Ontario Mortgage and Housing Corporation Annual Report

Transcription

1 Ontario Mortgage and Housing Corporation Annual Report

2 Ministry of Housing Minister Responsible for the Poverty Reduction Strategy Office of the Minister 777 Bay Street, 17 th Floor Toronto ON M5G 2E5 Tel.: Fax: Ministère du Logement Ministre responsable de la Stratégie de réduction de la pauvreté Bureau du ministre 777, rue Bay, 17 e étage Toronto ON M5G 2E5 Tél. : Téléc. : TO THE LIEUTENANT GOVERNOR OF THE PROVINCE OF ONTARIO MAY IT PLEASE YOUR HONOUR: For the information of Your Honour and the Legislative Assembly, I am presenting the Annual Report and audited Financial Statements of the Ontario Mortgage and Housing Corporation for the fiscal year Respectfully submitted, Chris Ballard Minister, Housing

3 777 Bay Street, 14 th Floor 777, rue Bay, 14 e étage Tel: (416) Toronto ON M5E 2E5 Fax: (416) Tél: (416) Télécopieur: (416) TO THE HONOURABLE MINISTER OF HOUSING MINISTER: On behalf of the Board of Directors, I am pleased to present a copy of the Ontario Mortgage and Housing Corporation s Annual Report and audited Financial Statements for the fiscal year Respectfully submitted, Janet Hope Chair Ontario Mortgage and Housing Corporation

4 Message from the Chair I would like to thank my colleagues on the Board, the officers of the Corporation and Ministry staff for their contributions and achievements in respect of the Ontario Mortgage and Housing Corporation (OMHC) for the fiscal year. As of April 1, 2015, the Ontario Mortgage Corporation (OMC) was dissolved and the OMHC assumed its assets, liabilities, rights, obligations and functions. All of this work has proceeded smoothly. As part of the consolidation process, mortgages issued under Program A2 Affordable Home Ownership Program (AHP mortgages) were transferred and vested in the OMHC by Minister s Order in February The transfer aligns ownership of the mortgages with OMHC s previous responsibilities. The OMHC has a long-established responsibility for managing and administering obligations related to the former housing programs, including debt retirement and environmental obligations related to its former public housing land and properties. We look forward to continuing with the expanded work of the Corporation in Janet Hope Chair Ontario Mortgage and Housing Corporation Board of Directors

5 ANNUAL REPORT OF THE ONTARIO MORTGAGE AND HOUSING CORPORATION FOR INTRODUCTION The Ontario Mortgage and Housing Corporation (OMHC) is a provincial agency, continued under the Ontario Mortgage and Housing Corporation Act which reported to the Minister of Municipal Affairs and Housing during the fiscal year. This Annual Report reflects OMHC activities undertaken over the April 1, 2015 to March 31, 2016 period. The Report incorporates both OMHC s original functions and the functions of the Ontario Mortgage Corporation (OMC) it assumed as of April 1, On that date, in accordance with amendments to the Ontario Mortgage and Housing Corporation Act and the Housing Development Act, the Ontario Mortgage Corporation (OMC) was dissolved and its assets, liabilities, rights, obligations and functions were transferred to the OMHC. As part of the consolidation process, mortgages issued under Program A2 Affordable Home Ownership Program (AHP mortgages) were transferred and vested in the OMHC by Minister s Order in The transfer was made in accordance with provisions of the Ontario Mortgage and Housing Corporation Act to align ownership of the mortgages with OMHC s historic responsibility to manage and administer the Affordable Home Ownership Program (AHP). The AHP mortgages were previously held by the Minister in his role as representative of Her Majesty the Queen. Ontario Mortgage and Housing Corporation Page 1 Annual Report

6 During the fiscal year, the Corporation was funded by the Province through an annual transfer payment. After transfer, the funds were not part of the books of the Ministry of Municipal Affairs and Housing. The Corporation is subject to an annual audit by the Auditor General of the Province, as required by its founding legislation. The funding transferred to OMHC covered debentures, repayments on loans, mortgage insurance payments and capital costs for environmental remediation for which the Corporation was responsible. Staff of the Ministry of Municipal Affairs and Housing provided all of OMHC s administrative and operational support. BOARD OF DIRECTORS The Ontario Mortgage and Housing Corporation s Board of Directors was appointed by the Lieutenant Governor in Council and was accountable to the Minister of Municipal Affairs and Housing in for ensuring that the Corporation carried out its mandate effectively. A five-member Board of Directors, composed of senior provincial public servants, oversees the Corporation s business. As of March 31, 2016, the Board consisted of: Ontario Mortgage and Housing Corporation Page 2 Annual Report

7 Name Position Date of First Appointment Expires Appointment Janet Hope Chair, February 1, 2007 December 31, 2017 Member Jim Cassimatis Vice-Chair, December 10, 2012 December 31, 2017 Member Elizabeth Harding Member January 1, 2012 December 31, 2017 Kate Manson-Smith Member December 10, 2014 December 31, 2017 Larry Clay Member January 1, 2016 December 31, 2017 MANDATE The Corporation s enabling legislation consists of two statutes: the Ontario Mortgage and Housing Corporation Act and the Housing Development Act. The Corporation has the authority to make certain housing-related loans, grants, advances and guarantees and to enter into certain housing-related agreements. Such actions are subject to the approval of the Lieutenant Governor in Council. The Corporation has the authority to borrow, issue debentures and grant mortgages, subject to the approval of the Lieutenant Governor in Council. The Corporation also has the authority to acquire, hold and dispose of real property in the ordinary course of business. In addition, the Corporation has the authority to manage, administer and deliver the Affordable Home Ownership Program, set out in the Canada-Ontario Affordable Housing Program Agreement, and to manage, administer and deliver other prescribed programs. Ontario Mortgage and Housing Corporation Page 3 Annual Report

8 Under the Social Housing Reform Act, 2000, the Lieutenant Governor in Council transferred, by transfer order for no consideration, ownership of public housing land from the Corporation to the Local Housing Corporations (LHCs) controlled by the Service Managers. The Ministry of Municipal Affairs and Housing provided the Corporation with subsidies to cover its debt servicing payments and other expenses. The Corporation s responsibilities over the period included: maintaining debt retirement obligations, debt service administration for all loans and consolidated debentures pertaining to the Public Housing Program and the Student Residences Program, satisfying obligations related to former public housing and currently owned properties, and carrying out any other duties assigned by the Minister of Municipal Affairs and Housing in respect of matters under the Ontario Mortgage and Housing Corporation Act. The OMC programs and functions assumed by OMHC on April 1, 2015 are consistent with the Mandate of the OMHC expressed in the Memorandum of Understanding between the Minister of Municipal Affairs and Housing and Ontario Mortgage and Housing Corporation, ACTIVITIES IN On April 1, 2015, pursuant to amendments to the Ontario Mortgage and Housing Corporation Act and the Housing Development Act, the assets, liabilities, rights, obligations and functions of the OMC were transferred to OMHC. As a result, the OMHC is responsible for certain former OMC programs. Ontario Mortgage and Housing Corporation Page 4 Annual Report

9 During OMHC continued to administer the Affordable Home Ownership Program (AHP). AHP mortgages were transferred and vested in the OMHC by Minister s Order in February 2016 and the AHP Revolving Fund was vested in the OMHC by statute. The OMHC administered a small, declining portfolio of mortgages under former OMC programs including the: Home Ownership Made Easy Program (HOME), Low-Rise Rehabilitation Program (LRR), Low-Rise Jobs Ontario Program (LR3), Low-Rise Rupert House Program (LRT), Low-Rise Anti-Recession Program (LRX), Permanent Homes for the Homeless Program (PHH) and Project 3600 Ontario Non-Profit Housing Program (P3600). The OMHC has a long-established responsibility for managing and administering obligations related to the former housing programs. Responsibilities include debt retirement and potential environmental obligations related to its former public housing land and properties under the Environmental Protection Act (EPA). The Corporation was obligated to indemnify the Canada Mortgage and Housing Corporation (CMHC) with respect to defaults under certain non-profit social housing mortgages. No claims have been made to date under this obligation. ADMINISTRATION OF THE PUBLIC HOUSING DEBT In the past, the Corporation borrowed funds from CMHC and the province to finance investments in real property now devolved to Local Housing Corporations (LHCs). The capital funds provided by the province were reclassified as Loans Repayable, with Ontario Mortgage and Housing Corporation Page 5 Annual Report

10 interest and principal payments being made to CMHC and the Ontario Ministry of Finance. There were a total of twenty-nine (29) consolidated debentures that were extended past their initial maturation date (in 2003). Two projects were transferred to the City of Sarnia and completed in Thirteen (13) debentures matured between 2003 and March 31, As of March 31, 2016, fourteen (14) remained outstanding. ADMINISTRATION OF LOANS TO COLLEGES AND UNIVERSITIES Between 1969 and 1972, OMHC, formerly the Ontario Housing Corporation, advanced loans to twelve (12) colleges and universities for a total of twenty-two (22) loans for the development of on-campus student housing. Funding for these loans was obtained from CMHC and the province. Although these loans are scheduled to reach maturity over the 2019 to 2023 period, the institutions are entitled to make early repayment at any time, without penalty or bonus. In , the University of Guelph paid its loan in full. When the debt is fully repaid, any related encumbrances in favour of the Corporation on the properties are discharged. Ontario Mortgage and Housing Corporation Page 6 Annual Report

11 ONGOING LIABILITY FOR PUBLIC HOUSING PROPERTIES OMHC maintains certain liabilities related to its former ownership of public housing properties. This includes potential environmental liability, relating to environmental contamination, as per the provisions in the Environmental Protection Act. OMHC may be required to undertake actions deemed necessary by the Ministry of the Environment and Climate Change to rectify any environmental contamination that may have existed at the time OMHC transferred the public housing portfolio to the local housing corporations. The Corporation, being a previous owner, may also be held responsible to clean up environmental contamination which it did not cause on these properties. Currently, there are two potential remediation matters of concern to the Board: Alexandra Park and ongoing potential claims from Regent Park in Toronto. In the fiscal year, the Corporation negotiated an agreement with the Thunder Bay District Housing Corporation and the District of Thunder Bay Social Services Administration Board to assist with the remediation costs at 1100 Lincoln Street in the City of Thunder Bay. The Corporation provided funds in the amount of $10, to assist with remediation work, and to settle all liabilities associated with the property. As a result of an Internal Audit review, undertaken in 2013, of the OMHC environmental remediation processes, a number of recommendations arising from the review have been implemented. One of the recommendations being implemented is the annual review by the OMHC Board of the OMHC Environmental Remediation Service Manager Technical Bulletin and Internal Staff Guidelines to ensure their currency. Staff will review the Bulletin and Guidelines in Ontario Mortgage and Housing Corporation Page 7 Annual Report

12 Where possible, the Corporation is transferring parcels of land remaining in the Corporation s name to the appropriate municipalities. These include narrow strips of land adjacent to municipal properties that are used for access roads/walkways. Other parcels of land are proposed to be transferred to the Ministry of Transportation, since they are adjacent to public highways. A parcel of land is awaiting transfer to a municipal public utility. As of March 31, 2016, sixteen parcels remain to be transferred. PERFORMANCE DURING THE YEAR Operational Performance The Corporation carried out its duties during the course of the year as required by its mandate. 2. Administration and Administrative Support Officers: The following employees of the Ministry were the Officers of the Corporation in : Alison Coke, Chief Executive Officer Beverley Thomas-Barnes, Treasurer Margaret Booth, Corporate Secretary The Chief Executive Officer is responsible for managing the day-to-day operations of the agency. The Treasurer is responsible for financial business practices, financial controllership of the Corporation, as well as provision of financial advice to the Board and reports on the Corporation s financial position. The Corporate Secretary s duties include attending Board meetings, preparing board and Ministry reports, recording minutes of Board meetings, and coordinating mortgage and lease discharge requests with Ontario Mortgage and Housing Corporation Page 8 Annual Report

13 staff in various branches in the Ministry with CMHC. Other staff in the Ministry provide the Corporation s administrative and operational support and financial administration. Legal services are provided by the Ministry of the Attorney General. 3. Financial Performance The Corporation managed the business and funds for which it is responsible as required by its mandate, applicable provincial financial laws, directives, guidelines and policies, and the terms of individual transactions and agreements. 4. Variance Analysis Below is the Corporation s Statement of Operations for fiscal year: Budget ($ 000) 2016 ($ 000) Revenue Subsidies from Province of Ontario: Debt service obligations Environmental Remediation 87,414 15,582 87,320 9,991 Affordable Home Ownership Program Mortgages Interest received from Student Housing Miscellaneous Total revenues 103,436 98,669 Expenses Debentures Interest: Devolved properties Student housing Environmental Remediation 24, , ,916 Miscellaneous 10 1 Loss on Restructuring (OMC) - 50 Total expenses 25,433 26,888 Excess of Revenues over Expenses 78,003 71,781 Ontario Mortgage and Housing Corporation Page 9 Annual Report

14 The significant variances of actuals as at March 31, 2016 to budget are as follows: Revenue: Environmental Remediation: actuals were less than budget by $5.6M as a result of a delay in environmental remediation work for Regent Park. These costs vary significantly year over year and are based on actual costs incurred. The interest received from Student Housing is less than budget by $0.1M due to prepayment in full of the University of Guelph debenture in Expenses: Environmental Remediation: actuals exceed the budget by $1.5M due to revisions in the estimates, timing differences and change in the interest rates. The interest paid for Student Housing is less than budget by $0.1M due to prepayment in full of the University of Guelph debenture in Excess of Revenues over Expenses: The actuals exceed the budget by $7.2M mainly as a result of the above variances. 5. Future Performance Measures and Targets The Corporation s performance targets, over and above its general commitments, are to continue to practice good management and comply with applicable rules of financial and administrative performance. Ontario Mortgage and Housing Corporation Page 10 Annual Report

15 777 Bay Street, 14 nd Floor 777, rue Bay, 14 e étage Toronto ON M5G 2E5 Toronto ON M5E 2E5 Tel: (416) Tél: (416) Fax: (416) Télécopieur: (416) Management s Responsibility for Financial Statements The accompanying financial statements of the Ontario Mortgage and Housing Corporation have been prepared in accordance with Canadian public sector accounting standards and are the responsibility of management. The preparation of financial statements necessarily involves the use of estimates based on management's judgement, particularly when transactions affecting the current accounting period cannot be finalized with certainty until future periods. The financial statements have been properly prepared within reasonable limits of materiality and in light of information available up to June 14, Management maintains a system of internal controls designed to provide reasonable assurance that the assets are safeguarded and that reliable financial information is available on a timely basis. The system includes formal policies and procedures and an organizational structure that provides for appropriate delegation of authority and segregation of responsibilities. An internal audit function independently evaluates the effectiveness of these internal controls on a periodic basis and reports its findings to management and to the Board of Directors. The Board of Directors is responsible for ensuring that management fulfils its responsibilities for financial reporting and internal controls. The Board of Directors reviews and approves the financial statements. The financial statements have been audited by the Office of the Auditor General of Ontario. The Auditor General's responsibility is to express an opinion on whether the financial statements are fairly presented in accordance with Canadian public sector accounting standards. The Independent Auditor's Report, which appears on the following page, outlines the scope of the Auditor General's examination and opinion. On behalf of Management, Keith Extance Chief Executive Officer

16 ONTARIO MORTGAGE AND HOUSING CORPORATION Financial Statement For the Year Ended March 31, 2016

17 Independent Auditor s Report To the Ontario Mortgage and Housing Corporation and to the Minister of Housing I have audited the accompanying financial statements of the Ontario Mortgage and Housing Corporation, which comprise the statement of financial position as at March 31, 2016, and the statements of operations and accumulated deficit, 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 My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with Canadian generally accepted auditing standards. Those standards require that I 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. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion. Opinion In my opinion, the financial statements present fairly, in all material respects, the financial position of the Ontario Mortgage and Housing Corporation as at March 31, 2016 and the results of its operations and accumulated deficit, and its cash flows for the year then ended in accordance with Canadian public sector accounting standards. Toronto, Ontario June 14, 2016 Susan Klein, CPA, CA, LPA Assistant Auditor General

18 ONTARIO MORTGAGE AND HOUSING CORPORATION Statement of Financial Position As at March 31, 2016 Liabilities Accounts payable and accrued liabilities (Note 6) Long-term debt (Note 7) Long-Term Environmental Remediation (Note 4) Due to Province of Ontario March, 31, 2016 March 31, 2015 ($ 000) ($ 000) 11,816 8, , ,022 53,983 62, , ,048 Financial Assets Cash 1,485 1,340 Accrued interest from Universities and Colleges Due from Canada Mortgage and Housing Corporation Due from Province of Ontario , ,915 Investments in student housing properties (Note 5) 4,107 7,419 17,348 15,793 Net Debt and Accumulated Deficit (386,474) (458,255) Contingent Liabilities (Note 8) The accompanying notes are an integral part of these financial statements. On behalf of the Board: Janet Hope, Chair Keith Extance, Chief Executive Officer

19 ONTARIO MORTGAGE AND HOUSING CORPORATION Statement of Operations and Accumulated Deficit For the year ended March 31, 2016 Budget ($ 000) (Note 12) 2016 ($ 000) 2015 ($ 000) Revenue Subsidies from Province of Ontario: Debt service obligations Environmental Remediation (Note 4) 87,414 15,582 87,320 9,991 89, Affordable Home Ownership Program (AHP) Mortgages (Note 13) Interest received from Student Housing Miscellaneous Total revenues 103,436 98,669 90,820 Expenses Debentures Interest: Devolved properties Student housing Environmental Remediation (Note 4) Loss on Restructuring (Note 3) Miscellaneous 24, , , , Total expenses 25,433 26,888 29,531 Excess of Revenues over Expenses (Note 9) 78,003 71,781 61,289 Accumulated Deficit, beginning of year, before adjustment (458,255) (458,255) (456,839) Adjustment for adoption of new accounting policy for contaminated sites (Note 4) - - (62,705) Accumulated Deficit, beginning of year, adjusted (458,255) (458,255) (519,544) Accumulated Deficit, end of year (380,252) (386,474) (458,255) The accompanying notes are an integral part of these financial statements.

20 ONTARIO MORTGAGE AND HOUSING CORPORATION Statement of Cash Flows For the year ended March 31, ($ 000) ($ 000) Operating transactions Excess of Revenue over Expenses 71,781 61,289 Changes in non-cash working capital: Increase /(Decrease) in Accounts Payable and Accrued Liabilities 3,806 (1,967) Decrease in Long-Term Environmental Remediation (8,033) (689) Increase in Due to Province of Ontario 46 - Decrease in Accrued Interest from Universities and Colleges Increase in Due from Canada Mortgage and Housing Corporation (6) - (Increase)/Decrease in Due from the Province of Ontario (4,765) 1,762 Cash provided by operating transactions 62,878 60,467 Financing Transactions Long-Term Debt Repayment Province of Ontario (7,029) (6,892) Canada Mortgage and Housing Corporation (59,016) (57,930) Cash applied to financing transactions (66,045) (64,822) Investing Transactions Collection of Ontario Student Housing Long-Term Debt 3,312 4,253 Increase / (Decrease) in Cash 145 (102) Cash Balance at Beginning of Year 1,340 1,442 Cash Balance at End of Year 1,485 1,340 The accompanying notes are an integral part of these financial statements.

21 ONTARIO MORTGAGE AND HOUSING CORPORATION Notes to the Financial Statements For the year ended March 31, Nature of Operations The Ontario Mortgage and Housing Corporation (the Corporation), formerly the Ontario Housing Corporation, was established without share capital in 2006 under the Ontario Mortgage and Housing Corporation Act (OMHCA), as a provincial government agency. The Corporation s responsibilities include maintaining debt retirement obligations, debt service administration and satisfying obligations related to former public housing. The Corporation also carries out any other duties assigned by the Minister of Municipal Affairs and Housing in respect of matters under the OMHCA. In addition, the Corporation has the authority to manage, administer and deliver the Affordable Home Ownership Program, set out in the Canada-Ontario Affordable Housing Program Agreement, and to manage, administer and deliver other prescribed programs. Under the Social Housing Reform Act 2000, the Corporation transferred, for no consideration, ownership of public housing units to Local Housing Corporations (LHCs) which are controlled by Municipal Service Managers. The Corporation retained its Investment in Student Housing and certain other assets, and responsibility for administering the Corporation s debts, and contingent liabilities. The Ontario Ministry of Municipal Affairs and Housing (the Ministry) provides the Corporation with subsidies to cover its debt service payments and other expenses. In accordance with the amendments to the OMHCA that came into force on April 1, 2015, the Ontario Mortgage Corporation (OMC) was dissolved and its assets, liabilities, obligations and programs were transferred to the Corporation. The Corporation is now responsible for managing the marketable and forgivable loans and mortgages that were owned by OMC prior to its dissolution and that were transferred to the Corporation on April 1, Significant Accounting Policies Significant accounting policies followed by the Corporation are summarized below: (A) BASIS OF ACCOUNTING These financial statements are prepared by management in accordance with Canadian public sector accounting standards for provincial reporting entities established by the Canadian Public Sector Accounting Board. (B) REVENUES Subsidies from the Province of Ontario (the Province) are accounted for as revenue when received, which is when the related expenses are incurred and when the environmental remediation liability is settled.

22 ONTARIO MORTGAGE AND HOUSING CORPORATION Notes to the Financial Statements For the year ended March 31, Significant Accounting Policies (Continued) (C) EXPENSES Expenses are reported on an accrual basis as incurred. These expenses include debt servicing cost such as interest expenses. (D) FINANCIAL INSTRUMENTS Cash and Cash Equivalents Cash and cash equivalents include cash on hand. Loans and Receivables Accrued Interest from Universities and Colleges, due from the Province, Investments in Student Housing Properties (note 5) and Interest Receivable are measured at amortized cost. Debt and other Financial Liabilities Long-Term Debt, which consists of loans from the Province and Canada Mortgage and Housing Corporation debentures (note 7), is measured at amortized cost. Accounts Payable and Accrued Liabilities (note 6) are measured at cost. (E) ACCUMULATED DEFICIT The Accumulated Deficit that resulted from the transfer of properties to LHCs for no consideration is reduced each year by an amount equal to the portion of the subsidy from the Province required to cover principal payments on the Corporation s long-term debt. The Accumulated Deficit is also reduced by the revenues provided by the Province to settle the Corporation s Long-Term Environmental Remediation liability. (F) STATEMENT OF CHANGES IN NET DEBT A Statement of Changes in Net Debt has not been included in these financial statements because the information it would provide is readily apparent from the other financial statements. (G) USE OF ESTIMATES Preparation of financial statements in conformity with Canadian public sector accounting standards requires management to make estimates and assumptions that affect the reported amounts. Actual results could differ from those estimates. Significant estimates include Long-Term Environmental Remediation Liability and Contingent Liabilities for Contaminated Sites.

23 ONTARIO MORTGAGE AND HOUSING CORPORATION Notes to the Financial Statements For the year ended March 31, Restructuring Transactions In the 2014 Ontario Budget, the Province of Ontario identified a number of agencies with overlapping functions. The OMC and the Corporation were identified within this group and as a result the OMHCA was amended to address the overlapping functions and dissolve the OMC. On April 1, 2015, the Corporation completed a restructuring transaction whereby the OMC was dissolved and all its assets, liabilities, rights, obligations and programs were transferred to the Corporation. No monetary compensation was involved in the transaction and no costs were incurred as a result of the restructuring. Effective April 1, 2015 the Corporation also early adopted the new Public Sector Accounting Standard 3430 Restructuring Transactions. The Corporations assets and liabilities in the following financial statement classifications were increased at the restructuring date to recognize the transfer from OMC: OMC Carrying Value ($ 000) Due from Canada Mortgage and Housing Corporation 11 Total Assets Recognized 11 Accounts Payable and Accrued Liabilities 11 Due to Province of Ontario 50 Total Liabilities Recognized 61 Loss recognized in the statement of operations due to restructuring (50) 4. Long-Term Environmental Remediation Effective April 1, 2014 the Corporation adopted the new PS3260 Liability for Contaminated Sites standard. The standard requires the recognition of a liability for the remediation of contaminated sites in the financial statements when the recognition criteria outlined in the standard are met. The balance in the Liability for contaminated sites as at March 31, 2016 is $54.0 million. The liability is discounted using the provincial borrowing rate for debentures with similar maturity (average 1.22%). The undiscounted value of the accrued liability is $56.3 million. The liability is management s best estimate based on environmental investigations performed by independent experts and reflects the costs required to remediate the sites. Remediation is expected to occur within the next six years. There are two commitments as at March 31, the multi-year Regent Park redevelopment project and the Alexandra Park redevelopment.

24 ONTARIO MORTGAGE AND HOUSING CORPORATION Notes to the Financial Statements For the year ended March 31, Long-Term Environmental Remediation (Continued) Regent Park, formerly owned by the Corporation, is being re-developed by the Toronto Community Housing Corporation (TCHC). The site has soil contamination as a result of historical industrial uses. Based on the redevelopment plan prepared by TCHC, it is expected that phases 2 and 3 will be completed by after which phases 4 and 5 will start. Current cost estimates, based on site testing reports, to complete phases 2 and 3 are $23.6 million and, for phases 4 and 5 are $29 million. In June 2013, TCHC advised that an Environmental Site Assessment (ESA) identified soil and groundwater contamination on the Alexandra Park site. In March 2014, TCHC requested that the Corporation provide financial assistance for soil remediation work. Cost estimates to remediate the contamination total $3.7 million. The Long-Term Environmental Remediation liability balance is comprised of the following: ($000) April 1, 2015 Opening Balance 62,016 Increase: Revised Estimate 1,905 Decrease: Subsidy from Province for Remediation (9,938) Balance as at March 31, ,983 Cumulative costs for site remediation to March 31, 2016 are $22.5 million (2015 $12.6 million). 5. Investments in Student Housing Properties The Corporation s investments in student housing properties represents funds advanced to universities and colleges to cover building costs for student accommodation projects. Each advance is associated with a specific long-term debt obligation of the Corporation and each educational institution makes semi-annual payments to the Corporation equal to the payments on the Corporation's corresponding long-term debt. When the debt is fully repaid, any related encumbrances in favour of the Corporation on the properties are discharged. Original Cost Less: Accumulated Capital Repayments March 31, 2016 ($ 000) 35,115 31,008 4,107 March 31, 2015 ($ 000) 35,115 27,696 7,419

25 ONTARIO MORTGAGE AND HOUSING CORPORATION Notes to the Financial Statements For the year ended March 31, Accounts Payable and Accrued Liabilities Most of the Accounts Payable and Accrued Liabilities balance is comprised of accrued interest payable on the Corporation s Long-Term Debt and amounts owing for environmental remediation costs incurred prior to year end. 7. Long Term Debt Long term debt is comprised of the following: March 31, 2016 March 31, 2015 Canada Mortgage and Housing Corporation ($ 000) 302,662 ($ 000) 361,678 Loans Repayable to the Province 35,315 42, , ,022 The Corporation borrowed funds from the Canada Mortgage and Housing Corporation (CMHC) and received capital funds from the Province to finance investments in real property now devolved to the LHCs. The capital funds provided by the Province are Loans Repayable to the Province, with interest and principal payments being made to the Ontario Ministry of Finance. Interest on both the CMHC debt and the Loans Repayable to the Province are payable at various rates based on individual agreements the average rates are 6.08% and 6.88% respectively ( % and 6.97% respectively). Interest expense for year ended March 31, 2016 totaled $25 million; (2015 $29.5 million), $2.9 million (2015 $3.4 million) of which was paid to the Province. The interest expense is included in the Statement of Operations and Accumulated Deficit and is off-set by the subsidy from the Ministry. Scheduled payments over the next five years and thereafter are as follows: Gross Payments Principal Payments ($ 000) ($ 000) ,049 58, ,320 55, ,858 53, ,483 34, ,410 26,799 Thereafter 53,641 47,466

26 ONTARIO MORTGAGE AND HOUSING CORPORATION Notes to the Financial Statements For the year ended March 31, Contingent Liabilities (A) GUARANTEED DEBT The Corporation previously entered into loan insurance agreements with CMHC pertaining to mortgage loans on projects funded under various provincially-funded non-profit housing programs administered by the Ministry. Under these agreements, CMHC has insured mortgage loans made by lenders approved under the National Housing Act for the purpose of purchasing, improving, constructing or altering housing units. While the insurance is provided by CMHC, the Corporation is liable to CMHC for any net costs, including any environmental liabilities, incurred as a result of the loan defaults. The Corporation would request that the Ministry reimburse any costs incurred by the Corporation. As of March 31, 2016, there were $5.0 billion (2015 $5.4 billion) of mortgage loans outstanding on provincially funded projects. To date, there have been no claims for defaults on the insured mortgage loans. (B) CONTAMINATED SITES The Corporation retains potential liability for cleaning up environmental contaminants of former public housing properties under the Environmental Protection Act, as noted in the former Social Housing Reform Act, 2000 and maintained in the Housing Services Act, The Ministry reimburses the Corporation for costs incurred. The Ministry completed its review in of the more than 1,500 former OMHC sites in order to better refine potential liabilities for environmental contamination. The potential liability is for soil and groundwater contaminants as defined under the Environmental Protection Act. Estimates were developed using a riskbased approach that analyzed current and historical land uses, local redevelopment potential, construction date and building type to assess potential environmental risk. A total of 50 sites were identified as having a high degree of risk for potential contamination. These 50 sites represent a potential contingent liability of approximately $295 million. The need for remediation would be confirmed if and when a Municipal Service Manager has identified a site for redevelopment. 9. Excess of Revenues over Expenses The Corporation derives its revenues from two subsidies from the Province: the debt service obligation subsidy and the environmental remediation subsidy. The debt service obligation subsidy covers the interest on long-term debt included in Corporation s expenses, and the remaining portion represents the excess of revenues over expenses that is applied to the principal payments on the long-term debt. Similarly, the environmental remediation subsidy covers the environmental remediation costs included in the Corporation s expenses, and the remaining portion represents the excess of revenues over expenses that is applied to offset the site remediation costs that are accounted for in the Long-Term Environmental Remediation obligation as described in note 4.

27 ONTARIO MORTGAGE AND HOUSING CORPORATION Notes to the Financial Statements For the year ended March 31, Related Party Transactions The Corporation is controlled by the Province and is therefore a related party to other organizations that are controlled by or subject to significant influence by the Province. Transactions with related parties were: (A) LOANS TO ONTARIO COLLEGES As of March 31, 2016, the outstanding balance due from colleges with respect to loans for Student Housing Properties (note 5) was $585,000 ( $647,000). Total interest and principal payments received from colleges was $108,000 ( $108,000). (B) ADMINISTRATIVE EXPENSES The Ministry provides administrative services to the Corporation at no charge. The Corporation does not have any payroll expense as all personnel are the Ministry s employees and are paid by the Ministry. 11. Risk Management The Corporation is not exposed to significant credit risk as amounts classified as loans and receivables are due primarily from the Province and publicly-funded Ontario colleges and universities. The Corporation is also not exposed to significant liquidity risk or interest rate risk. These risks are borne by the Province. 12. Budgeted Figures Budgeted amounts are required to be disclosed under Canadian public sector accounting standards with the basis of accounting and the scope of activities being consistent with the actual results reported. The budget was approved by the Minister of Municipal Affairs and Housing. 13. Affordable Home Ownership Program (AHP) Mortgages The Affordable Housing Program Agreement, effective April 1, 2003, between the Province and CMHC established the Affordable Housing Program (AHP). This program provided down payment assistance in the form of 20-year forgivable loans to low and moderate income renter households purchasing eligible units. When the original loan recipients sell their properties before the forgiveness period expires, they are required to repay a portion of their loan. The Corporation has historically held monies on behalf of the Ministry that were related to the repayment of mortgages issued under the AHP. In the current fiscal year, the Ministry transferred these monies to the Corporation so that it has clear authority to receive, retain and use the monies for other affordable housing purposes.