TOWN OF MORINVILLE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2015

FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2015

INDEPENDENT AUDITORS' REPORT To the Mayor and Council of the Town of Morinville We have audited the accompanying financial statements of the Town of Morinville, which comprise the statement of financial position as at December 31, 2015, and the statements of operations and accumulated surplus, changes in net financial assets and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian public sector accounting standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors' Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' 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. 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 financial statements present fairly, in all material respects, the financial position of the Town of Morinville as at December 31, 2015, and the results of its operations and accumulated surplus, changes in its net financial assets and its cash flows for the year then ended in accordance with Canadian public sector accounting standards. Edmonton, Alberta April 12, 2016 Hawkings Epp Dumont LLP Chartered Accountants

STATEMENT OF FINANCIAL POSITION AS AT DECEMBER 31, 2015 FINANCIAL ASSETS Cash and cash equivalents (Note 2) $ 10,070,695 $ 10,951,143 Accounts receivable (Note 3) 2,698,610 2,306,643 12,769,305 13,257,786 LIABILITIES Accounts payable and accrued liabilities (Note 4) 2,394,629 1,607,113 Deposit liabilities 334,617 423,692 Deferred revenue (Note 5) 3,092,658 3,514,659 Long-term debt (Note 6) 4,143,728 4,012,708 9,965,632 9,558,172 NET FINANCIAL ASSETS 2,803,673 3,699,614 NON-FINANCIAL ASSETS Prepaid expenses 115,385 116,257 Tangible Capital Assets (Schedule 1) 129,153,872 126,977,808 129,269,257 127,094,065 ACCUMULATED SURPLUS (Note 8) $132,072,930 $130,793,679 CONTINGENCIES (Note 11) ON BEHALF OF TOWN COUNCIL: Mayor Deputy Mayor The accompanying notes are an integral part of these financial statements. 3.

STATEMENT OF OPERATIONS AND ACCUMULATED SURPLUS FOR THE YEAR ENDED DECEMBER 31, 2015 Budget Actual Actual 2015 (Note16) REVENUE Net taxation (Schedule 2) $ 8,108,935 $ 8,117,566 $ 7,613,010 Water fees 2,507,547 2,545,471 2,386,926 Wastewater fees 1,703,139 1,712,632 1,605,442 Franchise fees (Note 12) 1,389,432 1,396,973 1,292,790 Sales to other governments 813,732 874,084 828,060 Government transfers for operating (Schedule 3) 586,062 790,860 737,972 Solid waste fees 709,515 727,404 687,202 Penalties and fines 644,410 636,846 599,552 Offsite levies - 441,417 454,287 Rentals 387,425 408,869 350,718 Development fees and permits 433,400 382,350 437,942 Other 247,450 304,243 340,531 Sales and user charges 216,140 208,792 138,155 Investment income 132,000 169,867 183,961 17,879,187 18,717,374 17,656,548 EXPENSES Public works 5,091,590 4,985,021 5,101,164 General administration 3,601,950 3,573,497 3,388,189 Parks and recreation 3,170,123 3,209,593 3,045,189 Protective services 2,798,365 2,474,681 2,393,162 Water 2,337,651 2,338,688 2,385,815 Wastewater 1,753,138 1,647,049 1,583,501 Solid waste 999,553 1,132,547 1,076,617 Planning and development 1,026,091 927,539 908,147 Library 307,178 483,922 426,918 Council and legislative 335,808 272,769 287,320 Family and community support services 205,726 238,492 196,978 21,627,173 21,283,798 20,793,000 ANNUAL SURPLUS (DEFICIT) BEFORE OTHER ITEMS (3,747,986) (2,566,424) (3,136,452) OTHER ITEMS Government transfers for capital (Schedule 3) 15,541,000 3,161,817 1,566,400 Contributed tangible capital assets - 807,115 1,585,957 Loss on disposal of tangible capital assets - (123,257) (3,458) 15,541,000 3,845,675 3,148,899 ANNUAL SURPLUS 11,793,014 1,279,251 12,447 ACCUMULATED SURPLUS, BEGINNING OF YEAR 130,793,679 130,793,679 130,781,232 ACCUMULATED SURPLUS, END OF YEAR $142,586,693 $132,072,930 $130,793,679 The accompanying notes are an integral part of these financial statements. 4.

STATEMENT OF CHANGES IN NET FINANCIAL ASSETS FOR THE YEAR ENDED DECEMBER 31, 2015 Budget Actual Actual 2015 (Note16) ANNUAL SURPLUS $ 11,793,014 $ 1,279,251 $ 12,447 Acquisition of tangible capital assets (21,940,000) (7,169,894) (3,886,926) Contributed tangible capital assets - (807,115) (1,585,957) Proceeds on disposal of tangible capital assets - 192,450 141,550 Amortization of tangible capital assets 5,266,467 5,485,237 5,439,388 Loss on disposal of tangible capital assets - 123,257 3,458 (16,673,533) (2,176,065) 111,513 Use (acquisition) of prepaid expenses - 873 (69,965) INCREASE (DECREASE) IN NET FINANCIAL ASSETS (4,880,519) (895,941) 53,995 NET FINANCIAL ASSETS, BEGINNING OF YEAR 3,699,614 3,699,614 3,645,619 NET FINANCIAL ASSETS (DEBT), END OF YEAR $ (1,180,905) $ 2,803,673 $ 3,699,614 The accompanying notes are an integral part of these financial statements. 5.

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2015 OPERATING ACTIVITIES Annual Surplus $ 1,279,251 $ 12,447 Non-cash items included in annual surplus: Amortization of tangible capital assets 5,485,237 5,439,388 Contributed tangible capital assets (807,115) (1,585,957) Loss on disposal of tangible capital assets 123,257 3,458 6,080,630 3,869,336 Change in non-cash working capital balances: Accounts receivable (391,967) 586,034 Prepaid expenses 873 (69,965) Accounts payable and accrued liabilities 787,516 (1,103,297) Deposit liabilities (89,075) 63,484 Deferred revenue (422,001) 1,099,697 (114,654) 575,953 5,965,976 4,445,289 FINANCING ACTIVITIES Long-term debt incurred on land purchase 1,000,000 - Long-term debt principal repayments (868,980) (846,273) 131,020 (846,273) CAPITAL ACTIVITIES Acquisition of tangible capital assets (7,169,894) (3,886,926) Proceeds on disposal of tangible capital assets 192,450 141,550 (6,977,444) (3,745,376) CHANGE IN CASH AND CASH EQUIVALENTS FOR THE YEAR (880,448) (146,360) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 10,951,143 11,097,503 CASH AND CASH EQUIVALENTS, END OF YEAR $ 10,070,695 $ 10,951,143 The accompanying notes are an integral part of these financial statements. 6.

SCHEDULE OF TANGIBLE CAPITAL ASSETS SCHEDULE 1 FOR THE YEAR ENDED DECEMBER 31, 2015 Land Engineered Machinery and Land Improvements Buildings Structures Equipment Vehicles COST: Balance, Beginning of Year $ 10,284,117 $ 4,776,798 $ 22,573,696 $ 154,136,661 $ 4,974,914 $ 3,343,352 $ 200,089,538 $ 195,078,272 Acquisition of tangible capital assets 1,700,000 216,824 144,890 5,388,972 339,002 187,321 7,977,009 5,472,883 Disposal of tangible capital assets - - (12,984) - (888,236) (181,082) (1,082,302) (461,617) Balance, End of Year 11,984,117 4,993,622 22,705,602 159,525,633 4,425,680 3,349,591 206,984,245 200,089,538 ACCUMULATED AMORTIZATION: Balance, Beginning of Year - 1,903,911 6,307,397 61,378,261 2,404,600 1,117,561 73,111,730 67,988,949 Annual amortization - 228,841 667,428 3,994,730 353,212 241,026 5,485,237 5,439,388 Accumulated amortization on disposals - - (11,945) - (658,223) (96,426) (766,594) (316,607) Balance, End of Year - 2,132,752 6,962,880 65,372,991 2,099,589 1,262,161 77,830,373 73,111,730 NET BOOK VALUE OF TANGIBLE CAPITAL ASSETS $ 11,984,117 $ 2,860,870 $ 15,742,722 $ 94,152,642 $ 2,326,091 $ 2,087,430 $ 129,153,872 $ 126,977,808 Cost includes construction in progress of $3,727,040 (2014 - $478,288). These amounts are not amortized until the asset is completed and in use. The accompanying notes are an integral part of these financial statements. 7.

SCHEDULE OF PROPERTY TAXES SCHEDULE 2 FOR THE YEAR ENDED DECEMBER 31, 2015 2015 (Budget) (Actual) (Actual) (Note 16) TAXATION Real property taxes $11,077,155 $11,152,425 $10,495,654 Linear property taxes 116,913 116,913 110,870 Government grants in place of property taxes 55,692 55,682 53,726 11,249,760 11,325,020 10,660,250 DEDUCT: Education 3,026,960 3,091,593 2,938,796 Seniors Foundation 113,865 115,861 108,444 3,140,825 3,207,454 3,047,240 NET MUNICIPAL PROPERTY TAXES $ 8,108,935 $ 8,117,566 $ 7,613,010 The accompanying notes are an integral part of these financial statements. 8.

SCHEDULE OF GOVERNMENT TRANSFERS SCHEDULE 3 FOR THE YEAR ENDED DECEMBER 31, 2015 2015 (Budget) (Actual) (Actual) (Note16) GOVERNMENT TRANSFERS FOR OPERATING Provincial $ 524,062 $ 684,945 $ 636,950 Local Governments 54,000 97,915 93,022 Federal 8,000 8,000 8,000 586,062 790,860 737,972 GOVERNMENT TRANSFERS FOR CAPITAL Provincial 15,541,000 3,161,817 1,566,400 $ 16,127,062 $ 3,952,677 $ 2,304,372 The accompanying notes are an integral part of these financial statements. 9.

SCHEDULE OF SEGMENTED INFORMATION SCHEDULE 4 FOR THE YEAR ENDED DECEMBER 31, 2015 General Protective Parks and Public Water, Wastewater Planning Administration Services Recreation Works and Solid Waste and Development Other Total REVENUE Net taxation $ 1,143,693 $ 1,281,375 $ 2,583,243 $ 2,019,618 $ - $ 539,392 $ 550,245 $ 8,117,566 Water, wastewater and solid waste fees - - - - 4,985,507 - - 4,985,507 Franchise fees 1,396,973 - - - - - - 1,396,973 Sales to other governments 50,320 310,982 - - 493,987-18,795 874,084 Government transfers - 375,216 62,450 - - 1,593 351,601 790,860 Penalties and fines 182,951 419,565 - - 26,930-7,400 636,846 Offsite levies 441,417 - - - - - - 441,417 Other revenues 358,143 87,543 563,900 10,839-386,554 67,142 1,474,121 3,573,497 2,474,681 3,209,593 2,030,457 5,506,424 927,539 995,183 18,717,374 EXPENSES Salaries, wages and benefits 1,948,473 856,226 1,471,456 1,062,383 747,127 388,133 725,056 7,198,854 Contracted and general services 826,487 1,215,659 165,658 126,560 859,043 461,805 82,258 3,737,470 Materials, goods and utilities 258,767 227,128 689,741 874,555 309,908 52,665 128,880 2,541,644 Purchases from other governments - - - - 1,886,829 - - 1,886,829 Transfers to governments 125,868-14,140 - - 24,936 50,615 215,559 Interest on long-term debt 62,665-41,779 12,123 - - - 116,567 Bank charges and short-term interest 67,853-7,364 - - - 457 75,674 Other expenses 6,927 - - - 11,120-7,917 25,964 Amortization of tangible capital assets 276,457 175,668 819,455 2,909,400 1,304,257 - - 5,485,237 3,573,497 2,474,681 3,209,593 4,985,021 5,118,284 927,539 995,183 21,283,798 ANNUAL SURPLUS (DEFICIT) BEFORE OTHER ITEMS $ - $ - $ - $ (2,954,564) $ 388,140 $ - $ - $ (2,566,424) The accompanying notes are an integral part of these financial statements. 10.

SCHEDULE OF EXPENDITURES BY OBJECT SCHEDULE 5 FOR THE YEAR ENDED DECEMBER 31, 2015 2015 (Budget) (Actual) (Actual) (Note 16) Salaries, wages and benefits $ 7,069,869 $ 7,198,854 $ 6,572,643 Contracted and general services 4,103,643 3,737,470 3,822,836 Materials, goods and utilities 2,674,783 2,541,644 2,720,505 Purchases from other governments 1,859,700 1,886,829 1,826,942 Transfers to governments, agencies and organizations 485,478 215,559 173,114 Interest on long-term debt 116,567 116,567 139,414 Bank charges and short-term interest 20,666 75,674 64,570 Other expenses 30,000 25,964 33,588 Amortization 5,266,467 5,485,237 5,439,388 $ 21,627,173 $ 21,283,798 $ 20,793,000 The accompanying notes are an integral part of these financial statements. 11.

NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2015 1. SIGNIFICANT ACCOUNTING POLICIES These financial statements are the representations of the Town of Morinville's (the "Town") management prepared in accordance with Canadian public sector accounting standards. Significant aspects of the accounting policies adopted by the Town are as follows: (a) (b) Reporting Entity These financial statements reflect the assets, liabilities, revenues, and expenditures, and changes in equity balances and cash flows of the Town. Basis of Accounting The 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 and 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. (c) (d) (e) Use of Estimates The preparation of financial statements in conformity with Canadian public sector accounting standards requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenditure during the period. Where management uncertainty exists, the financial statements have been prepared within reasonable limits of materiality. Actual results could differ from those estimates. Government Transfers Government transfers are recognized in the financial statements as revenue in the period that the events giving rise to the transfer occurred, providing the transfers are authorized, any eligibility criteria have been met by the Town, and reasonable estimates of the amounts can be made. Requisition of Over-Levies and Under-Levies Over-levies and under-levies arise from the difference between the actual levy made to cover each requisition and the actual amount requisitioned. If the actual levy exceeds the requisition, the over-levy is accrued as a liability and property tax revenue is reduced. In situations where the actual levy is less than the requisition amount, the under levy is accrued as a receivable and as property tax revenue. Requisition tax rates in the subsequent year are adjusted for any over-levies or under-levies of the prior year. 12.

NOTES TO FINANCIAL STATEMENTS (CONT'D) DECEMBER 31, 2015 1. SIGNIFICANT ACCOUNTING POLICIES (CONT'D) (f) 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 annual surplus, provides the consolidated change in net financial assets for the year. 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 asset. The cost, less residual value, of the tangible capital assets is amortized on a straight-line basis over the estimated useful life as follows: Land improvements Buildings Engineered structures Machinery and equipment Vehicles 10-50 years 25-50 years 20-100 years 5-40 years 5-20 years 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 are recorded as revenue. iii) Leases Leases are classified as capital or operating leases. Leases which transfer substantially all of the benefits 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. (g) (h) Cash and Cash Equivalents Cash and cash equivalents includes bank accounts, petty cash, Servus Credit Union common shares and Guaranteed Investment Certificates with maturity dates within 90 days or that are redeemable at any time. Tax Revenue Property taxes are recognized as revenue in the year they are levied. Construction and borrowing costs associated with local improvement projects are recovered through annual special assessments during the period of the related borrowings. These levies are collectable from property owners for work performed by the municipality and are recognized as revenue in the year the tax is levied. 13.

NOTES TO FINANCIAL STATEMENTS (CONT'D) DECEMBER 31, 2015 2. CASH AND CASH EQUIVALENTS Guaranteed Investment Certificates $ 8,600,000 $ 8,600,000 Bank accounts 1,401,952 2,286,045 Servus Credit Union common shares 66,079 63,698 Petty cash 2,664 1,400 $10,070,695 $10,951,143 Guaranteed Investment Certificates have interest rates ranging from 1.24% to 1.40% with maturity dates ranging from February 1, 2016 to November 30, 2016. 3. ACCOUNTS RECEIVABLE Government transfers $ 1,032,583 $ 465,686 Utilities 536,363 536,569 Trade 489,278 546,975 Property taxes 437,962 616,570 Goods and Services Tax 232,424 170,843 2,728,610 2,336,643 Allowance for doubtful accounts (30,000) (30,000) $ 2,698,610 $ 2,306,643 4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Trade $ 1,874,906 $ 1,331,493 Construction holdbacks 381,661 139,834 Vacation 121,353 116,204 Accrued interest on long-term debt 16,709 19,582 $ 2,394,629 $ 1,607,113 5. DEFERRED REVENUE Deferred revenue consists of the following amounts which have been restricted by third parties for a specific purpose. These amounts are recognized as revenue in the period in which the related expenditures are incurred. Provincial government transfers Municipal sustainability initiative grant $ 1,094,748 $ 1,681,449 Affordable housing grant 758,729 751,217 Federal gas tax fund grant 676,194 345,233 Basic municipal transportation grant 493,878 645,515 Other 69,109 91,245 $ 3,092,658 $ 3,514,659 14.

NOTES TO FINANCIAL STATEMENTS (CONT'D) DECEMBER 31, 2015 6. LONG-TERM DEBT Debenture debt held by Alberta Capital Finance Authority, repayable in semi-annual installments of $114,602 including interest at 2.634%; due June 15, 2027. $ 2,261,342 $ 2,427,688 Mortgage debt on land purchase, repayable in annual interest-free installments of $500,000. 1,000,000 - Debenture debt held by Alberta Capital Finance Authority, repayable in annual installments of $69,137 including interest at 6%; due August 15, 2022. 385,951 429,328 Debenture debt held by Alberta Capital Finance Authority, repayable in semi-annual installments of $318,912 including interest at 2.2545%; due June 15, 2016. 315,357 935,565 Debenture debt held by Alberta Capital Finance Authority, repayable in annual installments of $52,258 including interest at 6%; due July 15, 2019. 181,078 220,127 $ 4,143,728 $ 4,012,708 Principal Interest Total 2016 $ 1,073,488 $ 96,023 $ 1,169,511 2017 767,900 83,149 851,049 2018 278,104 72,494 350,598 2019 288,765 61,833 350,598 2020 247,649 50,692 298,341 Thereafter 1,487,822 140,277 1,628,099 Interest on long-term debt expense amounted to $116,567 (2014 - $139,414). $ 4,143,728 $ 504,468 $ 4,648,196 The Town's total cash payments for interest amounted to $119,441 (2014 - $142,153) 15.

NOTES TO FINANCIAL STATEMENTS (CONT'D) DECEMBER 31, 2015 7. EQUITY IN TANGIBLE CAPITAL ASSETS Tangible capital assets (Schedule 1) $206,984,245 $200,089,538 Accumulated amortization (Schedule 1) (77,830,373) (73,111,730) Long-term debt (Note 6) (4,143,728) (4,012,708) $125,010,144 $122,965,100 8. ACCUMULATED SURPLUS Restricted surplus General operating $ 2,928,867 $ 1,103,454 Traffic safety committee 16,000 16,000 Water contingency 254,547 238,692 Sanitary contingency 171,264 160,544 General capital 1,921,925 3,038,735 Community cultural centre (837,602) (951,974) Water capital (1,350,054) 796,843 Sanitary capital 630,461 157,196 Storm sewer capital 42,172 41,561 Transportation 2,502 35,544 Fire vehicles 134,543 152,306 Library 70,935 69,908 Public works vehicles 304,812 248,166 Office equipment 36,097 35,574 Parks, recreation and culture 5,694 5,612 Recreation - developer 300,520 309,621 Offsite levies - transportation 1,291,579 1,221,008 Offsite levies - sanitary 512,910 477,185 Offsite levies - water 625,614 672,604 7,062,786 7,828,579 Equity in tangible capital assets (Note 7) 125,010,144 122,965,100 $132,072,930 $130,793,679 16.

NOTES TO FINANCIAL STATEMENTS (CONT'D) DECEMBER 31, 2015 9. SALARIES AND BENEFITS DISCLOSURE 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: Salary (1) Benefits (2) Total Total Mayor L. Holmes $ 34,947 $ 6,738 $ 41,685 $ 44,759 Councilors S. Dafoe 26,348 6,218 32,566 32,454 N. Boutestein 22,022 6,041 28,063 25,875 B. Turner 21,339 6,047 27,386 23,132 G. Putnam 20,522 5,983 26,505 21,920 R. Ladouceur 19,546 5,953 25,499 25,236 B. Fitzgerald 20,952 2,709 23,661 24,372 Chief Administrative Officer 139,306 40,437 179,743 178,052 Designated Officers 375,826 96,494 472,320 460,718 (1) Salary includes regular base pay, per diem payments and any other direct cash remuneration. (2) Benefits and allowances include the employer's share of the employee benefits and contributions 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 memberships and tuition. 17.

NOTES TO FINANCIAL STATEMENTS (CONT'D) DECEMBER 31, 2015 10. DEBT LIMITS Section 276(2) of the Municipal Government Act requires that debt and debt limits as defined by Alberta Regulation 255/2000 for the Town be disclosed as follows: Total debt limit $ 28,076,061 $ 26,484,822 Total debt (4,143,728) (4,012,708) Amount of total debt limit unused $ 23,932,333 $ 22,472,114 Debt servicing limit $ 4,679,344 $ 4,414,137 Debt servicing (1,169,511) (988,424) Amount of debt servicing limit unused $ 3,509,833 $ 3,425,713 The debt limit is calculated at 1.50 times revenue of the Town (as defined in the Alberta Regulation 255/2000) and the debt service limit is calculated as 0.25 times such revenue. Incurring debt beyond these limitations requires approval by the Minister of Municipal Affairs. These thresholds are a conservative guideline used by Alberta Municipal Affairs to identify municipalities that could be at a financial risk if further debt is acquired. The calculation taken alone does not represent the financial stability of the Town. Rather, the financial statements must be interpreted as a whole. 11. CONTINGENCIES (a) The Town is a member of the Alberta Municipal Insurance Exchange. Under the terms of 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. (b) (c) The Town is in the process of planning and constructing a new recreation facility, including a new arena. The future use of the current arena is not yet determinable. If the Town chooses to demolish the current arena, it will incur deconstruction/demolition costs estimated between $1,500,000 - $2,000,000. Due to the uncertainty regarding the current arena site, a contingent liability has not been recorded as of year-end. The Town is involved in various legal disputes at December 31, 2015, the outcomes of which are not determinable at year end. Any related settlements not covered by insurance will be recorded as an expense in the year incurred. 18.

NOTES TO FINANCIAL STATEMENTS (CONT'D) DECEMBER 31, 2015 12. FRANCHISE FEES Disclosure of franchise fees under each utility franchise agreement entered into by the Town as required by Alberta Regulation 313/2000 is as follows: 2015 (Budget) (Actual) (Actual) (Note 16) Fortis Alberta $ 843,432 $ 881,806 $ 799,635 AltaGas Ltd. 546,000 515,167 493,155 $ 1,389,432 $ 1,396,973 $ 1,292,790 13. LOCAL AUTHORITIES PENSION PLAN Employees of the Town participate in the Local Authorities Pension Plan (LAPP), which is covered by the Public Sector Pension Plans Act. LAPP is financed by employer and employee contributions and investment earnings of the LAPP Fund. The Town is required to make current service contributions to the Plan of 11.39% of pensionable earnings up to the Canada Pension Plan year's maximum pensionable earnings and 15.84% for the excess. Employees of the Town are required to make current service contributions of 10.39% of pensionable earnings up to the year's maximum pensionable earnings and 14.84% on pensionable earnings above this amount. Total current and past service contributions made by the Town to the LAPP in 2015 were $550,407 (2014 - $505,270). Total current and past service contributions made by the employees of the Town to the LAPP in 2015 were $506,247 (2014 - $464,550). At December 31, 2014, the LAPP disclosed an actuarial deficit of $2.5 billion (2013 - $4.9 billion). 14. FINANCIAL INSTRUMENTS The Town's financial instruments consist of cash and cash equivalents, accounts receivables, accounts payable and accrued liabilities, and long-term debt. It is management's opinion that the Town is not exposed to significant interest, liquidity, currency or credit risk arising from these financial instruments Unless otherwise noted, the fair value of these financial instruments approximates their carrying value. 15. SEGMENTED INFORMATION The Town provides a range of services to its residents. For each reported segment, revenues and expenses represent both amounts that are directly attributable to the segment and amounts that are allocated on a reasonable basis. The accounting policies used in these segments are consistent with those followed in the preparation of the financial statements as disclosed in Note 1. For additional information see the Schedule of Segment Disclosure (Schedule 4). 19.

NOTES TO FINANCIAL STATEMENTS (CONT'D) DECEMBER 31, 2015 16. BUDGET The budget figures are provided for information purposes only, and have not been audited. The 2015 budget, prepared by the Town of Morinville, reflects all municipal activities including capital projects and restricted surplus for future use. The reconciliation below is provided to encompass these items and is provided for information purposes only. 2015 (Budget) Annual surplus (per statement of operations and accumulated surplus) $ 11,793,014 Amortization 5,266,467 Acquisition of tangible capital assets (21,940,000) Net transfers from restricted surplus (per below) 4,880,519 - Acquisition of tangible capital assets funded from restricted surplus 6,399,000 Tax supported surplus to restricted surplus (862,094) Utility supported surplus to restricted surplus (1,525,369) Debenture repayment from restricted surplus 868,982 Net transfers from restricted surplus 4,880,519 17. CREDIT FACILITY The Town is approved for a revolving demand loan of $1,000,000 that is available, if needed, for operating cash flow. The interest rate is set at prime minus 0.5%. The loan has not been drawn upon. The loan is secured by the cash and cash equivalents of the Town. 18. APPROVAL OF FINANCIAL STATEMENTS These financial statements were approved by Council and Management. 19. ACCOUNTING POLICY ADOPTION In June 2010, the Public Sector Accounting Board issued PS - 3260 Liability for Contaminated Sites for fiscal years starting on or after April 1, 2014. Contaminated sites are a result of contamination being introduced into the air, soil, water or sediment of a chemical, organic, or radioactive material, or live organism that exceeds an environmental standard. The Town adopted this accounting standard retroactively as of April 1, 2014. There was no impact to the Town s financial statements due to this. 20.