,883,457 35,818,379 113,065,078 Cash and cash equivalents, end of year $ 112,312,523 $ 148,883,457 The accompanying notes are an integral part of these consolidated financial statements Page 10 of 216 THE CORPORATION OF THE CITY OF KITCHENER Notes to the Consolidated Financial Statements For the Year Ended December 31 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 municipal 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. 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 consolidated financial statements: a. Basis of consolidation Consolidated entities These consolidated financial statements reflect the assets, liabilities, reserves, surpluses/deficits, revenues, and expenditures of those City funds and governmental functions or entities which have been determined to comprise a part of the aggregate City operations based upon control exercised by the City except for the City's government businesses which are accounted for on the modified equity basis of accounting. The following boards, municipal enterprises and utilities have been included in the consolidated financial statements: • Kitchener Public Library It% • Kitchener Downtown Improvement Area Board of Management • Belmont Improvement Area_Boa4&of Management • The Centre in the Square • Waterworks Enterpris • Gasworks Enterprise • Sewer Surcharge EnterprisN • Storm Water Management E • Building Enterprise • Golf Enterprise • Parking Enterprise All inter -organizational and inter -fund 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 11 of 216 THE CORPORATION OF THE CITY OF KITCHENER Notes to the Consolidated Financial Statements For the Year Ended December 31 1. Significant Accounting Policies (continued) b. Basis of accounting i. 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 liquid investments held for the purpose of meeting short-term cash commitments rather than investing or other purposes. Investments are only classified as cash equivalents when they have a maturity of three months or less from the date of acquisition. iii. Trade and other accounts receivable Trade and other accounts receivable are reported net of any allowance for doubtful accounts. iv. Loans receivable Loans receivable are reported net of any allowance for doubtful accounts. Interest income is recorded as it accrues. When the value of any loan receivable is identified as impaired, an allowance is set up to offset the carrying amount and any gustmre included in materials and services expense in the period the impairment is recognized. -M *0 v. Inventory for resale Inventory for resale is v�alL vi. Portfolio investr�fen st realizable value on an average cost basis. Portfolio investments are held for purposes other than meeting short-term cash commitments. Portfolio investments in debt instruments are carried at cost or amortized cost with transaction costs added to the carrying value at initial recognition. Portfolio investments in equity instruments are carried at fair value with transaction costs expensed. Interest income is recorded as it accrues. When the value of any portfolio investment is identified as impaired, the carrying amount is adjusted to the estimated realizable amount and any adjustments are included in investment income in the period the impairment is recognized. 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 12 of 216 THE CORPORATION OF THE CITY OF KITCHENER Notes to the Consolidated Financial Statements For the Year Ended December 31 1. 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 the projected benefits method prorated on service and management's best estimate of retirement ages of employees, salary escalation, expected health care costs and plan investment performance. Liabilities are actuarially determined using discount rates that are consistent with the market rates of high quality debt instruments. Any gains or losses from changes in assumptions or experience are amortized over the average remaining service period for active employees. ix. Contaminated sites Contaminated sites are defined as the result of contamination being introduced into air, soil, water or sediment of a chemical, organic, or radioactive material or live organism that exceeds an environment standard. A liability for remediation of contaminated sites is recognized when, as at the financial reporting date: a) an environmental standard exists, b) contamination exceeds the environmental standard, c) the government is directly responsible or accepts responsibility, d) it is expected that future economic benefits will be given up, and e) a reasonable estimate of the amount can be made. x. Asset retirement obligations A liability for an asset retirement obligation is recognized at the best estimate of the amount required to retire a tangible capital asset (or a component thereof) at the financial statement date when there is a legal obligation for the City 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. The best estimate of the liability includes all costs directly attributable to asset retirement activities, based on information available at the financial reporting date. When the cash flows and timing 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 13 of 216 THE CORPORATION OF THE CITY OF KITCHENER Notes to the Consolidated Financial Statements For the Year Ended December 31 1. 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 includes all amounts that are directly attributable to acquisition, construction, development or betterment of the asset. The cost less residual value of the tangible capital assets is amortized on a straight-line basis over their estimated useful lives as follows: Assets Amortization Period Land Land improvements Buildings & building improvem( Leasehold improvements The original cost of land is not amortized 10 to 100 years f to 50 years er the useful life of the improvement or the lease m,whichever is shorter Machinery & equipment 1 to 15 years Computer hardware 5 years Computer softwareI—VWN5 to 10 years Linear assets 5 to 100 years Vehicles 5 to 16 years b. Contributions of tangible capital assets Tangible capital assets received as contributions are recorded at their fair value at time of receipt and are recorded as revenue. 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 consolidated financial statements. Page 14 of 216 THE CORPORATION OF THE CITY OF KITCHENER Notes to the Consolidated Financial Statements For the Year Ended December 31 1. 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 revenue when transfer stipulations give rise to a liability. Transfer revenue is recognized in the statement of operations as the stipulation liabilities are settled. Government transfers, contributions, and other amounts are received from third parties pursuant to legislation, regulation, or agreement and may only be used in the conduct of certain programs, in the completion of specific work, or the purchase of tangible capital asset. In addition, certain user charges and fees are collected for which the related services have yet to be performed. Revenue is recognized in the period when the related expenses are incurred, services performed, or the tangible assets are acquired. Tax revenue is recognized when it is authorized and in the period for which the tax is levied. Tax revenue reported relates to property taxes. xiii. Use of estimates The preparation of the financial statementsre ` es management to make estimates and assumptions that affect the reported amounts of assets a ilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. These estimates and assumptions, including employee future benefits payable, legal claims provisions, liability for contaminated sites, the valuation of tangible capital assets and their related useful lives and amortization are based on management's best information and judgment and may differ significantly from future actual results. In addition, the City's implementation 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 15 of 216 THE CORPORATION OF THE CITY OF KITCHENER Notes to the Consolidated Financial Statements For the Year Ended December 31 1. 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 fair. -value are classified based on the observability of inputs as follows: • Level 1 - quoted prices (unadjusted) in active markets; • Level 2 - inputs other than quoted prices include hin LeveT1 that are observable, either directly (i.e., as prices) or indirectly (i.e., derived from p . ); an • Level 3 - inputs that are not based on observa a market data (unobservable inputs). The City 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. Unrealized gains and losses from changes in the fair value of financial instruments are recognized in the statement of remeasurement gains and losses in the period they occur. Once realized, the cumulative gain or loss is reclassified to the statement of operations. 2. Change in accounting policy In 2024, the City adopted the Public Sector Accounting Board's new standard PS 3400 Revenue. The standard establishes a single framework to categorize revenue and to enhance the consistency of revenue recognition and its measurement. The standard was adopted prospectively at the date of adoption. The adoption of this standard did not have a material impact on these consolidated financial statements. In 2024, the City adopted PS 3160 Public Private Partnerships. The standard includes requirements for the recognition, measurement, and classification of infrastructure procured through a public private partnership. The adoption of this standard did not have a material impact on these consolidated financial statements. In 2024, the City adopted the Public Sector Accounting Board's new guideline PSG -8 Purchased Intangibles. The guideline permits the recognition of intangible assets that are acquired through an arm's length transaction between willing parties provided the purchased intangible meets the recognition criteria for an asset. The adoption of this new guideline did not have a material impact on these consolidated financial statements. 3. Taxes and accounts receivable Taxes receivable are reported net of a valuation allowance of $11,628,537 (2023 - $10,813,112). Trade and other accounts receivable are reported net of a valuation allowance of $2,003,204 (2023 - $1,840,818). Page 16 of 216 THE CORPORATION OF THE CITY OF KITCHENER Notes to the Consolidated Financial Statements For the Year Ended December 31 4. Operations of school boards and the Regional Municipality of Waterloo Further to Note 1 a) iii, the taxation, other revenues and requisitions for the school boards and the Regional Municipality of Waterloo are comprised of the following: School Boards Region Total Taxation and user charges $ 85,796,977 $ 365,769,589 $ 451,566,566 Share of payments in lieu of taxes - 3,813,163 3,813,163 Share of linear properties 45,038 128,012 173,050 Amounts requisitioned $ 85,842,015 $ 369,710,764 $ 455,552,779 5. Trust funds Trust funds administered by the City have not been inclu in the Consolidated Statement of Financial Position, nor have their operations been included in the Co dated Statement of Operations. The trust funds under administration are comprised of cemetery per al c e and prepaid interment funds totalling $19,870,440 (2023 - $18,979,167). 6. Loans receivable Loans receivable are made up of the following: 2024 2023 Major capital improvement loans receivable $ 4,705,560 $ 5,306,487 Loans receivable with forgiveness provisions 25,396 25,396 Minor capital improvement and other loans receivable 107,900 113,339 $ 4,838,856 $ 5,445,222 Major capital improvement loans are individual loans in excess of $500,000 when issued with no forgiveness provision built into the loan. These loans have repayment terms ranging from 10 to 12 years (2023 - 10 to 12 years). All major capital improvement loans are unsecured and bear interest at rates ranging from 2.50% to 3.15% (2023 - 1.32% to 4.1096). Forgivable loans are those initially offered with forgiveness provisions built into the agreement. All loans in this category are unsecured and have repayment terms of 5 years (2023 - 5 years). The forgiveness provisions are 15% (2023 - 1596). The balances recorded are net of the allowance for forgiveness. Interest rates on these loans are 8% (2023 - 896). Minor capital improvement and other loans receivable comprise any loan receivable not fitting into the first two categories. There is a variety of terms related to these loans with payment terms ranging from 1 to 5 years (2023 - 1 to 5 years). The majority of these loans are secured by the asset the loan was granted to finance, but others are unsecured. The interest rates on these loans are 0% (2023 - 096). Page 17 of 216 THE CORPORATION OF THE CITY OF KITCHENER Notes to the Consolidated Financial Statements For the Year Ended December 31 7. Portfolio investments Investments are made up of the following: 2024 2024 2023 2023 Carrying Market Carrying Market Value Value Value Value Guaranteed investment certificates $ 150,934,441 $ 150,959,547 $ 203,042,714 $ 209,972,546 Notice plan accounts 131,871,724 131,871,724 - - Bonds and debentures 32,651,926 33,129,746 32,455,680 30,440,314 Derivatives 752,400 752,400 - - Shares 557,726 5J7,726 493,622 493,622 $ 316,768,217 $ 31W1,143 $ 235,992,016 $ 240,906,482 Derivatives and shares are carried at fair value and are el 2 and Level 1 instruments in the fair value hierarchy respectively. A 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 , e City and Wilmot. Mergers of the holding mpanies, 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, KWHI and WNHI legally amalgamated on September 1, 2022 and the new local distribution company continues as Enova Power Corp., a corporation amalgamated under the laws of Ontario. Enova Power Corp. is 100% owned by Enova Energy Corporation. In April 2023, the Class A special shares were remeasured to $163 per share for post -closing adjustments. As a result, the City recorded a gain of $1,503,675. The shares were immediately redeemed. Page 18 of 216 THE CORPORATION OF THE CITY OF KITCHENER Notes to the Consolidated Financial Statements For the Year Ended December 31 8. Investment in Enova Energy Corporation (continued) The City's investment in Enova Energy Corporation is comprised of the following: 2024 2023 Common shares $ 174,183,807 $ 174,183,807 Long-term notes receivable 70,997,576 70,997,576 Share of net income and prior period adjustments due to changes in accounting policies since acquisition, net of dividends 67,370,479 65,883,611 Share of other comprehensive income since acquisition 688,197 697,807 VW $ 313.240.059 $ 311,762,801 The Enova Energy Corporation notes are unsecured and bear There are no repayment terms and there is no intent to redeerryJn The continuity of the City's investment in Enova Energy Co Fation is as fol the rate of 3.23% (2023 - 3.2396). the shares. 2024 2023 Balance, beginning of year Ilk, $ 311,762,801 $ 306,970,957 Gain on dilution from prior interest in Kitchener er nd its affiliates - 1,503,675 Redemption of Class A special share - (1,503,675) Share of net income for year 7,664,668 7,039,472 Share of other comprehensive to r ye (9,610) (151,628) Dividends received during year 6,177,800 2,096,000 Balance, end of year j -q1h, Ilk, $ 313,240,059 $ 311,762,801 The following table providks condensftfinancial information with respect to Enova Energy Corporation: 2024 2023 Financial position Current assets $ 89,770,000 $ 82,238,000 Non-current assets 784,875,000 758,156,000 Regulatory assets 56,972,000 50,638,000 Total assets 931,617,000 891,032,000 Current liabilities 96,819,000 188,476,000 Long-term debt 230,918,000 110,976,000 Regulatory liabilities 15,475,000 11,346,000 Other liabilities 134,358,000 128,112,000 Total liabilities 477,570,000 438,910,000 Net assets $ 454,047,000 $ 452,122,000 Page 19 of 216 THE CORPORATION OF THE CITY OF KITCHENER Notes to the Consolidated Financial Statements For the Year Ended December 31 8. Investment in Enova Energy Corporation (continued) 2024 2023 Results of operations Revenues $ 519,151,000 $ 472,900,000 Expenses (504,795,000) (459,715,000) Net income 14,356,000 13,185,000 City's share of net income - 53.39% $ 7,664,668 $ 7,039,472 9. Investment in Kitchener Generation Corporation Under the provincial government's Business Corporation Act, chener Generation Corporation was incorporated on December 9, 2011. Effective January 1, 2012, the City transferred the solar roof et constructed on the surface of the Kitchener Operations Facility to Kitchener Generation Corporation xchange for 100% of its common shares and interest bearing debt. The investment in Kitchener Generation Corporation is comprised of the following: Page 20 of 216 2024 2023 Common shares $ 139,351 $ 162,576 Long-term notes receivable 1,254,159 1,463,186 $ 1,393,510 $ 1,625,762 The notes receivable are unsecured and bear interest at the rate of 5.01%. To the extent that Kitchener Generation Corporation has positive annual cash flows after any dividend payment, the cash will be returned to the City as repayment of the outstanding debt and return of capital. The proportion to which they contribute is 90% debt, 10% equity. The continuity of the City's investment in Kitchener Generation Corporation is as follows: 2024 2023 Balance, beginning of year $ 1,625,762 $ 1,858,014 Share of net income for year 43,144 73,735 Dividends received during year (43,144) (73,735) Return of capital (23,225) (23,225) Repayment of outstanding debt (209,027) (209,027) Balance, end of year $ 1,393,510 $ 1,625,762 Page 20 of 216 THE CORPORATION OF THE CITY OF KITCHENER Notes to the Consolidated Financial Statements For the Year Ended December 31 9. Investment in Kitchener Generation Corporation (continued) The following table provides condensed financial information with respect to Kitchener Generation Corporation: 2024 2023 Financial position Current assets $ 2,751 $ 4,478 Capital assets 1,393,509 1,625,760 Total assets 1,396,260 1,630,238 Current liabilities 2,749 4,476 Long-term debt IAL 1,254,159 1,463,186 Total liabilities Net assets Results of operations Revenues Expenses Net income Citv's share of net income - 1 10. Insurance pool 1,256,908 1,467,662 $ 139,352 $ 162,576 2024 2023 $ 361,247 $ (318,103) 389,765 (316,030 43,144 73,735 $ 43,144 $ 73,735 Accounts payable and accrued liabilitiW include an amount of $12,883,468 (2023 - $15,671,086) which represents funds belonging to the Waterloo Region Municipalities Insurance Pool (the "Pool") and administered by the City on behalf of the Pool's members. The members entered an agreement in 1998 to purchase property damage and public liability insurance on a group basis and share a retained level of risk. The members pay an actuarially determined annual levy to fund insurance, prefund expected losses and contribute to a surplus. The Pool has purchased insurance to fund losses above a predetermined deductible and any losses above a predetermined total in any year. The City's share of Pool levies is 25.27% (2023 - 25.0496) and its share of the Pool's cumulative surplus as at May 31, 2024 was $2,232,819 (2023 - $1,186,489). The City's share of the Pool's cumulative surplus has not been included in the Consolidated Statement of Financial Position. 11. Contaminated sites Accounts payable and accrued liabilities include a liability for remediation of contaminated sites of $5,378,000 (2023 - $nil). The liability was based on environmental assessments, or estimates for those sites where an assessment has not been conducted. This estimate is subject to significant measurement uncertainty due to the possible variation in activities required to complete the remediation. Estimated recoveries are expected to be $nil (2023 - $nil). Page 21 of 216 THE CORPORATION OF THE CITY OF KITCHENER Notes to the Consolidated Financial Statements For the Year Ended December 31 12. Deferred revenue - obligatory reserve funds Obligatory deferred revenue is comprised of the following: 2024 2023 Development charges $ 53,495,388 $ 55,957,838 Canada Community -Building Fund 12,050,778 8,043,263 Building 12,728,632 14,212,512 Recreational land 18,456,790 15,410,081 $ 96,731,588 $ 93,623,694 The continuity of obligatory deferred revenue is as follows: Page 22 of 216 Cana Commum - Development B ' ng Recreational charges F` d Building land Total Balance, January 1, 2024 $ 55,957,838 8,043,2 4111; 14,212,512 $ 15,410,081 $ 93,623,694 Collections 19,677,055 726 - 2,868,638 30,737,419 Interest and investment income earned 192,150 ,371 758,740 439,642 1,405,903 Deferred revenue recognized 2 31,65 99,582 (2,242,620) (261,571) (29,035,428) Balance, December 31, 2024 ,495,388 12, 0,778 12,728,632 18,456,790 96,731,588 Balance, January 1, 2023 5, 94 10,881,638 13,703,780 12,331,116 82,750,528 Collections 1 7,718,266 74,285 2,610,130 41,120,371 Interest and investme income earned 1 9,813 66,096 649,270 424,937 2,160,116 Deferred revenue reco nize 13,659 (10,622,737) (214,823) 43,898 (32,407,321) Balance, December 31, 2023 5,957,838 $ 8,043,263 $ 14,212,512 $ 15,410,081 $ 93,623,694 Page 22 of 216 THE CORPORATION OF THE CITY OF KITCHENER Notes to the Consolidated Financial Statements For the Year Ended December 31 13. Municipal debt The City has assumed responsibility for the payment of principal and interest charges on certain long-term debt issued by other municipalities. At the end of the year, the outstanding principal amount of this liability is $79,263,355 (2023 - $52,615,623). The annual principal repayments are: 2025 $ 12,481,372 2026 12,371,468 2027 9,479,174 2028 8,513,271 2029 7,556,777 2030 and thereafter 28,861,293 $ 79,263,355 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 0.85% to 5.15% (2023 - 0.70% to 5.4096). Interest charges for 2024 relating to municipal debt totalled $1,675,564 (2023 - $1,703,950). 14. 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 2024 amounting to $14,011,606 (2023 - $12,651,041). The latest available report for the OMERS plan was as at December 31, 2024. At that time the plan reported a $2.9 billion actuarial deficit, based on actuarial liabilities of $142.5 billion and actuarial assets of $139.6 billion. The City does not recognize any share of the pension plan deficit since this is a joint responsility for all Ontario municipalities and their employees. Ongoing adequacy of the current contribution rates will need to be monitored and may lead to increased future funding requirements. As at December 31, 2024, the City has no obligation under the past service provisions of the OMERS agreement. Page 23 of 216 THE CORPORATION OF THE CITY OF KITCHENER Notes to the Consolidated Financial Statements For the Year Ended December 31 15. Employee future benefits The estimated liability for employee future benefits is comprised of the following: 2024 2023 Sick leave benefit plan $ 20,957,900 $ 21,053,287 Retirement benefits 25,405,600 24,851,723 Workplace Safety and Insurance Board 8,851,000 8,754,900 $ 55,214,500 $ 54,659,910 Sianificant actuarial assumptions a. Sick leave benefit plan low Under the sick leave benefit plan, unu sick e e 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 $1,699,300 (2023 - $1,774,010). A reserve fund to provide for this liability is included in accumulated surplus, in the amount of $6,228,995 (2023 - $6,706,355). Anticipated undiscounted payments to employees who are eligible to retire are 2025 Workplace Safety and Sick Leave and Retirement December 31, 2024 Insurance Board 919,027 Benefits 395,080 2024 2023 2024 2023 Discount rate 4.40 4.60 4.60 4.60 Salary growth assumptions N/A N/A 3.00 3.00 CPI increase assumptions 2. 2.50 2.50 2.50 Health care initial trend rate N/A N/A 5.50 5.50 Health care ultimate trend rate N/A 4.00 4.00 Dental care initial trend rate / N/A 4.00 4.00 Dental care ultimate trend rate N/A N/A 4.00 4.00 a. Sick leave benefit plan low Under the sick leave benefit plan, unu sick e e 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 $1,699,300 (2023 - $1,774,010). A reserve fund to provide for this liability is included in accumulated surplus, in the amount of $6,228,995 (2023 - $6,706,355). Anticipated undiscounted payments to employees who are eligible to retire are 2025 $ 1,089,186 2026 1,149,760 2027 919,027 2028 395,080 2028 997,969 2029 and thereafter 7,253,545 $ 11,804,567 The actuarial valuation of the future liability for sick leave assumes a discount rate of 4.60% (2023 - 4.60%). The last actuarial valuation for this liability was completed at December 31, 2023. Page 24 of 216 THE CORPORATION OF THE CITY OF KITCHENER Notes to the Consolidated Financial Statements For the Year Ended December 31 15. Employee future benefits (continued) a. Sick leave benefit plan (continued) The actuarial expense for the current year was $1,604,000 (2023 - $1,779,043) and is comprised of the following items: 2024 2023 Current period benefit cost $ 1,210,800 $ 1,092,378 Amortization of actuarial gains (352,200) (187,954) Sick leave benefit expense 858,600 904,424 Sick leave benefit interest expense IAL 745,400 874,619 Total expenses related to sick leave benefits llfR $ 1,604,000 $ 1,779,043 As at December 31, 2024, the unamortized actuarial gai ere $4,854,500 (2023 - $5,210,717) and are amortized over 12 to 14 years (2023 - 11 to 13 years). b. Retirement benefits The City pays certain health, dental and life insur ce bene behalf of its retired employees up to the age of 65 if they have at least ten years of service ity. T ount of benefits paid during the year were $1,755,800 (2023 - $1,260,725). The City holds no reserve to meet this liability. The actuarial valuation of the future liability for retire nt benefits assumes a discount rate of 4.60% (2023 - 4.60%) and inflation rates for benefit premiums of 4. /o to 5.5% (2023 - 4.0% to 5.596). The last actuarial valuation for this liability was completed at December S1, 2023. The actuarial expense for the current year was $2,309,700 (2023 - $1,768,212) and is comprised of the following items: 2024 2023 Current period benefit cost $ 1,001,500 $ 830,645 Amortization of actuarial gains (30,600) (319,421) Amortization plan improvements 316,000 332,736 Retirement benefit expense 1,286,900 843,960 Retirement benefit interest expense 1,022,800 924,252 Total expenses related to retirement benefits $ 2,309,700 $ 1,768,212 As at December 31, 2024, the unamortized actuarial gains were $2,709,000 (2023 - $2,739,601) and are amortized over 11 to 14 years (2023 - 11 to 13 years). Page 25 of 216 THE CORPORATION OF THE CITY OF KITCHENER Notes to the Consolidated Financial Statements For the Year Ended December 31 15. Employee future benefits (continued) c. Workplace Safety and Insurance Board The Workplace Safety and Insurance Board (WSIB) administers injured worker benefits payments on behalf of the City as a Schedule 2 employer. The amount of benefits paid during the year were $3,111,700 (2023 - $2,324,200). A reserve fund to provide for this liability is included in accumulated surplus, in the amount of $4,388,205 (2023 - $5,847,131). The actuarial valuation of the future liability for WSIB assumes a discount rate of 4.40% (2023 - 4.6096). The last actuarial valuation for this liability was completed at December 31, 2022. The actuarial expense for the current year was $3,207,800 (2023 - $1,821,300) and is comprised of the following items: 2024 2023 Current period benefit cost $ 2,563,700 $ 853,400 Amortization of actuarial losses 96,100 405,600 WSIB benefit expense 2,659,800 1,259,000 WSIB benefit interest expense 548,000 562,300 Total expenses related to WSIB benefits VA $ 3,207,800 $ 1,821,300 As at December 31, 2024, the unamortized actuarial losses were $2,189,700 (2023 - $2,151,100) and are amortized over 13 years (2023 - 13 years). 16. 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 represents a risk of ground contamination due to leaks and corrosion. The Environmental Protection Act outlines the legal obligation to remove the tanks and clean up the surrounding soil. Following the adoption of PS 3280 Asset Retirement Obligations, the City recognized an obligation relating to the removal of the tanks and the surrounding soil remediation as estimated at January 1, 2022. Page 26 of 216 THE CORPORATION OF THE CITY OF KITCHENER Notes to the Consolidated Financial Statements For the Year Ended December 31 16. Asset retirement obligations (continued) c. Gas mains and service lines The City owns and operates a network of gas mains and service lines that deliver gas to customers throughout the city. When these assets have reached the end of their useful life or when they have been identified for replacement, they are typically abandoned in place rather than removed. The Canadian Standards Association CSA Standard Z662 covers the design, construction, operation, maintenance, deactivation, and abandonment of oil and gas industry pipeline systems. Following the adoption of PS 3280 Asset Retirement Obligations, the City recognized an obligation relating to the abandonment of gas mains and service lines as estimated at January 1, 2022. The continuity of asset retirement obligations is as follows: Buildings and Machinery and Linear Assets Leasehold Equipment (Gas Mains Improvements (Storage and Service (Asbestos) Tanks) Lines) Total Balance, January 1, 2024 $ 13,990,265 $ 500,000 $ 96,845,384 $ 111,335,649 Liabilities incurred 273,776 - 3,212,759 3,486,535 Liabilities settled (3,059) - (1,030,737) (1,033,796) Change in estimate 555,572 20,000 3,268,880 3,844,452 Balance, December 3112024 14,816,554 520,000 102,296,286 117,632,840 Balance, January 1, 2023 Ov 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) Chanae in estimate 916.961 25.928 7.371.449 8.314.338 Balance, December 31,,M-23 `$ -13,990,264 $ 500,000 $ 96,845,385 $ 111,335,649 17. Tangible capital assets . The continuity schedule of tangible capital assets is presented in Schedule A. Assets under construction having a value of $82,871,747 (2023 - $48,726,778) have not been amortized. Amortization of these assets will commence when the assets are put into service. Contributed tangible capital assets of $29,240,620 (2023 - $22,638,316) 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 (2023 - $nil). The amount of interest capitalized was $nil (2023 - $nil). Page 27 of 216 THE CORPORATION OF THE CITY OF KITCHENER Notes to the Consolidated Financial Statements For the Year Ended December 31 18. Accumulated operating surplus The accumulated operating surplus consists of individual fund surpluses/(deficits) and reserve funds as follows: 2024 2023 Surplus: Invested in tangible capital assets $1,709,533,110 $1,573,660,744 Other 64,135,619 75,426,145 Investment in Enova Energy Corporation 312,551,862 311,064,994 Investment in Kitchener Generation Corporation 1,393,510 1,625,762 Employee future benefits (unfunded) (55,214,500) (54,659,910) Asset retirement obligations �' (117,632,840) (111,335,649) Total surplus X1,914,766,761 1,795,782,086 Reserve funds set aside for specific purposes by C it for: IV Capital 77,867,204 56,854,924 Stabilization 56,668,964 49,591,194 Program specific 10,662,715 12,199,444 Corporate 13,200,980 15,026,992 158,399,863 133,672,554 Reserve funds set aside for specific purposes by consolidated entities: Kitchener Public Library 449,336 449,336 Kitchener Downtown Improvement Area Board of Management 50,000 50,000 The Centre in the Square Inc. 2,308,857 2,174,449 2,808,193 2,673,785 Total reserve funds 161,208,056 136,346,339 Accumulated operating surplus $2,075,974,817 $1,932,128,425 Page 28 of 216 THE CORPORATION OF THE CITY OF KITCHENER Notes to the Consolidated Financial Statements For the Year Ended December 31 19. Government transfers Government transfers are comprised of the following: 2024 2023 Federal Conditional grants $ 1,254,263 $ 228,494 Capital grants 18,095,482 16,642,730 19,349,745 16,871,224 Provincial Conditional grants 2,179,528 1,969,595 Capital grants 8,125,086 939,824 10,304,614 2,909,419 Municipal Revenue from other municipalities 7,635,890 7,412,415 Revenue from other municipalities for capital projects 784,291 134,948 8,420,181 7,547,363 Total government transfers $ 38,074,540 $ 27,328,006 20. Contingent liabilities Legal actions have been undertaken against the Cilokrelating 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. 21. Segmented information The City of Kitchener is a diversified municipal government institution that provides a wide range of services to its citizens, including fire, roads, water, sewer, storm sewer, gasworks, libraries, and community services. Segmented information has been presented in Schedule B by major functional classification of activities provided, consistent with the Consolidated Statement of Operations and provincially legislated requirements. For each reported segment, revenues and expenses represent both amounts that are directly attributable to the segment and amounts that are allocated on a reasonable basis. The accounting policies used in these segments are consistent with those followed in the preparation of the consolidated financial statements as disclosed in Note 1. Page 29 of 216 THE CORPORATION OF THE CITY OF KITCHENER Notes to the Consolidated Financial Statements For the Year Ended December 31 22. Budget figures The budget figures reflected in these consolidated financial statements are those approved by Council at a meeting on December 14, 2023. Budget figures have been translated to reflect Public Sector Accounting Board standards as follows: 23. 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, 2024. 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 all portfolio investments; • Assessing the quality of its counterparties, taking into account their creditworthiness and reputation, past experience and other factors; and • Reviewing collectability and establishing allowances for doubtful accounts. Accounts receivable of $4,301,855 (2023 - $5,000,569) was more than 60 days past due. The City has a broad base of customers which minimizes the concentration of credit risk. Valuation allowances for accounts receivable are disclosed in Note 3. There are no provisions for impairment of portfolio investments or loans receivable. Page 30 of 216 2024 Approved operating budget surplus $ - Adjustments Reserve budget revenues net of expenses 34,179,425 Non -tangible capital asset portion of capital budget (9,640,495) Consolidated entity budget surpluses 3,121,567 Share of net income of government business enterprises 7,707,812 Debt charge recoveries 135,299 Contributions of tangible capital assets 29,240,620 Amortization of tangible capital assets (66,322,533) Unfunded accrual for employee future benefits (554,590) Net transfers to capital and reserve funds 93,018,469 Debt principle repayments net of recoveries 4,578,059 Consolidated financial statement budget surplus $ 95,463,633 23. 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, 2024. 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 all portfolio investments; • Assessing the quality of its counterparties, taking into account their creditworthiness and reputation, past experience and other factors; and • Reviewing collectability and establishing allowances for doubtful accounts. Accounts receivable of $4,301,855 (2023 - $5,000,569) was more than 60 days past due. The City has a broad base of customers which minimizes the concentration of credit risk. Valuation allowances for accounts receivable are disclosed in Note 3. There are no provisions for impairment of portfolio investments or loans receivable. Page 30 of 216 THE CORPORATION OF THE CITY OF KITCHENER Notes to the Consolidated Financial Statements For the Year Ended December 31 23. Financial instruments (continued) b. Liquidity risk Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. The City is exposed to liquidity risk from accounts payable and accrued liabilities and municipal debt. The City manages its exposure to this risk through monitoring projected and actual cash flows and anticipated investing in order to maintain sufficient funds for meeting obligations as they come due. Accounts payable and accrued liabilities are generally due within 30 days. The annual repayment obligations for municipal debt are disclosed in Note 13. Market risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk is comprised of currency risk, interest rate risk, and other price risk. Currency risk is the risk that the fair 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 and notice plan account balances to a 1% decrease in the interest rate would be a reduction in interest income of $2,570,093 for the year (2023 - $1,993,883). 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. 24. Comparative figures Certain of the prior year's comparative figures have been reclassified to conform to the current year's presentation. 25. 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 significant adjustments. Page 31 of 216 w W Z W 2 U F— Y LL 0T I F— L) W �? 2 ,�A F N LL 0� }1 Z Q N O N 0_U� d Qd � v 0L�°' r 1 N Q � i O mw W m F— Cl) LL N O N co (D 0) ^(U LL �p M 00 ' r V! 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N W W Lo 00 Cl) Cl) C r� R r_ N Cl) It N ' w ' fl ' ' ' 00 O N O 0 w w w 00 00 O VO In O �_ O N ClN 00 w f- It M N N T f0 M f0 O O O fl 0 00 M N _ U> 00 Cl) V! V! N It W 0 N N W M W r y O CO Cl) a) w a a r V! N M Lo w T O N O M f0 r 00 f0 d Cl) O- f- f- Lo N N 00 Lo V! V) V) R T W 00 ' N f0 a) N V! V! a) r 00 a 00 N O a E f- Cl) f0 M f- t CO N O O f� W N r't f0 fl 00 W It r N It 00 't Cl! M Cl! a f0 M It a N V! O 00 a) N a) CO CO 00 00 Nr It M i� y Cl) 00 00 r N N M O r a) O O ao Lo 00 N O Lo O Lo N N f0 N N f- Cl) N It 00 f- f- Lo O N N - M fz N w N M Cl) N 0 0 .6 Q o 0 N N U N Y O ` C a V N a C d W d C Q R C' R N V) w CLX > C L N a) N II R .R. C O O E R W .4` Y °- 2 U -2> O R `O E a o a) w o w a) E '— a) a 2 Q `m `w m o °' E° E 'Z a) a r E R o— R O N o R U (` p OU 'E U C O C d N NR a) `w N 7 a ... Q .— a m O H U 3 O 2 2 v �n a .4 w E a N C N .0 w E- E 2' O O p 0 O Q N .� CL R a/ R a) N a V R a d 0 2 O a N a .0 E r 0 x a`) >= o > R a R U r 0 R Q `m E o o O r c a°/ H 7 U a 0' U) (7 U) w U) w Q F THE CORPORATION OF THE CITY OF KITCHENER TRUST FUNDS Balance Sheet As at December 31 2024 2023 Assets Accounts receivable $ 32,611 $ 24,750 Interest receivable 132,578 126,441 Loans receivable (Note 2) 308,707 365,160 Investments (Note 3) Short-term 2,610,672 5,638,593 Long-term 16,785,872 12,824,223 19,870,440 18,979,167 Fund Balance The accompanying notes are an integral part of these financial s ents. $19,870,440 $18,979,167 Page 36 of 216 THE CORPORATION OF THE CITY OF KITCHENER TRUST FUNDS Statement of Continuity For the Year Ended December 31 2024 2023 Receipts Perpetual care funds $ 548,608 $ 452,541 Interest earned 711,339 540,436 Other 352,472 306,202 1,612,419 1,299,179 Expenditures Transfer to cemeteries operations 462,814 346,172 Other disbursements 258,332 287,615 721,146 633,787 Net change in fund 891,273 665,392 Balance, beginning of year 18,979,167 18,313,775 Balance, end of year $ 19,870,440 $ 18,979,167 The accompanying notes are an integr 11 Page 37 of 216 THE CORPORATION OF THE CITY OF KITCHENER TRUST FUNDS Notes to the Financial Statements For the Year Ended December 31 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 accrual basis of accounting. The accrual basis of accounting recognizes receipts as they become available and measurable; expenditures are recognized as they are incurred and measurable as a result of receipt of goods or services and the creation of a legal obligation to pay. b. 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 ent of operations. The Trust Funds evaluate contractual obligations fo a existence of embedded derivatives and separately measure the fair value of the derivative component w n characteristics of the derivative are not closely related to the economic characteristics and risks of the contra tself. 2. Loans receivable During 2019, under authorization of the Bereavement Authority of Ontario, the Woodland Cemetery Perpetual Care Trust issued a loan to the Corporation of the City of Kitchener in the amount of $575,000. The loan bears interest at 3% and will be repaid over ten years beginning in February 2020. 3. Investments The long-term investments of $16,785,872 (2023 - $12,824,223) reported on the Balance Sheet at amortized cost, have a market value of $16,733,033 (2023 - $12,550,055). 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 38 of 216 THE CORPORATION OF THE CITY OF KITCHENER TRUST FUNDS Notes to the Financial Statements For the Year Ended December 31 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, 2024. 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, and portfolio investments. The carrying amounts of financial assets represent the Trust Funds' maximum credit exposure. The Trust Funds manage their exposure to this risk by: • Maintaining their funds in creditworthy organizations and financial institutions • Requiring minimum S&P credit rating of A- (or equivalent rating) for all portfolio investments; • Assessing the quality of their counterparties, taking into account their creditworthiness and reputation, past experience and other factors. There were no provisions for impairment or losses. b. Market risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk is comprised of currency risk, interest rate risk, and other price 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 Trust Funds manage their interest rate risk by maintaining a mix of fixed income investments which meet the criteria outlined in the Investment Policy. The sensitivity of short-term investments to a 1% decrease in the interest rate would be a reduction in interest income of $75,394 for the year (2023 - $36,909). The fair value of long-term investments is directly impacted by changes in market interest rates. However, the investments are measured at cost or amortized cost so there is no impact on the operational results of the Trust Funds. Page 39 of 216 v / Z LL v / F- LU Z LU L2 r Y LL 0 F- L) U LU 2 F- ' �^ Y 0 L Z Oi+ M Q � � v 0 00 a U 0 i O m LL LU m 2 � L F— Cl) LL al y L v C w R 7 C. 0 a CO 00 O I- M O M IT V I- LO N LO r M r LO 0 r- 0 M CO M O N ONIT M LO M OO 0 00 O- NN - MN Cfl O - � LO LO LO Cfl 06 N N Ef3 O Cfl O Cfl O N M O O M O LO O O V 00 I- N CO V CO LO O M V V LO M LO M 1- LO V N N Cfl O 00 N N 6�3 00 00 O " " " ' N � O O 00 Cfl V O M 0') M V o N M� V Co LO O r- N M 00 I- N N i ® N 00r- O M N LO- r- .� IT 00 00 Nr- , I - V co O N O M O M I V I- l.C) G�O N LO MMOV LQ C9 M CO L CO CO N N O LO 00 O - N 00 M a r V V N V M M a Lri Lri cm a ER ff y i i 'a a) 7 O O O O O N y LL E N a) y LL1 U a) U U� U '� U 0� o RCOL 0�-�N ������a)cm CL �o�,�a a . � N 0 >O -> N Lu J d > m> Cn U LL LL J W U` W W d N 4- 0 O BELMONT IMPROVEMENT AREA BOARD OF MANAGEMENT Statement of Financial Position As at December 31 Financial assets Cash 2024 2023 (Restated Note 3) $ 19,091 $ 16,409 Liabilities Accounts payable and accrued liabilities 10,170 4,626 Deferred revenue 7,404 7,404 17,574 12,030 Net financial assets 1,517 4,379 Non-financial assets Tangible capital assets (Note 2) 40,391 48,811 Prepaid expenses 1,734 1,347 42,125 50,158 Net assets 43,642 54,537 Accumulated surplus Accumulated net revenue 3,251 5,726 Invested in tangible capital assets 40,391 48,811 Total accumulated surplus $ 43,642 $ 54,537 The accompanying notes are an integral cial statements. Page 41 of 216 BELMONT IMPROVEMENT AREA BOARD OF MANAGEMENT Statement of Operations For the Year Ended December 31 The accompanying notes are an integral part of these financial statements. Page 42 of 216 2024 2023 (Restated Note 3) Revenues Assessments $ 48,624 $ 44,797 Other revenue 6,495 9,783 55,119 54,580 Expenses Administration 9,881 10,453 Amortization 8,420 7,225 Events 11,459 3,683 Marketing 6,320 3,187 Repairs and maintenance 28,115 25,312 Streetsca in 1,819 1,241 66,014 51,101 Annual surplus deficit (10,895) 3,479 Accumulated surplus, beginning of year, as previous 54,537 58,462 Restatement relating to grant revenue Note 3 - (7,404) Accumulated surplus, beginning of year, as restateOiZ! 54,537 51,058 Accumulated surplus, end of year $ 43,642 $ 54,537 The accompanying notes are an integral part of these financial statements. Page 42 of 216 BELMONT IMPROVEMENT AREA BOARD OF MANAGEMENT Statement of Change in Net Financial Assets For the Year Ended December 31 2024 2023 (Restated Note 3) Annual surplus (deficit) $ (10,895) $ 3,479 Acquisition of tangible capital assets - (5,006) Amortization of tangible capital assets 8,420 7,225 Net change in prepaid expenses (387) (152) Change in net financial assets (2,862) 5,546 Net financial assets (debt), beginning of year 4,379 (1,167) Net financial assets, end of year $ 1,517 $ 4,379 The accompanying notes are an integral part of these financial statements. Page 43 of 216 BELMONT IMPROVEMENT AREA BOARD OF MANAGEMENT Statement of Cash Flow For the Year Ended December 31 2024 2023 Operating Annual surplus (deficit) $ (10,895) $ 3,479 Item not involving cash Amortization 8,420 7,225 Change in non-cash assets and liabilities Prepaid expenses (387) (152) Accounts payable and accrued liabilities 5,544 (7,628) Net change in cash from operating activies 2,682 2,924 Capital —Acquisition of tangible capital assets - (5,006) Net change in cash 2,682 (2,082) Cash, beginning of year 16,409 18,491 Cash, end of year $ 19,091 $ 16,409 The accompanying notes are an integr L Page 44 of 216 BELMONT IMPROVEMENT AREA BOARD OF MANAGEMENT Notes to Financial Statements For the Year Ended December 31 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 ization Period Machinery & equipment to 1 years Computer hardware 2 years Tangible capital assets recei s c e 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 45 of 216 BELMONT IMPROVEMENT AREA BOARD OF MANAGEMENT Notes to Financial Statements For the Year Ended December 31 1. Summary of significant accounting policies (continued) e. Newly adopted accounting standards The Board adopted Public Sector Accounting Standard 3400 Revenue for the year ended December 31, 2024. The adoption of this standard had no material impact on the financial statements of the Board. 2. Tangible capital assets 3. Restatement of prior period figures The 2023 comparative information has been restated to correct an error which relates to the recognition of grant revenue for funds recognized as revenue when the corresponding expense has not been incurred. As a result, the Statement of Financial Position as at December 31, 2023 is being restated as follows: • Deferred revenue increased by $7,404 • Accumulated net revenue decreased by $7,404 The Statement of Operations for the year ended December 31, 2023 is being restated as follows: • Accumulated surplus, beginning of year decreased by $7,404. 4. Related party transactions During the year, the Board received reimbursement of $nil (2023 - $5,006) for aquisition of tangible capital assets from the Corporation of the City of Kitchener, its ultimate controlling party. This is included in other revenue on the Statement of Operations. Page 46 of 216 Machinery & Computer Equipment Hardware Total Cost Balance, beginning of year $ 64,917$ 5,989 $ 70,906 Additions - - - Balance, end of year ,917 5,989 70,906 Accumulated amortization Balance, beginning of year( 81) (2,514) (22,095) Amortization expense ,104 (2,316) (8,420) Balance, end of year 25,685 (4,830) (30,515) Net book value, end of year V7 39,232 1,159 40,391 Net book value, beginning of ye $ 45,336 $ 3,475 $ 48,811 3. Restatement of prior period figures The 2023 comparative information has been restated to correct an error which relates to the recognition of grant revenue for funds recognized as revenue when the corresponding expense has not been incurred. As a result, the Statement of Financial Position as at December 31, 2023 is being restated as follows: • Deferred revenue increased by $7,404 • Accumulated net revenue decreased by $7,404 The Statement of Operations for the year ended December 31, 2023 is being restated as follows: • Accumulated surplus, beginning of year decreased by $7,404. 4. Related party transactions During the year, the Board received reimbursement of $nil (2023 - $5,006) for aquisition of tangible capital assets from the Corporation of the City of Kitchener, its ultimate controlling party. This is included in other revenue on the Statement of Operations. Page 46 of 216 BELMONT IMPROVEMENT AREA BOARD OF MANAGEMENT Notes to Financial Statements For the Year Ended December 31 5. 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, 2024. 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 �eting obligations associated with financial liabilities. The Board is exposed to liquidity risk from its a unts payable and accrued liabilities. The Board manages its exposure to this risk through monitoring h 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 f m funding by the City. The loss of this relationship would have a significant impact on the Board's venue. Page 47 of 216 Financial Statements of KITCHENER DOWNTOWN IMPROVEMENT AREA BOARD OF MANAGEMENT And Independent Auditor's Report thereon Year ended December 31, 2024 Page 48 of 216 s 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 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, 2024 • 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, 2024 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. KPMG LLP, an Ontario limited liability partnership and member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. KPMG Canada provides services to KPMG LLP. Page 49 of 216 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 50 of 216 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. k'Awz�r /4/7 Chartered Professional Accountants, Licensed Public Accountants Kitchener, Canada May 6, 2025 Page 51 of 216 KITCHENER DOWNTOWN IMPROVEMENT AREA BOARD OF MANAGEMENT Statement of Financial Position December 31, 2024, with comparative information for 2023 2024 2023 Financial assets Cash $ 265,270 $ 360,753 Term deposits (note 2) 512,068 494,106 Accounts receivable 108,141 58,523 885,479 913,382 Financial liabilities: Accounts payable and accrued liabilities 244,984 245,490 Due to the City of Kitchener (note 4) 67,659 54,814 312,643 300,304 Net financial assets 572,836 613,078 Non-financial assets: Prepaid expenses 14,733 16,332 Tangible capital assets (note 5) 651,340 664,954 666,073 681,286 Commitments (note 3) $ 1,238,909 $ 1,294,364 Accumulated surplus Reserve for rate stabilization $ 50,000 $ 50,000 Accumulated net revenue 537,569 579,410 Invested in tangible capital assets 651,340 664,954 $ 1,238,909 $ 1,294,364 See accompanying notes to financial statements. On behalf of the Board: Director Director 1 Page 52 of 216 KITCHENER DOWNTOWN IMPROVEMENT AREA BOARD OF MANAGEMENT Statement of Revenue and Expenses and Accumulated Surplus Year ended December 31, 2024, with comparative information for 2023 Accumulated surplus, end of year $ 1,294,364 $ 1,238,909 $ 1,294,364 See accompanying notes to financial statements. Page 53 of 216 2024 2024 2023 Budget Actual Actual (note 7) Revenue: Assessments $ 1,816,000 $ 1,816,000 $ 1,485,000 Interest - 17,962 8,599 Other income (note 6) - 126,275 280,652 1,816,000 1,960,237 1,774,251 Expenses: Promotions and advertising 960,000 1,021,764 788,500 Salaries, wages and benefits 566,000 568,652 429,556 Administration 155,000 142,143 141,660 Meetings and seminars 18,000 11,310 25,858 Safety and beautification 110,000 112,205 83,719 Member relations 7,000 14,555 3,736 Amortization - 77,404 71,983 1,816,000 1,948,033 1,545,012 Net revenue before other items - 12,204 229,239 Less:Net assessment write-offs (note 4) - 67,659 54,814 Annual surplus (deficit) - (55,455) 174,425 Accumulated surplus, beginning of year 1,294,364 1,294,364 1,119,939 Accumulated surplus, end of year $ 1,294,364 $ 1,238,909 $ 1,294,364 See accompanying notes to financial statements. Page 53 of 216 KITCHENER DOWNTOWN IMPROVEMENT AREA BOARD OF MANAGEMENT Statement of Changes in Net Financial Assets Year ended December 31, 2024, with comparative information for 2023 2024 2023 Annual surplus $ (55,455) $ 174,425 Acquisition of tangible capital assets (63,790) (12,377) Amortization of tangible capital assets 77,404 71,983 Change in prepaid expenses 1,599 917 Change in net financial assets (40,242) 234,948 Net financial assets, beginning of year 613,078 378,130 Net financial assets, end of year $ 572,836 $ 613,078 See accompanying notes to financial statements. 3 Page 54 of 216 KITCHENER DOWNTOWN IMPROVEMENT AREA BOARD OF MANAGEMENT Statement of Cash Flows Year ended December 31, 2024, with comparative information for 2023 2024 2023 Cash provided by (used in): Operating activities Annual surplus (deficit) $ (55,455) $ 174,425 Item not involving cash: Amortization 77,404 71,983 Changes in non-cash operating working capital: Accounts receivable (49,618) 19,330 Prepaid expenses 1,599 917 Accounts payable and accrued liabilities (506) (191,813) Due to the City of Kitchener 12,845 33,208 (13,731) 108,050 Investing activities Purchase of investments (17,962) (377,569) Acquisition of tangible capital assets (63,790) (12,377) Decrease in cash (95,483) (281,896) Cash, beginning of year 360,753 642,649 Cash, end of year $ 265,270 $ 360,753 See accompanying notes to financial statements. 4 Page 55 of 216 KITCHENER DOWNTOWN IMPROVEMENT AREA BOARD OF MANAGEMENT Notes to Financial Statements Year ended December 31, 2024 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. 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 56 of 216 KITCHENER DOWNTOWN IMPROVEMENT AREA BOARD OF MANAGEMENT Notes to Financial Statements (continued) Year ended December 31, 2024 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. (d) Change in accounting standards: The Board adopted the following accounting standards beginning January 1, 2024, retroactively, with no impact on the financial statements: • PS 3400 Revenue establishes standards on how to account for and report on revenue, specifically differentiating between transactions that include performance obligations (i.e. the payor expects a good or service from the public sector entity), referred to as exchange transactions, and transactions that do not have performance obligations, referred to as non-exchange transactions. For exchange transactions, revenue is recognized when a performance obligation is satisfied. For non-exchange transactions, revenue is recognized when there is authority to retain an inflow of economic resources and a past event that gave rise to an asset has occurred. • PSG -8 Purchased Intangibles provides guidance on the accounting and reporting for purchased intangible assets that are acquired through arm's length exchange transactions between knowledgeable, willing parties that are under no compulsion to act. • PS 3160 Public Private Partnerships (P3s) provides specific guidance on the accounting and reporting for P3s between public and private sector entities where the public sector entity procures infrastructure using a private sector partner. 6 Page 57 of 216 KITCHENER DOWNTOWN IMPROVEMENT AREA BOARD OF MANAGEMENT Notes to Financial Statements (continued) Year ended December 31, 2024 2. Term deposits: The term deposits consist of the following: Maturity Principal Rate February 16, 2025 $ 57,300 3.25 % March 12, 2025 11,920 3.25 % April 1, 2025 54,523 3.00 % March 26, 2025 387,707 2.80 % 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: 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 $67,659 (2023 - $54,814). 7 Page 58 of 216 a o M 00 00 (O I— N M NW Ii o0 0) (O (O � La r (n r z W O 7 2 o) N 00) 0o) 7 v_ 01I— \W N Y 7 O n N I.L EA a (D a) i 0 oc N _F- 7 oc n O zz M 7 I 30, W L OWE N a� Z C� d c O �a0 0 z� oar i6 N Ch _ I INi2N EN a) M � W LL 2 �- ZOFu W cu N cl 2 L)a o� O� ~' z i Ln 0 0 O O h � c � Z m c `a, o a m t. > E N c r O O c c U E a Q o5 c c a NOV. ro ro o M 00 00 (O I— N M M o0 0) (O (O � r (n r co 7 O 7 0) r o) N 00) 0o) 7 v_ 01I— M N Y 7 M (O n N c EA (D a) i 0 oc N 7 7 oc n O 7 M 7 I 7 ro ro o ro 0) M � 0 O O � r M co 7 O 7 0) r U) U)000) (n oc M v_ n v_ 00 M oo Y M 7 N c 6" i O o0 7 c r M M 7 O L 01 I- N 0 N N i 0 O C O o3 6" 0 W 7 � r M co 7 O 7 0) r N � Y c i E � � w L o a a� a C N d c O U > i6 O U (N6 w a w a cn Kol N O LO (6 KITCHENER DOWNTOWN IMPROVEMENT AREA BOARD OF MANAGEMENT Notes to Financial Statements (continued) Year ended December 31, 2024 6. Government grants: Included in other income for the year ended December 31, 2024 is a transfer of $125,000 from Government of Canada under the Tourism Growth Program. 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. 7. Budget figures: The budget figures shown in the financial statements were approved by the Board at a meeting on August 23, 2023. Page 60 of 216 Financial Statements of KITCHENER PUBLIC LIBRARY BOARD And Independent Auditor's Report thereon Year ended December 31, 2024 Page 61 of 216 s 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 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, 2024 • 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, 2024 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. KPMG LLP, an Ontario limited liability partnership and member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. KPMG Canada provides services to KPMG LLP. Page 62 of 216 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 63 of 216 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. /1PWG «v Chartered Professional Accountants, Licensed Public Accountants Kitchener, Canada March 21, 2025 Page 64 of 216 KITCHENER PUBLIC LIBRARY BOARD Statement of Financial Position December 31, 2024, with comparative information for 2023 2024 2023 Financial assets Cash $ 3,641,544 $ 2,362,668 Accounts receivable 346,766 269,716 Due from City of Kitchener 627,473 885,079 Investments (note 2) 175,000 90,000 Endowment investments (note 2) 100,000 100,000 4,890,783 3,707,463 Financial liabilities Accounts payable and accrued liabilities 1,203,956 1,194,179 Due to Early Literacy Alliance of Waterloo Region 750,001 726,661 Deferred revenue (note 4) 554,033 555,732 Capital advance from Federal Government (note 5) 1,855,393 681,373 4,363,383 3,157,945 Net financial assets 527,400 549,518 Non-financial assets Tangible capital assets (note 3) 5,027,905 4,870,958 Prepaid expenses 21,000 - 5,048,905 4,870,958 Subsequent events (note 12) Accumulated surplus (note 9) $ 5,576,305 $ 5,420,476 See accompanying notes to financial statements. On behalf of the Board: Director Director 1 Page 65 of 216 KITCHENER PUBLIC LIBRARY BOARD Statement of Operations and Changes in Accumulated Surplus Year ended December 31, 2024, with comparative information for 2023 See accompanying notes to financial statements. Page 66 of 216 2024 2024 2023 Budget Actual Actual Revenue: Grants: The City of Kitchener - Operating $ 12,688,968 $ 12,688,968 $ 12,132,850 The City of Kitchener - Capital and special (note 6) - 1,058,310 775,085 Other (note 7) - 365,033 226,966 Province of Ontario 306,980 306,980 306,980 Interest and miscellaneous 40,000 205,331 177,690 Rentals 97,000 129,473 125,242 Partnerships 58,169 56,470 43,962 Photocopy 40,000 65,389 55,477 Lost and damaged fees 25,000 30,905 33,017 13,256,117 14,906,859 13,877,269 Expenses: Personnel costs (Schedule 1) 10,316,809 10,284,654 9,635,160 Resource materials 1,240,100 1,394,136 1,418,954 Equipment (Schedule 2) 413,423 898,525 947,382 Facilities costs (Schedule 3) 844,633 860,732 877,221 Required expenditures related to special grants (note 7) - 365,033 361,969 Expenditures related to capital and special (note 6) - 306,715 435,533 Administrative (Schedule 4) 253,652 445,463 386,091 Processing/bindery 100,000 114,645 95,790 Programs and publicity (Schedule 5) 77,500 61,906 66,654 General library 10,000 19,221 12,113 13,256,117 14,751,030 14,236,867 Excess (deficiency) of revenue over expenses - 155,829 (359,598) Accumulated surplus, beginning of year 5,420,476 5,420,476 5,780,074 Accumulated surplus, end of year $ 5,420,476 $ 5,576,305 $ 5,420,476 See accompanying notes to financial statements. Page 66 of 216 KITCHENER PUBLIC LIBRARY BOARD Statement of Changes in Net Financial Assets Year ended December 31, 2024, with comparative information for 2023 2024 2023 Excess (deficiency) of revenue over expenses 155,829 (359,598) Acquisition of tangible capital assets (1,423,677) (1,155,589) Amortization of tangible capital assets 1,266,730 1,380,366 Acquisition of prepaid expenses (21,000) - Change in net financial assets (22,118) (134,821) Net financial assets, beginning of year 549,518 684,339 Net financial assets, end of year $ 527,400 $ 549,518 See accompanying notes to financial statements. 3 Page 67 of 216 KITCHENER PUBLIC LIBRARY BOARD Statement of Cash Flows Year ended December 31, 2024, with comparative information for 2023 2024 2023 Cash provided by (used in) Operating activities: Excess (deficiency) of revenue over expenses $ 155,829 $ (359,598) Item not involving cash: Amortization of tangible capital assets 1,266,730 1,380,366 Changes in non-cash operating working capital: Accounts receivable (77,050) (118,538) Accounts payable and accrued liabilities 9,777 635,245 Due to Early Literacy Alliance of Waterloo Region 23,340 78,024 Deferred revenue (1,699) 41,922 Due from City of Kitchener 257,606 (802,001) Prepaid expenses (21,000) - Capital advance from federal government 1,174,020 681,373 2,787,553 1,536,793 Investing activities: Purchase of investments (85,000) (40,000) Capital activities: Cash used to acquire tangible capital assets (1,423,677) (1,155,589) Increase in cash 1,278,876 341,204 Cash, beginning of year 2,362,668 2,021,464 Cash, end of year $ 3,641,544 $ 2,362,668 See accompanying notes to financial statements. 4 Page 68 of 216 KITCHENER PUBLIC LIBRARY BOARD Notes to Financial Statements Year ended December 31, 2024 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. 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 69 of 216 KITCHENER PUBLIC LIBRARY BOARD Notes to Financial Statements (continued) Year ended December 31, 2024 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 70 of 216 KITCHENER PUBLIC LIBRARY BOARD Notes to Financial Statements (continued) Year ended December 31, 2024 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, 2024, 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. 7 Page 71 of 216 KITCHENER PUBLIC LIBRARY BOARD Notes to Financial Statements (continued) Year ended December 31, 2024 Significant accounting policies (continued): Q) Financial instruments (continued): 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. The following is a list of the Board's financial instruments and their related measurement basis as at December 31, 2024. 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. 8 Page 72 of 216 KITCHENER PUBLIC LIBRARY BOARD Notes to Financial Statements (continued) Year ended December 31, 2024 Significant accounting policies (continued): Q) Financial instruments (continued): 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. 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. 9 Page 73 of 216 KITCHENER PUBLIC LIBRARY BOARD Notes to Financial Statements (continued) Year ended December 31, 2024 1. Significant accounting policies (continued): (k) Adoption of new accounting standards: The Board adopted the following accounting standards beginning January 1, 2024, retroactively, with no impact on the financial statements: i. PS 3400 Revenue establishes standards on how to account for and report on revenue, specifically differentiating between transactions that include performance obligations (i.e. the payor expects a good or service from the public sector entity), referred to as exchange transactions, and transactions that do not have performance obligations, referred to as non-exchange transactions. For exchange transactions, revenue is recognized when a performance obligation is satisfied. For non-exchange transactions, revenue is recognized when there is authority to retain an inflow of economic resources and a past event that gave rise to an asset has occurred. No significant changes were required as a result of implementing the new standards. 2. Investments: The Guaranteed investment Certificates have a 3.15% interest rate and mature December 16, 2025. 10 Page 74 of 216 2024 2023 Amortized cost Market Value Amortized cost Market Value Investments: Guaranteed Investment Certificate $ 50,000 $ 50,069 $ 50,000 $ 51,243 Waterloo Region Community Foundation 125,000 144,347 40,000 46,357 175,000 194,416 90,000 97,600 Endowment investments: Guaranteed Investment Certificate 100,000 100,138 100,000 102,508 $ 275,000 $ 294,554 $ 190,000 $ 200,108 The Guaranteed investment Certificates have a 3.15% interest rate and mature December 16, 2025. 10 Page 74 of 216 KITCHENER PUBLIC LIBRARY BOARD Notes to Financial Statements (continued) Year ended December 31, 2024 3. Tangible capital assets: Balance, end year Books and 3,253,161 Furniture, Other Accumulated amortization: audio visual fixtures and equipment 4,252,585 2024 resources Computers equipment and vehicles Total 121,688 10,988 1,266,730 Disposals (979,999) (76,966) (7,502) Cost: Balance, beginning of year 7,060,058 2,973,105 2,350,805 236,485 12,620,453 Additions 1,019,503 357,022 42,305 4,847 1,423,677 Disposals (979,999) (76,966) (7,502) - (1,064,467) Balance, end year 7,099,562 3,253,161 2,385,608 241,332 12,979,663 Accumulated amortization: Balance, beginning of year 4,252,585 2,186,559 1,296,180 14,171 7,749,495 Amortization 798,448 335,606 121,688 10,988 1,266,730 Disposals (979,999) (76,966) (7,502) - (1,064,467) Balance, end of year 4,071,034 2,445,199 1,410,366 25,159 7,951,758 Net book value, end of year 3,028,528 807,962 975,242 216,173 5,027,905 11 Page 75 of 216 KITCHENER PUBLIC LIBRARY BOARD Notes to Financial Statements (continued) Year ended December 31, 2024 3. Tangible capital assets (continued): 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 Amortization for the year amounted to $1,266,730. This amount is allocated as follows: $798,448 is recorded in resource materials expenses, and $468,282 is recorded in equipment expenses. 12 Page 76 of 216 KITCHENER PUBLIC LIBRARY BOARD Notes to Financial Statements (continued) Year ended December 31, 2024 4. Deferred revenue: The deferred revenues, reported on the statement of financial position, are made up of the following: 5. Capital advance from Federal Government: On August 31, 2023, Kitchener Public Library signed an agreement with the Federal Government to receive funds to cover the costs of the construction of the new Southwest Community Library. The balance represents the remaining cash advance received from the Federal Government to be applied against incurred construction costs. The agreement with the federal government is set to end on March 31, 2026. 13 Page 77 of 216 2024 2023 Deferred capital grants Other $ 554,033 - $ 528,737 26,995 Total deferred revenue $ 554,033 $ 555,732 Continuity of deferred capital grants is as follows: 2024 2023 Balance, beginning of year Receipt of grant Transfer to capital advance from federal government Contributions realized as revenue $ 528,737 390,329 - (365,033) $ 479,825 957,251 (681,373) (226,966) Balance, end of year $ 554,033 $ 528,737 5. Capital advance from Federal Government: On August 31, 2023, Kitchener Public Library signed an agreement with the Federal Government to receive funds to cover the costs of the construction of the new Southwest Community Library. The balance represents the remaining cash advance received from the Federal Government to be applied against incurred construction costs. The agreement with the federal government is set to end on March 31, 2026. 13 Page 77 of 216 KITCHENER PUBLIC LIBRARY BOARD Notes to Financial Statements (continued) Year ended December 31, 2024 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 2024 included $122,078 (2023 - $103,998) for general renovations, maintenance and upgrading of existing facilities, $ 400,574 (2023 - $443,671) for communication infrastructure and technology upgrades, $ 30,914 (2023 - $30,308) for KPL Accessibility Fund, $60,343 (2023 - $58,793) for resources, furniture and equipment, and $Nil (2023 - $60,000) for customer needs survey. The portion of these grants and previous year grants that are included in revenue in 2024 is $1,058,310 (2023 - $775,085). 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 2024, the Board received various special non-recurring grants and donations totaling $390,329 (2023 - $275,878). The portion of these grants and previous year special grants that are included in revenue in 2024 is $365,033 (2023 - $226,966). 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 $694,854 (2023 - $685,464) for current service on behalf of its staff. The latest available report for the OMERS plan was as at December 31, 2024. At that time the plan reported a $2.9 billion actuarial deficit, based on actuarial liabilities of $142.5 billion and actuarial assets of $139.6 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, 2024, the Board has no obligation under the past service provisions of the OMERS agreement. 14 Page 78 of 216 KITCHENER PUBLIC LIBRARY BOARD Notes to Financial Statements (continued) Year ended December 31, 2024 9. Accumulated surplus: The accumulated surplus consists of surplus and reserve funds as follows: 2024 2023 Reserves set aside by the Board Capital fund 344,460 344,460 HR fund 37,000 37,000 Inclusion fund 67,876 67,876 Total reserves 449,336 449,336 Investment in tangible capital assets Accumulated surplus — unrestricted 5,027,905 4,870,958 99,064 100,182 Accumulated surplus $ 5,576,305 $ 5,420,476 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, 2024 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, 2024 is $Nil (2023 - $Nil). 15 Page 79 of 216 KITCHENER PUBLIC LIBRARY BOARD Notes to Financial Statements (continued) Year ended December 31, 2024 10. Financial risks and concentration of risk (continued): (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. 11. Comparative information Certain comparative information have been reclassified from those previously presented to conform to the presentation of the 2024 financial statements. 12. Subsequent events: On February 14, 2025, an agreement between the Board and CUPE Local 331 Union was ratified, setting out terms for the retroactive payment of salary and wages for library staff for the period covering July 1, 2024 to the date of ratification, set to be paid out on March 13, 2025. The estimated amount of the retroactive pay has been accrued for in the fiscal year. 16 Page 80 of 216 KITCHENER PUBLIC LIBRARY BOARD Notes to Financial Statements (continued) Year ended December 31, 2024 13. Future accounting standards: The Board is in the process of assessing the impact of the upcoming new accounting standards and the extent of the impact of their adoption on its financial statements. New accounting standards applicable for fiscal years beginning on or after April 1, 2026 (in effect for the Board as of January 1, 2027 for the year ending December 31, 2027). The following accounting standards must be implemented at the same time: (a) New Public Sector Accounting Standards (PSAS) Conceptual Framework: This new model is a comprehensive set of concepts that underlie and support financial reporting. The main changes are: — Additional guidance to improve understanding and clarity — Non -substantive changes to terminology/definitions — Financial statement objectives foreshadow changes in the Reporting Model — Relocation of recognition exclusions to the Reporting Model — Consequential amendments throughout the Public Sector Accounting Handbook — The framework is expected to be implemented prospectively. (b) Reporting Model - PS 1202 Financial Statement Presentation: This reporting model provides guidance on how information should be presented in the financial statements and will replace PS 1201 Financial Statement Presentation. The model is expected to be implemented retroactively with restatement of prior year amounts. 17 Page 81 of 216 KITCHENER PUBLIC LIBRARY BOARD Schedules Year ended December 31, 2024, with comparative information for 2023 18 Page 82 of 216 2024 2023 Schedule 1 - Personnel Costs Salaries $ 8,117,396 $ 7,697,846 Pension benefits 1,102,850 1,066,963 Health benefits 615,621 561,228 Employment insurance 152,931 147,469 Sick leave reserve 210,000 70,000 Staff training 59,892 69,635 WSIB 25,964 22,019 $ 10,284,654 $ 9,635,160 Schedule 2 - Equipment Amortization $ 468,283 $ 535,728 Technology 410,582 392,461 Equipment maintenance 19,660 19,193 $ 898,525 $ 947,382 Schedule 3 - Facilities Costs Facilities expenses $ 625,159 $ 620,727 Main utilities 235,573 256,494 $ 860,732 $ 877,221 Schedule 4 - Administrative Professional services $ 227,830 $ 161,890 General business 113,864 111,249 Stationery 53,146 67,820 Insurance 21,636 21,212 Telephone 24,214 19,038 Postage and delivery 4,773 4,882 $ 445,463 $ 386,091 Schedule 5 - Programs and Publicity Public programs $ 33,563 $ 36,167 Promotional expenses 28,343 30,487 $ 61,906 $ 66,654 18 Page 82 of 216 Financial Statements of THE CENTRE IN THE SQUARE INC. And Independent Auditor's Report thereon Year ended December 31, 2024 Page 83 of 216 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 Board of 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, 2024 • 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 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, 2024 and its results of operations and its cash flows for the year then ended in accordance with Canadian public sector accounting standards. Basis for Opinion We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the "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. KPMG LLP, an Ontario limited liability partnership and member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. KPMG Canada provides services to KPMG LLP. Page 84 of 216 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. • 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. Page 85 of 216 Page 3 • 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'�� /410 Chartered Professional Accountants, Licensed Public Accountants Kitchener, Canada April 29, 2025 Page 86 of 216 THE CENTRE IN THE SQUARE INC. Statement of Financial Position December 31, 2024, with comparative information for 2023 2024 2023 Financial assets Cash and cash equivalents $ 5,672,181 $ 4,406,917 Accounts receivable (note 3) 587,858 257,868 Interest receivable 872 1,045 Costs to be recovered 250,790 139,156 Investments (note 4) 1,269,983 1,752,607 Due from the City of Kitchener 2,790 32,707 7,784,474 6,590,300 Financial liabilities Accounts payable and accrued liabilities 2,680,123 2,208,140 Asset retirement obligations (note 8) 205,985 201,946 Deferred revenue (note 9) 2,639,371 2,082,347 5,525,479 4,492,433 Net financial assets 2,258,995 2,097,867 Non-financial assets Tangible capital assets (note 6) 17,604,420 17,322,559 Inventories (note 5) 70,992 58,059 Prepaid expenses 236,165 217,675 17,911,577 17,598,293 Net assets $ 20,170,572 $ 19,696,160 Accumulated surplus: Operating fund activities (note 7) Reserves - Capital (note 15) Reserves - Sustainability (note 15) Reserves - Restricted (note 15) 1,293,444 1,215,436 219,795 213,284 795,618 745,730 Invested in tangible capital assets 17,604,420 17,322,559 19,913,277 19,497,009 Accumulated remeasurement gains (losses) See accompanying notes to financial statements. On behalf of the Board: 257,295 199,151 $ 20,170,572 $ 19,696,160 Director Director Page 87 of 216 THE CENTRE IN THE SQUARE INC. Statement of Operations and Changes in Accumulated Surplus Year ended December 31, 2024, with comparative information for 2023 2024 2024 2023 Budget Actual Actual Revenue Performances $ 4,994,820 $ 5,304,346 $ 4,250,078 Grants from City of Kitchener - operating 2,072,000 2,084,019 2,011,601 Grants from other governments - capital 498,940 498,939 744,789 Grant from the City of Kitchener - capital 591,187 83,372 1,439,004 Other revenue 514,754 637,606 793,768 Ticket surcharge (note 15) 400,000 404,031 344,472 Rent from K -W Symphony Orchestra 250,550 - 117,450 Sponsorships and memberships 135,575 126,777 88,325 Grants from other governments - operating - - 25,000 Rent - Kitchener Waterloo Art Gallery 113,851 111,618 111,618 Donations 27,500 56,768 25,872 Investment income 36,000 260,035 239,692 Capital asset donations 147,000 147,958 - Gain on sale of investments 30,000 30,272 1,387 9,812,177 9,745,741 10,193,056 Expenses: Salaries and wages 2,701,819 2,741,655 2,624,668 Performances 3,577,845 3,498,990 2,701,643 Amortization of tangible capital assets 1,255,000 1,254,010 1,262,739 Occupancy 799,915 757,773 711,441 Administration and box office 761,002 914,526 768,207 Marketing 102,000 94,957 61,333 Reserve expenditures (note 15) 10,800 11,779 10,988 Loss on sale of tangible capital assets - - 4,951 Sponsorship and membership expenses 65,320 43,470 43,051 Capital costs 12,313 12,313 12,767 9,286,014 9,329,473 8,201,788 Excess of revenue over expenses 526,163 416,268 1,991,268 Accumulated surplus, beginning of year 19,497,009 19,497,009 17,505,741 Accumulated surplus, end of year $ 20,023,172 $ 19,913,277 $ 19,497,009 See accompanying notes to financial statements. Page 88 of 216 THE CENTRE IN THE SQUARE INC. Statement of Changes in Net Financial Assets Year ended December 31, 2024, with comparative information for 2023 2024 2023 Excess of revenue over expenses $ 416,268 $ 1,991,268 Acquisition of tangible capital assets (1,531,832) (2,751,977) Amortization of tangible capital assets 1,254,010 1,262,739 Loss on sale of tangible capital assets - 4,951 138,446 506,981 Net use (acquisition) of inventories (12,933) 16,614 Acquisition of prepaid expenses (18,490) (21,635) (31,423) (5,021) Increase in net financial assets 107,023 501,960 Net financial assets, beginning of year 2,097,867 1,598,702 Increase in accumulated remeasurement gain 58,144 199,151 Increase in asset retirement obligation (4,039) (201,946) Net financial assets, end of year $ 2,258,995 $ 2,097,867 See accompanying notes to financial statements. 3 Page 89 of 216 THE CENTRE IN THE SQUARE INC. Statement of Remeasurement Gains Year ended December 31, 2024, with comparative information for 2023 2024 2023 Accumulated remeasurement gains, beginning of year $ 199,151 $ - Adjustment on adoption of the financial instruments standard - 155,664 Realized (gains) losses reclassified to statement of operations: Investments - Equity instruments (30,272) (1,387) Unrealized gains (losses) attributable to: Investments - Equity instruments 88,416 44,874 See accompanying notes to financial statements. $ 257,295 $ 199,151 4 Page 90 of 216 THE CENTRE IN THE SQUARE INC. Statement of Cash Flows Year ended December 31, 2024, with comparative information for 2023 2024 2023 Cash provided by (used in) Operating activities: Excess of revenue over expenses $ 416,268 $ 1,991,268 Items not involving cash: Amortization 1,254,010 1,262,737 Loss on disposal of tangible capital assets - 4,951 Gain on sale of investments (30,272) (1,387) Changes in non-cash operating working capital 586,050 574,289 2,226,056 3,831,858 Capital activities: Cash used to acquire tangible capital assets (1,531,832) (2,751,975) Investing activities: Cash used in purchasing of investments (352,259) (293,935) Cash received on sale of investments 923,299 268,920 571,040 (25,015) Increase in cash and cash equivalents 1,265,264 1,054,868 Cash and cash equivalents, beginning of year 4,406,917 3,352,049 Cash and cash equivalents, end of year $ 5,672,181 $ 4,406,917 See accompanying notes to financial statements Page 91 of 216 THE CENTRE IN THE SQUARE INC. Notes to Financial Statements Year ended December 31, 2024 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"). 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 92 of 216 THE CENTRE IN THE SQUARE INC. Notes to Financial Statements (continued) Year ended December 31, 2024 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. 7 Page 93 of 216 THE CENTRE IN THE SQUARE INC. Notes to Financial Statements (continued) Year ended December 31, 2024 Significant accounting policies (continued): (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. (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 Machinery and equipment Site 5 - 100 years 3 - 10 years 5 -100 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 94 of 216 THE CENTRE IN THE SQUARE INC. Notes to Financial Statements (continued) Year ended December 31, 2024 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, asset retirement obligations, and useful lives of tangible capital assets. 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. A liability for the removal of asbestos in the building owned by the Centre has been recognized based on estimated future expenses on closure of the site and post -closure care. 2. Change in accounting policy: The Centre adopted the following accounting standard beginning January 1, 2024, retroactively, with no impact on the financial statements: PS 3400 Revenue establishes standards on how to account for and report on revenue, specifically differentiating between transactions that include performance obligations (i.e. the payor expects a good or service from the public sector entity), referred to as exchange transactions, and transactions that do not have performance obligations, referred to as non-exchange transactions. For exchange transactions, revenue is recognized when a performance obligation is satisfied. For non-exchange transactions, revenue is recognized when there is authority to retain an inflow of economic resources and a past event that gave rise to an asset has occurred. 9 Page 95 of 216 THE CENTRE IN THE SQUARE INC. Notes to Financial Statements (continued) Year ended December 31, 2024 3. Accounts receivable: 10 Page 96 of 216 2024 2023 Accounts receivable $ 587,858 $ 257,868 Allowance for doubtful accounts _ _ $ 587,858 $ 257,868 4. Investments: Investments consist of: 2024 2023 Assets measured at amortized cost: Guaranteed Investment Certificates $ 219,796 $ 804,252 Fixed income 492,461 454,733 Investments measured at fair value: Equity instruments, quoted in an active market 557,726 493,622 $ 1,269,983 $ 1,752,607 Equity instruments, quoted in an active market are classified as level 1 investments. 5. Inventories: Inventories consist of the following: 2024 2023 Bar stock $ 68,090 $ 55,213 Supplies 2,902 2,846 $ 70,992 $ 58,059 10 Page 96 of 216 U Z LW L� Q U) W 7 L2 r o O Z N O C N N W E Cl) L E Z`u °' U U W U LL N W O c U o L F— Z N d fn cn cu ^a i.l. iQ U cu H LJ, 1 C C C i dr N O � Cfl Cl) M rl_ rl- CO O M M r 11 CC) � Cl) Cl) � L O Cl) t) Ln rl- i i Lf M CO r dr O d N CA CN dr CO d V} Lo O O O O O LO O O LO N Vy M (c) M Cc) M U'Y dr L dr Cl) Ln Cl) Cc) t) Loa Cn LO O r O r Cc) r rl- CA LO 0 dr r Cl) CC M M O C � T � Cn M 0')CS N — O M N r O dr M C O r M a Cn V3 O O Cl) LO Cn C)) i_ 0) E Q) Q L - O V) L U M O N C6 V) fn C2 C U m o Q Q o Q CO LOO_r LO O r rl- N O a O r lzi a � LO LO C L co 'q N p M r M r ++ ++ M O O fu I O - M N LO Ln r C O rl- LO C Cfl dr M C LO Cl) N C LO Cl) � Lf O r CD 0 (. Cc) ib CD co co co co O CO CO co co O « N Lr C, rl- dr It Lf LO M Cc) C � cc ( a N CA LO Lf Cl) rl_ C N Cl) C ib LO O r- co O O c Cr r- dr a Cc) M co a Cl) CA m C N M O Cc) O O M LO Cn CO M M Cc) LO LO CA M O It M dr O CA LO dr Cc) O Cl) co LO Cc) O N dr dr O Cfl k} rlM O (3 co to Cn CA Cn Ef3 CA Yd co N Cl) dr t3 LO N Cc) co CO LO V3 O O M LO Cn Ulk 0) c L co '� p .E ++ ++ O O fu N - V N E U L N N V = O c (D C O C Q _ o E Ll U Q m C CO M M Cc) LO LO CA M O It M dr O CA LO dr Cc) O Cl) co LO Cc) O N dr dr O Cfl k} rlM O (3 co to Cn CA Cn Ef3 CA Yd co N Cl) dr t3 LO N Cc) co CO LO V3 O O M LO Cn Ulk U Z LU L� Q U) W 7 L2 r o O Z N O C N N W E Cl) L E Z`u °' U U W U LL N W O c U o L F— Z d 7 C C O N CD N cn cu ^a i.l. cu U cu H LJ, 1 0 C C i rn LO (.C) a O Il- It (O Lf) O O Cc) Lf) r - Lf) Lf) O M Il N M 00 N N t) C, dr O O O Lf dr Cfl IX Lf) M d Lf) r Lf ri r r Vy O 00 r N O IX r LQ IX Il- o r 00 O Cl M V3 00 (D M CC) Cl) (3 O 00 � Lf) O rl- O O Il- N Cl) N C, co 00 co c I- p- Cfl C, O 00 = 6 Lf) dT Lf) 6 N r rl- V} 00 00 dr Qc) 0 I- O O O d N O r r I� Lf) O C M N d r C, V3 O O Cl) LO rn 0 ka ) c 0) E Q) Q L — O V) L U M O N Ca V) N C2 c U m o Q Q o Q dr Cl) Il_ u CO 00 M r Il- r r— r M O N c I� N C O N r M r Lo co 0) N dr r Lf) Lf) O O N Lf) O M r Lf) dr rn I O O N O O r N r 00 00 CO CO 00 00 Cfl CO M Cl) Il- dr Ln T 00 N O N O c Lf) dr rl- c CO Lf) N V N Lf) OD co c O Lf) M O I- 00 r � M �a It CO r 7 M O CO r rl- LO dr 00 Cfl I� O dr U N O Il- 0 LO M O Lf) 00 O O O O Cl) LO rn LO O N LO It 00 00 N It It 00 00 O M N L O O 00 O M O LO LO N N Cl) k} LO co It N dr ta O Cl) N rlM CA k} N rlO N to It M It N O N N V3 O O Cl) LO rn Ulk N N O co 0) (6 0- 0) c L co 'a O .E ++ ++ O O fu N - V N E U L N N V = O c (D C O C Q _ o E Ll U Q m C LO O N LO It 00 00 N It It 00 00 O M N L O O 00 O M O LO LO N N Cl) k} LO co It N dr ta O Cl) N rlM CA k} N rlO N to It M It N O N N V3 O O Cl) LO rn Ulk N N O co 0) (6 0- THE CENTRE IN THE SQUARE INC. Notes to Financial Statements (continued) Year ended December 31, 2024 7. Operating fund activities: 2024 2024 2023 Budget Actual Actual Revenue Performances $ 4,994,820 $ 5,304,346 $ 4,250,078 Rent - Kitchener -Waterloo Symphony 250,550 - 117,450 Grants from City of Kitchener 2,072,000 2,084,019 2,011,601 Grants, other governments - - 25,000 Donations 27,500 54,015 23,254 Investment income 36,000 199,589 173,054 Sponsorships and memberships 135,575 126,777 88,325 Rent - Kitchener -Waterloo Art Gallery 113,851 111,618 111,618 Other 514,754 637,606 793,768 8,145,050 8,517,970 7,594,148 Expenses Performances 3,577,845 3,498,990 2,701,643 Administration and box office 761,002 914,526 768,207 Marketing 102,000 94,957 61,333 Occupancy 799,915 757,773 711,441 Salaries and wages 2,701,819 2,741,655 2,624,668 Sponsorship expenses 65,320 43,470 43,051 8,007,901 8,051,371 6,910,343 Operating fund net revenues before amortization 137,149 466,599 683,805 Transfer to reserve funds (note 15) (137,149) (466,599) (683,805) 13 Page 99 of 216 THE CENTRE IN THE SQUARE INC. Notes to Financial Statements (continued) Year ended December 31, 2024 8. Asset retirement obligations: 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. The building had an estimated remaining useful life of 30 years. 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, 2024 the Centre earned $2,167,391 (2023 - $4,196,043) of revenue from the City of Kitchener. 11. Budget: The original budgeted figures were approved by the Board of Directors at their meeting August 16, 2023, and included certain expenses and offsetting recoveries on a net basis. 14 Page 100 of 216 2024 2023 Opening balance $ 201,946 $ - Asset retirement obligation additions at adoption of standard - 201,946 Plus: additional obligations incurred during the year 4,039 - Closing balance $ 205,985 $ 201,946 9. Deferred revenue: Deferred revenue consists of the following: 2024 2023 Performances $ 2,397,059 $ 1,812,483 Gift certificates 34,483 35,327 Sponsorships 53,810 41,548 Other 130,534 180,133 Membership 23,485 12,856 $ 2,639,371 $ 2,082,347 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, 2024 the Centre earned $2,167,391 (2023 - $4,196,043) of revenue from the City of Kitchener. 11. Budget: The original budgeted figures were approved by the Board of Directors at their meeting August 16, 2023, and included certain expenses and offsetting recoveries on a net basis. 14 Page 100 of 216 THE CENTRE IN THE SQUARE INC. Notes to Financial Statements (continued) Year ended December 31, 2024 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, 2024. At that time the plan reported a $2.9 billion actuarial deficit (2023 - $4.2 billion actuarial deficit), based on actuarial liabilities of $142.5 billion (2023 - $136.2 billion) and actuarial assets of $139.6 billion (2023 - $132.0 billion). Ongoing adequacy of the current contribution rates will need to be monitored and may lead to increased future funding requirements. The 2024 employer portion of OMERS pension contributions was $225,693 (2023 - $210,986). 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. (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, 2024 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, 2024 is $Nil (2023 - $Nil). 15 Page 101 of 216 THE CENTRE IN THE SQUARE INC. Notes to Financial Statements (continued) Year ended December 31, 2024 13. Financial risks (continued): (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 2024 financial statements. 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 2024, The Centre's Board of Directors approved transfers out of the Capital Reserve Fund for major capital asset projects of $1,535,871 (2023 - $2,953,923). (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. 16 Page 102 of 216 THE CENTRE IN THE SQUARE INC. Notes to Financial Statements (continued) Year ended December 31, 2024 15. Schedule of reserve funds (continued): (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. Expenses: Professional fees - 11,779 11,779 Capital costs 12,313 - 12,313 Capital Sustainability Restricted Total Funds Revenue: Donations and sundry $ 147,958 $ $ 2,753 $ 150,711 Grants from City of Kitchener 83,372 - 83,372 Grants, other governments and foundations 498,939 498,939 Ticket surcharge 404,031 - 404,031 Investment income 25,293 6,511 28,642 60,446 Gain on investments - - 30,272 30,272 1.159.593 6.511 61.667 1.227.771 Expenses: Professional fees - 11,779 11,779 Capital costs 12,313 - 12,313 17 Page 103 of 216 12,313 - 11,779 24,092 Excess of revenue over expenses 1,147,280 6,511 49,888 1,203,679 Balance, beginning of year 1,215,436 213,284 745,730 2,174,450 Transfer to accumulated surplus - tangible capital assets (note 15 (b)) (1,535,871) - - (1,535,871) Transfer from operating fund 466,599 - - 466,599 $ 1,293,444 $ 219,795 $ 795,618 $ 2,308,857 17 Page 103 of 216 THE CORPORATION OF THE CITY OF KITCHENER GASWORKS ENTERPRISE Statement of Operations and Accumulated Surplus For the Year Ended December 31 2024 2024 2023 Budget DELIVERY OPERATIONS Gas delivery M2,262155 24,342,576 18,329,531 Revenue $ 50,484,547 $ 48,533,020 $ 45,880,933 Expenses 31,882,196 28,295,791 30,981,245 Interest revenue 18,602,351 20,237,229 14,899,688 Other programs 4 , 26) (15,846,926) (15,846,926) (Dispatch and rental water heaters) 22, 2,755 24,342,576 18,329,531 Revenue 14,796,354 15,428,075 14,596,947 Expenses 11,135,950 11,322,728 11,167,104 ,3.660.404 . 4.105.347 3.429.843 Excess of revenue over expenses M2,262155 24,342,576 18,329,531 Accumulated surplus - Delivery 39,348,747 32,442,217 40,118,668 Balance, beginning of year 1 73,386 146,473,386 143,847,272 Interest revenue 363 131,506 143,509 Transfer to gas investment reserve 4 , 26) (15,846,926) (15,846,926) Excess of revenue over expenses 22, 2,755 24,342,576 18,329,531 Balance. end of vear 152.995.578 155.100.542 146,473,386 Revenue 36,911,526 29,479,973 41,928,727 Expenses 39,348,747 32,442,217 40,118,668 Excess/(deficiency) of revenue over expenses (2,437,221) (2,962,244) 1,810,059 Accumulated surplus - Supply Balance, beginning of year 8,148,005 8,148,005 6,038,619 Interest revenue 417,313 463,588 299,327 Excess/(deficiency) of revenue over expenses (2,437,221) (2,962,244) 1,810,059 Balance, end of year $ 6,128,097 $ 5,649,349 $ 8,148,005 Page 104 of 216 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 23, 2025. Management maintained a system of internal controls designed to the assets were safeguarded and that reliable information was avail included formal policies and procedures and an organizatio appropriate delegation of authority and segregation of responsi KITCHENER GENERATION CORPORATION On behalf of management, Jonathan Lautenbach, CPA, CGA Chief Financial Officer and City T June 23, 2025 Kitchener, Canada reasonable assurance that on a timely basis. The system Icture that provided for the Page 105 of 216 KITCHENER GENERATION CORPORATION Statement of Financial Position As at December 31 (Unaudited) 2024 2023 Financial assets Accounts receivable $ 2,751 $ 4,478 2.751 4.478 Liabilities Due to the Corporation of the City of Kitchener 2,749 4,476 Long-term debt (Note 3) 1,254,159 1,463,186 1,256,908 1,467,662 Net financial debt (1,254,157) (1,463,184) Non-financial assets Tangible capital assets (Note 4) 1,393,509 1,625,760 1,393,509 1,625,760 Shareholder's equity (Note 5) $ 139,352 $ 162,576 The accompanying notes are an integral part of these financial stelml ents. Page 106 of 216 KITCHENER GENERATION CORPORATION Statement of Operations For the Year Ended December 31 (Unaudited) 2024 2024 2023 Budget Revenue Sale of electricity $ 385,000 $ 361,247 $ 389,765 Total revenue 385.000 361.247 389.765 Expenses Maintenance 20,000 12,545 - Amortization of tangible capital assets 232,252 232,252 232,252 Total expenses 252,252 244,797 232,252 Surplus before interest and provision for payments - in -lieu of corporate income taxes 132,748 116,450 157,513 Interest expense 7&,306',qjjL 73,306 83,778 Surplus before provision for payments -in -lieu of corporate income taxes 59 442 43,144 73,735 Provision for payments -in -lieu of corporate income taxes - - - Annual surplus $ 9,442 $ 43,144 $ 73,735 The accompanying notes are an integral part of these financial statements. Page 107 of 216 KITCHENER GENERATION CORPORATION Statement of Change in Net Financial Debt For the Year Ended December 31 (Unaudited) Annual surplus 2024 2023 43,144 $ 73,735 Change in share capital (23,225) (23,225) Dividends (43,144) (73,735) Amortization of tangible capital assets 232,252 232,252 Change in net financial debt 209,027 209,027 Net financial debt, beginning of year (1,463,184) (1,672,211) Net financial debt, end of year $ (1,254,157) $ (1,463,184) The accompanying notes are an integral part of these financial statements. r4 0 Page 108 of 216 KITCHENER GENERATION CORPORATION Statement of Cash Flow For the Year Ended December 31 (Unaudited) 2024 2023 Operating Annual surplus $ 43,144 $ 73,735 Items not involving cash Amortization of tangible capital assets 232,252 232,252 Change in non-cash assets and liabilities Trade and other accounts receivable 1,726 7,000 Accounts payable and accrued liabilities (1,726) (7,000) Net chanae in cash from oneratina activities IA6 275.396 305.987 Financing Change in share capital (23,225) (23,225) Change in long-term debt (209,027) (209,027) Dividends paid,#&AN43,144 (73,735) Net change in cash from financing activities 4C A& (275,396) (305,987) Net change in cash and cash equivalents - - Cash and cash equivalents, beginning of year - - Cash and cash equivalents, end of year $ - $ - The accompanying notes are an integral part of these financial statements. Page 109 of 216 KITCHENER GENERATION CORPORATION Notes to the Financial Statements For the Year Ended December 31 (Unaudited) 1. Incorporation On December 9, 2011 Kitchener Generation Corporation (the "Company") was incorporated under the Business Corporations Act (Ontario). Effective January 1, 2012, the Corporation of the City of Kitchener transferred the solar roof asset constructed on the surface of the Kitchener Operations Facility to the Company in exchange for 100% of the Company's common shares and interest bearing debt. 2. Summary of significant accounting policies These financial statements of the Company have been prepared by management in accordance with Canadian generally accepted accounting principles for public sector entities as established by the Public Sector Accounting Board of the Chartered Professional Accountants of Canada. The following is a summary of the significant accounting policies followed in the preparation of these financial statements: a. Basis of accounting The financial statements are prepared using the accrual basis of accounting. The accrual basis of accounting recognizes revenues in the period in which the transactions or events occurred that gave rise to the revenues. Expenses are recognized in the period the goods and services are acquired and a liability is incurred or when an external transfer is due. b. Tangible capital assets Tangible capital assets are recorded at cost which includes all amounts that are directly attributable to acquisition, construction, development or betterment of the asset. The cost less residual value of the solar roof asset is amortized on a straight-line basis over its estimated useful life of nineteen years. Revenue recognition _ The Company records revenue from the sale of electricity on the basis of regular meter readings and estimates of energy generation since the last meter reading to the end of the year. d. Use of estimates The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. These estimates and assumptions, including the valuation of tangible capital assets and their related useful lives and amortization are based on management's best information and judgment and may differ significantly from future actual results. 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 110 of 216 KITCHENER GENERATION CORPORATION Notes to the Financial Statements For the Year Ended December 31 (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 impa a financial statements of the Company. 3. Long-term debt Effective January 1, 2012 the Company issued an unsecur missory note payable to the Corporation of the City of Kitchener. Payments are made annually including inte ind principal. Interest is calculated at the fixed rate of 5.01 % per annum. Interest paid in 2024 amoun $7 (2023 - $83,778). 4. Tangible capital assets Page 111 of 216 Accumulated Net Book Cost Amortization Value Opening balance $ 4,412,784 $ (2,787,023) $ 1,625,761 Additions - - - Amortization - (232,252) (232,252) Disposals - - - Ending balance $ 4,412,784 $ (3,019,275) $ 1,393,509 5. Shareholder's equity Shareholder's equity consists of the following: 2024 2023 Share capital - common shares (Note 6) $ 139,352 $ 162,576 Retained earnings - - $ 139,352 $ 162,576 Page 111 of 216 KITCHENER GENERATION CORPORATION Notes to the Financial Statements For the Year Ended December 31 (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. 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 Company is exposed to credit risk from its financial assets, which consists of accounts receivable from a government organization. The carrying amount represents the Company's maximum credit exposure. There is no allowance for doubtful accounts since the Company has historically had no difficulty collecting. b. Liquidity risk Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. The Company is exposed to liquidity risk from its long-term debt, which it manages by preparing budget and cash forecasts in order to maintain sufficient funds for meeting obligations as they come due. Market risk OV 1— Market risk is the risk that the faFrW or future cash flows of a financial instrument will fluctuate because of changes in market prices. MarkMWisk is comprised of currency risk, interest rate risk, and other price risk. The Company is not exposed to significant market risk since it does not have foreign currency transactions or floating interest rates. The fair value of long-term debt with a fixed interest rate is directly impacted by changes in market interest rates. However, the Company is not exposed to significant interest rate risk as the long-term debt has an interest rate fixed for a long period of time with the debt intended to be repaid in accordance with the terms of the loan. Concentration of risk a. Limited counterparties 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 112 of 216 Financial Statements of Enova Energy Corporation (Consolidated) Year ended December 31, 2024 (Expressed in thousands of dollars) Page 113 of 216 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 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, 2024 • 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, 2024, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board. 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. KPMG LLP, an Ontario limited liability partnership and member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. KPMG Canada provides services to KPMG LLP. Page 114 of 216 11911T, MIR 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 IFRS Accounting Standards as issued by the International Accounting Standards Board, 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. Page 115 of 216 11911T, MIR Page 3 • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Entity's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our 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. • Plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the financial information of the entities or business units within the group as a basis for forming an opinion on the group financial statements. We are responsible for the direction, supervision and review of the audit work performed for the purposes of the group audit. We remain solely responsible for our audit opinion. Chartered Professional Accountants, Licensed Public Accountants Kitchener, Canada April 23, 2025 Page 116 of 216 ENOVA ENERGY CORPORATION Consolidated Statement of Financial Position As at December 31, 2024, with comparative information for 2023 (Expressed in thousands of dollars) December 31, December 31, Note 2024 2023 ASSETS Current Cash $ - $ - Accounts receivable 5 42,776 37,808 Unbilled revenue 35,911 33,477 I ncome Tax Receivable 509 - Inventories 8,322 8,754 Prepaid expenses 2,146 2,072 Current portion of lease receivables 106 127 Total current assets $ 89,770 $ 82,238 Non-current assets Derivative asset 248 396 Property, plant and equipment 6 622,695 598,152 Intangible assets 7 19,148 16,969 Goodwill 3 140,077 140,077 Long term portion of lease receivables 574 980 Deferred tax asset 8 1,697 1,210 Investments in subsidiaries 436 372 Total non-current assets $ 784,875 $ 758,156 Total assets 874,645 840,394 Regulatory deferral account debit balances 9 56,972 50,638 Total assets and regulatory deferral account debit balances $ 931,617 $ 891,032 2 Page 117 of 216 ENOVA ENERGY CORPORATION Consolidated Statement of Financial Position As at December 31, 2024, with comparative information for 2023 (Expressed in thousands of dollars) Note December 31, December 31, 2024 2023 LIABILITIES AND SHAREHOLDERS' EQUITY Current Bank overdraft $ 13,770 $ 4,416 Accounts payable and accrued liabilities 56,498 48,529 Current portion of long-term bank debt 10 9,176 118,145 Current portion of lease liabilities 17 97 97 1 ncome tax payable - 702 Current portion of deferred revenue 15 2,527 2,378 Current portion of customer deposits 13 14,751 14,209 Total current liabilities $ 96,819 $ 188,476 Long-term Notes payable to shareholders Long-term bank debt Long-term notes payable Long term portion of customer deposits Long term portion of lease liabilities 11 110,254 110,254 10 120,000 - 3 200 - 13 7,623 9,166 17 664 722 Deferred revenue 15 87,288 83,395 Employee future benefits 12 8,097 8,107 Deferred tax liability 8 31,150 27,444 Total long-term liabilities $ 365,276 $ 239,088 Total liabilities 462,095 427,564 Shareholders' equity Share capital 14 326,248 326,248 Retained earnings 126,510 123,725 Accumulated other comprehensive income (loss) 12 1,289 1,307 Non -controlling interest - 842 Total shareholders' equity $ 454,047 $ 452,122 Total liabilities and shareholders' equity $ 916,142 $ 879,686 Regulatory deferral account credit balances 9 4,311 1,467 Deferred taxes associated with regulatory accounts 9 11,164 9,879 Total equity, liabilities and regulatory deferral account credit balances $ 931,617 $ 891,032 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 118 of 216 ENOVA ENERGY CORPORATION Consolidated Statement of Comprehensive Income For the year ended December 31, 2024, with comparative information for 2023 (Expressed in thousands of dollars) Note 2024 2023 REVENUES 16 (425) (578) Energy sales 15 $ 404,551 $ 370,416 Cost of energy sold 413,302 370,720 Administration (8,751) (304) Other operating revenue 6 25,279 24,335 Distribution revenue 15 103,675 91,475 Other income 15 8,035 7,570 Net operating revenue $ 102,959 $ 98,741 EXPENSES 16 (425) (578) Operations and maintenance 21,919 19,283 Customer services 9,063 9,447 Administration 19,443 17,900 Amortization 6 25,279 24,335 related to profit or loss and the related deferred tax 75,704 70,965 Other 2,205 2,135 Energy conservation program revenue (117) (764) Energy conservation program expense 168 767 Net energy conservation programs 51 3 Finance income 16 (425) (578) Finance charges 16 12,155 11,404 Revaluation of Class A and B Special Shares - 1,630 Unrealized loss (gain) on derivative 147 196 Net finance costs 11,877 12,652 Income before income taxes $ 15,327 $ 15,121 Income tax expense 8 3,466 4,229 Income for the period before movements in regulatory deferral account balances and other comprehensive income $ 11,861 $ 10,892 Net movement in regulatory deferral account balances related to profit or loss and the related deferred tax movement 9 2,205 2,135 Other comprehensive income (loss), net of taxes 12 (18) (284) Non -controlling interest - 158 Net comprehensive income for the period $ 14,048 $ 12,901 The accompanying notes are an integral part of these financial statements. 4 Page 119 of 216 ENOVA ENERGY CORPORATION Consolidated Statement of Changes in Equity For the year ended December 31, 2024, with comparative information for 2023 (Expressed in thousands of dollars) Accumulated Non- Other Share Controlling Comprehensive Retained Note Capital Interest Income (loss) Earnings Total 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 Net income and net movement in regulatory balances - - (18) 14,066 14,048 Purchase of non -controlling interest 3 - (842) - 290 (552) Dividends paid 14 - - - (11,571) (11,571) Balance at December 31, 2024 $ 326,248 $ - $ 1,289 $ 126,510 $ 454,047 The accompanying notes are an integral part of these financial statements. 5 Page 120 of 216 ENOVA ENERGY CORPORATION Consolidated Statement of Cash Flows For the year ended December 31, 2024, with comparative information for 2023 (Expressed in thousands of dollars) Net change in non-cash operating working capital Note 2024 2023 OPERATING ACTIVITIES (3,148) Unbilled revenue (2,434) Net income I nventori es 14,048 $ 12,901 Add (deduct) charges to operations not requiring a current (1,450) (1,864) Prepaid expenses cash payment: 299 Accounts payable and accrued liabilities 7,969 Amortization 6 26,853 25,970 Amortization of deferred revenue (6,334) (2,447) (2,282) Gain on disposal of property, plant and equipment 15 (308) (84) Income tax expense 8 3,466 4,229 Income tax expense included in OCI 10 (7) (103) Net interest (revenue) expense on lease liabilities (47) (36) Change in non -controlling interest 15 - (158) Change in investments in subsidiaries (64) (50) Decrease in employee future benefits liability 12 (10) 404 Unrealized gain on derivatives $ 147 196 Net cash used during period 41,631 40,987 Net change in non-cash operating working capital Accounts receivable (4,968) (3,148) Unbilled revenue (2,434) (111) I nventori es 432 (1,099) Income taxes paid (1,450) (1,864) Prepaid expenses (74) 299 Accounts payable and accrued liabilities 7,969 (1,389) Dividends payable - (5,056) Regulatory deferral account debit balances (6,334) 1,234 Regulatory deferral account credit balances 4,129 (3,371) Cash provided by operating activities $ 38,901 $ 26,482 INVESTING ACTIVITIES Purchase of property, plant and equipment 6 (48,867) (51,246) Purchase of intangible assets 7 (4,785) (1,110) Proceeds on disposal of property, plant and equipment 424 84 Cash used in investing activities $ (53,228) $ (52,272) FINANCING ACTIVITIES Net change in customer deposits (1,001) 2,660 Increase in demand loan payable 10 1,500 1,000 Repayment of short-term debt 10 (469) (453) Increase in long-term debt 10 10,000 - Dividends paid (11,571) (3,925) Capital contributions received 15 6,489 6,664 Payment of principal on lease assets / liabilities (22) 203 Net receipt (payment) of interest on lease assets / liabilities 47 36 Cash provided by financing activities $ 4,973 $ 6,185 Net cash used during period (9,354) (19,605) Cash and cash equivalents (bank overdraft), beginning of period (4,416) 15,189 Bank overdraft, end of period $ (13,770) $ (4,416) The accompanying notes are an integral part of these financial statements. 6 Page 121 of 216 ENOVA ENERGY CORPORATION Notes to Financial Statements For the year ended December 31, 2024, with comparative information for 2023 (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, and Grand River Energy Solutions Corp. ("GRE"), a generation and renewable energy solutions company. The Corporation also owns 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, 2024. 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 11, 2025. (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 22. (c) Functional and presentation currency These financial statements are presented in Canadian dollars, which is the Corporation's functional currency. All financial information presented in Canadian dollars has been rounded to the nearest thousand. (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. 7 Page 122 of 216 ENOVA ENERGY CORPORATION Notes to Financial Statements For the year ended December 31, 2024, with comparative information for 2023 (Expressed in thousands of dollars) 2. Basis of Presentation (continued) (d) Use of estimates and judgments (continued) 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(b) — Revenue Recognition — determination of the performance obligation for contributions from customers and the related amortization period (ii) Note 4(d) — Capital assets (Property, plant and equipment) — determination of the useful life of assets and the related amortization period (iii) Note 12 — Employee future benefits — determination of discount rate, benefit cost increase trends and sick time utilization (iv) Note 18 — Commitments and contingencies — determination of the likelihood of loss realization and estimate of present value of anticipated losses (e) Rate regulation The Corporation is regulated by the Ontario Energy Board ("OEB"), under the authority granted by the Ontario Energy Board Act, 1998. Among other things, the OEB has the power and responsibility to approve or set rates for the transmission and distribution of electricity, providing continued rate protection for electricity consumers in Ontario, and ensuring that transmission and distribution companies fulfill obligations to connect and service customers. The OEB may also prescribe license requirements and conditions of service to local distribution companies ("LDCs"), such as the Corporation, which may include, among other things, record keeping, regulatory accounting principles, separation of accounts for distinct businesses, and filing and process requirements for rate setting purposes. Rate setting Distribution revenue 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 intervenors. Rates are approved based on this review including any required revisions. 8 Page 123 of 216 ENOVA ENERGY CORPORATION Notes to Financial Statements For the year ended December 31, 2024, with comparative information for 2023 (Expressed in thousands of dollars) 2. Basis of Presentation (continued) (e) Rate regulation (continued) 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 "MAADs Application") with the OEB under the Handbook to Electricity Distributor and Transmitter Consolidation (the "MAADs 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). 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. In 2023, the Corporation filed its joint 2024 IRM application requesting new rates effective January 1, 2024. The application also included requests for recovery of the latest flowthrough retail service and transmission rates, disposition of Group 1 Deferral and Variance accounts and other regulatory balances. On December 14, 2023, the OEB issued its Decision and Order approving the annual adjustment of 4.50% and disposition of deferral and variance accounts as requested, effective January 1, 2024. 9 Page 124 of 216 ENOVA ENERGY CORPORATION Notes to Financial Statements For the year ended December 31, 2024, with comparative information for 2023 (Expressed in thousands of dollars) 2. Basis of Presentation (continued) (e) Rate regulation (continued) In 2024, the Corporation filed its joint 2025 IRM application requesting new rates effective January 1, 2025. The application also included requests for recovery of the latest flowthrough retail service and transmission rates, disposition of Group 1 Deferral and Variance accounts and other regulatory balances. On December 17, 2024, the OEB issued its Decision and Order approving the annual adjustment of 3.30% and disposition of deferral and variance accounts as requested, effective January 1, 2025. 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 Page 125 of 216 ENOVA ENERGY CORPORATION Notes to Financial Statements For the year ended December 31, 2024, with comparative information for 2023 (Expressed in thousands of dollars) 3. Acquisition of Non -Controlling Interest As of December 31, 2023, the Corporation owned 66.6% of Grand River Energy Solutions ("GRE") and Grandbridge Corporation ("GBS") owned the remaining 33.3%, giving it non -controlling interest in GRE. On May 31, 2024, the Corporation purchased 333 shares in GRE for $333 and GBS made a corresponding purchase of 167 shares for $167, maintaining the relative ownership of GRE. On October 31, 2024, the Corporation purchased 500 shares in GRE for $500 and GBS did not make a relative contribution. This effectively increased the Corporation's share in GRE to 69.5%. On December 30, 2024, the Corporation purchased all remaining shares of GRE from GBS, giving the Corporation 100% ownership of GRE. The shares were purchased for total consideration of $727, payable as follows: • $167 in cash, paid at the time of closing • $200 in the form of a promissory note issued by the Corporation and payable to GBS in cash on the second anniversary of the closing date of the transaction (December 30, 2026); and • Assumption of the $360 promissory note between GBS and GRE, which eliminates on consolidation As a result of the transaction, non -controlling interest (NCI) has been reclassified to equity. At the time of purchase, the carrying amount of NCI exceeded the purchase price. As a result, the net difference has been adjusted to retained earnings. Non- Non- Retained Net Assets of Controlling Controlling Earnings GRE Interest ($1 Interest (%) Adjustment Balance, December 31, 2024 $ 2,527 $ 842 33.3% $ - Intra -group transactions 8 167 Share purchase, May 31, 2024 500 167 Assumption of note to GRE Share purchase, October 31, 2024 500 (57) 57 Balance, December 30, 2024 prior to earnings share purchase 960 30.5% 57 Share purchase, December 30, 2024 (960) 233 Balance, December 31, 2024 $ - 0.0% $ 290 Non -Controlling Interest Acquired 960 Consideration Cash 167 Promissory note to GBS 200 Assumption of note to GRE 360 Total Consideration 727 Gain transferred to retained earnings 233 11 Page 126 of 216 ENOVA ENERGY CORPORATION Notes to Financial Statements For the year ended December 31, 2024, with comparative information for 2023 (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; (iii) AMS, and (iv) 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. 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. 12 Page 127 of 216 ENOVA ENERGY CORPORATION Notes to Financial Statements For the year ended December 31, 2024, with comparative information for 2023 (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 FIRS 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 FIRS 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. 13 Page 128 of 216 ENOVA ENERGY CORPORATION Notes to Financial Statements For the year ended December 31, 2024, with comparative information for 2023 (Expressed in thousands of dollars) 4. Material Accounting Policies (continued) (c) 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. (d) 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. 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 (e) 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. 14 Page 129 of 216 ENOVA ENERGY CORPORATION Notes to Financial Statements For the year ended December 31, 2024, with comparative information for 2023 (Expressed in thousands of dollars) 4. Material Accounting Policies (continued) (e) Intangible assets (continued) (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 Amortization methods and useful lives of all intangible assets are reviewed at each reporting date and adjusted prospectively if appropriate. (f) Goodwill Goodwill arising on the acquisition of subsidiaries or on amalgamation is measured at cost and not amortized. (g) 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. 15 Page 130 of 216 ENOVA ENERGY CORPORATION Notes to Financial Statements For the year ended December 31, 2024, with comparative information for 2023 (Expressed in thousands of dollars) 4. Material Accounting Policies (continued) (g) Impairment (continued) 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" or "CGU"). Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is recognized if the carrying amount of an asset or its 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. (h) 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. (i) 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. 16 Page 131 of 216 ENOVA ENERGY CORPORATION Notes to Financial Statements For the year ended December 31, 2024, with comparative information for 2023 (Expressed in thousands of dollars) 4. Material Accounting Policies (continued) (i) Regulatory deferral accounts (continued) Regulatory deferral accounts attract interest at OEB-prescribed rates. Except for the deferral account for Pension and Other Future benefits (OPEBs), from January to June 2024 the rate was 5.49%, from July to September the rate was 5.20% and from October to December the rate was 4.40%. The rates for the OPEB account were as follows: from January to March 2024, the rate was 5.48%, from April to September the rate was 4.98% and from October to December the rate was 4.55%. (j) 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. (k) 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. 17 Page 132 of 216 ENOVA ENERGY CORPORATION Notes to Financial Statements For the year ended December 31, 2024, with comparative information for 2023 (Expressed in thousands of dollars) 4. Material Accounting Policies (continued) (1) 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. (m) 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. 18 Page 133 of 216 ENOVA ENERGY CORPORATION Notes to Financial Statements For the year ended December 31, 2024, with comparative information for 2023 (Expressed in thousands of dollars) 4. Material Accounting Policies (continued) (n) 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 Companys 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 Corporation. These payments are calculated under the rules for computing income and other relevant amounts contained in the Income Tax Act (Canada) and the Companys 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. 19 Page 134 of 216 ENOVA ENERGY CORPORATION Notes to Financial Statements For the year ended December 31, 2024, with comparative information for 2023 (Expressed in thousands of dollars) 5. Accounts Receivable Trade receivables I ESO receivable Miscellaneous receivables Allowance for bad debt Other December 31, December 31, 2024 2023 $ 37,241 $ 34,908 - 1,049 3,234 2,288 (800) (600) 3,101 163 Total Accounts Receivable $ 42,776 $ 37,808 6. Property, Plant and Equipment (a) Cost or deemed cost Distribution Land & Other Fixed Construction Right -of -use Equipment Buildinq Assets in Progress assets Total Balance at January 1, 2023 $ Distribution Land & Other Fixed Construction Right -of -use Total 4,463 Equipment Building Assets in Progress assets 217 Balance at January 1, 2024 $ 606,128 $ 53,714 $ 22,423 $ 11,110 $ 1,417 $ 694,792 Additions 44,548 821 3,839 (341) - 48,867 Disposals / retirements (11,321) (29) (2,334) - 39 (13,645) Balance at December 31, 2024 $ 639,355 $ 54,506 $ 23,928 $ 10,769 $ 1,456 $ 730,014 Distribution Land & Other Fixed Construction Right -of -use Equipment Buildinq Assets in Progress assets Total 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 20 Page 135 of 216 ENOVA ENERGY CORPORATION Notes to Financial Statements For the year ended December 31, 2024, with comparative information for 2023 (Expressed in thousands of dollars) 6. Property, Plant and Equipment (continued) (b) Accumulated depreciation (c) Carrying amounts Distribution Distribution Land & Other Fixed Construction Right -of -use Total Building Equipment Building Assets in Progress Assets Total Balance at January 1, 2024 $ 84,769 $ 6,756 $ 4,944 $ $ 171 $ 96,640 Depreciation charge 19,372 1,606 3,146 - 123 24,247 Disposals / retirements (11,321) (29) (2,218) - - (13,568) Balance at December 31, 2024 $ 92,820 $ 8,333 $ 5,872 $ $ 294 $ 107,319 (c) Carrying amounts Distribution Distribution Land & Other Fixed Construction Right -of -use Equipment Building Equipment Building Assets in Progress Assets Total 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) Balance at December 31, 2023 $ 84,769 $ 6,756 $ 4,944 $ $ 171 $ 96,640 (c) Carrying amounts Distribution Land & Other Fixed Construction Right -of -use Equipment Building Assets in Progress Assets Total At December 31, 2024 $ 546,535 $ 46,173 $ 18,056 $ 10,769 $ 1,162 $ 622,695 At December 31, 2023 $ 521,359 $ 46,958 $ 17,479 $ 11,110 $ 1,246 $ 598,152 21 Page 136 of 216 ENOVA ENERGY CORPORATION Notes to Financial Statements For the year ended December 31, 2024, with comparative information for 2023 (Expressed in thousands of dollars) 6. Property, Plant and Equipment (continued) (d) Security At December 31, 2024, 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 7. Intangible Assets and Goodwill (a) Cost or deemed cost Computer Land FIT Work in Software Rights Contracts Progress Total Balance at January 1, 2024 $ 16,080 $ 1,303 $ 3,906 $ 252 $ 21,541 Additions 1,122 17 - 3,646 4,785 Disposals / retirements (580) - - - (580) Balance at December 31, 2024 $ 16,622 $ 1,320 $ 3,906 $ 3,898 $ 25,746 Balance at January 1, 2023 Additions Transfers Computer Land FIT Work in Software Rights Contracts Progress Total $ 14,524 $ 1,246 $ 3,906 $ 1,556 57 - 972 $ 20,648 (503) 1,110 (217) (217) Balance at December 31, 2023 $ 16,080 $ 1,303 $ 3,906 $ 252 $ 21,541 22 Page 137 of 216 expense expense expense Amortization Total December 31, 2024: Depreciation of property, plant $ 1,568 $ - $ 6 $ 22,673 $ 24,247 and equipment Amortization of intangible assets - - - 2,606 2,606 $ 1,568 $ - $ 6 $ 25,279 $ 26,853 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 7. Intangible Assets and Goodwill (a) Cost or deemed cost Computer Land FIT Work in Software Rights Contracts Progress Total Balance at January 1, 2024 $ 16,080 $ 1,303 $ 3,906 $ 252 $ 21,541 Additions 1,122 17 - 3,646 4,785 Disposals / retirements (580) - - - (580) Balance at December 31, 2024 $ 16,622 $ 1,320 $ 3,906 $ 3,898 $ 25,746 Balance at January 1, 2023 Additions Transfers Computer Land FIT Work in Software Rights Contracts Progress Total $ 14,524 $ 1,246 $ 3,906 $ 1,556 57 - 972 $ 20,648 (503) 1,110 (217) (217) Balance at December 31, 2023 $ 16,080 $ 1,303 $ 3,906 $ 252 $ 21,541 22 Page 137 of 216 ENOVA ENERGY CORPORATION Notes to Financial Statements For the year ended December 31, 2024, with comparative information for 2023 (Expressed in thousands of dollars) 7. Intangible Assets and Goodwill (continued) (b) Accumulated amortization Computer Land FIT Work in Software Rights Contracts Progress Total Balance at January 1, 2024 $ 4,135 $ 8 $ 429 $ - $ 4,572 Amortization charge 2,285 - 321 - 2,606 Disposal/retirements (580) - - - (580) Balance at December 31, 2024 $ 5,840 $ 8 $ 750 $ - $ 6,598 Computer Land FIT Work in Software Rights Contracts Progress Total Balance at January 1, 2023 $ 1,962 $ 8 $ 107 $ - $ 2,077 Amortization charge 2,173 - 322 - 2,495 Balance at December 31, 2023 $ 4,135 $ 8 $ 429 $ - $ 4,572 (c) Carrying amounts Computer Land FIT Work in Software Rights Contracts Progress Total At December 31, 2024 $ 10,782 $ 1,312 $ 3,156 $ 3,898 $ 19,148 At December 31, 2023 $ 11,945 $ 1,295 $ 3,477 $ 252 $ 16,969 23 Page 138 of 216 ENOVA ENERGY CORPORATION Notes to Financial Statements For the year ended December 31, 2024, with comparative information for 2023 (Expressed in thousands of dollars) 8. Income Tax Expense 2024 2023 Current period $ 982 $ 949 Adjustment for prior periods (741) (68) Deferred 3,225 3,348 Income tax expense $ 3,466 $ 4,229 Reconciliation of effective tax rate: 2024 2023 Income from operations before income taxes $ 15,327 $ 15,121 Statutory Canadian federal and provincial income tax rate 26.50% 26.50% Expected taxes on income $ 4,062 $ 4,007 Changes in income taxes resulting from Permanent differences 37 26 Other temporary differences 217 264 Adjustment for prior periods (850) (68) $ (596) $ 222 Income tax expense $ 3,466 $ 4,229 Significant components of the Corporation's deferred tax balances are as follows: December 31, December 31, 2024 2023 Deferred tax assets (liabilities): Plant and equipment $ (57,516) $ (52,946) Deferred revenue 23,797 22,730 Employee future benefits 2,146 2,148 Non -vested sick leave 307 327 Unrealized gain on derivatives 146 54 Allowance for doubtful accounts (3) (6) Other 1,670 1,459 $ (29,453) $ (26,234) Regulatory deferred tax asset $ 37,278 Deferred taxes associated with regulatory accounts (9,879) 24 Page 139 of 216 ENOVA ENERGY CORPORATION Notes to Financial Statements For the year ended December 31, 2024, with comparative information for 2023 (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, 2024: 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. 25 Page 140 of 216 ENOVA ENERGY CORPORATION Notes to Financial Statements For the year ended December 31, 2024, with comparative information for 2023 (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: Movements in regulatory accounts Balances Transfer $ 3,490 $ 3,371 Recovery / 2024 arising in the between Recovery / 2024 reversal 3,421 Opening period accounts reversal Ending period (years) Regulatory deferral account debit balances $ 2,205 $ 2,135 Group 1 accounts $ 12,000 $ 9,109 $ (4,230) $ (3,886) $ 12,993 Note 1 Regulatory asset recovery account - 10,968 (28) (10,709) 231 Note 1 Regulatory asset associated with deferred tax liability 37,278 4,849 42,127 Note 2 Other regulated accounts 1,360 261 1,621 5 - 9 years Total amount related to regulatory deferral account $ 50,638 $ 25,187 $ (4,258) $ (14,595) $ 56,972 debit balances Balances Transfer Recovery / 2024 arising in the between Recovery / 2024 reversal Opening period accounts reversal Ending period (years) Regulatory deferral account credit balances Group 1 accounts $ 856 $ 254 $ (4,230) $ 6,834 $ 3,714 Note 1 Regulatory asset recovery account 28 - (28) - Note 1 Other regulated accounts 583 14 597 5 - 9 years Total amount related to regulatory deferral account $ 1,467 $ 268 $ (4,258) $ 6,834 $ 4,311 credit balances Balances Transfer Recovery / 2023 arising in the between Recovery / 2023 reversal Opening 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 Regulatory asset associated with deferred tax liability 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 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 Movements in regulatory accounts Net change in regulatory deferral account debit and credit balances $ 3,490 $ 3,371 Less movement related to the balance sheet Change in regulatory asset associated with deferred tax liability (4,849) (4,654) Deferred income tax 3,564 3,421 Deferred revenue (3) Net movement in regulatory deferral account balances related to profit or loss and the related deferral tax movement $ 2,205 $ 2,135 Note 1: The Corporation has been approved for collection of these amounts in its 2024 filings for 2025 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. 26 Page 141 of 216 ENOVA ENERGY CORPORATION Notes to Financial Statements For the year ended December 31, 2024, with comparative information for 2023 (Expressed in thousands of dollars) 10. Long -Term Debt The Corporation has a credit facility ("Credit Facility #1 ") with a Canadian Chartered bank. The facility is an uncommitted demand facility for working capital and capital funding, with a maximum amount of $5,000. The Corporation can draw on the facility by way of prime rate loans, or adjusted term CORRA + 0.8%. Interest is payable monthly. As at December 31, 2024, the Corporation had $2,500 drawn on Credit Facility #1 as CORRA loans (2023 - $1,000). A consolidated subsidiary of the Corporation has a second credit facility ("Credit Facility #2") with a Canadian Chartered bank. The facility includes a demand revolving loan with a maximum of $200,000 inclusive of an overdraft component of $45,000 (note 22(c)). The Corporation amended the facility in June 2024 to amend the withdrawals to be by of Prime Rate Advances or Term CORRA advances at Adjusted Term CORRA + 0.8%. It was also amended to require 12 months advance notice of demand. Principal is due on maturity, June 13, 2026, with interest payments due monthly. As at December 31, 2024, the Corporation had drawn $120,000 as a revolving demand loan at CORRA + 0.8% (2023 - $110,000). The credit agreement contains the following financial covenants: i) Maximum ratio of Senior Funded Debt to Capitalization of <= 50% ii) Minimum Interest Coverage Ratrio of >= 3.Ox iii) Maximum ratio of Total Funded Debt to Capitalization of <= 60% Enova is obligated to issue a certificate of compliance on a quarterly basis. Enova consistently monitors the financial ratios and incorporates them in financial planning. As of December 31, 2024, Enova is in compliance with the above covenants and there are no facts or circumstances that suggest Enova will have difficulty with compliance in the future. A consolidated subsidiary of the Corporation has a third credit facility ("Credit Facility #3") 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 %. 27 Page 142 of 216 ENOVA ENERGY CORPORATION Notes to Financial Statements For the year ended December 31, 2024, with comparative information for 2023 (Expressed in thousands of dollars) 10. Long -Term Debt (continued) As of December 31, 2024, the Corporation had the following loans outstanding under the credit facilities: The aggregate amount of expected principal repayments required under the Credit Facility are as follows: 2024 2023 2025 $ 487 Swap Monthly 505 487 2027 Facility Bank loans Rate Payments Term 2024 2023 Facility 3 Term loan 1 4.205% $ 30 August 15, 2035 $ 2,945 $ 3,159 Facility 3 Term loan 2 3.845% $ 18 December 21, 2034 $ 1,660 $ 1,793 Facility 3 Term loan 3 2.510% $ 11 July 31, 2040 $ 1,597 $ 1,680 Facility 3 Term loan 4 2.365% $ 4 July 31, 2035 $ 474 $ 513 Facility 1 Line of Credit variable N/A undefined $ 2,500 $ 1,000 Facility 2 Revolving Demand variable N/A June 13, 2026 $ 120,000 $ 110,000 Total $ 129,176 $ 118,145 Less: Current Portion $ 9,176 $ 118,145 Long -Term Debt $ 120,000 $ - The aggregate amount of expected principal repayments required under the Credit Facility are as follows: 2024 2023 2025 $ 487 $ 470 2026 505 487 2027 526 505 2028 544 526 2029 564 544 Thereafter 4,050 4,613 Undefined 122,500 111,000 $ 129,176 $ 118,145 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 instruments result in the Corporation receiving interest at the 30 -day bankers' 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. IFRS 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 $248 (2023 - $396) and recognized a corresponding unrealized loss on interest rate swaps of 147 (2023 — $196). 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. 28 Page 143 of 216 ENOVA ENERGY CORPORATION Notes to Financial Statements For the year ended December 31, 2024, with comparative information for 2023 (Expressed in thousands of dollars) 11. Notes Payable to Shareholder 2024 2023 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 Unsecured promissory notes, 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. Due on demand with at least 12 months notice. 29 Page 144 of 216 ENOVA ENERGY CORPORATION Notes to Financial Statements For the year ended December 31, 2024, with comparative information for 2023 (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, 2022. The Corporation recognizes these post-retirement costs in the period in which employees' services were rendered. The accrued benefit liability at December 31, 2024 is $8,097 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: 2024 2023 Accrued benefit obligation Balance, beginning of period $ 8,107 $ 7,703 Current service cost 247 228 I nterest cost 363 374 Benefits Paid (645) (585) Actuarial gains recognized in other comprehensive income 25 387 Accrued benefit liability, end of period $ 8,097 $ 8,107 Components of net benefit expense recognized are a follows: 2024 2023 Current service cost $ 247 $ 228 Interest cost 363 374 Net benefit expense recognized $ 610 $ 602 Actuarial losses recognized in other comprehensive income 2024 2023 Cumulative amount at beginning of period $ 1,307 $ 1,591 Recognized during the period (net of tax) (18) (284) Cumulative amount at end of period $ 1,289 $ 1,307 30 Page 145 of 216 ENOVA ENERGY CORPORATION Notes to Financial Statements For the year ended December 31, 2024, with comparative information for 2023 (Expressed in thousands of dollars) 12. Employee Future Benefits (continued) The significant actuarial assumptions used in the valuation are as follows (weighted average): General inflation: Changes in the Consumer Price Index Accrued obligation: Discount rate Salary increases 2024 2023 3.00% 3.00% 4.70% 4.65% 3.00% 3.00% Benefit cost for the period: AA ee 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: 2024 2023 1% increase in trend rate 1% decrease in trend rate $ 526 $ 466 (442) (394) 31 Page 146 of 216 ENOVA ENERGY CORPORATION Notes to Financial Statements For the year ended December 31, 2024, with comparative information for 2023 (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 2024 2023 $ 1,432 $ 1,819 13,119 12,190 200 200 $ 14,751 $ 14,209 Long-term I ESO deposit for energy conservation programs - 1,158 Customer deposits - long-term 7,623 8,008 $ 7,623 $ 9,166 32 Page 147 of 216 ENOVA ENERGY CORPORATION Notes to Financial Statements For the year ended December 31, 2024, with comparative information for 2023 (Expressed in thousands of dollars) 14. Share Capital 414, *Y463 Authorized Unlimited Common shares None Class A special shares None Class B special shares Issued 100,000 Common shares $ 326,248 $ 326,248 - Class A special shares - - - Class B common shares - - 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. Dividends The holder of the common shares is entitled to receive dividends as declared from time to time. The Corporation declared and paid $11,571 in dividends during the period. 33 Page 148 of 216 ENOVA ENERGY CORPORATION Notes to Financial Statements For the year ended December 31, 2024, with comparative information for 2023 (Expressed in thousands of dollars) 15. Revenue Revenue from contracts with customers Other revenue Specific service charges Deferred revenue Scrap sales Net gain (loss) on disposal of capital assets Non -Utility operations Retailer services Sundry I ncome from subsidiaries 2024 2023 $ 508,226 $ 461,891 2,580 2,532 2,447 2,282 376 468 308 84 2,020 1,869 67 70 173 215 64 50 Total other revenue $ 8,035 $ 7,570 Total revenues $ 516,261 $ 469,461 In the following table, revenue from contracts with customers is disaggregated by type of customer. 2024 2023 Residential $ 210,568 $ 184,347 Commercial 277,300 258,247 Large users 11,437 11,337 Other 8,921 7,960 $ 508,226 $ 461,891 In the following table, deferred revenues are broken down by contributions received and revenues recognized: 2024 2023 Balance, beginning of period $ 85,773 $ 81,391 Capital contributions received 6,489 6,664 Deferred revenue recognized (2,447) (2,282) Balance, end of period $ 89,815 $ 85,773 Current portion $ 2,527 $ 2,378 Long-term portion 87,288 83,395 Total Deferred Revenues $ 89,815 $ 85,773 34 Page 149 of 216 ENOVA ENERGY CORPORATION Notes to Financial Statements For the year ended December 31, 2024, with comparative information for 2023 (Expressed in thousands of dollars) 16. Interest Income and Expense 2024 2023 Interest income on bank deposits $ (338) $ (499) Interest income on capital lease (87) (79) Interest on shareholder debt Interest expense on long term debt Interest expense on short tem debt Interest expense on deposits Interest expense on capital lease $ (425) $ (578) 3,564 3,553 6,893 6,588 1,136 672 522 548 40 43 $ 12,155 $ 11,404 Net interest cost $ 11,730 $ 10,826 17. Lease Liabilities The Corporation has entered into a lease agreement for solar PV 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 2024 2023 Less than one year $ 97 $ 97 One - five years 394 393 More than five years 469 568 Total undiscounted lease liabilities at period end $ 960 $ 1,058 Interest included on the liabilities included in the statement of financial position at December 31 (199) (239) Lease Liabilities - current $ 97 $ 97 Lease Liabilities - non-current $ 664 $ 722 35 Page 150 of 216 ENOVA ENERGY CORPORATION Notes to Financial Statements For the year ended December 31, 2024, with comparative information for 2023 (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, 2024, no assessments have been made. 19. Pension Agreement The Corporation provides a pension plan for its employees through OMERS. The plan is a multi- employer, contributory defined pension plan with equal contributions by the employer and its employees. From January 1, 2024 to December 31, 2024, the Corporation made employer contributions of $3,235 to OMERS and estimates contributions of $3,390 in 2025. In total, the OMERS pension fund has net assets of $138,200,000 and accrued obligations of $141,000,000 for a deficit of $2,800,000. The Corporation's net benefit expense has been allocated as follows: (a) $970 capitalized as part of labour in PP&E and (b) $2,265 recorded as an expense against net income. 20. Employee Benefits 2024 2023 Salary, wages and benefits $ 37,764 $ 36,919 CPP and EI remittances 1,709 1,497 Contributions to OMERS 3,235 2,985 Expenses related to employee future benefits 611 602 Total employee expenditures $ 43,319 $ 42,003 Employee costs capitalized 10,133 10,117 Employee costs in Operations, Maintenance, Customer Service and Administration expenses $ 33,186 $ 31,886 36 Page 151 of 216 ENOVA ENERGY CORPORATION Notes to Financial Statements For the year ended December 31, 2024, with comparative information for 2023 (Expressed in thousands of dollars) 21. 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: 2024 2023 Directors' fees $ 491 $ 568 Executive compensation and benefits 2,424 2,581 $ 2,915 $ 3,149 (d) Transactions with entities with significant influence In the ordinary course of business, the Corporation may issue dividends to the shareholders. (e) Transactions with ultimate shareholders (the Cities and Townships) In 2024 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, 2024. These transactions are in the normal course of operations and are measured at fair value. 37 Page 152 of 216 ENOVA ENERGY CORPORATION Notes to Financial Statements For the year ended December 31, 2024, with comparative information for 2023 (Expressed in thousands of dollars) 22. 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 long-term 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 1.24% of total accounts receivable 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, 2024 is $800 (2023 - $600). The Corporation's credit risk associated with accounts receivable is primarily related to payments from distribution customers. At December 31, 2024, approximately $1,478 is considered 60 days past due. The Corporation has over 163,000 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, 2024, the Corporation holds security deposits in the amount of $9,055. (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 long-term debt as of December 31, 2024 is at a variable interest rate. 38 Page 153 of 216 ENOVA ENERGY CORPORATION Notes to Financial Statements For the year ended December 31, 2024, with comparative information for 2023 (Expressed in thousands of dollars) 22. Financial Instruments and Risk Management (continued) (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 overdraft facility (Credit Facility #2 - Note 10) 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, 2024, $13,770 (2023 — $4,416) had been drawn under BMO's $45M operating credit facility. In 2024 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 (Credit Facility #2 — Note 10) 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 (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, 2024, shareholder's equity amounts to $454,047 (2023 - 452,122) and long-term debt including shareholder debt amounts to $230,254 (2023 - $220,254). 23. Comparative Figures Certain comparative figures have been reclassified to conform with the current year's presentation. 24. 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 Company effective January 1, 2024: Lease Liability in a Sale and Leaseback - Amendments to IFRS 16 Leases; ii. Classification of Liabilities as Current or Non -Current Liabilities with Covenants - Amendments to IAS 1 Presentation of Financial Statements; iii. Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures — Supplier Finance Arrangements. The amendments and clarifications did not have a material impact on the financial statements. 39 Page 154 of 216 ENOVA ENERGY CORPORATION Notes to Financial Statements For the year ended December 31, 2024, with comparative information for 2023 (Expressed in thousands of dollars) 25. Future Changes in Accounting Policy and Disclosures The following new and amended standards are effective for annual periods beginning after January 1, 2025 and earlier application is permitted. The Company has not early adopted any of these new and amended standards and does not expect that they will have a significant impact on the Company's financial statements when become effective. 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N E O N U .Q � - O c - Q IA COD m m _ \ � U a Y m N (6 N O `o O U U_ N O Q �- Ew Ew Im cc � N N r.+ N 3 Y N � N - N 3 � O a � � � a Y t t KPMG LLP 120 Victoria Street South, Suite 600 Kitchener, ON N2G OE1 Canada Tel 519-747-8800 Fax 519-747-8811 INDEPENDENT AUDITOR'S REPORT 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 financial position as at December 31, 2024 • 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 "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, 2024, and its consolidated results of operations, its consolidated remeasurement of gains and losses, its consolidated changes in net debt 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 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. KPMG LLP, an Ontario limited liability partnership and member fine of the KPMG global organization of independent member fines affiliated with KPMG International Limited, a private English company limited by guarantee. KPMG Canada provides services to KPMG LLP. Page 195 of 216 11911R, MIR Page 2 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with Canadian public sector accounting standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Entity's ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so. Those charged with 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 196 of 216 11911R, MIR 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. • Plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the financial information of the entities or business units within the group as a basis for forming an opinion on the group financial statements. We are responsible for the direction, supervision and review of the audit work performed for the purposes of the group audit. We remain solely responsible for our audit opinion. I§]C7_Al2A Kitchener, Canada June 23, 2025 Page 197 of 216 d U C U C N Q N O COD 0) O v 0) w N � N c (0 d d U C U C N Q U C .70, COD o v � w 15N N _ O U C N � � U O Y N C c N N E `v ; N_ COD N CLO) - U .Q U � - U N Q `o m � _ � � a Y t m N (6 N N .V `o O Q a E Eo CLO) Im cm � N N � Y N c r = N E N 3 � a � � � a Y t t KPMG LLP 120 Victoria Street South, Suite 600 Kitchener, ON N2G OE1 Canada June 23, 2025 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, 2024. General: 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 also 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: Responsibilities • We have fulfilled our responsibilities, as set out in the terms of the engagement letter dated October 22, 2024, including for: o 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. o providing you with all information of which we are aware that is relevant to the preparation of the financial statements ("relevant information"), such as financial records, documentation and other matters, including: — the names of all related parties and information regarding all relationships and transactions with related parties; — the 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. All significant actions are included in such summaries. o providing you with unrestricted access to such relevant information. o providing you with complete responses to all enquiries made by you during the engagement. Page 199 of 216 o providing you with additional information that you may request from us for the purpose of the engagement. o providing you with unrestricted access to persons within the Entity from whom you determined it necessary to obtain audit evidence. o such internal control as we determined is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. We also acknowledge and understand that we are responsible for the design, implementation and maintenance of internal control to prevent and detect fraud. o ensuring that all transactions have been recorded in the accounting records and are reflected in the financial statements. o ensuring that internal auditors providing direct assistance to you, if any, were instructed to follow your instructions and that we, and others within the Entity, did not intervene in the work the internal auditors performed for you. Internal control over financial reporting: • We have communicated to you all deficiencies in the design and implementation or maintenance of internal control over financial reporting of which we are aware. Fraud & non-compliance with laws and regulations: • We have disclosed to you: o the results of our assessment of the risk that the financial statements may be materially misstated as a result of fraud. o all information in relation to fraud or suspected fraud that we are aware of that involves: — management; — employees who have significant roles in internal control over financial reporting; or — others o where such fraud or suspected fraud could have a material effect on the financial statements. o all information in relation to allegations of fraud, or suspected fraud, affecting the financial statements, communicated by employees, former employees, analysts, regulators, short sellers, or others. o all known instances of non-compliance or suspected non-compliance with laws and regulations, including all aspects of contractual agreements or illegal acts, whose effects should be considered when preparing financial statements. o all known actual or possible litigation and claims whose effects should be considered when preparing the financial statements. Subsequent events: • 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. Page 200 of 216 Related parties: • We have disclosed to you the identity of the Entity's related parties. • We have disclosed to you all the related party relationships and transactions/balances of which we are aware. • All related party relationships and transactions/balances have been appropriately accounted for, and disclosed, in accordance with the relevant financial reporting framework. Estimates: • The methods, the data and the significant assumptions used in making accounting estimates, and their related disclosures are appropriate to achieve recognition, measurement or disclosure that is reasonable in the context of the applicable financial reporting framework. Going concern: • We have provided you with all information relevant to the use of the going concern assumption in the financial statements. • We confirm that we are not aware of material uncertainties related to events or conditions that may cast significant doubt upon the Entity's ability to continue as a going concern. Misstatements: • The effects of the uncorrected misstatements described in Attachment II are immaterial, both individually and in the aggregate, to the financial statements as a whole. • We approve the corrected misstatements identified by you during the audit described in Attachment II. Non -SEC registrants or non -reporting issuers: • 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). Other: • We confirm that we have provided you with a complete list of service organizations (SO) and sub -service organizations (SSO) and that the relevant complementary user entity controls (CUECs) related to each SO/SSO have been designed and implemented. For the purpose of this representation, a service organization is one as defined in CAS 402. Page 201 of 216 Yours very truly, Jonathan Lautenbach, Treasurer Katie Fischer, Director, Financial Reporting and ERP Solutions Page 202 of 216 Attachment I- Definitions Materiality Certain representations in this letter are described as being limited to matters that are material. Information is material if omitting, misstating or obscuring it 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 perception of the needs of, or the characteristics of, the users of the financial statements and, the size or nature of a misstatement, or a combination of both while also considering the entity's own circumstances. 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. 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