CORPORATION OF THE TOWN OF HEARST

Transcription

1 CORPORATION OF THE TOWN OF HEARST INDEPENDENT AUDITOR S REPORT AND INTERNAL FINANCIAL STATEMENTS

2 INTERNAL FINANCIAL STATEMENTS Council and Officials 1 Management s Report 2 Independent Auditor s Report 3-4 FINANCIAL STATEMENTS Internal Statement of Financial Position 5 Internal Statement of Operations 6 Internal Statement of Changes in Net Financial Assets 7 Internal Statement of Cash Flows 8 Notes to Internal Financial Statements 9-27 Schedule of Tangible Capital Assets 28 Independent Auditor s Report on Trust Funds Trust Funds - Statement of Continuity and Statement of Financial Position 31 Trust Funds - Notes to Financial Statements 32 Analysis of Revenues Analysis of Expenses 36-43

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 Marc Dufresne Janice Newsome Réal Lapointe Marcel Dillon Manon Higgins

4 2 MANAGEMENT S REPORT The accompanying financial statements of the Corporation of the Town of Hearst are the responsibility of the Municipality s management and have been prepared in accordance with Canadian generally accepted accounting principles for local governments established by the Public Sector Accounting Board of the Chartered Professional Accountants Canada. A summary of the significant accounting policies are described in the notes to the financial statements. The preparation of financial statements necessarily involves the use of estimates based on management s judgments, particularly when transactions affecting the current accounting period cannot be finalized with certainty until future periods. The Municipality s management maintains a system of internal controls designed to provide reasonable assurance that assets are safeguarded, transactions are properly authorized and recorded in compliance with legislative and regulatory requirements, and reliable financial information is available on a timely basis for preparation of the financial statements. These systems are monitored and evaluated by management. Town Council meets with management to review the financial statements and discuss any significant financial reporting or internal control matters prior to their approval of the financial statements. The financial statements have been audited by Collins Barrow Gagné Gagnon Bisson Hébert, independent external auditors appointed by Town Council. The accompanying Independent Auditor s Report outlines their responsibilities, the scope of their examination and their opinion on the Municipality s financial statements. Manon Higgins, Treasurer Hearst, Ontario June 20, 2017

5 3 INDEPENDENT AUDITOR S REPORT To the Members of Council, Inhabitants and Ratepayers of the Corporation of the Town of Hearst Report on the Financial Statements We have audited the accompanying financial statements of the Corporation of the Town of Hearst, which comprise the internal statement of financial position as at December 31, 2016 and the internal statements of operations, changes 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 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 controls 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.

6 4 INDEPENDENT AUDITOR S REPORT (CONT D) Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of the Corporation of the Town of Hearst as at December 31, 2016, and the results of its operations, 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 20, 2017

7 5 INTERNAL STATEMENT OF FINANCIAL POSITION FINANCIAL ASSETS Cash $ 2,291,538 $ 1,224,008 Accounts receivable (note 4) 920,502 1,657,308 Taxes receivable 198, ,336 Long-term receivables (note 5) 2,277,495 2,458,239 Investments (note 6) 1,234, ,135 LIABILITIES 6,922,820 6,029,026 Accounts payable and accrued liabilities (note 9) 955,312 1,480,867 Deferred revenues - obligatory reserve funds (note 10) 224, ,817 Long-term debt (note 11) 822, ,452 2,002,141 2,594,136 NET FINANCIAL ASSETS 4,920,679 3,434,890 NON-FINANCIAL ASSETS Inventories of supplies 326, ,676 Prepaid expenses 42,726 63,214 Tangible capital assets (note 7) 39,681,013 41,672,891 40,050,703 41,992,781 ACCUMULATED SURPLUS (note 12) $ 44,971,382 $ 45,427,671 CONTINGENCIES (note 16) COMMITMENTS (note 17) The accompanying notes are an integral part of these financial statements.

8 6 INTERNAL STATEMENT OF OPERATIONS YEAR ENDED Budget (note 22) Actual Actual REVENUES (PAGES 33 TO 35) Taxation $ 5,862,800 $ 5,724,128 $ 5,478,778 Government transfers - operations 3,687,600 4,095,146 3,866,711 Fees and service charges 2,940,400 2,956,728 2,910,924 Other revenues 1,082,900 1,202,107 1,459,262 EXPENSES (PAGES 36 TO 43) 13,573,700 13,978,109 13,715,675 General government services 1,367,800 1,541,372 1,450,443 Protection services 1,619,500 1,606,978 1,727,308 Transportation services 4,091,000 3,620,360 4,037,448 Environmental services 2,369,100 2,415,218 2,613,553 Health services 567, , ,932 Social and family services 2,330,100 2,262,272 2,259,824 Recreation and cultural services 2,056,500 2,011,958 2,033,098 Planning and development services 743, , ,884 15,144,900 14,741,213 15,441,490 EXCESS OF EXPENSES OVER REVENUES (1,571,200) (763,104) (1,725,815) GOVERNMENT TRANSFERS - CAPITAL - 306,815 2,493,779 SURPLUS (DEFICIT) FOR THE YEAR (1,571,200) (456,289) 767,964 ACCUMULATED SURPLUS, BEGINNING OF YEAR 45,427,671 45,427,671 44,659,707 ACCUMULATED SURPLUS, END OF YEAR (note 12) $ 43,856,471 $ 44,971,382 $ 45,427,671 The accompanying notes are an integral part of these financial statements.

9 7 INTERNAL STATEMENT OF CHANGES IN NET FINANCIAL ASSETS YEAR ENDED SURPLUS (DEFICIT) FOR THE YEAR $ (456,289) $ 767,964 TANGIBLE CAPITAL ASSET ACTIVITY Acquisition of tangible capital assets (706,322) (3,749,550) Loss on disposal of tangible capital assets - 62,415 Amortization of tangible capital assets 2,698,200 2,775,402 NON-FINANCIAL ASSET ACTIVITY 1,991,878 (911,733) Change in inventories and prepaid expenses (49,800) 52,849 INCREASE (DECREASE) IN NET FINANCIAL ASSETS 1,485,789 (90,920) NET FINANCIAL ASSETS, BEGINNING OF YEAR 3,434,890 3,525,810 NET FINANCIAL ASSETS, END OF YEAR $ 4,920,679 $ 3,434,890 The accompanying notes are an integral part of these financial statements.

10 8 INTERNAL STATEMENT OF CASH FLOWS YEAR ENDED OPERATING ACTIVITIES Surplus (deficit) for the year $ (456,289) $ 767,964 Items non affecting cash: Loss on disposal of tangible capital assets - 62,415 Amortization of tangible capital assets 2,698,200 2,775,402 Changes in: Accounts receivable 736,806 5,346 Taxes receivable (24,312) 46,883 Accounts payable and accrued liabilities (525,555) (155,215) Deferred revenue - obligatory reserve funds 32,329 (241,647) Inventories of supplies (70,288) (5,932) Prepaid expenses 20,488 58,781 2,411,379 3,313,997 CAPITAL ACTIVITIES Acquisition of tangible capital assets (706,322) (3,749,550) INVESTING ACTIVITIES Increase in investments (719,502) (13,200) Advances received on long-term receivables 180, ,862 (538,758) 95,662 FINANCING ACTIVITIES Principal payments on long-term debt (154,600) (149,772) Proceeds from long-term debt 55,831 - (98,769) (149,772) INCREASE (DECREASE) IN CASH POSITION 1,067,530 (489,663) CASH POSITION, BEGINNING OF YEAR 1,224,008 1,713,671 CASH POSITION, END OF YEAR $ 2,291,538 $ 1,224,008 The accompanying notes are an integral part of these financial statements.

11 9 NOTES TO INTERNAL 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 internal 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. 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 Porcupine Health Unit Public Library Board

12 10 NOTES TO INTERNAL FINANCIAL STATEMENTS 2. SIGNIFICANT ACCOUNTING POLICIES (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 these internal 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 31). 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 collectibility 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 beyond the current year end 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 provides the change in net assets for the year. INVENTORIES OF SUPPLIES Inventories held for consumption are recorded at the lower of cost and replacement cost with cost being determined by the average cost method. 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. 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.

13 11 NOTES TO INTERNAL FINANCIAL STATEMENTS 2. SIGNIFICANT ACCOUNTING POLICIES (CONT D) 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. TANGIBLE CAPITAL ASSETS Tangible capital assets are recorded at cost which includes all amounts that are directly attributable to acquisition, construction, development or settlement of the asset. The cost, less residual value, if any, of the tangible capital assets are 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. 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.

14 12 NOTES TO INTERNAL FINANCIAL STATEMENTS 2. SIGNIFICANT ACCOUNTING POLICIES (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. TAXATION 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. ACCUMULATED SURPLUS / RESERVES 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.

15 13 NOTES TO INTERNAL FINANCIAL STATEMENTS 3. FUTURE CHANGES IN ACCOUNTING STANDARDS The amended pronouncements for 2016 are: Financial Instruments, PS 3450, Foreign Currency Translation, PS 2601 and Financial Statement Presentation, PS They are effective for fiscal years beginning on or after April 1, While early adoption is permitted, all three of the standards must be adopted in the same year. PS 3450 provides guidance on the recognition, measurement, presentation and disclosure of financial instruments including derivative instruments. PS 2601, Foreign Currency Translation includes guidance on deferral and amortization of unrealized gains and losses, hedge accounting and separation of realized and unrealized foreign exchange gains and losses. PS 1201 Financial Statement Presentation includes the addition of a new statement outlining re-measurement gains and losses. The new pronouncements for 2016 are: Assets, PS 3210, Contingent assets, PS 3320, Contractual rights, PS 3380 and Restructuring transactions, PS PS 3210, PS 3320 and PS 3380 are effective for fiscal years beginning on or after April 1, 2017, and an early adoption is permitted. PS 3430 is effective for fiscal year beginning on or after April 1, 2018, and an early adoption is permitted. PS 3210, Assets provides guidance for applying the definition of assets set out in Financial Statement Concepts, Section PS 1000, and establishes general disclosure standards for assets. PS 3320, Contingent assets defines and establishes disclosure standards on contingent assets. PS 3380, Contractual rights, defines and establishes disclosures standards on contractual rights. PS 3430, Restructuring transactions defines a restructuring transaction and establishes standards for recognizing and measuring assets and liabilities in a restructuring transaction. The Municipality has not yet adopted these standards, nor determined the effect on the internal financial statements. 4. ACCOUNTS RECEIVABLE Province of Ontario $ 67,625 $ 492,440 Government of Canada 164, ,661 Due from Local Boards 484, ,784 Other 204, ,423 $ 920,502 $ 1,657,308

16 14 NOTES TO INTERNAL 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 $ 75,518 $ 70,002 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 discretion of 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 discretion of 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 , ,493 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 , ,744 Private loans receivable under the Community Improvement Plan, no interest, yearly capital payments of $6,000, due in 2017 and ,000 15,000 $ 2,277,495 $ 2,458,239

17 15 NOTES TO INTERNAL FINANCIAL STATEMENTS 6. INVESTMENTS One Investment - Corporate bonds mutual fund $ 1,234,637 $ 515,135 The bonds are recorded at cost. Over the years, $1,200,000 were invested and $34,637 of interest income were reinvested. As of December 31, 2016, the fair market value is $1,211,829 ( $512,383) 7. TANGIBLE CAPITAL ASSETS General Land and vacant land $ 1,033,276 $ 1,033,276 Land improvements 1,430,808 1,513,470 Buildings 8,597,372 9,008,485 Vehicles, machinery and equipment 1,834,997 1,980,958 Furniture and fixtures 157, ,152 Computers 150, ,627 Infrastructure Roads 12,405,485 13,232,269 Water system 5,698,450 5,900,790 Storm sewer system 4,590,437 4,749,342 Sanitary sewer system 3,782,582 3,929,522 $ 39,681,013 $ 41,672,891

18 16 NOTES TO INTERNAL FINANCIAL STATEMENTS 7. TANGIBLE CAPITAL ASSETS (CONT D) For additional information, see the Schedule of Tangible Capital Assets (page 28) During the year, $57,735 of tangible capital assets were written down or disposed ( $521,162). The distribution by segment is as follows: General government $ 505,612 $ 573,478 Protection to persons and property 570, ,898 Transportation services 15,073,355 16,021,332 Environmental services 16,400,900 16,946,724 Health services 106, ,265 Recreation and cultural services 2,440,285 2,623,693 Social and family services 1,163,440 1,225,089 Planning and development 3,420,290 3,555,412 $ 39,681,013 $ 41,672, 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. 9. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Trade payables and accruals $ 532,821 $ 946,621 Payroll related 223, ,995 Holdbacks 18,272 92,753 Government remittances 22,588 23,452 Due to other funds and related parties 158, ,046 $ 955,312 $ 1,480,867

19 17 NOTES TO INTERNAL FINANCIAL STATEMENTS 10. DEFERRED REVENUES - 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 Internal 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 REVENUES Balance, Balance, beginning Received Used ending Bicycle paths $ 15,507 $ - $ - $ 15,507 Child Care Centre Improvements 8,502-3,450 5,052 Health and Safety 11, ,190 Je Bouge/I Move 50,095-50,095 - Monument 3, ,033 Nord Aski license Other 2, ,616 Planning Board 5, ,205 Wages and training 15,659-1,899 13,760 Waste Management 6,505-6,505 - Well being clinic 7, ,500 OBLIGATORY RESERVE FUNDS 126, ,743 63,962 Derelict motor vehicle 35, ,260 Dedicated gas tax 11, ,483 Federal gas tax 17, , , ,441 65, , , ,184 $ 191,817 $ 310,063 $ 277,734 $ 224,146

20 18 NOTES TO INTERNAL FINANCIAL STATEMENTS 11. 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 $ 704,496 $ 820,493 TRANSPORTATION SERVICES Loan repaid in the current year - 13,114 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 ,614 81,548 6 th street local improvement loan, payable to Caisse Populaire de Hearst Limitée, monthly interest payments at 0.25% under prime, yearly principal payment of $2,635, secured by a general assignment of the Municipality s properties, due in ,481 6,297 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 ,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 ,257 - $ 822,683 $ 921,452

21 19 NOTES TO INTERNAL FINANCIAL STATEMENTS 11. 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: 2017 $ 140, , , , , and subsequent 95,527 $ 822,683 During the year, the Municipality paid the following long-term debt charges: Principal Interest Total Total General Government $ 115,997 $ 24,068 $ 140,065 $ 140,066 Transportation Services 38,603 3,418 42,021 43,701 $ 154,600 $ 27,486 $ 182,086 $ 183,767 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 INTERNAL 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 Deferred capital contributions 5,632,319 5,968,837 Electrical services 1,625,218 1,598,829 Health services 6,121 6,121 Lifeline 89,088 87,049 Parks and recreation 176, ,052 Planning and Economic Development 5,482 5,482 Sanitary sewers 63,922 63,922 Snowmobile 6,354 6,354 Waste management 60,941 48,441 Waterworks 83,316 83,316 Working capital 100, ,000 INVESTED IN TANGIBLE CAPITAL ASSETS 8,298,188 8,593,778 Tangible capital assets - net book value 39,681,013 41,672,891 Long-term debt (822,683) (921,452) Local improvement receivable 138, ,744 38,996,811 40,954,183 GENERAL DEFICIT (2,323,617) (4,120,290) $ 44,971,382 $ 45,427,671

23 21 NOTES TO INTERNAL FINANCIAL STATEMENTS 13. EXPENSES BY OBJECT The operating expenses for the year reported of the Internal Statement of Operations by object are as follows: Budget (Note 22) Actual Actual Salary, wages and benefits $ 3,994,300 $ 4,031,061 $ 3,947,253 Interest and bank charges 30,200 28,791 33,995 Supplies and services 3,891,400 3,661,130 3,926,905 Contracted services 2,727,500 2,310,435 2,665,803 External transfers 1,803,200 2,011,596 2,029,717 Amortization 2,698,300 2,698,200 2,775,402 Loss on disposal of tangible capital assets ,415 $ 15,144,900 $ 14,741,213 $ 15,441, CONTRIBUTION TO NON CONSOLIDATED ENTITIES Further to note Non-consolidated entities, the following contributions were made by the Municipality to these entities: Budget (note 22) Hearst and Area Economic Development Corporation $ 438,100 $ 418,260 $ 410,854 Downtown Business Improvement Area Board 33,300 33,275 33,275 Porcupine Health Unit 164, , ,548 Public Library Board 228, , ,600 District of Cochrane Social Services Administration Board 860, , ,759 $ 1,725,100 $ 1,671,600 $ 1,689,036 The Municipality share of the non-consolidated entities is as follow: Hearst and Area Economic Development Corporation - surplus $ 81,294 $ 70,161 Downtown Business Improvement Area Board - surplus $ 48,376 $ 53,481 Porcupine Health Unit Information not available Public Library Board - surplus $ 192,910 $ 186,019 District of Cochrane Social Services Administration Board Information not available

24 22 NOTES TO INTERNAL FINANCIAL STATEMENTS 15. TRUST FUNDS Trust funds administered by the Municipality amounting to $543,888 ( $527,804) have not been included in the Internal Statement of Financial Position nor have their operations been included in the Internal Statement of Operations. 16. CONTINGENCIES The Municipality is a guarantor on a loan of $2,952,650 ( $3,285,449) and a loan of $1,292,420 ( $1,338,546) owed by Foyer Hearst-Mattice Soins de Santé. As of December 31, 2016 no covenants on these loans were in default. The Municipality is a guarantor on a loan of $25,000 ( $25,000) owed by a medical student. As of December 31, 2016, no covenants on this loan were in default. The Municipality is a guarantor on a loan of $279,610 ( $287,417) and on a line of credit of $15,000 ( nil) owed by the Hearst Community Curling Club. As of December 31, 2016, no covenants on this loan were in default. 17. COMMITMENTS Signed agreements The Municipality has currently committed the following amounts through various signed agreements: Total General government $ 20,221 $ 20,221 $ - $ - $ - $ 40,442 Protection services 1,632,265 1,742,265 1,765, ,139,820 Transportation services 110, , ,688 Environmental 540, , , ,670-2,162,680 Social and family services 14, ,040 Recreation services 18,537 18,537 18,537 18,537 18,537 92,685 Planning 13,825 1, ,977 $ 2,349,870 $ 2,423,353 $ 2,325,365 $ 559,207 $ 18,537 $ 7,676,332

25 23 NOTES TO INTERNAL FINANCIAL STATEMENTS 17. COMMITMENTS (CONT D) Benefits for retired employees Per agreement, the Municipality purchases certain benefits for retired employees until they reach 65 years of age. Payments for these benefits will amount to: 2017 $ 52, , , , ,792 $ 212, 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 $86,959 million ( $81,924 million) in respect of benefits with net assets available for benefits at that date of $85,360 million ( $77,245 million) indicating an actuarial deficit of $5,720 million ( $6,977 million). The primary plan s funded ratio of assets to pension obligation was 93.4% ( %). Because OMERS is a multi-employer 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 2016 were $283,272 ( $300,270). Employer contributions are included as an expense on the Internal Statement of Operations.

26 24 NOTES TO INTERNAL FINANCIAL STATEMENTS 19. 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 $69,825 for the current year ( $81,452). 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 18 years.

27 25 NOTES TO INTERNAL FINANCIAL STATEMENTS 20. RELATED PARTY TRANSACTIONS During the year, the Municipality incurred the following transactions with Hearst Power Distribution Company Limited and Hearst Power Sales and Services Company Limited, wholly owned government business enterprises. Hearst Power Distribution Company Limited Revenues: Clerical and answering services $ 173,251 $ 176,769 Gasoline $ 4,217 $ 4,691 Interest on long-term debt $ 77,097 $ 79,300 Miscellaneous $ 1,334 $ 379 Office supplies $ 618 $ 429 Rent $ 13,608 $ 13,380 Repair and maintenance $ 8,468 $ 10,235 Retrofits $ 130,608 $ 5,219 Telephone $ 2,613 $ 3,497 Water $ 929,144 $ 896,080 Expenses: Service (hydro) $ 810,243 $ 817,005 Year end balances were as follows: Due from Hearst Power Distribution Company $ 351,728 $ 429,192 Long-term receivable $ 1,250,000 $ 1,250,000 Hearst Power Sales and Services Company Limited Interest revenue $ 24,068 $ 27,516 Capital loan payments $ 115,997 $ 112,550 Year end balances were as follows: Due from Local Boards $ - $ 51,084 Long-term receivables $ 804,496 $ 920,493 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, 2016, Hearst Power Distribution Company Limited has equity of $3,177,153 and Hearst Power Sales and Services Company Limited has equity of $221,798.

28 26 NOTES TO INTERNAL FINANCIAL STATEMENTS 21. 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.

29 27 NOTES TO INTERNAL FINANCIAL STATEMENTS 22. BUDGET The budget approved by the Municipality for 2016 is reflected on the Internal 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 but are included in the detailed operating budget as follows: Budget approved Total by Council Amortization Budget General government services $ 1,283,500 $ 84,300 $ 1,367,800 Protection services 1,568,500 51,000 1,619,500 Transportation services 2,805,200 1,285,800 4,091,000 Environmental services 2,222, ,700 2,369,100 Health services 556,200 11, ,500 Social and family services 2,247,900 82,200 2,330,100 Recreational and cultural services 1,771, ,900 2,056,500 Planning and development services 607, , ,400 $ 13,063,100 $ 2,081,800 $ 15,144,900 Included in the budget approved by the Council in the Environment services an amount of $616,500 of budgeted amortization expense, therefore the total budget amortization is in the amount of $2,698,300.

30 28 SCHEDULE OF TANGIBLE CAPITAL ASSETS YEAR ENDED GENERAL INFRASTRUCTURETOTALS 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 $ 4,363,476 $ 18,820,924 $ 4,906,700 $ 1,694,906 $ 405,295 $ 32,224,867 $ 10,321,206 $ 15,312,277 $ 89,082,927 $ 85,854,539 Add: Additions - 82, ,374 96,412 30,935 80, , ,322 3,749,550 Less: Disposals (44,567) (2,406) (10,763) - - (57,736) (521,162) Balance, end of year 1,033,276 4,445,704 19,010,298 5,003,112 1,681, ,328 32,441,038 10,321,206 15,312,277 89,731,513 89,082,927 ACCUMULATED AMORTIZATION Balance, beginning of year - 2,850,006 9,812,439 2,925,742 1,500, ,668 18,992,598 4,420,416 6,633,413 47,410,036 45,093,381 Add: Amortization during the year - 164, , ,373 67,679 60,868 1,053, , ,845 2,698,200 2,775,402 Less: Accumulated amortization on disposals (44,567) (2,406) (10,763) - - (57,736) (458,747) Balance, end 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 NET BOOK VALUE $ 1,033,276 $ 1,430,808 $ 8,597,372 $ 1,834,997 $ 157,408 $ 150,198 $ 12,405,485 $ 5,698,450 $ 8,373,019 $ 39,681,013 $ 41,672,891

31 29 INDEPENDENT AUDITOR S REPORT To the Members of Council, Inhabitants and Ratepayers of the Corporation of the Town of Hearst Report on the Financial Statements We have audited the accompanying financial statements of the trust fund of the Corporation of the Town of Hearst, which comprise the statement of financial position as at December 31, 2016 and the statement of continuity of trust fund 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.

32 30 INDEPENDENT AUDITOR S REPORT (CONT D) Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of trust fund of the Corporation of the Town of Hearst as at December 31, 2016, 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 20, 2017

33 TRUST FUNDS 31 STATEMENT OF CONTINUITY OF FUNDS YEAR ENDED Cemetery Educational Care and Assistance Maintenance Fund Fund Total Total ACCUMULATED SURPLUS, BEGINNING OF YEAR $ 242,746 $ 285,058 $ 527,804 $ 513,115 REVENUES Interest and dividends earned - 25,388 25,388 22,124 Perpetual care charge 7,196-7,196 6,572 7,196 25,388 32,584 28,696 EXPENSES Scholarships - 16,500 16,500 14,000 School expenses ,500 16,500 14,007 ACCUMULATED SURPLUS, END OF YEAR $ 249,942 $ 293,946 $ 543,888 $ 527,804 STATEMENT OF FINANCIAL POSITION FINANCIAL ASSETS Cash $ 249,782 $ 78,530 $ 328,312 $ 317,642 Due from Municipality , , ,162 ACCUMULATED SURPLUS $ 249,942 $ 293,946 $ 543,888 $ 527,804

34 TRUST FUNDS 32 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.

35 33 ANALYSIS OF REVENUES YEAR ENDED Budget (note 22) Actual Actual TAXATION Municipal $ 5,512,200 $ 5,527,496 $ 5,304,699 Education - 1,381,186 1,378,887 Supplementary 185,000 31,896 19,379 Other charges 45,100 43,946 40,394 5,742,300 6,984,524 6,743,359 Payments in lieu of taxes 120, , ,306 TOTAL LEVIED 5,862,800 7,105,314 6,857,665 LESS: LEVIED FOR SCHOOL BOARDS - (1,381,186) (1,378,887) TOTAL MUNICIPAL TAXATION $ 5,862,800 $ 5,724,128 $ 5,478,778

36 34 ANALYSIS OF REVENUES YEAR ENDED GOVERNMENT TRANSFERS Budget Total Total Operating (note 22) Operations Capital Actual Actual ONTARIO GENERAL Ontario Municipal Partnership Fund $ 2,679,900 $ 2,679,900 $ - $ 2,679,900 $ 2,745,700 ONTARIO SPECIFIC Child care and related services 870,900 1,063,603-1,063, ,593 Community Investment Fund (CIF) ,175 19,175 - CSTP program 2, ,515 Dedicated gas tax funds 44,200 44,609-44,609 44,960 Long-term care relief - 126, ,826 - MCSCS Ride - - 6,755 6,755 7,551 Ministry of Tourism Culture and Sports 50,095 38,208-38,208 54,612 NEOnet Inc. - 7,563-7,563 - NOHFC 10,305 7,214-7,214 15,886 Ontario Community Fund Infrastructure ,701 83,701 - OMAFRA ,116,816 Ontario youth program 2,500 2,875-2,875 13,206 Planning board 25,900 25,894-25,894 25,894 Strategic economic plan ,701 1,006,400 1,316, ,631 1,426,423 3,277,194 CANADA SPECIFIC Canada work program 1,300 6,361-6,361 1,320 EM-INAC Evacuees - 74,285-74,285 - Federal Gas tax - 17, , , ,654 Fednor ,872 National Trail Coalition ,750 1,300 98, , , ,596 $ 3,687,600 $ 4,095,146 $ 306,815 $ 4,401,961 $ 6,360,490

37 35 ANALYSIS OF REVENUES YEAR ENDED Budget (note 22) Actual Actual FEES AND SERVICE CHARGES Water and sewer services $ 1,539,900 $ 1,536,627 $ 1,437,055 Meter collections and environmental services 100,400 92, ,698 Child care centre fees 303, , ,561 Planning and development fees 9,600 17,095 7,475 Recreational services 458, , ,211 Cemeteries fees 40,000 49,835 40,881 Fire protection and housing services 27,800 29,173 30,652 Administration fees and services 186, , ,902 Air transportation services 274, , ,489 $ 2,940,400 $ 2,956,728 $ 2,910,924 OTHER REVENUES Provincial Offences Act $ 71,800 $ 74,680 $ 79,173 Licences and permits 61,300 61,467 67,495 Equipment rentals 632, , ,508 Fines 24,000 18,769 20,818 Penalties and interest on taxes 43,200 47,048 47,450 Investment income 128, , ,063 Sale of materials 1,600 7,765 67,566 Overhead recovered 79, ,580 80,742 Donations - 71, ,500 Miscellaneous 41,000 58,075 43,947 $ 1,082,900 $ 1,202,107 $ 1,459,262

38 36 ANALYSIS OF EXPENSES YEAR ENDED Budget (note 22) Actual Actual GENERAL GOVERNMENT SERVICES SALARIES, WAGES AND BENEFITS Members of council $ 104,700 $ 104,503 $ 98,715 Administration 748, , ,266 Municipal building operation 2,500 1,572 2, , , ,389 INTEREST AND BANK CHARGES 25,700 25,845 30,717 SUPPLIES AND SERVICES Members of council 75,800 75,052 77,193 Administration 215, , ,680 Municipal building operation 35,200 33,698 33, , , ,408 CONTRACTED SERVICES Municipal building operation 75,900 75,622 75,856 AMORTIZATION 84,300 84, ,073 $ 1,367,800 $ 1,541,372 $ 1,450,443

39 37 ANALYSIS OF EXPENSES YEAR ENDED Budget (note 22) Actual Actual PROTECTION SERVICES SALARIES, WAGES AND BENEFITS Police services $ 2,500 $ 1,000 $ 1,300 Fire department 124, , ,652 Emergency measures Protective inspection and control 63,400 59,191 66, , , ,935 SUPPLIES AND SERVICES Police services 1,200 6,953 8,686 Fire department 135, , ,755 Emergency measures 6,300 68,950 5,812 Protective inspection and control 33,700 22,700 22, , , ,694 CONTRACTED SERVICES Police services 1,114,500 1,103,277 1,248,551 Fire department 9,300 9,252 8,564 Emergency measures 77,100 61,090 72,135 1,200,900 1,173,619 1,329,250 AMORTIZATION 51,000 50,935 56,429 $ 1,619,500 $ 1,606,978 $ 1,727,308