Consolidated Financial Statements and Independent Auditor's Report
INDEPENDENT AUDITOR'S REPORT To the Members of Council of Town of Eckville Report on Financial Statements We have audited the accompanying consolidated financial statements of Town of Eckville, which comprise the statement of financial position as at and the statements of operations and accumulated surplus, changes in net financial assets (debt) and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Canadian public sector accounting standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Town of Eckville as at, the results of its operations, changes in net financial assets (debt) and its cash flows for the year then ended in accordance with Canadian public sector accounting standards. Red Deer, Alberta April 22, 2013 Chartered Accountants
Contents Financial Statements Page Consolidated Statement of Financial Position 1 Consolidated Statement of Operations and Accumulated Surplus 2 Consolidated Statement of Changes in Net Financial Assets (Debt) 3 Consolidated Statement of Cash Flows 4 Consolidated Schedule of Changes in Accumulated Surplus 5 Consolidated Schedule of Tangible Capital Assets 6 Consolidated Schedule of Property and Other Taxes 7 Consolidated Schedule of Government Transfers 8 Consolidated Schedule of Expenses by Object 9 Notes to the Consolidated Financial Statements 10-20
Consolidated Statement of Financial Position 2012 2011 (restated) FINANCIAL ASSETS Cash and temporary investments (note 4) $ 3,222,384 2,539,136 Accounts receivable (note 5) 194,159 364,602 Land for resale inventory 263,177 263,177 3,679,720 3,166,915 LIABILITIES Accounts payable and accruals 208,753 101,549 Deferred revenue (note 7) 1,379,634 1,299,086 Long-term debt (note 8) 681,610 722,858 2,269,997 2,123,493 Contingencies (note 10) NET FINANCIAL ASSETS 1,409,723 1,043,422 NON-FINANCIAL ASSETS Tangible capital assets 7,625,950 7,627,047 Prepaid expenses 18,634 14,040 7,644,584 7,641,087 ACCUMULATED SURPLUS (note 11) $ 9,054,307 8,684,509 Approved by Council: Mayor Chief Administrative Officer -1-
Consolidated Statement of Operations and Accumulated Surplus Year Ended Budget (unaudited) 2012 2011 (restated) Revenue Net municipal taxes (page 7) $ 982,785 975,811 946,176 User fees and sales of goods 596,855 554,477 656,838 Government transfers for operating (page 8) 127,931 237,279 118,642 Franchise fees 112,249 98,482 96,150 Other 57,590 38,807 57,773 Fines 28,000 29,093 36,461 Investment income 10,000 28,218 13,417 Penalties and cost of taxes 18,000 17,606 17,740 Licenses and permits 11,000 12,949 13,443 Rentals 1,060 1,150 1,060 1,945,470 1,993,872 1,957,700 Expenses (page 9) Administrative 334,245 325,937 304,206 Roads, streets, walks and lighting 340,263 320,964 337,253 Wastewater treatment and disposal 169,635 319,019 223,905 Waste management 160,356 216,170 167,646 Parks and recreation 142,770 189,896 179,389 Water supply and distribution 135,240 166,709 157,365 Common services 77,380 108,467 82,625 Fire and disaster services 85,554 104,502 109,436 Legislative 76,625 70,942 70,651 Library 37,686 57,119 61,394 Bylaws enforcement 47,600 46,200 44,776 Ambulance 30,621 30,421 30,425 Other 895 2,810 586 Subdivision land development 30,108 2,163 28,322 1,668,978 1,961,319 1,797,979 Excess of revenue over expenses before the following 276,492 32,553 159,721 Other income (expenses) Government transfers for capital (page 8) - 337,245 1,483,210 Loss on sale of tangible capital assets - - (26,782) - 337,245 1,456,428 Excess of revenue over expenses 276,492 369,798 1,616,149 Accumulated surplus, beginning of year, as restated (note 3) 8,684,509 8,684,509 7,068,360 Accumulated surplus, end of year $ 8,961,001 9,054,307 8,684,509-2-
Consolidated Statement of Changes in Net Financial Assets (Debt) Year Ended Budget (unaudited) 2012 2011 (restated) Excess of revenue over expenses $ 276,492 369,798 1,616,149 Acquisition of tangible capital assets (563,000) (300,953) (836,573) Amortization of tangible capital assets - 302,050 275,002 Proceeds on disposal of tangible capital assets - - 40,128 Loss on disposal of tangible capital assets - - 26,782 Change in prepaid expenses - (4,594) (1,603) Increase (decrease) in net financial assets (286,508) 366,301 1,119,885 Net financial assets (debt), beginning of year 1,043,422 1,043,422 (76,463) Net financial assets, end of year $ 756,914 $ 1,409,723 1,043,422-3-
Consolidated Statement of Cash Flows Year Ended 2012 2011 CASH PROVIDED BY (USED FOR) Operating activities Cash receipts from ratepayers, services and agencies $ 2,553,890 3,329,418 Cash paid to suppliers, employees and agencies (1,622,017) (1,753,047) Interest received 28,218 13,417 Interest paid (772) (741) 959,319 1,589,047 Capital activities Purchase of tangible capital assets (234,824) (836,572) Proceeds on disposal of tangible capital assets - 40,128 (234,824) (796,444) Investing activities Decrease in restricted cash and temporary investments 147,098 185,935 Financing activities Repayment of long-term debt (41,248) (39,691) Increase in cash and cash equivalents 830,345 938,847 Cash and cash equivalents (deficiency), beginning of year 929,953 (8,894) Cash and cash equivalents, end of year $ 1,760,298 929,953 Cash and cash equivalents consists of: Cash and temporary investments (note 4) $ 3,222,384 2,539,136 Less restricted portion of cash and temporary investments (note 4) (1,462,086) (1,609,183) $ 1,760,298 929,953-4-
Consolidated Schedule of Changes in Accumulated Surplus Year Ended Unrestricted Surplus Reserves Equity in Tangible Capital Assets 2012 2011 (restated) Balance, beginning of year $ 903,382 876,938 6,904,189 8,684,509 7,068,360 Excess of revenue over expenses 369,798 - - 369,798 1,616,149 Unrestricted funds designated for future use (66,519) 66,519 - - - Current year funds used for tangible capital assets (300,953) - 300,953 - - Annual amortization expense 302,050 - (302,050) - - Long-term debt repaid (41,248) - 41,248 - - Balance, end of year $ 1,166,510 943,457 6,944,340 9,054,307 8,684,509-5-
Consolidated Schedule of Tangible Capital Assets Year Ended Land Buildings Engineered structures Machinery and equipment Automotive 2012 2011 (restated) Cost Balance, beginning of year $ 109,198 3,389,770 7,875,996 1,023,598 324,867 12,723,429 12,188,324 Acquisition of tangible capital assets 6,050-90,857 83,500-180,407 836,572 Construction-in-progress - 24,661 92,517 3,368-120,546 - Disposal of tangible capital assets - - - - (11,749) (11,749) (301,467) Balance, end of year 115,248 3,414,431 8,059,370 1,110,466 313,118 13,012,633 12,723,429 Accumulated amortization Balance, beginning of year - 1,894,001 2,719,276 388,114 94,991 5,096,382 4,837,355 Annual amortization - 64,783 134,809 75,438 27,020 302,050 275,002 Accumulated amortization on disposals - - - - (11,749) (11,749) (15,975) Balance, end of year - 1,958,784 2,854,085 463,552 110,262 5,386,683 5,096,382 2012 Net book value of tangible capital assets $ 115,248 1,455,647 5,205,285 646,914 202,856 7,625,950 7,627,047 2011 Net book value of tangible capital assets $ 109,198 1,495,769 5,156,720 635,484 229,876 7,627,047-6-
Consolidated Schedule of Property and Other Taxes Year Ended Budget (unaudited) 2012 2011 Taxation Real property taxes $ 1,264,492 1,223,367 1,163,703 Linear property taxes - 40,081 38,843 Special assessments and local improvement taxes 24,121 17,757 17,757 1,288,613 1,281,205 1,220,303 Requisitions Alberta School Foundation Fund 298,145 297,711 267,169 Seniors Lodge 7,683 7,683 6,958 305,828 305,394 274,127 Net municipal taxes $ 982,785 975,811 946,176-7-
Consolidated Schedule of Government Transfers Year Ended Budget (unaudited) 2012 2011 (restated) Operating transfers Provincial Government $ 79,431 179,233 57,224 Other Local Government 48,500 58,046 61,418 127,931 237,279 118,642 Capital transfers Provincial Government - 287,885 1,163,210 Federal Government - 49,360 320,000-337,245 1,483,210 Total government transfers $ 127,931 574,524 1,601,852-8-
Consolidated Schedule of Expenses by Object Year Ended Budget (unaudited) 2012 2011 (restated) Salaries, wages and benefits $ 606,391 580,711 536,578 Contracted and general services 487,723 559,541 468,075 Amortization of tangible capital assets - 302,050 275,002 Materials, goods and utilities 304,480 258,710 284,442 Transfers to local boards and agencies 133,051 132,893 134,573 Transfers to other governments 68,566 96,909 68,151 Interest on long-term debt 54,603 18,737 19,740 Interest on bank indebtedness 10,414 9,859 10,414 Provision for allowances 3,000 1,137 262 Bank charges and short-term interest 750 772 742 $ 1,668,978 1,961,319 1,797,979-9-
Notes to the Consolidated Financial Statements 1. Nature of Activities The Town of Eckville is incorporated under the Municipal Government Act and carries out the administration of the Town. 2. Significant Accounting Policies The consolidated financial statements of the Town of Eckville are the representations of management prepared in accordance with local government accounting standards established by the Public Sector Accounting Board ("PSAB") of the Canadian Institute of Chartered Accountants. Significant aspects of the accounting policies adopted are as follows: Reporting entity The consolidated financial statements reflect the assets, liabilities, revenues, expenses and changes in fund balances in financial position of the reporting entity and all organizations that are accountable for the administration of their financial affairs and resources to the Council and are owned or controlled by the town. Included is the following: Eckville Library Board The schedule of taxes levied also includes requisitions for education, health, social and other external organizations that are not part of the municipal reporting entity. The statements exclude trust assets that are administered for the benefit of external parties. Interdepartmental and organizational transactions and balances are eliminated. Basis of accounting The consolidated financial statements are prepared using the accrual basis of accounting. The accrual basis of accounting records revenue as it is earned and measurable. Expenses are recognized as they are incurred and measurable based upon receipt of goods or services and/or the legal obligation to pay. Funds from external parties and earnings thereon restricted by agreement or legislation are accounted for as deferred revenue until used for the purpose specified. Government transfers, contributions and other amounts are received from third parties pursuant to legislation, regulation or agreement and may only be used for certain programs, in the completion of specific work, or for the purchase of tangible capital assets. In additions, certain user charges and fees are collected for which the related services have yet to be performed. Revenue is recognized in the period when the related expenses are incurred, services performed or the tangible capital assets are acquired. -10-
Notes to the Consolidated Financial Statements 2. Significant Accounting Policies (Continued) Measurement uncertainty The preparation of financial statements in accordance with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the period. Significant areas requiring the use of estimates include: allowance for doubtful accounts, impairment of long-lived assets, estimated useful lives of tangible capital assets and contingencies. Actual results may differ from management's best estimates as additional information becomes available in the future. Cash and temporary investments Cash includes short-term deposits, which are all marketable securities with a maturity of less than twelve months. Investments Investments are recorded at amortized cost. Investment premiums and discounts are amortized on the net present value basis over the term of the respective investments. When there has been a loss in value that is other than a temporary decline, the respective investment is written down to recognize the loss. Land held for resale Land held for resale is recorded at the lower of cost or net realizable value. Cost includes costs for land acquisition and improvements required to prepare the land for servicing such as stripping and leveling charges. Related development costs incurred to provide infrastructure such as water and waste water services, roads, sidewalks and lighting are recorded as tangible capital assets under their respective functions. Non-financial assets Non-financial assets are not available to discharge existing liabilities and are held for use in the provision of services. They have useful lives extending beyond the current year and are not intended for sale in the normal course of operations. The change in non-financial assets during the year, together with the excess of revenue over expenses, provides the consolidated changes in net financial assets (debt) for the year. Non-financial assets consist of the following: -11-
Notes to the Consolidated Financial Statements 2. Significant Accounting Policies (Continued) i. Tangible capital assets Tangible capital assets are recorded at cost which includes all amounts that are directly attributable to acquisition, construction, development or betterment of the assets. The cost, less residual value, of the tangible capital assets are amortized on a straight-line basis over the estimated useful life as follows: Engineered structures Buildings Automotive Machinery and equipment 5 to 75 years 50 years 10 years 5 to 20 years One half the amortization is calculated in the year of acquisition. No amortization is calculated in the year of disposition. Assets under construction are not amortized until the asset is available for productive use. ii. Contributions of tangible capital assets Tangible capital assets received as contributions are recorded at fair value at the date of receipt and also recorded as revenue. iii. Leases Leases are classified as capital or operating leases. Leases which transfer substantially all of the benefit and risks incidental to ownership of property are accounted for as capital leases. All other leases are accounted for as operating leases and the related lease payments are charged to expenses as incurred. iv. Prepaid expenses Expenses paid in advance where services have not been performed or materials have not been received. -12-
Notes to the Consolidated Financial Statements 3. Restatement of Prior Years The Town has adopted the provisions of Public Sector Accounting Board Handbook Section 3150, Tangible Capital Assets. This section requires governments to record and amortize tangible capital assets over their estimated useful lives. During the current year it was noted that certain equipment was acquired by the Town in prior years for fair value of $157,815. The equipment, donations and contributions received from local and provincial governments to assist with the purchase were not reported. Comparative amounts have therefore been restated to reflect an increase in accumulated surplus and equity in tangible capital assets as at January 1, 2011 of $149,924 as well as an increase in tangible capital assets for equipment of $157,815, increase in accumulated amortization of equipment of $23,672, increase in equity in tangible capital assets and accumulated surplus of $134,143 as at December 31, 2011 and an increase in parks and recreation amortization expense of $15,781 for the 2011 fiscal year. During the current year it was noted that certain grant funds received in previous years were applied to project costs in previous years but had not been recognized to revenues. Comparative amounts have therefore been restated to reflect an increase in government transfers for capital of $74,118 in the 2011 fiscal year as well as a decrease in deferred revenues of $106,151 and increase in accumulated surplus and unrestricted surplus of $32,033 as at December 31, 2011. 4. Cash and Temporary Investments 2012 2011 Cash - general $ 1,760,298 929,953 Cash - restricted 802,909 961,244 Temporary investments - restricted 659,177 647,939 $ 3,222,384 2,539,136 Temporary investments are term deposits that earn interest at rates ranging from 1.50% to 1.75% and have maturities ranging from February to October 2013. The restricted cash are funds being held on behalf of the Library board, Fire Department, Ambulance and Museum. Included in cash and temporary investments are restricted amounts held exclusively for specific projects (note 7). -13-
Notes to the Consolidated Financial Statements 5. Accounts Receivable 2012 2011 Current taxes and grants in place of taxes $ 43,120 46,702 Arrears taxes 10,111 13,874 Total taxes and grants in place of taxes 53,231 60,576 Trade and other receivables 140,928 125,591 Receivables from governments - 178,435 $ 194,159 364,602 Included in trade and other receivables is interest earned on restricted cash and temporary investments of $10,239 (2011 - $4,109) held exclusively for specific projects (note 7) and capital reserves (note 11). 6. Bank Indebtedness The Town has an authorized overdraft remaining and available of $295,300, bearing interest at bank prime (currently 3.00%) less 0.25%. Collateral is provided by an overdraft protection agreement, borrowing bylaw and registered first mortgage over land held for resale. No amounts have been drawn upon at year-end. 7. Deferred Revenue 2012 2011 (restated) Alberta Infrastructure and Transportation $ 896,134 954,047 Alberta Municipal Affairs 477,874 343,319 Prepaid licenses and other 5,626 1,720 $ 1,379,634 1,299,086-14-
Notes to the Consolidated Financial Statements 7. Deferred Revenue (Continued) Alberta Infrastructure and Transportation Funding in the amount $60,120 was received in the current year from the Basic Municipal Transportation Grant to assist with the construction of transportation related projects. The use of these funds is restricted to eligible expenditures as approved in the funding agreement. Expenditures in the amount of $25,080 were incurred in the year and interest earned on unexpended funds was received of $6,842. Accumulated unexpended funds related to the program are supported by cash and temporary investments of $742,945 (2011 - $701,063) (note 4). Funding in the amount of $55,841 was received in the current year from the Federal Gas Tax Fund to assist with infrastructure development. The use of these funds is restricted to eligible expenditures as approved in the funding agreement. Expenditures in the amount of $155,636 were incurred in the year. Accumulated unexpended funds related to the program are supported by cash and temporary investments of $153,189 (2011 - $252,984) (note 4). Alberta Municipal Affairs Funding in the amount of $264,966 was received in the current year for the Municipal Sustainability Initiative to assist with meeting growth challenges and enhancing the long-term sustainability of the municipality. Expenditures in the amount of $130,411 were incurred in the year. The use of these funds is restricted to eligible expenditures as approved in the funding agreement. Accumulated unexpended funds related to the program are supported by cash of $477,874 (2011 - $343,319) (note 4). 8. Long-Term Debt 2012 2011 Tax supported debentures repayable in total semi-annual instalments of $34,922 including principal and interest at 4.006%, due June 2025. Debenture debt is issued on the credit and security of the town at large. $ 681,610 722,858 Estimated principal and interest repayments are as follows: Principal Interest Total 2013 $ 42,967 $ 26,877 $ 69,844 2014 44,706 25,138 69,844 2015 46,514 23,330 69,844 2016 48,396 21,448 69,844 2017 50,355 19,489 69,844 Subsequent 448,672 80,575 529,247 $ 681,610 $ 196,857 $ 878,467-15-
Notes to the Consolidated Financial Statements 9. Debt Limits 2012 2011 (restated) Section 276(2) of the Municipal Government Act requires that debt and debt limits as defined by Alberta Regulation 255/00 for the municipality as follows: Total debt limit $ 2,634,890 2,758,588 Total debt 681,610 722,858 Amount of debt limit unused 1,953,280 2,035,730 Service limit of debt $ 439,148 459,765 Service on debt 69,844 69,844 Amount of debt servicing limit unused $ 369,304 389,921 The debt limit is calculated at 1.5 times the revenue of the municipality (as defined in Alberta Regulation 255/00) and the debt service limit is calculated at 0.25 times such revenue. Incurring debt beyond these limitation requires approval by the Minister of Municipal Affairs. These thresholds are guidelines used by Alberta Municipal Affairs to identify municipalities that could be at financial risk if further debt is acquired. The calculation taken alone does not represent the financial stability of the municipality. Rather, the financial statements must be interpreted as a whole. 10. Contingencies The Town is a member of the Alberta Municipal Insurance Exchange (MUNIX). Under the terms of the membership, the Town could become liable for its proportionate share of any claim losses in excess of the funds held by the exchange. Any liability incurred would be accounted for as a current transaction in the year the losses are determined. The Town is a member of the Alberta Urban Municipalities Association (AUMA). Under the terms of the membership, the town could become liable for its proportionate share of any claim losses in excess of the funds held by the AUMA. Any liability would be accounted for as a current transaction in the year of settlement. The Town has provided a guarantee of $80,000 for loan on behalf of the Lacombe Foundation. The guarantee will remain in place for the duration of the debt which is expected to be repaid in July, 2014. In the event that the Lacombe Foundation fails to discharge its obligations under the conditions of the loans, the Town may be required to pay any of the outstanding debt. -16-
Notes to the Consolidated Financial Statements 11. Accumulated Surplus 2012 2011 (restated) Unrestricted surplus $ 1,166,510 903,382 Reserves: Operating: General 274,997 245,532 Cemetery 9,330 22,276 284,327 267,808 Capital: Land development 313,653 313,653 Fire fighting 130,000 130,000 Water 74,000 59,000 Museum 52,270 52,270 Waste management 61,190 31,190 Ambulance 21,642 21,642 Wastewater 6,375 1,375 659,130 609,130 Total reserves 943,457 876,938 Equity in tangible capital assets Tangible capital assets 7,625,950 7,627,047 Long-term debt (note 8) (681,610) (722,858) 6,944,340 6,904,189 $ 9,054,307 8,684,509-17-
Notes to the Consolidated Financial Statements 12. Salary and Benefits Disclosure 2012 2011 Disclosure of salaries and benefits for municipal officials, the chief administrative officer and designated officers as required by Alberta Regulation 313/2000 is as follows: Councilors Salary (1) Benefits and allowances (2) Total Total Helen Posti - Mayor $ 10,738 388 $ 11,126 11,101 John Walker 5,567-5,567 5,267 Colleen Ebden 4,413 103 4,516 4,166 Dale Chretien 4,233 94 4,327 3,905 Kevin See 4,437 104 4,541 3,383 Andrew van Dirstein 3,767 71 3,838 3,661 Scott Kinley 3,550 50 3,600 2,389 Previous councilors - - - 1,787 Chief Administrative 49,487 10,628 60,115 71,631 Officer Acting Chief Administrative Officer 33,210 5,966 39,176 13,977 1. Salary includes base pay, bonuses, overtime, lump sum payments, gross honoraria and any other direct cash remuneration. 2. Employer's share of all employee benefits and contributions or payments made on behalf of employees including pension, health care, dental coverage, vision coverage, group life insurance, accidental disability and dismemberment insurance, long and short-term disability plans, professional membership and tuition. -18-
Notes to the Consolidated Financial Statements 13. Local Authorities Pension Plan Employees of the Town participate in the Local Authorities Pension Plan (LAPP), which is one of the plans covered by the Alberta Public Sector Pension Plans Act. The LAPP serves about 214,000 people and 478 employers. The LAPP is financed by employer and employee contributions and by investment earnings in the LAPP Fund. Contributions for current service are recorded as expenses in the year in which they become due. The Town is required to make current service contributions to the LAPP of 9.91% of pensionable earnings up to the year's maximum pensionable earnings under the Canada Pension Plan and 13.74% on pensionable earnings above that amount. Employees of the Town are required to make current service contributions of 8.91% of pensionable salary up to the year's maximum pensionable salary and 12.74% on pensionable salary above this amount. Total current service contributions by the Town to the LAPP in 2012 were $27,687 (2011 - $26,003). Total current service contributions by employees of the town to the LAPP in 2012 were $25,209 (2011 - $23,413). As at December 31, 2011 the LAPP disclosed an actuarial deficiency of $4,639 million. LAPP has not yet disclosed the actuarial deficiency as at. 14. Commitments The Town has an exclusive contract with a real estate agency to April 2013 to sell the McDonald Heights Subdivision lots at a set commission of 5% of the sales price. The estimated commitment based on current lot prices is $100,000. The Town has a contract, expiring December 31, 2013, to purchase gas and electricity at fixed rates of $8.33/GJ for gas, $0.08078/KWh for electricity and $0.10421/KWh on-peak, and $0.06687/KWh for street lights for electricity. Total commitment is based on usage and is therefore not determinable. The Town has a contract with Wild Rose Assessments to perform tax assessments that expires on March 31, 2015. The estimated commitment over the next three years of this contract is as follows: 2013 $ 14,900 2014 15,502 2015 3,913 $ 34,315-19-
Notes to the Consolidated Financial Statements 15. Financial Instruments The Town's financial instruments consist of cash and temporary investments, accounts receivable, accounts payable and accruals, long-term debt and contingencies. The fair value of these financial instruments approximates their carrying value, unless otherwise noted. It is management's opinion that the town is not exposed to significant interest, currency or credit risks arising from these financial instruments except as follows: Interest rate risk The Town is exposed to interest rate price risk as the temporary investments and long-term debt bear interest at fixed interest rates. Credit risk The Town is exposed to credit risk with respect to taxes and grants in place of taxes receivable and trade and other receivables as it grants credit to its residents in the normal course of business. Credit risk arises from the possibility that taxpayers and entities to which the town provides services may experience financial difficulty and be unable to fulfil their obligations. The large number and diversity of taxpayers and customers in addition to certain rights granted to the Town under the Municipal Government Act minimizes the credit risk. 16. Comparative Amounts The presentation of certain accounts of the previous year has been changed to conform with the presentation adopted for the current year. 17. Approval of Financial Statements Council and management have approved these statements. -20-