THE REGIONAL MUNICIPALITY OF PEEL AUDIT AND RISK COMMITTEE

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1 THE REGIONAL MUNICIPALITY OF PEEL AUDIT AND RISK COMMITTEE REVISED AGENDA ARC - 2/2017 DATE: Thursday, April 20, 2017 TIME: LOCATION: 11:00 AM 12:30 PM Regional Council Chamber, 5th Floor Regional Administrative Headquarters 10 Peel Centre Drive, Suite A Brampton, Ontario MEMBERS: F. Dale; C. Fonseca; G. Miles; K. Ras; R. Starr; A. Thompson Chaired by Councillor Fonseca or Vice Chair Councillor Ras 1. DECLARATIONS OF CONFLICTS OF INTEREST 2. APPROVAL OF AGENDA 3. DELEGATIONS 3.1. Trevor Ferguson, Audit Partner, Deloitte LLP and Scott Finkel, Audit Manager, Deloitte LLP, Presenting the 2016 Deloitte Audit Results Report 4. REPORTS Region of Peel Consolidated Financial Statements (For information) Peel Housing Corporation Financial Statements (For information) Deloitte's Audit Results Report (For information) Region of Peel Debt Retirement and Sinking Funds Financial Statements (For information)

2 ARC-2/ Thursday, April 20, Region of Peel Trust Funds Financial Statements (For information) 4.6. Peel Living Procurement Audit (For information) Presentation by Dan Labrecque, General Manager, Peel Living, and Jennifer Weinman, Manager, Internal Audit 4.7. Board of Health Financial Controls Checklist (For information) 4.8 Status of Outstanding Management Action Plans (For information) 5. COMMUNICATIONS 6. IN CAMERA MATTERS 7. OTHER BUSINESS 8. NEXT MEETING Thursday, May 25, 2017 at 8:30 a.m. Regional Council Chamber, 5th Floor Regional Administrative Headquarters 10 Peel Centre Drive, Suite A Brampton, Ontario 9. ADJOURNMENT

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4 4.1-1 REPORT Meeting Date: Audit and Risk Committee For Information DATE: April 12, 2017 REPORT TITLE: FROM: 2016 REGION OF PEEL CONSOLIDATED FINANCIAL STATEMENTS Stephen VanOfwegen, Commissioner of Finance and Chief Financial Officer OBJECTIVE To present the 2016 Region of Peel unaudited consolidated financial statements. REPORT HIGHLIGHTS The Region of Peel s external auditors, Deloitte have completed their audit of the Region s financial statements. The attached (Appendix I) consolidated financial statements are prepared by Regional staff in accordance with Canadian public sector accounting standards for local government. There are no corrected or uncorrected misstatements arising from the audit. It is anticipated that Deloitte will issue their Auditor s Report on April 20, 2017 once all audit procedures have been completed, as per auditing standards. DISCUSSION The 2016 consolidated financial statements and related notes have been prepared by Regional staff and are attached as Appendix I to the subject report. They have been prepared in accordance with Canadian public sector accounting standards, as recommended by the Public Sector Accounting Board of the Chartered Professional Accountants of Canada. The statements reflect the financial activities of all entities which are accountable to the Region of Peel including the Peel Regional Police Services Board and the Peel Housing Corporation. There are no corrected or uncorrected misstatements in the statements. Deloitte have completed their external audit and it is anticipated that their Auditor s Report will be issued on April 20, 2017 as per current audit standards. The consolidated financial statements and the Auditor s Report will be posted on the Region s website once the Auditor s Report is issued.

5 REGION OF PEEL CONSOLIDATED FINANCIAL STATEMENTS CONCLUSION The 2016 consolidated financial statements are presented for the Audit and Risk Committee s review and demonstrate a strong, healthy and financially responsible position. Gayle Bursey for Stephen VanOfwegen, Commissioner of Finance and Chief Financial Officer Approved for Submission: J. Sheehy for D. Szwarc, Chief Administrative Officer APPENDICES Appendix I 2016 Region of Peel Consolidated Financial Statements For further information regarding this report, please contact David Bingham, Treasurer and Director of Corporate Finance at extension 4292 or dave.bingham@peelregion.ca. Authored By: Monique Hynes - 2 -

6 2016 REGION OF PEEL CONSOLIDATED FINANCIAL STATEMENTS APPENDIX I (Unaudited) Consolidated financial statements of The Regional Municipality of Peel December 31, 2016

7 REGION OF PEEL CONSOLIDATED FINANCIAL STATEMENTS APPENDIX I (Unaudited) Consolidated financial statements of The Regional Municipality of Peel December 31, 2016 Table of Contents Independent Auditor s Report Consolidated Statement of Financial Position... 3 Consolidated Statement of Operations... 4 Consolidated Statement of Change in Net Financial Assets (Debt)...5 Consolidated Statement of Cash Flows... 6 Notes to the Consolidated Financial Statements

8 4.1-5 Deloitte LLP 400 Applewood Crescent Suite 500 Vaughan ON L4K 0C3 Canada Tel: Fax: Independent Auditor s Report To the Members of Council, Inhabitants and Ratepayers of the Regional Municipality of Peel We have audited the accompanying consolidated financial statements of the Regional Municipality of Peel, which comprise the consolidated statement of financial position as at December 31, 2016, and the consolidated statements of operations, change in net financial assets (debt) and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Management s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Canadian public sector accounting standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. D R A F T We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. For discussion purposes only 1

9 4.1-6 Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Regional Municipality of Peel as at December 31, 2016 and the results of its operations, change in its net financial assets (debt), and its cash flows for the year then ended in accordance with Canadian public sector accounting standards. Chartered Professional Accountants Licensed Public Accountants, 2017 D R A F T For discussion purposes only 2

10 REGION OF PEEL CONSOLIDATED FINANCIAL STATEMENTS APPENDIX I The Regional Municipality of Peel Consolidated Statement of Financial Position As at December 31, 2016 (All dollars in $000) (Unaudited) FINANCIAL ASSETS Cash and short-term investments (Note 2) $ 394,944 $ 291,239 Accounts receivable Federal and provincial governments 44,686 28,199 Other municipalities 12,756 41,126 Wastewater and water billings 51,449 57,573 Accrued interest 8,074 8,449 Sundry 21,388 20,989 Long-term loans receivable (Note 3) 9,245 15,862 Long-term investments (Note 2) 1,780,861 1,589,777 Recoverable gross long-term debt from area municipalities (Note 7) 145, ,877 2,468,986 2,174,091 LIABILITIES Accounts payable and accrued liabilities Trade accounts payable 329, ,125 Provincial government 199, ,256 Other municipalities 6,663 8,431 Deferred revenue (Note 4) 125, ,480 Landfill closure and post-closure liability (Note 5) 18,394 16,984 Employee future benefits and post-employment liabilities (Note 6) 104,174 97,813 Other liabilities 4,374 4,315 Long-term debt (Note 7) 1,474,347 1,341,784 Mortgages payable on income-producing properties (Note 7) 195, ,939 2,458,537 2,321,127 NET FINANCIAL ASSETS (DEBT) 10,449 (147,036) NON-FINANCIAL ASSETS Tangible capital assets (Note 11) 10,760,026 10,530,091 Prepaid expenses 24,499 23,898 Inventory 4,994 5,077 $ 10,789,519 $ 10,559,066 ACCUMULATED SURPLUS (Note 8) $ 10,799,968 $ 10,412,030 The accompanying notes are an integral part of these consolidated financial statements. 3

11 REGION OF PEEL CONSOLIDATED FINANCIAL STATEMENTS APPENDIX I The Regional Municipality of Peel Consolidated Statement of Operations For the year ended December 31, 2016 (All dollars in $000) (Unaudited) Budget (Note 10) REVENUES Levies on area municipalities $ 962,383 $ 963,485 $ 937,857 Direct charges on ratepayers 349, , ,429 Contributions other governments 599, , ,687 Contributions developers 195, , ,936 Contributed capital assets - 58,615 85,656 Investment income 51,021 56,046 61,280 Fees, service charges and other 150, , ,184 Total revenues 2,308,272 2,533,379 2,472,029 EXPENSES (Note 12 and 15) General government 73,358 88,560 51,401 Protection to property and persons 456, , ,846 Transportation services 127, , ,966 GO Transit - 18,291 17,303 Gas tax transferred to area municipalities 32,725 32,725 31,166 Environmental services 575, , ,334 Health services 160, , ,819 Social and family services 487, , ,095 Social housing 198, , ,913 Planning and development 7,068 6,496 5,694 Assessment/other 18,083 18,019 17,842 Total expenses 2,137,226 2,145,441 2,037,379 Annual surplus 171, , ,650 Accumulated surplus, beginning of year 10,412,030 10,412,030 9,977,380 ACCUMULATED SURPLUS, END OF YEAR (Note 8) $ 10,583,076 $ 10,799,968 $ 10,412,030 The accompanying notes are an integral part of these consolidated financial statements. 4

12 REGION OF PEEL CONSOLIDATED FINANCIAL STATEMENTS APPENDIX I (Unaudited) The Regional Municipality of Peel Consolidated Statement of Change in Net Financial Assets (Debt) For the year ended December 31, 2016 (All dollars in $000) Budget (Note 10) ANNUAL SURPLUS $ 171,046 $ 387,938 $ 434,650 Acquisition of tangible capital assets (441,630) (448,784) (658,936) Amortization of tangible capital assets 270, , ,273 Contributed tangible capital assets - (58,615) (85,656) Write-down of tangible capital assets - 2,407 7,936 Loss on sale of tangible capital assets - 3,956 2,000 Proceeds on sale of tangible capital assets ,787 (458) 158,003 (46,946) Acquisition of inventory - (11,127) (10,150) Acquisition of prepaid expenses - (78,121) (59,406) Consumption of inventory - 11,210 10,334 Use of prepaid expenses - 77,520 56,707 Change in net financial assets (debt) $ (458) $ 157,485 $ (49,461) Net debt, beginning of year (147,036) (147,036) (97,575) NET FINANCIAL ASSETS (DEBT), END OF YEAR $ (147,494) $ 10,449 $ (147,036) The accompanying notes are an integral part of these consolidated financial statements. 5

13 REGION OF PEEL CONSOLIDATED FINANCIAL STATEMENTS APPENDIX I The Regional Municipality of Peel Consolidated Statement of Cash Flows For the year ended December 31, 2016 (All dollars in $000) (Unaudited) OPERATING ACTIVITIES Annual surplus $ 387,938 $ 434,650 Items not involving cash Amortization of tangible capital assets 270, ,273 Loss on sale of tangible capital assets 3,956 2,000 Contributed tangible capital assets (58,615) (85,656) Write-down of tangible capital assets 2,407 7,936 Change in employee future benefits and post-employment liabilities 6,361 4,939 Change in landfill closure and post-closure liability 1,410 (6,501) Change in non-cash assets and liabilities Accounts receivable 17,983 (7,036) Recoverable gross long-term debt from area municipalities 9 (433) Accounts payable and accrued liabilities 19,280 43,163 Deferred revenue 1,784 (13,079) Other liabilities 59 (591) Prepaid expenses (601) (2,699) Inventory Net change in cash and short-term investments from operating activities 652, ,150 CAPITAL ACTIVITIES Proceeds on sale of tangible capital assets 991 1,787 Cash used to acquire tangible capital assets (448,784) (658,936) Net change in cash and short-term investments from capital activities (447,793) (657,149) INVESTING ACTIVITIES Proceeds from disposals and redemptions of investments 218, ,230 Acquisition of investments (409,972) (150,805) Decrease (Increase) in long-term loans receivable 6,617 (7,354) Net change in cash and short-term investments from investing activities (184,467) 151,071 FINANCING ACTIVITIES Proceeds on debt issuance 150,000 - Repayment of long-term debt (3,864) (3,759) Accrual for interest payments (369) 382 Contributions to sinking fund (32,986) (32,969) Investment income earned on sinking fund (4,933) (3,763) Repayment of mortgages payable (24,047) (22,464) Net change in cash and short-term investments from financing activities 83,801 (62,573) Net change in cash and short-term investments 103,705 59,499 Cash and short-term investments, beginning of year 291, ,740 CASH AND SHORT-TERM INVESTMENTS, END OF YEAR $ 394,944 $ 291,239 Cash paid for interest $ 93,037 $ 71,777 Cash received from interest 49,598 51,890 The accompanying notes are an integral part of these consolidated financial statements. 6

14 2016 REGION OF PEEL CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) APPENDIX I THE REGIONAL MUNICIPALITY OF PEEL Notes to the Consolidated Financial Statements For the year ended December 31, 2016 (All dollars in $000) The Regional Municipality of Peel ( Region ) is an upper-tier municipality in the Province of Ontario ( Province ), Canada. The provisions of provincial statutes such as the Municipal Act, Municipal Affairs Act and related legislation guide its operations. 1. Significant Accounting Policies The consolidated financial statements ( financial statements ) of the Region are the representation of management and are prepared in accordance with Canadian public sector accounting standards, as recommended by the Public Sector Accounting Board ( PSAB ) of the Chartered Professional Accountants of Canada ( CPA Canada ). The focus of these financial statements is on the financial position of the Region and the changes thereto. The consolidated statement of financial position includes all the financial assets and liabilities of the Region as well as non-financial assets. Financial assets are those assets that could provide resources to discharge existing liabilities or finance future operations. Net financial assets (debt) forms a part of the financial position and is the difference between financial assets and liabilities. This provides information about the Region s overall future revenue requirements and its ability to finance activities and meet its obligations. Non-financial assets are normally used to deliver services. Their value lies with their service potential rather than their ability to generate future cash inflows. They form part of the financial position, as they provide resources that the Region can employ in the future to meet its objectives. The accumulated surplus is made up of the combination of net financial assets (debt) and non-financial assets. Significant aspects of the accounting policies adopted by the Region are as follows: a) Basis of Presentation The financial statements reflect the financial activities of all entities that are accountable to and controlled by the Region, which include: Peel Police Services Board Peel Housing Corporation ( PHC ) All inter-departmental and inter-organizational transactions are eliminated on consolidation. Also included are the Regional contributions to the local conservation authorities, and the funding thereof. The Region is required, by legislation, to reimburse the Municipal Property Assessment Corporation for the cost of Assessment Services that are not administered or controlled by the Region. Funds held in trust by the Region for residents of Peel Manor and Sheridan Villa Senior Citizens Residences, the Tall Pines and Malton Village Long Term Care Centres, and the Vera M. Davis Community Care Centre in the amount of $213 (2015 $191), are not included in the financial statements. The financial activity and position of the trust funds are reported separately in the trust funds financial statements. 7

15 REGION OF PEEL CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) APPENDIX I The Region maintains separate funds for the purpose of providing for periodic repayments on debt to be retired by means of debt retirement funds and sinking funds. The financial activity and position of this fund are disclosed separately in the debt retirement funds and the sinking funds financial statements. b) Basis of Accounting i) Accrual Method of Accounting The Region follows the accrual method of accounting. The accrual basis of accounting recognizes revenue in the period in which the transactions or events occurred that gave rise to the revenues. Expenses are the cost of goods or services acquired in the period, whether or not payment has been made or invoices received. ii) Cash and Short-term Investments Cash and short-term investments include short-term, highly liquid investments with a term to maturity of 90 days or less at acquisition. iii) Investment Income Investment income earned on surplus current fund, capital fund, reserves and reserve funds (other than obligatory reserve funds) are reported as revenue in the period earned. Investment income on unspent obligatory reserve funds is added to obligatory reserve fund balances. Temporary investments are carried at the lower of cost and market value. Portfolio investments are carried at cost, unless there are impairments in value, at which time they are written down to recognize the loss in value. Discounts or premiums are amortized using the effective interest method. iv) Loans Receivable Loans receivable are valued at cost. Recoverability is reviewed annually and a valuation allowance is recorded when recoverability is impaired. The loans receivable is written off when it is no longer recoverable. Recoveries of loans receivable previously written off are recognized in the year received. Interest revenue is recognized as it is earned. v) Non-Financial Assets Non-financial assets are not available to discharge existing liabilities and are held for use in 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. a. Tangible Capital Assets Tangible capital assets are recorded at cost, which includes amounts that are directly attributable to acquisition, construction, development or betterment of the asset. The Region does not have any tangible capital assets recognized at nominal value. The cost, less residual value, of tangible capital assets, excluding land and landfill sites, are amortized on a straight-line basis over their estimated useful lives as follows: 8

16 REGION OF PEEL CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) APPENDIX I Assets Useful life years Land improvements 5 99 Buildings Building improvements Leasehold improvements 2 40 Equipment and furnishings 3 80 Linear Linear improvements 50 Structures Vehicles 3 Annual amortization is charged in the year of acquisition and in the year of disposal. Assets under construction are not amortized until the asset is in service. b. Contributions of Tangible Capital Assets Tangible capital assets received as contributions are recorded at their fair value at the date of receipt and are also recorded as revenue. c. Interest Capitalization The Region capitalizes interest costs associated with the acquisition or construction of a tangible capital asset relating to certain projects. In 2016, the Region capitalized $83 (2015 $79) of interest cost. d. Natural Resources Natural resources that have not been purchased are not recognized as assets in the financial statements. vi) Deferred Revenue Development Charges Development charges, collected under the authority of Sections 33 to 35 of the Development Charges Act, 1997, are reported as deferred revenue in the consolidated statement of financial position in accordance with Canadian public sector accounting standards. Amounts applied to qualifying capital projects are recorded as revenue in the fiscal period in which the funds are expended on qualifying capital projects. Development charges will also be applied to cover costs for servicing debt including interest on borrowings and contributions to sinking funds to retire debt. vii) Tax Revenue Property tax revenue is recognized on an accrual basis when the tax is authorized by the passing of the tax levy by-law. Taxes are levied on properties listed on the assessment roll at the time the by-law is passed based on the approved budget and tax rates. Supplementary taxation is recognized as additional billings are issued for properties that are added to the assessment roll during the year. At year-end, the Region evaluates the likelihood of having to repay taxes as a result of tax appeals or other changes and recognizes a liability if the amount can be reasonably estimated. 9

17 REGION OF PEEL CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) APPENDIX I viii) Government Transfers Government transfers are recognized in the financial statements in the period in which the events giving rise to the transfer occur, providing the transfers are authorized, any eligibility criteria have been met, and reasonable estimates of the amounts can be made, and there are no stipulations that give rise to a liability. ix) Employee Future Benefits and Post-Employment Liabilities The Region accounts for its participation in the Ontario Municipal Employee Retirement System ( OMERS ), a multi-employer public sector pension fund, as a defined contribution plan. Vacation entitlements are accrued for as entitlements are earned. Sick leave benefits were discontinued in 1986 and the remaining balance from prior years were paid out in Other post-employment benefits and compensated absences are accrued in accordance with the projected benefit method, pro-rated on service and management s best estimate of salary escalation and retirement ages of employees. Actuarial valuations, where necessary for accounting purposes, are generally performed triennially. The discount rate used to determine the accrued benefit obligation was determined by reference to the Region s short and long term rate of borrowing. Unamortized actuarial gains/losses are amortized on a straight-line basis over the expected average remaining service life of the related employee groups. Unamortized actuarial gains/losses for event-triggered liabilities, such as those determined as claims related to Workplace Safety and Insurance Board ( WSIB ), are recorded when determined. Costs related to prior-period employee services arising out of plan amendments are recognized in the period in which the plan is amended. Where applicable, the Region has set aside Reserves intended to fund these obligations, either in full or in part. These Reserves were created under municipal bylaw and do not meet the definition of a plan asset under Canadian public sector accounting standard PS 3250 Retirement Benefits. Therefore, for the purposes of these financial statements, the plans are considered unfunded. x) Landfill Liability The costs to close an existing landfill site and to maintain closed landfill sites are based on the future estimated expenditures required over a twenty-five year period, discounted using the Region s long-term borrowing rate. These costs are reported as a liability on the consolidated statement of financial position. Landfill sites are amortized using the units of production method based upon capacity used during the year. xi) Liability for Contaminated Sites A liability for the remediation of a contaminated site is recognized as the best estimate of the amount required to remediate the contaminated site when contamination exceeding an environmental standard exists, the Region is either directly responsible or accepts responsibility, it is expected that the future economic benefit will be given up, and a reasonable estimate of the amount is determinable. If 10

18 2016 REGION OF PEEL CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) APPENDIX I the likelihood of the Region s obligation to incur these costs is either not determinable, or if an amount cannot be reasonably estimated, the costs are disclosed as contingent liabilities in the notes to the financial statements. xii) Foreign Currency Translation Monetary assets and liabilities denominated in foreign currencies are translated at the prevailing rates of exchange at the year-end date. Revenue and expenses are translated at the exchange rate prevailing on the transaction date. Realized and unrealized exchange gains and losses are included in the consolidated statement of operations. xiii) Use of Estimates The preparation of these 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 date of the consolidated financial statements and the reported amount of revenues and expenses during the period. Significant estimates relate to accounts receivable, accrued liabilities, landfill closure and post-closure liability, liabilities for contaminated sites, employee future benefits and post-employment liabilities and expenses. Due to the inherent uncertainty in making estimates, actual results could differ from those estimates. 2. Investments Cash and short-term investments have a market value of $394,921 (2015 $291,356) at the end of the year. Long-term investments have a market value of $1,834,026 (2015 $1,675,751), at the end of the year. Included in the Region s investment portfolio are Region of Peel debentures at coupon rates that vary from 1.10 to 6.65 per cent ( to 6.65 per cent) with a carrying value $26,188 (2015 $17,585). 3. Long-Term Loans Receivable The balance for long-term loans receivable includes the following: a) A 30-year memorandum of understanding at per cent with Credit Valley Conservation ( CVC ) to be used to finance the renovation of their head office facility. b) A 20-year loan agreement at 5.12 per cent with Abbeyfield Houses of Caledon ( Abbeyfield ) to be used to finance the construction of affordable housing for senior citizens. c) An interest free subsidy agreement with Cervantes Lions Non-Profit Housing Corporation due on the day immediately following the fifteenth anniversary of the expiry of the housing provider s operating agreement with the Region. d) A loan to Shalimar International Housing Corporation; interest to be charged based on the prevailing capital market rate beginning September 1 st, 2031; all principal and interest owing to be repaid by September 2 nd,

19 REGION OF PEEL CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) APPENDIX I e) A loan to Ahneen Co-operative Homes; interest to be charged based on the prevailing capital market rate beginning February 1 st, 2027; all principal and interest owing to be repaid by February 2 nd, f) A loan to Forum Italia Non-Profit Housing Corporation; interest to be charged based on the prevailing capital market rate beginning July 2 nd, 2025; all principal and interest owing to be repaid by July 2 nd, g) A loan to Grace Retirement and Community Enterprises Inc.; interest to be charged based on the prevailing capital market rate beginning August 2 nd, 2018; all principal and interest owing to be repaid by August 2 nd, h) A bridge loan at 3.40 per cent to Supportive Housing in Peel to facilitate the development of housing project pending receipt of provincial funding. This was repaid during the year CVC memorandum of understanding $ 6,079 $ 6,193 Abbeyfield Houses of Caledon loan agreement Cervantes Lions Housing subsidy agreement Shalimar International Housing loan agreement Ahneen Co-operative Homes loan agreement Forum Italia Non-Profit Housing loan agreement Grace Retirement and Community Enterprises Inc loan agreement Supportive Housing in Peel loan agreement - 7,146 Total $ 9,245 $ 15,862 i) Future Repayments Estimated future receipts of long-term receivables are as follows: Total 2017 $ Subsequent to ,505 Total $ 9,245 12

20 2016 REGION OF PEEL CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) APPENDIX I 4. Deferred Revenue Deferred revenues set-aside for specific purposes by legislation, regulation or agreement as at December 31, are composed of the following: Balance at Inflows Revenue Balance at December Earned December 31, , 2016 Development Charges $ - $ 311,057 $ 311,057 $ - Federal Gas Tax 35,072 40,520 36,132 39,460 Provincial Gas Tax General Region 37,314 66,846 60,017 44,143 General PHC 4, ,248 76, ,187 96,809 87,928 York/Peel Water Supply Agreement 46,930-9,594 37,336 Total $ 123,480 $ 419,244 $ 417,460 $ 125,264 In 2001, the Region entered into a Long Term Water Supply Agreement ( Agreement ) with the Region of York ( York ) to supply potable water. The Agreement stipulates a maximum day water demand in each year to be supplied to York. New infrastructure constructed and used jointly by both Regions since the inception of the Agreement, has been funded through agreed cost-sharing based on allocating the flow capacity available to the Region and York on a project by project basis. In 2013, negotiations with York on the cost-share split for the Hanlan Feedermain resulted in a reduction to the maximum day water demand supplied to York. The reduction in flow requirement impacts the majority of infrastructure which forms part of this agreement. As such, a credit for the investment made by York to-date for this jointly used infrastructure was warranted. The credit in the amount of $36,800 (2015 $46,900) will be used to fund York s share of the construction costs of jointly used infrastructure in the future. 5. Landfill Closure and Post-Closure Liability The Environmental Protection Act sets out regulatory requirements to properly close and maintain all active and inactive landfill sites. Under environmental law, there is a requirement for closure and post-closure care of solid waste landfill sites. Landfill closure and post-closure care are activities for landfill sites that are expected to occur in perpetuity and requirements have been defined in accordance with industry standards and include final covering and landscaping of the landfill, pumping of groundwater and leachates from the site, and ongoing environmental monitoring, site inspection and maintenance. 13

21 REGION OF PEEL CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) APPENDIX I The Region has one open and twenty closed landfill sites. The Caledon site is open but not currently being used and has an estimated remaining life of one year, which represents 5 per cent of its total capacity. For the site that is still open, the estimated liability is recognized as the landfill site capacity is used. For closed sites, the estimated liability for these expenditures is calculated for a twenty-five year period. The estimated liability of $18,394 (2015 $16,984) included in the financial statements represents the sum of the discounted future cash flows for closure and post-closure care activities discounted at the Region s long-term borrowing rate of 4.75 per cent ( per cent). As at December 31, the Region maintained a reserve of $17,759 (2015 $18,677), which will be used to fund expected future costs. 6. Employee Future Benefits and Post-Employment Liabilities Employee future benefits and post-employment liabilities reported on the consolidated statement of financial position consist of the following: Retiree benefits Peel Police Services Board $ 63,598 $ 59,313 Retiree benefits Peel Police Services Board (LTD recipients) 5,745 6,065 Retiree benefits Peel Region 8,330 8,013 Retiree benefits Peel Region (LTD recipients) 3,834 3,535 81,507 76,926 Workplace Safety and Insurance Board 22,667 20,887 Total $104,174 $ 97,813 a) Retirement Benefits The liability for retirement benefits is for the Region s and the Peel Police Services Board s share of costs associated with extending the coverage for health, dental and life insurance benefits to qualifying employees. Benefit coverage, except for life insurance coverage, and health care spending account for Peel Police Services Board, ceases at the age of 65. The valuation treats enrolled members in receipt of long-term disability or WSIB benefits as continuing to receive active service benefits. The liability is based on the actuarial valuations as at December , with estimates to December 31, The following significant actuarial assumptions adopted in the valuations were based on management s best estimates. Future discount rates 4.85 per cent per year for Police 4.75 per cent per year for Region Future inflation rate 2.0 per cent per year Future salaries Escalate at 3.0 per cent per year 14

22 REGION OF PEEL CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) APPENDIX I Future dental premium rates: - Peel Regional Police Escalate at 3.5 per cent per annum - Region of Peel Escalate at 4.0 per cent per annum Future health care premium rates: - Peel Regional Police Initial rate of 6.5 per cent decreasing by 0.5 per cent per year to the ultimate rate of 4.0 per cent - Region of Peel Escalate at 4.0 per cent per annum The following are the actuarial results for the accrued benefit liability reported on the consolidated statement of financial position: Retirement Benefits Liability Accrued benefit obligation at January 1 $ 81,510 $ 77,534 Add: benefit service cost 3,782 3,613 Add: interest accrued 3,940 3,745 Deduct: benefit payments (3,482) (3,382) Accrued benefit obligation at December 31 85,750 81,510 Deduct: unamortized actuarial loss (4,243) (4,584) Liability at December 31 $ 81,507 $ 76,926 Retirement Benefits Expense Current period benefit cost $ 3,782 $ 3,613 Interest on accrued benefit obligation 3,940 3,745 Amortization of actuarial losses Total $ 8,063 $ 7,699 The actuarial loss is the result of assumptions used in the above noted valuations that varied from assumptions used in prior valuations. These assumptions pertained to the distribution of covered employees, discount rate, escalation of health care rates, projected mortality rates and benefit coverage. The actuarial loss will be amortized over the expected average remaining service life of employees. b) Workplace Safety and Insurance Board (WSIB) The Region is a Schedule II employer under the Workplace Safety and Insurance Act, and therefore, self-insures the entire risk of their own WSIB claims and is responsible for reimbursing the WSIB for all costs relating to its workers claims. The liability reported in the consolidated statement of financial position is the result of a 2014 actuarial update that estimated potential liabilities of the Region under the provisions of the Workplace Safety and Insurance Act. The last full actuarial evaluation for the Region was completed as at December 31,

23 2016 REGION OF PEEL CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) APPENDIX I The liability also includes the results of a partial actuarial evaluation that was completed as at December 31, 2016 due to the enactment of the Supporting Ontario s First Responders Act, which creates a presumption that post-traumatic stress disorder diagnosed in first responders is work-related. The presumption allows for faster access to WSIB benefits, resources and timely treatment. The results of the actuarial valuations are as follows: WSIB Liability Accrued benefit obligation at January 1 $ 20,757 $ 20,156 Add: plan amendment Add: estimated cost of claims (service cost) 4,546 2,666 Add: interest accrued Deduct: expected benefits paid (3,950) (2,916) Accrued benefit obligation at December 31 22,516 20,757 Add: unamortized actuarial gain Liability at December 31 $ 22,667 $ 20,887 WSIB Benefits Expense Current period benefit cost $ 4,546 $ 2,666 Plan amendment Interest on accrued benefit obligation Amortization of actuarial gain Total $ 5,731 $ 3, Long-Term Debt Under the terms of the Municipal Act, 2001, Regional Council has approved the issuing of debentures to finance its own capital expenses and tangible capital assets, and those of the area municipalities within the annual debt repayment limit prescribed by the Ministry of Municipal Affairs and Housing. Debentures issued for such purposes are direct, joint and several obligations of the Region and local municipalities. In 2016, the Region issued $190,684 (2015 $40,000) in debenture debt, of which $37,584 (2015 $40,000) was on behalf of the City of Mississauga, $3,100 (2015 $Nil) was on behalf of the Town of Caledon and $150,000 (2015 $Nil) was attributed to ensuring the sustainability of its capital program and to provide appropriate levels of cash flow for the expansion of utility infrastructure required to accommodate growth. Long-term debt financing of the growth-related capital plan was necessary due to a difference in timing between investment in infrastructure and collection of development charge revenue. The repayment of the debentures will be financed by development charges projected to be collected over the useful lives of the assets included in the capital plan. 16

24 REGION OF PEEL CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) APPENDIX I a) Net Long-Term Debt The total for long-term liabilities reported in the consolidated statement of financial position consists of the following: Total long-term liabilities incurred by the Region including amounts incurred on behalf of area municipalities $1,636,320 $1,465,838 Less: Total value of Region s sinking fund deposits 161, ,518 Less: Value of Town of Caledon sinking fund assumed by the Region Total long-term liabilities 1,474,347 1,341,784 Mortgages payable by Peel Housing Corporation 195, ,939 Note payable by Peel Housing Corporation - 1,000 Total mortgages payable on income-producing properties 195, ,939 Recoverable from lower-tiers City of Mississauga 134, ,785 Town of Caledon 16,084 15,040 Less: Town of Caledon debt assumed by Region 4,948 4,948 Total recoverable gross long-term debt from area municipalities 145, ,877 Net Long-Term Debt at December 31 $1,524,656 $1,440,846 Serial debt and sinking fund debentures issued by the Region mature between June 2017 and June 2053 and have interest rates ranging between 1.10 per cent and 6.65 per cent. Mortgages of $195,892 (2015 $218,939) on PHC properties are secured by a first charge on specific assets of PHC with amortization periods ranging from 5 to 50 years and interest rates ranging from 1.04 per cent to 8.0 per cent. The note payable in the amount of $1,000 due to the tenants association of Twin Pines (PHC), which was contributed by its members, was repaid during the year. Sinking funds were established to provide for the orderly retirement of sinking fund debentures issued by the Region totaling $1,433,000 (2015 $1,283,000). These debentures mature between December 2021 and June

25 REGION OF PEEL CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) APPENDIX I b) Future Principal Repayments Estimated future principal repayments for the Region, including sinking fund contributions and PHC, are as follows: Peel Housing Region of Corporation Peel Total 2017 $ 22,173 $ 50,632 $ 72, ,105 50,712 71, ,142 50,829 69, ,383 50,951 69, , , ,841 Subsequent to , , ,972 Net sinking fund debt repayable - 420, ,916 Total $ 195,892 $1,328,764 $1,524,656 Total interest charges in the amount of $67,630 (2015 $68,329) are reported in the consolidated statement of operations. The charges consist of $8,110 (2015 $9,246) for interest on PHC mortgages and $59,520 (2015 $59,083) for debenture debt. 8. Accumulated Surplus The Accumulated Surplus consists of the following balances: Accumulated Surplus Investment in tangible capital assets and social housing $ 10,556,696 $ 10,305,275 Reserves and reserve funds 1,726,090 1,613,042 Capital fund (1,424,953) (1,446,480) Current fund 12,226 7,183 Less: unfunded liabilities Retiree benefits: Peel Police Services Board (32,968) (31,336) Region of Peel (5,843) (5,843) Workplace Safety and Insurance Board (8,512) (8,512) Landfill closure costs (18,394) (16,984) Other (4,374) (4,315) Total Surplus $ 10,799,968 $ 10,412,030 a) Accumulated Surplus The Region has a surplus management strategy that permits year-end transfers to and from reserves to manage the level of surplus carried forward into the next fiscal year. Such transfers are made to ensure that future commitments of the Region can be met and are based on management s planning of infrastructure replacement, property tax rate and user rate stabilization, potential exposure to program funding shortfalls and contingent liabilities. The allocation of these transfers and their purpose is disclosed annually to Regional Council following completion of the year-end audit. The financial 18

26 2016 REGION OF PEEL CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) APPENDIX I statements include the transfers made to reserves under the surplus management strategy. b) Reserves and Reserve Funds Reserves and reserve funds are established by Regional Council as appropriate, and are included in the accumulated surplus position of the Region. 9. Pension Agreements The Region makes contributions to OMERS on behalf of approximately 7,886 eligible employees. OMERS is a defined benefit pension plan, fully funded by equal contributions from participating employers and employees, and by the investment earnings of the OMERS Fund. OMERS pensions are calculated using a defined benefit formula, taking into account length of service and average annual wage (based upon the highest 60 consecutive months of earnings), that is designed to integrate with the pension payable from the Canada Pension Plan. During the year, the Region s contribution to OMERS for current service was $63,602 (2015 $62,133). The Region s contributions are reported in the consolidated statement of operations. Employee contributions also amount to $63,602 (2015 $62,133). For the December 31, 2016 year-end, the funded portion of the OMERS pension plan increased to 93.4 per cent ( per cent). Pension plan assets increased to $85,200,000 (2015 $77,000,000) primarily due to strong investment returns. 19

27 2016 REGION OF PEEL CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) APPENDIX I 10. Budget Data The budget amounts presented in the consolidated financial statements are based on the 2016 operating and capital budgets approved by Regional Council on December 3, The following reconciles the approved budget to the budget amounts presented in the consolidated financial statements using the accrual basis of accounting, in accordance with Canadian public sector accounting standards. Budgets established for tangible capital asset acquisitions are on a project-oriented basis, the costs of which may be carried over one or more fiscal years. Where amounts were budgeted for on a project-oriented basis, the budget amounts used are based on actual projects that took place during the year to reflect the same basis of accounting that was used to report the actual results. Revenues Expenses Operating Budget Council Approved Budget $ 2,142,242 $ 2,142,242 In-year budget adjustments 4,560 4,560 Board Approved Peel Housing Corporation 98,037 98,037 Adjustment for intercompany transactions (49,226) (49,226) PSAB Adjustments Contributions to reserves/reserve funds - (366,535) Contributions from reserves/reserve funds (62,095) - Payment to sinking fund for debt retirement - (36,799) Other liabilities - 3,101 Other adjustments (13,979) (13,979) Adjusted Operating Budget 2,119,539 1,781,401 Capital Budget Council Approved Budget 483, ,000 Timing difference between budget and spending 78,088 78,088 Board Approved Peel Housing Corporation 14,500 14,500 Timing difference between budget and spending 1,334 1,334 PSAB Adjustments Contributions from reserves/reserve funds (435,924) - Acquisition of tangible capital assets - (467,615) Amortization - 246,519 Adjusted Capital Budget 140, ,826 Other Reserve fund interest and other revenue 47,736 - Budget as presented in Financial Statements $ 2,308,272 $ 2,137,226 20

28 2016 REGION OF PEEL CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) APPENDIX I 11. Tangible Capital Assets 2016 (All dollars in $000) Balance at Disposals & Balance at Cost December 31, 2015 Additions Write-downs December 31, 2016 Land $ 1,136,196 $ 13,583 $ - $ 1,149,779 Land improvements 39, ,003 Buildings and building improvements 2,289,744 26,499-2,316,243 Leasehold improvements 23, (139) 23,521 Linear and linear improvements 7,423, ,296-7,779,280 Structures 227,189 2, ,885 Vehicles 80,197 10,139 (6,478) 83,858 Equipment and furnishings 1,889, ,104 (12,228) 1,983,416 Construction work in progress 831,055 (6,994) (2,407) 821,654 Total cost $ 13,940,492 $ 507,399 $ (21,252) $ 14,426,639 Balance at Balance at Accumulated Amortization December 31, 2015 Disposals Amortization December 31, 2016 Land improvements $ 14,031 $ - $ 1,227 $ 15,258 Buildings and building improvements 588,540-43, ,347 Leasehold improvements 10,381 (140) 1,008 11,249 Linear and linear improvements 2,016, ,019 2,149,955 Structures 90,297-5,565 95,862 Vehicles 43,730 (5,282) 8,271 46,719 Equipment and furnishings 646,486 (8,476) 77, ,223 Total accumulated amortization $ 3,410,401 $ (13,898) $ 270,110 $ 3,666,613 Net Book Value Net Book Value December 31, 2016 Land $ 1,149,779 Land improvements 23,745 Buildings and building improvements 1,683,896 Leasehold improvements 12,272 Linear and linear improvements 5,629,325 Structures 134,023 Vehicles 37,139 Equipment and furnishings 1,268,193 Construction work in progress 821,654 Total net book value $ 10,760,026 21

29 2016 REGION OF PEEL CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) APPENDIX I 11. Tangible Capital Assets (Continued) 2015 (All dollars in $000) Balance at Disposals & Balance at Cost December 31, 2014 Additions Write-downs December 31, 2015 Land $ 1,118,798 $ 19,578 $ (2,180) $ 1,136,196 Land improvements 39, ,003 Buildings and building improvements 2,236,524 53,220-2,289,744 Leasehold improvements 23, (203) 23,584 Linear and linear improvements 6,914, ,632 (190) 7,423,984 Structures 201,525 25, ,189 Vehicles 77,813 10,852 (8,468) 80,197 Equipment and furnishings 1,825,428 68,526 (4,414) 1,889,540 Construction work in progress 782,133 56,361 (7,439) 831,055 Total cost $ 13,218,794 $ 744,592 $ (22,894) $ 13,940,492 Balance at Balance at Accumulated Amortization December 31, 2014 Disposals Amortization December 31, 2015 Land improvements $ 12,791 $ - $ 1,240 $ 14,031 Buildings and building improvements 545,548-42, ,540 Leasehold improvements 9,601 (203) ,381 Linear and linear improvements 1,892, ,184 2,016,936 Structures 85,018-5,279 90,297 Vehicles 42,206 (6,964) 8,488 43,730 Equipment and furnishings 582,383 (4,004) 68, ,486 Total accumulated amortization $ 3,170,299 $ (11,171) $ 251,273 $ 3,410,401 Net Book Value Net Book Value December 31, 2015 Land $ 1,136,196 Land improvements 24,972 Buildings and building improvements 1,701,204 Leasehold improvements 13,203 Linear and linear improvements 5,407,048 Structures 136,892 Vehicles 36,467 Equipment and furnishings 1,243,054 Construction work in progress 831,055 Total net book value $ 10,530,091 22

30 2016 REGION OF PEEL CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) APPENDIX I a) Construction in Progress Assets under construction having a value of $821,654 (2015 $831,055) have not been amortized. Amortization of these assets will commence when the asset is put into service. b) Contributed Tangible Capital Assets Contributed tangible capital assets transferred to the Region in 2016 amounted to $58,615 (2015 $85,656). The majority of tangible capital assets transferred were from developers and included water and wastewater local mains as well as land. c) Works of Art and Cultural Assets The Region manages and controls various works of art and non-operational historical cultural assets including buildings, artifacts, paintings and sculptures located at Region sites and public display areas. These assets are not recorded as tangible capital assets and are not amortized. d) Write Downs The write-down of tangible capital assets during the year was $2,407 (2015 $7,936) in the consolidated statement of operations. 12. Expenses by Object The consolidated statement of operations reports expenses for the Region by functions or by business programs. The following is a summary of expenses by object Salary and wages $ 787,982 $ 756,905 Services and rents 345, ,659 Materials and supplies 86,835 83,753 Grants and transfer payments 492, ,404 Debt charges 67,630 68,328 Intra government transfers (40,456) (40,603) Amortization 270, ,273 Other operational expenses 135, ,660 Total $ 2,145,441 $ 2,037, Contractual Obligations and Contingent Liabilities a) As at December 31, 2016 outstanding contractual obligations for capital works amounted to approximately $369,628 (2015 $516,002). Regional Council has authorized the financing of these obligations. b) As at December 31, 2016 the Region has been named as defendant or co-defendant in a number of outstanding legal actions. No provision has been made for any claims that are expected to be covered by insurance or where the consequences are undeterminable. A provision of $9,868 (2015 $9,430) has been made for those claims not expected to be covered by insurance. 23

31 REGION OF PEEL CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) APPENDIX I c) Under the terms of various operating lease agreements, future minimum payments are as follows: 2017 $ 2, , Subsequent to ,570 Total $ 8,686 d) Under a 10-year service agreement, effective January 1, 2010, the Region has contracted the operations of the South Peel wastewater and water treatment systems to the Ontario Clean Water Agency ( OCWA ). Included in the consolidated statement of operations are the 2016 charges from OCWA totaling $35,796 (2015 $33,578). The consolidated statement of financial position reflects only the capital assets of the wastewater and water treatment facilities and the service charges due to or from OCWA. e) The Peel Regional Police provide policing services to the Greater Toronto Airports Authority ( GTAA ). Under a service agreement, the GTAA provides funding to fully offset any costs incurred by the Peel Regional Police. In 2016, the Peel Regional Police received $15,566 (2015 $17,577) from the GTAA. f) Under contracts approved by the Region in 2005 with amendments in 2012 and 2016, a private waste management corporation will provide waste disposal capacity at current market rates (additional 26 years as at December 31, 2016) and waste transfer services to the Region. The annual estimated expenditure is $14,400. g) Under separate contracts approved by the Region in 2014, two private waste management companies provide services including, but not limited to: bi-weekly, alternating garbage cart and recycling cart collection, bi-weekly bulky item collection, weekly organics cart collection, seasonal yard waste collection, garbage exemption collection periods, and manual (bag based) garbage, recycling and organics bin collection at specified locations. Each contract term is for an eight year plus nine month period which began on January 2016, with two additional, separate twelve month period extension options, based on satisfactory service, performance and pricing. The total of the two contracts is $40,500. h) The Region has issued letters of credit for $12,207 (2015 $4,759) in order to meet the credit requirements and conditions of certain agreements related to capital projects. i) The Region has also identified a contaminated site on a piece of land downloaded from the federal government. The Region is currently working with the federal government to determine who accepts responsibility for the remediation of this site and has therefore not recognized a liability for this site in the consolidated statement of financial position. 24

32 2016 REGION OF PEEL CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) APPENDIX I 14. Liability for Contaminated Sites The Region has recorded a liability of $Nil (2015 $63) in accounts payable and accrued liabilities for a Regionally owned site which contained elevated levels of elements in the soil. The liability estimate for the site identified was based on the environmental assessment conducted by a third party engineering firm and cost of possible remediation alternatives and was settled in There were no recoveries received in 2016 or Comparative Figures Certain prior year figures have been reclassified to conform to the financial statement presentation adopted in the current year. 16. Municipal Act, 2001 Since the introduction of Current Value Assessment ( CVA ) taxation in 1998, provincial legislation mandates a limit to assessment-related tax increases for the commercial, industrial and multi-residential classes. The purpose of this limit is to ensure that the impact of CVA reform is manageable for taxpayers in these three property classes. These assessment-related tax adjustments are capped using a number of Council-adopted parameters which include the optional capping tools and recently introduced capping program enhancements. Adoption of the capping parameters is designed to maximize the number of properties moving to full CVA-based taxation with the new capping enhancements providing a four-year phase-out and/or immediate exit from the capping program for an eligible municipality. The legislation permits the costs of capping to be funded by limiting the property tax decreases within the subject property class. While the local municipalities have the jurisdiction responsibility for managing the tax collection system, the Region is responsible for acting as the banker in order to balance out the overall impact of the capping initiative on a broader Regional basis. Implementation may cause some year-to-year variances. Such post billing capping variances are written-off at the local municipal level and funded between the Region, the local municipality and the school board based on the tax rate prorated shares of the write-offs. 17. Segmented Information The Region of Peel is a diversified municipal government institution providing a wide range of services to its residents that include General Government, Protection to Property and Persons, Transportation, Environmental, Health and Social and Family Services. The Region also controls and administers Peel Housing Corporation, a non-profit housing company. For management reporting purposes the Region s operations and activities are reported by Program Services. Program Services were created for the purpose of recording specific activities to attain certain objectives in accordance with regulations, restrictions or limitations. Regional services are provided by divisions and their activities are reported in the Program Services. Divisions disclosed in the Segmented Information, along with the services they provide are as follows: 25

33 REGION OF PEEL CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) APPENDIX I General Government General government comprises divisions under Finance, Corporate Services and the Executive Office, Council and Service Innovation Information & Technology. The divisions provide direct support to the various citizen-facing Regional services, as well as Council and Committee. These divisions also supply financial and administrative leadership for the Regional Corporation. Also included are corporate expenses and revenues that are not directly attributable to any individual service, but do impact the overall tax requirement. Protection to Property and Persons Protection to property and persons consists of Police Services and the conservation authorities. Police Services partners with the community to maintain social order and contribute to a safe environment in which to live, work and visit. Funding is provided to support the operating costs, special projects and land purchases for three conservation authorities in the Region. Transportation Services Transportation services is responsible for Roads and TransHelp services. The mandate of the Roads division is to provide safe, reliable and secure roads while respecting the environment. TransHelp provides transit services to Peel residents unable to utilize conventional modes of public transportation. GO Transit GO Transit includes the Region s apportionment of capital costs billed by GO Transit. Gas Tax Transferred to Local Municipalities This segment includes the Federal Gas Tax Revenue that is transferred to local municipalities. Environmental Services Environmental services is responsible for Water, Wastewater and Waste Management Services. The Water Program sustainably delivers high quality drinking water, and the related support services, in an efficient and reliable manner. The mandate of Wastewater is to manage, collect and treat municipal wastewater. Waste Management provides environmentally sustainable waste management services to residents and small businesses while maximizing recovery of valuable resources. Health Services Health services includes Public Health and Paramedic Services. Public Health is mandated by the Ontario Health Protection and Promotion Act and other legislation. Public Health provides programs and services in six key areas: communicable disease control and prevention, clinical services, enforcement, youth and adult illness prevention, early childhood development and health surveillance. The mandate of Paramedic Services is to decrease suffering and improve and promote community safety. Social and Family Services Children s services plans, manages and coordinates a Region-wide early learning and child care system. Long Term Care operates five long-term care facilities for seniors. Ontario 26

34 REGION OF PEEL CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) APPENDIX I Works delivers a range of programs providing employment and financial assistance to residents in need. Social Housing Social housing is responsible for administering social housing providers, the rent supplement programs and managing a social housing waiting list. Peel Housing Corporation is a non-profit housing company providing over 16,000 residents with affordable rental units. Planning and Development Regional planning provides planning policy and research and development planning services that respond to the growth and change experienced in Peel. Assessment Services Assessment Services is the funding to the Municipal Property Assessment Corporation, which administers province-wide property assessment services for municipalities. 27

35 REGION OF PEEL CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) APPENDIX I Segmented Information For the year ended December 31, 2016 (All dollars in $000) General Protection to Property Transportation Go Transit Gas Tax Transferred Government & Persons Services To Area Municipalities Environmental Health Social & Family Social Planning & Assessment Services Servcies Services Housing Development Services Total Operations Revenue Levies on area municpalities 963, , , ,857 Direct charges on ratepayers , , , ,429 Contributions - other governments 14,556 14,070 14,887 14,270 6,831 6, ,724 31,167 39,079 65,300 86,802 86, , ,760 37,206 56, , ,687 Contributions - developers ,883 4,175 34,273 57, , , , , ,936 Contributed capital assets ,904 2, ,696 82, , ,615 85,656 Investment income 12,356 13,462 4,832 5,023 5,637 5, ,070 27,955 1,665 2,232 2,024 2,195 6,215 4, ,046 61,280 Fees and service charges 29,607 23,909 24,263 28,148 10,590 7, ,840 20, ,264 17,787 17,006 59,999 62, , ,184 1,020, ,583 47,865 51,616 67,235 80, ,724 31, , ,990 90,311 90, , , , , ,533,379 2,472,029 Expenses Salaries and wages 68,380 62, , ,850 40,596 38, ,515 51, , , , ,149 8,437 8,322 7,981 6, , ,905 Services and rents 41,316 23,070 28,879 28,291 24,513 22, , ,129 11,349 13,980 11,302 11,728 58,629 56, ,019 17, , ,659 Materials and supplies 3,785 3,463 10,412 10,236 4,989 8, ,455 49,821 6,128 4,953 7,023 7, ,835 83,753 Grants and transfer payments 23,667 21,761 41,809 39,313 (7) ,725 31, , ,575 64,385 65, , ,404 Debt charges 3,044 2, ,065 54, ,873 10, ,630 68,328 Intra government transfers (88,995) (83,245) (14,430) (14,616) (23,710) (24,207) ,295 52,503 11,852 10,785 16,233 14,723 5,511 5,354 (2,212) (1,900) - - (40,456) (40,603) Amortization 18,006 15,262 11,893 11,144 54,059 50, , ,040 3,947 3,504 3,644 3,644 14,639 14, , ,273 Other operating expenses 19,357 5,634 12,577 10,628 20,861 36,100 18,291 17, ,458 33, ,113 3,320 3,234 16,004 22, , ,660 88,560 51, , , , ,966 18,291 17,303 32,725 31, , , , , , , , ,913 6,496 5,694 18,019 17,842 2,145,441 2,037,379 Net Revenue Expenses 931, ,182 (405,462) (384,230) (54,715) (52,389) (18,291) (17,303) (1) 1 191, ,656 (60,683) (58,467) (101,527) (109,134) (71,617) (56,843) (5,652) (5,236) (17,769) (17,588) 387, ,650 28

36 4.2-1 REPORT Meeting Date: Audit and Risk Committee For Information DATE: April 12, 2017 REPORT TITLE: FROM: 2016 PEEL HOUSING CORPORATION FINANCIAL STATEMENTS Dan Labrecque, General Manager, Peel Living David Bingham, Treasurer, Peel Living OBJECTIVE To present the 2016 Peel Housing Corporation (operating as Peel Living) unaudited financial statements. REPORT HIGHLIGHTS Peel Living s 2016 financial statements have been audited by Deloitte, the Region s external auditors. Deloitte will issue their Auditor s Report once the statements are approved by the Peel Housing Corporation Board of Directors. The financial statements are prepared in accordance with the Canadian public sector accounting standards, as recommended by the Public Sector Accounting Board of the Chartered Professional Accountants of Canada. There are no unadjusted audit differences arising from the 2016 external audit. DISCUSSION The 2016 Statement of Financial Position; Statement of Operations; Statement of Remeasurement Gains and Losses; Statement of Change in Net Debt; and Statement of Cash Flows, along with the notes to the financial statements are attached to the subject report. These statements reflect the financial activities of Peel Housing Corporation and are the representation of management. The statements have been prepared by Regional staff in accordance with the Canadian public sector accounting standards, as recommended by the Public Sector Accounting Board of the Chartered Professional Accountants of Canada. There are no unrecorded audit differences arising from the 2016 external audit.

37 PEEL HOUSING CORPORATION FINANCIAL STATEMENTS CONCLUSION The 2016 financial statements for Peel Housing Corporation are presented for Audit and Risk Committee s review. Dan Labrecque, General Manager, Peel Living David Bingham, Treasurer, Peel Living Approved for Submission: J. Sheehy for D. Szwarc, Chief Administrative Officer APPENDICES Appendix I 2016 Peel Housing Corporation Financial Statements For further information regarding this report, please contact David Bingham at extension 4292 or via at dave.bingham@peelregion.ca. Authored By: Monique Hynes - 2 -

38 PEEL HOUSING CORPORATION FINANCIAL STATEMENTS APPENDIX I (Unaudited) Financial statements of Peel Housing Corporation December 31, 2016

39 PEEL HOUSING CORPORATION FINANCIAL STATEMENTS APPENDIX I (Unaudited) Financial statements of Peel Housing Corporation December 31, 2016 Table of Contents Independent Auditor s Report Statement of Financial Position... 3 Statement of Operations... 4 Statement of Remeasurement Gains and Losses... 5 Statement of Change in Net Debt... 6 Statement of Cash Flows... 7 Notes to the Financial Statements

40 4.2-5 Deloitte LLP 400 Applewood Crescent Suite 500 Vaughan ON L4K 0C3 Canada Tel: Fax: Independent Auditor s Report To the Board of Directors of Peel Housing Corporation We have audited the accompanying financial statements of Peel Housing Corporation, which comprise the statement of financial position as at December 31, 2016, and the statements of operations, remeasurement gains and losses, change in net debt 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 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. D R A F T We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. For discussion purposes only 1

41 4.2-6 Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of Peel Housing Corporation as at December 31, 2016, and the results of its operations, change in its net debt, and its cash flows for the year then ended in accordance with Canadian public sector accounting standards. Chartered Professional Accountants Licensed Public Accountants, 2017 D R A F T For discussion purposes only 2

42 PEEL HOUSING CORPORATION FINANCIAL STATEMENTS APPENDIX I (Unaudited) Peel Housing Corporation Statement of Financial Position As at December 31, Financial assets Investments, unrestricted (Note 3) $ 13,927,713 $ 13,661,026 Accounts receivable (Note 4) 2,776,262 2,230,716 Investments, restricted (Note 3) 14,713,200 14,567,458 31,417,175 30,459,200 Liabilities Accounts payable and accrued liabilities (Note 6) 8,695,488 7,217,190 Rental deposits 4,246,159 4,089,083 Post-employment liabilities (Note 7) 108, ,467 Mortgages payable on income producing properties (Note 8) 195,891, ,939,868 Long term debt (Note 9) 34,991,445 34,661, ,933, ,016,036 Net debt (212,515,957) (234,556,836) Non-financial assets Tangible capital assets (Note 5) 429,021, ,118,408 Prepaid expenses 1,166,354 1,220,960 $ 430,188,339 $ 440,339,368 Accumulated surplus (Note 11) $ 217,672,382 $ 205,782,532 Accumulated surplus comprising: Accumulated operating surplus $ 216,774,598 $ 205,360,923 Accumulated remeasurement gains 897, ,609 $ 217,672,382 $ 205,782,532 The accompanying notes are an integral part of these financial statements. 3

43 PEEL HOUSING CORPORATION FINANCIAL STATEMENTS APPENDIX I (Unaudited) Peel Housing Corporation Statement of Operations As at December 31, Budget Actual Actual Revenues Rental income $ 57,976,064 $ 58,807,711 $ 65,890,221 Non-rental income 5,452,427 5,464,565 5,011,662 Interest income from operations 455, , ,100 Government grants 34,153,066 33,176,322 33,636,723 Investment Income 322, , ,934 Contributed capital (Note 10) 23,750 23,750 23,750 Total revenues 98,383,881 98,343, ,333,390 Expenses (Note 13) Social housing 92,293,820 86,929,642 91,215,065 Total expenses 92,293,820 86,929,642 91,215,065 Annual operating surplus 6,090,061 11,413,675 14,118,325 Accumulated operating surplus, beginning of year 205,360, ,360, ,242,598 Accumulated operating surplus, end of year $ 211,450,984 $ 216,774,598 $ 205,360,923 The accompanying notes are an integral part of these financial statements. 4

44 PEEL HOUSING CORPORATION FINANCIAL STATEMENTS APPENDIX I (Unaudited) Peel Housing Corporation Statement of Remeasurement Gains and Losses As at December 31, Accumulated remeasurement gain, beginning of year $ 421,609 $ 414,512 Unrealized gain attributable to: Investments 476,175 7,097 Remeasurement gain for the year 476,175 7,097 Accumulated remeasurement gain, end of year $ 897,784 $ 421,609 The accompanying notes are an integral part of these financial statements. 5

45 PEEL HOUSING CORPORATION FINANCIAL STATEMENTS APPENDIX I (Unaudited) Peel Housing Corporation Statement of Change in Net Debt As at December 31, Budget Actual Actual Annual operating surplus $ 6,090,061 $ 11,413,675 $ 14,118,325 Acquisition of tangible capital assets - (816,804) (78,600) Amortization of tangible capital assets 10,913,227 10,913,227 10,920,465 17,003,288 21,510,098 24,960,190 Acquisition of prepaid expenses - (1,338,077) (1,470,145) Use of prepaid expenses - 1,392,683 1,456,092 $ - $ 54,606 $ (14,053) Net remeasurement gains - 476,175 7,097 17,003,288 22,040,879 24,953,234 Net debt, beginning of year (234,556,836) (234,556,836) (259,510,070) Net debt, end of year $ (217,553,548) $ (212,515,957) $ (234,556,836) The accompanying notes are an integral part of these financial statements. 6

46 PEEL HOUSING CORPORATION FINANCIAL STATEMENTS APPENDIX I (Unaudited) Peel Housing Corporation Statement of Cash Flows As at December 31, Operating activities Annual operating surplus $ 11,413,675 $ 14,118,325 Items not involving cash Amortization of tangible capital assets 10,913,227 10,920,465 Change in post-employment liabilities Net remeasurement gains for the year 476,175 7,097 Change in non-cash assets and liabilities Accounts receivable (545,546) 4,062,277 Accounts payable and accrued liabilities 1,478,298 (1,599,970) Rental deposits 157,076 (150,991) Prepaid expenses 54,606 (14,053) Net change in cash from operating activities 23,947,981 27,343,803 Capital activity Acquisition of tangible capital assets (816,804) (78,600) Net change in cash from capital activity (816,804) (78,600) Investing activities (Increase) in unrestricted investments (266,687) (3,911,316) (Increase) in restricted investments (145,742) (4,751,580) Net change in cash from investing activities (412,429) (8,662,896) Financing activities Proceeds from Peel Region loan 1,353,767 3,884,995 Repayment of long-term debt (1,023,750) (23,750) Repayment of mortgages payable (23,048,765) (22,463,552) Net change in cash from financing activities (22,718,748) (18,602,307) Net change in cash - - Cash, beginning of year - - Cash, end of year $ - $ - Cash paid for interest $ 8,107,678 $ 9,245,785 Cash received from interest 787, ,819 The accompanying notes are an integral part of these financial statements. 7

47 2016 PEEL HOUSING CORPORATION FINANCIAL STATEMENTS (Unaudited) APPENDIX I Peel Housing Corporation Notes to the Financial Statements For the year ended December 31, Introduction Peel Housing Corporation (the "Corporation") was incorporated under the Ontario Business Corporations Act in The Corporation has issued 100 common shares which are owned entirely by The Regional Municipality of Peel. The Corporation was formed as a result of the amalgamation effective January 1, 2003 of Peel Non Profit Housing Corporation with Peel Regional Housing Corporation. The Corporation is a not-for-profit organization that provides and operates housing accommodation for people with low and modest income in the Region of Peel. Effective October 1, 2001, the Region of Peel assumed from the Province of Ontario responsibility as Service Manager for social housing located in the Region of Peel. Effective January 1, 2012, the Corporation manages and operates its social housing units under the provisions of Housing Services Act and related regulations. As of October 6, 2016, the Board of Directors consist of six members of Council including the Regional Chair. 2. Accounting Policies The financial statements of the Corporation are the representation of management and are prepared in accordance with Canadian public sector accounting standards, as recommended by the Public Sector Accounting Board ( PSAB ) of the Chartered Professional Accountants of Canada ( CPA Canada ). The focus of PSAB financial statements is on the financial position of the Corporation and the changes thereto. The statement of financial position reports the financial assets and liabilities, and the non-financial assets of the Corporation. Financial assets are those assets that could provide resources to discharge existing liabilities or finance future operations. Accumulated surplus represents the financial position and is the difference between assets and liabilities. This provides information about the Corporation s overall future revenue requirements and its ability to finance activities and meet its obligations. a) Basis of Accounting i. Accrual Method of Accounting The Corporation follows the accrual method of accounting. The accrual basis of accounting recognizes revenue in the period in which the transactions or events occurred that gave rise to the revenues. Expenses are the cost of goods or services acquired in the period, whether or not payment has been made or invoices received. ii. iii. Recognition of Rental Income Rental income relates to rent revenue earned on the lease of the Corporation s social housing units. Revenue is recognized as earned over the term of the lease. Recognition of Government Grants Government grants are recognized in the financial statements in the period in which the events giving rise to the transfer occur, providing the transfers are authorized, any eligibility criteria have been met, reasonable estimates of the amounts can be made, and there are no stipulations which give rise to a liability. 8

48 PEEL HOUSING CORPORATION FINANCIAL STATEMENTS (Unaudited) APPENDIX I iv. Recognition and Measurement of Financial Instruments The Corporation accounts for its accounts receivable, investments, accounts payable and accrued liabilities, and long term debt according to PSAB s standards for accounting and reporting financial instruments. Portfolio investments held in equity instruments that are quoted in an active market are reported at fair market value in the financial statements. The fair value of investments is determined by the combination of the fair market value of investments with Encasa Financial Inc. ( Encasa ) and a pro-rated portion of Region of Peel's investments to reflect the fact that the balance of Peel Housing Corporation's investments is pooled with Region of Peel. Only the Encasa investment is reported at market value in the financial statements. Transaction costs are expensed as incurred. The carrying value of cash, accounts receivable, accounts payable and accrued liabilities approximate respective fair values due to their relatively short term maturity. The carrying value of long term debt and vendor mortgage approximate fair value due to the terms and conditions of the borrowing arrangements compared to current market conditions of similar items. v. Tangible Capital Assets Tangible capital assets are recorded at cost, which includes amounts that are directly attributable to acquisition, construction, development or betterment of the asset. The cost, less residual value, of tangible capital assets, excluding land, are amortized on a straight-line basis over their estimated useful lives as follows: Assets Useful life years Buildings Building improvements Equipment and furnishings 3 80 Vehicles 3 Annual amortization is charged in the year of acquisition and in the year of disposal. Assets under construction are not amortized until the asset is in service. vi. vii. viii. Contributions of Tangible Capital Assets Tangible capital assets received as contributions are recorded at their fair value at the date of receipt and are also recorded as revenue. Accounts Receivable The rent receivable portion of accounts receivable includes backdated rent receivables as determined in accordance with the Housing Services Act. These are established at the point of discovery. Capitalization of Costs The Corporation capitalizes all development or construction related direct costs to incomeproducing property under construction. These costs include realty tax, project management fees, interest on construction loans and/or the interest relating to short-term bridge financing. During the year, the Corporation capitalized $82,663 (2015 $78,600) of interest relating to various projects. 9

49 PEEL HOUSING CORPORATION FINANCIAL STATEMENTS (Unaudited) APPENDIX I ix. Reserves The reserve for the replacement of capital property is established for each operating project according to the terms of the agreements. The annual reserve contribution is not to exceed the amounts prescribed by the Agreements or such amount as amended by either Canada Mortgage and Housing Corporation or the Ontario Ministry of Municipal Affairs and Housing. The energy conservation reserve was established by the Board of Directors with a view to reduce utility costs. Interest is to be paid calculated on 100 basis points above the Canada Bond Yield s rate having a term to maturity equivalent to the term the reserve is being asked to invest. The working fund reserve was established by the Board of Directors with a view to provide for unforeseen contingencies for which alternative financing cannot be arranged. x. Mortgages Payable on Income Producing Property On the interest adjustment date, construction loans payable are transferred to mortgages payable on income-producing property. The interest adjustment date represents the effective date for commencement of mortgage payments and receipt of government grants based on the original mortgage commitment obtained to finance the project. To the extent that final mortgage requirements may differ from the original mortgage commitment when final construction costs are known, mortgages payable on income-producing property are adjusted accordingly. xi. xii. Liability for Contaminated Sites A liability for the remediation of a contaminated site is recognized as the best estimate of the amount required to remediate the contaminated site when contamination exceeding an environmental standard exists, the Corporation is either directly responsible or accepts responsibility, it is expected that the future economic benefit will be given up, and a reasonable estimate of the amount is determinable. If the likelihood of the Corporation s obligation to incur these costs is either not determinable, or if an amount cannot be reasonably estimated, the costs are disclosed as contingent liabilities in the notes to the financial statements. Use of Estimates The preparation of financial statements in conformity with the Canadian public sector accounting standards requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the period. Significant estimates relate to accounts receivable, accrued liabilities and amortization. Actual amounts could differ from those estimates. 3. Investments The Corporation s investments of $2,896,596 (2015 $2,896,596) with Encasa Financial Inc. had a fair market value of $3,794,380 as at December 31, 2016 (2015 $3,318,205). The net accumulated unrealized gain of $897,784 (2015 $421,609) for restricted investments is reported in the statement of re-measurement gains and losses and in the statement of financial position as an increase to restricted investments. The balance of Corporation funds are with the Region of Peel for investment purposes which earn interest based on the Region of Peel's investment yield. As at December 31, 2016, the Corporation s unrestricted investments had a fair market value of $14,266,401 (2015 $14,290,841). 10

50 PEEL HOUSING CORPORATION FINANCIAL STATEMENTS (Unaudited) APPENDIX I At December 31, 2016, the Corporation's restricted investments had a fair market value of $14,978,720 (2015 $15,086,083). Rental deposits and reserve funds established by legislation or by the Board are disclosed as a restricted investment. 4. Accounts Receivable Accounts receivable consists of the following: Rents $ 928,752 $ 823,512 HST receivable 579, ,843 Other 938, ,078 Region of Peel 329, ,283 Total $ 2,776,262 $ 2,230, Tangible Capital Assets December 31, 2016 Accumulated Cost Amortization Net Book Value Land $ 142,017,280 $ - $ 142,017,280 Buildings 542,351, ,129, ,222,761 Building improvements 988, , ,225 Equipment and furnishings 676, , ,034 Vehicles 21,961 15,482 6,479 Construction work in progress 738, ,206 Total $ 686,794,620 $ 257,772,635 $ 429,021,985 December 31, 2015 Accumulated Cost Amortization Net Book Value Land $ 141,938,682 $ - $ 141,938,682 Buildings 542,351, ,281, ,069,876 Building improvements 988, , ,758 Equipment and furnishings 676, , ,637 Vehicles 21,961 13,506 8,455 Total $ 685,977,816 $ 246,859,408 $ 439,118,408 11

51 2016 PEEL HOUSING CORPORATION FINANCIAL STATEMENTS (Unaudited) APPENDIX I 6. Accounts Payable and Accrued Liabilities The amount due to the Region of Peel at December 31, 2016 of $239,935 (2015 $Nil) is included in accounts payable and accrued liabilities, and does not bear interest and has no specific terms of payment. Long term debt payable to the Region of Peel is disclosed in note Post-Employment Liabilities The liability for retirement benefits on the statement of financial position is the result of a full actuarial valuation as at December 31, 2014 for the Corporation s share of costs associated with extending the coverage for health, dental and life insurance benefits to qualifying employees, with estimates to December 31, Benefit coverage, except for life insurance coverage, ceases at the age of 65. The following significant actuarial assumptions adopted in the valuation were based on management s best estimates. Future discount rates 4.75 per cent per year Future inflation rate 2.0 per cent per year Future salaries Escalate at 3.0 per cent per year Future dental premium rates Escalate at 4.0 per cent per annum Future health care premium rates Escalate at 4.0 per cent per annum The following are the actuarial results for the accrued benefit liability reported on the statement of financial position: Retirement Benefits Liability Accrued benefit obligation at January 1 $ 108,467 $ 107,814 Add: benefit service cost 2,671 2,548 Add: interest accrued 5,228 5,201 Deduct: benefit payments (7,429) (7,096) Accrued benefit obligation at December , ,467 Liability at December 31 $ 108,937 $ 108,467 Retirement Benefits Expense Current period benefit cost $ 2,671 $ 2,548 Interest on accrued benefit obligation 5,228 5,201 Total $ 7,899 $ 7,749 12

52 PEEL HOUSING CORPORATION FINANCIAL STATEMENTS (Unaudited) APPENDIX I 8. Mortgages Payable on Income Producing Properties Mortgages are secured by a first charge on specific assets of the Corporation with amortization periods that ranged from 5 to 50 years and interest ranging from 1.04 per cent to 8.0 per cent. Generally, interest rates are fixed for either 5 or 10 years. Estimated principal repayments in respect to these mortgages for the years and thereafter are as follows: Principal Reduction 2017 $ 22,169, ,102, ,139, ,380, ,573,980 Subsequent to ,524,863 Total $ 195,891, Long Term Debt Long term debt consists primarily of four loans from the Region of Peel and forgivable loans with the provincial government associated with some of the properties developed with the Region of Peel. The first Regional loan is for Summerville and the current term is 2.9 per cent for ten years from March 6, 2016 to March 5, 2026, amortized over 35 years; payments made are based on the operating surplus of the project. The second Regional loan is payable over 15 years commencing with the various property locations respective Operating Agreement end dates. The third Regional loan is for the purchase of land adjacent to Twin Pines, with an interest rate of 3.2 per cent, with an open term to repay. The fourth Regional loan is to fund the development of the Twin Pines site, with an interest rate of 2.95 per cent, with an open term to repay. The provincial loans will be forgiven after 20 years once program requirements have been met. The majority will be forgiven in the year The long term debt of $1,000,000 due to the Twin Pines tenants association (member contributions) was repaid in Long Term Debt Region of Peel loan 2005 Summerville Pines $ 11,480,646 $ 11,480,646 Region of Peel loan Service Manager capital reinvestment 18,042,481 17,505,519 Region of Peel loan 2013 land acquisition 2,763,362 2,684,763 Region of Peel loan Twin Pines Site Development 738,206 - Provincial loans (forgivable) 1,966,750 1,990,500 Twin Pines tenants association - 1,000,000 Total $ 34,991,445 $ 34,661,428 13

53 2016 PEEL HOUSING CORPORATION FINANCIAL STATEMENTS (Unaudited) APPENDIX I 10. Contributed Capital The following summarizes changes to the balance for contributed capital. Contributed Capital Balance at the beginning of the year $ 18,807,504 $ 18,783,754 Assisted Housing in Peel forgivable loan 23,750 23,750 Total Contributed Capital $ 18,831,254 $ 18,807, Accumulated Surplus The accumulated surplus consists of the following: Accumulated Surplus Accumulated operating surplus: Investment in tangible capital assets $ 206,284,516 $ 187,868,401 Reserves 9,085,886 15,574,647 Contributed capital 18,831,254 18,807,504 Capital fund (18,042,481) (17,505,519) Accumulated surplus from operations 724, ,260 Unfunded liability retiree benefits (108,937) (108,467) Common shares ,774, ,360,923 Unrealized gain on restricted investments 897, ,609 Total Accumulated Surplus $ 217,672,382 $ 205,782,532 14

54 PEEL HOUSING CORPORATION FINANCIAL STATEMENTS (Unaudited) APPENDIX I 12. Surplus / (Deficit) from Housing Program Administration Overhead costs are related to administrative functions performed by the Region of Peel and are allocated based on the buildings weighted unit count Total revenue $ 895,855 $ 823,697 Less: expenses 10,135,265 10,014,307 Deficit before the under noted items (9,239,410) (9,190,610) Transfer of investment income to reserve funds (322,817) (342,934) Transfer of investment revenue to last month s rent (81,586) (63,567) Transfer of investment income to operations (382,623) (253,318) Administrative expense recovered from operations 9,069,742 8,599,227 Administrative allocation to Region of Peel buildings 956,694 1,251,202 Surplus/ (deficit) from housing program administration $ - $ Expenses by Object The statement of operations reports expenses for the Corporation by function. The following is a summary of expenses by object Salary and wages $ 4,940,343 $ 5,040,616 Municipal taxes 12,306,861 12,510,090 Amortization 10,913,227 10,920,465 Debt interest charges 9,232,966 10,904,588 Other operating expenses 49,536,245 51,839,306 Total $ 86,929,642 $ 91,215, Contingent Liabilities As at December 31, 2016, the Corporation has certain legal disputes outstanding that have arisen in the ordinary course of operations. No provision has been made in 2016 for costs or losses, as all claims are expected to be covered by insurance or the consequences are undeterminable at this time. 15. Risks a) Credit Risk The Corporation is subject to credit risks from its tenants as a result of counterparty default. This risk is mitigated by prudent monitoring procedures. 15

55 2016 PEEL HOUSING CORPORATION FINANCIAL STATEMENTS (Unaudited) APPENDIX I b) Interest Rate Risk The Corporation is subject to interest rate fluctuations on its mortgages and long term debt. The Corporation currently does not use any hedging strategies to mitigate this interest rate exposure. c) Market Risk Market risk arises as a result of trading in fixed income securities and equities. Fluctuations in the market expose the Corporation to a risk of loss. The Corporation mitigates this risk through cash management processes and compliance to the approved investment policy. 16. Commitments The Corporation has obligations under non-cancellable operating leases with the Region of Peel for various service agreements. The payments to the expiry of leases and agreements are as follows: Principal Reduction 2017 $ 2,051, ,051, ,051, ,051, ,051,497 Subsequent to ,448,818 Total $ 63,706,303 16

56 4.3-1 REPORT Meeting Date: Audit and Risk Committee For Information DATE: April 7, 2017 REPORT TITLE: FROM: 2016 DELOITTE'S AUDIT RESULTS REPORT Stephen VanOfwegen, Commissioner of Finance and Chief Financial Officer David Bingham, Treasurer, Peel Living OBJECTIVE To provide the Audit and Risk Committee with a summary of the external audit results for both the Region of Peel and Peel Housing Corporation, as issued by our external auditors, Deloitte, for the year ending December 31, REPORT HIGHLIGHTS Deloitte has recently completed their 2016 audit of the Region of Peel and Peel Housing Corporation. Deloitte has prepared an Audit Results report summarizing the key findings and audit results and this report is attached to the subject report as Appendix I. There are no uncorrected misstatements in the financial statements of the Region of Peel and of Peel Housing Corporation for There are no significant internal control deficiencies. There are no management letter comments for DISCUSSION On an annual basis, the external auditors provide the Region of Peel and the Peel Housing Corporation with audits in accordance with generally accepted auditing standards. The audits for the 2016 fiscal year have been completed and Deloitte has issued their Audit Results report which is attached as Appendix I. This report highlights the main findings from the external audits, the status of the audits, the audit risks, internal control matters and the Management Letters for both the Region and Peel Housing Corporation. The audits did not identify any significant deficiencies in internal controls. There are no misstatements resulting from the current audits. There are no management letter comments for 2016.

57 2016 DELOITTE'S AUDIT RESULTS REPORT CONCLUSION Deloitte s Audit Results report which is attached as Appendix I, is presented for Audit and Risk Committee s review. Gayle Bursey for Stephen VanOfwegen, Commissioner of Finance and Chief Financial Officer David Bingham, Treasurer, Peel Living Approved for Submission: J. Sheehy for D. Szwarc, Chief Administrative Officer APPENDICES Appendix I Report to the Audit and Risk Committee on the 2016 Audits For further information regarding this report, please contact David Bingham at extension 4292 or via at dave.bingham@peelregion.ca. Authored By: Monique Hynes - 2 -

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73 Appendix I Deloitte's Audit Results Report March 21, 2017 Deloitte LLP 400 Applewood Crescent Suite 500 Vaughan ON L4K 0C3 Canada Tel: Fax: Private and confidential The Members of the Audit and Risk Committee Regional Municipality of Peel 10 Peel Centre Drive Brampton ON L6T 4B9 Dear Audit and Risk Committee Members, We have been engaged to audit the financial statements of Regional Municipality of Peel (the Region ) and the financial statements of Peel Housing Corporation ( PHC ) for the year ended December 31, You have requested that we communicate in writing with you regarding our compliance with relevant ethical requirements regarding independence as well as all relationships and other matters between the Region, PHC, our Firm and network firms that, in our professional judgment, may reasonably be thought to bear on our independence. You have also requested us to communicate the related safeguards that have been applied to eliminate identified threats to independence or reduce them to an acceptable level. In determining which relationships to report, we have considered relevant rules and related interpretations prescribed by the appropriate provincial regulator/ordre and applicable legislation, covering such matters as: a. Holding a financial interest, either directly or indirectly, in a client b. Holding a position, either directly or indirectly, that gives the right or responsibility to exert significant influence over the financial or accounting policies of a client c. Personal or business relationships of immediate family, close relatives, partners or retired partners, either directly or indirectly, with a client d. Economic dependence on a client, and e. Provision of services in addition to the audit engagement. We confirm to you that the engagement team and others in the firm as appropriate, the firm and, when applicable, network firms have complied with relevant ethical requirements regarding independence. We have prepared the following comments to facilitate our discussion with you regarding independence matters arising since March 17, 2016, the date of our last letter. We are not aware of any relationships between the Region, PHC, and our Firm, including any network firms that, in our professional judgment, may reasonably be thought to bear on independence, that have occurred from March 17, 2016 to March 21, We hereby confirm that we are independent with respect to the Region and PHC in accordance with the Rules of Professional Conduct of the Chartered Professional Accountants of Ontario as of March 21, This letter is intended solely for the use of the Committee, management, and others within the Region and PHC and should not be used for any other purposes. We look forward to discussing with you the matters addressed in this letter at our upcoming meeting. Yours truly, Chartered Professional Accountants Licensed Public Accountants

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79 Appendix I Deloitte's Audit Results Report

80 Appendix I Deloitte's Audit Results Report (Region letterhead), 2017 Private and confidential Deloitte LLP 400 Applewood Cres. Suite 500 Vaughan ON L4K 0C3 Re: Consolidated financial statements of the Regional Municipality of Peel for the year ended December 31, 2016 Dear Mr. Trevor Ferguson: This representation letter is provided in connection with the audit by Deloitte D LLP ( Deloitte or you ) of the consolidated financial statements of the Regional Municipality of Peel el (the Region or we or us ) for the year ended December 31, 2016, and a summary of significant nt accounting counting policies and other explanatory information (the Financial Statements ) for the purpose of expressing an opinion as to whether the Financial Statements present fairly, in all material a respects, the financial position, results of operations, and cash flows of the Region in accordance with h Public Sector Accounting o Standards ( PSAS ). We confirm that, to the best of our knowledge and belief, e having made such s inquiries as we considered necessary for the purpose of appropriately informing ourselves: Financial statements 1. We have fulfilled our responsibilities as set out in the terms of f the Master Services Agreement between the Region and Deloitte dated July 22, for the preparation at of the Financial Statements in accordance with PSAS. In particular, the Financial Statements are fairly presented, in all material respects, and present the financial position o on of the Region as at December 31, 2016 and the results of its operations and cash flows for the year then ended in accordance with PSAS. 2. Significant assumptions used in n making estimates,, including those measured at fair value, are reasonable. 3. In preparing the Financial Statements tements in accordance with PSAS, management makes judgments and assumptions about the future u e and uses estimates. The completeness and appropriateness of the disclosures related to estimates are in accordance a c with PSAS. The Region has appropriately disclosed in the Financial Statements s the nature of measurement uncertainties that are material, including all estimates where it t is reasonably possible si that the estimate will change in the near term and the effect of the change could be material to the Financial Statements. The measurement m methods, including the related assumptions and models, used in determining the estimates, including fair value, were appropriate, reasonable and consistently applied in accordance with PSAS S and appropriately y reflect management's intent and ability to carry out specific courses of action on behalf of the entity. No events have occurred subsequent to December 31, 2016 that require adjustment to the estimates and disclosures included in the Financial Statements. There are no changes s in management s method of determining significant estimates in the current year. 4. We have determined m that the Financial Statements are complete as of the date of this letter as this is the date when n there are no changes to the Financial Statements (including disclosures) planned or expected; all final adjusting journal entries have been reflected in the Financial Statements and the Financial Statements have been approved in accordance with our process to finalize financial statements. en

81 Appendix I Deloitte's Audit Results Report Deloitte LLP, 2017 Page 2 5. We have completed our review of events after December 31, 2016 and up to the date e of this letter. All events subsequent to the date of the Financial Statements and for which PSAS requires u adjustment or r disclosure have been adjusted or disclosed. Accounting estimates and disclosures s included in the Financial Statements that are impacted by subsequent events have been appropriately adjusted. 6. The Financial Statements are free of material errors and omissions. 7. The Region has satisfactory title to and control over all assets, and there are a no liens or encumbrances on such assets. We have disclosed to you and in the Financial Statements en all assets that have h been pledged as collateral. Information provided 8. We have provided you with: a. Access to all information of which we are aware that is relevant to the preparation pa of the Financial Statements, such as records, documentation and other matters. All financial nc statements and other financial information provided to you accurately reflect ec the activities and expenses of the Region and do not reflect any activities or expenses of any other person or entity b. All relevant information as well as additional information that you have h requested from us for the purpose of the audit, and, c. Unrestricted access to persons within the entity ty from whom you determined it necessary to obtain audit evidence. 9. All transactions have been properly recorded ed in the accounting co records and are reflected in the Financial Statements. 10. We have disclosed to you the results of our assessment en of the risk that the Financial Statements may be materially misstated as a result of fraud. 11. We have disclosed to you all information in relation to fraud or suspected fraud that we are aware of and that affects the entity and involves: a. Management b. Employees who have significant nt roles in internal control or c. Others where the fraud could have a material effect on the Financial Statements. 12. We have disclosed o to you all information in relation to allegations of fraud, or suspected fraud, affecting the e entity s Financial Statements and all knowledge of concerns or allegations of potential errors in the h selection of accounting policies or the recording of transactions affecting the Region that have been e communicated by employees, former employees, or others, whether written or oral. 13. We have disclosed to you all communications from regulatory agencies and all known instances of non-compliance n or suspected s non-compliance with laws and regulations whose effects should be considered when preparing the Financial Statements We have disclosed to you the identity of the entity s related parties and all the related party relationships and transactions of which we are aware, including guarantees, non-monetary transactions and transactions for no consideration. 15. We acknowledge our responsibility for the design, implementation and maintenance of internal control to prevent e and detect fraud and error.

82 Appendix I Deloitte's Audit Results Report Deloitte LLP, 2017 Page We have disclosed to you all known, actual or possible litigation and claims, whether or o not they have been discussed with our lawyers, whose effects should be considered when preparing n the Financial Statements. As appropriate, these items have been disclosed and accounted for in the Financial Statements in accordance with PSAS. 17. We have disclosed to you all liabilities, provisions, contingent liabilities and contingent assets, including those associated with guarantees, whether written or oral, and they are appropriately e reflected in the Financial Statements. 18. We have disclosed to you, and the Region has complied with all aspects of contractual c agreements that could have a material effect on the Financial Statements in the e event ent of non-compliance, including all covenants, conditions or other requirements of all outstanding g debt. 19. We have disclosed to you all the documents that we expect to o issue that may comprise other information, in the context of CAS 720, The Auditor's Responsibilities Relating to t Other Information in Documents Containing Audited Financial Statements. Independence matters For purposes of the following paragraph, Deloitte shall l mean Deloitte te LLP P and Deloitte Touche Tohmatsu Limited, including related member firms and affiliates Prior to the Region having any substantive employment conversations with a former or current Deloitte engagement team member, the Region g has held discussions with Deloitte and obtained approval from the Audit Committee. Selection of accounting policies and n recording of transactions 21. The Region s accounting policies and d their method of application have been applied on a basis consistent with that of the audited d consolidated a financial n statements as at and for the year ended December 31, Work of management s experts x erts 22. We agree with the work of management s experts x in evaluating the landfill liability and employee future benefits liability, and have adequately e considered the competence and capabilities of the experts in determining ng amounts and disclosures d c used in the Financial Statements and underlying accounting records.. We did not give any, n nor cause any, instructions to be given to management s experts with respect to values or amounts derived in an attempt to bias their work, and we are not aware of any matters that have impacted m the independence or objectivity of the experts. Plans or intentions affecting gcarrying value/classification of assets and liabilities 23. We have disclosed to you all plans or intentions that may materially affect the carrying value or classification c of assets and d liabilities reflected in the Financial Statements. Loans s and receivables es 24. The Region is responsible for determining and maintaining the adequacy of the allowance for doubtful notes, loans, and accounts receivable, as well as estimates used to determine such amounts. Management believes the allowances are adequate to absorb currently estimated bad debts in the account balances. 25. We have identified d to you all forgivable loans and loans with concessionary terms and have appropriately reflected these instruments in the financial statements.

83 Appendix I Deloitte's Audit Results Report Deloitte LLP, 2017 Page 4 Investments 26. With regard to the Region s investments, we have disclosed to you any events that t have occurred and d facts that have been discovered with respect to such investment that would indicate any other than temporary impairment of the investment s value. Employee future benefits 27. Employee future benefit costs, assets, and obligations have been properly recorded and adequately disclosed in the Financial Statements including those arising under defined benefit and defined contribution plans as well as termination arrangements. We believe that the actuarial assumptions and methods used to measure defined benefit plan assets, liabilities and costs for financial al accounting purposes are appropriate in the circumstances. 28. We have disclosed to you any intentions of terminating any of f our r pension plans s or withdrawing from the multi-employer plan, or taking any other action that could result in an effective ec termination or reportable event for any of the plans. We have disclosed to you any occurrences n that could result in the termination of any of our pension or multi-employer r plans to which we contribute. 29. We are unable to determine the possibility of a withdrawal wal liability in a multi-employer m benefit plan. 30. We do not plan to make frequent amendments to o our r pension or other post-retirement benefit plans. Liabilities for contaminated sites 31. We have evaluated all of our tangible capital a assets that we own w or accept responsibility, and have not identified any sites in which contamination exceeds an environmental standard. Deferred revenue relating to York-Peel k Water Supply S Agreement 32. With respect to the deferred revenue u amount relating to t the York-Peel Water Supply Agreement, we believe that the amount represents management s best estimate of the liability as at December 31, 2016, and incorporates our best judgment and assumptions about the transaction up to the date of this letter. Management believes ev s the deferred ed revenue e amount adequately represents the Region s liability. Various matters 33. The following have been properly recorded e d and, when appropriate, adequately disclosed and presented in the Financial Statements: a. Economic dependence e on another party b. Losses arising from sale and d purchase commitments c. Agreements em to buy back k assets previously sold d. Provisions o for future removal and site restoration costs e. Financial instruments with significant individual or group concentration of credit risk, and related maximum credit t risk exposure f. Sales with recourse provisions g. Sales incentives, including cash consideration provided to customers and vendor rebates h. Arrangements e with financial institutions involving compensating balances or other arrangements involving restriction on cash balances and line-of-credit or similar arrangements

84 Appendix I Deloitte's Audit Results Report Deloitte LLP, 2017 Page 5 i. All impaired loans receivable j. Loans that have been restructured to provide a reduction or deferral of interest or principal payments because of borrower financial difficulties. 34. We have not provided you access to review certain minutes and reports which may violate the solicitor-client privilege. The Regional Solicitor has reviewed all minutes and n reports impacted d by the solicitor-client privilege, and has concluded that there are no material liabilities a or contractual tu obligations included in them which are not already reflected in the consolidated financial statements of the Region. Yours truly, Regional Municipality of Peel David Szwarc, Chief Administrative Officer Stephen VanOfwegen, Chief Financial Officer and Commissioner of Finance David Bingham, Treasurer and Director, Corporate Finance

85 Appendix I Deloitte's Audit Results Report Appendix A Summary of uncorrected financial statement en misstatements Regional Municipality of Peel Year ended December 31, 2016 There were no uncorrected misstatements identified.

86 Appendix I Deloitte's Audit Results Report Appendix B Summary of disclosure items passed Regional Municipality of Peel Year ended December 31, 2016 No disclosure deficiencies identified.

87 Appendix I Deloitte's Audit Results Report

88 4.4-1 REPORT Meeting Date: Audit and Risk Committee For Information DATE: April 12, 2017 REPORT TITLE: FROM: 2016 REGION OF PEEL DEBT RETIREMENT AND SINKING FUNDS FINANCIAL STATEMENTS Stephen VanOfwegen, Commissioner of Finance and Chief Financial Officer OBJECTIVE To present the Region of Peel unaudited 2016 Debt Retirement and Sinking Funds financial statements. REPORT HIGHLIGHTS On an annual basis, Region of Peel management prepares the Region s Debt Retirement and Sinking Funds financial statements and these are audited by Deloitte, the Region s external auditors. The external auditors have completed their audit and it is anticipated that their Auditor s Report will be issued on April 20, 2017 once all audit procedures have been completed, as per auditing standards. The Region s Debt Retirement Fund is a separate fund maintained for the purpose of providing periodic payments of debt service associated with one debenture series assumed by the Town of Caledon. The fund will end in 2017 and Caledon will transfer funds to the Region as and when required for the balance of the payments as with other debentures issued for the Town. The Region s Sinking Funds are separate funds maintained for the purpose of providing periodic repayments for debt to be retired by means of sinking funds. DISCUSSION The 2016 Debt Retirement and Sinking Funds financial statements were prepared by Region of Peel management in accordance with Canadian public sector accounting standards, as recommended by the Public Sector Accounting Board. The Debt Retirement Fund is a separate fund maintained for the purpose of providing periodic payments of debt service costs associated with Debenture Series AD assumed by the Town of Caledon to be retired by means of debt retirement funds on hand with the Region and also with further contributions from the Town of Caledon. At December 31, 2016, the balance in the debt retirement fund was $413,000. The Debt Retirement fund will end in 2017 and the Town of Caledon will transfer funds to the Region when required for the balance of the payments as with other debentures issued for the Town. The Region of Peel Sinking Fund is a separate fund maintained for the purpose of providing periodic repayments for debt to be retired by means of sinking funds. The Region makes the

89 REGION OF PEEL DEBT RETIREMENT AND SINKING FUNDS FINANCIAL STATEMENTS payments to the sinking funds and together with interest income compounded annually, the debt will be retired at maturity. At December 31, 2016, the Region has a balance of $ million in the sinking funds representing both the Region s funds and the funds for the Town of Caledon. The Treasurer meets annually with the Debt Retirement and Sinking Fund Committee once the external audit is complete and the Committee reviews and receives the Auditor s Report and financial statements. Committee members are the Peel Treasurer and Director, Corporate Finance (chair) and the three local municipality s Treasurers. CONCLUSION The 2016 Region of Peel Debt Retirement and Sinking Funds financial statements are presented for the Audit and Risk Committee s review. Gayle Bursey for Stephen VanOfwegen, Commissioner of Finance and Chief Financial Officer Approved for Submission: J. Sheehy for D. Szwarc, Chief Administrative Officer APPENDICES Appendix I 2016 Region of Peel Debt Retirement and Sinking Funds Financial Statements For further information regarding this report, please contact David Bingham, Treasurer and Director of Corporate Finance at extension 4292 or dave.bingham@peelregion.ca. Authored By: Monique Hynes - 2 -

90 REGION OF PEEL DEBT RETIREMENT AND SINKING FUNDS FINANCIAL STATEMENTS APPENDIX I (Unaudited) Debt retirement and sinking funds financial statements of The Regional Municipality of Peel December 31, 2016

91 REGION OF PEEL DEBT RETIREMENT AND SINKING FUNDS FINANCIAL STATEMENTS APPENDIX I (Unaudited) Debt retirement and sinking funds financial statements of The Regional Municipality of Peel December 31, 2016 Table of Contents Independent Auditor s Report Debt Retirement and Sinking Funds Statement of Financial Position... 3 Debt Retirement and Sinking Funds Statement of Operations... 4 Debt Retirement and Sinking Funds Statement of Cash Flows... 5 Debt Retirement and Sinking Funds Statement of Change in Net Financial Assets... 5 Notes to the Debt Retirement and Sinking Funds Financial Statements

92 4.4-5 Deloitte LLP 400 Applewood Crescent Suite 500 Vaughan ON L4K 0C3 Canada Tel: Fax: Independent Auditor s Report To the Members of Council, Inhabitants and Ratepayers of the Regional Municipality of Peel We have audited the accompanying financial statements of the Debt Retirement and Sinking Funds of the Regional Municipality of Peel, which comprise the statement of financial position as at December 31, 2016, and the statements of operations, change in net financial assets and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Management s Responsibility for the 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. D R A F T We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. For discussion purposes only 1

93 4.4-6 Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of the Debt Retirement and Sinking Funds of the Regional Municipality of Peel as at December 31, 2016, and the results of its operations, change in its net financial assets, and its cash flows for the year then ended in accordance with Canadian public sector accounting standards. Chartered Professional Accountants Licensed Public Accountants, 2017 D R A F T For discussion purposes only 2

94 REGION OF PEEL DEBT RETIREMENT AND SINKING FUNDS FINANCIAL STATEMENTS APPENDIX I (Unaudited) The Regional Municipality of Peel Debt Retirement and Sinking Funds Statement of Financial Position As at December 31, 2016 (All dollars in $000) FINANCIAL ASSETS Cash $ 27,097 $ 69,734 Accrued interest Long-term investments (Note 8) (Fair value 2016 $135,245; 2015 $61,804) 135,178 57,188 TOTAL FINANCIAL ASSETS 162, ,142 LIABILITY Actuarial requirements for retirement of sinking fund debt (Note 2d) 159, ,590 NET FINANCIAL ASSETS 2,620 4,552 ASSET ALLOCATION Region of Peel 161, ,011 Town of Caledon 600 3,131 $ 162,521 $ 127,142 ASSET ALLOCATION Debt retirement fund 413 2,981 Sinking fund 162, ,161 $ 162,521 $ 127,142 The accompanying notes are an integral part of these financial statements. 3

95 REGION OF PEEL DEBT RETIREMENT AND SINKING FUNDS FINANCIAL STATEMENTS APPENDIX I (Unaudited) The Regional Municipality of Peel Debt Retirement and Sinking Funds Statement of Operations For the year ended December 31, 2016 (All dollars in $000) REVENUE Contributions (Note 5) $ 33,011 $ 32,995 Investment income 5,013 3,924 TOTAL REVENUE 38,024 36,919 EXPENSES Provision for actuarial requirements 37,311 36,162 Payment of principal from debt retirement fund 2,046 1,921 Payment of interest from debt retirement fund TOTAL EXPENSES 39,956 38,810 EXCESS OF EXPENSES OVER REVENUE FOR THE YEAR $ (1,932) $ (1,891) The accompanying notes are an integral part of these financial statements. 4

96 REGION OF PEEL DEBT RETIREMENT AND SINKING FUNDS FINANCIAL STATEMENTS APPENDIX I (Unaudited) The Regional Municipality of Peel Debt Retirement and Sinking Funds Statement of Cash Flows For the year ended December 31, 2016 (All dollars in $000) OPERATING ACTIVITIES Excess of expenses over revenue $ (1,932) $ (1,891) Change in non-cash assets and liabilities Accrued interest (26) (65) Increase in actuarial requirements 37,311 36,162 NET CHANGE IN CASH FROM OPERATING ACTIVITIES 35,353 34,206 INVESTING ACTIVITIES Acquisition of investments (77,990) (4,619) NET CHANGE IN CASH FROM INVESTING ACTIVITIES (77,990) (4,619) Net change in cash (42,637) 29,587 Cash, beginning of year 69,734 40,147 CASH, END OF YEAR $ 27,097 $ 69,734 The accompanying notes are an integral part of these financial statements. The Regional Municipality of Peel Debt Retirement and Sinking Funds Statement of Change in Net Financial Assets For the year ended December 31, 2016 (All dollars in $000) Excess of expenses over revenue for the year $ (1,932) $ (1,891) Net financial assets, beginning of year 4,552 6,443 NET FINANCIAL ASSETS, END OF YEAR $ 2,620 $ 4,552 The accompanying notes are an integral part of these financial statements. 5

97 REGION OF PEEL DEBT RETIREMENT AND SINKING FUNDS FINANCIAL STATEMENTS (Unaudited) APPENDIX I The Regional Municipality of Peel Debt Retirement and Sinking Funds Notes to the Financial Statements For the year ended December 31, 2016 (All dollars in $000) 1. Purpose of Funds The Region of Peel Debt Retirement Fund is a separate fund maintained for the purpose of providing periodic repayments of debt associated with Debenture Series AD assumed by the Town of Caledon to be retired by means of debt retirement funds on hand with the Region and further contributions from the Town of Caledon. The Region of Peel Sinking Fund is a separate fund maintained for the purpose of providing periodic repayments for debt to be retired by means of sinking funds. 2. Summary of Significant Accounting Policies These financial statements are the representation of management and are prepared in accordance Canadian public sector accounting standards, as recommended by Public Sector Accounting Board ( PSAB ) of Chartered Professional Accountants of Canada ( CPA Canada ). The significant accounting policies are summarized below: (a) Basis of Accounting The Region of Peel Debt Retirement and Sinking Funds follow the accrual method of accounting for revenues and expenses. (b) Revenue Recognition Contributions are recognized in the year receivable. Investment income is recognized as revenue when earned. (c) Investments Investments are recorded at amortized cost. Discounts on zero-coupon bonds are amortized on a compound interest basis over the term of the investment. The discounts or premiums on any coupon-bearing investment are amortized on a straight-line basis over the term of the investment. Investment purchases are accounted for on the settlement date. costs incurred in the purchase of investments. There are no transaction (d) Provision for Actuarial Requirements The provision for actuarial requirements for the Sinking Fund represents the amounts required which, together with interest compounded annually, will be sufficient to retire the related debt at maturity, based on contributions to the Sinking Fund to date. The actuarial requirements were calculated using a rate of 4 per cent per annum on debt issued in 2010 and 2.5 per cent, 3.25 per cent or 4 per cent per annum on debt issued in 2011 and thereafter. The excess or deficiency of financial assets over these requirements is included in the fund balance. 6

98 2016 REGION OF PEEL DEBT RETIREMENT AND SINKING FUNDS FINANCIAL STATEMENTS (Unaudited) APPENDIX I 3. Allocation of Series DQ Debenture Repayment The Town of Caledon continues to pay $433 in Series DQ debt that was spent on projects unrelated to the arterial road transferred to the Region of Peel in The interest expense and sinking fund payments related to that portion of debt will be paid annually by the Town of Caledon to the Region of Peel. 4. Allocation of Surplus In 2016, there was no surplus declared payable to the Regional Municipality of Peel by the Debt Retirement and Sinking Fund Committee (2015 $nil). The following is the apportionment of the sinking fund balance. Sinking Fund Surplus / (Deficit) Total Total Town of Caledon Region of Peel $ $ % % Series DQ Series EB Series EC 1, Series EP (9) (2) Series EQ 63 (13) ,207 1, Contributions In 2016, there were no contributions made to the Debt Retirement Fund (2015 $nil). Contributions to the Sinking Fund were $33,011 (2015 $32,995). 6. Financial Instruments The Debt Retirement Fund and Sinking Funds are subject to market risk and interest rate price risk with respect to the investment portfolio. 7. Principal Repayment Annual principal repayments issued on behalf of the Town of Caledon over the next three years and thereafter are due as follows: 7

99 REGION OF PEEL DEBT RETIREMENT AND SINKING FUNDS FINANCIAL STATEMENTS (Unaudited) APPENDIX I $ , , , and thereafter 1,074 Total 8, Investment Portfolio Long-term investments consist of provincial, municipal and bank bonds bearing yield rates from 2.11 to 4.50 per cent and coupon rates from 3.05 to 5.20 per cent maturing from August 2021 to January Excess Over Actuarial Requirements Consists of: $ $ Debt Retirement Fund 413 2,981 Sinking Fund 2,207 1,571 Total 2,620 4,552 8

100 4.5-1 REPORT Meeting Date: Audit and Risk Committee For Information DATE: April 12, 2017 REPORT TITLE: FROM: 2016 REGION OF PEEL TRUST FUNDS FINANCIAL STATEMENTS Stephen VanOfwegen, Commissioner of Finance and Chief Financial Officer OBJECTIVE To present the 2016 Region of Peel unaudited Trust Funds financial statements. REPORT HIGHLIGHTS Funds are held in trust by the Region of Peel on behalf of the residents of the long term care homes. Separate financial statements reflect the funds held in trust which consist of deposits and withdrawals from residents and payments made on behalf of the residents such as for cable television. Residents can make fund withdrawals as funds are required. Deloitte, the Region s external auditors have completed their annual audit and it is anticipated that their Auditor s Report will be issued on April 20, 2017, once all audit procedures have been completed, as per auditing standards. DISCUSSION Residents of Peel Manor, Sheridan Villa, Tall Pines, Malton Village and Davis Centre can deposit funds to a trust fund, withdraw money as they need funds, and direct home staff to make payments from the trust funds. These funds are segregated from the Region of Peel operations and a separate bank account is used to administer the trust funds. The average bank account balance on a monthly basis was approximately $257,940 in When residents leave the home, the resident s remaining deposit is returned to them. On an annual basis, Deloitte, Peel s external auditors, audit the trust funds and provide an audit opinion. It is anticipated that the signed Auditor s Report will be issued by Deloitte on April 20, The 2016 financial statements are attached as Appendix I.

101 REGION OF PEEL TRUST FUNDS FINANCIAL STATEMENTS CONCLUSION The 2016 Trust Funds financial statements are presented for Audit and Risk Committee s review. Gayle Bursey for Stephen VanOfwegen, Commissioner of Finance and Chief Financial Officer Approved for Submission: J. Sheehy for D. Szwarc, Chief Administrative Officer APPENDICES Appendix I 2016 Trust Funds Financial Statements For further information regarding this report, please contact David Bingham, Treasurer and Director of Corporate Finance at extension 4292 or via at dave.bingham@peelregion.ca. Authored By: Monique Hynes - 2 -

102 REGION OF PEEL TRUST FUNDS FINANCIAL STATEMENTS APPENDIX I (Unaudited) Trust funds financial statements of The Regional Municipality of Peel December 31, 2016

103 REGION OF PEEL TRUST FUNDS FINANCIAL STATEMENTS APPENDIX I (Unaudited) Trust funds financial statements of The Regional Municipality of Peel December 31, 2016 Table of Contents Independent Auditor s Report Trust Funds Statement of Financial Position... 3 Trust Funds Statement of Financial Activities and Fund Balance... 3 Trust Funds Statement of Cash Flows... 4 Notes to the Trust Funds Financial Statements... 5

104 4.5-5 Deloitte LLP 400 Applewood Crescent Suite 500 Vaughan ON L4K 0C3 Canada Tel: Fax: Independent Auditor s Report To the Members of Council, Inhabitants and Ratepayers of the Regional Municipality of Peel We have audited the accompanying financial statements of the trust funds of the Regional Municipality of Peel, which comprise the statement of financial position as at December 31, 2016, and the statements of financial activities and fund balance and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian accounting standards for not-for-profit organizations, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. D R A F T We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. For discussion purposes only 1

105 4.5-6 Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of the trust funds of the Regional Municipality of Peel as at December 31, 2016, and the results of its operations and its cash flows for the year then ended in accordance with Canadian accounting standards for not-for-profit organizations. Chartered Professional Accountants Licensed Public Accountants, 2017 D R A F T For discussion purposes only 2

106 REGION OF PEEL TRUST FUNDS FINANCIAL STATEMENTS APPENDIX I (Unaudited) The Regional Municipality of Peel Trust Funds Statement of Financial Position As at December 31, 2016 (All dollars in $000) FINANCIAL ASSET Cash $ 213 $ 191 FUND BALANCE Residents' equity $ 213 $ 191 The accompanying notes are an integral part of these financial statements. The Regional Municipality of Peel Trust Funds Statement of Financial Activities and Fund Balance As at December 31, 2016 (All dollars in $000) REVENUES Deposits from residents $ 466 $ 497 EXPENSES Payment for maintenance, withdrawals by residents and estate payments Excess of revenues over expenses 22 4 Fund balance, beginning of year FUND BALANCE, END OF YEAR $ 213 $ 191 The accompanying notes are an integral part of these financial statements. 3

107 REGION OF PEEL TRUST FUNDS FINANCIAL STATEMENTS APPENDIX I (Unaudited) The Regional Municipality of Peel Trust Funds Statement of Cash Flows For the year ended December 31, 2016 (All dollars in $000) Excess of revenues over expenses $ 22 $ 4 Cash, beginning of year CASH, END OF YEAR $ 213 $ 191 The accompanying notes are an integral part of these financial statements. 4

108 2016 REGION OF PEEL TRUST FUNDS FINANCIAL STATEMENTS (Unaudited) APPENDIX I The Regional Municipality of Peel Trust Funds Notes to the Financial Statements For the year ended December 31, 2016 Significant Accounting Policies These financial statements reflect the financial position, financial operations, and cash flows of funds held in trust by The Regional Municipality of Peel ( the Region ) for residents of the Peel Manor and Sheridan Villa Senior Citizens Residences, the Tall Pines and Malton Village Long Term Care Centres, and the Vera M. Davis Community Care Centre. These financial statements are the representation of management and are prepared by management in accordance with Canadian accounting standards for not-for-profit organizations, and reflect the following policies: Basis of Accounting Revenues are recorded in the period in which the transactions or events occurred that gave rise to the revenue. Expenses are recorded in the period the goods and services are acquired and a liability is incurred, or transfers are due. Use of Estimates The preparation of financial statements in conformity with Canadian accounting standards for not-for-profit organizations 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 amount of revenues and expenses during the period. Actual results could differ from these estimates. 5

109 4.6-1 REPORT Meeting Date: Audit and Risk Committee For Information DATE: April 10, 2017 REPORT TITLE: FROM: PEEL LIVING PROCUREMENT AUDIT Michelle Morris, Director, Internal Audit OBJECTIVE To inform the Audit and Risk Committee of the results from the Peel Living Procurement Audit. REPORT HIGHLIGHTS The audit focused on governance over Peel Living procurement and on procurement transactions under $25,000 that were made by purchasing card or by express purchase order. There are four areas where governance and controls over procurement can be improved to meet Peel Living s needs. These include: o defining and strengthening a procurement governance and accountability framework which incorporates Peel Living s procurement strategy and related risk appetite; o establishing a procurement service level agreement between Peel Living and the Region of Peel that clearly defines roles, responsibilities, various procurement options and expected service delivery time frames; o increasing education and awareness about property management procurement practices and processes for staff; and, o documenting support for procurement decisions to ensure purchases are made in accordance with policies and procedures. Management has developed action plans to address the observations noted in the audit. This report will be presented to the Peel Housing Corporation Board of Directors at an upcoming meeting. DISCUSSION 1. Background The 2016 Internal Audit Risk Based Work Plan included a Peel Living Procurement audit. The work plan was approved by the Audit and Risk Committee on February 4, The Peel Housing Corporation, also known as Peel Living, is the Region of Peel s non-profit housing company. It operates as an independent corporation with a mandate to provide affordable and subsidized rental housing to low and moderate income households in Peel. Peel Living is the largest landlord in the Region and the third largest housing provider in Ontario. The portfolio includes 68 buildings consisting of high and low-rise apartments as

110 PEEL LIVING PROCUREMENT AUDIT well as townhouses. Regional departments provide administrative and property management related services to Peel Living; one of these services is procurement. The results of the audit will be presented to the Board of Directors of Peel Housing Corporation at an upcoming meeting. 2. Audit Objective The objective of the audit was to assess the effectiveness of the procurement practices and processes being followed to acquire goods and services for Peel Living. Specifically, the audit focused on: governance of Peel Living procurement; applicable policies and procedures that support Peel Living procurement; and, the associated roles and responsibilities. The audit also focused on Peel Living procurement transactions under $25,000 that were made by purchasing card and by express purchase order between July 1, 2015 and June 30, Peel Living procurement transactions under $25,000 were included in the scope of the audit as these transactions are not subject to the same level of oversight from the Region s Purchasing division as transactions over $25,000. This audit was conducted in accordance with the International Standards for the Professional Practice of Internal Auditing. 3. Audit Observations and Management Response There are four areas where governance and controls over Peel Living procurement can be better defined and strengthened to meet Peel Living s needs. i) Governance for Peel Living Procurement There is no formal by-law that outlines the authority and responsibilities of the corporation s directors and officers for procurement. As such, the Peel Living Board of Directors and corporate officers have no formal authority or responsibility over the procurement services that are provided by the Region of Peel as they are bound by the Region of Peel Purchasing By-law. A governance and accountability framework that defines authority and responsibility helps ensure expectations are met for organizations. It also helps ensure there is alignment between an organization's business strategy, its risk appetite and the manner in which goods and services are acquired for that organization. Without a governance and accountability framework, there is a risk that Peel Living is not obtaining goods and services in a manner that s aligned with its business needs. The General Manager, Peel Housing Corporation, will be engaging the Board of Directors regarding a service and governance model for the Corporation. The governance model will include clear accountabilities for the procurement process. Work on procurement process accountability is expected to be completed by March 31,

111 PEEL LIVING PROCUREMENT AUDIT ii) Procurement Service Level Agreement All goods and services for Peel Living properties are acquired by the Region of Peel. There is no service level agreement or contract between Peel Living and the Region that clearly defines the level of service expected. Service level agreements help ensure the roles and responsibilities of all parties are clearly defined. Service level agreements also identify various procurement options that are available to meet the business needs of the organization and outline the expected service delivery time frames under which procurement services will be fulfilled. Without a procurement service level agreement, there is a risk that Peel Living s expectations for procurement services may not be met. The General Manager, together with the Purchasing division, will develop a service level agreement by September 30, iii) Procurement Awareness and Education There are a number of detailed policies and procedures that have been implemented by the Region of Peel to help Peel Living acquire goods and services. Property Managers for Peel Living indicated that procurement processes are complex and that there are a number of different approval layers built into these processes. Roles and responsibilities are also not clear to the staff and more technical property management related education and training is needed in the areas that support procurement. Ongoing education and awareness provides staff with the information they need. It also provides staff with information about roles and responsibilities and helps ensure processes will be consistently followed and applied. When ongoing education and awareness about procurement and property management is not readily available and understood by staff, there is a risk that staff: may not be aware of revised property management procurement practices and processes; may not know 'who' is responsible for 'what' part of the property management procurement process; may not procure goods and services in accordance with applicable by-laws, policies and procedures; may not know that property management procurement practices and processes should be consistently followed and applied; and, may spend more time acquiring goods and services for Peel Living than is necessary. Working with the Purchasing division, the General Manager will clarify roles and responsibilities and improve the efficiency, effectiveness, and value added to the procurement process by September 30, iv) Documenting Procurement Decisions During the period July 1, 2015 to June 30, 2016, Peel Living spent approximately $560,000 on purchases of property management related goods and services using - 3 -

112 PEEL LIVING PROCUREMENT AUDIT purchasing cards and express purchase orders. During the same period, $13.6 million worth of property management related goods and services were procured for Peel Living through blanket purchase orders. The rationale and supporting documentation for purchases made by purchasing card or express purchase order when a blanket purchase order existed for the item procured was not included in the procurement database. The database was set up to include all information and supporting documentation related to the procurement of goods and services for Peel Living. Including the rationale and supporting documentation for using express purchase orders or purchasing cards when related blanket purchase orders exist, ensures that purchases are being made in accordance with the spirit and intent of the policies and procedures. When the rationale is not properly supported and documented, there is a risk Peel Living may not be able to maintain the trust and confidence associated with procuring goods and services in a fair, objective and transparent manner. As part of the work to improve the effectiveness and efficiency of the procurement process, requirements for supporting documentation will be established by the Peel Living Management Team. This work will be completed by September 30, CONCLUSION There are areas where governance and controls over Peel Living procurement can be better defined and strengthened to meet Peel Living s needs. Internal Audit has reviewed management s action plans and is satisfied the actions developed will address the risks identified. Internal Audit will follow-up on the status of these management action plans and will report back to the Audit and Risk Committee on the status of all management action plans annually. Michelle Morris, Director, Internal Audit Approved for Submission: D. Szwarc, Chief Administrative Officer For further information regarding this report, please contact Michelle Morris, Director, Internal Audit, extension 4297 or via at michlle.morris@peelregion.ca. Authored By: Jennifer Weinman, CPA, CA, CIA - 4 -

113 4.6-5 Peel Living Procurement Audit Dan Labrecque, General Manager, Peel Living Jennifer Weinman, Manager, Internal Audit 1

114 4.6-6 Background Peel Living is the largest landlord in the Region and the 3 rd largest housing provider in Ontario. The portfolio includes 68 buildings consisting of high and low-rise apartments and townhouses. Peel Living is owned, managed and administered by the Region of Peel. The Region of Peel provides procurement services to Peel Living. 2

115 4.6-7 Audit Objective and Scope To assess the effectiveness of procurement practices and processes followed to acquire needed goods and services for Peel Living. The audit focused on: governance of Peel Living procurement including applicable policies, procedures, roles and responsibilities, and transactions under $25K that were made by Purchasing Card and Express Purchase Order. 3

116 4.6-8 Audit Observations There are opportunities to: better define and strengthen a procurement governance and accountability framework that incorporates Peel Living s purchasing strategy and risk appetite. establish a procurement service level agreement that clearly defines roles, responsibilities, and procurement options as well as service delivery time frames. 4

117 4.6-9 Audit Observations There are opportunities to: increase education and awareness about property management procurement practices and processes for staff, and ensure that purchases are made in accordance with policies and procedures by documenting support for procurement decisions. 5

118 Management Response Two focus points: Review Board governance needs with respect to procurement process accountability Engaging with Purchasing division to clarify: Service Level Agreement Use of relevant procurement processes by staff Procedures for use of purchasing card and express purchase order 6

119 Conclusion Internal Audit has reviewed the action plans developed by management and is satisfied the proposed actions address the risks observed Internal Audit will follow up with management to ensure action plans are implemented 7

120 Questions 8

121 4.7-1 REPORT Meeting Date: Audit and Risk Committee For Information DATE: April 10, 2017 REPORT TITLE: FROM: BOARD OF HEALTH FINANCIAL CONTROLS CHECKLIST Stephen VanOfwegen, Commissioner of Finance and Chief Financial Officer Nancy Polsinelli, Commissioner of Health Services Lawrence Loh, MD MPH CCFP FRCPC FACPM, Acting Medical Officer of Health OBJECTIVE To present the Audit and Risk Committee with the completed Board of Health Financial Controls Checklist, which is a review and assessment of the financial controls for the Public Health Unit and is required to be submitted to the Ministry of Health and Long-Term Care. REPORT HIGHLIGHTS Funding for Public Health programs from the Ministry of Health and Long-Term Care is governed by the Public Health Funding and Accountability Agreement, which includes a schedule of financial controls. The Board of Health in the Region of Peel is Regional Council. Financial controls support the integrity of the Board of Health s financial statements, support the safeguarding of assets, and assist with the prevention and/or detection of significant errors including fraud. A review and assessment of financial controls is required through the Ministry s Financial Controls Checklist, which must also be received by the Board of Health for the 2016 funding year. Staff have reviewed the Financial Controls Checklist and assessed that the Board of Health is in compliance with the Ministry s requirements. DISCUSSION 1. Background Funding for Public Health programs from the Ministry of Health and Long-Term Care is governed by the Public Health Funding and Accountability Agreement (the Accountability Agreement ), which since 2014 includes a schedule of financial controls. Financial controls support the integrity of the Board of Health s (Regional Council) financial statements, support the safeguarding of assets, and assist with the prevention and/or detection of significant errors including fraud.

122 4.7-2 BOARD OF HEALTH FINANCIAL CONTROLS CHECKLIST The Board of Health is required to adhere to principles of financial controls that provide reasonable assurance that financial transactions include the following attributes: completeness, accuracy, authorization, validity, existence, error handling, segregation of duties, and presentation and disclosure. The Board of Health is therefore required to have financial controls in place to meet the following objectives: 1. Controls are in place to ensure that financial information is accurately and completely collected, recorded, and reported. 2. Controls are in place to ensure that revenue receipts are collected and recorded on a timely basis. 3. Controls are in place to ensure that goods and services procurement, payroll and employee expenses are processed correctly and in accordance with applicable policies and directives. 4. Controls are in place in the fund disbursement process to prevent and detect errors, omissions or fraud. A review and assessment of financial controls is required through the Ministry s Financial Controls Checklist, which must also be received by the Board of Health for the 2016 funding year. 2. Findings The Financial Controls Checklist (attached in Appendix I) consists of a number of controls categorized under each of the four control objectives mentioned above. Staff undertook a review of the Ministry s Checklist, comparing it to the Region of Peel s existing financial controls. The review assessed that the Region s financial controls are consistent with those in the Accountability Agreement. CONCLUSION Staff have reviewed the Financial Controls Checklist and assessed that the Board of Health is in compliance with the Ministry s requirement for financial controls as outlined in the Public Health Funding and Accountability Agreement. Gayle Bursey for Stephen VanOfwegen, Commissioner of Finance and Chief Financial Officer Nancy Polsinelli, Commissioner of Health Services - 2 -

123 4.7-3 BOARD OF HEALTH FINANCIAL CONTROLS CHECKLIST Lawrence Loh, MD MPH CCFP FRCPC FACPM, Acting Medical Officer of Health Approved for Submission: D. Szwarc, Chief Administrative Officer APPENDICES Appendix I Financial Controls Checklist For further information regarding this report, please contact Norman Lum, Director Business and Financial Planning, extension Authored By: Heidi Bischof - 3 -

124 APPENDIX I Board of Health Financial Controls Checklist 4.7-4

125 APPENDIX I Board of Health Financial Controls Checklist 4.7-5

126 APPENDIX I Board of Health Financial Controls Checklist 4.7-6

127 APPENDIX I Board of Health Financial Controls Checklist 4.7-7

128 APPENDIX I Board of Health Financial Controls Checklist 4.7-8

129 APPENDIX I Board of Health Financial Controls Checklist 4.7-9

130 4.8-1 REPORT Meeting Date: Audit and Risk Committee For Information DATE: April 18, 2017 REPORT TITLE: FROM: STATUS OF OUTSTANDING MANAGEMENT ACTION PLANS Michelle Morris, Director, Internal Audit OBJECTIVE To provide the Audit and Risk Committee with an update on the status of outstanding management action plans which were developed to address audit observations. REPORT HIGHLIGHTS Professional auditing standards require that Internal Audit has a process in place to monitor the implementation of management action plans. Management implemented 62 per cent of the management action plans that were due to be implemented on or before December 31, Risk analysis information has been provided to show the current risk exposure for the outstanding management action plans. DISCUSSION 1. Background Standard 2500.A1 of the International Standards for the Professional Practice of Internal Auditing, states that Internal Audit must establish a process to monitor and ensure that management actions have been effectively implemented. Internal Audit has a process in place to monitor the implementation of management action plans and reports annually to the Audit and Risk Committee on the results. Commissioners are provided with reports on the status of outstanding management action plans throughout the year. These reports provide information to assist with monitoring department specific management action plans. 2. Analysis of Results Management action plans due to be implemented on or before December 31, 2016 were reviewed. Internal Audit verified that 62 per cent of the management action plans that were due to be implemented on or before December 31, 2016 were implemented.

131 4.8-2 STATUS OF OUTSTANDING MANAGEMENT ACTION PLANS In addition, one management action plan related to the 2011 Consultants Acquisition and Oversight audit was deferred. The risks associated with this management action plan will be addressed in the Use of Employment Agencies audit planned to start in In addition to the management action plans that were due to be implemented on or before December 31, 2016, one management action plan related to the Hiring Practices audit and one related to the Community Investment Program audit, that were due to be implemented in 2017, were implemented in our 2016 reporting process. Outlined below are comments specific to management action plans that were due to be implemented on or before December 31, 2016 but are still in progress. Overtime Phase I Audit One management action plan remains outstanding. This management action plan is related to stand-by policies. Updating the policy is on the Human Resources priority list in line with the Terms of Council Priorities to reflect the flexible working arrangement initiatives. Work to update the policy is expected to be complete by mid Overtime Phase II Audit One management action plan remains outstanding. Updating stand-by policy is on the Human Resources priority list in line with the Terms of Council Priorities to reflect flexible working arrangement initiatives and will be addressed with the outstanding management action plan from Phase I stated above. SCADA Vulnerability Assessment One management action plan remains for SCADA. Information, Systems and Technology Solutions is currently working on addressing this management action plan, as part of a corporate solution. Phase II Fleet Two management action plans remain outstanding; these management action plans are more extensive and longer term in nature. The first involves the development of performance metrics is dependent on the full implementation of GPS in all fleet vehicles. The second management action plan is dependent on the development of a financial process to standardize fleet charges; with the revised completion estimated as mid to late 2017 in line with the 2018 budget cycle. TransHelp Operations Two management action plans are outstanding. Of the remaining two management action plans, the TransHelp privacy impact assessment is in progress with staff privacy training scheduled and targeted for completion mid For the second management action plan which addressed consistent third party billing, management has indicated that new invoicing procedures will be implemented once the contracts are finalized

132 4.8-3 STATUS OF OUTSTANDING MANAGEMENT ACTION PLANS Treasury Services One management action plan remains outstanding. It is related to updating policies and the procedure manual. Management has confirmed that the business review process is underway and the policies and procedures will be updated when the review is completed. Employee Expense Claims and Tuition Assistance Program Three management action plans remain outstanding. Two management action plans involving the tuition assistance program are expected to be completed in late 2017 in conjunction with the development of a new learning and development business model. The final management action plan involving automation of the business expense claims process is partially complete. 3. Risk Analysis of Management Action Plans For the current reporting period, 62 per cent of the management action plans that were due have been implemented. We are providing a risk analysis of the management action plans that were due but not fully implemented. Part of the audit process involves assigning a risk category to each audit observation and also applying a risk rating as illustrated in the diagram below

133 4.8-4 STATUS OF OUTSTANDING MANAGEMENT ACTION PLANS Illustrated in the chart below is the number and related percentage of outstanding management action plans broken down by audit report and relevant risk category. RISK RISK CATEGORY Governance Service Delivery Strategic Planning Regulatory Technology Audits Overtime Phase I 1 Overtime Phase II 1 SCADA Assessment 1 Phase II Fleet 1 1 TransHelp Operations 1 1 Employee Expense Claims & Tuition Assistance Program 2 1 Total Percentage to Total Outstanding 30% 30% 20% 10% 10% The most prevalent risks identified in the outstanding management action plans are governance and service delivery. Governance falls under the category of strategic risk and more specifically is the risk associated with corporate and management culture, corporate policies, board governance and organizational structure. Based on our analysis, our exposure for governance risk is medium. Service Delivery risk falls under the category of operational risk. Operational risks are dayto-day risks typically managed by managers, supervisors and staff. Our current exposure for this risk is medium. Strategic planning is the third most prevalent risk identified and falls under the category of strategic risk. Strategic risk is the risk of not meeting business objectives or risks that prevent us from meeting business objectives; exposure to loss resulting from lack of response to changes in the business environment, adverse business decisions, and/or improper implementation of decisions. Our current exposure for these risks is medium. There is one risk each relating to Regulatory and Technology. Regulatory risks fall under Compliance risk. This is the risk associated with not complying with law, legislation or policy arising from the complexity and uncertainty regarding legislation, its interpretation, the judicial process and various regulatory requirements across multiple business lines. Technology risk falls under Operational risk. Our current exposure for these risks is medium

134 4.8-5 STATUS OF OUTSTANDING MANAGEMENT ACTION PLANS In addition to the risks identified through the audit, process improvement opportunities are also identified, which result in improving efficiencies or effectiveness. In this reporting period, there is one process improvement management action plan that remains outstanding for the Treasury Services audit. Below is a graphical heat map of outstanding management action plans. The heat map is a reporting tool for highlighting risk information in a brief and consistent manner and represents risks that are low, medium, high or very high. Risk Map - Outstanding Management Action Plan (Due: on or before December 31, 2016) A Governance Impact A B F C E D B Service Delivery C Policy D Strategic Planning E Technology F Regulatory Likelihood CONCLUSION Internal Audit will continue to work with and support management in their efforts toward implementing the management action plans in a timely manner. Michelle Morris, Director, Internal Audit Approved for Submission: D. Szwarc, Chief Administrative Officer For further information regarding this report, please contact Michelle Morris, Director, Internal Audit at ext or via at michelle.morris@peelregion.ca. Authored By: Jennifer Weinman, CPA, CA, CIA and Curline Murray - 5 -