Loading...
HomeMy Public PortalAbout2017-03-31_Report_Consolidated Financial Statements Consolidated Financial Statements Municipality of the District of Chester March 31, 2017 Contents Page Consolidated Financial Statements Municipality of the District of Chester Management's Report 1 Independent Auditor's Report 2 - 3 Consolidated Statement of Operations 4 Consolidated Statement of Change in Net Assets (Debt)5 Consolidated Statement of Financial Position 6 Consolidated Statement of Cash Flows 7 Notes to the Consolidated Financial Statements 8 - 21 Schedules to Consolidated Statement of Operations 22 - 27 Grant Thornton LLP 4th Floor, Dawson Centre 197 Dufferin Street Bridgewater, NS B4V 2G9 T +1 902 543 8115 F +1 902 543 7707 www.GrantThornton.ca 2 Independent auditor’s report To the Council of the Municipality of the District of Chester We have audited the accompanying consolidated financial statements of Municipality of the District of Chester, which comprise the consolidated statement of financial position as at March 31, 2017, and the consolidated statements of operations, changes in net debt, and cash flow 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 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 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 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 3 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 consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Municipality of the District of Chester as at March 31, 2017, and the consolidated results of its operations, changes in net debt, and its cash flows for the year then ended in accordance with Canadian public sector accounting standards. Emphasis of Matter We draw attention to Note 2 of the financial statements which describes the prior period adjustment. Our opinion is not qualified in respect of this matter. Other Matters Our audit was conducted for the purposes of forming an opinion on the financial statements taken as a whole. The Supplementary schedules on pages 22 – 27 are presented for purposes of additional information and are not a required part of the financial statements. Such information has been subject to the auditing procedures applied, only to the extent necessary to express an opinion, in the audit of the financial statements taken as a whole. Bridgewater, Canada August 31, 2017 Chartered Professional Accountants Licensed Public Accountants Municipality of the District of Chester Restated Consolidated Statement of Operations (Note 2) Year Ended March 31 2017 2016 Page Budget Actual Actual Revenue Taxes 22 $10,854,895 $10,919,846 $10,326,442 Grants in lieu of taxes 23 177,045 173,713 169,480 Sales of services 23 3,701,852 4,567,150 4,026,247 Other revenue from own sources 23 790,027 645,251 825,468 Transfers from Federal and Provincial governments and agencies Unconditional 23 75,923 116,865 104,890 Conditional 24 6,500 111,262 289,783 Grants for capital projects 24 1,807,221 679,608 765,849 Interest 8,500 156,375 103,515 $17,421,963 $17,370,070 $16,611,674 Expenditures General government services 25 $3,516,310 $3,358,133 $3,242,949 Protective services 26 2,591,930 2,398,401 2,419,780 Transportation services 26 841,072 802,361 780,820 Environmental health services 26 5,449,106 6,081,881 6,054,583 Environmental development services 26 1,353,982 1,174,752 1,389,082 Recreational and cultural services 27 957,133 858,306 981,548 Loss on disposal of assets -341,614 - $14,709,533 $15,015,448 $14,868,762 Annual surplus $2,712,430 $2,354,622 $1,742,912 Accumulated surplus, beginning of the year 20,098,352 18,807,389 Prior period adjustment (Note 2)-(451,949) Accumulated surplus, beginning of the year restated -18,355,440 Accumulated surplus, end of the year $22,452,974 $20,098,352 See accompanying notes and schedules to the consolidated financial statements. 4 Municipality of the District of Chester Restated Consolidated Statement of Change in Net Assets (Debt)(Note 2) Year Ended March 31 2017 2016 Budget Actual Actual Annual Surplus $2,712,430 $2,354,622 $1,742,912 Acquisition of tangible capital assets (3,562,025) (1,131,374) (2,018,795) Write off of tangible capital assets - 341,614 132,425 Amortization of tangible capital assets 2,213,961 2,357,166 2,302,931 1,364,366 3,922,028 2,159,473 (Increase) decrease in prepaid expense - 72,767 (59,374) Increase in net assets 1,364,366 3,994,795 2,100,099 Net assets (debt) Beginning of year (2,484,993) (2,484,993) (4,585,092) End of year $(1,120,627) $1,509,802 $(2,484,993) See accompanying notes and schedules to the consolidated financial statements. 5 Municipality of the District of Chester Restated Consolidated Statement of Cash Flows (Note 2) Year Ended March 31 2017 2016 Operating activities Net revenue $2,354,622 $1,742,912 Amortization 2,357,166 2,302,931 Write off of tangible capital assets 341,614 132,425 5,053,402 4,178,268 Changes in non-cash working capital Decrease (increase) in receivables (707,220) (302,577) (Decrease) increase in prepaid expenses 72,767 (59,374) Decrease (increase) in payables (460,165) 334,717 Increase in employee future benefits 1,327 47,501 (Decrease) increase in deferred revenue 8,900 (40,500) (Decrease) increase in tax sale surplus (5,380) 70,099 Increase in landfill closure costs 1,411,434 1,409,909 5,375,065 5,638,043 Capital transactions Acquisition of tangible capital assets (1,131,374) (2,018,795) (1,131,374) (2,018,795) Financing activities Proceeds from issuance of short term debt Capital asset loans -450,738 Proceeds from issuance of long term debt Capital asset loans 521,000 3,000,000 Repayment of short term debt Capital asset loans (450,738) (2,275,980) Repayment of long term debt Capital asset loans (1,653,733) (1,434,933) On behalf of other local governments -(7,695) (1,583,471)(267,870) Change in net cash and cash equivalents 2,660,220 3,351,378 Cash and cash equivalents Beginning of year 12,847,709 9,496,331 End of year $15,507,929 $12,847,709 See accompanying notes and schedules to the consolidated financial statements. 7 Municipality of the District of Chester Notes to the Consolidated Financial Statements March 31, 2017 1. Significant accounting policies The consolidated financial statements of the Municipality of the District of Chester are prepared by management in accordance with Canadian Public Sector Accounting Standards. Significant aspects of the accounting policies adopted by the Municipality are as follows: a) Reporting entity The consolidated financial statements reflect the assets, liabilities, revenues, expenditures and changes in accumulated surplus and in financial position of the reporting entity. The reporting entity is comprised of all organizations and enterprises accountable for the administration of their affairs and resources to the Municipality and which are owned or controlled by the Municipality. Interdepartmental and organizational transactions and balances are eliminated. The consolidated entities are the general operating fund, general capital fund, operating reserve fund and the capital reserve fund. b) Basis of accounting The accrual basis of accounting followed in the financial statement presentation includes recognizing revenues in the period in which the transactions or events occurred that gave rise to the revenues and expenditures in the period the goods and services are acquired and a liability is incurred. c) Valuation allowance The Municipality provides a valuation allowance for estimated losses that will be incurred in collecting receivables outstanding. d) Cash and cash equivalents Cash and cash equivalents include cash on hand and balances with banks, bank overdrafts, and highly liquid temporary money instruments with original maturities of three months or less. Bank borrowings are considered to be financing activities. e) Use of Estimates The presentation 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 liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those reported. f) Landfill Closure Costs Landfill closure and post closure costs are recognized as the landfill site's capacity is used. Usage is measured based on tonnes of waste added to the site. Landfill closure and post closure costs are discounted using the Municipality's average rate earned on funds invested for future landfill closure and post-closure expenses. 8 Municipality of the District of Chester Notes to the Consolidated Financial Statements March 31, 2017 1. Significant accounting policies (continued) g) Revenue and Expenditure The accrual basis of accounting is used for all funds. The accrual basis of accounting recognizes revenues as they are earned and measurable; expenses are recognized as they are incurred and reasurable as a result of legal obligation to pay. Tax and Related Revenue Property tax billings are prepared by the Municipality based on assessment rolls issued by the Property Valuation Services Corporation. Tax rates are established annually by Council during the budget approval process. Tax adjustments as a result of appeals and re-assessment are recorded when the result of the appeals process is known. Government Transfers Grant proceeds from other governments are recognized as revenue when the transfer is authorized and eligibility criteria and stipulations are met. Grant proceeds where eligibility criteria and stipulations are not met are recorded as deferred revenue. Other Revenues Other revenues are recognized as services or goods are provided, the exchange amount is measurable and collectibility of the amount is reasonably assured. h) 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: Buildings - Plants 20 years Electronic Data Equipment 3 years Lagoons 10 years Land Improvements 20 years Landfill as estimated capacity is utilized Machinery and Equipment 5-10 years Municipal Buildings 40 years Sewer Lines 50 years Sidewalks 20 years Small Equipment 5 years Streets, Roads & Curbs 25 years Vehicles 5 years Wharves 25 years Wind Turbines 20 years Full amount of the annual amortization is charged in the year of acquisition except for wind turbines. Wind turbines are amortized beginning on the date power generation occurs in accordance with the provincial community feed-in tariff (COMFIT) program agreement. Assets under construction are not amortized until the asset is available for productive use. All costs associated with placing an asset in service, including freight, installation costs, site preparation costs, alterations and professional fees are included in the capitalized value. 9 Municipality of the District of Chester Notes to the Consolidated Financial Statements March 31, 2017 2. Prior Period Adjustment During the year, management determined that the landfill closure liability had been understated by $1,098,220 in fiscal 2016. The error was due to omitting the impact of inflation in the determination of the estimated total liability. A portion of the landfill closure costs are shared with the Valley Region solid Waste Authority and therefore the landfill revenue and accounts receivable related to this cost sharing arrangement were understated by $476,210. As a result of the error, the following accounting balances as at March 31, 2016 have been increased (decreased) as follows:As previously reported Adjustment As restated Statement of financial position Accounts receivable $2,208,243 $476,210 $2,684,453 Landfill closure liability 3,763,618 1,098,228 4,861,846 Accumulated surplus 20,720,370 (622,018) 20,098,352 Statement of financial activities Sales of Services - Revenue 3,851,336 174,911 4,026,247 Environmental Health Services - Expense 5,709,604 344,979 6,054,583 Opening Equity 18,807,389 (451,949) 18,355,440 Annual surplus 1,912,981 (170,069) 1,742,912 3. Contributions to Boards and Commissions The Municipality of the District of Chester, along with other municipal units in Lunenburg County, is required to finance the operations of various boards and regional authorities. Lunenburg County Regional Housing Authority 11.00% interest in Western Shore Unit 11.00% interest in New Ross Unit During 2017, the Municipality incurred costs payable of $16,685 (2016 - $18,362) to the Lunenburg County Regional Housing Authority as its share of operations. South Shore Regional Library board - 17.94% interest During 2017, the Municipality paid $68,035 (2016 - $68,035) to the South Shore Regional Library Board. Regional Economic Network During 2017, the Municipality paid $45,794 (2016 - $62,464) to the Regional Economic Network. 4. Contributions to Provincial Government Departments & AgenciesThe Municipality of the District of Chester, along with other municipal units in Lunenburg County, is required to finance the operations of various provincial departments based upon formulas defined in legislation. Corrections Contribution During 2017, the Municipality paid $235,698 (2016 - $236,441) as its share of operations towards corrections facilities in Lunenburg County. Education Contribution The required contribution to the South Shore Regional School Board is calculated using the mandatory municipal education rate (set by the Minister of Education) times the Municipality's uniform assessment. For 2016/17 the education tax rate of $.30480 (2015/16 - $.30480) per $100 of uniform assessment times the uniform assessment of $1,509,852,243 (2015/16 - $1,459,018,213) for a total amount paid of $4,602,030 (2015/16 - $4,447,088). Assessment Services Contribution The required contribution for assessment services is calculated first using an amount, set by the Property Valuation Services Cprporation (PVSC), to be recovered from all municipal units for 2016/17 $17,090,000 (2015/16 - $17,090,000). Fifty percent of this recovery amount is allocated among municipal units using each unit's uniform assessment as a percentage of provincial uniform assessment. The other fifty percent is allocated using each unit's number of assessment accounts as a percentage of the provincial assessment accounts. During 2016/17 the Municipality paid $340,514 (2015/16 - $341,463) to the PVSC for assessment services. 10 Municipality of the District of Chester Notes to the Consolidated Financial Statements March 31, 2017 5. Cash and cash equivalents The Cash and cash equivalents amount on the Statement of Financial Position includes portfolio investments as follows: Operating Capital Reserves 2017 2016 Cash $1,736,769 $50,670 $2,121,447 $3,908,886 $3,722,386 Short term investments (GICs)11,599,043 11,599,043 9,125,323 $1,736,769 $50,670 $13,720,490 $15,507,929 $12,847,709 Included in the cash and cash equivalents are restricted amounts. The gas tax grant program funds are restricted to eligible capital projects. The landfill closure funds are restricted by provincial regulations to fund landfill closure costs. The tax sale surplus funds are restricted as they are required to be held as described in Note 9. Operating Capital Reserves 2017 2016 Gas tax grant program $1,326,855 $1,326,855 $1,174,527 Tax sale surplus account $181,953 181,953 116,415 Landfill closure costs 4,888,463 4,888,463 4,172,779 Unrestricted cash 1,554,816 50,670 7,505,172 9,110,658 7,383,989 $1,736,769 50,670 13,720,490 $15,507,929 $12,847,709 6. Receivables 2017 2016 Taxes receivable - rate roll:Current 2015 Year 2016 and Prior Total Total Balance, beginning of year $- $829,574 $355,648 $1,185,222 $1,243,690 Collections for other governments 1,455,441 - - 1,455,441 1,482,269 Current year's levy 13,787,526 - - 13,787,526 13,817,059 15,242,967 829,574 355,648 16,428,189 16,543,018 Deduct Current year's collections 14,188,297 475,593 166,134 14,830,024 15,093,023 Reduced taxes 234,840 - - 234,840 244,780 Write-offs 3,214 2,695 3,319 9,228 19,993 14,426,351 478,288 169,453 15,074,092 15,357,796 Balance, end of year $816,616 $351,286 $186,195 1,354,097 1,185,222 Allowance for uncollectible taxes & unresolved assessments (76,073) (75,379) Allowance for other doubtful accounts (27,230) (17,263) Taxes receivable - interest 144,344 108,457 Billing receivable - water utility (42) (42) HST receivable 81,405 176,094 Due from Federal Government - 10,486 Due from Provincial Government 109,384 185,975 Due from other local governments 1,139,979 527,306 Landfill receivable 387,580 238,855 Other 278,229 344,742 Balance, end of year $3,391,673 $2,684,453 Included in other receivables is a loan receivable in the amounts of $34,000 (2016 - $102,000) and $70,800 (2016 - $106,200) receivable from the residents serviced by the former Mill Cove Water Utility and the Aspotogan Heritage Trust respectively. The amounts receivable are for construction of private wells as agreed upon on the decommissioning of the Mill Cove Water Utility. The amount is scheduled to be repaid by residents over the next 4 years through collection of area rates and over the next four years from the Aspotogan Heritage Trust. 11 Municipality of the District of Chester Notes to the Consolidated Financial Statements March 31, 2017 7. Employee Future Benefits - Non-Vested Sick Leave Benefits The Municipality of the District of Chester provides non-vested sick leave benefits to Municipal employees. Municipal employees are allowed to accumulate unused sick day credits each year, up to the allowable maximum. Accumulated credits may be used in future years to the extent that the employee's illness or injury exceeds the current year's allocation of credits. The use of accumulated sick days for sick leave compensation ceases on termination of employment. The benefit costs and liabilities related to the plan are included in the consolidated financial statements. The most recent actuarial valuation was conducted on July 12, 2017. The Municipality has provided non-vested sick leave benefits as follows: 2017Accrued benefit liability Accrued benefit obligation, beginning of the year $247,006 Current service cost for the year 14,958 Interest cost for the year 6,115 Amortization of experience gains Fiscal payments for employees (19,746) Expected benefit obligation 248,333 Unamortized Actuarial losses (gains)(98,302) Actual benefit obligation $150,031 Employee future benefits, non-vested sick leave benefits Current service costs $14,958 Interest cost for the year 6,115 Amortization of experience gains - $21,073 The significant actuarial assumptions adopted in measuring the municipalitiy's non-vested sick leave benefits are as follows: Discount rate 2.5% Retirement age at age 65 Rate of compensation increase 3.0% Actuarial gains are amortized starting the year following the year in which the gain occurs. Amortization is on a straight line basis over the expected average remaining service life (15 years). 8. Deferred revenue Funds received with specific spending criteria and stipulations that result in a liability, are recorded in deferred revenue until these funds are spent on eligible expenditures. 2017 2016 Prepayment of Taxes $131,804 $102,587 Other deferred revenue 171,884 192,201 Total Deferred Revenue $303,688 $294,788 12 Municipality of the District of Chester Notes to the Consolidated Financial Statements March 31, 2017 9. Tax sale surplus account The Municipality of the District of Chester is required to deposit in a tax sale surplus account the balance of proceeds of properties sold for taxes, after deducting the taxes owing to the Municipality at the time a property was sold. Where a balance remains in the tax sale surplus account twenty years after the sale, the Municipality is required to transfer it to the Capital Reserve Fund. There is no tax sale surplus from the 1996-97 fiscal year that needs to be transferred to the Capital Reserve Fund in the 2017-18 fiscal year. As per provincial accounting rules for municipalities the tax sale surplus is shown as a liability on the consolidated financial statements. The tax sale surplus account ammounts and the years in which they arose are as follows: 2017 2016 1996 $- $854 1999 4,224 4,224 2000 1,024 1,024 2001 2,010 2,010 2003 8,396 8,396 2005 8,267 8,267 2011 20,717 20,717 2012 10,040 10,040 2014 59,147 59,147 2015 1,000 1,000 2016 65,484 70,064 Accumulated interest 790 736 $181,099 $186,479 10. Long term debt 2017 2016 Capital asset loans $97,998 $130,664 562,500 625,000 500,000 550,000 557,398 621,182 177,600 236,800 - 278,600 13 Municipal Finance Corporation debenture, bearing interest from 5.45% - 5.75%, repayable in annual instalments of $32,667 plus interest, maturing in 2020. The original debenture of $490,000 was taken out in 2004 for Recreation and Culture use. Municipal Finance Corporation debenture, bearing interest from 4.44% - 4.83%, repayable in annual instalments of $62,500 plus interest, maturing in 2021. The original debenture of $1,250,000 was taken out in 2006 for environmental health services use. Municipal Finance Corporation debenture, bearing interest from 4.285% - 4.590%, repayable in annual instalments of $50,000 plus interest, maturing in 2022. The original debenture of $1,000,000 was taken out in 2007 for environmental health services use. Municipal Finance Corporation debenture, bearing interest from 4.565% - 5.480%, repayable in annual instalments of $63,784 plus interest, maturing in 2024. The original debenture of $1,067,670 was taken out in 2008 for environmental health services use. Municipal Finance Corporation debenture, bearing interest from 3.212% - 4.889%, repayable in annual instalments of $59,200 plus interest, maturing in 2020. The original debenture of $592,000 was taken out in 2009 for environmental health and transportation services use. Municipal Finance Corporation debenture, bearing interest from 2.491% - 3.115%, repayable in annual instalments of $278,600 plus interest, maturing in 2017. The original debenture of $1,393,000 was taken out in 2011 for environmental health services use. Municipality of the District of Chester Notes to the Consolidated Financial Statements March 31, 2017 10. Long term debt (continued) 378,000 441,000 453,550 567,200 3,344,334 3,674,667 2,400,000 3,000,000 521,000 - $8,992,380 $10,125,126 Principal repayments during the next five years are due as follows: 2018 $1,437,833 2019 $1,437,833 2020 $1,369,433 2021 $1,495,067 2022 $770,067 All long term debt outstanding at year end has been properly authorized by Service Nova Scotia and Municipal Relations. Interest expensed on long term debt during the year was $266,298 (2016 - $285,751). 14 Municipal Finance Corporation debenture, bearing interest from 1.330% - 2.979%, repayable in annual instalments of $113,650 plus interest, maturing in 2024. The original debenture of $794,500 was taken out in 2013 for environmental health services use. Municipal Finance Corporation debenture, bearing interest from 1.245% - 3.792%, repayable in annual instalments of $330,333 plus interest, maturing in 2030. The original debenture of $4,005,000 was taken out in 2015 for environmental health and environmental development services use. Municipal Finance Corporation debenture, bearing interest from 1.011% - 1.833%, repayable in annual instalments of $600,000 plus interest, maturing in 2021. The original debenture of $3,000,000 was taken out in 2016 for environmental health. Municipal Finance Corporation debenture, bearing interest from 1.15% - 2.925%, repayable in annual instalments of $62,700 plus interest, maturing in 2027. The original debenture of $521,000 was taken out in 2016 for environmental health. Municipal Finance Corporation debenture, bearing interest from 1.905% - 3.480%, repayable in annual instalments of $63,000 plus interest, maturing in 2023. The original debenture of $630,000 was taken out in 2012 for environmental health and general government services use. Municipality of the District of Chester Notes to the Consolidated Financial Statements March 31, 2017 11. Capital assets Opening Cost Additions Disposals Transfers Ending Cost Buildings - Plants $7,977,310 $20,040 $- $- $7,997,350 Electronic Data Equipment 919,314 178,998 - - 1,098,312 Lagoons 113,516 - - - 113,516 Land 1,696,461 - - - 1,696,461 Land Improvements 1,996,024 121,879 - - 2,117,903 Landfill 11,855,785 - - - 11,855,785 Machinery and Equipment 3,224,554 51,930 - 26,656 3,303,140 Municipal Buildings 2,715,494 138,604 - 173,940 3,028,038 Sewer Lines 7,304,802 49,823 - - 7,354,625 Sidewalks 2,483,122 - - 219,237 2,702,359 Small Equipment 302,986 6,184 - - 309,170 Streets, Roads & Curbs 5,641,442 309,461 - 27,070 5,977,973 Vehicles 392,085 48,770 - - 440,855 Wharves 191,210 - - - 191,210 Wind Turbine 5,123,893 - - - 5,123,893 Work in Progress 964,155 205,685 (341,614) (446,903) 381,323 $52,902,153 $1,131,374 $(341,614) $- $53,691,913 Opening Amortization Ending Accumulated During Amortization Accumulated Amortization the Year on Disposals Amortization Buildings - Plants $4,867,672 $252,320 $- $5,119,992 Electronic Data Equipment 693,481 118,949 - 812,430 Lagoons 11,352 11,352 - 22,704 Land - - - Land Improvements 935,891 107,689 - 1,043,580 Landfill 9,447,429 797,623 - 10,245,052 Machinery and Equipment 2,341,444 254,832 - 2,596,276 Municipal Buildings 1,135,612 76,116 - 1,211,728 Sewer Lines 5,117,595 147,018 - 5,264,613 Sidewalks 1,233,701 105,270 - 1,338,971 Small Equipment 280,947 7,859 - 288,806 Streets, Roads & Curbs 3,419,633 175,299 - 3,594,932 Vehicles 321,013 38,798 - 359,811 Wharves 93,351 7,648 - 100,999 Wind Turbines 531,935 256,393 - 788,328 $30,431,056 $2,357,166 $- $32,788,222 NBV 2017 NBV 2016 Buildings - Plants $2,877,358 $3,109,638 Electronic Data Equipment 285,882 225,833 Lagoons 90,812 102,164 Land 1,696,461 1,696,461 Land Improvements 1,074,323 1,060,133 Landfill 1,610,733 2,408,356 Machinery and Equipment 706,864 883,110 Municipal Buildings 1,816,310 1,579,882 Sewer Lines 2,090,012 2,187,207 Sidewalks 1,363,388 1,249,421 Small Equipment 20,364 22,039 Streets, Roads & Curbs 2,383,041 2,221,809 Vehicles 81,044 71,072 Wharves 90,211 97,859 Wind Turbines 4,335,565 4,591,958 Work in Progress 381,323 964,155 $20,903,691 $22,471,097 15 Municipality of the District of Chester Notes to the Consolidated Financial Statements March 31, 2017 12. Financial Instruments Financial instruments are any contract that gives rise to financial assets of one entity and financial liabilities of another entity. Financial assets represent a contratual right receive cash, or assets that can be used to discharge liabilities, in the future Financial liabilities represent a contractual obligation to deliver cash, or another financial asset, in the future. The Municipality of the District of Chester's financial assets include cash and cash equivalents, portfolio investments and receivables. The Municipality's financial liabilities include payables and accruals and long term debt. Risk Management The Municipality is exposed to a number of risks as a result of the financial instruments in its Statement of Financial Position that can affect its operating performance. These risks include interest rate risk, market risk, credit risk, liquidity risk and foreign exchange risk. Interest rate risk Interest rate risk is the risk relating to fluctuating changes in the market interest rate impacting the value of financial instruments. For financing the Municipality does not have any variable interest rate debt as all long term debt has fixed rates. Therefore, interest rate fluctuations has no effect until such time as the debt is refinanced. Note 8 decribes future debt principal repayments. For portfolio investments the Municipality mitigates risk by diversification with multiple short term fixed rate guaranteed investment certificates. Market risk Market risk is the risk that the fair value of a financial instrument will fluctuate as a result of changes in market prices. The Municipality's objective places greater relevant importance to the preservation of capital that a competive return on portfolio investments which is why cash is invested in GICs. Credit risk The Muncipality is exposed to credit risk with respect to accounts receivable and loans receivable as described in Note 5. The Municipality has a credit monitoring process to mitigate potential credit risks and maintains provisions for potential credit losses that are assessed on an ongoing basis. Liquidity risk The Municipality has contractual obligations and financial liabilities, therefore, is exposed to liquidity risk. The Municipality monitors its liquidity risk by updating and reviewing mutli-year cash flow projections on a regular and as needed basis, and by matching its long term financing arrangements with its cash flow needs. Foreign exchange risk Foreign exchange risk arises on financial instruments that are denominated in a foreign currency. The Muncipality's exposure is minor as it only occassionally makes payments denominated in foreign currencies and the amounts are small. Capital management The Municpality's capital management focus is on ensuring liquid resources are available for operations. This objective is considered by the Municipality in the preparation of the annual budget, in the monitoring of cash flows and in the monitoring of actual results compared to budget. As of March 31, 2017, the Municipality has met its objective of having sufficient liquid resources to meet its current obligations. 16 Municipality of the District of Chester Notes to the Consolidated Financial Statements March 31, 2017 13. Accumulated Surplus Restated Operating Capital Reserves 2017 2016 Accumulated Surplus, beginning of the year $2,086,886 $9,576,857 $9,095,708 $20,759,451 $18,807,389 Prior period adjustment (153,588) - (507,511) (661,099) - Accumulated Surplus, beginning restated 1,933,298 9,576,857 8,588,197 20,098,352 18,807,389 Financial activities Revenue (fund transfer) Repayment of debt (1,653,733) 1,653,733 - - - Capital fund acquisitions (1,131,374) 1,131,374 - - - Other revenue 22,066,622 8,020 142,963 22,217,605 21,614,864 Transfer to reserves (2,740,329) - 2,740,329 - - 16,541,186 2,793,127 2,883,292 22,217,605 21,614,864 Expenditures (transfer) Capital asset write off - 341,614 - 341,614 132,425 Amortization (2,357,166) 2,357,166 - - - Other expenditures (incl amortiztion)18,109,934 - 1,411,435 19,521,369 20,191,476 15,752,768 2,698,780 1,411,435 $19,862,983 20,323,901 Annual surplus 788,418 94,347 1,471,857 2,354,622 1,290,963 Accumulated Surplus, end of the year $2,721,716 $9,671,204 $10,060,054 $22,452,974 $20,098,352 Financial position Cash $1,736,714 $50,670 $13,720,491 $15,507,875 $12,847,709 Receivables 3,391,673 - - 3,391,673 2,684,453 Due to own funds (322,068) (2,290,777) 2,612,845 - - 4,806,319 (2,240,107) 16,333,336 18,899,548 15,532,162 Borrowings, Payables and deferred revenue 2,124,086 2,124,086 3,030,196 Landfill closure costs - - 6,273,280 6,273,280 4,861,846 Long term debt - 8,992,380 - 8,992,380 10,125,113 2,124,086 8,992,380 6,273,280 17,389,746 18,017,155 Net assets (debt)2,682,233 (11,232,487) 10,060,056 1,509,802 (2,484,993) Non-financial assets 39,481 20,903,691 - 20,943,172 22,583,345 Accumulated Surplus $2,721,714 $9,671,204 $10,060,056 $22,452,974 $20,098,352 14. District School Board On January 31, 1982, the Municipality of the District of Chester joined with the other Municipality and Towns of Lunenburg County to form the South Shore District School Board. Under the agreement, all school buildings on hand at December 31, 1981, will remain assets of the Municipality, but will be under the control of the District School Board until such time as the Board no longer requires the asset for school purposes. At that time, control will revert to the Municipality. The South Shore District School Board was subsequently amalgamated with other boards to become the South Shore Regional School Board. 15. Pension plans Defined Contribution Plan The Municipality of the District of Chester currently makes contributions to a pension plan on behalf of employees who have opted to participate in the plan. The pension plan is a defined contribution plan and is administered by Standard Life Assurance Company on behalf of the Municipality.Contributions to this plan are shared by the Municipality and its employees with both contributing 6% (2016 - 5%) of base salary. During the year the Municipality contributed $165,230 (2016 - $135,118) to the pension plan. 17 Municipality of the District of Chester Notes to the Consolidated Financial Statements March 31, 2017 16. Landfill closure costs Landfill closure costs include estimated expenses for capping the cell sites as well as ongoing environmental monitoring and care. The liability for closure costs is accrued each year based on the total tonnes of garbage delivered to the landfill compared to the estimated tonnes of landfill capacity. The estimated total of landfill closure and post closure costs at the start of the second generation landfill was $6,755,143. Management continued the process of revisiting the landfill closure and post closure costs during the current year. The Municipality uses an engineering report dated June 2016 to update estimated landfill closure and post closure costs. Management will continue to monitor its estimate in future years. Based on information currently available, management estimates that the total landfill closure and post closure costs are $9,835,350 when site capacity is completely utilized. The total liability recognized to date of $6,273,280 is based on the capacity of the site utilized to date. The remaining $3,562,070 will be recognized as the landfill capacity is utilized each year. The estimated remaining capacity of the site is 255,877 tonnes which is currently expected to be filled over the next 6 years. A portion of the total current cost of landfill closure and post-closure care is being transferred into the Special Reserve Fund - Capital Reserve Section in each period the landfill accepts solid waste in the amount equal to the change in the closure liability recongnized each year. The total amount for landfill closure costs in reserve is $6,273,280. The estimated time for post closure care is 30 years. Estimated closure and post closure costs as well as landfill capacity are examined annually. The calculated liability is revised annually based on the capacity of the landfill utilized during the year and any revisions for estimated closure and post closure costs. Any changes in the estimates used to calculate the accrued landfill closure and post closure costs, including cost, total capacity and discount rate, could result in a material change to the financial statements. 17. Commitments Solid Waste - Sales of Services The Municipality of the District of Chester has contractually entered into agreements with the Valley Region Solid Waste Authority for the next 19 years, and the Town of Lunenburg and the Lunenburg Regional Solid Waste Management Committee for the next 9 years, to accept solid waste at its second generation landfill site fees charged to Valley Region Solid Waste Authority are a proportionate share of operating costs calculated annually on the basis of tonnes delivered to the site as a percentage of total tonnes accepted from all sources. Fees charged to the Town of Lunenburg and the Lunenburg Regional Solid Waste Management Committee are based on a per tonne charge which is adjusted annually for inflation. The Municipality of the District of Chester collects a host community fee from users based on the number of tonnes delivered to the landfill site. In order to fulfill the terms associated with these arrangements it is estimated the Municipality will be required to complete construction of three solid waste cells for the duration of the agreements (see Note 22). Solid Waste - Processing of Waste Agreement In August 2016 the Municipality of the District of Chester entered into an agreement with Sustane Chester Inc. to provide Sustane with all municipal solid waste (MSW) for 20 years after construction of their facility (estimated to be during Q4 2017) on land leased from the Municipality. The Municipality will pay Sustane a base fee per tonne for waste delivered to Sustane's facility. Sustane will separate MSW and convert it into marketable by-products with the goal to reduce MSW going to the landfill (up to 90%), create employment in the region, increase recycling rates and reduce the carbon footprint of the landfill site. Sustane will pay the Municipality a fee per tonne for any residual waste that cannot be processed and must go to the landfill. An estimate of the financial impact on future operations cannot be made at this time. Waste Collection In August 2014, the Municipality signed a contract for waste collection services with a 5 year term expiring in March 2019. Total payments remaining over the next 2 years amount to $1,445,388 plus HST. 18 Municipality of the District of Chester Notes to the Consolidated Financial Statements March 31, 2017 18. Remuneration The municipality is required by legislation to disclose the remuneration paid to each council member and the chief administrative officer. 2017 2016 Councilor Remuneration Mileage Expenses Total Total Brad Armstrong $10,655 $72 $- $10,727 18,773 Danielle Barkhouse 8,041 214 1,488 9,743 - Sharon Church-Cornelius 18,696 805 4,285 23,786 19,265 Tina Connors 18,696 4,394 1,166 24,256 23,020 Robert Myra 1,558 49 - 1,607 21,174 Abdella Assaff 8,041 534 12 8,587 - Floyd Shatford 21,058 1,799 58 22,915 23,022 Andre Veinotte 18,696 - 3,441 22,137 18,974 Allen Webber 39,395 653 5,269 45,317 40,282 Staff Tammy Wilson 139,771 2,736 8,857 151,364 146,392 $284,607 $11,256 $24,576 $320,439 310,902 19. Segmented Information The Municipality of the District of Chester is a diversified municipal unit that provides a wide range of services to it's citizens. For management reporting purposes the Municipality's operations and activities are organized and reported by fund. Funds were created for the purpose of recording specific activities to attain certain objectives in accordance with special regulations, restrictions or limitations. Municipal services are provided by departments and their activity is reported in these funds. The services provided by these departments are as follows. General government services This department is responsible for the overall financial and local government administration. Its tasks include tax billings and payments, accounts payable and receivables, budgets and financial statements, the Municipal Government Act, administration and maintenance of bylaws and change of address. Protective services This department is responsible for overseeing police and legal services, animal control, fire protection issuing building permits and fire safety inspections. Transportation services This department is responsible for the development and maintenance of roads, sidewalks and street lighting. Environmental health services This department is responsible for the maintenance and operations of waste and sewer services provided to residents and other customers. Its tasks include waste collection, recycling, composting and sewer hook-up. Environmental development services This department is responsible for planning and development within the Municipality. Its tasks include operations of the wind turbine, issuing development permits, developing strategies, economic development and planning reports. Recreational and cultural services This department is responsible for promoting and offering recreation opportunities and activities to the Municipality's residents. 19 Municipality of the District of Chester Notes to the Consolidated Financial Statements March 31, 2016 19. Segmented Information (continued) Recreation General Environmental Environmental and Restated Government Protective Transportation Health Development Culture 2017 2016 Services Services Services Services Services Services Consolidated Consolidated Revenue Taxes $7,700,193 $35,121 $238,035 $2,289,923 $656,574 $- $10,919,846 $10,326,442 Grants in lieu of taxes 168,464 5,249 - - - - 173,713 169,480 Sales of Services 20,637 24,400 - 3,631,534 776,775 113,804 4,567,150 4,026,247 Other revenue from own sources 223,389 27,770 16,237 347,119 30,736 - 645,251 825,468 Unconditional transfers from other governments 6,736 - - 110,129 - - 116,865 104,890 Conditional transfers from other governments 111,262 111,262 289,783 Grants for capital projects 679,608 - - - - - 679,608 765,849 Interest 156,375 - - - - - 156,375 103,515 9,066,664 92,540 254,272 6,378,705 1,464,085 113,804 17,370,070 16,611,674 Expenditures Salaries and benefits 1,502,791 328,197 14,398 920,530 503,146 500,617 3,769,679 3,861,489 Goods and services 765,524 2,070,204 535,495 3,451,927 260,154 204,233 7,287,537 7,366,543 Gov't transfers & board contributions 408,548 - 408,548 409,497 Amortization 175,507 - 238,268 1,550,620 291,953 100,818 2,357,166 2,302,932 Interest 2,992 - 14,200 158,805 91,801 5,949 273,747 308,268 Other 844,384 - - - 27,699 46,688 918,771 620,038 3,699,746 2,398,401 802,361 6,081,882 1,174,753 858,305 15,015,448 14,868,767 Annual surplus $5,366,918 $(2,305,861) $(548,089) $296,823 $289,332 $(744,501) $2,354,622 $1,742,907 Supplementary Information Add Back Depreciation $175,507 $- $238,268 $1,550,620 $291,953 $100,818 $2,357,166 $2,302,932 Less Debenture Principle Payments (16,000) - (67,198) (1,302,536) (235,333) (32,666) (1,653,733) (1,109,601) Transfers to Reserves (1,153,145) - (1,599,418) (983,992) (5,000) (3,741,555) (1,467,153) Segment Surplus (Deficit)$4,373,280 $(2,305,861) $(377,019) $(1,054,511) $(638,040) $(681,349) $(683,500) $1,469,085 20 Municipality of the District of Chester Notes to the Consolidated Financial Statements March 31, 2017 20. Loan guarantees The Municipality has guaranteed a loan for the Hubbards and District Fire Commission for the purchase of a fire vehicle in the amount of $350,000. The balance outstanding as of March 31, 2017 is $87,870 (2016 - $117,456). Interest is calculated at prime and principal payments are $29,586 per year. The loan matures on June 4, 2019. 21. Contingency The Municipality is required to comply with new environmental legislation related to waste water treatment. As a result the Municipality is required to complete upgrades to their current waste water treatment system over the next 3 years. Currently the Municipality has not entered into any contracts to complete the necessary upgrades. Internal engineering staff have estimated that the costs to be incurred over the next four years will be approximately $3,800,000. 22. Subsequent Events Solid Waste - Landfill cell construction In April 2017 Municipal Council awarded a tender for the construction of a landfill cell at Kaizer Meadow landfill in the amount of $2,398,000 plus HST. 23. Comparative figures Certain of the 2016 comparative figures have been reclassified to conform to the financial statement presentation adopted for the current year. 24. Budgeted figures Budgeted figures have been provided for comparison purposes and have been derived from the estimates approved by the Council of the Municipality of the District of Chester. 21 Municipality of the District of Chester Schedules to Consolidated Statement of Operations Restated Year Ended March 31 2017 2016 REVENUE Budget Actual Actual Taxes Residential assessable property $9,516,075 $9,472,450 $9,378,158 Commercial based taxable assessments 1,355,909 1,347,645 1,369,194 Resource Taxable assessments 296,895 293,024 287,176 Non-profit acreage 4,360 4,360 4,152 Forest property tax (less than 50,000 acres)27,211 27,334 27,439 Forest property tax (50,000 acres or more)8,590 8,590 8,590 337,056 333,308 327,357 Area rates Protective services 275,990 277,110 276,820 Transportation services 238,650 238,035 258,209 Environmental Health services 2,329,112 2,289,923 2,207,321 2,843,752 2,805,068 2,742,350 Business property Based on revenue (Aliant)50,000 49,067 49,128 NS Power HST rebate 74,000 67,783 88,676 124,000 116,850 137,804 Deed Transfer tax 880,000 1,048,655 905,458 Wind Farm Developer tax 656,574 656,574 174,221 Transfers and collections for other governments Collection - other governments 1,497,036 1,455,441 1,482,269 Transfers to village and local fire commissions (1,497,036) (1,461,732) (1,488,478) - (6,291) (6,209) 15,713,366 15,774,259 15,028,333 Education mandatory contribution (Note 4)(4,602,030) (4,603,030) (4,447,088) Correction services (236,441) (235,698) (236,441) Regional Housing Authority (20,000) (16,685) (18,362) $10,854,895 $10,919,846 $10,326,442 See accompanying notes and schedules to the consolidated financial statements. 22 Municipality of the District of Chester Schedules to Consolidated Statement of Operations Restated Year Ended March 31 2017 2016 Grants in lieu of taxes Federal government $60,938 $51,686 $54,396 Provincial government Real property 54,042 56,596 53,142 Crown timberland 34,176 33,342 33,342 Fire protection 360 5,249 359 Conservation 7,000 6,311 6,004 Provincial government agencies NS Power Incorporated 20,529 20,529 22,237 $177,045 $173,713 $169,480 Sales of services General government services - election $- $20,637 - Waste Collection fees - other local governments 2,801,496 3,631,534 $3,010,489 Planning services - other local governments 46,418 46,921 52,567 Building/fire inspection services - other local gov't 21,662 21,897 21,576 Recreation and cultural services 82,750 82,991 90,134 FHCS 27,400 30,813 28,314 REMO - other local governments 2,476 2,503 2,466 Wind Energy 719,650 729,854 820,701 $3,701,852 $4,567,150 $4,026,247 Other revenue from own sources Administrative services $162,750 $223,389 $211,728 Transportation services 8,217 16,237 7,721 Building inspection services 15,000 25,206 21,217 Animal control services 4,350 2,564 1,881 Sewer hookup services 500 17,420 8,299 Solid waste & disposal services 571,820 329,699 516,617 Planning services 22,390 25,682 52,951 Industrial park services 5,000 5,054 5,054 $790,027 $645,251 $825,468 Unconditional transfers from Federal and Provincial governments and agencies Provincial government Service Nova Scotia Assessment Act - farm acreage $6,736 $6,736 $6,699 Recycling projects 69,187 110,129 98,191 $75,923 $116,865 $104,890 See accompanying notes and schedules to the consolidated financial statements. 23 Municipality of the District of Chester Schedules to Consolidated Statement of Operations Restated Year Ended March 31 2017 2016 Conditional transfers from Federal and Provincial governments and agencies Federal government Employment grants $2,000 $2,996 $1,272 Provincial government Emergency measures 4,500 4,767 4,760 Recreation - 94,490 156,899 Employment grants - 9,009 - Other agencies REN - - 126,852 $6,500 $111,262 $289,783 Grants for Capital Projects Infrastructure grant $485,000 $- $77,782 Gas tax grant 589,371 589,371 559,359 PCAP grant 581,250 54,237 88,190 SNSMR grant 130,000 18,000 33,018 Local agencies grant 21,600 18,000 7,500 $1,807,221 $679,608 $765,849 See accompanying notes and schedules to the consolidated financial statements. 24 Municipality of the District of Chester Schedules to Consolidated Statement of Operations Restated Year Ended March 31 2017 2016 EXPENDITURES Budget Actual Actual General government services Legislative Council/committee remuneration $164,844 $150,726 $159,596 Administrative expenses 90,047 64,266 90,498 Grants to organizations 253,921 267,929 206,732 Elections 75,000 57,452 - 583,812 540,373 456,826 CAO/Clerk administrative Administration salaries 374,906 365,582 367,262 Administrative expenses 128,551 113,790 106,018 Town crier 1,000 - - Surveys/appraisals 2,000 1,043 4,901 Newsletter/promotions 33,520 10,985 10,627 Joint occupational health and safety 25,000 8,188 7,132 Health & wellness 7,000 4,521 2,541 571,977 504,109 498,481 Finance/property tax administrative Administration salaries 338,364 343,360 317,291 Administrative expenses 220,235 188,092 159,912 Auditor services 40,000 44,899 40,623 Property tax administration 279,900 275,919 299,726 878,499 852,270 817,552 Information services administrative Administration salaries 217,195 218,369 175,394 Administrative expenses 210,245 195,723 225,451 Debenture interest 3,122 2,992 3,355 430,562 417,084 404,200 Municipal property services Salaries 83,751 74,693 78,694 Administrative expenses 44,100 36,006 36,195 Property services 110,976 114,662 164,195 Wharves 8,500 5,415 5,735 Community Development 15,000 7,687 9,052 262,327 238,463 293,871 Public works general Salaries 154,663 142,040 149,923 Administrative expenses 85,197 56,005 85,049 Special Projects 34,965 23,733 23,297 274,825 221,778 258,269 Other general government services Assessment recovery costs 340,514 340,514 341,463 Regional library 69,056 68,035 68,035 Depreciation 104,738 175,507 104,252 514,308 584,056 513,750 $3,516,310 $3,358,133 $3,242,949 See accompanying notes and schedules to the consolidated financial statements. 25 Municipality of the District of Chester Schedules to Consolidated Statement of Operations Restated Year Ended March 31 2017 2016 Budget Actual Actual Protective services Police services $1,751,980 $1,742,347 $1,673,443 Legal prosecution services 5,000 7,725 5,438 By-law enforcement 35,751 18,185 18,753 Animal control 76,700 67,440 65,661 Emergency measures 41,114 45,010 37,943 1,910,545 1,880,707 1,801,238 Fire services Fire coordinator/advisory 121,601 101,807 96,081 Fire protection agreement 237,748 153,761 243,844 Fire rescue boat 12,123 12,129 11,457 371,472 267,697 351,382 Building/fire inspections Salaries 220,904 196,798 202,988 Administrative expenses 89,009 53,199 64,172 309,913 249,997 267,160 $2,591,930 $2,398,401 $2,419,780 Transportation services Road transport Administration $26,269 $17,390 $16,914 Road and sidewalk maintenance 450,654 423,508 379,817 Street lighting 107,255 108,995 128,187 Debenture interest 15,284 14,200 15,628 Depreciation 241,610 238,268 240,274 $841,072 $802,361 $780,820 Environmental health services Sewage collection and disposal $541,831 $482,804 $558,150 Waste collection and disposal 3,178,760 3,841,440 3,690,653 Recycling project 64,572 50,991 44,769 Debenture interest 177,371 156,026 186,617 Depreciation 1,486,572 1,550,620 1,574,394 $5,449,106 $6,081,881 $6,054,583 Environmental development services Planning and zoning $580,148 $501,013 $573,448 Economic Development 186,975 103,166 155,115 Tourism development 48,000 50,777 43,803 Eco Park 21,082 14,987 10,609 Regional economic network 45,794 45,794 143,415 Wind Turbine 89,741 75,261 78,508 Debenture interest 92,572 91,801 94,896 Depreciation 289,670 291,953 289,288 $1,353,982 $1,174,752 $1,389,082 See accompanying notes and schedules to the consolidated financial statements. 26 Municipality of the District of Chester Schedules to Consolidated Statement of Operations Restated Year Ended March 31 2017 2016 Recreational and cultural services Administration $657,346 $634,721 $690,805 Program expenses 39,700 36,372 40,262 Church Memorial Park 50,000 - 50,000 Parks & trails 76,000 39,188 68,535 Heritage properties 500 - - Debenture interest 6,501 5,949 7,772 Forest Heights Community School 35,715 41,258 29,450 Depreciation 91,371 100,818 94,724 $957,133 $858,306 $981,548 See accompanying notes and schedules to the consolidated financial statements. 27