Kneehill County Consolidated Financial Statements For the year ended December 31, 2016

Transcription

1 Consolidated Financial Statements For the year ended

2 Consolidated Financial Statements For the year ended Contents Auditors' Report 1 Consolidated Financial Statements Consolidated Statement of Financial Position 2 Consolidated Statement of Operations 3 Consolidated Statement of Change in Net Financial Assets 4 Consolidated Statement of Cash Flows 5 Summary of Significant Accounting Policies 6-8 Notes to the Consolidated Financial Statements 9-28

3 Tel: Fax: BDO Canada LLP Millennium Centre 600, Street Red Deer AB T4N 1V1 Canada Independent Auditors' Report To the Reeve and Council of Report on the Consolidated Financial Statements We have audited the accompanying consolidated financial statements of, which comprise the consolidated statement of financial position as at, and the consolidated statements of operations, change in net financial 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 Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Canadian public sector accounting standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these consolidated 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 consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the consolidated 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 consolidated 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 consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of as at and the results of its operations, change in net financial assets and its cash flows for the year then ended in accordance with Canadian public sector accounting standards. Red Deer, Alberta April 25, 2017 Chartered Professional Accountants 1

4 Consolidated Statement of Financial Position December Financial assets Cash and cash equivalents (Note 1) $ 25,490,293 $ 42,661,922 Short term investments (Note 2) 13,015,855 - Taxes receivable (Note 3) 391, ,256 Accounts receivable (Note 4) 2,260, ,972 Deposits - 120,787 Land held for resale 75,899 75,901 Investments (Note 5) ,234,679 43,800,960 Liabilities Accounts payable and accrued liabilities 1,925,351 4,377,253 Employee benefit obligation (Note 6) 694, ,598 Deposit liabilities 61,085 91,000 Deferred revenue (Note 7) 1,669, ,592 Long-term debt - 3,212,194 Solid waste closure and post-closure liabilities (Note 8) 246, ,512 Liability for contaminated sites (Note 9) 397, ,400 4,994,086 9,554,549 Net financial assets 36,240,593 34,246,411 Non-financial assets Tangible capital assets (Note 10) 112,074, ,823,917 Inventory for consumption (Note 11) 6,590,403 5,517,067 Prepaid expenses 204, , ,869, ,538,904 Accumulated surplus (Note 13) $ 155,110,226 $ 151,785,315 Debenture debt limits (Note 20) Contingencies (Note 21) The accompanying summary of significant accounting policies and notes are an integral part of these financial statements 2

5 Consolidated Statement of Operations Budget For the year ended December Revenue Net municipal taxes (Note 15) $ 24,600,689 $ 24,585,817 $ 26,480,386 Government transfers for operating (Note 16) 1,469,365 1,443,516 1,337,407 Sales and user fees 866, , ,401 Rental revenue 42,472 48,865 65,423 Investment income 277, , ,919 Penalties and costs on taxes 77, , ,490 Fines and costs 50,100 57,883 68,354 Other 21,900 74,369 46,557 Local improvement tax 326, , ,771 Drilling licenses 40, ,996 29,964 Sales to other governments 152, , ,679 27,923,849 28,410,892 30,070,351 Expenditures (Note 17) Legislative 516, , ,760 Administration and Assessment 5,381,617 5,640,921 4,999,322 Protective services 1,510,966 1,285,227 1,368,062 Transportation 12,261,888 13,063,176 13,768,863 Water and wastewater 3,856,954 2,727,220 2,425,667 Waste management 467, , ,708 Public health and welfare 1,304,373 1,198,849 1,090,512 Planning and development 593, , ,373 Economic/ Agricultural development 963, , ,259 Parks, recreation and culture 659, , ,346 Loss on disposal of tangible capital assets - 320, ,011 27,516,445 26,974,649 26,706,883 Excess of revenue over expenditures - before other 407,404 1,436,243 3,363,468 Other Government transfers for capital (Note 16) 1,901,390 1,888,668 3,481,139 Excess of revenue over expenditures 2,308,794 3,324,911 6,844,607 Accumulated surplus, beginning of year 151,785, ,785, ,940,708 Accumulated surplus, end of year $ 154,094,108 $ 155,110,226 $ 151,785,315 The accompanying summary of significant accounting policies and notes are an integral part of these financial statements 3

6 Consolidated Statement of Change in Net Financial Assets Budget For the year ended December Excess of revenue over expenditures $ 2,308,794 $ 3,324,911 $ 6,844,607 Acquisition of tangible capital assets (12,809,693) (6,282,506) (12,384,630) Amortization of tangible capital assets 4,985,316 4,985,316 4,752,424 Net loss on sale of tangible capital assets - 320, ,011 Proceeds on sale of tangible capital assets 773, , ,477 (4,741,961) 3,074, ,889 Change in prepaid expenses - (6,625) 286 Purchase inventory for consumption (7,108,724) (5,484,187) (6,264,381) Use inventory for consumption 5,591,759 4,410,850 5,591,760 Net change in net financial assets (6,258,926) 1,994,182 (440,446) Net financial assets, beginning of year 34,246,411 34,246,411 34,686,857 Net financial assets, end of year $ 27,987,485 $ 36,240,593 $ 34,246,411 The accompanying summary of significant accounting policies and notes are an integral part of these financial statements 4

7 Consolidated Statement of Cash Flows For the year ended December Operating transactions Excess of revenue over expenditures $ 3,324,911 $ 6,844,607 Items not involving cash Amortization 4,985,316 4,752,424 Net loss on disposal of tangible capital assets 320, ,011 Changes in non-cash operating balances Taxes receivable (20,456) 69,707 Accounts receivable (1,689,825) 240,769 Deposits 120,787 - Inventory held for resale 2 (120,783) Prepaid expenses (6,625) 286 Accounts payable and accrued liabilities (2,451,903) 2,279,346 Inventory for consumption (1,073,337) (672,620) Employee benefit obligation 69,864 (68,340) Deposit liabilities (29,915) 41,000 Deferred revenue 1,103, ,432 Solid waste closure and post closure liabilities (40,066) 31,250 Liability for contaminated sites - 397,400 4,613,230 14,328,489 Capital transactions Acquisition of tangible capital assets (6,282,506) (12,384,630) Proceeds on sale of tangible capital assets 725, ,477 (5,556,810) (11,764,153) Investing transactions Purchase of short term investments (13,015,855) - Financing transactions Repayment of long-term debt (3,212,194) (1,857,327) Net change in cash and cash equivalents (17,171,629) 707,009 Cash and cash equivalents, beginning of year 42,661,922 41,954,913 Cash and cash equivalents, end of year $ 25,490,293 $ 42,661,922 Cash and cash equivalents is comprised of: Cash and cash equivalents $ 25,490,293 $ 42,661,922 Less: restricted (Note 1) (1,669,342) (565,592) $ 23,820,951 $ 42,096,330 The accompanying summary of significant accounting policies and notes are an integral part of these financial statements 5

8 Summary of Significant Accounting Policies Management's Responsibility for the Financial Statements Basis of Consolidation The consolidated financial statements of the County are the responsibility of management. They have been prepared in accordance with Canadian generally accepted accounting principles established by the Public Sector Accounting Board of the Chartered Professional Accountants of Canada. The financial statement reflect the assets, liabilities, revenue and expenses of all municipal organizations, committees and Boards which are owned or controlled by the County and are, therefore, accountable to the County Council for the administration of their financial affairs and resources. Included with the municipality are the following: The schedule of taxes levied also includes operational requisitions for educational, health, social and other external organizations that are not part of the municipal reporting entity. The statement excludes trust assets that are administered for the benefit of external parties. Interdepartmental and organizational transactions and balances are eliminated. Cash and Cash Equivalents Investments Land Held for Resale Inventory for Consumption Excess Collections and Under-levies Management considers all highly liquid investments with maturity of three months or less at acquisition to be cash equivalents. Investments are recorded at cost unless there has been a decline in the market value which is other than temporary in nature in which case the investments are written down to market value. Land held for resale is recorded at lower of cost or net realizable value. Cost includes costs for land acquisition and improvements required to prepare the land for servicing such as clearing, stripping and leveling charges. Related development costs incurred to provide infrastructure such as water and wastewater services, roads, sidewalks and street lighting are recorded as physical assets under their respective function. Inventories of materials and supplies for consumption are valued at the lower of cost or replacement cost. Inventory of gravel is maintained by perpetual records and is recorded in the accounts to the extent of royalties, land costs, crushing costs incurred, hauling and equipment rentals. Excess collections arise from the difference between the actual levy made to cover each requisition and the actual amount requisitioned. If the actual levy exceeds the requisition, the excess collection is accrued as a liability and as a reduction in property tax revenue. Requisition tax rates in the subsequent year are adjusted for any excess collections. 6

9 Summary of Significant Accounting Policies Tangible Capital Assets Tangible capital assets are recorded at cost less accumulated amortization. Cost includes all costs directly attributable to acquisition or construction of the tangible capital asset including transportation costs, installation costs, design and engineering fees, legal fees and site preparation costs. Contributed tangible capital assets are recorded at fair value at the time of the donation, with a corresponding amount recorded as revenue. Amortization is recorded on a straight-line basis over the estimated life of the tangible capital asset commencing once the asset is available for productive use as follows: Land improvements Buildings Engineered Structures Water system Wastewater system Other engineered structures Machinery, equipment and furnishings Vehicles 10 to 20 years 25 to 50 years 15 to 75 years 25 to 60 years 6 to 100 years 5 to 45 years 5 to 20 years Assets under construction are not amortized until the asset is available for productive use. Tangible capital assets received as contributions are recorded at fair value at the date of receipt and are also recorded as revenue. Leased Assets Leases entered into that transfer substantially all the benefits and risks associated with ownership are recorded as the acquisition of a tangible capital asset and the incurrence of an obligation. The asset is amortized in a manner consistent with tangible capital assets owned by the County, and the obligation, including interest thereon, is liquidated over the term of the lease. All other leases are accounted for as operating leases, and the rental costs are expensed as incurred. Pension Expenditure Deferred Revenue Government Transfers The County's participates in a multi-employer defined benefit pension plan. The plan is accounted for as a defined contribution plan. Funds received for specific purposes which are externally restricted by legislation, regulation or agreement and are not available for general municipal purposes are accounted for as deferred revenue on the consolidated statement of financial position. The revenue is recognized in the consolidated statement of operations in the year in which it is used for the specified purpose. Government transfers, which include legislative grants, are recognized in the financial statements in the period in which events giving rise to the transfers occur, providing the transfers are authorized, any eligibility criteria have been met, and reasonable estimates of the amount can be made. 7

10 Summary of Significant Accounting Policies Revenue Recognition Taxes are recognized as revenue in the year they are levied. Charges for sewer and water usage are recorded as user fees. Connection fee revenues are recognized when the connection has been established. Conditional grant revenue is recognized to the extent the conditions imposed on it have been fulfilled. Unconditional grant revenue is recognized when monies are receivable. Grants for the acquisition of tangible capital assets are recognized in the period in which eligible expenditures are made. Sales of service and other revenue is recognized on an accrual basis. Landfill Closure and Post Closure Liability Liability for Contaminated Sites Use of Estimates Pursuant to Alberta Environmental Protection and Enhancement Act, the County is required to fund the closure of its landfill site and provide for post-closure care of the facility. Closure and post-closure activities include, but are not limited to, final clay cover, landscaping, as well as surface and ground water monitoring, leachate control and visual inspection. The requirement is being provided for over the estimate of the remaining life of the landfill site based on usage. A contaminated site is a site at which substances occur in concentrations that exceed the maximum acceptable amounts under an environmental standard. Sites that are currently in productive use are only considered a contaminated site if an unexpected event results in contamination. A liability for remediation of contaminated sites is recognized when the organization is directly responsible or accepts responsibility; it is expected that future economic benefits will be given up; and a reasonable estimate of the amount can be made. The liability includes all costs directly attributable to remediation activities including post remediation operations, maintenance and monitoring. The liability is recorded net of any expected recoveries. The preparation of consolidated financial statements in accordance with Canadian public sector accounting standards requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from management's best estimates as additional information becomes available in the future. 8

11 1. Cash and Cash Equivalents Current account $ 25,490,293 $ 42,661,922 The County has an undrawn line of credit of $2,500,000 that is available should the need arise. The line of credit bears interest at prime minus 0.75%. Included in the above amounts are the following amounts received from the Government of Canada and the Province of Alberta as conditional grants held exclusively for future projects Municipal Sustainability Initiative $ 1,491,388 $ 127,901 FCSS 38,700 24,608 PLC 38,408 28,408 KCRP 23,000 23,000 CBI 2,446 2,447 ACP Development Plan 74, ,895 Other 1,000 14,333 $ 1,669,342 $ 565, Short-term Investments Guaranteed investment certificates, bearing interest at rates of 1.47% to 1.53% and maturing on dates ranging from May 30, 2017 through August 28, 2017 $ 13,015,855 $ - 9

12 3. Taxes Receivable Current taxes and grants in place $ 878,128 $ 779,841 Non-current taxes and grants in place 702, ,763 Less: Allowance for doubtful accounts (1,188,583) (600,348) $ 391,712 $ 371, Accounts Receivable Trade receivables $ 2,158,603 $ 157,686 GST Receivable 102, ,286 $ 2,260,797 $ 570, Investments Alberta Capital Finance Shares, at cost $ 121 $ 121 Servus Credit Union Membership Shares, at cost 2 1 $ 123 $ Employee Benefit Obligation Accrued vacation pay $ 276,160 $ 171,801 Accrued sick leave benefit 418, ,797 $ 694,462 $ 624,598 The vacation and sick benefits liability is comprised of vacation and sick days credits that employees are deferring to future years. Employees have either earned the benefits (and are vested) or are entitled to these benefits within the next budget year. 10

13 7. Deferred Revenue Opening balance Contributions Revenue Ending balance received recognized MSI 127,901 2,835,821 (1,472,334) 1,491,388 Gas Tax Fund - 265,306 (265,306) - FCSS 24,608 36,592 (22,500) 38,700 PLC 28,408 23,220 (13,220) 38,408 KCRP 23, ,000 CBI 2,447 3,648 (3,649) 2,446 ACP 344,895 - (270,495) 74,400 Development Plan Other 14, ,374 (164,707) 1,000 $ 565,592 3,315,961 (2,212,211) $ 1,669,342 Grants Under various grant agreements with the Government of Canada and the Province of Alberta, the County is required to account for grants provided and to complete the projects or program in accordance with standards detailed in the various agreements. If these requirements are not adhered to, grants provided will become repayable to the source government. Unexpended funds are repayable to the source government upon final accounting. Funds are deferred until related expenditures under the specific grant agreement have been incurred. 8. Landfill Closure and Post-Closure Liabilities Solid waste closure and post-closure care requirements have been defined in accordance with industry standards and include final covering and landscaping of the landfill, removal of ground water and leachates, and ongoing environmental monitoring, site inspection and maintenance. The estimated total liability is based on the sum of the discounted future cash flows for close and postclosure activities for 25 years after closure using a discount rate of 4.4% and assuming annual inflation of 3%. The accrued liability portion is based on the cumulative capacity used at year end compared to the estimated total landfill capacity. The total capacity of the site is estimated at 47,520 cubic metres. The existing landfill site is expected to reach capacity in (approximately) The County has not designated assets for settling closure and post closure liabilities ($) 2015 ($) Estimated closure costs 272, ,000 Estimated post-closure costs 323, ,000 Estimated total liability 595, ,000 Liability accrued (246,446) (286,512) Balance of estimated cost to accrue 348, ,488 11

14 9. Liability for Contaminated Sites The County has one site that falls under this standard. This site was acquired through the tax recovery process. The contamination comes from an underground storage tank plus additional possible contamination from the former bulk fuel storage facility. Costs to reclaim were estimated using the soil vapour extraction and air sparging technology at an estimated cost of $397,400 over 3 years which includes costs to remove the tank, install equipment and operate the equipment for 3 years. Costs to reclaim have not been discounted. 12

15 10. Tangible Capital Assets Land Land Improvements Buildings Engineered Structures Machinery and Equipment Vehicles Work in Progress Cost, beginning of year $ 2,095,993 $ 1,416,247 $ 8,811,851 $ 153,061,833 $ 9,381,937 $ 8,191,584 $ 8,297,652 $ 191,257,097 Additions 548, ,617 1,451, ,865 1,102, , ,874 6,282,506 Change in work in progress - - 8,252, (8,252,425) - Write-downs & disposals (27,754) (57,578) (1,526,684) (496,641) (642,548) (399,902) - (3,151,107) Cost, end of year $ 2,617,078 $ 2,220,286 $ 16,989,152 $ 153,458,057 $ 9,841,501 $ 8,588,321 $ 674,101 $ 194,388, Total Accumulated amortization, beginning of year $ - $ 869,836 $ 2,556,529 $ 69,869,386 $ 2,498,738 $ 3,638,691 $ - $ 79,433,180 Amortization - 87, ,711 3,277, , ,991-4,985,316 Write-downs & disposals - (32,843) (1,071,131) (496,641) (203,332) (300,738) - (2,104,685) Accumulated amortization, end of year $ - $ 924,720 $ 1,834,109 $ 72,650,387 $ 2,872,651 $ 4,031,944 $ - $ 82,313,811 Net carrying amount, end of year $ 2,617,078 $ 1,295,566 $ 15,155,043 $ 80,807,670 $ 6,968,850 $ 4,556,377 $ 674,101 $ 112,074,685 13

16 10. Tangible Capital Assets (continued) 2015 Land Land Engineered Machinery and Work in Buildings Vehicles Improvements Structures Equipment Progress Total Cost, beginning of year $ 2,096,817 $ 1,416,247 $ 8,786,092 $ 152,478,261 $ 7,850,618 $ 8,052,137 $ 813,182 $ 181,493,354 Additions - 25,759 1,418,763 2,336,960 1,117,758 7,485,390 12,384,630 Change in work in progress (920) - Write-downs & disposals (824) - - (836,111) (805,641) (978,311) - (2,620,887) Cost, end of year $ 2,095,993 $ 1,416,247 $ 8,811,851 $ 153,061,833 $ 9,381,937 $ 8,191,584 $ 8,297,652 $ 191,257,097 Accumulated amortization, beginning of year $ - $ 823,735 $ 2,358,191 $ 67,185,122 $ 2,270,572 $ 3,644,535 $ - $ 76,282,155 Amortization 46, ,338 3,273, , ,969-4,752,424 Write-downs - - (588,941) (317,645) (694,813) - (1,601,399) Accumulated amortization, end of year $ - $ 869,836 $ 2,556,529 $ 69,869,386 $ 2,498,738 $ 3,638,691 $ - $ 79,433,180 Net carrying amount, end of year $ 2,095,993 $ 546,411 $ 6,255,322 $ 83,192,447 $ 6,883,199 $ 4,552,893 $ 8,297,652 $ 111,823,917 14

17 11. Inventory For Consumption Gravel $ 6,051,652 $ 5,008,399 Other transportation amounts 415, ,872 Other 123, ,796 $ 6,590,403 $ 5,517, Equity in Tangible Capital Assets Tangible capital assets $ 194,388,496 $ 191,257,097 Accumulated amortization (82,313,811) (79,433,180) Debenture debt - (3,212,194) $ 112,074,685 $ 108,611,723 15

18 13. Accumulated Surplus Equity in tangible capital assets (Note 12) $ 112,074,685 $ 108,611,723 Equity in other non-financial assets 6,794,948 5,714,987 Unrestricted surplus 803, , ,673, ,088,493 Reserves Operating Reserves: Contingency 2,446,740 2,788,784 Information Technology 218, ,009 Joint Community Support 32,423 51,560 Doctor Recruitment 169, ,814 Fuel Stabilization 312, ,766 Gravel 1,678,046 1,393,122 Family & Community Support Services 85,162 71,227 Kneehill Community Resource Program 130, ,770 Parent Link Program Cemeteries 36,422 58,874 Planning 113,361 98,986 Parks 25, ,085 Strategic Plan Reserves 330, ,636 Special Projects 1,726,868 2,899,468 Disaster - 200,000 Revenue Stabilization Reserve 2,590,000 - Hamlet Infrastructure 300,000-10,196,528 9,096,228 Capital Reserves: Capital Equipment Replacement 3,640,120 2,470,874 Buildings - 986,040 Bridges 4,978,695 5,349,395 Roads 8,199,404 8,345,853 Water 3,587, ,367 Water Service Area 2,955,004 3,366,371 Environmental 322, ,876 Recreation and Leisure Funding 38,728 38,728 Medical 250,000 5,189,694 Urban Sustainability 1,268,399 1,268,396 25,240,433 27,600,594 Total Reserves 35,436,961 36,696,822 $ 155,110,226 $ 151,785,315 The equity in tangible capital assets represents amounts already spent and invested in infrastructure. Reserves represents funds set aside by bylaw or council resolution for specific purposes. 16

19 14. Change in Accumulated Surplus Balance, beginning of year Excess of revenue over expenses Net operating transfers to restricted surplus Debenture principal payments Capital transfers from restricted surplus Acquisition of capital Disposals and write-down of assets Amortization Change in accumulated surplus Balance, end of year Unrestricted surplus Reserves Equity in tangible capital assets Equity in other non-financial assets $ 761,783 $ 36,696,822 $ 108,611,723 $ 5,714,987 $ 151,785,315 $ 144,940,708 2,244, ,079,961 3,324,911 6,844,607 1,259,861 (1,259,861) (3,212,194) - 3,212, (6,282,506) - 6,282, ,046,422 - (1,046,422) ,985,316 - (4,985,316) $ 41,849 $ (1,259,861) $ 3,462,962 $ 1,079,961 $ 3,324,911 $ 6,844,607 $ 803,632 $ 35,436,961 $ 112,074,685 $ 6,794,948 $ 155,110,226 $ 151,785,315 17

20 15. Taxation - Net Budget Taxation Farmland $ 1,461,700 $ 1,461,754 $ 1,415,634 Residential 2,559,227 2,552,236 2,756,859 Commercial 2,155,399 2,154,252 2,198,455 Linear property 19,011,384 19,010,712 20,313,900 Machinery and equipment 4,505,505 4,499,582 4,850,902 Railway 30,164 30,164 27,967 Minimum tax 9,953 9,960 9,769 Grants in lieu ,177 Water area special tax (rural) 75,989 76,246 84,191 Water area special tax (non residential) 1,154,341 1,153,935 1,242,656 Recreation levy 45,000 44,949 44,575 31,009,509 30,994,637 32,947,085 Requisitions Alberta School Foundation Fund 6,368,293 6,368,294 6,425,759 Kneehill Foundation 40,527 40,526 40,940 6,408,820 6,408,820 6,466,699 Available for general municipal purposes $ 24,600,689 $24,585,817 $ 26,480, Government Transfers Budget Operating Provincial government 1,182,848 1,138,460 1,034,673 Other local government 286, , ,734 $ 1,469,365 $ 1,443,516 $ 1,337,407 Capital Provincial government $ 1,901,390 $ 1,888,668 $ 3,481,139 Total government transfers $ 3,370,755 $ 3,332,184 $ 4,818,546 18

21 17. Expenses by Object Budget Salaries and wages $ 8,351,188 $ 7,933,054 $ 7,552,655 Contracted and general services 7,971,531 8,003,043 8,744,103 Materials, goods and utilities 3,979,484 2,949,995 2,990,787 Transfer to local agencies 1,668, ,588 1,612,308 Transfer to individuals and organizations 388,368 2,298, ,779 Interest on long-term debt 171, , ,808 Amortization 4,985,316 4,985,316 4,752,423 Loss on sale of assets - 320, ,020 $ 27,516,445 $ 26,974,650 $ 26,706, Municipal Employees Pension Plans Local Authorities Pension Plan Certain employees of the County are eligible to be members of the Local Authorities Pension Plan (LAPP), a multi-employer pension plan which is covered by the Public Sector Pension Plans Act. The Plan serves about 244,621 people and over 426 employers. It is financed by employer and employee contributions and investment earnings of the LAPP Fund. The plan provides defined pension benefits to employees based on their length of service and rates of pay. The County contributes to the Plan at a rate of 11.39% of pensionable earnings up to the Canada Pension Plan Maximum Pensionable Earnings and 15.84% for the excess. Employees contribute to the Plan at a rate of 10.39% of pensionable earnings up to the Canada Pension Plan Maximum Pensionable Earnings and 14.84% for the excess. Contributions for the year were: Employer contributions $ 537,964 $ 499,175 Employee contributions 499, ,196 $ 1,037,014 $ 958,371 As this is a multi-employer pension plan, these contributions are the County's pension benefit expense. No pension liability for this type of plan is included in the County's financial statements. The most recent valuation as at December 31, 2015 indicates a deficit of $923 million ( $2.45 billion) for basic pension benefits. The actuary does not attribute portions of the unfunded liability to individual employers. 19

22 19. Salary and Benefits Disclosure Disclosure of salaries and benefits for municipal officials and designated officers as required by Alberta Regulation 313/2000 is as follows: Salary Benefits & Allowances Total 2016 Total 2015 Division 1 (1 person) 39,500 3,977 43,477 38,596 Division 2 (1 person) 33,759 3,977 37,736 31,971 Division 3 (1 person) 42,686 3,977 46,663 37,668 Division 4 (1 person) 36,656 3,977 40,633 31,434 Division 5 (1 person) 65,239 3,977 69,216 61,063 Division 6 (1 person) 36,304 4,382 40,686 30,523 Division 7 (1 person) 31,838 3,977 35,815 26,572 Chief Administration Officer 266,779 39, , ,063 Designated Officers (3) 248,381 50, , ,144 Salary includes regular base pay, bonuses, overtime, lump sum payments, gross honoraria and any other direct cash remuneration. Benefits and allowances includes the employer's share of all employee benefits and contributions or payments made on behalf of employees including pension, health care, dental coverage, group life insurance, accidental disability and dismemberment, dental coverage, vision coverage, professional memberships, tuition, travel, cell phone, car allowances, and long and short term disability plans. 20

23 20. Debt Limits Section 276(2) of the Municipal Government Act requires that debt and debt limits as defined by Alberta Regulation 255/100 for the County be disclosed as follows: Total debt limit $42,592,004 $ 45,062,525 Total debt - 3,212,194 Total debt limit available 42,592,004 41,850,331 Debt servicing limit 7,098,667 7,510,421 Debt servicing - 1,370,630 Total debt servicing limit available 7,098,667 6,139,791 The debt limit is calculated at 1.5 times revenue of the County (as defined in Alberta Regulation 255/00) and the debt service limit is calculated at 0.25 times such revenue. Incurring debt beyond these limitations requires approval by the Minister of Municipal Affairs. These thresholds are guidelines used by Alberta Municipal Affairs to identify municipalities which could be at financial risk if further debt is acquired. The calculation taken alone does not represent the financial stability of the municipality. Rather, the financial statements must be interpreted as a whole. 21. Contingencies The County is a member of the Alberta Local Municipal Insurance Exchange (Munix). Under the terms of membership, the County could become liable for its proportionate share of any claim losses in excess of the funds held by the exchange. Any liability incurred would be accounted for as a current transaction in the year the losses are determined. 21

24 22. Commitments has contracts for 2016 to provide peace officer and by-law enforcement services at a cost recovery for the following Municipalities: Town of Three Hills, Town of Trochu, Village of Linden, Village of Acme, Village of Carbon. is managing partner of the Aqua 7 Regional Water Services Commission. The current contract is for 3 years from April 1, 2016 to March 31, The County will receive $24,599 in 2017 and $25,337 in 2018 for fees to provide support services to the Commission. is a partnering member of the Drumheller and District Solid Waste Management Association. In 2016 paid requisition of $185,276, and is expected to pay $194,540 in entered into a 5 year contract for assessment services in The total financial commitment from 2014 to 2018 will be approximately $989,944. has entered into a three year contract for the purchase of gravel. The contract requires to purchase 150,000 tonnes of gravel and runs from 2016 to The County will pay $2,337,000 in 2017 and $2,070,000 in 2018 for the purchase of the gravel. is part of a Master Fire Protection Agreement with the following Municipalities to provide fire protection services to rural residents in the County from 2015 to 2017 inclusive, the total committment is as follows: 2017 ($) 2016 ($) Town of Three Hills 52,000 52,000 Town of Trochu 32,700 32,700 Village of Acme 41,950 41,950 Village of Carbon 41,950 41,950 Village of Linden 45,400 45,400 22

25 23. Budget The budget adopted by Council on April 26, 2016, was not prepared on a basis consistent with that used to report actual results (Public Sector Accounting Standards). The budget was prepared on a modified accrual basis while Public Sector Accounting Standards now require a full accrual basis. The budget figures anticipated use of surpluses accumulated in previous years to fund current year operation and capital activities. In addition, the budget expensed all tangible capital asset expenditures rather than including amortization expense. As a result, the budget figures presented in the statements of operations and change in net financial assets represent the budget adopted by Council on April 26, 2016, with adjustments as follows: Budget Amortization Allocation Budget per Financial Statements Actual per Financial Statements Revenues $ 27,923,849-27,923,849 $ 28,410,892 Government transfers for capital 1,901,390-1,901,390 1,888,668 Total revenues 29,825,239-29,825,239 30,299,560 Legislative 516, , ,262 Administration 5,243, ,114 5,381,617 5,640,921 Protective services 1,274, ,831 1,510,966 1,285,227 Transportation 8,782,997 3,478,891 12,261,888 13,063,176 Water and Wastewater 2,962, ,212 3,856,954 2,727,220 Waste management 467, , ,666 Planning and development 593, , ,976 Parks, recreation and culture 586,110 73, , ,278 Public health and welfare 1,217,196 87,177 1,304,373 1,198,849 Economic and agricultural 886,871 76, , ,347 development services Loss on disposal of assets ,727 Total Expenditures 22,531,129 4,985,316 27,516,445 26,974,649 Excess of revenues over expenditures 7,294,110 (4,985,316) 2,308,794 3,324,911 Reconciling: Payment of debentures (3,212,195) (3,212,195) (3,212,194) Proceeds on disposal of capital 773, , ,696 Capital expenditures (12,809,693) (12,809,693) (6,282,506) Contributed assets Purchase of gravel (3,676,841) - (3,676,841) (3,936,070) Inter-fund transfers 11,630,997-11,630,997 1,259,864 - (4,985,316) (4,985,316) (8,120,299) Add back non cash items: Change in closure/ post-closure (40,066) Use of gravel ,892,817 Net change in non-gravel inventory (30,082) Net change in prepaids (6,625) Amortization 4,985,316 4,985,316 4,985,316 Change in liability for contaminated site Gain/ loss on disposal of capital 320,727 Net Revenue over Expenses $ $ 1,788 23

26 24. Segmented Information Situated in the heart of central Alberta, is a progressive rural municipality comprised of approximately 815,000 acres of land and 2,000 kilometres of developed roads. Agriculture remains the backbone of the local economy, complemented by a strong oil and gas industry. is first and foremost a rural community that values safety and good government for their citizens. Responsible development is encouraged that supports our resource-based economy, while at the same time investing in and enhancing infrastructure and services to citizens. Our municipality continues to promote environmental responsibility, prosperity, and positive relationships with citizens, private sector and government partners. A wide range of services are provided by departments and for management purposes, their operations and activities are organized and reported by fund. Certain departments that have been separately disclosed in the segmented information, along with the services they provide, are as follows: Agriculture Services The Agriculture Services Department focuses on the need to maintain agricultural production and profitability with an emphasis on helping farmers help themselves. It involves the participation of ratepayers and the cooperation of the Alberta Agriculture Food and Rural Development. The key priorities and goals of the department are to advise landowners concerning proper land utilization with a view of improving their economic well being. Priorities include advising landowners of effective methods to control weeds, diseases, insects and predators along with the prevention of soil and water degradation. Administration The Administration Department focuses on the delivery of quality services to customers at a reasonable cost. Along with meeting all of the financial reporting requirements, this department is also instrumental in ensuring legislative requirements are met associated with assessment and taxation. Additional support services initiated by this department include GPS, Records management, Information Technology and Human Resources. The goal of the Administration team is the delivery of customer service in a friendly, courteous and helpful manner guided by integrity and fairness. 24

27 23. Segmented Information (continued) Protective Services s Protective Services section includes that of both Fire Services and Enforcement (Peace Officer) Services. Fire Services provides emergency fire protection and preventative services that mitigate loss of life and property with professionally trained volunteers and modern response equipment. support operating contracts with each of the six urban fire departments in addition to major contributions emergency response vehicles. Emergency preparedness planning is also led by through the implementation of a regional with all urban centres within our boundaries. identified a need for protection of municipal infrastructure and the need to enhance public safety. Our Peace Officers enhance some services provided by the local RCMP in addition to the protection of municipal infrastructure and enforcement of municipal bylaws. Enforcement assistance is also provided to other County departments such as Planning and Operations. Planning and Development The Planning and Development department promotes the incorporation of progressive planning and development practices into the organizations daily operations, along with orderly development and land use practices benefiting residents and minimizing conflicting uses. These practices centre around environmental stewardship, the notion of shared responsibilities in a global community, quality, livable communities and public participation. Recent initiatives of the department include the development of Intermunicipal Development Plans with neighbouring municipalities, an Environmentally Significant Areas Assessment and an Integrated Community Sustainability Plan. Long-term planning is supported by the Municipal Development Plan and Land Use Bylaw which reflect the vision and expectations of County residents. Transportation The Transportation department oversees many responsibilities including that of construction, maintenance and dust control of roads. has over 200 bridge crossing sites that are also maintained by this department. The oil and gas sector along with the development of large feedlots and new grain elevators have had significant impacts on the growth of the County and the resulting effects on our transportation corridors. In addition to the rural transportation routes, the Transportation department also provides services in five major hamlets located within our boundaries. 25

28 23. Segmented Information (continued) Water, Wastewater and Waste Managements Major infrastructure projects have taken place under the direction of Council in the area of potable water distribution. As a member of the Aqua 7 Regional Water Services Commission, the County has diligently worked to bring water to areas of the County where safe potable water is not available through the traditional well systems. Major completion of these distribution lines were completed in Other water distribution systems located throughout the County are also part of this operation. The wastewater needs of our local hamlets are also met by this department. As a member of the Drumheller and District Solid Water management Association, various transfer sites provide for the collection and disbursement of solid waste. Expansion to handle various recyclables at these stations along with initiatives in the areas of agricultural plastic recycling have also been facilitated through this relationship. Parks, Recreation and Culture Under the direction of the Transportation department, the County is responsible for the maintenance and operation of various municipal parks and campgrounds. Enhancements over the past several years have increased the level of services available at various locations. A Recreation Master Plan completed several years ago was the basis for the development of both major annual operating and capital contributions towards the various recreational facilities (arenas, swimming pools) located within our urban centres in Kneehill County. Public Health and Welfare Kneehill Regional FCSS is partnership between the Province and the six municipalities located within the boundaries of. An elected official s board sets the direction for the program and makes the funding decisions for preventative based programs. Other programs that are administered under the FCSS Director include the Kneehill Community Resource Program, Parent Link Program and Community Building Initiatives. Services provided care for and strengthen the quality of life for all citizens, through volunteering, consulting and providing services to meet needs where they exist. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. In measuring and reporting segment revenue from transactions with other segments, inter-segment transfers have been eliminated. The revenues and expenses that are directly attributable to a particular segment are allocated to that segment. Taxation revenue has been allocated to general government except where specific tax revenues can be directly allocated to a service area. 26

29 24. Segmented Information (continued) For the year ended December 31 Protective Services Economic/ Agricultural Development Transportation Services Environmental Services Planning and Development Parks and Recreation Public Health and Welfare General Government 2016 Total Revenue Taxation $ 1,172,190 $ 840,128 $ 13,222,804 $ 2,517,549 $ 457,267 $ 602,792 $ 1,242,938 4,530,149 $ 24,585,817 Government transfers for operating 15, , , ,748 1,012,810 53,679 1,443,515 Government transfers for capital 255, ,306 1,344, ,790 1,888,668 Sales and user fees - 14, , , ,151 63,018 3,415 34, ,515 Investment income , ,454 Fines and costs 57, , , ,654 Rental revenue 2,472 11,790 31, ,507-48,866 Licences and permits , ,996 Other 32,470-6, , ,732 44, ,075 1,535,510 1,085,042 13,654,410 5,011, , ,558 2,288,402 5,352,211 30,299,560 Expenses Salaries and wages 514, ,304 3,299, , , , ,107 2,123,117 7,933,054 Contracted and general services 205, ,006 5,043, , , , ,387 1,509,765 8,003,042 Materials, goods and utilities 114, ,093 1,233, , ,430 66, ,004 2,949,995 Transfer to local agencies 214, ,949-44, ,588 Transfers to individuals and organizations - - 1,928,344 69,199-46, ,059-2,298,810 Interest on long-term debt , , ,117 Amortization 236,831 76,945 3,478, ,212-73,146 87, ,114 4,985,316 Loss on sale of capital assets , ,727 1,285, ,348 15,305,238 3,145, , ,277 1,198,849 4,189,848 26,974,649 Net surplus (deficit) $ 250,282 $ 256,694 $ (1,650,828) $ 1,865,591 $ 189,975 $ 161,281 $ 1,089,553 $ 1,162,363 $ 3,324,911 27

30 24. Segmented Information (continued) For the year ended December 31 Protective Services Agricultural Services Transportation Services Water and Wastewater Planning and Development Parks and Recreation Public Health and Welfare General Government 2015 Total Revenue Taxation $ 1,343,676 $ 860,838 $ 12,796,980 $ 2,637,046 $ 480,498 $ 588,068 $ 1,305,829 $ 6,467,451 $ 26,480,386 Government transfers for operating 5, , , ,639 45,338 1,337,407 Government transfers for capital 5, , ,519-2,941,108 3,481,139 Sales and user fees 20,029 11, , ,487 80,116 57,284 5,050 35, ,403 Investment income , ,919 Fines and costs 68, , , ,844 Rentals 2,400 13,975 33, ,000-65,423 Licences and permits ,964 29,964 Other 60,374-3, , ,893 62, ,005 1,504,938 1,104,627 13,547,140 3,706, , ,871 2,314,411 10,072,215 33,551,490 Expenses Salaries and wages 559, ,825 3,292, , , , ,456 1,878,025 7,552,655 Contracted and general services 201, ,679 5,670, , ,240 88, ,433 1,849,012 8,744,103 Materials, goods and utilities 154, ,510 1,390, , ,833 51, ,730 2,990,787 Transfer to local agencies 214, ,371-1,303,937 1,612,308 Transfers to individuals and organizations - - 7,000 69, , ,030 25, ,779 Interest on long-term debt - - 1, , , ,808 Amortization 239,432 57,246 3,406, ,572-74,034 7,869 70,022 4,752,423 Loss on sale of capital assets (14,610) (8,057) 247, , ,020 Other ,353, ,203 14,016,016 3,083, , ,342 1,090,515 5,432,078 26,706,883 Net surplus (deficit) $ 151,486 $ 342,424 $ (468,876) $ 622,699 $ 248,312 $ 84,529 $ 1,223,896 $ 4,640,137 $ 6,844,607 28

31 25. Comparative Figures Wherever necessary, comparative figures have been reclassified to conform with current year financial statement presentation. 26. Approval of Financial Statements Council and Management approved these financial statements. 29