THE UNITED CHURCH OF CANADA SASKATCHEWAN CONFERENCE. Financial Statements Year Ended December 31, 2017

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1 Financial Statements

2 MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING The financial statements of The United Church of Canada Saskatchewan Conference have been prepared in accordance with Canadian accounting standards for not-for-profit organizations. When alternative accounting methods exist, management has chosen those it deems most appropriate in the circumstances. These statements include certain amounts based on management's estimates and judgments. Management has determined such amounts based on a reasonable basis in order to ensure that the financial statements are presented fairly in all material respects. The integrity and reliability of The United Church of Canada Saskatchewan Conference's reporting systems are achieved through the use of formal policies and procedures, the careful selection of employees and an appropriate division of responsibilities. These systems are designed to provide reasonable assurance that the financial information is reliable and accurate. The Saskatchewan Conference Executive is responsible for ensuring that management fulfills its responsibility for financial reporting and is ultimately responsible for reviewing and approving the financial statements. The Executive carries out this responsibility by meeting periodically with management and the members' auditors to review significant accounting, reporting and internal control matters. Following its review of the financial statements and discussions with the auditors, the Executive reports to the members prior to their approval of the financial statements. The Executive also considers, for review and approval by the members, the engagement or re-appointment of the external auditors. The financial statements have been audited on behalf of the members by MWC Chartered Professional Accountants LLP, in accordance with Canadian generally accepted auditing standards. President Executive Secretary Regina, SK May 15, 2018

3 INDEPENDENT AUDITOR'S REPORT To the Members of The United Church of Canada Saskatchewan Conference We have audited the accompanying financial statements of The United Church of Canada Saskatchewan Conference, which comprise the statement of financial position as at December 31, 2017 and the statements of operations, changes in net assets and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian accounting standards for not-for-profit organizations, 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. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements 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. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion. (continues) 2

4 Independent Auditor's Report to the Members of The United Church of Canada Saskatchewan Conference (continued) Basis for Qualified Opinion In common with many charitable organizations, the Conference is unable to economically implement controls that will offer assurance on the completeness of donations, bequests, and event fees, and we are unable to satisfy ourselves on amounts reported using other procedures. Accordingly, our verification of these revenues was limited to the amounts recorded in the records of the Conference and we were not able to determine whether any adjustments might be necessary to revenues, excess of revenues (expenses), current assets and net assets. Qualified Opinion In our opinion, except for the effect of adjustments, if any, which we might have determined to be necessary had we been able to satisfy ourselves concerning the completeness of the revenues referred to in the preceding paragraph, the financial statements present fairly, in all material respects, the financial position of The United Church of Canada Saskatchewan Conference as at December 31, 2017 and the results of its operations and its cash flows for the year then ended in accordance with Canadian accounting standards for not-for-profit organizations. Emphasis of Matter We draw attention to Note 1 on the financial statements which outlines expected changes to the organizational structure of the United Church of Canada and in particular, the future operation of the Saskatchewan Conference. The report is qualified for a scope limitation as outlined in the Basis of Qualified Opinion above but this qualification is not a consequence of future organizational decisions. Chartered Professional Accountants Regina, Saskatchewan May 15, 2018 MWC Chartered Professional Accountants LLP 3

5 Statement of Financial Position December 31, ASSETS CURRENT Cash $ 31,554 $ 75,765 Accounts receivable 27,451 5,913 Goods and services tax recoverable 2,668 2,987 Prepaid expenses 5,704 7,864 67,377 92,529 CAPITAL ASSETS (Note 5) 5,551 4,276 LOANS RECEIVABLE (Note 6) - 20,000 INVESTMENTS (Note 8) 513, ,699 SES SOLAR CO-OPERATIVE LTD. INVESTMENT 4,750 - RESTRICTED AND DESIGNATED ASSETS (Note 8) 310, ,095 $ 901,778 $ 804,599 LIABILITIES AND NET ASSETS CURRENT Accounts payable and accrued liabilities $ 27,652 $ 20,183 Deposits received - 7,500 Due to related parties (Note 6) 9,918 9,595 37,570 37,278 NET ASSETS General fund 554, ,226 Designated funds 310, , , ,321 $ 901,778 $ 804,599 SUBSEQUENT EVENTS (Note 1) COMMITMENTS (Note 7) ON BEHALF OF THE SASKATCHEWAN President Executive Secretary See accompanying notes MWC Chartered Professional Accountants LLP 4

6 Statement of Operations General Fund Restricted and Designated Funds Total Total REVENUES Presbytery assessments $ 439,734 $ - $ 439,734 $ 439,734 General Council grants (Note 6) 220, , ,887 Government of Canada 7,650-7,650 5,940 Investment income 77,764-77,764 7,225 Event fees 40,390-40,390 44,480 Donations 4,913 2,465 7,378 3,835 United Church of Canada Foundation ,000 Lease and rental income - 29,280 29,280 21,330 Sales of goods and services Oil royalty - 16,140 16,140 9,751 Unrealized gain(loss) on market value adjustment (28,006) - (28,006) 24, ,557 47, , ,692 EXPENSES Allocations and payments to programs 19,100 69,363 88,463 70,982 Amortization 1,946-1,946 1,582 Annual meeting 10,091-10,091 64,207 General fund 110, ,802 98,563 Office operations 97,736-97, ,332 Staffing costs 405, , , ,192 69, , ,898 EXCESS OF REVENUES (EXPENSES) $ 118,365 $ (21,478) $ 96,887 $ 3,794 See accompanying notes MWC Chartered Professional Accountants LLP 5

7 Statement of Changes in Net Assets General Designated Fund Funds NET ASSETS - BEGINNING OF YEAR $ 431,226 $ 336,095 $ 767,321 $ 763,527 Excess of revenues (expenses) 118,365 (21,478) 96,887 3,794 Internal transfers (Schedule 1) 4,424 (4,424) - - NET ASSETS - END OF YEAR $ 554,015 $ 310,193 $ 864,208 $ 767,321 See accompanying notes MWC Chartered Professional Accountants LLP 6

8 Statement of Cash Flows OPERATING ACTIVITIES Excess of revenues (expenses) $ 96,887 $ 3,794 Amortization of capital assets 1,946 1,582 Unrealized (gain) loss on market value adjustment 28,006 (24,555) 126,839 (19,179) Changes in non-cash working capital: Accounts receivable (21,538) (5,518) Accounts payable and accrued liabilities 7,470 (12,297) Prepaid expenses 2,160 (838) Goods and services tax payable 319 (302) Loans and notes receivable 20,000 - Deposits received (7,500) 7, (11,455) Cash flow from operating activities 127,750 (30,634) INVESTING ACTIVITIES Purchase of capital assets (3,222) (4,214) Purchase of investments (319,812) (156,765) Proceeds on disposal of investments 150, ,404 Cash flow used by investing activities (172,284) (26,575) FINANCING ACTIVITY Advances from related parties 323 1,252 Cash flow from financing activity 323 1,252 DECREASE IN CASH FLOW (44,211) (55,957) CASH - BEGINNING OF YEAR 75, ,722 CASH - END OF YEAR $ 31,554 $ 75,765 See accompanying notes MWC Chartered Professional Accountants LLP 7

9 Notes to Financial Statements 1. GOING CONCERN The United Church of Canada (UCC) is in the midst of preparing for a fundamental change to its organizational structure that will replace conferences (such as Saskatchewan Conference) and the presbyteries with regional councils. Of the 16 regions in the proposed structure, the Saskatchewan Region will cover the same territory as the current Saskatchewan Conference. It is the Conference's understanding that all funds remaining in the Conference at the end of the year will be retained by the Saskatchewan Region. It is expected that the changes (proposed and accepted in nation-wide remits) will come into effect on January 1, 2019 but revisions may be enacted at the meeting of the General Council in July of In the prior year, the Conference was advised that they should expect and plan for funding from the UCC to be reduced to zero in Since funding from the UCC is approximately 30% of gross revenue and all payroll functions are currently managed by that office, significant changes will occur and the effects will be far reaching. Readers should be advised that size and scope of the Conference operations will be severely impacted in 2018 but the Conference believes it has sufficient resources to operate until the successor region is formed. Despite these circumstances, these financial statements have been prepared on a going concern basis that contemplates realization of assets and the payment of liabilities in the ordinary course of operation. This is reasonable because the Conference has very few non-monetary assets and liabilities and expects monetary assets and liabilities to be realized or settled at their carrying values. 2. CURRENT NATURE OF OPERATIONS The United Church of Canada (UCC) was formed in the union of three denominations - Congregational, Methodist, and part of the Presbyterian Church in Canada. The Church s legal structure is set out in the federal United Church of Canada Act of Within the councillor structure of The United Church of Canada there are 13 bodies called Conferences of which the Conference of Saskatchewan is one. Each conference exercises certain responsibilities under The United Church of Canada Act and the Church s by-laws. The Conference is a registered charity under the Income Tax Act. It and the other Conferences have no other independent status, as they are part of the national corporation. The Church s General Council has significant influence over the conferences and The United Church of Canada is ultimately responsible for any liabilities of the conferences. The Purpose of the Saskatchewan Conference is: To oversee the religious life of the Presbyteries and the Pastoral Charges within its bounds. To offer resources of faith to the Presbyteries and Pastoral Charges within its bounds. To ordain, commission and recognize the ministry personnel at an annual gathering of ministry personnel and elected lay representatives from all pastoral charges from within its bounds. To speak both pastorally and prophetically while providing education and advocacy on issues that affect the health of our communities. MWC Chartered Professional Accountants LLP 8

10 Notes to Financial Statements 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of presentation These financial statements are presented in accordance with Canadian accounting standards for notfor-profit organizations. Financial instruments policy Financial instruments are recorded at fair value when acquired or issued. In subsequent periods, financial assets with actively traded markets are reported at fair value, with any unrealized gains and losses reported in income. All other financial instruments are reported at amortized cost, and tested for impairment at each reporting date. Transaction costs on the acquisition, sale, or issue of financial instruments are expensed when incurred. Financial assets including cash, term deposits, accounts receivable and loans receivable are reported at amortized cost. Fiera Capital Balanced Fund (a portion of investments and Restricted and Designated assets) is reported at fair market value. Financial liabilities including accounts payable and accrued liabilities are measured at amortized cost. Fund accounting A portion of the monies received by the organization may only be used for specific purposes and accordingly are reflected in separate funds within the accounting records. While individual bank accounts are not maintained for these restricted pools, long term investments are apportioned to fund these. Permanent transfers are recorded as transfers in the net asset accounts. The General Fund reports those revenues and expenses related to the operations of the Conference office. The Restricted and Designated Funds report the revenues and related expenses of externally or internally restricted programs carried on or administered by the Conference and are identified in the schedule of changes in designated funds. (continues) MWC Chartered Professional Accountants LLP 9

11 Notes to Financial Statements 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Revenue recognition The United Church of Canada Saskatchewan Conference follows the restricted fund method of accounting for contributions. Restricted contributions related to general operations are recognized as revenue of the General Fund in the year in which the related expenses are incurred. All other restricted contributions are recognized as revenue of the appropriate fund. Unrestricted contributions are recognized as revenue of the General Fund in the year received or receivable if the amount to be received can be reasonably estimated and collection is reasonably assured. Each presbytery in the Conference issues a levy each year based upon a pre-determined formula for their proportionate contribution to the Conference. Event fees are recognized in the year the related event occurs. Sales of goods and services are recognized in the year the related good or service is rendered. Royalties, lease and rental income are received from NAL Resources Limited, Spartan Energy Corporation, TORC Oil & Gas Ltd. and Crescent Point Resources Partnership and are recognized as revenue when received. Capital assets Capital assets are stated at cost less accumulated amortization. Capital assets are amortized using the straight-line method over 5 years. A full year of amortization is taken in the year of addition. 4. ECONOMIC DEPENDENCE The Conference received 28% ( %) of its revenues from the General Council of the United Church of Canada. Should the United Church of Canada substantially change its dealings with the Conference, continued viable operations would be doubtful. 5. CAPITAL ASSETS Cost Accumulated Net book Net book amortization value value Furniture & equipment $ 15,141 $ 9,590 $ 5,551 $ 4,276 MWC Chartered Professional Accountants LLP 10

12 Notes to Financial Statements 6. RELATED PARTIES Loan receivable to Calling Lakes Centre In a prior year, the Conference loaned Calling Lakes Centre $20,000. The balance was paid off in full following the successful sale of Calling Lakes Centre's assets. Transactions with United Church of Canada The United Church of Canada has oversight and significant influence over the Conference and is ultimately responsible for any liabilities of the Conference. In 2017, the United Church granted a total of $220,552 ( $230,887) to the Conference of which $216,390 ( $216,390) were payroll expenses on behalf of the Conference. These transactions are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties. The Conference has a payable of $9,918 ( $9,595) to the General Council of The United Church of Canada at year end. 7. COMMITMENTS Lease Commitments The Conference leases premises under a long term lease that expires on December 31, This lease has been renewed for a further 2 years to December 31, This lease and equipment rental commit the Conference to the following payments: Funding Commitments 2018 $ 42,985 In a prior year, a motion made and passed at the annual meeting commits the Conference to contribute half of the annual revenues of the Moats Land Fund to the All Native Circle Conference 8. INVESTMENTS AND RESTRICTED AND DESIGNATED ASSETS Conexus Credit Union Term Deposits (interest rates at.75% % per annum, maturing between January 2018 and November 2018) $ 241,190 $ 151,706 Fiera Capital Balanced Fund 582, ,088 $ 824,100 $ 687,794 Investments $ 513,907 $ 351,699 Restricted and designated assets 310, ,095 The General Fund reports investment income on all investments. $ 824,100 $ 687,794 MWC Chartered Professional Accountants LLP 11

13 Notes to Financial Statements 9. FINANCIAL INSTRUMENTS The Conference is exposed to various risks through its financial instruments and management is responsible for monitoring, evaluating and managing these risks. Unless otherwise noted, it is management's opinion that the Conference is not exposed to significant interest, currency or credit risks arising from these financial instruments. Credit risk Credit risk arises from the potential that those that owe money to the Conference will fail to perform its obligations. The Conference is exposed to credit risk from those it serves. The Conference's primary sources of revenue are the UCC, presbyteries and oil companies. Collection risk from these entities is considered to be low. The Conference serves a significant number of people for event revenues and sales of goods and services which minimizes concentration of credit risk. Liquidity risk Liquidity risk is the risk that the Conference will encounter difficulty in meeting obligations associated with financial liabilities. While the Conference does have unrestricted net assets to draw upon, it relies on the continued support of the United Church of Canada and the presbytery dues. Given the stability of these parties, the liquidity risk is considered low. 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 comprises three types of risk: currency rate risk, interest rate risk and other price risk. The Conference is mainly exposed to interest rate risk and other price risk with respect to the Fiera Capital Balanced Fund. Interest rate risk Interest rate risk is the risk that the value of a financial instrument might be adversely affected by a change in the interest rates. In seeking to minimize the risks from interest rate fluctuations, the Conference manages exposure by varying the maturity of interest bearing investments and investing in other instruments that do not rely solely on market interest rates. While investment income is only a small part of the Conference's overall funding, it is an important source of income. This risk is considered low. Other price risk 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), whether those changes are caused by factors specific to the individual financial instrument or it s issuer, or factors affecting all similar financial instruments traded in the market. The Conference is exposed to other price risk through its investment in the Fiera Capital Balanced Fund. 10. CORRESPONDING FIGURES Certain of the prior year corresponding figures have been reclassified to be consistent with the current year's presentation. MWC Chartered Professional Accountants LLP 12

14 Schedule of Changes in Restricted and Designated Funds (Schedule 1) Beginning Revenue Expenses Transfers Ending Moats Land Fund (Note 7) $ 145,129 $ 45,420 $ (39,579) $ - $ 150,970 Reserve Fund 73, (10,000) 63, ,286 45,420 (39,579) (10,000) 214,127 Personnel Issues Resolution Fund 11, ,379 Caravan Fund 1, (1,781) - Cohen Fund 23, ,627 Counselling Assistance Fund 6, ,000 Interim Ministry Fund 6, ,000 Continuing Education Fund 17,104 - (9,219) - 7,885 First Five Event Fund 3, ,731 Learning Sites Fund 10,000 - (10,000) 10,000 10,000 79,622 - (19,219) 8,219 68,622 UCW Bursary Fund 17,331 2,465 (5,500) - 14,296 Behold Learning Circles 2, (2,643) - Stewardship Generosity for Mission Fund 17,708 - (4,560) - 13,148 UCWCC Regional Gatherings UCW 50th Anniversary Fund (505) ,187 2,465 (10,565) (2,643) 27, $ 336,095 $ 47,885 $ (69,363) $ (4,424) $ 310,193 See accompanying notes MWC Chartered Professional Accountants LLP 13