THE CHILDREN'S AID SOCIETY OF THE DISTRICTS OF SUDBURY AND MANITOULIN

Transcription

1 Financial Statements of THE CHILDREN'S AID SOCIETY OF THE DISTRICTS OF SUDBURY AND MANITOULIN

2 KPMG LLP Telephone (705) Claridge Executive Centre Fax (705) Pine Street In Watts (1800) Sudbury ON P3C 1X3 Internet INDEPENDENT AUDITORS' REPORT To the Board of Directors of The Children's Aid Society of the Districts of Sudbury and Manitoulin We have audited the accompanying financial statements of The Children's Aid Society of the Districts of Sudbury and Manitoulin, which comprise the statement of financial position as at March 31, 2015, the statements of operations, changes in net assets (deficiency), cash flows and the statement of remeasurement gains and losses for the year then ended, and notes, comprising 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. Auditors 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 disclosure in the financial statements. The procedures selected depend on our 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, we consider internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. KPMG LLP, is a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. KPMG Canada provides services to KPMG LLP.

3 Opinion In our opinion, the financial statements present fairly, in all material respects the financial position of The Children's Aid Society of the Districts of Sudbury and Manitoulin as at March 31, 2015, and its results of operations, its cash flows and its remeasurement gains and losses for the year then ended, in accordance with Canadian public sector accounting standards. Chartered Professional Accountants, Licensed Public Accountants June 11, 2015 Sudbury, Canada

4 Statement of Financial Position March 31, 2015, with comparative information for 2014 Assets Current assets: Cash Accounts receivable: Due from the Ministry of Children and Youth Services Other Prepaid expenses $ 3,067,803 42, , ,597 3,610,069 2,883, , , ,590 3,536,509 Capital assets (note 2) 4,805,374 4,980,929 $ 8,415,443 8,517,438 Liabilities and Net Assets (Deficiency) Current liabilities: Accounts payable and accrued liabilities (note 5) Due to the Ministry of Children and Youth Services (note 6) Vacation payable Health spending account Deferred revenue Ontario Child Benefit Equivalent Current portion of longterm debt (note 4) Employee future benefits (note 3) Longterm debt (note 4) Interest rate swaps (note 4) Net assets (deficiency): Unrestricted: Operating Employee related Interest rate swaps Capital (note 7) Accumulated remeasurement gains Commitments (note 8) Contingencies (note 9) $ 3,127, , ,548 79, , ,221 4,507,982 5,572,231 3,563, ,333 14,432,236 (29,766) (6,209,157) (807,174) 1,010,463 (6,035,634) 18,841 (6,016,793) 3,153, ,233 79, , ,443 4,417,966 5,127,474 3,794, ,060 13,939,411 (24,403) (5,765,085) (807,174) 966,575 (5,630,087) 208,114 (5,421,973) $ 8,415,443 8,517,438 See accompanying notes to financial statements. 1

5 Statement of Operations, with comparative information for Operating Capital Total Total (Schedule) Revenue: Ministry of Children and Youth Services Child Welfare Operating $ 34,058,334 34,058,334 37,129,680 Ontario Child Benefit Equivalent 521, , ,947 Other 104, , ,825 Children's special allowance 1,292,170 1,292,170 1,391,890 Maintenance from other societies 212, , ,400 Children's pension/benefits 15,022 15,022 2,979 Maintenance from parents 2,800 2,800 1,150 Interest 43,242 43,242 31,029 Rental income 251, , ,355 Recoveries 412, , ,418 Other 42,109 42,109 35,991 36,956,057 36,956,057 40,198,664 Expenses: Wages 14,236,991 14,236,991 14,747,159 Benefits 3,992,154 3,992,154 4,209,724 Travel 1,657,178 1,657,178 1,790,964 Training and recruitment 113, , ,713 Building occupancy 924, , ,223 Amortization of capital assets 274, , ,714 Interest on longterm debt 203, , ,585 Purchased services noncase related 395, , ,976 Purchased services case related 697, , ,082 Boarding rates 11,390,384 11,390,384 13,356,922 Client personal needs 1,763,071 1,763,071 1,999,109 Medical and related services 672, , ,668 Promotion and publicity 21,138 21,138 18,324 Office 411, , ,501 Technology 256, , ,999 Miscellaneous 344, , ,645 37,082, ,198 37,356,241 40,391,308 Excess (deficiency) of revenue over expenses before undernoted (125,986) (274,198) (400,184) (192,644) Provincial subsidy for funding of prior years' deficit 1,332,218 Recovery of prior year's operating surplus (5,363) (5,363) Excess (deficiency) of revenue over expenses $ (131,349) (274,198) (405,547) 1,139,574 See accompanying notes to financial statements. 2

6 Statement of Changes in Net Assets (Deficiency), with comparative information for 2014 Operating Unrestricted Employee Interest related Rate Swaps Total Unrestricted Capital 2015 Total 2014 Total Net assets (deficiency), beginning of year Excess (deficiency) of revenue over expenses Net change in investment in capital assets $ (24,403) (5,765,085) (807,174) (6,596,662) 966,575 (5,630,087) (6,769,661) 312,723 (444,072) (131,349) (274,198) (405,547) 1,139,574 (318,086) (318,086) 318,086 Net assets (deficiency), end of year $ (29,766) (6,209,157) (807,174) (7,046,097) 1,010,463 (6,035,634) (5,630,087) See accompanying notes to financial statements. 3

7 Statement of Cash Flows, with comparative information for Cash flows from operating activities: Excess (deficiency) of revenue over expenses Adjustment for: Amortization of capital assets Provision for employmentrelated obligations Gain on debt retirement Change in noncash working capital: Decrease in due from the Ministry of Children and Youth Services Increase in accounts receivable other Increase in prepaid expenses Increase (decrease) in accounts payable and accrued liabilities Increase in due to the Ministry of Children and Youth Services Decrease in vacation payable Increase (decrease) in health spending account Decrease in deferred revenue Ontario Child Benefit Equivalent $ (405,547) 274, , , ,043 (55,045) (6,008) (25,409) 200,533 (685) (96,201) 502,636 $ 1,139, , ,295 (17,499) 1,857, ,278 (37,011) (17,474) 249,323 (12,143) (190,622) (123,117) 2,026,318 Cash flows from financing activities: Principal repayments on longterm debt (219,442) (276,371) Cash flows from capital activities: Capital asset additions (98,643) (40,350) Net increase in cash 184,551 1,709,597 Cash, beginning of year 2,883,252 1,173,655 Cash, end of year $ 3,067,803 $ 2,883,252 See accompanying notes to financial statements. 4

8 Statement of Remeasurement Gains and Losses, with comparative information for Accumulated remeasurement gains (losses), beginning of year $ 208,114 (10,110) Unrealized gains (losses) attributable to: Derivative interest rate swap (189,273) 218,224 Accumulated remeasurement gains, end of year $ 18, ,114 See accompanying notes to financial statements. 5

9 Notes to Financial Statements The Children's Aid Society of the Districts of Sudbury and Manitoulin (the "Society") provides child protection services in the territorial districts of Sudbury and Manitoulin. It is incorporated without share capital under the Laws of Ontario and is registered as a taxexempt charitable organization under the Federal Income Tax Act. 1. Significant accounting policies: The financial statements have been prepared by management in accordance with Canadian public sector accounting standards including the 4200 standards for government notforprofit organizations. (a) Revenue recognition: The Society accounts for contributions, which include donations and government grants, under the deferral method of accounting as follows: (b) Capital assets: Operating grants are recorded as revenue in the period to which they relate. Grants and donations relating to future periods are deferred and recognized in the subsequent period when the related activity occurs. Grants approved but not received are accrued. Unrestricted contributions are recognized as revenue when received or receivable if the amounts can be reasonably estimated and collection is reasonably assured. Externally restricted contributions are recognized as revenue in the period in which the related expenses are recognized. Contributions restricted for the purchase of capital assets are deferred and amortized into revenue at rates corresponding to those of the related capital assets. Capital assets are recorded at cost. Amortization of capital assets is recorded as follows: Asset Basis Period Buildings Straightline 30 years Furniture and equipment Straightline 10 years Computer equipment Straightline 3 years 6

10 Notes to Financial Statements (continued) 1. Significant accounting policies (continued): (c) Employee future benefits: Vacation entitlements and banked overtime are accrued for as entitlements are earned. The health spending account reflects the provision for the annual discretionary employee health spending of up to $1,000 annually. The Society accrues its obligations for postemployment benefit plans as the employees render the services necessary to earn the benefits. The actuarial determination of the accrued benefit obligation uses the projected benefit method prorated on service (which incorporates management s best estimate of future salary levels, other cost escalation, retirement ages of employees and other actuarial factors). Under this method, the benefit costs are recognized over the expected average service life of the employee group. Actuarial gains and losses on the accrued benefit obligation arise from differences between actual and expected experience and from changes in the actuarial assumptions used to determine the accrued benefit obligation. The Society elected to recognize these on transition. The most recent actuarial valuation of the sick leave plan and the benefit plan was as of September 30, Substantially all of the employees of the Society are eligible to be members of the Ontario Municipal Employees Retirement Fund ( OMERS ), which is a multiemployer, defined benefit, final average earnings and contributory pension plan. Defined contribution plan accounting is applied to OMERS as the Society has insufficient information to apply defined benefit accounting (note 10). (d) Use of estimates: The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Items subject to such estimates are valuation of capital assets and employee future benefits. Actual results could differ from those estimates. These estimates are reviewed periodically, and, as adjustments become necessary, they are reported in earnings in the year in which they become known. 7

11 Notes to Financial Statements (continued) 1. Significant accounting policies (continued): (e) Financial instruments: All financial instruments are initially recorded on the statement of financial position at fair value. All investments held in equity instruments that trade in an active market would be recorded at fair value. Management has elected to record investments at fair value as they are managed and evaluated on a fair value basis. Unrealized changes in fair value would be recognized in the statement of remeasurement gains and losses until they are realized, when they would be transferred to the statement of operations. Transaction costs incurred on the acquisition of financial instruments measured subsequently at fair value are expensed as incurred. Where a decline in fair value is determined to be other than temporary, the amount of the loss is removed from accumulated remeasurement gains and losses and recognized in the statement of operations. On sale, the amount held in accumulated remeasurement gains and losses associated with that instrument is removed from net assets and recognized in the statement of operations. Financial instruments are classified into fair value hierarchy Levels 1, 2 or 3 for the purposes of describing the basis of the inputs used to determine the fair market value of those amounts recorded a fair value, as described below: Level 1 Level 2 Level 3 Fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities Fair value measurements are those derived marketbased inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly Fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data The Society has selected to account for transactions at the trade date. 8

12 Notes to Financial Statements (continued) 2. Capital assets: Accumulated Net book 2015 Cost Amortization value Land $ 675, ,000 Buildings 5,502,622 1,510,555 3,992,067 Furniture and equipment 1,045, , ,526 Computer equipment 173, ,355 15,781 $ 7,396,387 2,591,013 4,805,374 Accumulated Net book 2014 Cost Amortization value Land $ 675, ,000 Buildings 5,409,962 1,315,264 4,094,698 Furniture and equipment 1,045, , ,856 Computer equipment 167, ,778 45,375 $ 7,297,743 2,316,814 4,980, Employee future benefits: The Society maintains defined benefit and defined contribution plans providing other retirement and employee future benefits to most of its employees. The costs of other postemployment benefits (including medical benefits, dental care, life insurance, and certain compensated absences) related to the employees current service is charged to income annually. The cost is computed on an actuarial basis using the projected benefit method estimating the usage frequency and cost of services covered and management s best estimates of investment yields, salary escalation, and other factors. Plan assets are valued at fair value for purposes of calculating the expected return on plan assets. The fair values of plan assets and accrued benefit obligations were determined by independent actuaries on behalf of the Society as at September 30,

13 Notes to Financial Statements (continued) 3. Employee future benefits (continued): The discount rate used is 3.5% ( %). Health care costs are presumed to increase at 8% commencing the first year and grading to 4% in Balance, April 1, 2014 $ 4,969,633 4,683,179 Benefit cost 301, ,795 Interest cost 218, ,366 Benefits paid (62,230) (53,866) Actuarial gains (20,907) (157,841) Balance, end of year 5,406,747 4,969,633 Unamortized net actuarial gains 165, ,841 Employee future benefit, March 31, 2015 $ 5,572,231 5,127, Longterm debt: CIBC debt, due April 2, 2027 $ 3,794,911 4,014,354 Current portion of longterm debt (231,221) (219,443) $ 3,563,690 3,794,911 Interest rate swaps $ 788, ,060 The CIBC debt due April 2, 2027 is secured by a first fixed charge on the land and building to which it relates. The debt was advanced under a variable rate credit facility, with interest adjusted monthly. To reduce the interest rate cash flow risk on this debt, the Society has entered into an interest rate swap contract that entitles the Society to receive interest at floating rates on the notional principal amount and obliges it to pay interest at a fixed rate of 5.24% over the entire term of the debt. The fair value of the interest rate swap has been determined using Level 3 of the fair value hierarchy. The net interest receivable or payable under the contract is settled monthly with the CIBC, which is a Canadian chartered bank. 10

14 Notes to Financial Statements (continued) 4. Longterm debt (continued): The Ministry of Children and Youth Services has approved the use of operating funds for the purpose of mortgage repayments. To protect their interest on the land and building the Ministry has entered into a Mortgage Funding Agreement with the Society. The Agreement, which has been registered with the Lands Registration Office, gives the Ministry rights on the use and disposition of the property. Principal due within each of the next five years and thereafter on the longterm debt is as follows: 2016 $ 231, , , , ,009 Thereafter 2,276,628 $ 3,563, Accounts payable and accrued liabilities: Included in accounts payable and accrued liabilities are government remittances payable of $195,258 (2014 $18,693), which includes amounts payable for HST and payroll related taxes. 6. Balanced Budget Fund and Access to Surpluses: During the year, the Ministry of Children and Youth Services announced the details around the creation of the Balanced Budget Fund to support Children s Aid Societies in meeting the newly announced budget requirement set out in Regulation 70 and to proactively manage the risks associated with a multiyear budget planning process. The Balanced Budget Fund will be developed on an individual CAS basis, in an amount up to each CAS s accumulated surplus that has been returned to the Ministry following the implementation of the new funding model in In order to be eligible to access these funds in a future year, the Society must meet two conditions: (1) the Society must have generated a prior year surplus that was recovered in or after ; and (2) in a subsequent year, the Society requires additional funding in an amount up to its total accumulated prior year surplus to balance its budget. During the year, the Society generated a surplus of $2,213,509 (2014 $5,363), $2,012,976 of which was held back by the Ministry. The balance of $200,533 is included within Due to the Ministry of Children and Youth Services. 11

15 Notes to Financial Statements (continued) 7. Capital: The equity in capital assets is calculated as follows: Capital assets Less: Longterm debt $ 4,805,374 (3,794,911) $ 1,010,463 4,980,929 (4,014,354) 966, Commitments: a) The rental obligations for leased property are as follows: $ 45,029 45,029 45,029 45,029 45,029 3,752 b) The Society has committed to roof repairs to be undertaken in 2016 at a cost of $309, Contingencies: The Society is involved in certain legal matters and litigation, the outcome of which is not presently determinable. The loss, if any, from these contingencies will be accounted for in the periods in which the matters are resolved. Management is of the opinion these matters are mitigated by adequate insurance coverage. 10. Pension agreement: The Society makes contributions to OMERS, which is a multiemployer plan, on behalf of certain members of its staff. The plan is a defined benefit plan which specifies the amount of the retirement benefit to be received by the employees based on the length of service and rates of pay. The amount contributed to OMERS was $1,374,599 (2014 $1,467,897) for current service. 12

16 Notes to Financial Statements (continued) 11. Financial risks: (a) Credit and market risk: The Society has no significant exposure to credit or market risks. (b) Liquidity risk: Liquidity risk is that the Society will be unable to fulfill its obligations on a timely basis or at a reasonable cost. The Society manages its liquidity risk by monitoring its operating requirements. The Society prepares budget and cash forecasts to ensure it has sufficient funds to fulfill its obligations. (c) Interest rate risk: Interest rate risk is the potential for financial loss caused by fluctuations in fair value or future cash flows of financial instruments because of changes in market interest rates. The Society is exposed to this risk through its interest bearing investments, bank loans and term debt. The Society mitigates interest rate risk on its term debt through derivative financial instrument (interest rate swaps) that exchanges the variable rate inherent in the term debt for a fixed rate (see note 4). Therefore, fluctuations in market interest rates would not impact future cash flows and operations relating to the term debt. There have been no significant changes from the previous year in the exposure to risk or policies, procedures and methods used to measure the risk. 12. Public Sector Disclosure Act: For the calendar year ended December 31, 2014, the Society is in compliance with the Public Sector Disclosure Act, 1996 and the Public Sector Salary Disclosure Amendment Act, Adoption of new accounting policy: The Society adopted Public Sector Accounting Board Standard PS 3260 Liability for Contaminated Sites effective April 1, Under PS 3260, contaminated sites are defined as the result of contamination being introduced in air, soil, water or sediment of a chemical, organic, or radioactive material or live organism that exceeds an environmental standard. This Standard relates to sites that are not in productive use and sites in productive use where an unexpected event resulted in contamination. The Society adopted this standard on a retroactive basis and there were no adjustments as a result of the adoption of this standard. 13

17 Schedule of Operations by Program, with comparative information for 2014 Child Child Employment Benefit Targeted Total Total Welfare Related Equivalent Subsidies Independence Revenue: Ministry of Children and Youth Services Child Welfare Operating Ontario Child Benefit Equivalent Other Children's special allowance Maintenance from other societies Children's pension/benefits Maintenance from parents Interest Rental income Recoveries Other $ 33,935,784 $ 1,292, ,133 15,022 2,800 43, , ,905 42,109 36,207,228 $ $ 521, , , ,550 $ $ 104, ,825 34,058,334 $ 521, ,825 1,292, ,133 15,022 2,800 43, , ,905 42,109 36,956,057 37,129, , ,825 1,391, ,400 2,979 1,150 31, , ,418 18,492 40,181,165 Expenses: Wages Benefits Travel Training and recruitment Building occupancy Interest on longterm debt Purchased Services noncase related Purchased Services case related Boarding rates Client personal needs Medical and related services Promotion and publicity Office Technology Miscellaneous 14,153,760 3,526,489 1,657, , , , , ,912 11,390,384 1,119, ,069 21, , , ,449 35,889,143 (685) 444, , , , , ,550 83,916 20, ,824 14,236,991 3,992,154 1,657, , , , , ,912 11,390,384 1,763, ,069 21, , , ,449 37,082,043 14,747,159 4,209,724 1,790, , , , , ,082 13,356,922 1,999, ,668 18, , , ,645 40,100,594 Excess (deficiency) of revenue over expenses before undernoted items 318,085 (444,072) 1 (125,986) 80,571 Provincial subsidy for funding of of prior years' deficit (surplus) (5,363) (5,363) 1,332,218 Excess (deficiency) of revenue over expenses 312,722 (444,072) 1 (131,349) 1,412,789 Transfer for capital purchases (98,643) (98,643) (40,350) Repayment of longterm debt principal (219,442) (219,442) (276,371) Net assets (deficiency), beginning of year (24,402) (5,765,085) (1) (5,789,488) (6,885,556) Net assets (deficiency), end of year $ (29,765) $ (6,209,157) $ $ $ $ (6,238,922) $ (5,789,488) 14