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2 This booklet was printed using paper that was manufactured with 30% post-consumer waste and is Forest Stewardship Council (FSC) Mixed Sources certified.

3 Table of Contents Page History and Purpose 3 Vision, Mission and Values 4 Elected Officials and Appointed Officers 5 Message from the Chair 7 Functions and Participating Areas Highlights 11 Management s Responsibility for Financial Reporting 14 Auditors Report 15 Consolidated Financial Statements A Consolidated Statement of Financial Position 17 B Consolidated Statement of Operations 18 C Consolidated Statement of Changes in Net Financial Assets 19 D Consolidated Statement of Cash Flows 20 Notes to the Consolidated Financial Statements 21 Supporting Schedules 1 Consolidated Schedule of Segment Disclosure by Service Consolidated Schedule of Segment Disclosure by Service Consolidated Schedule of Tangible Capital Assets 31 4 Consolidated Schedule of Long-Term Debt 32 Supplementary Information and Information Pursuant to the Financial Information Act Statement of Financial Information Approval 34 i Consolidated Summary of Surpluses and Reserves 35 ii Schedule of Changes in Reserve Fund Balances 37 iii Schedule of Function Requisition Limits 38 iv Schedule of Guarantee and Indemnity Agreements 40 v Schedule of Remuneration and Expenses 41 vi Statement of Severance Agreements 42 vii Schedule of Payments to Suppliers 43 Page 1

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5 History and Purpose The Strathcona Regional District (SRD) is a partnership of four electoral areas and five municipalities providing approximately 43,000 residents with 59 services that include parks, land use planning, water, solid and liquid waste systems, and a full-service sports facility. The geography of the SRD ranges from forested hills to remote inlets to picturesque villages to vibrant urban landscapes. The borders extend from the Oyster River in the south to the southern part of Brooks Peninsula in the northwest, to the Sayward Valley and then east to take in Cortes, Quadra and the Discovery Islands, and a portion of the mainland north of Powell River. The SRD was established on February 15, 2008, when the Provincial government restructured the Comox Strathcona Regional District into the Strathcona Regional District and the Comox Valley Regional District, immediately to the south of the SRD. The Strathcona Regional District municipal members include the Villages of Gold River, Sayward, Tahsis, and Zeballos and the City of Campbell River. Its electoral areas, shown on the map below, include Area A (Kyuquot/Nootka-Sayward), Area B (Cortes Island), Area C (Discovery Island-Mainland Inlets) and Area D (Oyster Bay-Buttle Lake). Page 3

6 Vision To provide the citizens with a healthy environment and social well being that leads to a vibrant quality of life through responsible economic development and effective delivery of services. Mission On behalf of our constituents we will: Advocate Liaise with other orders of government (Federal, Provincial, First Nations) Exercise local control Deliver services economically and efficiently Reach out and engage the public Effectively manage growth Values We honour and value: Respect for each other Leadership Integrity Responsibility Accountability Dedication Innovation Diversity Openness Strathcona Regional District offices 990 Cedar Street Campbell River, BC Page 4

7 2012 Elected Officials and Appointed Officers From left to right, back row: C. Anderson, J. Abram, L. Samson, W. Jakeway, J. MacDonald, G. Whalley, R. Kerr From left to right, front row: B. Leigh, M. Storry, T. Lewis, N. Anderson, J. Schooner, C. Moglove Board of Directors City of Campbell River City of Campbell River City of Campbell River City of Campbell River City of Campbell River Village of Gold River Village of Sayward Village of Tahsis Village of Zeballos Electoral Area A Kyuquot-Nootka/Sayward Electoral Area B Cortes Island Electoral Area C Discovery Islands Mainland Inlets Electoral Area D Oyster Bay Buttle Lake L. Samson W. Jakeway R. Kerr C. Moglove M. Storry C. Anderson J. MacDonald J. Schooner E. Lewis (Chair) G. Whalley N. Anderson J. Abram B. Leigh Officers Chief Administrative Officer Officer responsible for Financial Administration Officer responsible for Corporate Administration B. Reardon D. Christenson T. Yates Page 5

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9 Message from the Chair On behalf of my fellow directors on the Board of the Strathcona Regional District I am pleased to present the 2012 Annual Report and Financial Statements. The Strathcona Regional District is still a relatively young organization, having just celebrated the 5 th anniversary of its incorporation on February 15, Previously the communities within our region were represented on the Board of the Comox-Strathcona Regional District. The year saw this organization continue to learn and grow, filtering its decisions through the Board s strategic vision to create a healthy environment for people and wildlife, provide a world class destination for tourists, ensure future affordability through a diverse and resilient economy, and deliver quality services by being a leader in regional governance. The year 2012 saw further progress toward building strategic relationships with first nations and other government organizations. In particular, a joint meeting with representatives of the Maanulth First Nations government helped to define a way forward for further cooperation around servicing and governance matters of mutual interest. Similarly, the members of the Regional Board were welcomed by the Klahoose First Nation to a Community to Community forum held in October at the impressive new Klahoose Multi-Purpose Facility on Cortes Island. These events are simply the start of a longer term process that will allow first nations interests and perspectives to have more prominence at the Board table. In addition, through a partnership with the Vancouver Island Health Authority, the Regional District was also able to provide funding for a variety of projects in communities throughout the region in support of local homelessness and community wellness initiatives. Looking forward into 2013 and beyond, the Strathcona Regional District will continue to build strategic partnerships with local governments, first nations and others in order to secure our vision for the region. We have a solid foundation to build on to achieve our goals and with a focused administration and responsible fiscal management, I am confident that we will continue to excel in service to our constituents, stakeholders and first nations partners. Edward (Ted) Lewis Chair June 1, 2013 Page 7

10 Functions and Participating Areas Function Participating Area(s) General Government Services Electoral Areas Administration and Election Services All electoral areas Feasibility Studies Electoral Areas and Regional All member municipalities and electoral areas General Administration All member municipalities and electoral areas Grants in Aid All electoral areas Member Municipality Administration All member municipalities Protective Services 911 Emergency Answering All member municipalities and electoral areas Area A Kyuquot/Nootka Emergency Program Part of Electoral Area A Area D Animal Control Electoral Area D Building Inspection Electoral Area D Campbell River Area D Fire Protection Part of Electoral Area D Emergency Rescue Supplies Grants in Aid Electoral Areas B and City of Campbell River Noise Control Electoral Area D North Quadra Island Assistance Response Part of Electoral Area C Sayward Valley Fire Protection Part of Electoral Area A Soil Deposit and Removal Control Electoral Area D South Cortes Island Fire Protection Part of Electoral Area B Strathcona Emergency Program All electoral areas and municipalities Unsightly Premises Electoral Area D Transportation Services Area C Street Lighting Electoral Area C Area D Street Lighting Part of Electoral Area D Area D Transit Electoral Area D Oyster River Bank Protection Part of Electoral Area D Environmental Health Services Area A Kyuquot/Nootka Solid Waste Disposal Part of Electoral Area A Area D Water Part of Electoral Area D Cortes Island Refuse Collection Part of Electoral Area B Cortes Island Refuse Disposal Part of Electoral Area B Craig Road Water Part of Electoral Area D Liquid Waste Management Plan Electoral Areas B and D Quathiaski Cove Sewer Part of Electoral Area C Sayward Valley Refuse Collection Part of Electoral Area A Page 8

11 Function Sayward Valley Refuse Disposal Walters Cove Water Supply Development Services Area A Economic Development Area C Economic Development House Numbering Planning Planning Non-Part 26 Recreation and Cultural Services Area A Kyuquot/Nootka Community Parks Area B Community Parks Area C Community Parks Area D Community Parks Heritage Conservation Kyuquot Community Hall Quadra Island Community Hall Sayward Valley Recreation and Community Hall Strathcona Gardens Recreation Complex Vancouver Island Regional Library Participating Area(s) Village of Sayward and part of Electoral Area A Part of Electoral Area A Parts of Electoral Area A Electoral Area C Electoral Areas B, C, D and part of Electoral Area A All electoral areas All member municipalities and electoral areas Part of Electoral Area A Electoral Area B Electoral Area C Electoral Area D Electoral Areas B, C and D Part of Electoral Area A Part of Electoral Area C Part of Electoral Area A City of Campbell River and Electoral Area D All electoral areas Page 9

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13 2012 Highlights Regional Community to Community Forum with the Klahoose First Nation On October 17, 2012 the directors and senior staff from the Regional District were welcomed by the Klahoose First Nation to their newly constructed Community Centre in Squirrel Cove on Cortes Island to attend a one day Community to Community Forum between the Klahoose First Nation and the Strathcona Regional District. The Forum provided an opportunity for local government and first nation representatives to meet one another and exchange ideas, concerns and viewpoints in a constructive and respectful manner. In addition, it also gave participants the opportunity to learn from each other and to start building a relationship that would sustain their mutual interests over the long term. The Forum included welcoming statements, a meeting prayer, a drumming ceremony, a presentation of gifts, a discussion on the history of the Klahoose and the Strathcona Regional District, sharing of a meal, dance and a walking tour of the Klahoose First Nation Village. The Forum was a good first step in building a positive relationship between the Klahoose First Nation and the Strathcona Regional District and the understanding of each other s priorities, goals and objectives. Homelessness and Healthy Communities Grants In May and June 2012 the Strathcona Regional District provided conditional grants totaling $450,000 to member municipalities and electoral areas for the purpose of providing community capacity, including capacity to address the issues of...homeless populations, and to support healthy communities. The grants were provided subject to the recipients signing grant funding agreements with the Regional District. Eligible projects included those that would increase community capacity, and could be linked to issues of homelessness, community health or both including the recovery of reasonable Page 11

14 administrative overhead costs in managing the intake, selection, disbursement and reporting requirements of the program. Funds for the program were made available under the Vancouver Island Health Authority community wellness initiative. The following table lists the apportionment of the grant funds to each area. Grant Apportionment by Population Jurisdiction Population* Percentage Amount City of Campbell River 30, $319,664 Village of Gold River 1, ,330 Village of Sayward ,588 Village of Tahsis ,851 Village of Zeballos ,988 Electoral Area A (Kyuquot/Nootka-Sayward) 1, ,520 Electoral Area B (Cortes Island) 1, ,794 Electoral Area C (Discovery Islands-Mainland Inlets) 2, ,849 Electoral Area D (Oyster Bay-Buttle Lake) 4, ,416 42, % $450,000 *Populations certified by the Minister of Community Services as of February 15, Community Wildfire Protection Plans British Columbia is a forested province. As urban development continues, so will the growth of new homes in close proximity to forest lands. With expert views on climate change and predictions of longer dry weather patterns, it is anticipated that the risk of interface wildfire will increase for many neighbourhoods similar to what has already occurred in 2003, 2006 and For communities within the Strathcona Regional District, the potential for interface wildfire is a significant issue. Compounding the potential issues are communities with a single road access and infrastructure risks such as wooden power poles. A forest fire incident that impacts access and egress routes or damages key community infrastructure would create considerable challenges and hardship for both the residents and the community responders. Following the 2003 Okanagan firestorms, provincial and local governments have placed greater priority on wildfire preparation and mitigation. In 2012, the Strathcona Regional District together with Strategic Group of Campbell River developed a Community Wildfire Prevention Plan (CWPP) for Electoral Area D (Oyster Bay-Buttle Lake). The project engaged many local stakeholders such as fire services, emergency coordinators, Fortis BC, Telus, BC Hydro and forestry companies. It also identified fire risks and created recommendations pertaining to the prevention and/or mitigation following the Strategic Wildfire Prevention guidelines. Page 12

15 The CWPP recommendations were categorized into three broad areas of wildfire prevention: education, engineering and enforcement. The primary recommendation focused on the development of an effective education program to enhance public knowledge, training exercises and to improve operational knowledge. On October 25, 2012 the Board approved the CWPP for Electoral Area D and recommended that the CWPP be provided to the public, local fire services and other interested parties and to campaign for public education in Electoral Area D with the recommendations of the CWPP Report. The CWPP for Electoral Area D and other Regions within the Strathcona Regional District are available for viewing on the Strathcona Regional District website at *Funding for the CWPP was provided by the UBCM under its Strategic Wildfire Prevention Fund. Strathcona Gardens Recreation Complex The Strathcona Gardens is a multi-purpose recreation centre which has two NHL-sized ice surfaces, a leisure/practice ice surface, a 37.5 meter swimming pool, a leisure pool with a waterslide and a fitness area. Strathcona Gardens celebrated its 40th anniversary in Spectators in the Rod Brind Amour Arena can now watch the Campbell River Storm Jr. B. Hockey Club games without worrying about flying pucks, thanks to the new protective netting funded by a Municipal Insurance Association risk mitigation grant. The arena lobby is also sporting an updated look which has created more space for spectators to sit, eat or just enjoy while watching the various ice activities. As part of this updated look a new sign was installed welcoming the public to the Home of the Campbell River Storm Jr. B Hockey Club. Upgrades to the concession area included new stainless steel countertops, tables and cabinets. The outdoor marquee also got a facelift new paint and brighter signage with the Strathcona Regional District logo. On May 28 and 29, 2012 the Strathcona Gardens hosted the Third Annual Upper Island Safety Conference. Over 150 delegates were in attendance to network with other delegates, presenters and trade show experts. They learned about the latest safety research, trends and had two full days of educational workshops, including Leadership Strategies for the 21 st Century, Working at Heights, Young & New Worker Safety and many others. Page 13

16 Management s Responsibility for Financial Reporting The consolidated financial statements have been prepared by management in accordance with generally accepted accounting principles for British Columbia local governments and the integrity and objectivity of these statements are management s responsibility. Management is also responsible for all the supplementary statements and schedules, and for ensuring that this information is consistent, where appropriate, with the information contained in the financial statements. Management is also responsible for implementing and maintaining a system of internal controls to provide reasonable assurance that reliable financial information is produced. The Board of Directors is responsible for reviewing and approving the financial statements and for ensuring that management fulfils its responsibilities for financial reporting and internal control. The external auditors, MNP LLP, conduct an independent examination in accordance with generally accepted auditing standards and express their opinion on the financial statements. Their examination includes a review and evaluation of the Regional District s system of internal controls and appropriate tests and procedures to provide reasonable assurance that the financial statements are presented fairly. The external auditors have full and free access to the Board of Directors and meet with it at least two times a year. Dawn Christenson, BAccS, CGA Officer responsible for Financial Administration, pursuant to Section 199 of the Local Government Act May 23, 2013 Prepared pursuant to Financial Information Regulation, Schedule 1, section 9 Page 14

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19 Strathcona Regional District Consolidated Statement of Financial Position As at December 31, 2012 Statement A Financial assets Cash and temporary investments (Note 3) $ 9,779,091 $ 8,462,392 Receivables (Note 4) 306, ,420 Inventory for resale 9,683 10,906 Municipal debt receivable (Note 5) 6,326,409 7,689,070 Total financial assets 16,421,991 16,503,788 Liabilities Accounts payable and accrued liabilities (Note 6) 616, ,938 Deferred revenue (Note 7) 2,844,155 2,407,140 Long-term debt Member municipalities (Note 5) 6,326,409 7,689,070 Regional District (Note 9) (Schedule 4) 493, ,388 Capital leases (Note 10) - 11,983 Total liabilities 10,280,348 11,358,519 Net financial assets 6,141,643 5,145,269 Non-financial assets Prepaid expenses 36,029 29,746 Tangible capital assets (Schedule 3) 14,792,522 15,447,619 Total non-financial assets 14,828,551 15,477,365 Accumulated surplus (Note 11) $ 20,970,194 $ 20,622,634 Contingent liabilities (Note 13) Dawn Christenson, BAccS, CGA Officer responsible for financial administration, pursuant to Section 199 of the Local Government Act The accompanying notes and schedules are an integral part of these financial statements. Page 17

20 Strathcona Regional District Consolidated Statement of Operations Year ended December 31, 2012 Statement B Actual Budget Actual (Unaudited) (Note 20) Revenue Frontage and parcel taxes $ 18,484 $ 18,453 $ 17,928 Grants in lieu of taxes 159,664 83, ,758 Property tax requisition 7,311,010 7,312,012 6,620,448 Government grants and transfers 700, , ,297 Sales of services 1,886,794 1,901,867 1,758,249 Other revenue from own sources 94,760 96, ,110 Contributions from others 9,816 17, ,660 Investment income 87,355 10,000 85,423 MFA surplus repatriation - - 2,215 MFA debt reserve refund - - 1,282 Actuarial adjustment of debenture debt 2,525-6,769 Total revenue 10,271,152 10,169,975 9,849,139 Expense General government services 2,124,476 2,375,832 1,779,727 Protective services 1,096,623 1,169,895 1,103,263 Transportation services 149, , ,531 Environmental health services 764, , ,141 Development services 470, , ,445 Recreation and cultural services 5,318,451 5,154,877 5,207,650 Total expense 9,923,592 10,302,157 9,506,757 Annual surplus (deficit) 347,560 (132,182) 342,382 Accumulated surplus, beginning 20,622,634 20,622,634 20,280,252 Accumulated surplus, ending $ 20,970,194 $ 20,490,452 $ 20,622,634 The accompanying notes and schedules are an integral part of these financial statements. Page 18

21 Statement C Strathcona Regional District Consolidated Statement of Changes in Net Financial Assets Year ended December 31, Actual Budget Actual (Unaudited) (Note 20) Annual surplus $ 347,560 $ (132,182) $ 342,382 Acquisition of tangible capital assets (106,197) (1,033,935) (1,052,252) Disposal of tangible capital assets ,672 Write down of tangible capital assets - - 1,248 Amortization of tangible capital assets 761, ,036 Change in prepaid expenses (6,283) - (4,090) Increase in net financial assets 996,374 (1,166,117) 86,996 Net financial assets, beginning 5,145,269 5,145,269 5,058,273 Net financial assets, ending $ 6,141,643 $ 3,979,152 $ 5,145,269 The accompanying notes and schedules are an integral part of these financial statements. Page 19

22 Strathcona Regional District Consolidated Statement of Cash Flows Year ended December 31, 2012 Statement D Operating activities Annual surplus $ 347,560 $ 342,382 Items not affecting operating activities Actuarial adjustment of debenture debt (2,525) (6,769) Amortization of tangible capital assets 761, ,036 Change in prepaid expenses (6,283) (4,090) Loss on disposal of tangible capital asset - 83,672 Gain on disposal of tangible capital asset (1,000) - Write down of tangible capital asset - 1,248 Decrease in non-cash financial assets Receivables 34, ,393 Inventory for resale 1, Increase (decrease) in short-term liabilities Accounts payable and accrued liabilties 28,250 (276,993) Deferred revenue 437, ,493 Cash provided by operating activities 1,600,146 2,022,863 Capital activities Acquisition of tangible capital assets (106,197) (1,052,252) Proceeds on disposition of tangible capital asset 1,000 - Cash provided by (applied to) capital activities (105,197) (1,052,252) Financing activities Capital lease principal repaid (11,983) (54,530) Debt principal repaid (166,267) (281,440) Net debt issued for capital - 330,932 Decrease in temporary borrowing - (70,032) Cash provided by (applied to) financing activities (178,250) (75,070) Net change in cash and temporary investments 1,316, ,541 Cash and temporary investments, beginning 8,462,392 7,566,851 Cash and temporary investments, ending $ 9,779,091 $ 8,462,392 Supplemental information Interest received $ 119,684 $ 113,979 Interest paid $ 17,814 $ 24,492 The accompanying notes and schedules are an integral part of these financial statements. Page 20

23 Strathcona Regional District Notes to Consolidated Financial Statements Year ended December 31, Purpose The Strathcona Regional District (Regional District) was incorporated on February 15, 2008 by letters patent issued by the Province of British Columbia. Its principal activities are the provision and coordination of local government services to the residents of four unincorporated electoral areas and five municipalities within its boundaries. These services include general government administration, bylaw enforcement, planning and development services, building inspection, fire protection and emergency response planning, public transportation, parks and recreation, water distribution and sewer collection and disposal, solid waste collection and disposal and street lighting. 2. Significant accounting policies a) Principles of consolidation The Regional District follows Canadian public sector accounting standards. The resources and operations of the Regional District are segregated into various funds for accounting and financial reporting purposes, each being treated as a separate entity with responsibility for the stewardship of the assets allocated to it. The consolidated financial statements are prepared in accordance with the recommendations of the Public Sector Accounting Board (PSAB). The consolidated financial statements include the activities related to all funds belonging to the one economic entity of the Regional District. Interfund transactions and fund balances have been eliminated on consolidation. b) Temporary investments Investments are comprised primarily of Municipal Finance Authority (MFA) pooled investments including money market, intermediate and bond funds. Regional District funds invested with MFA are pooled with other local governments and managed independently by Phillips, Hager & North Investment Management. The investments are carried at cost which approximates market value. The Regional District also carries guaranteed investment certificates at cost which approximates market value. c) Inventory Inventory for resale is recorded at the lower of cost or net realizable value as a financial asset. d) Financial instruments Financial instruments consist of cash and temporary investments, receivables, municipal debt receivable, accounts payable and accrued liabilities, temporary borrowing and long-term debt. Unless otherwise noted, it is management s opinion that the Regional District is not exposed to significant interest, currency or credit risk arising from these financial instruments e) Tangible capital assets Tangible capital assets are recorded at cost, net of tangible capital asset disposals, write-downs and amortization. The cost of the tangible capital assets, which includes all amounts that are directly attributable to acquisition, construction, development or betterment of the asset, is amortized on a straight line basis over their estimated useful lives as follows: Land improvements 20 to 50 years Buildings 40 to 50 years Building improvements 20 years Machinery, equipment, vehicles and fixtures 5 to 20 years Water systems 50 years Sewer system 15 to 50 years One-half of the annual amortization is charged in the year of acquisition and in the year of disposal. Capital projects under construction are not amortized until the asset is put into use. Assets contributed to the Regional District are recorded at fair value at the time of contribution. Page 21

24 Strathcona Regional District Notes to Consolidated Financial Statements Year ended December 31, 2012 f) Accrued employee benefits Based on obligations as determined by collective agreements and contractual arrangements, employee benefit accruals, which include an allowance for sick leave and vacation entitlement, are recorded in the year in which they are earned. g) Post employment benefits The long-term, post employment benefit liability of the Regional District will be met by the Municipal Pension Plan into which both employees and the Regional District contribute. The Regional District is only liable for the interim retirement benefits for early retirees, from the date of retirement to the effective start date of the Municipal Pension Plan. Any liability for these benefits is accrued when the event occurs and the obligation arises. h) Revenue recognition Revenue is recorded on an accrual basis and is recognized in the period in which it is earned. Government transfers are recognized as revenue in the period in which 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. Unrestricted revenues such as property tax requisitions, user and permit fees are recognized as revenues when received or receivable. Revenue from sales of services and investment income is recognized in the period in which it is earned. i) Use of estimates The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Significant areas requiring management estimates are the determination of employee benefit obligations, amortization, actuarial adjustments and provisions for contingencies. Actual results may vary from the estimates and adjustments will be reported and reflected in operations as they become known. Changes to the underlying assumptions and estimates or legislative changes in the near term could have a material impact on the provisions recognized. j) Allocation of assets and liabilities from prior organization In February 2008, the Province of British Columbia issued an order in council repealing the letters patent for the Comox Strathcona Regional District and incorporating the Strathcona Regional District and Comox Valley Regional District by letters patent on February 15, The assets, liabilities and equity of the Comox Strathcona Regional District at February 14, 2008 were allocated to the Strathcona and Comox Valley Regional Districts based on management s interpretation of the letters patent. 3. Temporary investments Included in cash and temporary investments is $1,456,799 (2011 $1,430,235) of temporary investments held with the Municipal Finance Authority in money market, intermediate and bond funds. These investments are carried at market value which approximates cost. The Regional District also holds a five-year 2.86% non-redeemable Guaranteed Investment Certificate at a cost of $149,985 which matures on July 5, Included in cash and temporary investments are the following funds that are externally restricted by agreement: Hank s Beach Forest Conservation Park Reserve $ 149,985 $ 149,985 Evans Bay Port Facility Reserve (Note 12) 133, ,861 $ 283,658 $ 287,846 Page 22

25 4. Receivables Strathcona Regional District Notes to Consolidated Financial Statements Year ended December 31, Government of Canada $ 44,630 $ 91,218 Province of British Columbia 27,003 60,740 Regional and local governments 19,097 13,739 Utility service customers 91,095 70,132 Other trade receivables 124, , Municipal debt receivable $306,808 $341,420 Pursuant to the Local Government Act, the Regional District acts as the agency through which its member municipalities borrow funds from the Municipal Finance Authority (MFA). The annual cost of servicing this municipal debt is recovered entirely from the borrowing member municipality. However, in the event of default the Regional District is contingently liable to the MFA for this debt City of Campbell River $6,193,333 $7,536,161 Village of Sayward 119, ,420 Village of Zeballos 13,567 26,489 $6,326,409 $7,689, Accounts payable and accrued liabilities Province of British Columbia $ 48,230 $ 58,096 Regional and local governments 77, ,884 Accrued interest on long-term debenture debt 2,103 2,105 Payroll liabilities 322, ,409 Other trade payables 165, ,444 $616,188 $587, Deferred revenue Community Works Fund (Note 8) $2,719,335 $2,205,555 Deferred grant contributions 76, ,000 Unearned revenue 47,969 51,585 $2,844,155 $2,407,140 Page 23

26 8. Community Works Fund Strathcona Regional District Notes to Consolidated Financial Statements Year ended December 31, 2012 Community Works Fund is a component of the Gas Tax Agreement funding provided by the Government of Canada, through the Union of British Columbia Municipalities. Gas Tax Agreement funding may be used towards designated public transit, community energy, water, wastewater, solid waste and capacity building projects, as specified in the funding agreements. Unspent funds and the applicable interest earned are recorded as deferred revenue. The following balances are included in the totals reported for deferred revenue Community Works Fund, beginning balance $2,205,555 $1,693,112 Add: Amounts received during the year 490, ,970 Interest earned on funds 33,643 31,465 Less: Amounts allocated to projects during the year (10,833) (9,992) Community Works Fund, ending balance $2,719,335 $2,205, Long-term debt Details of long-term debt, including maturity dates, interest rates and outstanding amounts, are summarized in the Schedule 4 Consolidated Schedule of Long-term Debt. Payments of principal on issued debt of the Regional District, not including municipal debt, for the next five years are: 2013 $ 6, , , , ,081 Total $396,149 Interest on long-term debt recorded in the Consolidated Statement of Operations in 2012 is $17,748 (2011 $21,486). 10. Capital leases The Regional District has no outstanding capital leases. In 2012, payment commitments were completed for the financing of one fire truck through a capital lease in the amount of $113,337 held by the MFA Leasing Corporation. While payments were fixed for the term of the lease, interest rates varied daily based on the Canadian prime rate minus 1.0%. Interest on capital leases recorded in the Consolidated Statement of Operations in 2012 was $66 (2011 $760). 11. Accumulated surplus Equity in tangible capital assets $14,307,772 $14,782,763 Operating funds 1,746,949 1,410,075 Capital funds 122, ,712 Reserve funds 3,574,860 3,276,519 Appropriated surplus 1,217,901 1,030,565 Accumulated surplus $20,970,194 $20,622,634 Page 24

27 12. Evans Bay Port Facility reserve Strathcona Regional District Notes to Consolidated Financial Statements Year ended December 31, 2012 On March 22, 2010 Transport Canada divested the Evans Bay Port Facility to the Strathcona Regional District. Divestiture funds are used for eligible operations and maintenance expense, net of any input tax credits or rebates, up to the period ending March 22, The unused portion of the contribution has been deposited in a separate Canadian interest-bearing bank account dedicated exclusively for the operation of the Port Evans Bay Port Facility Reserve, beginning balance $137,861 $138,487 Add: Interest earned on funds 1,781 1,781 Less: Amount applied to eligible expenses (5,969) (2,407) Evans Bay Port Facility Reserve, ending balance $133,673 $137, Contingent liabilities As at December 31, 2012, there existed outstanding claims against the Regional District. These claims have been referred to legal counsel and to the Regional District s liability insurers. It is not possible to determine the Regional District s potential liability, if any, with respect to these matters. 14. Pension liability The Regional District and its employees contribute to the Municipal Pension Plan (the Plan), a jointly trusteed pension plan. The board of trustees, representing plan members and employers, is responsible for overseeing the management of the Plan, including investment of the assets and administration of benefits. The Plan is a multi-employer contributory pension plan. Basic pension benefits provided are based on a formula. The Plan has about 176,000 active members and approximately 67,000 retired members. Active members include approximately 35,000 contributors from local governments. The latest valuation as at December 31, 2009 indicated a $1.024 billion funding deficit for basic pension benefits. The next valuation will be as at December 31, 2012 with results available in Defined contribution plan accounting is applied to the Plan as the Plan exposes the participating entities to actuarial risks associated with the current and former employees of other entities, with the result that there is no consistent and reliable basis for allocating the obligation, Plan assets and cost to individual entities participating in the Plan. The Strathcona Regional District paid $241,269 (2011 $212,706) for employer contributions while employees contributed $230,932 (2011 $210,539) to the Plan in fiscal Municipal Finance Authority debt reserve funds The Regional District secures its long-term borrowing through the Municipal Finance Authority (MFA). As a condition of these borrowings, a portion of the debenture proceeds is retained by MFA as debt reserve funds. As at December 31, 2012 the Regional District had debt reserve funds of $9,003 (2011 $8,919). Page 25

28 16. North Island 911 Corporation Strathcona Regional District Notes to Consolidated Financial Statements Year ended December 31, 2012 The 911 emergency answering and fire dispatch services are provided by the North Island 911 Corporation which is owned by the Regional Districts of Alberni-Clayoquot, Comox Valley, Mount Waddington, Nanaimo, Powell River and Strathcona. The shares in the corporation are owned as follows: Alberni-Clayoquot 3 shares Comox Valley 6 shares Mount Waddington 1 share Nanaimo 5 shares Powell River 2 shares Strathcona 4 shares The Strathcona Regional District s investment in shares of the North Island 911 Corporation is recorded at cost. 17. Environmental regulations The Regional District makes every effort to comply with all environmental regulations that apply to its operations. These regulations may require future expenditures to meet applicable standards and subject the Regional District to possible penalties for violations. Amounts required to meet these obligations will be charged to operations when incurred or set aside as future reserves when they can be reasonably estimated. 18. Segmented information The Strathcona Regional District is a diversified local government providing a wide range of services to 43,000 residents, including parks, recreation centre, community halls, fire protection, water and sewer services. As a requirement of the Local Government Act, separate financial records must be kept for each service providing detailed allocations of assets and liabilities, revenues and expenses, information concerning reserve funds and other pertinent financial details. For each reported segment, revenues and expenses represent amounts that are directly attributable to the segment and also amounts that are allocated on a reasonable basis. Segmentation has been determined on a functional basis with consideration to service delivery and departmental accountabilities. The following is a description of the types of services included in each of the main service segments of the Regional District s financial statements. A detailed summary of the 2012 revenues and expenses can be found in Schedule 1 of the accompanying financial statements. Schedule 2 contains 2011 comparative figures. General Government General government comprises member municipality and electoral area governance, general administration, feasibility studies and grants in aid. Protective Services Protective services include volunteer fire departments, search and rescue, emergency programs, 911 answering service, building inspection and various bylaw compliance services. Transportation Transportation services include a rural transit service, street lighting and bank protection. Environmental Health The environmental health service includes solid waste collection and disposal, liquid waste management planning, water distribution, and wastewater collection and disposal for participating electoral areas. Page 26

29 Strathcona Regional District Notes to Consolidated Financial Statements Year ended December 31, 2012 Development Development service consists of rural land use planning, economic development, heritage conservation and house numbering. Recreation and Culture Recreation and cultural services consists of a full-service recreation facility offering fitness, ice and aquatic programs, community parks and trail networks and contributions towards community halls and the Vancouver Island Regional Library. 19. Comox-Strathcona Regional Hospital District The board members of the Strathcona Regional District sit on the board of the Comox-Strathcona Regional Hospital District (CSRHD) together with the board members of the Comox Valley Regional District. The Regional District and the CSRHD are separate legal entities as defined by separate letters patent and authorized by separate legislation. 20. Restatement of 2012 budget The budget amounts presented throughout these financial statements are unaudited and represent the five year financial plan bylaw approved by the Regional District Board on March 22, The financial plan anticipated use of surpluses accumulated in previous years to balance against current year expenditures in excess of current year revenues. Another significant variance is that the financial plan anticipated capital expenditures rather than amortization expense. The summary below reconciles the 2012 adopted financial plan to the Consolidated Statement of Operations. Consolidated deficit, per the 2012 to 2016 Financial Plan and Capital Expenditure Program Bylaw No. 140, as approved March 22, 2012, ($ 1,364,350) Add: Capital acquisitions 1,033,935 Debt principal payments 208,252 Transfers to reserves and appropriated surplus 491,796 Less: Proceeds from borrowing (300,000) Transfers from reserves (201,815) Budgeted deficit, as restated ($ 132,182) 21. Recent accounting pronouncements In June 2010, the Public Sector Accounting Board (PSAB) issued PS 3260 Liability for Contaminated Sites to establish recognition, measurement and disclosure standards for liabilities associated with the remediation of contaminated sites. The new section defines activities included in a liability for remediation, establishes when to recognize and how to measure a liability for remediation, and provides the related financial statement presentation and disclosure requirements. PS 3260 is effective for fiscal years beginning on or after April 1, The Regional District has not yet determined the effect of the new section on its consolidated financial statements. In March 2011, the Public Sector Accounting Board replaced and revised existing section PS 3410 Government Transfers with a newly amended section PS Newly issued PS 3410 establishes standards on how to account for and report government transfers to individuals, organizations and other governments from both a transferring government and a recipient government perspective. This section permits a recipient government to recognize government transfers as revenue when the transfer is authorized by the transferring government, unless the transfer creates a liability for the recipient. A liability is created as a result of the recipient government not yet meeting eligibility criteria or the existence of stipulations in the transfer agreement. When a government transfer results in Page 27

30 Strathcona Regional District Notes to Consolidated Financial Statements Year ended December 31, 2012 recognition of a liability, revenue is recognized by a recipient government as the liability is settled. A transferring government recognizes an expense when the transfer is authorized and the recipient has met all eligibility criteria. Newly revised and issued PS 3410 may be applied prospectively or retroactively and is effective for fiscal years beginning on or after April 1, 2012; however, earlier adoption is encouraged. PS 3410 will be applied prospectively and the Regional District does not expect the adoption of the newly issued section to have a material impact on its consolidated financial statements. 22. Comparative figures Prior year s comparative figures have been reclassified where applicable to conform to the current year s presentation. Page 28

31 Schedule 1 Strathcona Regional District Consolidated Schedule of Segment Disclosure by Service Year ended December 31, 2012 General Government Protective Transportation Environmental Health Development Recreation and Cultural Actual Budget (Unaudited) (Note 20) Revenue Frontage and parcel taxes $ - $ - $ 4,751 $ 13,733 $ - $ - $ 18,484 $ 18,453 Grants in lieu of taxes 107,966 5, ,185 42, ,664 83,524 Property tax requisition 1,034,208 1,103, , , ,906 4,243,443 7,311,010 7,312,012 Government grants and transfers 646,663 20,835-10,833-22, , ,084 Sales of services - 9, , ,364,723 1,886,794 1,901,867 Other revenue from own sources , ,453 39,721 21,619 94,760 96,368 Contribution from others ,816 9,816 17,667 Investment income 43,774 2,174 1,341 3, ,885 87,355 10,000 Actuarial adjustment of debenture debt - - 1,280 1, ,525 - Total revenue 1,833,465 1,159, , , ,279 5,740,518 10,271,152 10,169,975 Expense Labour and benefits 1,057, ,429 3,793 77, ,127 2,900,363 4,518,862 4,889,217 Grants 485, ,415 98, , ,144 1,923,966 1,730,371 Goods and services 503,768 77,692 33, ,603 21,687 1,488,719 2,701,656 3,651,567 Interest ,832 7,010-7,906 17,814 31,002 Amortization of tangible capital assets 77,393 48,021 10, ,105 3, , ,294 - Total expense 2,124,476 1,096, , , ,068 5,318,451 9,923,592 10,302,157 Surplus (deficit) $ (291,011) $ 63,257 $ 11,875 $ 28,161 $ 113,211 $ 422,067 $ 347,560 $ (132,182) Page 29

32 Schedule 2 Strathcona Regional District Consolidated Schedule of Segment Disclosure by Service Year ended December 31, 2011 General Government Protective Transportation Environmental Health Development Recreation and Cultural Actual Budget (Unaudited) (Note 20) Revenue Frontage and parcel taxes $ - $ - $ 4,720 $ 13,208 $ - $ - $ 17,928 $ 17,933 Grants in lieu of taxes 103,199 4, ,171 1,034 34, ,758 82,829 Property tax requisition 971,110 1,114, , , ,844 3,852,931 6,620,448 6,620,448 Government grants and transfers 318,379 32,784-10, , ,297 1,417,326 Sales of services - 17, ,872-1,299,382 1,758,249 1,610,259 Other revenue from own sources 34,351 30, ,024 25,427 14, ,110 96,550 Contribution from others , ,660 - Investment income 42,508 2,029 2,026 4, ,288 85,423 10,000 MFA surplus repatriation - 1,205 1, ,215 - MFA debt reserve refund - - 1, ,282 - Actuarial adjustment of debenture debt - - 5, ,769 - Total revenue 1,469,547 1,203, , , ,746 5,969,393 9,849,139 9,855,345 Expense Labour and benefits 1,025, ,588 3,966 67, ,660 2,778,129 4,384,052 4,402,393 Grants 150, ,678 89, , ,484 1,574,431 1,653,330 Goods and services 530,304 81,217 34, ,381 28,286 1,465,363 2,725,072 3,546,823 Interest ,839 7,190-9,457 22,246 35,344 Amortization of tangible capital assets 74,158 48,020 10, ,106 3, , ,036 - Loss on disposal of tangible capital asset ,672 83,672 - Write-down of assets ,248 1,248 - Total expense 1,779,727 1,103, , , ,445 5,207,650 9,506,757 9,637,890 Surplus (deficit) $ (310,180) $ 100,145 $ 23,502 $ (114,129) $ (118,699) $ 761,743 $ 342,382 $ 217,455 Page 30

33 Schedule 3 Strathcona Regional District Consolidated Schedule of Tangible Capital Assets Year ended December 31, 2012 Machinery Land Buildings Equipment Capital and and Vehicles and Water Sewer Projects Improvements Improvements Fixtures Infrastructure Infrastructure in progress Cost Balance, beginning $ 4,475,390 $ 15,418,359 $ 1,845,826 $ 4,099,023 $ 1,096,201 $ - $ 26,934,799 $ 26,239,966 Add: Additions during year , , ,197 1,865,008 Less: Disposals or write downs - - (7,000) (7,000) (357,419) Completed during year (812,756) Balance, ending 4,475,390 15,418,359 1,893,791 4,099,023 1,096,201 51,232 $ 27,033,996 26,934,799 Accumulated amortization Balance, beginning 393,824 7,509, ,044 2,246, ,428-11,487,180 11,043,643 Add: Amortization for the year 41, , ,370 81,980 20, , ,036 Less: Accumulated amortization on disposals - - (7,000) (7,000) (272,499) Balance, ending 435,472 7,962,359 1,080,414 2,328, ,017-12,241,474 11,487,180 Net book value $ 4,039,918 $ 7,456,000 $ 813,377 $ 1,770,811 $ 661,184 $ 51,232 $ 14,792,522 $ 15,447,619 Page 31

34 Schedule 4 Strathcona Regional District Consolidated Schedule of Long-term Debt As at December 31, 2012 Issue # Maturity Date Rate Beginning Balance Principal Payments Net Debt Issued Actuarial Additions Ending Balance Interest Payments Accrued Interest Accrued Actuarial General capital fund Oyster River Bank Protection MFA64 09/ % 13,629 (1,186) - (1,280) 11,163 2, Strathcona Gardens Recreation BL78 09/2015 Variable: Prime minus 1.25% 526,000 (160,000) ,000 7, Total general capital fund 539,629 (161,186) - (1,280) 377,163 10, Water capital fund Craig Road Water MFA99 10/ % 113,244 (4,649) - (1,007) 107,588 6,575 1, Total water capital fund 113,244 (4,649) - (1,007) 107,588 6,575 1, Water operating fund Walters Cove Water MFA77 06/ % 9,515 (432) - (238) 8, Total water operating fund 9,515 (432) - (238) 8, Regional district long-term debt $ 662,388 $ (166,267) $ - $ (2,525) $ 493,596 $ 17,748 $ 2,104 $ 778 Page 32

35 Supplementary Information and Information Pursuant to the Financial Information Act Page 33

36 Statement of Financial Information Approval The information that follows includes schedules that have been prepared under the Financial Information Act for the year ended December 31, This information was included with the 2012 Annual Report and Financial Statements presented to and approved by the Strathcona Regional District Board at a meeting held on May 23, Approved in accordance with the requirements of Financial Information Regulation 371/93, Schedule 1, Section 9, Edward (Ted) Lewis Board Chair Dawn Christenson, BAccS, CGA Chief Financial Officer Page 34