METROPOLITAN TORONTO CONDOMINIUM CORPORATION NO. 878 FINANCIAL STATEMENTS WITH INDEPENDENT AUDITOR'S REPORT JUNE 30, 2017
June 30, 2017 Contents Page Independent Auditor's Report 1 Financial Statements Statement of Financial Position 2 Statement of General Operations and Changes in Fund Balance 3 Statement of Reserve Operations and Changes in Fund Balance 4 Statement of Cash Flows 5 Notes to the Financial Statements 6-9 Schedule of General Fund Expenditures 10-11
DAURIO & FRANKLIN LLP CHARTERED ACCOUNTANTS 220 DUNCAN MILL ROAD, SUITE 513, TORONTO, ONTARIO, M3B 3J5 TEL:(416) 444-3906, FAX: (416) 447-9798 INDEPENDENT AUDITOR'S REPORT To the Unit Owners of Metropolitan Toronto Condominium Corporation No. 878 We have audited the accompanying financial statements of Metropolitan Toronto Condominium Corporation No. 878, which comprise the statement of financial position as at June 30, 2017 and the statements of operations and changes in fund balances of the general fund, reserve fund, and the statement of 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 Accounting Standards for Not-For-Profit Organizations and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's 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 auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. 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 Metropolitan Toronto Condominium Corporation No. 878 as at June 30, 2017, and the results of its operations and its cash flows for the year then ended in accordance with Canadian Accounting Standards for Not-For-Profit Organizations. Report on the Condominium Act of Ontario Requirements In accordance with Section 67(5) of the Condominium Act, we report that these financial statements are not prepared in accordance with the requirements of Section 94 of the Act and Regulation 48/01, Section 31 related thereto as the Corporation has not conducted a reserve fund study within three years of the preceding study and has not issued a notice of future funding of the reserve for major repairs and replacements within the prescribed times. Chartered Accountants, Licensed Public Accountants September 28, 2017 Toronto, Ontario 1.
Metropolitan Toronto Condominium Corporation No. 878 Statement of Financial Position As at Friday, June 30, 2017 Note General Reserve 2017 2016 ASSETS Current Cash $ 235,323 $ 886,497 $ 1,121,820 $ 1,059,639 Common element fees receivable 4,141-4,141 9,005 Interfund balance 14,840 (14,840) - - Prepaid expenses 50,793-50,793 49,291 305,097 871,657 1,176,754 1,117,935 Investments [3] - 795,737 795,737 442,283 TOTAL ASSETS 305,097 1,667,394 1,972,491 1,560,218 LIABILITIES Current Accounts payable and accrued liabilities 131,036-131,036 159,404 NET ASSETS $ 174,061 $ 1,667,394 $ 1,841,455 $ 1,400,814 Increase (decrease) in Net Assets, in thousands 94 347 441 Net Assets represented by fund: General $ 174,061 $ - $ 174,061 $ 225,709 Reserve [2.a] [4] - 1,667,394 1,667,394 1,175,105 $ 174,061 $ 1,667,394 $ 1,841,455 $ 1,400,814 The accompanying notes are an integral part of these financial statements. 2.
Metropolitan Toronto Condominium Corporation No. 878 Statement of General Operations and Changes in Fund Balance For the year ended June 30, 2017 Note Budget 2017 [Note: 6] 2017 2016 REVENUE Common element fees $ 3,017,116 $ 3,016,898 $ 2,836,154 Allocation to reserve fund (664,500) (664,500) (575,000) Miscellaneous income 5,500 50,173 50,006 EXPENDITURES, Pages 10 to 11 2,358,116 2,402,571 2,311,160 Utilities 1,215,000 1,113,164 1,074,032 Contract services 812,303 853,804 812,543 General and administrative 134,363 195,479 136,957 Repairs and maintenance 196,450 146,550 202,024 2,358,116 2,308,997 2,225,556 Excess of Revenue over Expenditures - 93,574 85,604 Balance, Beginning of the Year 225,709 316,349 Transfer to reserve fund [5] (145,222) (176,244) Balance, End of the Year $ 174,061 $ 225,709 The accompanying notes are an integral part of these financial statements. 3.
REVENUE Metropolitan Toronto Condominium Corporation No. 878 Statement of Reserve Operations and Changes in Fund Balance For the year ended June 30, 2017 Note 2017 2016 Allocation from common element fees $ 664,500 $ 575,000 Interest 13,391 12,717 EXPENDITURES 677,891 587,717 Windows and doors 8,712 64,217 Interior walls 55,744 48,076 Security system 26,499 5,362 Landscaping 9,005 - Recreation facilities 17,291 264,465 Garage 17,453 1,187 Heating, ventilation and air conditioning 87,348 26,216 Floor, carpet and drapes - 7,854 Roof - 1,639 Theatre room - 3,842 Bank charges 518 1,334 LED retrofit - 80,052 Exhaust fan 26,273 - Concrete 4,068 - Roadways and driveways 11,224 8,215 Reserve fund study 8,818 5,481 Fire equipment 1,526 1,763 Guest room - 6,520 Plumbing 18,684 25,008 Balcony and patio doors 18,125 6,215 Hot water storage tanks 19,536 2,597 Signs - 4,983 330,824 565,026 Excess of Revenue over Expenditures 347,067 22,691 Balance, Beginning of the Year 1,175,105 976,170 Transfer from general fund [5] 145,222 176,244 Balance, End of the Year $ 1,667,394 $ 1,175,105 The accompanying notes are an integral part of these financial statements. 4.
Metropolitan Toronto Condominium Corporation No. 878 Statement of Cash Flows For the year ended June 30, 2017 Cash provided by (used in) operating activities 2017 2016 Cash received for all general operations $ 2,407,437 $ 2,316,268 Cash received for all reserve operations 677,890 587,715 Cash paid for all general operations (2,338,868) (2,211,951) Cash paid for all reserve operations (330,824) (567,230) Cash provided by (used in) investing activities Reserve fund investments 415,635 124,802 (353,454) 329,027 Net Increase in Cash 62,181 453,829 Cash, Beginning of the Year 1,059,639 605,810 Cash, End of the Year $ 1,121,820 $ 1,059,639 Cash consists of: Cash, General fund $ 235,323 $ 440,029 Cash, Reserve fund 886,497 619,610 $ 1,121,820 $ 1,059,639 The accompanying notes are an integral part of these financial statements. 5.
Notes to the Financial Statements June 30, 2017 1. Operations Metropolitan Toronto Condominium Corporation No. 878 (the "Corporation" or the "Entity") was registered in Ontario without share capital on March 9, 1990 under The Condominium Act, 1998. The purpose of the Corporation is to manage and maintain the common elements (as defined in the Corporation's declaration and by-laws) and to provide common services for the benefit of the owners of the 383 units of the complex. For Canadian income tax purposes the Corporation qualifies as a not-for-profit organization which is exempt from income tax under the Income Tax Act. 2. Significant Accounting Policies These financial statements have been prepared in accordance with Canadian accounting standards for not-for-profit organizations and are in accordance with Canadian generally accepted accounting principles, which are applicable to Ontario Condominium Corporations and Shared Facilities. The significant policies are: a) Fund Accounting The general fund reports common element fees from owners, budgeted allocations of those fees to other funds and expenses related to the operations and administration of the common elements. The reserve fund is an externally restricted fund which reports the common element fees allocated to it and expenditures for major repair and replacement of the Entity's common elements and assets. The basis for determining the reserve fund's requirements is explained in Note 4. All major repairs and replacements of the common elements must be charged directly to the reserve fund with the exception of the cost of the reserve fund study which may be charged to the reserve fund. Minor repairs and replacements must be charged to repairs and maintenance of the general fund. The Entity segregates amounts accumulated for the purpose of financing future charges to the reserve fund in bank and investment accounts for use only to finance such charges. Interest earned on these amounts is included in the reserve fund. b) Common Elements The real property directly associated with the units of the Entity (the "common elements") are owned proportionately by the unit owners, and consequently are not reflected as assets in these financial statements. c) Transfers Transfers between funds that are not included in the annual budget, or which are in excess of budgeted amounts, are not recorded in the operating section of the general fund, rather they are included in the related fund statement as additions or deductions, as applicable. d) Financial Instruments All assets and liabilities, with the exception of prepaid expenses, are financial instruments, and are initially recorded at fair market value and are subsequently recorded at amortized cost. 6.
Notes to the Financial Statements June 30, 2017 e) Use of Estimates The preparation of financial statements in accordance with Canadian accounting standards for not-for-profit organizations requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates include those used when accounting for accounts payable and accrued liabilities. Actual results could differ from management's best estimates as additional information becomes available in the future. f) Shared Costs The Corporation is a participant in a Shared Use Agreement (reciprocal agreement) and shares in the costs related to certain shared facilities and services with the other participant(s) to the agreement. The Corporation s proportionate share of these costs is included in these financial statements in the statement of general operations. g) Revenue Recognition Common element fees are recognized as revenue on a monthly basis in the statement of general operations based on the budget distributed to owners each year. Special assessments are recognized as revenue in the appropriate fund when a formal resolution declaring the assessment has been passed by the Board of Directors, and when the special assessment becomes receivable by the Entity from the owners. Interest and other revenue are recognized in the appropriate fund when earned. h) Contributed Services Directors, committee members and owners volunteer their time to assist in the Entity's activities. While their services benefit the Entity considerably, a reasonable estimate of their amount and fair value cannot be made and, accordingly, these contributed services are not recognized in these financial statements. 3. Investments Reserve fund and general fund investments are comprised of "eligible securities" which are defined in the Condominium Act, 1998 (the "Act"), as bonds, debentures, guaranteed investment certificates, deposit receipts or notes, or term deposits which are issued or guaranteed by the Government of Canada or any province in Canada, or are issued by an institution located in Ontario insured by the Canada Deposit Insurance Corporation or the Deposit Insurance Corporation of Ontario. General fund investments have the additional feature that they must be convertible to cash within ninety days following a request by the Board of Directors. All investments are purchased with the intent that they will be held to maturity, and therefore are classified as long term, except for any general fund investments, which are classified as current due to their convertibility feature. 7.
Notes to the Financial Statements June 30, 2017 4. Reserve Fund The Corporation, as required by the Condominium Act, 1998, has established a reserve fund for financing future major repairs and replacements of the Corporation's common elements and assets. The Board of Directors have relied on an updated reserve fund study based on a site inspection prepared on May 28, 2013 by GRG Building Consultants Inc. and such other information as was available to them in evaluating the adequacy of the reserve fund. The Board of Directors have accepted the recommendations of the study. The actual reserve fund contributions including transfers, if any, during 2017 were $809,722, which is different than the reserve fund study which anticipated contributions of $809,701. The actual expenditures from the reserve fund were $330,824 compared to $368,800 estimated in the study. The closing reserve fund balance was $1,667,394 compared to $2,490,214 estimated in the study. Annual reserve allocations in the study increase by 7.8 % each year for five years and then increase by 1.9% each year thereafter. Any evaluation of the adequacy of the reserve fund is based upon assumptions as to the future interest and inflation rates and estimates of the life expectancy of the building components and their replacement costs. These factors are subject to change over time and the changes may be material; accordingly, the Condominium Act requires that reserve fund studies be updated every three years. 5. Interfund Transfer During the year, the Board of Directors approved a transfer of $145,222 from the general fund to the reserve fund. 6. Budget The budgeted figures, which are presented for comparison purposes only, are unaudited and are those approved by the Board of Directors in 2016. 7. Shared Use Agreement The Corporation is a participant in a Reciprocal Agreement (shared used agreement), contained in by-law #5 of the Corporation, between the Corporation and Metropolitan Toronto Condominium Corporation No.'s 1119, 1131, 1164, 1165, 1231, and 1239. Each participant is responsible for their proportionate percentage of the shared facilities costs and services, in accordance with the Reciprocal Agreement (shared use agreement). The Corporation's proportionate share of these costs is 26.69%, which are included in these financial statements in the statement of general operations. 8. Contractual Obligations The Corporation has entered into contracts with various third parties to provide certain services to manage and maintain the common elements. 8.
Notes to the Financial Statements June 30, 2017 9. Related Party Transactions No remuneration was paid to the Board of Directors during the year. Management is reimbursed for certain administrative costs and paid a monthly management fee by the Corporation, and collects fees from owners, purchasers and others for issuing status certificates and lien notices. These transactions were in the normal course of operations and were measured at the exchange amount. 10. Commitment The Corporation entered into a contract with KIB Building Restoration Inc. for balcony repairs, which is a reserve fund item. The amount remaining to be billed subsequent to the year end is approximately $268,000, including taxes. 11. Financial Instruments - Risk Management Interest rate risk Interest rate risk is the risk of potential financial loss caused by fluctuations in the fair value of future cash flow of financial instruments due to changes in market interest rates. The Corporation is exposed to this risk through its interest-bearing investments. The Corporation manages this risk through investing in fixed-rate securities of short to medium term maturity and plans to hold the securities to maturity. Credit risk Credit risk is the risk of financial loss should a counter-party in a transaction fail to meet its obligations. The Corporation places its operating and reserve cash and investments with high quality institutions and believes its exposure to this risk is not significant. Liquidity risk Liquidity risk is the risk that the Corporation will not be able to meet its obligations as they become due. The Corporation manages this risk by setting common element fees at a level which ensures that the Corporation has sufficient cash available to pay the day to day operating costs, to fund the reserve fund in accordance with the Corporation's funding plan, and to fund all other funds, as required. There has been no change to the risk profile of the Corporation during the year. 9.
Schedule of General Fund Expenses For the year ended June 30, 2017 Budget 2017 [Note: 6] 2017 2016 Utilities Hydro $ 650,000 $ 621,586 $ 609,615 Gas 240,000 163,825 157,694 Water 325,000 327,753 306,723 $ 1,215,000 $ 1,113,164 $ 1,074,032 Contract services Landscaping and snow removal $ 41,184 $ 37,610 $ 38,452 Heating, ventilation and air conditioning 45,000 46,475 45,935 Elevators 27,156 27,864 26,603 Security 227,000 229,626 216,255 Pest control 7,000 6,961 8,393 Fire safety 8,000 15,246 13,130 Cleaning services and superintendent 223,711 230,778 228,340 Cable TV 2,000 317 1,899 Bookkeeping software license 6,780 6,780 - Management fees 168,380 166,419 166,192 Garbage removal 30,000 46,913 45,448 Garage doors and cleaning 8,100 3,864 7,120 Recreation facilities 13,492 34,499 14,183 Anchor inspection 4,500 452 593 $ 812,303 $ 853,804 $ 812,543 General and administrative Telephone $ 9,500 $ 4,268 $ 5,295 Insurance 66,404 67,098 56,274 Office and general 17,450 21,956 33,495 Legal fees 15,000 42,201 12,113 Audit fees 5,000 4,463 4,300 Bank charges 2,500 2,199 2,285 Printing and stationery 9,009 7,125 4,140 Shared facilities - generator 4,000 5,726 9,349 Bad debt expense - 31,315 - AGM, meetings, and sundry 4,500 7,295 4,831 Traffic products 500 1,503 4,475 Transit - pick and delivery 500 330 400 $ 134,363 $ 195,479 $ 136,957 10.
Schedule of General Fund Expenses For the year ended June 30, 2017 Budget 2017 [Note: 6] 2017 2016 Repairs and maintenance Landscaping, non-contract $ 10,000 $ 1,723 $ 14,512 Heating, ventilation and air conditioning, non-contract 8,000 7,428 3,402 Plumbing 8,000 12,720 18,071 Fire safety, non-contract 5,950 10,691 6,173 Allowances 6,800 9,744 31,730 Electrical 13,000 5,259 18,234 Cleaning services 33,200 8,660 21,892 Waste disposal 2,500 7,809 4,470 Security hardware and supplies 13,500 25,076 15,792 General amenities and recreation (wet and dry) 6,500 3,661 6,421 Dryer and vent maintenance 27,000 220 - Guest suites 4,500 4,936 2,242 Signs 2,000 2,540 3,251 Parking and locker costs 23,800 7,580 7,123 General 31,700 38,503 48,711 $ 196,450 $ 146,550 $ 202,024 11.