Consolidated Financial Statements of SIX NATIONS OF THE GRAND RIVER DEVELOPMENT CORPORATION

Transcription

1 Consolidated Financial Statements of SIX NATIONS OF THE GRAND RIVER DEVELOPMENT CORPORATION Year ended

2 KPMG LLP Commerce Place 21 King Street West, Suite 700 Hamilton Ontario L8P 4W7 Canada Telephone (905) Fax (905) INDEPENDENT AUDITORS' REPORT To the Directors of Six Nations of the Grand River Development Corporation We have audited the accompanying consolidated financial statements of Six Nations of the Grand River Development Corporation, which comprise the consolidated statement of financial position as at, and the consolidated statements of operations, changes in net assets and cash flows for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these consolidated 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. Auditors' Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. KPMG Canada provides services to KPMG LLP.

3 Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Six Nations of the Grand River Development Corporation as at, and its results of operations and its cash flows for the year then ended in accordance with Canadian accounting standards for not-for-profit organizations. Chartered Accountants, Licensed Public Accountants August 2, 2016 Hamilton, Canada

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5 Consolidated Statement of Earnings Ten month period ended Revenues: Nations Enterprises $ 19,707,483 Economic interests (note 4) 9,988,953 Master Trust income 2,107,700 31,804,136 Expenses: General, operating and administrative expenses 14,259,890 Salaries and benefits 2,530,233 Utilities 865,344 Gaming licenses and sponsors 649,411 Six Nations of the Grand River Elected Council rent 549,997 Six Nations of the Grand River Elected Council bingo hall debt charges 462,802 Interest 384,531 Amortization 76,795 Other 29,243 19,808,246 Excess of revenues over expenses before distribution 11,995,890 Distribution to Six Nations of the Grand River Economic Development Trust (note 12) 3,578,184 Excess of revenues over expenses before reserves $ 8,417,706 See accompanying notes to consolidated financial statements. 2

6 Consolidated Statement of Changes in Net Assets Ten month period ended Internally restricted Future debt Current year reduction and Invested in investment re-investment Capital Share capital assets Unrestricted reserve reserve reserve capital Total Balance, beginning of period Transfer from Six Nations of the Grand River Elected Council - (709,866) (709,865) Excess of revenues over expenses available for distribution (76,795) 8,494, ,417,706 Transfers 235,923 (7,784,635) 3,689,059 3,591, , Balance, end of year 159,128-3,689,059 3,591, , ,707,841 See accompanying notes to consolidated financial statements. 3

7 Consolidated Statement of Cash Flows Ten month period ended Cash provided by (used in): Operations: Excess of revenues over expenses $ 8,417,706 Items not involving cash: Amortization of capital assets 76,795 Changes in non-cash operating working capital: Increase in accounts receivable (556,968) Increase in inventories (122,396) Increase in due to related parties 224,723 Increase in accounts payable and accrued liabilities 951,204 Increase in due to Six Nations of the Grand River Elected Council 293,625 Increase in deferred revenue 17,741 9,302,430 Financing: Payment of long-term debt (4,469,000) Proceeds of long-term debt 4,068,347 (400,653) Investing: Purchase of capital assets (235,923) Purchase of investments in economic interest projects (4,027,788) Due to Six Nations of the Grand River Economic Development Trust 3,578,184 (685,527) Cash, end of period $ 8,216,250 See accompanying notes to consolidated financial statements. 4

8 Notes to Consolidated Financial Statements Six Nations of the Grand River Development Corporation (the Organization ) manages the economic interests of the Organization including partnerships of renewable energy projects with third parties. It also operates the Six Nations Bingo Hall, Six Nations Tourism, the Chiefswood Museum and other ancillary operations in Six Nations Indian Reserve, No. 40 (the Community ). The Organization s objective is to derive economic benefits, create employment for Community members and generate income to support community priorities as determined in the Six Nations Community Plan. The Organization is incorporated with share capital on November 18, 2013 under the Canada Business Corporations Act. The Organization is governed by a board of directors and trustees with an Advisory Committee providing oversight for the Community. 1. Significant accounting policies: These financial statements are prepared in accordance with Canadian accounting standards for not-for-profit organizations in Part III of the CPA Handbook. The Organization s significant accounting policies are as follows: (a) Basis of consolidation: (i) Consolidated entities: The consolidated financial statements reflect the assets, liabilities, revenue, expenses and net assets of the reporting entity. The reporting entity is comprised of all organizations, committees and trusts accountable for the administration of their financial affairs and resources to the Organization and which are owned or controlled by the Organization. All significant intercompany balances and transactions have been eliminated upon consolidation. These entities and organizations include: Canada Limited Canada Limited Canada Limited Canada Limited Canada Limited SN Solar Development LP SNGR Trustee Services Inc. SNGR Wind Project 1 Trustee Inc. SNGR Community Benefits Trustee Inc. SNGR Utilities Trustee Inc. SNGR Solar Project 1 Trustee Inc. Six Nations of the Grand River GP Inc. SNGR Utilities LP 5

9 Notes to Consolidated Financial Statements 1. Significant accounting policies (continued): (a) Basis of consolidation (continued): (ii) Trusts: Various Trusts have been created to facilitate the distribution of excess cash flow to the Community. The following trusts are included in the consolidated financial statements as the Organization controls the trust as the trustee: SNGR Utilities Trust SNGR Solar Project 1 Trust SNGR Wind Project 1 Trust SNGR Community Benefits Trust Six Nations of the Grand River Master Trust (b) Revenue recognition: The Organization follows the deferral method of accounting for contributions which include government grants. Contributions from grants that are unrestricted are recorded as revenue when received or receivable if the amount to be received can be reasonably estimated and collection is reasonably assured. Grants approved but not received at the end of an accounting period are accrued. Revenue derived from grants which as restricted is recognized when the related expenditures have been made. Funds received for which the related expenditures have not been made are recorded as deferred revenue. Externally restricted contributions are recognized as revenue in the period in which the related expenses are recognized. Contributions restricted for the purchase of capital assets are deferred and amortized into revenue at a rate corresponding with the amortization rate of the related capital asset. Six Nations Bingo revenue is recognized as earned. Distributions revenue is recognized as the available cash flow from the underlining agreements are earned and collection of the relevant receivable is probable. Revenues from Indigenous and Northern Affairs Canada are used only for the intended purpose of the funding received. 6

10 1. Significant accounting policies: (c) Cash and cash equivalents: Cash and cash equivalents consist of cash, bank overdrafts and investments in money market or other short-term instruments or investments with a maturity of less than 90 days. (d) Inventories: Inventories are valued at the low of cost and net realizable value. Cost is determined by actual invoice amounts. (e) Capital assets: Capital assets are stated at cost, less accumulated amortization. Amortization is provided using the declining balance method and following annual rates: Asset Rate Equipment 20-33% Computers 50% Computer software 100% The carrying amount of an item of capital assets is tested for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized when the asset s carrying amount is not recoverable and exceeds its fair value. (f) Investments in entities: The Organization accounts for its investments in entities subject to significant influence and its investments in joint ventures using the equity method whereby the investment is carried at cost and adjusted for any contributions or withdrawals and its share of the net earnings or losses of the investment. The investments in other companies are accounted for at cost. 7

11 1. Significant accounting policies (continued): (g) Financial instruments: Financial instruments are recorded at fair value on initial recognition. Equity instruments that are quoted in an active market are subsequently measured at fair value. All other financial instruments are subsequently recorded at cost or amortized cost, unless management has elected to carry the instruments at fair value. The Organization has not elected to carry any such financial instruments at fair value. Transaction costs incurred on the acquisition of financial instruments measured subsequently at fair value are expensed as incurred. All other financial instruments are adjusted by transaction costs incurred on acquisition and financing costs, which are amortized using the straight-line method. Financial assets are assessed for impairment on an annual basis at the end of the fiscal year if there are indicators of impairment. If there is an indicator of impairment, the Organization determines if there is a significant adverse change in the expected amount or timing of future cash flows from the financial asset. If there is a significant adverse change in the expected cash flows, the carrying amount of the financial asset is reduced to the highest of the present value of the expected cash flows, the amount that could be realized from selling the financial asset or the amount the Organization expects to realize by exercising its right to any collateral. If events and circumstances reverse in a future period, an impairment loss will be reversed to the extent of the improvement. (h) Income taxes: Income taxes have not been recorded on these financial statements as the Organization considers that it is a Tax Exempt Corporation under paragraph 149(1)(d.5) of the Income Tax Act (Canada). Additionally, the Organizations subsidiaries are considered Tax Exempt Subsidiaries under paragraph 149(1)(d.6) of the Income Tax Act (Canada). The Organization has not received a ruling from the Canada Revenue Agency on this matter and as a result if an unfavourable ruling is received then the Organization may be subject to income taxes. (i) Use of estimates: The preparation of the 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 amounts of revenue and expenses during the year. Significant items subject to such estimates and assumptions include the carrying amounts of capital assets and receivables, valuation of investments, recognition of income taxes. Actual results could differ from those estimates. 8

12 2. Transfer of operations from Six Nations of the Grand River Elected Council: Effective June 1, 2015 the Organization commenced operations independently from Six Nations of the Grand River Elected Council ( SNEC ). At this time a separate board of directors, trustees and advisory board where established to govern the operations of the Organization, previously the Organization and the related activities were controlled by SNEC. The operations transferred to the Organization include Six Nations Bingo, Old Bingo Hall, Six Nations Tourism, Chiefswood Museum, Oneida Business Park, Our Sustenance, Internet Towers, Martin Property Line and other vacant properties. The consolidated statement of operations include the results of these operations for the ten month period beginning June 1, 2015 to, all other periods are reported in the SNEC s financial statements. In addition to the operations above the economic interests in various renewable energy entities, Ontario Land Lease and all related agreements were transferred to the Organization for no consideration as follows: Investments in economic interest projects $ 9,673,160 Accounts payable and accrued liabilities (1,000) Long-term debt (10,382,026) $ (709,866) 3. Accounts receivable: Economic interest receivables $ 469,659 Accounts receivable 87,043 HST recoverable 266 $ 556,968 9

13 4. Investments in economic interest projects: The following investments are carried at cost: Grand Renewable Wind LP 10% limited partner $ 6,799,000 Grand Renewable Solar LP 10% limited partner 2,874,160 Gunn s Hill LP 10% limited partner 1,835,625 Nanticoke Solar LP 10% limited partner 240,025 11,748,810 The following joint ventures are accounted for using the equity method: Corporation of the County of Brant; Six Nations of the Grand River Joint Venture; Ontario Inc. Joint Venture ( BGI Joint Venture ) 15% venture interest 146,250 Corporation of the County of Brant and Six Nations of the Grand River Joint Venture ( OBP Joint Venture ) 90% venture interest 1,682,294 Six Nations Aecon Joint Venture 51% venture interest 123,592 1,952,136 $ 13,700,946 The following is a summary of the Organization s share of revenues and expenses of each joint venture: BGI Joint Venture Revenues $ 27,102 Expenses (6,149) 20,953 OBP Joint Venture Revenues 135,219 Expenses (71,035) 64,184 Six Nations Aecon Joint Venture Revenues 1,265,317 Expenses (1,265,317) - $ 85,137 10

14 4. Investments in economic interest projects (continued): The Organization is the beneficiary of the Nextera Wind Projects and the Capital Power & Dufferin Wind Projects. The Organization was not required to provide capital in these projects. Management evaluate the expected return on the all investments on an annual basis. The revenues generated from the Organization s investment in economic interest projects are as follows: Distributions received from investments carried at cost $ 9,903,816 Equity pick up of joint ventures accounted for using the equity method 85,137 $ 9,988,953 Included in distributions received from investments carried at cost are amounts of $470,000 in which the General Partner declared distributions in 2016 for cash flows earned in previous periods. 5. Capital assets: Accumulated Net book Cost amortization value Equipment $ 103,372 $ 17,056 $ 86,316 Computer 26,146 6,537 19,609 Computer software 106,405 53,202 53,203 $ 235,923 $ 76,795 $ 159, Accounts payable and accrued liabilities: Included in accounts payable and accrued liabilities are government remittances payable of $85,788, for payroll deductions and HST. 11

15 7. Long-term debt: Fixed rate term loan repayable in full on February 28, 2017, bearing interest at prime plus 0.75%. Secured by the property of Canada Limited, excluding the partnership units $ 1,877,832 Fixed rate term loan with monthly principal and interest payments in the amount of $7,413, repayable in full on April 6, 2021, bearing interest 2.94%. Secured by the property of Canada Limited, excluding the partnership units 1,863,516 Ontario Power Generation Inc. equity loan with monthly principal and interest repayments commencing on the Commercial Operation Date, over 20 years with a fixed interest rate of 7.5%. No interest is charged until the beginning of the construction period. Secured by the limited partnership units held of Nanticoke Solar LP 240,025 Fixed rate term loan with monthly principal and interest payments in the amount of $15,034, repayable in full on June 3, 2018, bearing interest 2.51%. Secured by the property of Canada Limited, excluding the partnership units 2,000,000 Fixed rate term loan with monthly principal and interest payments in the amount of $30,598, repayable in full on June 3, 2021, bearing interest 2.79%. Secured by the property of Canada Limited, excluding the partnership units 4,000,000 9,981,373 Less amounts due within one year 3,435,745 Principal repayments due in the next five years are as follows: $ 6,545, $ 3,435, , ,078, , and thereafter 3,642,006 Balance, end of year $ 9,981,373 The Nanticoke Solar LP had not commenced operations as at and as such the loan has been classified as long-term. 12

16 7. Long-term debt (continued): Subsequent to year end the Organization entered into a revised credit facility and converted the Canada Limited Banker Acceptance into a non-revolving term loan. A repayment of the existing loan was paid on April 1, 2016 in the amount of $1,100,000. Additionally, subsequent to year end the Organization entered into a revised credit facility and converted the Canada Limited Banker Acceptance into two non-revolving term loans. The Organization has various non-revolving credit facilities with the Royal Bank of Canada with total availability of $16,450,000 of which $9,741,348 have been drawn. SNEC is named as a guarantor of the loans. Management does not anticipate future draws will be made on the existing credit facilities. Under the terms of the loans agreement, the Organization has various covenants which at March 31, 2016 the Organization was in compliance with these covenants. 8. Due to/from related party: The Organization paid honorariums in the amount of $6,659 on behalf of the Six Nations of the Grand River Economic Development Trust, the beneficiary of the Organization s trusts. The Organization owes $231,382 to Aecon Construction Group Inc. a related company of the Six Nations Aecon Joint Venture. 9. Share capital: Authorized: Unlimited number of common shares Issued: 100 common shares $ Invested in capital assets: Net assets invested in capital assets is calculated as follows: Capital assets $ 159,128 13

17 11. Internally restricted reserves: During the year the Board of Directors approved the establishment of a capital reserve for the maintenance of the Six Nations Bingo hall. A future debt reduction and re-investment reserve was established for the purpose of servicing the debt of the Organization and future capital projects expected to occur in future periods. Current year investment reserve was established for the economic interest projects invested during year and working capital changes. The following reserves has been established through the transfer of unrestricted net assets. Capital reserve $ 268,231 Future debt reduction and re-investment reserve: Debt service ratio 291,422 Debt repayment 1,100,000 Capital projects 2,200,000 3,591,422 Current year investment reserve: Debt repayments 4,469,000 Transferred net debt (note 2) (709,866) Operating loss on start-up projects (70,075) 3,689,059 Balance, end of year $ 7,548, Community distributions: The following funds are available for distribution to the Six Nations of the Grand River Economic Development Trust from earnings of the entities in the Organization: Six Nations of the Grand River Master Trust: SNGR Solar Project 1 Trust $ 85,137 SNGR Wind Project 1 Trust 1,198,435 Revenue earned in Six Nations of the Grand River Master Trust 767,700 2,051,272 Six Nations of the Grand River Development Corporation 1,526,912 $ 3,578,184 There were no funds available from the SNGR Community Benefits Trust or SNGR Utilities Trust. The Board of Directors have made a resolution to approving the distribution of $3,578,184 to the Six Nations of the Grand River Economic Development Trust for further distribution to the Community. 14

18 12. Community distributions (continued): Community distributions available for distribution to the Six Nations of the Grand River Economic Development Trust during the year is determined as follows: Excess of revenues over expenses before distributions $ 11,995,890 Less: Current year debt payments 4,469,000 Invested in capital assets (note 10) 159,128 Capital reserve (note 11) 268,231 Future debt reduction and re-investment reserve (note 11) 3,591,422 8,487,781 Add back operating loss on start-up projects 70,075 Due to Six Nations of the Grand River Economic Development Trust $ 3,578,184 Trusts contained within the Organization have a calendar year end. These financial statement contain the results of operations for the 10 month period ended and as such recognized distributions available at December 31, 2015 and the additional 3 month period ended. Distributions due to Six Nations of the Grand River Economic Development Trust at December 31, 2015 was $1,579, Commitments: The Organization is committed to minimum annual lease payments under various operating lease for office equipment and buildings and property including the head lease agreement with Six Nations of the Grand River for the lease of various buildings and property. The lease payments under operating leases are as follows: 2017 $ 664, , , ,996 $ 2,644,904 15

19 14. Indigenous and Northern Affairs Canada: The following are the funds received Indigenous and Northern Affairs Canada and the allocation to the Organizations operations: Revenues: Community Economic Development Program $ 634,333 Pension Plan Administration Costs and Employee Contributions 7,957 CPP/QPP and Private Pension Plans - Employer Contributions 41,141 National Child Benefit 8,464 Band Support Funding 49,685 $ 741,580 Allocation of revenues to operations: Chiefswood Museum $ 53,087 Administration 294,103 Our Sustenance 58,082 Maintenance 56,063 Forestry 93,410 Tourism 186,835 $ 741,580 Indigenous and Northern Affairs Canada funds utilized by the Organization as follows: Chiefswood Museum: Salaries and benefits $ 42,765 Operations and maintenance 10,322 53,087 Administration: Salaries and benefits 294,103 Our Sustenance: Salaries and benefits 58,082 Maintenance: Salaries and benefits 56,063 Forestry: Salaries and benefits 41,225 Operations and maintenance 52,185 93,410 Tourism: Salaries and benefits 115,244 Operations and maintenance 71, ,835 $ 741,580 16

20 15. Corporate governance expenditures: Corporate governance expenses of the Board of Directors and Advisory Committee are include in the consolidated financial statements, Six Nations of the Grand River Economic Development Trust expenses have been paid on their behalf: Six Nations of The Grand River Board of Advisory Economic Directors Committee Development Trust Total Honoraria $ 13,943 $ 6,800 $ 1,250 $ 21,993 Meetings ,047 2,167 Travel Office supplies Training 1,500 1,500-3,000 Advertising and promotion Insurance 5,409 5,409 5,409 16,227 $ 22,515 $ 14,628 $ 7,706 $ 44,849 Included in capital assets are computers for the Board of Directors and Advisory Committee of $2,245 and $3,048 respectively. 16. Financial instruments: (a) Credit risk: Credit risk refers to the risk that a counterparty may default on its contractual obligations resulting in a financial loss. The Organization is exposed to credit risk with respect to the accounts receivable. The Organization assesses, on a continuous basis, accounts receivable and provides for any amounts that are not collectible in the allowance for doubtful accounts. (b) Interest rate risk: Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Further details about the long term debt are included in note 7. (c) Liquidity risk: Liquidity risk is the risk that the Organization will be unable to fulfill its obligations on a timely basis or at a reasonable cost. The Organization manages its liquidity risk by monitoring its operating requirements. The Organization prepares budget and cash forecasts to ensure it has sufficient funds to fulfill its obligations. 17