CORPORATION OF THE TOWN OF HEARST

Transcription

1 CORPORATION OF THE TOWN OF HEARST INDEPENDENT AUDITOR S REPORT AND NON-CONSOLIDATED FINANCIAL STATEMENTS

2 NON-CONSOLIDATED FINANCIAL STATEMENTS Council and Officials 1 Management s Report 2 Independent Auditor s Report 3-4 FINANCIAL STATEMENTS Non-Consolidated Statement of Financial Position 5 Non-Consolidated Statement of Operations 6 Non-Consolidated Statement of Changes in Net Assets 7 Non-Consolidated Statement of Cash Flows 8 Notes to Non-Consolidated Financial Statements 9-28 Schedule of Tangible Capital Assets 29 Independent Auditor s Report on Trust Funds Trust Funds - Statement of Continuity and Statement of Financial Position 32 Trust Funds - Notes to Financial Statements 33 Analysis of Revenues Analysis of Expenses 37-44

3 1 COUNCIL AND OFFICIALS MUNICIPAL COUNCIL Mayor Councillors Roger Sigouin Claude Gagnon André Rhéaume Daniel Lemaire Conrad Morin Gérard Proulx Raymond Vermette OFFICIALS OF MUNICIPALITY Chief Administrative Officer Clerk Director of Child Care Services Director of Parks and Recreation Director of Public Works and Engineering Services Fire Chief Planning Administrator / Chief Building Official Public Works Foreman Senior By-Law Enforcement Officer Treasurer Yves Morrissette Janine Lecours Pascale Tanguay Guy Losier Luc Léonard Jean-Marc St-Amour Kory Hautcoeur Réal Lapointe Tammy Coulombe Manon Higgins

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5 3 INDEPENDENT AUDITOR S REPORT To the Members of Council, Inhabitants and Ratepayers of the Corporation of the Town of Hearst We have audited the accompanying non-consolidated financial statements of the Corporation of the Town of Hearst, which comprise the non-consolidated statement of financial position as at December 31, 2017 and the non-consolidated statements of operations and accumulated surplus, 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 non-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 non-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 non-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 non-consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the nonconsolidated financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the non-consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entity s preparation and fair presentation of the non-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 non-consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis of our audit opinion.

6 4 INDEPENDENT AUDITOR S REPORT (CONT D) Opinion In our opinion, the non-consolidated financial statements present fairly, in all material respects, the nonconsolidated financial position of the Corporation of the Town of Hearst as at December 31, 2017, and the nonconsolidated results of its operations and accumulated surplus, its changes in net assets and its cash flows for the year then ended in accordance with Canadian Public Sector Accounting Standards. Chartered Professional Accountants Licenced Public Accountants June 26, 2018

7 5 NON-CONSOLIDATED STATEMENT OF FINANCIAL POSITION FINANCIAL ASSETS Cash $ 966,484 $ 2,291,538 Accounts receivable (note 4) 3,597, ,502 Taxes receivable 127, ,648 Long-term receivables (note 5) 2,619,760 2,277,495 Investments (note 6) 1,263,096 1,234,637 LIABILITIES 8,574,818 6,922,820 Accounts payable and accrued liabilities (note 8) 1,229, ,312 Deferred revenue - obligatory reserve funds (note 9) 301, ,146 Long-term debt (note 10) 679, ,683 2,211,212 2,002,141 NET FINANCIAL ASSETS 6,363,606 4,920,679 NON-FINANCIAL ASSETS Inventories of supplies 479, ,964 Prepaid expenses 68,353 42,726 Tangible capital assets (note 11) 40,953,577 39,681,013 41,501,241 40,050,703 ACCUMULATED SURPLUS (note 12) $ 47,864,847 $ 44,971,382 CONTINGENCIES (note 16) COMMITMENTS (note 17) The accompanying notes are an integral part of these financial statements.

8 6 NON-CONSOLIDATED STATEMENT OF OPERATIONS YEAR ENDED REVENUES (PAGES 34 TO 36) Budget (note 21) Actual Actual Taxation $ 6,051,400 $ 6,044,979 $ 5,698,790 Government transfers - operations 3,719,000 4,531,527 4,095,146 Fees and service charges 2,968,700 2,916,015 2,827,319 Other revenues 1,127,800 1,363,447 1,202,107 EXPENSES (PAGES 37 TO 44) 13,866,900 14,855,968 13,823,362 General government services 1,334,700 1,467,930 1,540,277 Protection services 1,464,400 2,085,048 1,587,978 Transportation services 2,692,100 3,889,016 3,616,119 Environmental services 2,513,500 2,597,534 2,383,898 Health services 577, , ,794 Social and family services 2,102,100 2,056,205 2,203,532 Recreation and cultural services 1,730,900 1,972,619 1,971,607 Planning and development services 551, , ,261 12,966,100 15,317,710 14,586,466 EXCESS OF REVENUES OVER EXPENSES (EXPENSES OVER REVENUES) 900,800 (461,742) (763,104) GOVERNMENT TRANSFERS - CAPITAL - 3,355, ,815 ANNUAL SURPLUS (DEFICIT) $ 900,800 2,893,465 (456,289) ACCUMULATED SURPLUS, BEGINNING OF YEAR 44,971,382 45,427,671 ACCUMULATED SURPLUS, END OF YEAR (note 12) $ 47,864,847 $ 44,971,382 The accompanying notes are an integral part of these financial statements.

9 7 NON-CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS YEAR ENDED ANNUAL SURPLUS (DEFICIT) $ 2,893,465 $ (456,289) TANGIBLE CAPITAL ASSETS ACTIVITIES Acquisition of tangible capital assets (4,284,028) (706,322) Amortization of tangible capital assets 2,758,953 2,698,200 Loss on disposal of tangible capital assets 220,511 - Proceed on disposition of tangible capital assets 32,000 - NON-FINANCIAL ASSETS ACTIVITIES (1,272,564) 1,991,878 Change in inventories (152,347) (70,288) Change in prepaid expenses (25,627) 20,488 (177,974) (49,800) INCREASE IN NET ASSETS 1,442,927 1,485,789 NET ASSETS, BEGINNING OF YEAR 4,920,679 3,434,890 NET ASSETS, END OF YEAR $ 6,363,606 $ 4,920,679 The accompanying notes are an integral part of these financial statements.

10 8 NON-CONSOLIDATED STATEMENT OF CASH FLOWS YEAR ENDED OPERATING ACTIVITIES Annual surplus (deficit) $ 2,893,465 $ (456,289) Items non affecting cash: Amortization of tangible capital assets 2,758,953 2,698,200 Loss on disposal of tangible capital assets 220,511 - Changes in: Accounts receivable (2,888,949) 736,806 Taxes receivable 70,904 (24,312) Accounts payable and accrued liabilities 274,280 (525,555) Deferred revenue - obligatory reserve funds 77,614 32,329 Inventories of supplies 59,370 (70,288) Prepaid expenses (25,627) 20,488 3,440,521 2,411,379 CAPITAL ACTIVITIES Acquisition of tangible capital assets (4,284,028) (706,322) Proceed on disposal of tangible capital assets 32,000 - (4,252,028) (706,322) INVESTING ACTIVITIES Increase in investments (28,459) (719,502) Advances received on long-term receivables 157, ,744 Advances of long-term receivables (500,000) - (370,724) (538,758) FINANCING ACTIVITIES Principal payments on long-term debt (142,823) (154,600) Proceeds from long-term debt - 55,831 (142,823) (98,769) INCREASE (DECREASE) IN CASH POSITION (1,325,054) 1,067,530 CASH POSITION, BEGINNING OF YEAR 2,291,538 1,224,008 CASH POSITION, END OF YEAR $ 966,484 $ 2,291,538 The accompanying notes are an integral part of these financial statements.

11 9 NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS 1. NATURE OF ACTIVITIES The municipality is responsible for the following services within city limits: - Protection to persons and property, including Police, Conservation Authorities, Emergency Planning, Fire Co-ordination and 911 emergency telephone services. - Transportation Services, including all Roadways and Traffic Control. - Environmental Services, including the Water Supply System, Sanitary Sewer System, Storm Sewer System and Solid Waste Management. - Health Services, including Public Health Services and Inspections. - Social and Family Services, including Ontario Works, Services for Seniors, and Children s Services. - Social Housing Services, including provision of subsidized housing, rent supplement programs and homeless shelters. - Planning including official plan administration. - Development and Promotion. - Administration, prosecution and collection of fines under the Provincial Offences Act (POA). 2. SIGNIFICANT ACCOUNTING POLICIES The non-consolidated financial statements of the Municipality are the representation of management and except that these are not consolidated as noted below, they have been prepared in accordance with Canadian Public Sector Accounting Standards (PSAS), as recommended by the Public Sector Accounting Board of the Chartered Professional Accountants of Canada. Significant aspects of the accounting policies adopted by the Municipality are as follows: REPORTING ENTITIES Non-consolidated entities The following local boards, joint local boards, municipal enterprises and utilities are not consolidated: Defined Parking Area Fund District of Cochrane Social Services Administration Board Foyer Hearst-Mattice Soins de santé Hearst Central Business District Improvement Area Board Hearst and Area Economic Development Corporation Hearst Non-Profit Housing Corporation Hearst Power Distribution Company Limited - a wholly owned government business enterprise Hearst Power Sales and Service Company Limited - a wholly owned government business enterprise Hearst Wi-Fibe Corporation - a wholly owned government business enterprise Porcupine Health Unit Public Library Board

12 10 NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS 2. SIGNIFICANT ACCOUNTING POLICIES (CONT D) REPORTING ENTITIES (CONT D) Accounting for school board transactions The taxation, other revenues, expenses, assets and liabilities with respect to the operations of the school boards are not reflected in the accumulated surplus of these non-consolidated financial statements. Trust funds Trust funds and their related operations administered by the municipality are not consolidated but are reported on the Statement of Continuity and Statement of Financial Position of Trust Funds (page 32). BASIS OF ACCOUNTING Accrual Basis of Accounting Revenues and expenses are reported on the accrual basis of accounting which recognizes revenues as they become available and measurable. Revenues from taxation, grants and all other sources are recognized when the amount is fixed or reasonably determinable and collectability is reasonably assured. Expenses 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. Non-Financial Assets Non-financial assets are not available to discharge existing liabilities and are held for the provision of services. They have useful lives extending 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 combined with the annual surplus (deficit) provides the change in net financial assets (debts) for the year. Inventories Inventories held for consumption are recorded at the lower of cost and replacement cost with cost being determined by the average cost method.

13 11 NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS 2. SIGNIFICANT ACCOUNTING POLICIES (CONT D) BASIS OF ACCOUNTING (CONT D) Tangible Capital Assets Under Canadian public sector accounting standards guidelines, tangible capital assets are recorded at historical cost which includes all amounts that are directly attributable to acquisition, construction, development or settlement of the asset and amortized over their estimated useful life. Tangible capital assets are defined as non-financial assets with an estimated useful life greater than 1 year, held for use in the production or supply of goods and services, not held for resale, in continuous use, and valued in excess of an established financial threshold. The cost, less residual value, if any, of the tangible capital assets is amortized on a straight-line basis, over the expected useful life of the assets, as follows: GENERAL Land improvements Buildings Vehicles, machinery and equipment Furniture and fixtures Computers INFRASTRUCTURE Roads Water and sewer system 20 to 40 years 20 to 40 years 10 to 20 years 5 to 10 years 5 years 20 to 40 years 50 years Assets under construction are not amortized until the asset is available for productive use. Contribution of Tangible Capital Assets Tangible Capital Assets received as contributions are recorded at their fair market value at the date of receipt. Revenue Recognition Taxation Revenue Property tax billings are prepared by the Municipality based on assessment rolls issued by the Municipal Property Assessment Corporation (MPAC) and in accordance with the provisions of the Municipal Act The Municipal Council establishes the tax rates annually and incorporate amounts to be raised for local services and on behalf of the School Boards in respect of education taxes. From time to time property assessments are adjusted by MPAC through the reconsideration process or by the Assessment Review Board through the appeal process. Additional assessments, referred to as supplementary and omitted assessments can also be issued by MPAC in accordance with the Assessment Act. These adjustments and additional assessments are processed by the Municipality upon receipt and recognized in the fiscal year they are determined. All property taxes are secured by the land and pose no collection risk.

14 12 NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS 2. SIGNIFICANT ACCOUNTING POLICIES (CONT D) BASIS OF ACCOUNTING (CONT D) Government Transfers Government transfer revenues are transfers from senior levels of government that are not the result of an exchange transaction and are not expected to be repaid in the future. Government transfers without eligibility criteria or stipulations are recognized as revenue when the transfer is authorized. All other transfers are recognized as revenue in the period the transfer is authorized and all eligibility criteria have been met, except when and to the extent that any stipulations give rise to an obligation that meets the definition of a liability for the municipality. The municipality also provides transfers to individuals or organizations. These transfers are recognized as expenses once they are authorized and eligibility criteria, if any, are met. User Charges User charges relate to various programs, and fees imposed on based on specific activities. Revenue is recognized when the activity is performed or when the services are rendered. Other Revenues Other revenues, as fines and penalties and others are recognized in the year that the events giving rise to the revenues occur and the revenues are earned. Cash and cash equivalents Cash and cash equivalents include cash on hand and in financial institutions and short-term guaranteed investment certificates. Long-Term Receivables Long-term receivables are recorded at cost. Valuation of the receivables are assessed annually by management. Any write down would be recorded in the period in which the change in value occurred. Investments Investments are recorded at amortized cost less any amounts written off to reflect a permanent decline in value. Investments consist of a corporate bonds mutual fund. Investment income is reported as revenue in the period earned. Investment income earned on trust funds that are set aside for specific purposes by legislation, regulation or agreement, is added to the fund balance and forms part of the respective deferred revenue balances.

15 13 NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS 2. SIGNIFICANT ACCOUNTING POLICIES (CONT D) BASIS OF ACCOUNTING (CONT D) Deferred Revenue - Obligatory Reserve Funds Grants, 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 projects or the completion of specific work. In addition, certain 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 or the services are performed. A requirement of Canadian Public Sector Accounting Standards is that the obligatory reserve funds be reported as deferred revenue. This requirement is in place as provincial legislation and other agreements restrict how these funds be used and under certain circumstances these funds may possible be refunded. Multi-Employer Defined Benefit Pension Substantially all of the employees of the municipality are eligible to be members of the Ontario Municipal Employees Retirement System (OMERS), which is a multi-employer, defined benefit, final average earnings, contributory pension plan. Defined contribution plan accounting is applied to OMERS, whereby contributions are expensed when due, as the municipality has insufficient information to apply defined benefit accounting. Accumulated Surplus Certain amounts of surpluses, as approved by council, are set aside in reserves for future operations and capital purposes. Transfers to and/or from reserves are recorded as an adjustment to the respective reserve when approved. Measurement Uncertainty The preparation of financial statements in conformity with Canadian Public Sector Accounting Standards 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 balance sheet date and the reported amounts of revenues and expenses during the year. Estimates are used when accounting for items and matters such as allowance for uncollectible taxes and other accounts receivable, useful life of tangible capital assets, accrued liabilities and contingencies. Actual results could differ from those estimates.

16 14 NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS 3. CONTRIBUTION TO NON CONSOLIDATED ENTITIES Further to note 2 Non-Consolidated Entities, the following contributions were made by the municipality to these entities: Budget (note 21) Hearst and Area Economic Development Corporation $ 396,300 $ 403,173 $ 418,260 Downtown Business Improvement Area Board 33,300 33,275 33,275 Porcupine Health Unit 170, , ,711 Public Library Board 224, , ,434 District of Cochrane Social Services Administration Board 889, , ,920 $ 1,713,900 $ 1,705,563 $ 1,671,600 The municipality share of equity of the non-consolidated entities is as follow: Hearst and Area Economic Development Corporation - surplus $ 84,402 $ 81,294 Downtown Business Improvement Area Board - surplus $ 47,315 $ 48,376 Porcupine Health Unit $ 259,853 $ 254,073 Public Library Board - surplus $ 200,699 $ 192,910 District of Cochrane Social Services Administration Board $ 1,660,478 $ 1,618, ACCOUNTS RECEIVABLE Province of Ontario $ 2,845,290 $ 67,625 Government of Canada 161, ,283 Due from related parties 346, ,040 Other 245, ,554 $ 3,597,734 $ 920,502

17 15 NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS 5. LONG-TERM RECEIVABLES Due from medical students, no interest, to be repaid at the discretion of the individuals over a course of 5 years, prime + 2 % interest applicable to any unpaid balance at the end of the 5 year term $ 68,164 $ 75,518 Receivable from Hearst Power Distribution Company Limited/ Corporation de distribution électrique de Hearst, a wholly owned government business enterprise, interest receivable yearly at a calculated rate, principal to be repaid at the discretion of the debtor 1,250,000 1,250,000 Receivable from Hearst Power Sales and Services Company Limited/Corporation de services et ventes d énergie de Hearst, a wholly owned government business enterprise, interest receivable monthly at prime, principal to be repaid at the discretion of the debtor 100, ,000 Receivable from Hearst Power Sales and Services Company Limited/Corporation de services et ventes d énergie de Hearst, a wholly owned government business enterprise, 3.04%, payable in semi-annual interest and principal payments of $70,333, due April , ,496 Receivable from Hearst Wi-Fibe Corporation/La Corporation Hearst Wi-Fibe, a wholly owned government business enterprise, interest receivable yearly at 4.50%, principal to be repaid at the discretion of the debtor 500,000 - Local Improvement loans, due from property owners, interest at prime, to be repaid over 10 years, can be repaid in full anytime, due in 2021, 2024 and , ,481 Private loan receivable under the Community Improvement Plan, no interest, yearly capital payments of $6,000, due in ,000 9,000 $ 2,619,760 $ 2,277,495

18 16 NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS 6. INVESTMENTS One Investment - Corporate bonds mutual fund $ 1,263,096 $ 1,234,637 The bonds are recorded at cost. Over the years, $1,200,000 were invested. This year, $29,459 of interest income was reinvested. As of December 31, 2017, the fair market value is $1,209,993 ( $1,211,829). 7. BANK INDEBTEDNESS The municipality has an authorized line of credit of $2,000,000 bearing interest at prime and secured by a general assignment of the municipality s assets. 8. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Trade payables and accruals $ 591,475 $ 532,821 Payroll related 258, ,331 Holdbacks 135,904 18,272 Government remittances 92,690 22,588 Due to other funds and related parties 150, ,300 $ 1,229,592 $ 955,312

19 17 NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS 9. DEFERRED REVENUE - OBLIGATORY RESERVE FUNDS Revenues received that should be used in the next year and have been set aside for specific purposes by legislation, regulation or agreement, are included in deferred revenue and reported on the Non-Consolidated Statement of Financial Position. These revenues may only be used in the conduct of certain programs or in the completion of specific work. Details of these deferred revenue and obligatory reserve funds amounts are as follows: DEFERRED REVENUE Balance, Balance, beginning Received Utilized ending Bicycle paths $ 15,507 $ - $ - $ 15,507 Child Care Centre Improvements 5,052-1,749 3,303 Cochrane District Social Services Administration Board - 106, ,600 Health and Safety 11, ,190 Monument 3, ,033 Other 2, ,263 Planning Board 5, ,205 Wages and training 13, ,760 Waste Management - 72,453-72,453 Well being clinic 7, ,500 OBLIGATORY RESERVE FUNDS 63, ,273 2, ,814 Derelict motor vehicle 36, ,755 Dedicated gas tax 11, ,483 Federal gas tax 112, , ,163 12, , , ,163 60,946 $ 224,146 $ 501,198 $ 423,584 $ 301,760

20 18 NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS 10. LONG-TERM DEBT GENERAL GOVERNMENT Ontario Infrastructure and Lands Corporation debenture, 3.04%, payable in blended semi annually interest and principal payments of $70,033, secured by a general assignment of the municipality s properties, due April 2022 $ 584,945 $ 704,496 TRANSPORTATION SERVICES Loan repaid in the current year - 2,481 Hallé, Piper and Cessna streets local improvement loan, payable to Caisse Populaire de Hearst Limitée, monthly interest payments at 0.25% under prime, yearly principal payment of $11,622, secured by a general assignment of the municipality s properties, due in ,574 68,614 Hwy 11 East Watermain streets local improvement loan, payable to Caisse Populaire de Hearst Limitée, monthly interest payments at prime, yearly principal payment of $2,678, secured by a general assignment of the municipality s properties, due in ,905 9,835 Hwy 11 East Watermain-Cécile streets local improvement loan, payable to Caisse Populaire de Hearst Limitée, monthly interest payments at prime, yearly principal payment of $4,244, secured by a general assignment of the municipality s properties, due in ,436 37,257 $ 679,860 $ 822,683

21 19 NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS 10. LONG-TERM DEBT (CONT D) The long-term liabilities are to be recovered from local improvements and power generation revenues within the next five years as follows: 2018 $ 141, , , , , and subsequent 11,216 $ 679,860 During the year, the municipality paid the following long-term debt charges: Principal Interest Total Total General Government $ 119,551 $ 20,515 $ 140,066 $ 140,065 Transportation Services 23,272 2,914 26,186 42,021 $ 142,823 $ 23,429 $ 166,252 $ 182,086 The long-term liabilities issued in the name of the municipality have been approved by by-law. The annual principal and interest payments required to service these liabilities are within the annual debt repayments limit presented by the Ministry of Municipal Affairs and Housing.

22 20 NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS 11. TANGIBLE CAPITAL ASSETS General Land and vacant land $ 1,033,276 $ 1,033,276 Land improvements 1,276,607 1,430,808 Buildings 8,531,006 8,597,372 Vehicles, machinery and equipment 1,856,211 1,834,997 Furniture and fixtures 191, ,408 Computers 131, ,198 Infrastructure Roads 14,212,609 12,405,485 Water system 5,496,109 5,698,450 Storm sewer system 4,587,800 4,590,437 Sanitary sewer system 3,636,926 3,782,582 $ 40,953,577 $ 39,681,013 For additional information, see the Schedule of Tangible Capital Assets (page 29) During the year, $1,717,306 of tangible capital assets were written down or disposed ( $57,736). The distribution by segment is as follows: General government $ 491,804 $ 505,612 Protection to persons and property 535, ,168 Transportation services 16,933,005 15,073,355 Environmental services 16,072,514 16,400,900 Health services 96, ,963 Recreation and cultural services 2,352,818 2,440,285 Social and family services 1,167,168 1,163,440 Planning and development services 3,303,391 3,420,290 $ 40,953,577 $ 39,681,013

23 21 NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS 12. ACCUMULATED SURPLUS Accumulated surplus consist of the following: RESERVES SET ASIDE FOR SPECIFIC PURPOSES BY COUNCIL Administration $ 57,361 $ 57,361 Airport Infrastructure 313, ,515 Cemeteries 8,883 8,883 Child Care Centre 69,616 69,616 Electrical services 1,625,218 1,625,218 General 456, ,970 Health services 6,121 6,121 Lifeline 90,029 89,088 Parks and recreation 177, ,052 Planning and Economic Development 5,482 5,482 Sanitary sewers 157,855 63,922 Snowmobile 6,354 6,354 Waste management 73,441 60,941 Waterworks 107,515 83,316 INVESTED IN TANGIBLE CAPITAL ASSETS 3,155,083 3,175,839 Tangible capital assets - net book value 40,953,577 39,681,013 Long-term debt (679,860) (822,683) Local improvement receivable 113, ,481 40,387,368 38,996,811 GENERAL SURPLUS 4,322,396 2,798,732 $ 47,864,847 $ 44,971,382

24 22 NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS 13. TRUST FUNDS Trust funds administered by the municipality amounting to $573,758 ( $543,888) have not been included in the Non-Consolidated Statement of Financial Position nor have their operations been included in the Non-Consolidated Statement of Operations. 14. PENSION AGREEMENTS The municipality makes contributions to the Ontario Municipal Employees Retirement Fund (OMERS), which is a multi-employer plan. 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. Employers and employees contribute jointly to the plan. OMERS provides pension services to more than 450,000 active and retired members and approximately 1,000 employers. Each year an independent actuary determines the funding status of OMERS Primary Pension Plan (the Plan) by comparing the actuarial value of invested assets to the estimated present value of all pension benefits that members have earned to date. The most recent actuarial valuation of the Plan was conducted at December 31, The results of this valuation disclosed a total accrued pension obligation of $93,614 million ( $86,959 million) in respect of benefits with net assets available for benefits at that date of $95,198 million ( $85,360 million) indicating an actuarial deficit of $5,403 million ( $5,720 million). The primary plan s funded ratio of assets to pension obligation was 94 % ( %). Because OMERS is a multiemployer plan, any pension plan surpluses or deficits are a joint responsibility of Ontario municipal organizations and their employees. As a result, the municipality does not recognize any share of the OMERS pension surplus or deficit. Contributions made by the municipality to OMERS in 2017 were $284,221 ( $283,272). Employer contributions are included as an expense on the Non-Consolidated Statement of Operations.

25 23 NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS 15. LANDFILL CLOSURE AND POST-CLOSURE LIABILITY The municipality owns and manages the municipal landfill site. Canadian Public Sector Accounting Standards require that landfill operators accrue for the future costs of landfill closure and post-closure on an annual basis. Closure and post-closure costs include final covering and landscaping, testing of ground water, environmental monitoring, site inspections and site maintenance. The annual charge should be calculated by dividing the estimated closure and post closure costs by the estimated life of the landfill and charging that amount to operations. The municipality is following Ministry guidelines in regards to upkeep of the landfill site and estimates that post closure site costs will be negligible as the site is prepared for closure on an annual basis. Costs for site preparation, maintenance and monitoring were $50,107 for the current year ( $69,825). Much of the cover material used for closure originates from road construction excavation without occurrence of direct costs to the landfill site. The expected remaining life of the landfill is 17 years. 16. CONTINGENCIES The municipality has entered into the following long-term agreements: i) The municipality is a guarantor on a loan of $2,603,191 ( $2,952,650) and a loan of $1,244,773 ( $1,292,420) owed by Foyer Hearst-Mattice Soins de Santé. As of December 31, 2017, no covenants on these loans were in default. ii) The municipality is a guarantor on a loan of $14,844 ( $18,606) owed by a medical student. As of December 31, 2017, no covenants on this loan were in default. iii) The municipality is a guarantor on a loan of $264,042 ( $279,610) and on a line of credit of $25,000 ( $25,000) owed by the Hearst Community Curling Club. As of December 31, 2017, no covenants on this loan were in default. iv) The municipality is a guarantor on a line of credit approved for $3,000,000 owed by Hearst Wi-Fibe Corporation. As of December 31, 2017 an amount of $600,000 was utilized and no covenants on this loan were in default.

26 24 NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS 17. COMMITMENTS Signed agreements The municipality has currently committed the following amounts through various signed agreements: Total General government $ 20,221 $ - $ - $ - $ 20,221 Protection services 1,146,523 1,058, ,205,071 Transportation services 156,522 56,882 56,014 54, ,780 Environmental 540, , ,670-1,622,010 Social and family services 18, ,648 Recreation services 35,545 35,545 35,545 18, ,172 Planning 13,825 1, ,977 $ 1,931,954 $ 1,692,797 $ 632,229 $ 72,899 $ 4,329,879 Benefits for retired employees As per an agreement, the municipality purchases certain benefits for retired employees until they reach 65 years of age. Payments for these benefits will amount to: 2018 $ 48, , , , ,949 $ 167,269

27 25 NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS 18. RELATED PARTY TRANSACTIONS During the year, the municipality incurred the following transactions with Hearst Power Distribution Company Limited, Hearst Power Sales and Services Company Limited and Hearst Wi-Fibe Corporation, wholly owned government business enterprises. Hearst Power Distribution Company Limited Revenues: Clerical and answering services $ 61,947 $ 60,573 Gasoline $ 6,631 $ 4,217 Interest on long-term debt $ 74,731 $ 77,097 Miscellaneous $ 488 $ 1,334 Office supplies $ 1,274 $ 618 Rent $ 13,880 $ 13,608 Repair and maintenance $ 15,831 $ 8,468 Retrofits $ 800 $ 130,608 Telephone $ 2,733 $ 2,613 Expenses: Service (hydro) $ 675,533 $ 810,243 Year end balances were as follows: Due from Hearst Power Distribution Company Limited $ 273,546 $ 351,728 Due to Hearst Power Distribution Company Limited $ (80,697) $ (102,839) Long-term receivables $ 1,250,000 $ 1,250,000 Hearst Power Sales and Services Company Limited Interest revenue $ 20,515 $ 24,068 Year end balances were as follows: Due from Hearst Power Sales Services Company Limited $ 16,443 $ - Long-term receivables $ 684,945 $ 804,496

28 26 NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS 18. RELATED PARTY TRANSACTIONS (CONT D) Hearst Wi-Fibe Corporaton Revenues: Gasoline $ 1,080 $ - Interest $ 14,577 $ - Miscellaneous $ 2,137 $ - Rent $ 6,000 $ - Telephone $ 2,794 $ - Expenses: Service (internet) $ 10,691 $ - Year end balances were as follows: Due from Hearst Wi-Fibe Corporation $ 49,869 $ - Due to Hearst Wi-Fibe Corporation $ (12,081) $ - Long-term receivables $ 500,000 $ - These transactions are in the normal courses of operations and are measured at the exchange amount received or paid on similar terms as those of unrelated parties. The municipality is liable for any accumulated loss of a government business enterprise. As of December 31, 2017, Hearst Power Distribution Company Limited has net equity of $3,249,223, Hearst Power Sales and Services Company Limited has net equity of $267,013 and Hearst Wi-Fibe Corporation has net equity of $ (233,242). 19. EXPENSES BY OBJECT The operating expenses for the year reported of the Non-Consolidated Statement of Operations by object are as follows: Budget (note 21) Actual Actual Salary, wages and benefits $ 4,210,800 $ 4,105,389 $ 4,031,061 Interest and bank charges 25,000 32,120 28,791 Supplies and services 3,749,700 4,072,635 3,506,383 Contracted services 2,317,000 2,154,014 2,310,435 External transfers 2,003,400 1,974,088 2,011,596 Amortization 660,200 2,758,953 2,698,200 Loss on disposal of tangible capital assets - 220,511 - $ 12,966,100 $ 15,317,710 $ 14,586,466

29 27 NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS 20. SEGMENTED INFORMATION The municipality is a municipal government institution that provides a range of services to its citizens. Municipality services are reported by function and their activities are separately disclosed in the Analysis of Expenses. The nature of the segments and the activities they encompass are as follows: General Government services General government consists of the activities of Council and general financial and administrative management of the municipality and its programs and services. Protection Services Protection services include police services, fire services, protective inspection and control, and building permits and inspection services. Transportation Services Transportation services include construction and maintenance of the municipality s roads and bridges, winter control, street lighting and airport services. Environment Services This function is responsible for providing water and sewer services, waste collection, waste disposal and recycling services. Health Services Health services consists of public health services, other medical services and cemeteries. Social and Family Services This function provides general assistance for social and family, childcare services and public housing. Recreation and Cultural Services Recreation and cultural services provide indoor and outdoor recreational facilities and programs, library services and other cultural services. Planning and Development Services The planning and development services function manages commercial, industrial and residential development within the municipality. The accounting policies used in these segments are the same as those described in note 2. For each reported segment, revenues and expenses represent amounts that are directly attributable to each segment. Tax revenues are reported as part of General Government Services.

30 28 NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS 21. BUDGET The budget approved by the municipality for 2017 is reflected on the Non-Consolidated Statement of Operations and the accompanying schedules and was prepared on a cash flow basis. The budget established for capital investment in tangible capital assets are on a project-oriented basis, the costs of which may be carried out over one or more years and, therefore, may not be comparable with current year s actual amounts. The related amortization are not included in the budget approved by Council except an amount of $660,200 in the Environment Services. Budget figures have not been audited. 22. COMPARATIVE FIGURES The financial statements have been reclassified, where applicable, to conform to the presentation used in the current year. The changes do not affect prior year accumulated surplus.

31 29 SCHEDULE OF TANGIBLE CAPITAL ASSETS YEAR ENDED GENERAL CONSTRUCTION TOTALS Vehicles Furniture Land and Land Machinery and and Vacant Land Improvements Buildings Equipment Fixtures Computers Roads Water Sewer COST Balance, beginning of year $ 1,033,276 $ 4,445,704 $ 19,010,298 $ 5,003,112 $ 1,681,274 $ 483,328 $ 32,441,038 $ 10,321,206 $ 15,312,277 $ 89,731,513 $ 89,082,927 Add: Additions - 8, , ,286 85,246 40,772 3,147, ,803 4,284, ,322 Less: Disposals (212,281) (90,366) (114,780) (1,299,879) - - (1,717,306) (57,736) Balance, end of year 1,033,276 4,454,639 19,573,700 5,063,117 1,676, ,320 34,288,743 10,321,206 15,478,080 92,298,235 89,731,513 ACCUMULATED AMORTIZATION Balance, beginning of year - 3,014,896 10,412,926 3,168,115 1,523, ,130 20,035,553 4,622,756 6,939,258 50,050,500 47,410,036 Add: Amortization during the year - 163, , ,203 51,264 59,075 1,097, , ,096 2,758,953 2,698,200 Less: Accumulated amortization on disposals (203,412) (90,114) (114,780) (1,056,489) - - (1,464,795) (57,736) Balance, end of year - 3,178,032 11,042,694 3,206,906 1,485, ,425 20,076,134 4,825,097 7,253,354 51,344,658 50,050,500 NET BOOK VALUE $ 1,033,276 $ 1,276,607 $ 8,531,006 $ 1,856,211 $ 191,138 $ 131,895 $ 14,212,609 $ 5,496,109 $ 8,224,726 $ 40,953,577 $ 39,681,013

32 30 INDEPENDENT AUDITOR S REPORT To the Members of Council, Inhabitants and Ratepayers of the Corporation of the Town of Hearst We have audited the accompanying financial statements of the trust funds of the Corporation of the Town of Hearst, which comprise the statement of financial position as at December 31, 2017 and the statement of continuity of the trust funds 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 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. 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 of our audit opinion.

33 31 INDEPENDENT AUDITOR S REPORT (CONT D) Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of the trust funds of the Corporation of the Town of Hearst as at December 31, 2017, and the continuity of the trust funds for the year then ended in accordance with Canadian Public Sector Accounting Standards. Chartered Professional Accountants Licenced Public Accountants June 26, 2018

34 32 TRUST FUNDS STATEMENT OF CONTINUITY OF FUNDS YEAR ENDED Cemetery Educational Care and Assistance Maintenance Fund Fund Total Total ACCUMULATED SURPLUS, BEGINNING OF YEAR $ 249,942 $ 293,946 $ 543,888 $ 527,804 REVENUES Interest and dividends earned - 30,004 30,004 25,388 Perpetual care charge 4,366-4,366 7,196 4,366 30,004 34,370 32,584 EXPENSES Scholarships - 4,500 4,500 16,500 ACCUMULATED SURPLUS, END OF YEAR $ 254,308 $ 319,450 $ 573,758 $ 543,888 STATEMENT OF FINANCIAL POSITION FINANCIAL ASSETS Cash $ 254,424 $ 44,807 $ 299,231 $ 328,312 Due from (to) municipality (116) 274, , ,576 ACCUMULATED SURPLUS $ 254,308 $ 319,450 $ 573,758 $ 543,888

35 33 TRUST FUNDS NOTES TO FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING Capital receipts and income are reported on the cash basis of accounting except for the interest on the investment which is accrued. Expenses are reported on the cash basis of accounting with the exception of administrative expenses which are reported on the accrual basis of accounting, which recognizes expenses as they are incurred and measurable as a result of the receipt of goods or services and the creation of a legal obligation to pay. 2. DESCRIPTION OF FUNDS CEMETERY CARE AND MAINTENANCE FUND This trust fund was created to provide for the long-term maintenance of the cemeteries in the Corporation of the Town of Hearst. A fee is charged on all sale of lots in the cemeteries and deposited in this trust fund. All interests on those funds are kept by the Corporation of the Town of Hearst to pay for the yearly costs of maintenance of the cemeteries. EDUCATIONAL ASSISTANCE FUND Money put in the trust fund by private benefactors for the benefit of school children in the public schooling system within the Corporation of the Town of Hearst. Administered by the Town, this money is to be used to fund school activities not covered by the regular school budget.

36 34 ANALYSIS OF REVENUES YEAR ENDED Budget (note 21) Actual Actual TAXATION Municipal $ 5,602,500 $ 5,609,957 $ 5,502,159 Education - 1,440,003 1,381,186 Supplementary 275, ,456 31,896 Other charges 44,600 42,632 43,946 5,922,400 7,352,048 6,959,187 Payments in lieu of taxes 129, , ,789 TOTAL LEVIED 6,051,400 7,484,982 7,079,976 LESS: LEVIED FOR SCHOOL BOARDS - (1,440,003) (1,381,186) TOTAL MUNICIPAL TAXATION $ 6,051,400 $ 6,044,979 $ 5,698,790

37 35 ANALYSIS OF REVENUES YEAR ENDED GOVERNMENT TRANSFERS Budget Total Total Operating (note 21) Operations Capital Actual Actual ONTARIO GENERAL Ontario Municipal Partnership Fund $ 2,615,600 $ 2,615,600 $ - $ 2,615,600 $ 2,679,900 ONTARIO SPECIFIC Child care and related services 979, ,626 63,269 1,015,895 1,063,603 Community Investment Fund (CIF) - 36,450 2,954 39,404 19,175 Connecting Links Program - - 2,653,799 2,653,799 - Clean Water and Waste Water Fund (CWWF) , ,686 - CSTP program 13,600 13,633-13,633 - Dedicated gas tax funds 44,300 45,625-45,625 44,609 Long-term care relief - 126, , ,826 MCSCS Ride - - 3,335 3,335 6,755 Ministry of Tourism Culture and Sports ,208 NEOnet Inc. - 4,928-4,928 7,563 NOHFC 33,600 21,969-21,969 7,214 Ontario Community Fund Infrastructure (OCIF) , ,217 - OMAFRA ,701 Ontario youth program 2,900 2,979-2,979 2,875 Planning board 25,900 25,894-25,894 25,894 1,099,300 1,230,930 2,991,260 4,222,190 1,426,423 CANADA SPECIFIC Canada work program 4,100 3,639-3,639 6,361 EM-INAC Evacuees - 616, ,222 74,285 Federal Gas tax - 65, , , ,992 Disability grant - - 7,920 7,920-4, , ,947 1,048, ,638 $ 3,719,000 $ 4,531,527 $ 3,355,207 $ 7,886,734 $ 4,401,961

38 36 ANALYSIS OF REVENUES YEAR ENDED Budget (note 21) Actual Actual FEES AND SERVICE CHARGES Water and sewer services $ 1,587,300 $ 1,547,602 $ 1,466,333 Meter collections and environmental services 110,000 94,730 92,162 Child care centre fees 313, , ,580 Planning and development fees 11,400 18,629 17,095 Recreational services 477, , ,109 Cemeteries fees 40,000 37,387 49,835 Fire protection and housing services 29,700 25,512 29,173 Administration fees and services 125, , ,278 Air transportation services 274, , ,754 $ 2,968,700 $ 2,916,015 $ 2,827,319 OTHER REVENUES Provincial Offences Act $ 75,600 $ 112,960 $ 74,680 Licences and permits 67,900 55,631 61,467 Equipment rentals 676, , ,529 Fines 27,000 19,963 18,769 Penalties and interest on taxes 41,000 38,335 47,048 Investment income 107, , ,735 Sale of materials 1,700 6,336 7,765 Overhead recovered 82, , ,580 Donations and local contributions - 141,687 71,459 Miscellaneous 48,200 53,698 58,075 $ 1,127,800 $ 1,363,447 $ 1,202,107

39 37 ANALYSIS OF EXPENSES YEAR ENDED Budget (note 21) Actual Actual GENERAL GOVERNMENT SERVICES SALARIES, WAGES AND BENEFITS Members of council $ 106,800 $ 105,683 $ 104,503 Administration 766, , ,981 Municipal building operation 2,200 1,374 1, , , ,056 INTEREST AND BANK CHARGES 22,100 29,246 25,845 SUPPLIES AND SERVICES Members of council 73,800 65,139 75,052 Administration 248, , ,839 Municipal building operation 36,800 31,668 32, , , ,494 CONTRACTED SERVICES Municipal building operation 77,700 77,197 75,622 AMORTIZATION - 86,098 84,260 $ 1,334,700 $ 1,467,930 $ 1,540,277

40 38 ANALYSIS OF EXPENSES YEAR ENDED Budget (note 21) Actual Actual PROTECTION SERVICES SALARIES, WAGES AND BENEFITS Police services $ 2,500 $ 1,500 $ 1,000 Fire department 123,400 88, ,800 Emergency measures - 11, Protective inspection and control 48,400 53,537 59, , , ,349 SUPPLIES AND SERVICES Police services 1,200 3,392 6,953 Fire department 136, ,789 97,472 Emergency measures 6, ,031 68,950 Protective inspection and control 28,500 24,816 22, , , ,075 CONTRACTED SERVICES Police services 1,040,500 1,030,351 1,103,277 Fire department 9,900 26,508 9,252 Emergency measures 67,300 84,871 61,090 1,117,700 1,141,730 1,173,619 AMORTIZATION - 55,537 50,935 $ 1,464,400 $ 2,085,048 $ 1,587,978

41 39 ANALYSIS OF EXPENSES YEAR ENDED Budget (note 21) Actual Actual TRANSPORTATION SERVICES SALARIES, WAGES AND BENEFITS Roadways $ 593,600 $ 582,707 $ 610,139 Winter control 171, , ,114 Parking control 154, , ,780 Air transportation 22,100 11,234 10, , , ,744 INTEREST AND BANK CHARGES 2,900 2,874 2,946 SUPPLIES AND SERVICES Roadways 669, , ,523 Winter control 304, , ,825 Parking control 14,600 16,120 11,142 Air transportation 252, , ,270 Street lighting 239, , ,957 1,480,500 1,207,446 1,190,717 CONTRACTED SERVICES Transit - long-term care transportation 148, , ,658 Winter control 56,000 33,758 23,903 Air transportation 63,100 59,624 58, , , ,913 LOSS ON DISPOSAL OF TANGIBLE CAPITAL ASSETS - 211,390 - AMORTIZATION - 1,328,372 1,285,799 $ 2,692,100 $ 3,889,016 $ 3,616,119

42 40 ANALYSIS OF EXPENSES YEAR ENDED Budget (note 21) Actual Actual ENVIRONMENTAL SERVICES SALARIES, WAGES AND BENEFITS Sanitary sewer system $ 31,800 $ 34,273 $ 31,546 Storm sewer system 34,100 24,416 38,389 Waste collection, disposal and recycling 233, , ,561 Water works system 27,200 19,549 17, , , ,729 SUPPLIES AND SERVICES Sanitary sewer system 229, , ,019 Storm sewer system 64,300 35,645 64,920 Waste collection, disposal and recycling 195, , ,018 Waste and recycling projects - 183,083 - Water works system 242, , , , , ,275 CONTRACTED SERVICES Water works system 37,800 35,209 36,886 Waste collection, disposal and recycling 201,200 47, ,711 Lagoon operations system 139, , ,519 Water filtration plant 416, , , , , ,673 LOSS ON DISPOSAL OF TANGIBLE CAPITAL ASSETS - 8,869 - AMORTIZATION 660, , ,221 $ 2,513,500 $ 2,597,534 $ 2,383,898