finance & intergovernmental committee agenda special ... · 6/20/2017 · finance &...

FINANCE & INTERGOVERNMENTAL COMMITTEEAGENDA

Special MeetingTuesday, June 20, 2017

4:30 PM - Heritage Room2580 Shaughnessy Street

1. CALL TO ORDER

2. ADOPTION OF THE AGENDA

2.1. Adoption of the June 20, 2017 Finance and IntergovernmentalCommittee Meeting AgendaRecommendation: That the June 20, 2017 Finance and IntergovernmentalCommittee Meeting Agenda be adopted.

3. REPORTS

3.1 2016 Investment Report

3.2 2016 Audited Financial StatementsRecommendation: That the Finance and Intergovernmental Committeerecommends that Council accept the 2016 Audited Financial Statements;and

That the 2017-2021 Financial Plan be amended to include a transfer of $220thousand RCMP surplus to the operating reserve.

3.3 Audit Results and Communications

4. RESOLUTION TO CLOSE

4.1. Resolution to Close the Finance and Intergovernmental CommitteeMeeting of June 20, 2017Recommendation: That the Finance and Intergovernmental CommitteeMeeting be closed to the public under the following subsection of section 90(1) A part of a council meeting may be closed to the public if the subjectmatter being considered relates to or is one or more of the following:

l) discussions with municipal officers and employees respectingmunicipal objectives, measures and progress reports for the purposes ofpreparing an annual report under section 98 (annual municipal report);

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5. MOTION TO RECONVENE

5.1 Motion to Reconvene the June 20, 2017 Finance and IntergovernmentalCommittee Meeting AgendaRecommendation: That the June 20, 2017 Finance and IntergovernmentalCommittee Meeting be reconvened

6. REPORTS CONTINUED

6.1 Kingsway Boat Launch ReinstatementRecommendation: That the boat launch remains barricaded and closed untilfurther notice

7. ADJOURNMENT

7.1 Adjournment of the Finance and Intergovernmental Committee Meetingof June 20, 2017Recommendation: That the Finance and Intergovernmental CommitteeMeeting of June 20, 2017 be adjourned.

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Information Report to FIG

DATE:

June 2, 2017

TO:

Finance & Intergovernmental Committee

FROM:

Brian North, Manager of Revenue and Collections

SUBJECT:

2016 INVESTMENT REPORT

EXECUTIVE SUMMARY: This report provides an overview of the city’s investment position as of December 31, 2016. Since the city is limited to investing in securities identified in the Community Charter, the city continues to hold the majority of its funds in credit union term deposits and with the Municipal Finance Authority. The city’s investment portfolio will continue to be affected by the current low interest rate environment. Near record low interest rates has resulted in a reduction in the average rate of return earned in 2016. The 1.93% return in 2016 was slightly lower than the 2015 average rate of 2.01% while investment income increased from $2.1 million in 2015 to $2.7 million in 2016. This can be attributed to an increase of $20 million (2016-$166M, 2015-$146M) in short term investments. The increase in investments is due to the additional cash flow as city builds it reserve balances for future infrastructure projects. While inflation and interest rates are expected to continue to remain low, the city will strive to maximize the return on its investment portfolio with the primary objective of safety and liquidity. The 2017 income is expected to be lower than the 2016 income due to lower returns and the decreased reserve levels as a result of funding the construction of the Community Recreation Complex. BACKGROUND AND COMMENTS: As per the Financial Management Policy, the city invests in short, medium and long term financial investment products in accordance with Section 183 of the Community Charter. Products are restricted to non-equity based securities, investments with the Municipal Finance Authority (MFA) and deposits in savings institutions. The investment mix and levels are illustrated in Attachment 3, Cash and Investment Distribution 2012- 2016. Rates tend to move with economic conditions; as economic growth increases, the demand for money increases and interest rates rise as a result. The continued slow economic recovery over the last several years, with the accompanying low interest rates and bond yields, has meant continuing low returns on the city's investments. Because city investments are restricted by

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June 2, 2017 2016 Investment Report Page 2

legislation to fixed income securities, investment income is directly influenced by prevailing interest rates. While economic data in the US and Canada appear to be gradually improving, the timing of any interest rate increase continues to be uncertain. The Bank of Canada is holding its benchmark overnight interest rate at 0.5 per cent as it says Canada faces “persistent economic slack.” The majority of investment over the next year is expected to consist of term deposits of two years and under, unless a strong improvement in debt yields occurs. Investing in shorter-term securities allows the city the flexibility to invest in longer term, higher yield investments when yields recover.

Looking Back at 2016 and Outlook for 2017 The city’s 2016 average rate of return was 1.93% compared to 2.03% in 2015. The 10 year historical average rates of return are illustrated in Attachment 1. Attachment 2 lists the investments held at December 31, 2016 and Attachment 3 illustrates the distribution of cash and investments for the last five years. 2016 income was consistant with 2015 at $2.7 million. This can be attributed to a slight decrease in the average rate of return, offset by an increase of $20 million (2016-$166M, 2015-$146M) in our short and long term term investments. The increase in investments is a result of increased cash flow due to increased reserve balances as the City saves for future infrastructure projects. Cash was converted to investments in order to earn a higher rate of return. To maximize interest the city has increased its percentage of investment terms of more than one year but less than two years. Longer term investments will be considered when future cash flow requirements are determined for upcoming capital projects. The 2017 income is expected to be lower than the 2016 income due to lower returns and the decreased reserve levels to used in the Community Recreation Complex financing. In 2016 certain economic events took place which resulted in both economic and political uncertainties within Canada and beyond. Some of these events include:

• Concerns over the slowdown of growth of China; • The low oil and commodity prices and the weakening of the Canadian dollar; • Lower than expected Canadian GDP; • Weak export sales and decline in business investment causing slowdown of Canada's

overall productivity growth; • The unexpected outcome of the United Kingdom's referendum to exit the European

Union causing uncertainty and volatility to the global financial markets;

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• The results of the US election adding another level of volatility and uncertainty to the financial markets and the Canadian economy; and

• The US Federal Reserve raising interest rate for the first time since 2008.

As shown in the graph below, the Canadian interest rates were operating at an all-time low throughout 2016. The Bank of Canada has continued to maintain its overnight interest rate unchanged at 0.50% throughout 2016. Recent statements from the Bank of Canada suggested that the possibility of further policy easing cannot be dismissed. It is continued to believe that the Bank of Canada will not increase interest rates until 2018.

Forthcoming Legislation and Banking Industry Changes There are two major changes in the banking industry that staff are monitoring:

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1. Bail-in Legislation

During the 2008 global financial crisis, some financial institutions were considered “too-big-to- fail” and were bailed-out by large scale government support. As a result of these failures taxpayers ended up paying a bill in the trillions of dollars for imprudent risks assumed by the big banks. There was widespread concern about the use to taxpayer funding to rescue these institutions and that government intervention to prop up a failing company can foster moral hazard by providing an incentive to companies to take on more risks and investors to take less dilegnce or act cautiously. To reduce global systemic risk and not expose taxpayers to the cost of another bail-out, the Canadian federal government came up with a bail-in process for non-viable banks.

In June 2016, the Government of Canada Parliament passed Bill C-15 which includes provisions to create a bank recapitalization regime (also known as bail-in legislation), where certain liabilities of a distressed financial institution are converted permanently converted into common shares to allow it to continue operating. The potential impact of this legislation to the city (and to all other BC municipal governments) could mean that bank investment that is current permitted under the Community Charter may no longer be considered principally guaranteed due to its convertible feature. As such, municipal governments may need to shift their investment holdings to only federal issues, provincial issues and short term deposits which offer lower yields and limited offerings, thereby resulting in reduced investment income and creating budget concerns. While this legislation has no immediate impact, the city will continue to assess the impact of the legislation and will act accordingly to ensure investment activities will continue to comply with statutory requirements. 2. Federally Regulated Credit Unions

In 2012, the federal government established the new legal frameworks under the Jobs and Economic Growth Act which enabled credit unions to register nationally, opening branches across the country. Coast Capital Savings Credit Union became the first credit union in BC where its members voted in December 2016 in favour of moving ahead with the plans to transition to a Federal Credit Union. Subject to approval from various regulatory bodies, if approval is granted, it is anticipated that it will become a federal credit union in 2018. Just like banks, any federal regulated credit unions will be regulated under the Office of the Superintendent of Financial Institutions (OSFI) and will be limited to $100,000 deposit insurance through the Canada Deposit Insurance Corporation (CDIC) instead of the 100% unlimited deposit guarantee under the Credit Union Deposit Insurance Corporation (CUD I C), a statutory corporation backed and regulated by the Province of BC. There is currently no change to the CUDIC deposit insurance for deposits held at Coast Capital until it completes the transition to the federal environment. It is anticipated that grandfathering provisions will be granted to any deposits held before the transition date until they mature. While the city does not have any investments with Coast Capital, the status of

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all credit unions that the city invests with will be scrutinized to verify the level to which the invested funds are guaranteed. CONCLUSION: The City’s investment activities for 2016 have been conducted in accordance with the City’s Investment policy where staff strives to maximize the return on its investment portfolio with the primary objective of safety and liquidity.

Respectfully Submitted by,

_______________________________ Brian North, CPA, CMA Manager of Revenue and Collections Attachments: 1. Average Rate of Return on Investments 2007 - 2016

2. Investments and Cash Equivalents as at December 31, 2016 3. Cash and Investment Distribution 2012 – 2016

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Attachment 1

Average Rate of Return on Investments 2007 - 2016

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31-Dec-16 Attachment 2

CASH EQUIVALENTS

INVESTMENT RATE

AMOUNT DEALER DESCRIPTION % GUARANTOR

$123,918.70 MFA MONEY MARKET FUND Municipal Finance Authority

$123,918.70

INVESTMENTS

INVESTMENT RATE

AMOUNT DEALER DESCRIPTION %

5,938,783.55 MFA INTERMEDIATE FUND Municipal Finance Authority

$5,938,783.55

INVESTMENT RATE

AMOUNT DEALER DESCRIPTION %

2,000,000.00 BLUESHORE TERM DEPOSIT 2.070% Province of BC

5,000,000.00 WESTMINSTER SAVINGS TERM DEPOSIT 1.650% Province of BC

3,000,000.00 CANADIAN WESTERN BANK TERM DEPOSIT 1.650% Province of BC


5,000,000.00 G & F FINANCIAL TERM DEPOSIT 1.800% Province of BC

3,000,000.00 ENVISION TERM DEPOSIT 1.800% Province of BC









3,000,000.00 CANADIAN WESTERN BANK TERM DEPOSIT 1.930% Province of BC














3,000,000.00 VANCITY TERM DEPOSIT 1.650% Province of BC























$160,000,000.00

$165,938,783.55

Total Investments

$166,062,702.25

TERM DEPOSITS - greater than 90 days and less than 365 days

LONG TERM - greater than 365 days

Total Short and Long Term Investments

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Attachment 3

Cash and Investment Distribution 2012- 2016

$0

$20,000,000

$40,000,000

$60,000,000

$80,000,000

$100,000,000

$120,000,000

$140,000,000

$160,000,000

$180,000,000

2012 2013 2014 2015 2016

Cash

Cash

EquivalentsShort-term

InvestmentsLong-term

Investments

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Report to FIG

DATE:

June 12, 2017

TO:

Finance & Intergovernmental Committee

FROM:

Sharleen Karamanian, Manager of Accounting Services

SUBJECT:

2016 AUDITED FINANCIAL STATEMENTS

EXECUTIVE SUMMARY: This report provides a review and analysis of the 2016 Consolidated Financial Statements audited by the city auditors, KPMG LLP. The Financial Statements have been prepared in accordance with Canadian Public Sector Accounting Standards as prescribed by the Public Sector Accounting Board. In compliance with Section 167 (1) of the Community Charter the financial statements must be prepared by the financial officer and presented to Council for acceptance. City revenues for the 2016 year were reported at $103.88 million (budgeted at $ 96.60 million) with corresponding expenses totaling $87.81 million (budgeted at $ 90.69 million) resulting in an annual surplus of $16.07 million (budgeted at $5.91 million prior to transfers to reserve and debt payments). Revenue variances are primarily attributable to increased investment income, additional development fees and permits, higher levels of sales of service fees as well as developer contributions of tangible capital assets. Operating expenses were under budget due to a combination of factors such as department vacancies, operational and maintenance work hampered by the winter weather, and project work carried forward to the upcoming year. The city’s accumulated surplus of $720.20 million is comprised of equity in assets and inventories totaling $603.38 million, restricted reserves at $92.12 million and unrestricted reserves that include the general, water and sewer fund amounting to $24.68 million. Accumulated surplus in all three funds exceeds the minimum required balance. As per the Annual Operating Surplus Allocation Policy these remaining funds will be considered during the next round of financial plan deliberations to be used to fund potential one-time, non-recurring projects. RECOMMENDATIONS: That the Finance and Intergovernmental Committee recommends: That Council accept the 2016 Audited Financial Statements; and That the 2017-2021 Financial Plan be amended to include a transfer of $220 thousand RCMP surplus to the operating reserve.

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June 12, 2017 2016 Audited Financial Statements Page 2

BACKGROUND AND COMMENTS: The City of Port Coquitlam 2016 Audited Consolidated Financial Statements (attachment 1) are prepared in accordance with Canadian Generally Accepted Accounting Principles as prescribed by the Canadian Public Sector Accounting Board (PSAB) and under the provisions of the Community Charter. The Annual Financial Statements must be presented and approved by Council. KPMG LLP have audited the 2016 financial statements and provided an Independent Auditors report accompanying this report (attachment 3). The financial statements are intended to report on the City’s financial condition as of December 31, 2016 and consist of the following four required statements and additional notes and supporting schedules:

The Consolidated Statement of Financial Position summarizes the City’s financial

position at the end of the 2016 year. The City’s assets and liabilities are netted against

each other to highlight the Net Financial position; a positive outcome is termed Net

Financial Assets and a negative outcome is titled Net Debt. This statement also reports on

the Non-Financial assets which are largely represented by the City’s tangible capital assets

and to a smaller extent inventories and prepaid expenses. The accumulated surplus figure

outlines the City’s available resources for future activities.

The Consolidated Statement of Operations report on the types of revenues generated

during the year to fund operating and capital needs and lists the expenses allocated

during the year. These revenue and expense items include cash and non-cash

transactions in compliance with accounting standards. The resulting difference between

the two for the fiscal year is recorded as the City’s annual surplus.

The Consolidated Statement of Change in Net Financial Assets (Net Debt) is a

reconciliation of the annual surplus earned in the year and the change in net financial

assets (debt). This statement reports on all operating expenses and spending to acquire

assets and inventories of supplies and reports disposal of tangible capital assets and the

use of inventory. The change in net financial assets (net debt) is an indicator if revenues

collected in the year are sufficient to cover expenses for the year.

The Consolidated Statement of Cash Flows identifies the sources and uses of cash and

cash equivalents within the year and reports on the aggregate of cash flows from

financing, investing and operating activities. A positive number equates to the amount

of cash the city has available to meet its obligations.

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The Notes and supporting schedules to the Financial Statements contain important

information and explanations, some of which are required by legislation and regulation.

The notes highlight various aspects of the financial statements and provide background

information and insight on the impacts of specific values in the financial statements.

The city is reporting for the 2016 year an annual surplus of $16.07 million increasing the overall accumulated surplus to $720.2 million (table 1). The accumulated surplus figure is an overall indicator of the financial resources the city has available to provide future services and consists of both cash and non-cash items including restricted and non-restricted reserves and equity in tangible capital assets and inventories. As illustrated in table 2, over $600 million of the accumulated surplus is tangible capital assets. The city’s consolidated operations for 2016 and 2015 are reported in the following table : Table 1 - 2016 Consolidated Financial Operations

Budgeted 2016 Actuals Variance 2015 Actuals

Revenues $ 96,604,400 $ 103,887,131 $ 7,282,731 $ 99,632,549

Expenses 90,699,800 $ 87,816,298 $ 2,883,502 $ 85,684,343

Annual Surplus 5,904,600 $ 16,070,833 $ 10,166,233 $ 13,948,206

Accumulated Surplus, Opening 704,129,674 $ 704,129,674 - $ 690,181,468

Accumulated Surplus, Closing $710,034,274 $ 720,200,507 $10,166,233 $ 704,129,674

Table 2 presents the elements of the city’s accumulated surplus and provides a comparison between the 2015 and 2016 year. Notably, equity in tangible capital assets represents the majority of the surplus. Table 2 - 2016 Accumulated Surplus Details

2016 Actuals 2015 Actuals Variance (Actuals)

Unrestricted Reserves $ 24,687,487 $ 28,171,796 (3,777,318)

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Restricted Reserves $ 92,124,484 $ 73,014,430 19,110,054

Equity in Tangible Capital Assets $ 602,964,183 $ 602,244,125 720,058

Equity in Inventory and Prepaids $ 424,353 $ 699,323 (274,970)

Accumulated Surplus, Closing $ 720,200,507 $ 704,129,674 16,070,833

FINANCIAL STATEMENTS AND ANALYSIS Statement of Financial Position The audited Statement of Financial Position (attachment 1) indicates that the overall financial position of the city improved in 2016 as financial assets are recorded at $181 million, an increase of $23.13 million from the previous year. Financial liabilities are reported at $86 million, up from 2015 by $6.9 million. Non-financial assets consist of the city’s tangible capital assets as well as inventories and prepaid expenses and in aggregate total $625 million, an increase of $123.8 thousand from 2015. The city’s accumulated surplus as highlighted in Table 2 above - increased to $720.2 million of which $602 million are tangible capital assets. It is important to note that the surplus figure is primarily the result of additional revenues, lower than expected expenses and favorable variances within some departments as well as unused funds designated to specific projects that were deferred in the 2016 year but are anticipated to be completed in 2017 and thereafter. These variances are highlighted below in the expenses by function analysis. With this in mind, the Accumulated Surplus figure is largely represented by the city’s investment in tangible capital assets meaning that accumulated surplus does not equate to available cash. Net assets amounted to $624.6 million of the total accumulated non-financial assets. Statement of Operations REVENUES BY SOURCE City revenues for 2016 were $103.8 million, which exceeded the budget by $7.28 million. This variance is predominantly attributable to sales of service income and developer contributions collected during the 2016 year. Although property taxes remain the city’s primary source of revenue, (recorded at $60 million for the 2016 year), sales of service revenue totaled $9.164 million, exceeding budgeted figures by $5.5 million. Details of these variances are provided below.

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CONSOLIDATED REVENUE – COMPARISON TO BUDGET Table 3 - 2016 Revenue Comparison to Budget

Taxation and other levies Taxation collected in 2016 totaled $59.65 million and resulted in a positive variance of $119 thousand higher than budgeted taxation at $59.47 million. The budgeted figure assigned to the taxation and other levies segment is $61.56 million, which includes penalties and interest on unpaid taxes, and 1% tax on utility properties. Currently, for reporting purposes, the city records the actuals under penalties and fines, and contributions respectively producing an apparent variance of $879 thousand highlighted in Table 3. In 2017 the budget for penalties has been reclassified to penalties and fines, payments for 1% tax on utilities will be reported as taxation. Utility Charges Utility charges which consist of water and sewer utility fees totaled $19.2 million. When compared to the 2016 budgeted amount of $ 21.22 million there appears to be a large variance however, solid waste fees collected are reported in the financial statements under the sales of service revenue source, while the budget is recorded under utility charges. Total solid waste fees collected for 2016 are $2.56 million. This is due to the restructure of revenues in the financial system, and in 2017 the actual solid waste fees will be recorded where budgeted. Sales of Services Sales of service revenues collected for the 2016 year total $9.16 million. Main drivers attributable to the sales of service revenue are additional fees from cemetery sales, community event fees, accounting fees for service and as reported above the inclusion of solid waste fees. The

2016 Budget 2016 Actuals

Variance

(Fav/(Unfavourable) %

Taxation and other levies 61,568,800$ 60,688,988$ (879,812)$ -1.4%

Utility Charges 21,222,600 19,250,925 (1,971,675) -9.3%

Sales of Services 3,661,600 9,164,716 5,503,116 150.3%

Contributions 4,190,600 7,304,634 3,114,034 74.3%

Permits and Licenses 978,200 2,827,534 1,849,334 189.1%

Investment Income 1,675,000 2,717,310 1,042,310 62.2%

Penalties and Fines 138,400 438,730 300,330 217.0%

Other Revenue 3,169,200 1,263,701 (1,905,499) -60.1%

Gain (loss) on disposals - 230,593 230,593 0.0%

Total Revenue 96,604,400$ 103,887,131$ 7,282,731$ 7.5%

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recreational department programs also realized higher than anticipated fees from aquatics and health and wellness programs as well as sponsorship revenues. Contributions Contribution revenues are difficult to forecast and for 2016 the city collected $7.304 million, resulting in a favorable variance of $3.11 million. Funds reported within that category include non-cash contributions or developer contributions which totaled $4.072 million for infrastructure received by the city during the year. Other contribution revenues include development cost charges revenue and grant revenues. Permits and Licensing Permits and licensing for 2016 totaled $2.83 million, exceeding 2016 budgeted figures by $1.85 million. Continued high levels of development activity resulted in higher revenues for application and inspection fees. The city’s practice has been to budget very conservatively for development revenues to avoid a tax increase for years when a reduction in development is expected. Similarly, business and dog licenses produced higher than anticipated revenues. In combination these two areas generated an additional $102 thousand over their respective budgets. Investment Income The city’s investment portfolio (budgeted for 2016 at $1.67 million) generated stable investment income totaling $2.7 million resulting in an additional $1.04 million of revenue. Although the average investment rate for 2016 was reported at 1.93%, a decline from previous years, the city preserved its principal balance and continued to realize a positive return. The combination of budgeting conservatively for investment income to avoid a tax increase in future years following the capital spending and the fact that more funds were anticipated to be spent in 2016, impacted this variance. For the 2017 year, as the city allocates funds toward projects and cash flow commitments, decreases will be realized in the reserve accounts and corresponding interest income will decline. More short term investments will be purchased with less principle to invest based on anticipated and budgeted cash flow commitments tied to capital project work. Penalties and Fines Penalties and fines for property taxes, water and sewer totaled $438,730, which is $300,330 more than budgeted. This is due to the restructure of revenues in the financial system, and in 2017 the budget for penalties on late taxes and utilities will be in penalties and fines where the actuals are recorded.

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Other revenues Other revenues for the year were budgeted at $3.17 million while final figures total $1.26 million. The variance is mostly due to 2016 revenue being budgeted under the other revenue category, while the actual revenues were recorded to more specific revenue accounts, such as contributions for grants. The 2017 budget moved many items out of other revenue and in to more specific categories to better align with actual results. Gain and loss on disposals Gain and loss on disposals revenue is the net result of disposing of city assets and for the 2016 year the gain is tied to the sale of city land.

EXPENSE BY FUNCTION City expenses for 2016 are reported at $87.8 million which is below budget by $2.83 million. Overall expenses varied within departments but the consolidated impact is partially attributable to ongoing city projects that were not completed in 2016 or projects that were deferred to the upcoming year as well as departmental vacancies that resulted in additional cost savings within departments. At the same time there were some departmental expense items that did exceed budgeted amounts and items of significance are noted within each expense category. In addition, amortization costs tied to the city’s tangible capital assets for 2016 totaled $11.8 million and are allocated as an expense item within each department presented on the consolidated statement of operations. Itemized amortization attributable to each department is disclosed in the segmented report or Note 21 in the financial statements. Although amortization is not an actual cash expense it is required to be recorded in the financial statements and the city allocates amortization at historical cost rates.

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CONSOLIDATED EXPENSES – COMPARISON TO BUDGET Table 4 - 2016 Expenses Comparison to Budget

General government General government expenses consist of multiple departments that include Finance, Corporate Office, Fiscal expenses and Human Resources and take into account multiple expenses items which include salaries, contracted services, insurance claims, materials and supplies, legal fees, and amortization. These expenses when consolidated are below budget by $15 thousand but it is worthy to highlight that the city did experience higher than expected legal costs ($88 thousand), additional software licensing costs ($263 thousand) as well as increased insurance claims however when aggregated against other costs that were under budget, the overall year end result produced a modest favourable variance. Engineering and public works Engineering and public works consolidated expenses were below budget by $430 thousand partially as a result of storm main repairs carried forward to 2017, staff vacancies and less amortization than budgeted. Some repair projects were considered capital under accounting standards and therefore were moved from operating expenses to capital. Snow and ice removal and drainage works were other programs impacted by the winter weather however a portion of the additional costs for snow and ice expenses were offset by transferring $399 thousand from the Snow and Ice Reserve account.

2016 Budget 2016 Actuals

Variance

(Fav/(Unfavourable) %

General Government 8,871,104$ 8,855,439$ 15,665$ 0.2%

Engineering and public works 17,922,499 17,491,505 430,994$ 2.4%

Recreation 13,424,531 12,618,315 806,216$ 6.0%

Police Services 14,840,438 14,220,414 620,024$ 4.2%

Fire and emergency services 11,032,540 11,135,010 (102,470)$ -0.9%

Development Services 3,275,545 2,884,493 391,052$ 11.9%

Solid waste operations 3,389,400 3,191,623 197,777$ 5.8%

Water operations 10,192,940 10,171,523 21,417$ 0.2%

Sanitary Sewer Operations 7,750,803 7,247,976 502,827$ 6.5%

Total Expenses 90,699,800$ 87,816,298$ 2,883,502$ 3.2%

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Recreation Recreation consolidated expenses were below budget by $800 thousand due to staff vacancies and several one-time operating projects and community event programs that are carried over to the 2017 year. Recreational projects such as the library maintenance programs, the city hall washroom renovations, the asbestos training program, and arts and culture projects represented $507 thousand of costs carried forward. Other maintenance related costs for the recreation complex were under budget and will only be spent if needed to keep the facility operational until the new facility is built. Police Services Police Services when compared to budget had a favorable variance of $620 thousand due to lower than expected police activities in Port Coquitlam compared to Coquitlam which decreased the cost share from the budgeted rate of 33.45% to 32.6%, staff vacancies, and reduced operating costs at the public safety building. For 2016 the cost share formula was based on the 2011 census data. These savings were somewhat offset by the retroactive pay increase accounted for in the 2016 year. Fire and Emergency services Fire and Emergency services reported a variance over budget by $102 thousand in expenses. This is attributable to the repairs and maintenance for fire hall #1 and costs allocated for training and fire prevention and emergency programs. This includes replacing the storage facility and replacing small equipment to meet current safety needs. These expense overages were almost entirely offset by higher than forecasted revenues. Development Services Development Services consolidated expenses for 2016 were reported $391 thousand under budget largely as a result of staff vacancies and one time projects deferred to 2017 (such as the subdivision servicing bylaw update). Solid Waste Operations Solid waste operations were slightly under budget by $197 thousand and are primarily the result of reduced solid waste administration costs and reduced recycling costs.

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Water Operations Water operations were on target. Sanitary Sewer Operations Sanitary sewer operations were under budget by $502 thousand attributable to less amortization than budgeted and some repair projects that were considered capital under accounting standards and therefore were moved from operating expenses to capital. Capital Expenditures The capital plan for 2016 totaled $21.6 million. A total of $6.5 million in capital expenditures was incurred in 2016, resulting in a variance of $15.1 million. Attachment 3 provides commentary on project status and 2016 expenses for capital projects with a 2016 budget greater than $75,000. The variance is largely attributable to our large capital projects, including the Community Recreation Complex, Blakeburn Lagoons, and Pitt River Road, which commenced construction in early 2017. The City’s Financial Management Policy allows for funding to be carried forward for those projects/purchases which are still in-progress at the end of the year.

Statement of Cash Flows

The Statement of Cash Flows records the change in cash as well as highlights the sources and uses of cash. Capital activities including the use of cash to acquire capital assets are also noted within this statement. Operating activities for 2016 generated $30.5 million while financing, capital acquisitions and investing activities utilized $28.49 million resulting in an additional $2.06 million increase in cash and cash equivalents for the year end.

Statement of Change in Net Financial Assets (Net Debt) The city realized a net operating increase in net financial assets of $16.1 million as a result of the difference between revenues and expenditures realized over the year. When combined with the beginning year balance the city records net financial assets at $ 95.1 million. As noted earlier, a net positive asset figure indicates the ability the city has to meet its obligations moving forward.

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ACCUMULATED SURPLUS AND ANNUAL SURPLUS The 2016 annual surplus of $16,070,833 is made up of amounts relating to unrestricted general reserves (-$3.78 million), unrestricted water ($266 thousand,) unrestricted sewer ($27 thousand,) restricted reserves ($19.1 million), tangible capital assets ($720 thousand) and, inventory (-$275 thousand). See note 13 in the Financial Statements. Accumulated surplus is the cumulative amount of surplus from all prior years and the current year, whereas the annual surplus is the difference between revenue and expenses for the current year. The minimum balance policy is based on the accumulated surplus. The policy to transfer funds to the LTR is based on the annual surplus. The Annual Surplus Allocation Policy sets out the guidelines for the fiduciary management of any year-end operating surplus in the general fund. Based on the policy, accumulated surplus should be maintained at a minimum of 12% of the prior year’s general property taxation revenue. For 2016 the balance on the Audited Financial Statements is $15.3 million which exceeds the minimum balance required of $7.2 million. The following table outlines the planned balance and actuals for general accumulated surplus :

Budget Actual

Opening Balance $19,102,569 $19,102,569 Annual Surplus (Deficit) (11,923,213) (3,777,318)

Closing Balance 7,179,356 15,325,251 2016 Project Funds Carried Forward - (3,468,936) Balance including commitments 7,179,356 11,856,315 Minimum balance 7,150,000 7,150,000

Balance Available $29,356 $4,706,315

• Opening balance: represents the starting amount in accumulated surplus for 2016. • Annual Surplus (Deficit): Represents the sum of all the ins and outs to accumulated surplus for the year. • Closing balance: represents opening balance plus annual surplus (deficit). As shown above, after factoring in transfers to the rec complex and rcmp reserves (~ $9 million) and funding allocated to one-time projects (~ $3 million), there was a planned net withdrawal from accumulated surplus of $11.9 million. Actual revenues were higher than expected and actual expenses were lower than expected thereby generating extra funds for the city. Additionally, some one-time projects were not completed in 2016 and funding was carried forward to the 2017 budget. As a result, the actual

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annual surplus (deficit) is smaller than forecasted. After factoring in funding carried forward to 2017 for one-time projects, the un-committed balance of accumulated surplus is $11.9 million. The minimum balance required is $7.2 million thereby leaving $4.7 million available. As per the Annual Operating Surplus Allocation Policy these remaining funds will be considered during the next round of financial plan deliberations to be used to fund potential one-time, non-recurring projects. Allocation of Annual Surplus The surplus policy states that once the minimum balance is achieved, a minimum of 50% of any then remaining current annual general fund surplus will be transferred to the Long Term Replacement Infrastructure Reserve (“LTR”). Because of budgeted transfers to reserves and the community recreation complex, the general fund is reporting an annual deficit of $3.78 million. As such, no transfers to LTR are recommended at this time. After accounting for $400 thousand of the 2016 RCMP budget that was funded internally from the city’s police operating reserve, the anticipated amount of 2016 police surplus available to transfer to the police operating reserve is $220 thousand. The current balance of the reserve is $1.46 million. Due to projected cost increases due to added positions and less vacancies, and the reduction in the tax funded portion of the RCMP budget for 2017/2018, it is recommended that the full $220 thousand of unused funds is transferred to the operating reserve to fund future RCMP operating expenses. This approach is consistent with the treatment of other specific budgets outlined in the financial management policy, such as snow and ice removal, May Day, and parking, whereby any positive variance in the year is transferred to the corresponding reserve to be used to offset costs in years where there is a negative variance. If approved, this transfer will result in a decrease to the 2016 reported accumulated surplus bringing the new total to $15.1 million, the balance available to $4.5 million, and an increase to the RCMP operating reserve bringing the new total to $1.68 million. Restricted Reserves The city maintains a Council approved policy which directs the use of restricted reserves. Initial establishment of reserves, as well as transfers to and from are guided by the Financial Management Policy and are approved by Council in the annual Financial Plan Bylaw. As outlined in the Financial Management Policy, the purpose of setting aside reserves is to:

Provide a source of funds for future capital expenditures.

Provide a source of funding for areas of expenditure that fluctuate significantly from year to year (equipment replacement, special building maintenance, etc.).

Protect the city from uncontrollable or unexpected increases in expenditures or unforeseen reductions in revenues, or a combination of the two.

Provide for working capital to ensure sufficient cash flow to meet the city’s needs throughout the year.

22


The Community Charter is the primary legislative source for the rules governing the use of restricted reserves. The Charter is supplemented by the city’s reserve bylaws which provide more specific details on the intended purposes of each of the city’s restricted reserves. These reserve balances total $92.12 million at the end of 2016, an increase of $19.1 million, and are designated for specific use for which they were established. This increase was higher than expected due to less capital work being done as well as unbudgeted proceeds from land sales. Details of the reserves are shown in Note 14 of the Financial Statements. Contributions to reserves include:

funding from property taxes (Capital Funding, Long Term Infrastructure contributions),

transfer from accumulated surplus to the recreation complex reserve

contributions from developers (parking), disposals of assets (land, equipment),

surplus operating funds as per the Financial Management Policy (Arts & Culture, Snow & Ice Removal, Canada/May Day, Election).

The interest allocation is based on the city’s average of the beginning and ending reserve balances and the average interest rate earned in the year. Tangible Capital Assets Represents the amount of equity that the city has related to its tangible capital assets. This is defined as the historical cost of the asset, minus any debt used to finance the purchase/acquisition of the tangible capital asset and minus any amortization on the asset. There was a $720 thousand increase in tangible capital assets in 2016. Factors that result in an increase to the balance include:

Purchase/acquisition of new tangible capital assets (without the use of external borrowing)

Repayment of any outstanding debt used to finance the purchase/acquisition of tangible capital assets

Factors that result in a decrease to the balance include:

Amortization or write-down of assets

Sale or disposal of assets CONCLUSION: In summary the city is reporting for the 2016 year an annual surplus of $16.07 million increasing the overall accumulated surplus to $720.2 million. The accumulated surplus figure is an overall primary indicator of the financial resources the city has available to provide future services and consists of both cash and non-cash items including restricted and non-restricted reserves and equity in tangible capital assets and inventories. The Accumulated Surplus figure is largely represented by the city’s investment in its tangible capital assets meaning that accumulated surplus does not equate to available cash. Given these points and with the 2017 capital works in

23


progress the long term financial planning process will continue to reflect the city’s ability to meet these obligations. The Community Charter requires that Council accepts the Financial Statements (Section 167(1)(b))


_______________________________ Sharleen Karamanian, CPA, CGA Manager of Accounting Services Attachment 1: 2016 Draft Audited Financial Statements Attachment 2: A Guide to Local Government Financial Statements Attachment 3 : 2016 Capital Variance

24

2016 2015

FINANCIAL ASSETS

Cash and cash equivalents 7,535,890$ 5,468,008$

Investments (Note 3) 165,938,783 145,692,744

Accounts receivable (Note 4) 7,988,055 7,140,789

Due from other governments (Note 5) 287,825 310,402

181,750,553 158,611,943

LIABILITIES

Accounts payable and accrued liabilities (Note 6) 12,750,321 10,131,023

Deferred revenues (Note 7) 10,576,583 10,244,066

Deposits (Note 8) 6,556,997 6,219,597

Development cost charges (Note 9) 32,317,681 27,916,031

Post-employment future benefits and compensated absences (Note 10) 2,737,000 2,915,000

Debt (Note 11) 21,672,308 22,241,280

86,610,890 79,666,997

NET FINANCIAL ASSETS 95,139,663 78,944,946

NON-FINANCIAL ASSETS

Tangible capital assets (Note 12) 624,636,491 624,485,405

Inventories 329,998 584,139

Prepaid expenses 94,355 115,184

625,060,844 625,184,728

ACCUMULATED SURPLUS (Note 13) 720,200,507$ 704,129,674$

Commitments and Contingencies (Note 17)

See accompanying notes to consolidated financial statements

JOHN LEEBURN

Chief Administrative Officer

KAREN GROMMADA

Director of Finance

THE CORPORATION OF THE CITY OF PORT COQUITLAM

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at December 31, 2016

25

Attachment 1.

2016

Budget 2016 2015

(note 2(c) and 20)

REVENUE

Taxation and other levies (Note 19) 61,568,800$ 60,688,988$ 58,915,659$

Utility charges 21,222,600 19,250,925 19,274,060

Sale of services 3,661,600 9,164,716 8,179,258

Contributions 4,190,600 7,304,634 3,793,559

Permits and licenses 978,200 2,827,534 2,481,191

Investment income 1,675,000 2,717,310 2,176,755

Penalties and fines 138,400 438,730 375,350

Other revenue 3,169,200 1,263,701 248,775

Gain on disposals and writedowns - 230,593 4,187,942

96,604,400$ 103,887,131$ 99,632,549$

EXPENSES

General government 8,871,104 8,855,439$ 8,629,553$

Engineering and public works 17,922,499$ 17,491,505 16,267,492

Recreation 13,424,531 12,618,315 12,855,248

Police services 14,840,438 14,220,414 13,528,327

Fire and emergency services 11,032,540 11,135,010 10,541,505

Development services 3,275,545 2,884,493 2,986,839

Solid waste operations 3,389,400 3,191,623 3,447,295

Water operations 10,192,940 10,171,523 10,018,955

Sanitary sewer operations 7,750,803 7,247,976 7,409,129

90,699,800$ 87,816,298$ 85,684,343$

ANNUAL SURPLUS 5,904,600$ 16,070,833 13,948,206

ACCUMULATED SURPLUS, beginning of year 704,129,674 704,129,674 690,181,468

ACCUMULATED SURPLUS, end of year 710,034,274$ 720,200,507$ 704,129,674$



CONSOLIDATED STATEMENT OF OPERATIONS

For the Year Ended December 31, 2016

26

2016 2015

CASH PROVIDED (USED) BY:

OPERATING ACTIVITIES

Annual surplus 16,070,833$ 13,948,206$

Items not involving cash:

Developer contributions of tangible capital assets (4,072,926) (374,662)

Amortization 11,831,408 12,035,385

Gain on disposal of tangible capital assets (230,593) (4,187,942)

Write-downs of tangible capital assets - -

Non-cash post employment future benefits and compensated absences (178,000) (70,000)

Change in non-cash operating assets and liabilities

Accounts receivable (847,266) 1,534,922

Due from other governments 22,577 292,712

Accounts payable and accrued liabilities 2,619,298 (2,763,203)

Deferred revenues 332,517 (42,953)

Deposits 337,400 (1,204,015)

Development cost charges 4,401,650 1,486,491

Inventories 254,141 (12,225)

Prepaid expenses 20,829 322,851

Cash provided by operating activities 30,561,868 20,965,567

FINANCING ACTIVITIES

Debt repayment (568,972) (546,951)

Cash used in financing activities (568,972) (546,951)

CAPITAL ACTIVITIES

Cash used to acquire tangible capital assets (11,295,897) (8,529,362)

Cash received from disposals of tangible capital assets 3,616,922 5,526,278

Cash used in capital activities (7,678,975) (3,003,084)

INVESTING ACTIVITIES

Purchase of investments (156,000,000) (135,000,000)

Redemption of investments 135,753,961 117,060,309

Cash used in investing activities (20,246,039) (17,939,691)

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,067,882 (524,159)

CASH AND CASH EQUIVALENTS, beginning of year 5,468,008 5,992,167

CASH AND CASH EQUIVALENTS, end of year 7,535,890$ 5,468,008$


CONSOLIDATED STATEMENT OF CASH FLOWS



27

2016

Budget 2016 2015

(note 2(c) and 20)

Annual surplus 5,904,600$ 16,070,833$ 13,948,206$

Acquisition of tangible capital assets (18,572,500) (11,295,897) (8,529,362)

Developer contributions of tangible capital assets (1,000,000) (4,072,926) (374,662)

Amortization of tangible capital assets 13,500,000 11,831,408 12,035,385

Gain on disposal of tangible capital assets - (230,593) (4,187,942)

Write-downs of tangible capital assets - - -

Proceeds on disposal of tangible capital assets - 3,616,922 5,526,278

Use (acquisition) of inventories - 254,141 (12,225)

Use of prepaid expenses - 20,829 322,851

INCREASE in Net Financial Assets (167,900) 16,194,717 18,728,529

NET FINANCIAL ASSETS, beginning of year 78,944,946 78,944,946 60,216,417

NET FINANCIAL ASSETS, end of year 78,777,046$ 95,139,663$ 78,944,946$




CONSOLIDATED STATEMENT OF CHANGE IN NET FINANCIAL ASSETS

28

1. OPERATIONS

2 SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Presentation

(b) Basis of Accounting

(c)

(d)

(e) Investments

(f) Revenue Recognition

The consolidated financial statements comprise the City's General, Water, Sewer and Reserve funds and the

Port Coquitlam Community Foundation. All inter-fund and inter-entity balances have been eliminated.


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2016

The Corporation of the City of Port Coquitlam (the "City") is incorporated under the Local Government Act of British

Columbia. The City's principal activities include the provision of local government services to residents of the

incorporated area. These include administrative, protective, transportation, environmental, recreational, water and

sanitary sewer services.

The consolidated financial statements of the City are prepared in accordance with Canadian Public Sector Accounting

Standards as prescribed by the Public Sector Accounting Board ("PSAB") of the Chartered Professional Accountants of

Canada.

Cash and cash equivalents consist of cash, highly liquid money market investments and investments with

maturities of less than 90 days at acquisition.

Under the Community Charter, City Council may, by bylaw, establish reserve funds for specified purposes:

Trust funds are those that are administered for certain beneficiaries. In accordance with PSAB

recommendations, trust funds are not included in the City's consolidated financial statements. Trust funds

administered by the City are presented in Note 18.

Budget Information

The budget information reported in the consolidated statement of operations and the consolidated statement

of change in net financial assets reflects the 2016 Financial Plan Bylaw adopted by City Council on May 9, 2016.

Cash and Cash Equivalents

The City follows the accrual method of accounting for revenues and expenses. Revenues are recognized in the

year in which they are earned and measurable. Expenses are recognized as they are incurred and measurable as

a result of receipt of goods and services and/or the creation of a legal obligation to pay.

Investments are recorded at cost, adjusted for amortization of premiums or discounts. Provisions for losses are

recorded when they are considered to be other than temporary.

(i) Internally restricted reserves are in accordance with City policy and with bylaws adopted by Council pursuant

to the Community Charter. The policy and bylaws define the funding source for each reserve and their usage.

(ii) Statutorily restricted reserves are reserves restricted by the provincial government in accordance with the

Community Charter. The legislation defines the funding source for each reserve and their usage.

Taxes are recorded at estimated amounts when they meet the definition of an asset, they are authorized and

the taxable event occurs. Levies imposed by other taxing authorities are not included as taxes for municipal

purposes. British Columbia Assessment's appeal process may adjust taxes by way of supplementary roll

adjustments. These adjustments are recognized at time they are assigned.29

2 SIGNIFICANT ACCOUNTING POLICIES - Continued

(g)

(h)

(i)

(j) Post-employment Future Benefits and compensated absences

(k)

(l) Non-Financial Assets

Tangible Capital Assets

Major Asset Category Useful Life

Land Not amortized

Parks Infrastructure 3 to 100 years

Vehicles, Machinery and Equipment 5 to 25 years

Transportation Infrastructure 10 to 100 years

Buildings 20 to 70 years

Drainage Infrastructure 25 to 100 years

Land Improvements 45 to 100 years

Water Infrastructure 25 to 80 years

Sanitary Infrastructure 25 to 100 years

Non-financial assets are not available to discharge existing liabilities and are held for use in the provision of

services. They are not intended for sale in the ordinary course of operations.

Tangible capital assets are recorded at cost which includes amounts that are directly attributable to acquisition,

construction, development or betterment of the asset. The cost, less residual value, is amortized on a straight

line basis over the asset's useful life as follows:

Deferred revenue consists of property taxes, utilities, and recreation program fees paid in advance for services

yet to be provided. The City defers amounts collected from permits, licenses, and other fees and recognizes the

amount as revenue in the year in which related inspections are performed or other related expenditures are

incurred.

Deposits

Deposits represent cash collected by the City as security against work performed by property developers. The

security is returned to the developer upon satisfactory completion of the work, or recognized into revenue if

the work is not performed in accordance with the applicable bylaws.

Debt is recorded in the consolidated financial statements net of sinking fund assets.

Development Cost Charges

Amortization begins once the asset is in use and ends when the asset is disposed or decommissioned. Assets

under construction are not amortized until the asset is available for productive use.

Tangible capital assets received as contributions are recorded at their fair value at the date of receipt and are

also recorded as revenue.

Interest is capitalized whenever external debt is issued to finance the construction of tangible capital assets.

Development cost charges, collected to pay for capital projects due to be developed, are deferred upon receipt

and are recognized as revenue when the capital costs for which they were collected are incurred.

The City and its employees make contributions to the Municipal Pension Plan. As this plan is a multi-employer

plan, contributions are expensed as incurred.

Post-employment future benefits and compensated absences also accrue to City employees. Liabilities related

to these benefits are actuarially determined based on service and best estimates of retirement ages and

expected future salary and wage increases. Liabilities under these benefits plans are accrued based on

projected benefits as the employees render services necessary to earn the future benefits.

Debt

Deferred Revenue

30

2 SIGNIFICANT ACCOUNTING POLICIES - Continued

(l) Non-Financial Assets-Continued

Inventories

(m) Government Transfers

(n) Liabilities for Contaminated Sites

(o) Use of Estimates

(p) Segment Disclosure

Inventories held for consumption or resale are recorded at the lower of cost and replacement cost.

A segment is defined as a distinguishable activity or group of activities of a government for which it is

appropriate to separately report financial information to achieve the objectives of the standard. Financial

information is presented in segmented format in Note 21.

Leases, which transfer substantially all of the benefits and risks incidental to ownership of property, are

accounted for as leased tangible capital assets. All other leases are accounted for as operating leases and the

related payments are charged to expenses as incurred.

Restricted transfers from governments are deferred and recognized as revenue as the related expenses are

incurred or the stipulations in the related agreement are met. Unrestricted transfers are recognized as revenue

when received or if the amount to be received can be reasonably estimated and collection is reasonably

assured.

The preparation of consolidated financial statements requires management to make estimates and assumptions

that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the

date of the consolidated financial statements and the reported amounts of revenue and expenses during the

reporting period. Significant areas requiring the use of management estimates relate to the determination of

post-employment future benefits and compensated absences, allowance for doubtful accounts receivable,

provision for contingencies and liability for contaminated sites, valuation of contributed tangible capital assets,

and useful lives of tangible capital assets. Actual results may differ from management’s estimates as additional

information becomes available. Adjustments, if any, will be reflected in the consolidated financial statements in

the period that the change in estimate is made, as well as in the period of settlement if the amount is different.

Contaminated sites are a result of contamination being introduced into air, soil, water or sediment of a

chemical, organic, radioactive material or live organism that exceeds an environmental standard. Liabilities are

recorded net of any expected recoveries.

A liability for remediation of contaminated sites is recognized when a site is not in productive use and the

following criteria are met:

(i) An environmental standard exists;

(ii) Contamination exceeds the environmental standards;

(iii) The City is directly responsible of accepts responsibility;

(iv) It is expected that future economic benefits will be given up and

(v) A reasonable estimate of the amount can be made.

The liability is recognized as management's estimate of the cost of post-remediation including operation,

maintenance, and monitoring that are an integral part of the remediation strategy for a contaminated site.

Natural resources, works of art and historic assets are not recorded as assets in these consolidated financial

statements.

31

3 INVESTMENTS

2016 2015

Short-term deposits 160,000,000$ 140,000,000$

Municipal Finance Authority Intermediate Fund 5,938,783 5,692,744

165,938,783$ 145,692,744$

4 ACCOUNTS RECEIVABLE

2016 2015

Property tax and utility receivable 2,360,428$ 2,674,639$

Accounts receivable 1,120,756 952,362

Development cost charges receivable 2,510,646 1,620,826 Other 1,996,225 1,892,962

7,988,055$ 7,140,789$

5 DUE FROM OTHER GOVERNMENTS

2016 2015

Government of Canada $ 229,952 $ 221,957

Province of British Columbia 57,747 84,631

Other governments 126 3,814

$ 287,825 $ 310,402

6 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

2016 2015

Accounts payable and accrued liabilities 9,834,004$ 7,522,812$

Wages and benefits payable 2,600,561 1,987,623

Statutory holdbacks 309,287 107,893

Due to other governments 6,469 512,695

12,750,321$ 10,131,023$

Investments have maturity dates of more than 90 days at acquisition and include term deposits in credit unions and deposits

in the Municipal Finance Authority. Short-term deposits include term deposits in credit unions guaranteed by the Province

of BC with varying maturity dates from January, 2017 to December, 2017 and have rates of return ranging from 1.65% to

2.07% (2015 - 1.45% to 2.12%). The carrying value of the Municipal Finance Authority Intermediate Fund at December 31

2016 was $5,938,783 (2015 - $ 5,692,744 ) and the market value at December 31, 2016 was $ 5,901,367 (2015 -$

5,836,443).

32

7 DEFERRED REVENUES

December 31 2015 Additions Revenue earned December 31 2016

Property Taxes and Utilities 7,248,183$ 13,514,159$ (13,124,822)$ 7,637,520$

Program and Services 2,027,314 2,154,334 (2,224,511) 1,957,137

Other 968,569 997,468 (984,111) 981,926

Total 10,244,066$ 16,665,961$ (16,333,444)$ 10,576,583$

8 DEPOSITS

9 DEVELOPMENT COST CHARGES

Third Party Interest Capital

Contributions Allocation Expenditures

Area 1

Drainage 4,042,353$ 23,443$ 78,244$ -$ 4,144,040$

Transportation 8,969,887 202,985 174,987 (9,361) 9,338,498

Parks 3,580,147 (3,199) 66,809 55,241 3,698,998

Water 4,616,732 10,013 89,200 - 4,715,945

Sanitary 1,446,471 6,215 27,977 - 1,480,663

Area 2

Drainage (119,624) 145,204 (908) - 24,672

Transportation 831,433 3,767,091 47,454 (512,412) 4,133,566

Parks 1,462,514 75,498 28,544 (42,596) 1,523,960

Water 1,278,962 73,921 25,397 - 1,378,280

Sanitary 795,056 45,346 15,782 - 856,184

Parks Interest 1,012,100 - 19,450 (8,675) 1,022,875

27,916,031$ 4,346,517$ 572,936$ (517,803)$ 32,317,681$

December 31, 2016December 31, 2015

Deposits represent cash collected as security under the following bylaws: Port Coquitlam Highway Bylaw, 1984 No. 2011;

Subdivision Servicing Bylaw 1987 No. 2241; and City of Port Coquitlam Soil Removal and Deposit Bylaw 2002 No. 3331.

Deferred revenues relate to amounts deposited in advance of services performed.

33

10 POST-EMPLOYMENT FUTURE BENEFITS AND COMPENSATED ABSENCES

The City provides sick leave and retirement benefits to its employees. Eligible employees accumulate sick leave entitlement on a

monthly basis and can only use this entitlement for paid time off under certain circumstances. Retirement benefits represent

the City's share of the cost to provide eligible employees with severance pay upon retirement.

The amount recorded for these benefits is based on an actuarial valuation done by an independent firm of actuaries using a

projected benefit actuarial valuation method pro-rated on services. The most recent actuarial valuation of the City’s future

benefits was completed as at December 31, 2014 and the results have been extrapolated to December 31, 2016.

Information regarding the City’s obligations for these benefits is as follows:

Accrued benefit obligation,

Beginning of the year

2015

$ 3,687,000 Service cost 197,000Interest cost 109,000Benefit payments (471,000)Amortization of net actuarial losses 17,000 Accrued benefit obligation,

End of the year

3,539,000Unamortized actuarial loss (624,000)Accrued benefit liability $ 2,915,000

The unamortized actuarial loss is amortized over a period equal to the employees’ average remaining service lifetime. The

significant actuarial assumptions adopted in measuring the City’s accrued benefit liability are as follows:

2016 2015

Discount rates 3.20% 3.00%Expected future inflation rates 2.50% 2.50%

Expected compensation increases

Expected average remaining service lifetime 2.58% - 4.63%

10 years2.58% - 4.63%

10 years

11 DEBT

The City incurs debt through the Municipal Finance Authority (MFA) in accordance with the Community Charter to finance

certain capital expenditures. Sinking Fund assets managed by the MFA are netted against related debt. The gross amount of

debt and the amount of sinking fund assets available to retire the debt are as follows:

2015

Coast Meridian Overpass, Bylaw

3611, 4.13% due 2039

Net Debt

$ 22,241,280

Future payments on net outstanding debt over the next five years and thereafter are paid from the General Fund and are as

follows:

2017 $ 1,478,252

2018 1,478,252

2019 1,478,252

2020 1,478,252

2021 1,478,252

Thereafter 26,608,547

Principal and interest payments 33,999,807

Amount representing interest 12,327,499

Debt Principal repayments $ 21,672,308

The City paid $909,280 net of earnings on debt reserve deposit, in interest on debt during the year (2015 - $931,301).

Non-Vested Sick

Leave Severance 2016

$ 641,000 $ 2,898,000 $ 3,539,000

40,000 162,000 202,000

20,000 87,000 107,000

(52,000) (532,000) (584,000)(12,000) 170,000 158,000

637,000 2,785,000 3,422,000(340,000) (345,000) (685,000)

$ 297,000 $ 2,440,000 $ 2,737,000

2016

Gross Debt Sinking Fund

Asset Net Debt

$ 25,000,000 $ 3,327,692 $ 21,672,308

34

12 TANGIBLE CAPITAL ASSETS(a) Assets Under Construction: Assets under construction having a value of $ 4,646,266 (2015 - $5,620,560) have not been amortized. Amortization of these assets will commence when the assets are put into service.

(b)

(c)

(d)

As at December 31, 2016 Assets

Vehicles, Under

Parks Machinery, Transportation Land Sanitary Construction 2016

Land Infrastructure Equipment Infrastructure Buildings Drainage Improvements Water Sewer (AUC) Total

COST

Opening Balance $ 219,696,864 $ 22,873,303 $ 24,796,882 $ 259,771,827 $ 37,256,695 $ 87,419,757 $ 20,395,464 $ 75,201,350 $ 57,675,355 $ 5,620,560 $ 810,708,057

Add: Additions 5,928,385 101,159 1,220,800 1,782,076 (227,086) 876,563 - 535,935 732,134 4,418,857 15,368,823

Add/(Deduct): Transfers from AUC - 2,364,259 712,212 721,544 594,732 114,568 128,810 247,199 429,107 (5,312,431) -

Less: Disposals (2,313,090) (4,462,656) (2,044,155) (7,153) - (4,025) - (80,747) (57,714) (80,720) (9,050,260)

Closing Balance 223,312,159 20,876,065 24,685,739 262,268,294 37,624,341 88,406,863 20,524,274 75,903,737 58,778,882 4,646,266 817,026,620

ACCUMULATED AMORTIZATION

Opening Balance - 14,173,813 14,208,808 54,070,874 17,627,952 29,294,160 5,687,763 30,977,457 20,181,825 - 186,222,652

Add: Amortization - 722,067 1,790,169 4,326,394 923,095 1,309,871 290,096 1,597,516 872,200 - 11,831,408

Less: Accumulated Amortization on Disposals - (3,688,260) (1,926,356) (2,132) - (575) - (25,020) (21,588) - (5,663,931)

Closing Balance - 11,207,620 14,072,621 58,395,136 18,551,047 30,603,456 5,977,859 32,549,953 21,032,437 - 192,390,129

Net Book Value as at

December 31, 2016 $ 223,312,159 $ 9,668,445 $ 10,613,118 $ 203,873,158 $ 19,073,294 $ 57,803,407 $ 14,546,415 $ 43,353,784 $ 37,746,445 $ 4,646,266 $ 624,636,491

As at December 31, 2015 Assets

Vehicles, Under

Parks Machinery, Transportation Land Sanitary Construction 2015

Land Infrastructure Equipment Infrastructure Buildings Drainage Improvements Water Sewer (AUC) Total

COST

Opening Balance $ 219,675,768 $ 22,581,751 $ 23,396,279 $ 257,862,608 $ 36,596,351 $ 86,641,124 $ 20,524,544 $ 74,248,236 $ 57,588,015 $ 5,291,264 $ 804,405,940

Add: Additions 27,699 291,552 2,104,055 1,700,311 660,344 732,735 - 1,363,889 89,406 1,934,033 8,904,024

Add/(Deduct): Transfers from AUC - - - 1,385,944 - 113,453 - 105,340 - (1,604,737) -

Less: Disposals (6,603) - (703,452) (1,177,036) - (67,555) (129,080) (516,115) (2,066) - (2,601,907)

Closing Balance 219,696,864 22,873,303 24,796,882 259,771,827 37,256,695 87,419,757 20,395,464 75,201,350 57,675,355 5,620,560 810,708,057

ACCUMULATED AMORTIZATION

Opening Balance - 13,356,911 12,763,076 50,331,624 16,741,268 28,021,987 5,477,710 29,432,812 19,325,450 - $ 175,450,838

Add: Amortization - 816,902 2,004,675 4,282,092 886,684 1,296,389 289,663 1,601,280 857,700 - 12,035,385

Less: Accumulated Amortization on Disposals - - (558,943) (542,842) - (24,216) (79,610) (56,635) (1,325) - (1,263,571)

Closing Balance - 14,173,813 14,208,808 54,070,874 17,627,952 29,294,160 5,687,763 30,977,457 20,181,825 - 186,222,652

Net Book Value as at

December 31, 2015 $ 219,696,864 $ 8,699,490 $ 10,588,074 $ 205,700,953 $ 19,628,743 $ 58,125,597 $ 14,707,701 $ 44,223,893 $ 37,493,530 $ 5,620,560 $ 624,485,405

Contributed Tangible Capital Assets: Contributed tangible capital assets (including transportation, drainage, water and sanitary sewer assets) have been recognized at fair market value at the date of contribution. The value of contributed assets received during

the year is $4,072,926 (2015 - $374,662).

Write-down of tangible capital assets: The write-down of tangible capital assets during the year was nil (2015-nil).

Works of art and historical treasures: The City manages and controls some works of art and non-operational historical assets located at City sites and public display areas. These assets are not recorded as tangible capital assets and are not amortized.

35

13 ACCUMULATED SURPLUS

2016 2015

Unrestricted Reserves

General 15,325,251$ $ 19,102,569

Water 6,764,871 6,499,179

Sewer 2,597,365 2,570,048

24,687,487 28,171,796

Restricted reserves (Note 14) 92,124,484 73,014,430

Equity in tangible capital assets (Note 15) 602,964,183 602,244,125

Equity in inventory and prepaids 424,353 699,323

603,388,536 602,943,448

$ 720,200,507 $ 704,129,674

14 RESTRICTED RESERVES

Contributions / Interest Use of

Transfers Allocation Reserves

Building maintenance 2,991,083$ 2,600$ 57,314$ (45,518)$ 3,005,479$

Cemetery expansion 55,356 39,712 1,121 (34,531) 61,658

Community amenities 180,958 - 3,492 - 184,450

Environmental 545,100 - 9,807 (73,958) 480,949

Equipment 9,659,899 2,092,449 189,668 (929,211) 11,012,805

Gas tax 437,102 221,383 10,573 - 669,058

Land sale 15,274,954 5,335,066 300,010 (4,795,830) 16,114,200

Long term infrastructure 16,562,152 4,414,800 362,252 21,339,204

Operating 2,483,475 268,414 46,088 (462,073) 2,335,904

Parking 2,820,964 30,000 54,568 (17,223) 2,888,309

Parks and recreation 638,559 432,200 14,863 (169,136) 916,486

Parkland acquisition 1,156,001 899,434 30,990 - 2,086,425

Public safety building 270,105 40,900 5,325 (29,247) 287,083

Public works special capital 2,301,838 - 44,426 - 2,346,264

Recreation complex 696,935 5,582,500 67,322 - 6,346,757

RCMP 1,183,476 249,000 25,244 - 1,457,720

Roads and drainage

infrastructure 7,587,109 1,635,850 150,436 (1,220,867) 8,152,528

Sewer 2,915,871 789,500 62,411 (153,812) 3,613,970

Social housing 250,602 17,500 5,005 - 273,107

Unallocated capital 4,965,860 1,788,000 112,483 (63,498) 6,802,845

Water 37,031 1,989,100 17,073 (293,921) 1,749,283

73,014,430$ 25,828,408$ 1,570,471$ (8,288,825)$ 92,124,484$

15 EQUITY IN TANGIBLE CAPITAL ASSETS

2016 2015

Cost of tangible capital assets (Note 12) 817,026,620$ 810,708,057$

Accumulated amortization (Note 12) (192,390,129) (186,222,652)

Debt incurred to purchase tangible capital assets (Note 11) (21,672,308) (22,241,280)

602,964,183$ $ 602,244,125

December 31,

2015

December 31,

2016

36

16 PENSION PLAN

17 COMMITMENTS AND CONTINGENCIES

(a)

(b)

(c)

(d)

A number of legal claims have been initiated against the City in varying or unspecified amounts. The

outcome of these claims cannot reasonably be determined at this time. The amount of loss, if any, arising

from these claims will be recorded in the period in which the loss is realized. Liability insurance is carried by

the City, subject to a deductible of $250,000. The City self insures claims under $250,000.

The City is a shareholder and member of E-Comm Emergency Communications for Southwest British

Columbia Incorporated (E-Comm) whose services provided include: regional 9-1-1 call centre for the

Greater Vancouver Regional District; Wide Area Radio network; dispatch operations; and records

management. The City has 1 Class A share and 2 Class B share (of a total of 28 Class A and 23 Class B shares

issued and outstanding as at December 31, 2016).

As a Class A shareholder, the City shares in both funding the future operations and capital obligations of E-

Comm (in accordance with a cost sharing formula), including any lease obligations committed to by E-Comm

up to the shareholder’s withdrawal date.

The City provides a share of both the ongoing operations and any additional costs relating to capital assets

(in accordance with a negotiated agreement) for the RCMP building located at 2986 Guildford Way,

Coquitlam, BC.

The employer and its employees contribute to the Municipal Pension Plan (a jointly trusteed pension plan). The board of

trustees, representing plan members and employers, is responsible for administering the plan, including investment of

assets and administration of benefits. The plan is a multi-employer defined benefit pension plan. Basic pension benefits

are based on a formula. As at December 31, 2015, the plan has about 189,000 active members and approximately

85,000 retired members. Active members include approximately 37,000 contributors from local governments.

Every three years, an actuarial valuation is performed to assess the financial position of the plan and adequacy of plan

funding. The actuary determines an appropriate combined employer and member contribution rate to fund the plan.

The actuary’s calculated contribution rate is based on the entry-age normal cost method, which produces the long-term

rate of member and employer contributions sufficient to provide benefits for average future entrants to the plan. This

rate is then adjusted to the extent there is amortization of any funding deficit.

The most recent valuation for the Municipal Pension Plan as at December 31, 2015, indicated a $2,224 million funding

surplus for basic pension benefits on a going concern basis. The City paid $2,699,947 (2015 - $2,939,031) for employer

contributions while employees contributed $2,179,888 (2015 - $2,395,079) to the plan in fiscal 2016. The next valuation

will be as at December 31, 2018, with results available in 2019.

The loan agreements with the Greater Vancouver Regional District and the Municipal Finance Authority

provide that, if at any time the scheduled payments provided for in the agreements are not sufficient to

meet the Authority's obligations in respect of such borrowing; the resulting deficiency becomes a joint and

several liability of the City and the other participants.

Employers participating in the plan record their pension expense as the amount of employer contributions made during

the fiscal year (defined contribution pension plan accounting). This is because the plan records accrued liabilities and

accrued assets for the plan in aggregate, resulting in no consistent and reliable basis for allocation the obligation, assets

and cost to individual employers participating in the plan.

37

18 TRUST FUNDS

2016 2015

Cemetery Perpetual Care Fund

Cash balance, beginning of the year 1,407,951$ 1,327,352$

Net contributions received 51,239 53,383

Interest earned 27,668 27,216Cash balance, end of the year 1,486,858$ 1,407,951$

19 TAXATION AND OTHER LEVIES

2016 2015

Gross taxes levied on property $ 95,832,824 $ 93,415,008

Taxes levied and collected on behalf of other jurisdictions

Province of BC - School Taxes 27,700,065 27,145,709

Greater Vancouver Regional District 840,225 809,029

BC Assessment Authority 894,348 870,350

South Coast British Columbia Transportation Authority 5,706,014 5,671,405

Municipal Finance Authority 3,184 2,856

35,143,836 34,499,349

Taxation revenue $ 60,688,988 58,915,659$

20 BUDGET INFORMATION

Budget Amount

Revenue 96,604,400

Expenses (90,699,800)

Annual surplus per consolidated statement of operations 5,904,600

Add:

Amortization 13,500,000

Less:

Transfers from reserves 613,700

Capital expenditures (18,572,500)

Capital contributed by developers (1,000,000)

Debt principal repayments (445,800) Approved budget -$

In addition to levying and collecting real property tax for municipal purposes, the City is required to levy and collect

taxes on behalf of other jurisdictions as noted below:

Certain assets have been conveyed or assigned to the City to be administered as directed by an agreement or statute.

The City holds the assets for the benefit of, and stands in a fiduciary relationship, to the beneficiary. The following

trust fund is excluded from the City’s consolidated financial statements.

The budget information presented in these consolidated financial statements is based upon the 2016 Financial Plan Bylaw approved

by Council on May 9, 2016. The chart below reconciles the approved budget to the budget figure reported in these consolidated

financial statements.

38

21 OPERATIONS BY SEGMENT

General Government:

General: Includes activities that are attributable to multiple segments.

Corporate Support: These support services include: communications and administrative services, corporate office and lands, bylaw services and information services.

Finance: Provides financial services to citizens, City departments and City Council including financial planning and systems, accounting services, revenue and collections, payroll, purchasing and risk management.

Development Services: Ensures orderly and safe development within the City, including Planning, Building and Development Engineering services.

Solid Waste: Includes curbside garbage, recycling and organics collection and glass collection from depot locations across the City.

Water Operations: The water utility is an essential service delivered by the City to its residents and businesses for the supply of high quality, potable water at flows and pressures suitable for fire protection.

Sanitary Sewer Operations: The sanitary sewer utility is an essential service provided by the City to its residents and businesses for the collection and disposal of liquid wastes.

General

Corporate

Support Finance

Human

Resources

Office of the

Chief

Administrative

Officer

REVENUE

Taxation and other levies 60,524,778$ -$ -$ -$ -$ -$ -$ -$ -$ 164,210$ -$ -$ -$ 60,688,988$ 58,915,659$

Utility rates (90,298) -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ 11,343,371$ 7,997,852$ 19,250,925 19,274,060

Sale of services 95,026 22,121$ 130,721$ -$ -$ 1,571,172$ 3,655,569$ 45,261$ 83,156$ 349,647$ 3,212,043$ -$ -$ 9,164,716 8,179,258

Contributions 1,124,767 3,249$ -$ -$ -$ 1,282,394$ 181,069$ 639,372$ 857$ 4,072,926$ -$ -$ -$ 7,304,634 3,793,559

Permits and licenses 21,398 1,069,564$ 166,288$ -$ -$ -$ -$ -$ 1,620$ 1,533,227$ -$ 15,025$ 20,412$ 2,827,534 2,481,191

Investment Income 1,146,839 1,570,471$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ 2,717,310 2,176,755

Penalties and fines 263,073 41,594$ -$ -$ -$ -$ -$ -$ -$ -$ -$ 79,062$ 55,001$ 438,730 375,350

Other Revenue 996,691 26,851$ 127,728$ -$ -$ 85,159$ 21,812$ -$ -$ -$ -$ 5,460$ -$ 1,263,701 248,775

Gain (loss) on disposals and writedowns 1,220,176$ -$ -$ -$ (918,773)$ -$ -$ 21,043$ -$ -$ (55,727)$ (36,126)$ 230,593 4,187,942

64,082,274$ 3,954,026$ 424,737$ -$ -$ 2,019,952$ 3,858,450$ 684,633$ 106,676$ 6,120,010$ 3,212,043$ 11,387,191$ 8,037,139$ 103,887,131$ 99,632,549$

EXPENSES

Personnel 1,403$ 2,882,708$ 2,057,489$ 689,269$ 260,003$ 7,285,227$ 6,991,201$ -$ 10,112,836$ 2,508,765$ 834,285$ 787,908$ 236,966$ 34,648,060 33,943,411$

Contracted and other Services 31,209 897,241 387,554 159,062 3,581 2,711,145 3,282,663 14,113,549 284,748 298,191 916,514 6,080,275 4,738,285 33,904,017 27,316,503

Telephone, utilities and rent 967 45,725 53,669 355 626 630,090 636,986 - 60,982 1,965 201 72,032 105,220 1,608,818 1,583,702

Materials and supplies 16,923 66,452 118,459 2,759 - 2,045,266 969,049 - 209,877 5,388 40,033 252,399 50,806 3,777,411 9,003,275

Internal charges (recoveries) (2,302) (367,039) (737,732) - - (2,923,171) (51,465) - 2,534 57,198 1,398,443 1,381,393 1,242,141 - -

Insurance and claims 1,393 - 740,038 - - 73,923 346 - - - 2,147 - 2,358 820,205 568,967

Interest and bank charges 909,924 9,162 12,354 - - 4,543 142,309 10,156 - - - 1,088,448 1,094,377

Grants and financial assistance 27,055 - - - - - 110,876 - - - - - - 137,931 138,723

Amortization 142,794 444,338 - - - 7,664,482 536,350 106,865 464,033 2,830 - 1,597,516 872,200 11,831,408 12,035,385

1,129,366$ 3,978,587$ 2,631,831$ 851,445$ 264,210$ 17,491,505$ 12,618,315$ 14,220,414$ 11,135,010$ 2,884,493$ 3,191,623$ 10,171,523$ 7,247,976$ 87,816,298$ 85,684,343$

ANNUAL SURPLUS (DEFICIT) 62,952,908$ (24,561)$ (2,207,094)$ (851,445)$ (264,210)$ (15,471,553)$ (8,759,865)$ (13,535,781)$ (11,028,334)$ 3,235,517$ 20,420$ 1,215,668$ 789,163$ 16,070,833$ 13,948,206$

Police Services

Fire and

Emergency

Services

Human Resources: Provides specialized advice and assistance in all facets of people management including recruitment, labour relations, occupational health and safety, staff training and development, benefit administration, wage and salary

administration.

Office of the Chief Administrative Officer: Oversees the implementation of the vision, plans and priorities by ensuring effective policies are in place and adhered to and by providing leadership that enables an engaged and productive municipal

workforce.

2015

Development

Services Solid Waste

Water

Operations

Sanitary Sewer

Operations 2016

General Government

Engineering and

Public Works Recreation

The City provides a wide range of municipal services to its residents, businesses, industries, farms and other properties within its boundaries. The City's operations and activities are organized and reported by segments broadly based on departmental

business units. The departments disclosed in the segmented information, along with the services they provide, are as follows:

Engineering and public works: Provides and maintains a number of essential municipal services and infrastructure including transportation, parks, trails, athletic fields, roads and drainage, environmental protection, management of the City’s fleet and

related engineering services.

Recreation: Delivery of recreation, sport, community and cultural programs, events and services, and the operation of recreation facilities.

Police Services: Is a shared service with the City of Coquitlam that protects the community from criminal activity and ensures public safety.

Fire and Emergency Services: Protects life, property and the environment through the provision of emergency response, inspections, code enforcement and public education.

39

January, 2012

Financial Statement GuideA Guide to Local Government

Financial Statements

40

Attachment 2

Ministry of Community, Sport and 1 Financial Statement Guide Cultural Development

41


Table of Contents

Introduction

Legislative Requirements and Reporting Standards 3

The Quick Guide to Municipal Financial Statements 4 Sample Financial Statements Statement of Financial Position

Sample Statement of Operations

Sample Statement of Changes in Net Debt

Sample Statement of Cash Flows

Sample

Financial Statement Questions and Explanations 13 Glossary of Terms 18

42


Introduction The guide to Local Government Financial Statements has been prepared by the Ministry of Community, Sport and Cultural Development (Ministry) to help the non‐financial reader understand the information presented in local government audited financial statements. The guide provides examples and explanations of the information generally contained in a local government’s annual audited financial statements. The guide provides a brief background about the legislative requirements and financial reporting standards local governments in British Columbia are required to follow, an overview and explanation of the consolidated financial statements that comprise the annual audited financial statement package, answers to commonly asked questions about financial statements and a glossary that provides definitions for many of the terms found in this guide. Consolidated financial statements report a local government’s financial position and its financial performance during a given year. They are a key source of information for elected officials who are then able to make informed decisions about how best to use the local government’s fiscal resources to serve the interests of the community. The consolidated financial statements also establish transparency around a local government’s financial position for a given year and provide a measure of accountability to taxpayers. Local government financial statements also demonstrate how well the local government managed its budget over the course of the year and specifically how the taxes and fees citizens paid to the local government were used. Note: The term “consolidated financial statements” used throughout the guide includes financial information for both the local government and all of the organizations it owns or controls, such as a utility company or a municipal police board.

Legislative Requirements and Reporting Standards The Local Government Act (section 814(3)) and the Community Charter (Part 6) require that every local government in British Columbia prepare consolidated financial statements each fiscal year (local governments in B.C. use the calendar year as their fiscal year). The consolidated financial statements must be prepared by a local government’s financial officer in accordance with generally accepted accounting principles for local government. These principles are established by the Public Sector Accounting Board (PSAB), a division of the Canadian Institute of Chartered Accountants (CICA), and are the same for all levels of government everywhere in Canada. The statements must be audited by a qualified auditor – an independent accountant authorized to be an auditor under section 205 of the Business Corporations Act. The audited statements must be presented to council and be available for public viewing before June 30. A copy of the audited financial statements must also be submitted to the Ministry by May 15 each year. The independent auditor reviews the accuracy and completeness of the consolidated financial statements prepared by the local government financial officer; the auditor then provides an audit opinion on the statements. The opinion may be:

43


Sample Financial Statements The Ministry has prepared a set of model financial statements. The set includes the four main statements, a comprehensive presentation of typical notes to a set of financial statements and supplementary schedules. This complete package is available online from the Ministry website at: http://www.cscd.gov.bc.ca/lgd/infra/library/Model_Financial_Statements.pdf

unqualified – the auditor has determined the statements are presented in conformity withestablished standards;

qualified – the auditor has identified one or more specific issues regarding the financialstatement preparation;

adverse – the auditor has identified significant issues in the preparation or accuracy of theconsolidated financial statement;

If an auditor is unable to examine enough of the financial information to form an opinion about the consolidated financial statements, a denial of opinion may be issued.

The auditor’s opinion is included in a report that can be found at the front of every audited financial statement package.

What’s included in a Consolidated Financial Statement? Local government consolidated financial statements must include the following four statements:

Consolidated Statement of Financial Position;

Consolidated Statement of Operations;

Consolidated Statement of Changes in Net Debt; and,

Consolidated Statement of Cash Flow.

Additional information about specific financial statement items is provided in schedules and notes to the financial statements. The notes and schedules provide additional information related to specific line items and figures contained in one or more of the statements and form an integral part of the financial statement package.

The Quick Guide to Municipal Financial Statements

A sample page showing each of the four main elements of the financial statements follows this section, with a set of explanatory notes and hints on the facing page for each one. Each term on the sample page has been bolded and highlighted with the corresponding term of the sample financial statement.

There is also a series of questions and answers that may assist in the understanding of these documents. A glossary of terms is included at the end of the document.

44


Consolidated Statement of Financial Position

The Consolidated Statement of Financial Position provides key details about a local government’s assets, liabilities and any accumulated surplus for a given fiscal year. It can be a general indicator of a local government’s long‐term financial health; however, it is much more than an accounting of the amount of the money a local government has in the bank. The statement of financial position gives the best indication whether or not a local government has the necessary assets to provide services to its residents in the future and meet its current financial commitments.

There are four key elements of a financial position statement.

Financial Assets – are those current cash resources plus any items that are expected to be converted into cash in the future. Land for resale and long‐term investments are examples of items that a local government could eventually turn into cash if the need arose. Cash on hand and accounts receivable are also included in this section of the consolidated statement of financial position.

Liabilities – are those items that a local government must expend cash resources to cover at some time in the future. Long‐term debt is an element in the liabilities section of the consolidated statement of financial position that denotes borrowing for capital purposes (e.g. roads or sewer systems). Local governments frequently report long‐term debt (liabilities) separately from short‐term debt, such as a line of credit or bank overdraft (used for immediate cash needs). Long‐term debt is normally a separate line item in the liabilities section of the consolidated statement of financial position. The notes section that accompanies a local government’s annual financial statement may also provide detailed information on future long‐term debt/liability repayment schedules.

Non‐Financial Assets – include tangible capital assets (e.g. a fire truck) as well as inventory of supply and prepaid expenses. Tangible capital assets are included on the statement of financial position at their net book value – their actual cost less any accumulated amortization. Information about the original cost of the asset, and the amortization or use of the asset over time, is contained in the notes to the statement of financial position.

Accumulated Surplus – is the total amount of assets, both financial and non‐financial, less any liabilities of the local government. The accumulated surplus is a key indicator of the financial resources a local government has available to provide future services to its citizens and meet its ongoing financial commitments. It consists of both cash and non‐cash components.

The notes that accompany a local government’s financial statements identify what portions of the accumulated surplus are:

unrestricted (including cash, accounts receivable);

restricted (cash that can only be used for a pre‐determined purpose); and,

equity in tangible capital assets.

Note: A net‐debt position does not necessarily mean the local government is in financial difficulty. It simply means the local government has more liabilities than financial assets. However, a viable debt management plan needs to be in place to ensure that debt is sufficiently funded and that municipal services are not jeopardized.

45


City of Anywhere CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at December 31, 2010

2010 2009

Financial Assets

Cash and investments (Note 2) $ 7,369,624 $ 6,658,836

Accounts receivable (Note 3) 4,473,644 1,943,094

MFA deposits (Note 4) 398,875 692,178

Business enterprise equity (Note 1) 3,200,000 3,000,000

Other financial assets 1,312,513 1,029,443

16,754,656 13,323,551

Liabilities

Accounts payable and accrued liabilities (Note 5) 1,542,473 1,433,667

Deferred revenue (Notes 6 & 7) 733,174 312,761

Development cost charges (Note 8) 1,776,478 68,380

Other restricted revenue 380,694 397,761

Capital leases (Note 9) 229,234 296,125

Long‐term debt (Note 10) 13,488,377 11,868,790

Future Obligations (Note 11) 3,923,651 3,608,123

Other liabilities 159,628 125,195

22,233,709 18,110,802

Net debt (5,479,053) (4,787,251)

Non‐financial assets

Tangible capital assets (Notes 1 & 12, Schedule 1) 50,770,697 48,818,283

Supply Inventory 112 222

Prepaid expenses 30 20

50,770,839 48,818,525

Accumulated surplus (Note 13) $ 45,291,786 $ 44,031,274

The accompanying notes and schedules are an integral part of these financial statements.

46


Consolidated Statement of Operations

The Consolidated Statement of Operations provides information about a local government’s revenues, expenses and the year‐end results (e.g. a surplus or deficit) for the reporting period. The statement of operations also provides detailed information regarding the specific transactions that have impacted the accumulated surplus over the course of the local government fiscal year. Non‐cash items such as amortization expense and contributed assets are also commonly included in the consolidated statement of operations

There are three key elements of a consolidated statement of operations:

Revenue – is an accounting of all local government earnings in a given year. The main sources of local government revenue are property taxation and user fees collected for services such as garbage collection or recreation facilities. Government transfers are another revenue source – in the revenue section they include line items for federal, provincial or other regional government grants provided to a local government for operating and /or capital purposes.

Most revenue listings include a line item specifically for other revenues. This generally includes such revenues as contributed assets, which are normally tangible capital assets that have been donated or transferred to a local government from a developer or outside organization. Contributed assets are reported as revenue on the Statement of Operations because they create an expected future economic benefit, and result in an increase in a local government’s year‐end accumulated surplus. Although contributed assets are reported as revenue, they do not represent cash received by a local government.

Expenses – are monies spent during the year for any items that reduce the value of a local government’s assets. Payment of salaries to staff, hydro, and mapping constitute expense, as does amortization.

Amortization – is a non‐cash expense that represents the portion of the historical cost of a local government’s tangible capital assets that is used up during the reporting period. Local governments may report the amortization expense as a separate line on their statement of operations or include the amortization expense in the costs of the specific service (e.g. drinking water or sewage disposal) provided by the local government.

Accumulated Surplus – is equal to the revenue less expenses for the year and is added to the amount from the previous year to equal the total included on the Statement of Financial Position. The accumulated surplus may increase significantly without a corresponding increase in a local government’s financial assets. For example, a subdivision turned over to the local government by a developer would be recorded in the statement of operations as contributed asset revenue, which would in turn increase the accumulated surplus amount at year‐end; however, there would be no change in the total financial assets held by the local government because it would instead be included in the value of the non‐financial assets.

47


City of Anywhere CONSOLIDATED STATEMENT OF OPERATIONS

for the year ended December 31, 2010

2010 Budget 2010 2009

Revenue (Schedule 3)

Property Taxes and grants in lieu (Note 15) $ 6,342,798 $ 6,634,941 $ 5,856,999

Sale of services (Note 16) 3,105,762 3,317,470 2,928,500

Government transfers (Note17) 695,254 860,089 650,567

Investment income 385,645 447,996 424,596

Income from enterprises 190,000 200,000 (62,000)

Development cost charges (Note 8) 140,965 201,759 208,347

Other 23,129 255,373 261,954

10,883,553 11,917,628 10,268,963

Expenses (Note 18, Schedule 3)

General government 945,981 908,744 875,154

Protective services 3,962,546 3,812,040 3,512,961

Solid waste management and recycling 135,693 105,793 98,184

Public health 105,624 93,760 85,458

Planning and development 245,862 213,167 186,594

Transportation 602,845 509,990 450,685

Parks, recreation and culture 1,256,965 1,120,421 994,265

Water services 699,843 674,335 634,584

Sewer services 813,569 765,255 746,953

Debt financing 350,068 353,617 327,252

Amortization (Note 1, Schedule 1) 1,497,930 1,618,977 1,582,273

Loss from sale/write down of tangible capital assets (Schedule 1) ‐ 103,249 115,269

Other 266,627 377,768 185,295

10,883,553 10,657,116 9,794,927

Annual surplus ‐ 1,260,512 474,036

Accumulated surplus at beginning of year 44,031,274 44,031,274 43,557,238

Accumulated surplus at end of year $ 44,031,274 $ 45,291,786 $ 44,031,274


48


Consolidated Statement of Changes in Net Debt

The Consolidated Statement of Changes in Net Debt illustrates the difference between a local government‘s annual surplus or deficit and the change in its net debt during the reporting period. The statement tracks local government expenditures used to acquire tangible capital assets (e.g. new vehicles) and pay for its inventories of supplies during the reporting period. The disposal of tangible capital assets, and the use of inventory and prepaid expenses (such as insurance paid at the beginning of the year and used during the year) are also captured in the statement of changes in net debt.

Some of the key elements of a consolidated statement of changes in net debt are:

Acquisition of tangible capital assets – the total funds spent by a local government acquiring tangible capital assets in the reporting year. Local governments generally use cash reserves, property taxes, long‐term debt or government transfers to fund the purchase of tangible capital assets. The acquisition of tangible capital assets in the consolidated statement of changes in net debt also includes contributed asset values.

(Gain)/loss on sale of tangible capital assets – is the difference between the net book value of a tangible capital asset and the amount received from its disposal. The consolidated statement of changes in net debt shows a gain when a tangible capital asset is sold or is taken out of use and the proceeds are greater than the net book value of the asset. The consolidated statement of changes in net debt shows a loss when a tangible capital asset is liquidated and the proceeds are less than the net book value of the asset. Gains and losses associated with the sale of capital assets are also reported on the Statement of Operations – where a gain is reported as revenue and a loss is reported as an expense.

(Increase)/decrease in net debt – is the result of all the purchases and use of assets by a local government throughout the year, combined with the accumulated surplus from the consolidated statement of operations. An increase in a local government’s net debt position is most likely the result of funding capital acquisitions with debt or with financial assets accumulated in prior years.

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City of Anywhere CONSOLIDATED STATEMENT OF CHANGES IN NET DEBT


2010 Budget 2010 2009

Annual surplus $ ‐ $ 1,260,512 $ 474,036

Acquisition of tangible capital assets (1,946,587) (3,684,640) (2,359,621)

Amortization of tangible capital assets 1,452,961 1,618,977 1,582,273

(Gain) / loss on sale of tangible capital assets ‐ 102,549 115,269

Proceeds on sale of tangible capital assets ‐ 10,000 35,000

Write downs of tangible capital assets ‐ 700 ‐

(493,626) (691,902) (153,043)

Acquisition of supply inventory (200) ‐ (329)

Acquisition of prepaid expense (50) (30) (100)

Consumption of supply inventory 100 110 107

Use of prepaid expense 20 20 20

(130) 100 (302)

(Increase)/decrease in net financial assets/net debt (493,756) (691,802) (153,345)

Net financial assets/(net debt) at beginning of year (4,787,251) (4,787,251) (4,633,906)

Net financial assets/(net debt) at end of year $ (5,281,007) $ (5,479,053) $ (4,787,251)


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Consolidated Statement of Cash Flows The Consolidated Statement of Cash Flows details the sources of cash and how the local government used that cash. The statement also provides details about any changes to a local government’s cash and cash equivalents since the last reporting period, as well as detailed information about any significant cash transactions made by a local government not included in the Statement of Operations. The Statement of Cash Flows tracks the change in the cash balance during a reporting period. It begins with the net results of local government operations – the annual surplus or deficit – and adds or subtracts transactions recorded in the other financial statements depending on whether or not they influence the cash balance. Items for which cash was paid reduce the cash balance; items that did not involve cash are added back to the surplus in order to accurately demonstrate the cash transactions. There are four key elements of a consolidated statement of cash flows: Operating Transactions – include revenues and expenses incurred during the day‐to‐day activities of a local government. Non‐cash expenses are added back into the operations result. Amortization, a non‐cash expense showing the use of a capital asset over time, is one example of a non‐cash operating transaction. The amortization amount is added back into the operations result in order to determine the change in the local government’s cash position. Capital Transactions – are monies a local government expended on tangible capital assets as well as the amount a local government received from selling tangible capital assets during the reporting period. Investing Transactions – include any increases or decreases in temporary or long‐term investments such as interest earned on bonds owned by a local government. Legislation (both the Local Government Act and the Community Charter) restricts the types of investments (e.g. GICs, Bonds) local governments are permitted to make in order to limit the financial risk. Financing Transactions – include funds received from long‐term debt financing, as well as the amount of long‐term debt principal repaid during the reporting period.

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City of Anywhere CONSOLIDATED STATEMENT OF CASH FLOWS


(Indirect method) 2010 2009

Operating transactions:

Annual surplus/(deficit) $ 1,260,512 $ 474,036

Non‐cash items:

Amortization 1,618,977 1,582,273

Decrease in supply inventory 110 (222)

Increase in pre‐paid expenses (10) (80)

(Gain)/Loss on the sale of tangible capital assets 102,549 115,269

Write down of tangible capital assets 700 ‐

Changes to financial assets/liabilities:

Increase in accounts receivable (2,530,550) (1,596,324)

Decrease in MFA cash deposits 293,303 356,025

Increase in GBE investment (200,000) (100,000)

Increase in other financial assets (283,070) (255,568)

Increase in accounts payable 108,806 156,965

Increase in deferred revenue 420,413 126,953

Increase in development cost charges 1,708,098 29,563

Decrease in other restricted revenue (17,067) 147,635

Increase in future obligations 315,528 329,654

Increase in other liabilities 34,433 25,914

Cash provided by operating transactions 2,832,732 1,392,093

Capital transactions:

Acquisition of tangible capital assets (3,684,640) (2,359,621)

Proceeds from the sale of tangible capital assets 10,000 35,000

Cash applied to capital transactions (3,674,640) (2,324,621)

Investing transactions:

Proceeds from sale of portfolio investments ‐ ‐

Portfolio investments purchases ‐ ‐

Other ‐ ‐

Cash provided by (applied to) investing transactions ‐ ‐

Financing transactions:

Proceeds from debt issues 2,000,000 3,000,000

Debt repayment (366,890) (269,000)

Actuarial Adjustments (80,414) (68,596)

Cash applied to financing transactions 1,552,696 2,662,404

Increase in cash and cash equivalents 710,788 1,729,876

Cash and cash equivalents at beginning of year 6,658,836 4,928,960

Cash and cash equivalents at end of year $ 7,369,624 $ 6,658,836

The accompanying notes and schedules are an integral part of these financial statements. 52


Frequently Asked Questions and Explanations What statements comprise a local government’s financial statements?

a) Consolidated Statement of Financial Position The Consolidated Statement of Financial Position provides key details about a local government’s assets, liabilities and any accumulated surplus for a given fiscal year. The statement provides the best indication whether or not a local government has the necessary assets to provide services to its residents in the future and meet its current financial commitments.

b) Consolidated Statement of Operations

The Consolidated Statement of Operations provides information about a local government’s revenues, expenses and the year‐end results (e.g. a surplus or deficit) for the reporting period. The consolidated statement of operations also provides detailed information regarding the specific transactions that have impacted the accumulated surplus over the course of the local government’s fiscal year.

c) Consolidated Statement of Changes in Net Debt

The Consolidated Statement of Changes in Net Debt illustrates the difference between a local government‘s annual surplus or deficit and the change in its net debt during the reporting period. The statement tracks local government expenditures used to acquire tangible capital assets (e.g. new vehicles) and pay for its inventories of supplies during the reporting period.

d) Consolidated Statement of Cash Flows

The Consolidated Statement of Cash Flows details the sources of cash and how the local government used that cash. The statement also provides details about any changes to a local government’s cash and cash equivalents since the last reporting period, as well as detailed information about any significant cash transactions made by a local government that are not included in the Statement of Operations.

How do the year‐end results compare with the budget for the year (Did the local government budget well)?

The Statement of Operations and the Statement of Changes in Net Debt include the approved budget to compare with the actual results. The Annual surplus and the Accumulated surplus at year end on the Statement of Operations provide the end results. The revenue and expense information in the Statement of Operations and the Statement of Changes in Net Debt provide additional information about how the actual year‐end results compared to the budget. The Statement of Changes in Net Debt provides information regarding tangible capital assets, inventories and prepaid assets.

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What is the local government’s long‐term debt position? Long‐term debt is generally incurred for capital purposes and is recorded separately on the Statement of Financial Position. The statement contains several notes to the financial statements that provide additional information regarding the long‐term debt position. One of the notes identifies the type of debt (e.g. loan, debenture) and provides a schedule of principal and interest payments for each of the next five years. This schedule identifies the amount of principal and interest to be paid in the upcoming year. The principal paid in the next year is the current portion of the long‐term debt.

The amount of money local governments in British Columbia may expend annually to service long‐term debt is limited by legislation. This limit is updated annually and whenever a local government requests a new long‐term debt servicing limit. The annual calculation is made with the information entered into the Local Government Data Entry (LGDE) system maintained by the Ministry, and shows how much capacity for future debt is available for each local government in the province.

What causes a change in net financial assets or net debt?

The Consolidated Statement of Changes in Net Debt reports how capital spending was funded – by increased revenues or increased debt. If no debt was incurred for capital spending, there would be no change in the net financial assets or net debt. If debt was incurred for capital spending, then the net financial assets would decrease or the net debt position would increase.

What is the Accumulated Surplus or Deficit?

The accumulated surplus position is the total amount by which local government assets exceed their liabilities. It is the indicator of a local government’s economic resources available to provide future services. The accumulated surplus or deficit amount consists of cash and non‐cash amounts and is separated into the following categories:

Unrestricted surplus/deficit – this amount may include cash and other financial assets such as accounts receivable.

Restricted surplus (Reserve funds) – the amount should be supported by cash. Reserve funds are established in legislation or by bylaw and segregate cash to be used for defined purposes.

Equity in tangible capital assets – the value of tangible capital assets a local government owns. An example of this amount would be a fire truck purchased for $500,000 (financed with a $200,000 loan to be paid) that has been depreciated by $50,000. The equity in the fire truck would be $250,000 – which is the cost of the fire truck less the outstanding debt and accumulated amortization.

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What created the change in the accumulated surplus/deficit? The accumulated surplus may have increased significantly without any increase in financial assets. For example, an asset may have been contributed by a developer to the local government, increasing the accumulated surplus amount. The accumulated surplus or deficit amount can be separated into the following categories: unrestricted, restricted and equity in tangible capital assets. An accumulated surplus note to the financial statements can show the increase/decrease in each of these categories. Another note, ‘Equity in Tangible Capital Assets’, could provide summary information for the current and previous fiscal years.

What is restricted surplus?

Restricted surplus is one of the categories of the accumulated surplus/deficit amount. These restrictions identify funds for a specified future purpose and may, for example, result from agreements with third parties, or bylaws that designate these funds for a specific purpose. Sources of such funds include unused grants and funds set aside for specified future projects. The restricted surplus will normally consist of multiple funds and the ‘accumulated surplus/deficit’ note in the financial statements could provide the amount in each of these restricted surplus funds.

How much did the tangible capital assets depreciate this year?

This amount can be found under the heading of amortization. Tangible capital assets depreciate each year and the amount of this depreciation (referred to as ‘amortization’) is reported as an expense. Some local governments record this amortization expense as a separate line on the Statement of Operations or allocate the amortization expense to the appropriate service. The following statements will also report the total amortization expense for the year:

Statement of Changes in Net Debt

Statement of Cash Flow

Schedule of Tangible Capital Assets What is the condition of the tangible capital assets?

The Schedule of Tangible Capital Assets reports each major asset class, the total cost, accumulated amortization and net book value of tangible capital assets. The net book value of the total cost provides a broad indication of the remaining useful life of the tangible capital assets in each major asset class.

E.g.: Vehicles Cost $100,000

Accumulated Amortization $90,000 Net Book Value $10,000

In this example, the vehicles are nearing the end of their useful life and will likely need to be replaced in the near future.

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Are there future planning or budgetary issues that should be addressed? A review of the financial statements may identify some issues that need to be addressed to ensure the ongoing financial sustainability of the local government, including:

net debt continues to increase;

restricted surplus is not fully funded; e.g.: financial assets do not exist to support the restricted surplus;

the short‐term debt and the working capital position has been determined to be insufficient; or,

net book value of the tangible capital assets is too low (e.g. the useful life is almost at the end).

Long‐range planning for future budgets can positively address some or all of the above issues.

What are some potential ‘red flags’ in financial statements?

Potential “red flag” items might include:

cash position has decreased significantly from the previous year;

amount of cash and cash equivalents, including temporary investments, is less than the amount of restricted surplus identified in the Accumulated Surplus note to the financial statements;

net financial assets reported on the Statement of Financial Position has significantly decreased or the net debt has significantly increased;

net book value of the tangible capital assets is a low percentage of the total cost of the tangible capital assets; or,

unrestricted portion of the accumulated surplus is in a deficit position. What are the revenues from and costs of providing specific services?

For each specific service (such as water or sewer) provided by a local government to its citizens, the local government must generally ensure sufficient revenues are generated to cover all of the costs associated with providing the service. This includes a portion of the administrative costs of the local government in general, as well as the costs of operations, debt servicing and capital purchases. A given service may be funded by parcel or assessment‐based taxes, user fees, a combination of both, as well as other revenues. The revenues may be fixed or based on usage (such as for metered water).

Have there been any extraordinary or unusual financial transactions?

There may be significant financial transactions reported in the financial statements that have positively or negatively impacted the local government’s financial position and ‘bottom line’. The financial statements provide information for the previous fiscal year; comparing the current and prior year amounts is one way to determine if there were any extraordinary or unusual transactions.

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Are there any contingencies that will have a future financial impact? Contingencies are possibilities that may have future financial implications that are not recorded in the financial statements. These are shown in the notes to the financial statements, and those notes provide a brief explanation of the nature and potential future impact of each contingency.

What are the auditor’s recommendations in the Management Letter?

The auditor is required to provide Council or the Board with a Management Letter at the conclusion of the annual audit. The Management letter is used to convey any matters the auditor identified during the financial statement audit to the local government. This letter normally identifies major concerns with recommendations to address those concerns.

How does a local government communicate the financial statement information to residents and businesses?

A summary of the audited financial results must be provided in a local government’s annual report and be available for public viewing by June 30 each year. The complete set of the financial statements must also be made available upon request.

How do the funds in ‘statutory reserves’ fit into long range plans?

Funds may be set aside each year to pay for items Council or the Board is planning for the future. Statutory reserves are established to accumulate funds for these future projects and may include such items as development cost charges and capital renewal reserves. These funds are restricted and may only be used for specific future capital projects.

To assess the impact of a net debt position on the financial health of a local government, consider the following:

Is there a debt management plan in place?

What is the term of the debt?

What portion of the local government’s liability servicing limit does the net debt represent?

Are the local government’s financial assets liquid and current?

What portion, if any, of the local government’s financial assets are restricted?

What portion of the net debt is funded by the annual tax levy? By user fees?

Will projected future revenues be sufficient to pay the net debt? If the answers to these questions are favourable, a local government is not likely to face financial difficulty in the near future.

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Glossary of Terms Amortization and Accumulated Amortization Amortization is the annual allocation of a portion of the historical cost of a tangible capital asset held/owned by a local government as an expense over its useful life. Accumulated amortization is the total amortization of a tangible capital asset from the time the asset was placed into service until the date of the financial statement. The purpose of amortization is to show the decline in the asset’s value as it ages or is used. Construction in Progress Items created in the fiscal year that have not been put into service; examples are engineered structures, buildings, and machinery and equipment that are not yet completely built. Contributed Assets Contributed assets are those assets transferred or donated to the local government by another entity. Contributed assets provide a future economic benefit to the receiving local government. Deferred Revenue Deferred revenue is income received by the local government that is not recorded as revenue until future conditions are met or events have taken place. Deferred revenue is held as a liability and may include items such as development cost charges and transfers for gas tax revenue. Equity in Tangible Capital Assets Equity in tangible capital assets is the net book value of recorded tangible capital assets less capital debt and related debt charges recoverable. Equity in tangible capital assets is that portion of the asset the local government actually owns ‐ the remaining amount would be considered as debt. Expenses Expenses are the wide variety of costs incurred to run the local government, such as wages, materials, contracted services and interest on debt. Expenses do not include the purchase of tangible capital assets or payments of debt principal. Financial Assets Financial assets are the total cash and other resources (e.g. accounts receivable or investments) that could be converted into cash in the future. Financial Plan The financial plan – commonly referred to as a budget – must be adopted by the local government council or board annually. The budget must be adopted by bylaw and it must cover a minimum five‐year period. Year one relates to the year in which it comes into force, years two through five are the following four years. Each year, the financial plan bylaw from the prior year remains in place until the financial plan bylaw for the current year is adopted. Gain/Loss on the Sale of Tangible Capital Assets Gain/Loss on the Sale of Tangible Capital Assets are the net proceeds resulting from the sale of a tangible capital asset where the proceeds are greater or less than the net book value of the asset.

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Government Transfers Government transfers are entitlements transferred to a local government under shared cost agreements, and grants from other levels of governments. Liability Servicing Limit A local government liability servicing limit is the total actual principal and interest charges on defined liabilities, plus the total of the average "implied" costs for all defined liabilities that are not yet recognized in the financial statements. Local governments in British Columbia are generally restricted to a 25 percent liability servicing limit based on 25 percent of certain revenues. Net Book Value of Tangible Capital Assets The net book value of a local government’s tangible capital assets is the total historical cost of the assets less the accumulated amortization and any write‐downs of the tangible capital assets by the local government. Net Financial Assets (Net Debt) Net financial assets (net debt) is equal to the total financial assets held by a local government less the total liabilities owed by the local government. Restricted Surplus Restricted surplus is the amount resulting from excess revenues that have been internally designated for a specified future purpose, externally restricted, or formally designated. Tangible Capital Asset Tangible capital assets are physical assets such as land, buildings, infrastructure, and equipment that have a useful life of more than one year. They are used on a continuing basis and not for sale in the usual course of operations. Write‐downs of Tangible Capital Assets Write‐downs of tangible capital assets occur when there is a permanent decline in value of an asset held by a local government that is not reflected in the amortization of the asset. Write‐offs are where the asset is no longer of value to a local government, but the item has a value left on the books that needs to be removed.

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60

2nd Quarter Variance and Update on 2016 Business Plan Goals

July 18, 2016

Page 29

CAPITAL VARIANCE ANALYSIS

PROJECT STATUS

2016

BUDGET

2016

ACTUAL

EXPENSES VARIANCE % Variance COMMENTS ON VARIANCE

InfrastructureCommunity Recreation Complex - Planning

& Project Management In Progress 1,307,072 259,323 1,047,748 80.2% This funding will be carried forward for the project in 2017

St. Anne Street, 3400 Block - Road

Widening Completed 136,087 130,252 5,835 4.3% Completed. Remaining funds will stay in reserve for future projects.

Nicola Avenue, 1000 Block - Road

Extension Completed 614,417 563,715 50,701 8.3% Project completed under budget.

Various Locations - Pre-Design Engineering In Progress 122,600 44,626 77,974 63.6%

Funds will be carried forward to pay outstanding invoices that will

be received in early 2017.

Pitt River Road/McLean Avenue - Mary Hill

Road to Taylor Street In Progress 2,374,200 89,236 2,284,964 96.2%

Design completed in 2016; funds carried forward for construction in

2017.

Major Road Network (MRN) Pavement

Rehabilitation 2016 - Coast Meridian Road -

Prairie Avenue to Dorset Avenue Deferred 660,000 35,263 624,737 94.7%

Only one bid was received in 2016 and was over budget, so the work

was deferred until 2017 and re-tendered with larger scope to get

better pricing. The work is now complete.

Lafleur Street Drainage Improvement In Progress 74,000 52,727 21,273 28.7%

Weather delays prevented paving in 2016. Funds carried forward to

complete paving in early 2017. Work is now complete.

Rowland Street Watermain Replacement Completed 68,000 45,102 22,898 33.7% Completed under budget.

Coast Meridian Overpass 5-Year

Inspection In Progress 100,000 88,041 11,959 12.0% Completed.

Laurier Avenue Pump Station - 2nd Pump

Equipment Purchase Completed 98,500 105,344 (6,844) -6.9%

Work is complete and was slightly over budget for replacement of

electrical cable.

Coquitlam River Bridge Repairs Completed 175,433 145,364 30,069 17.1% Completed.

Blakeburn Lagoons Community Park -

Parkland Rehabilitation In Progress 3,493,700 107,381 3,386,319 96.9% Design completed in 2016 and construction in 2017.

Sun Valley Park - Upgrade Spray Park In Progress 300,000 8,385 291,615 97.2% Design completed 2016 and construction in 2017.

Cemetery Development 2016 In Progress 100,000 34,531 65,469 65.5% Funds being CF to be completed in 2017

Argue Street Sanitary Pump Station

Rehabilitation and Upgrading In Progress 480,000 153,812 326,188 68.0% Funds carried forward to complete construction by June 2017

Water Meters - Replacement Program In Progress 200,064 215,722 (15,658) -7.8% Complete

10,304,072$ 2,078,826$ 8,225,246$ 79.83%

Facilities

PandR Bldg Mtce - Outdoor Pool - C-P08

Centennial Pool Maintenance Deferred 250,000 - 250,000 100.0%

Amount set aside for repairs to Centennial Pool - none anticipated

for 2016 that cannot be covered with operating.

PandR Rec Centre - RC replace lower south

roof and upper north roof Deferred 108,000 - 108,000 100.0%

Amount set aside for roof repairs at Recreation Complex - none

anticipated for 2016 that cannot be covered with operating.

358,000$ -$ 358,000$ 100.00%

Equipment

Street Sweeper Equipment Purchase Completed 278,785 278,785 (0) 0.0% Complete.

Dump Truck Equipment Purchase In Progress 180,842 180,842 0 0.0% Complete.

Bear-Proof Waste Cart Locks Equipment

Purchase Completed 317,246 11,693 305,553 96.3%

Remaining funds from bear lock program - to be used to purchase

inventory if required.

Aerial Truck Purchase Deferred 120,000 - 120,000 100.0% Deferred until positions were filled. Truck will arrive Q4 2017.

2016 Traffic Signal LEDs In Progress 130,261 130,261 (0) 0.0% Completed

Loader Backhoe In Progress 152,000 131,082 20,918 13.8%

Tender has closed and was below budget. Remaining funds will be

used to offset other equipment purchases as noted.

Solid Waste Cart Purchases 2016 Deferred 75,000 34,535 40,465 54.0%

On hold as supplier is no longer making same style carts that work

with our bear locks. They will manufacture our style, but only with

larger order so funds will be carried forward for large order in 2017.

Info Services Capital - ERP In Progress 307,500 98,965 208,535 67.8%

Agresso Modules complete. Remaining funds carried forward for

Maintenenace Management/Fleet to be completed in 2017

1,561,634$ 866,163$ 695,471$ 44.53%

12,223,706$ 9,278,717$ 75.91%

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Attachment 3

INFORMATION REPORT TO FIG

DATE:

June 14, 2017

TO:

Finance and Intergovernmental Committee

FROM:

Sharleen Karamanian, Manager of Accounting Services

SUBJECT: AUDIT RESULTS AND COMMUNICATIONS

BACKGROUND & COMMENTS

Attached is the Audit Findings Report (attachment 1) and Draft Auditor’s Report (attachment 2)

received from the City’s auditors, KPMG LLP. The purpose of the report is to assist the

Committee in your review of the results of the audit of the consolidated financial statements of

the city as at and for the year ended December 31, 2016. The Audit Findings Report builds on

the Audit Plan presented to the Committee on December 14, 2015 and includes Audit risks and

results, adjustments and differences, control and other observations.


_______________________________

Sharleen Karamanian, CPA, CGA Manager of Accounting Services

Attachment 1: KPMG – Audit Findings Report

Attachment 2: Draft Auditor’s Report

62

City of Port Coquitlam

Audit Findings Report For the year ended December 31, 2016

Dated June 13, 2017 For presentation on June 20, 2017

kpmg.ca/audit

63

City of Port Coquitlam Audit Findings Report for the year ended December 31, 2016 2

Table of Contents Executive summary 3

Audit risks and results 5

Adjustments and differences 10

Other observations 11

Appendices 12

Appendix 1: Required communications 13

Appendix 2: Audit Quality and Risk Management 14

Appendix 3: Background and professional standards 15

Appendix 4: Current developments 16

The contacts at KPMG in connection with this report are:

C.J. James, CPA, CA Audit Engagement Partner

Tel: (604) 527-3635 [email protected]

Archie Johnston, FCPA, FCA, CIA Client Relationship and Quality Review Partner


Brandon Ma, CPA, CA Audit Senior Manager


At KPMG, we are passionate about earning your trust. We take deep personal accountability, individually and as a team, to deliver

exceptional service and value in all our dealings with you.

At the end of the day, we measure our success from the only perspective that matters – yours.

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* This Audit Findings Report should not be used for any other purpose or by anyone other than the Finance and Intergovernmental Committee. KPMG shall have no responsibility or liability for loss or damages or claims, if any, to or by any third party as this Audit Findings Report has not been prepared for, and is not intended for, and should not be used by, any third party or for any other purpose.

Executive summary Purpose of this report* The purpose of this Audit Findings Report is to assist you, as a member of the Finance and Intergovernmental Committee (the “Committee”), in your review of the results of our audit of the consolidated financial statements (the “financial statements”) of the City of Port Coquitlam (the “City”) as at and for the year ended December 31, 2016.

This Audit Findings Report builds on the Audit Planning Report dated December 20, 2016 that we presented to the Committee.

Changes from the Audit Plan

There have been no significant changes regarding our audit from the Audit Planning Report previously presented to the Committee.

Audit risks and results We discussed with you at the start of the audit a number of key areas of focus for financial reporting. These risks have been addressed in our audit.

See pages 5 to 9 for results on these key areas and other matters arising during the audit.

Control and other observations We did not identify any control deficiencies that we determined to be significant deficiencies in internal control over financial reporting.

We have considered the control recommendations relating to the theft incident on page 5 and also identified other observations relating to financial reporting on page 11.

Adjustments and differences The impact of the uncorrected differences is as follows:

(in $’000s) Annual surplus

As currently presented $ 16,071

Uncorrected differences $ 114

As a % of the balance 0.71%

See page 10 for details

We did not identify any adjustments that were communicated to management and subsequently corrected in the financial statements.

.

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Executive summary (cont’d)Finalizing the audit As of the date of this report, we have completed the audit of the financial statements, with the exception of certain remaining procedures:

– completing our discussions with the Committee;

– obtaining the signed management representation letter;

– obtaining evidence of acceptance of the City’s financial statements by Council;

– completing subsequent event review procedures up to the date of Council’s acceptance of the financial statements

We will update the Committee on significant matters, if any, arising from the completion of the audit, including the completion of the above procedures. Our auditors’ report will be dated upon the completion of any remaining procedures.

Significant accounting policies and practices There have been no initial selections of, or changes to, significant accounting policies and practices to bring to your attention.

Financial statement presentation and disclosure The presentation and disclosure of the financial statements are, in all material respects, in accordance with the City’s relevant financial reporting framework.

Independence We confirm that we are independent with respect to the City within the meaning of the relevant rules and related interpretations prescribed by the relevant professional bodies in Canada and any other standards or applicable legislation or regulation from January 1, 2016 to the date of this report.

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Audit risks and results

Key area of focus Our significant findings from the audit

Theft incident In February 2017, the City was notified of an employee who was purchasing tools and equipment with the City’s money and subsequently reselling them for cash for their personal gain. The employee subsequently came forward and confessed. The City conducted an investigation and engaged an external independent forensics consultant to assist. The work was completed in April 2017. The employee cooperated with the investigation. As a result of the investigation, $175,000 of misappropriated funds was identified. The employee has repaid the entire amount. We have considered the impact of the theft incident on the financial statement audit as follows: - We inquired of both management and the external independent forensics consultant regarding

the procedures performed as part of the investigation and the results of the investigation. Based on our discussions, we are satisfied that there is not a material impact on the financial statements.

- We discussed with management the internal control deficiencies and control improvement recommendations identified.

- The $175,000 of misappropriated funds was comprised of a number of small purchases over approximately 3 years. As the annual impact is less than the audit misstatement posting threshold of $85,000 and the aggregate impact is less than materiality of $1,700,000, we concur with management that it is not necessary to present the theft expense as a separate caption on the statement of operations.

- We considered whether an accrual should be recorded for the recovered funds in the 2016 financial statements. The City was not aware of the theft and the investigation had not commenced prior to December 31, however the amount of recovery of funds is known prior to the completion of the 2016 financial statements. Under the subsequent event accounting rules, the recovery of funds should be recognized in the 2016 financial statements. As the recovery has not been recorded in the financial statements, it has been included in our summary of uncorrected audit differences.

Inherent risk of material misstatement is the susceptibility of a balance or assertion to misstatement which could be material, individually or when aggregated with other misstatements, assuming that there are no related controls.

We highlight our significant findings in respect of key areas of focus of financial reporting as identified in our discussion with the Committee in our Audit Planning Report, as well as other matters.

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Audit risks and results (cont’d) Key area of focus Our significant findings from the audit

Tangible capital assets (“TCA”)

Immaterial correction from prior year As part of the year-end financial close process, the finance department worked closely with the engineering department to identify and resolve discrepancies between the TCA balances in the City’s financial reporting records and in the City’s asset management software (CityWide). A net difference of $70,000 was found and reconciled through the 2016 balances on the City's financial statements. We reviewed management’s analysis with no issues noted. Current year activity and procedures During the current year, significant additions included contributed land under roads, vacant residential lands, and construction in-progress relating to the new recreation complex, and significant disposals included vacant lots sold and parks infrastructure relating to Evergreen Park and Cedar Park. Our audit procedures performed included: Updating our understanding of the City’s processes and controls over recording of TCA. Testing a selection of TCA additions, including developer contributed TCA, to supporting documentation to assess whether the

amount is accurately recorded, whether the item is appropriate to be capitalized, and whether the item is recorded to the appropriate TCA category.

Testing a selection of TCA disposals to supporting documentation to assess proceeds received, calculation of gain or loss on disposal, and reasonability of TCA disposed with no proceeds.

Performing a reasonability assessment of amortization expense of recognized. No audit differences were identified as a result of procedures performed.

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Deferred revenues Immaterial correction from prior year As part of the year-end financial close process, the finance department worked closely with the engineering department to review the “private jobs” deferred revenue account to identify jobs that had been completed but where revenue was not recognized. Private jobs relate to engineering works to be performed by the City’s engineering department for payment from residents / businesses. Payments received in advance are recorded as deferred revenue, and revenue is recognized as costs are incurred with residual amounts recognized upon notification from the engineering department to the finance department that the job is completed. It was identified that certain jobs were completed in prior years but not recognized as revenue. The following discrepancies were identified:

Per 2015 Financial

Statements ($000’s) Differences identified

and reconciled ($000’s) Difference (%)

Deferred revenue 10,244 (289) 2.82%

Impact on Annual surplus 13,948 289 2.07%

We reviewed management’s analysis and discussed with management regarding the discrepancies identified. Management has determined that the difference is immaterial to the 2015 financial statements and has corrected for the difference through the 2016 financial statements. The difference in timing of revenue recognition is included in our summary of uncorrected audit differences. Current year activity and procedures Deferred revenues relate to amounts deposited in advance of services performed, primarily for property taxes and utilities, various, various programs and services, and private jobs. There were no significant variances in deferred revenues year-over-year. Our audit procedures performed included: Updating our understanding of the City’s processes and controls over recording of deferred revenue. Performing substantive analytical procedures over deferred revenue balances. Testing a selection of current year amounts deferred at year-end to assess whether cash was received during the year and

whether amount was appropriately deferred. Testing a selection of current year amounts recognized from deferred revenue during the year to supporting documentation

evidencing recognition of revenue. No audit differences were identified as a result of procedures performed.

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Payroll system conversion

In 2016, the City implemented the payroll module of the Agresso system. Our audit procedures performed included: Obtaining an understanding of the City’s processes and controls over the payroll process after implementation of Agresso. Assessing any significant changes in controls between the previous process and current process. Performing substantive analytical procedures over payroll balances. Testing headcount listings to T4 slips to assess existence and accuracy of employees included on the headcount listing. Reviewing for significant variances in payroll expenses by segment compared to the prior year. No audit differences were identified as a result of procedures performed.

Development cost charges (“DCC”)

DCC fund with negative balance This item has been brought to the Committee’s attention in prior years and we are providing an update on this matter. The City had a negative balance in its Drainage Area 2 DCC fund as a result of borrowing money from other DCC funds to fund expenditures relating to the construction of the Coast Meridian Overpass during fiscal 2008 to 2010. Management has actively monitored the DCC fund balances and collection rates to ensure that sufficient funds are collected. As of December 31, 2016, the Drainage Area 2 DCC fund has returned to a positive balance of $24,672 from the negative balance of $119,624 as at December 31, 2015. Current year activity and procedures As disclosed in the note 9 to the financial statements, the City collected $4.3 million and spent $0.5 million in DCC during the year. Our audit procedures performed included: Testing a selection of DCCs charged to supporting documentation to assess whether the DCC was accurately calculated in

accordance with the bylaw and properly recorded to the appropriate DCC fund. Agreeing the amounts spent for a selection of DCC expenditures to supporting documentation. No audit differences were identified as a result of procedures performed.

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Employee future benefits

The City provides certain post-employment benefits to their employees, which are accrued as a liability in the financial statements. There is estimation uncertainty relating to the actuarial valuation of the liability balance. The City engaged Mercer (Canada) Limited (“Mercer”) as an external expert to determine the employee future benefits liability as at year-end. Mercer performed a full actuarial valuation in December 31, 2014 and extrapolated the results to December 31, 2016. As at December 31, 2016, the post-employment benefit liability is $2,737,000 (2015 - $2,915,000). Our audit procedures performed included: Reviewing significant underlying assumptions to assess whether they are reasonable Testing inputs used in the extrapolation to supporting documentation Reviewing Mercer’s report and the results of their actuarial valuation No audit differences were identified as a result of procedures performed.

Liability for contaminated sites

Under PS 3260 Liability for Contaminated Sites, the City is required to recognize any liabilities for contaminated sites where the City is responsible for the contamination and the contamination exceeds existing environmental standards. In the prior year, management performed an analysis of its sites and determined that no liability was required to be recognized under PS 3260. In the current year, management updated their analysis and no liabilities were identified. We reviewed management’s assessment and no audit differences were identified.

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Adjustments and differences Uncorrected differences The Summary of Uncorrected Audit Misstatements is presented below and is also included in the management representation letter. This schedule discloses the impact of all uncorrected differences considered to be other than clearly trivial. Both differences relate to prior period corrections that are recorded through the current year.

Based on both qualitative and quantitative considerations, management have decided not to correct certain differences, and represented to us that the uncorrected differences—individually and in the aggregate—are, in their judgment, not material to the financial statements.

We concur with management’s representation that the differences are not material to the financial statements. Accordingly, the differences have no effect on our auditors’ report.

Description of adjustment

Increase (decrease)

Annual surplus

Accumulated surplus

Financial assets Liabilities

Non-financial assets

DR Accrued receivable CR Other income (recovery) To accrue for recovery of misappropriated funds

- 175,000

- 175,000

175,000 -

- -

- -

DR Sale of services revenue CR Accumulated surplus Difference in sale of services revenue in current year as a result of deferred revenues recognized in the current year relating to the prior year

(289,000) -

(289,000) 289,000

- -

- -

- -

Total uncorrected audit differences (114,000) 175,000 175,000 - -

Adjustments and differences identified during the audit have been categorized as “Corrected adjustments” or “Uncorrected differences”. These include disclosure adjustments and differences.

Professional standards require that we request of management and the Committee that all identified differences be corrected. We have already made this request of management.

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Other observations Description Details

Financial reporting processes involving engineering

Observation and Recommendation As previously discussed, during the year, the City identified corrections to its accounting records relating to TCA and deferred revenue (private jobs) as a result of further investigation by the finance department. Both areas require input and involvement from the engineering department in order to produce accurate financial information. We recommend that management review its key financial reporting processes relating to areas requiring engineering department input and involvement, such as TCA and deferred revenue (private jobs), for control improvements. In particular, we recommend management consider whether to implement a procedures program detailing financial reporting items for review by the engineering department and steps that they should complete as part of this review. Management response Management will review the process, taking into consideration current resources and timing of the majority of capital work which occurs in the summer and fall.

Finance department resources

Observation and Recommendation We noted that the current year’s financial statement close process required more time than in previous years. As the City continues to grow, and in particular with the construction of the new recreation complex being a significant project for the City, it is important that the finance department is appropriately resourced to ensure that financial reporting and internal financial controls are properly implemented. We recommend that management review the City’s finance department budget, structure and resourcing needs to determine whether adjustments should be considered. Management response Council approved an additional finance resource in the 2017 financial plan. It is expected that the new Financial Analyst will assist with keeping the finance records and systems up to date in a timely manner, as well as supporting departments which will make the financial statement close process much more efficient. Once the new analyst is in place the resourcing needs will be evaluated to determine if further adjustments should be considered.

During the course of our audit, we identified other observations that we believe may be of interest to the Committee.

These observations are based on, among other things, our understanding of the affairs and processes of the City, as well as our understanding of other organizations with similar circumstances.

The following is a summary of our observations and insights as discussed with management:

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Appendices Appendix 1: Required communications

Appendix 2: Audit Quality and Risk Management

Appendix 3: Background and professional standards

Appendix 4: Current developments

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Appendix 1: Required communications In accordance with professional standards, there are a number of communications that are required during the course of and upon completion of our audit. These include:

– Auditors’ report – The conclusion of our audit is set out in our draft auditors’ report as attached to the draft financial statements

– Management representation letter –In accordance with professional standards, copies of the management representation letter are provided to the Committee as attached.

– Independence – In accordance with professional standards, we have confirmed our independence on page 4 of this report.

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KPMG LLP Metrotower I 4710 Kingsway, Suite 2400 Burnaby, BC V5H 4M2

June 20, 2017

Ladies and Gentlemen:

We are writing at your request to confirm our understanding that your audit was for the purpose of expressing an opinion on the consolidated financial statements (hereinafter referred to as “financial statements”) of the Corporation of the City of Port Coquitlam (“the City”) as at and for the period ended December 31, 2016.

General:

We confirm that the representations we make in this letter are in accordance with the definitions as set out in Attachment I to this letter.

We confirm that, to the best of our knowledge and belief, having made such inquiries as we considered necessary for the purpose of appropriately informing ourselves:

Responsibilities:

1) We have fulfilled our responsibilities, as set out in the terms of the audit engagement letter dated October 5, 2016, for:

a) the preparation and fair presentation of the financial statements and believe that these financial statements have been prepared and present fairly in accordance with the relevant financial reporting framework

b) providing you with all relevant information, such as all financial records and related data, including the names of all related parties and information regarding all relationships and transactions with related parties, and complete minutes of meetings, or summaries of actions of recent meetings for which minutes have not yet been prepared of Council and committees of Council that may affect the financial statements, and access to such relevant information

c) such internal control as management determined is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Management also acknowledges and understands that they are responsible for the design, implementation and maintenance of internal control to prevent and detect fraud.

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d) ensuring that all transactions have been recorded in the accounting records and are reflected in the financial statements.

Internal control over financial reporting:

2) We have communicated to you all deficiencies in the design and implementation or maintenance of internal control over financial reporting of which management is aware.

Fraud & non-compliance with laws and regulations:

3) We have disclosed to you:

a) the results of our assessment of the risk that the financial statements may be materially misstated as a result of fraud

b) all information in relation to fraud or suspected fraud that we are aware of and that affects the City and involves: management, employees who have significant roles in internal control, or others, where the fraud could have a material effect on the financial statements

c) all information in relation to allegations of fraud, or suspected fraud, affecting the City’s financial statements, communicated by employees, former employees, analysts, regulators, or others

d) all known instances of non-compliance or suspected non-compliance with laws and regulations, including all aspects of contractual agreements, whose effects should be considered when preparing financial statements

e) all known actual or possible litigation and claims whose effects should be considered when preparing the financial statements

Subsequent events:

4) All events subsequent to the date of the financial statements and for which the relevant financial reporting framework requires adjustment or disclosure in the financial statements have been adjusted or disclosed.

Related parties:

5) We have disclosed to you the identity of the City’s related parties.

6) We have disclosed to you all the related party relationships and transactions/balances of which we are aware.

7) All related party relationships and transactions/balances have been appropriately accounted for and disclosed in accordance with the relevant financial reporting framework.

Estimates:

8) Measurement methods and significant assumptions used by us in making accounting estimates, including those measured at fair value, are reasonable.

Misstatements:

9) The effects of the uncorrected misstatements described in Attachment II are immaterial, both individually and in the aggregate, to the financial statements as a whole.

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Non-SEC registrants or non-reporting issuers:

10) We confirm that the City is not a Canadian reporting issuer (as defined under any applicable Canadian securities act) and is not a United States Securities and Exchange Commission (“SEC”) Issuer (as defined by the Sarbanes-Oxley Act of 2002). We also confirm that the financial statements of the City will not be included in the consolidated financial statements of a Canadian reporting issuer audited by KPMG or an SEC Issuer audited by any member of the KPMG organization.

Employee future benefits:

11) The employee future benefits costs, assets and obligation, if any, have been determined, accounted for and disclosed in accordance with the relevant financial reporting framework.

12) All arrangements (contractual or otherwise) by which programs have been established to provide employee benefits have been disclosed to you and included in the determination of costs and obligations.

13) Each actuarial assumption used reflects management's best estimate solely with respect to that individual assumption, determined on a basis that the plan will continue to be in effect in the absence of evidence to the contrary.

14) The set of actuarial assumptions for each plan is individually consistent.

15) The assumptions included in the actuarial valuation are those that management instructed Mercer (Canada) Limited to use in computing amounts to be used by us in determining pension costs and obligations and in making required disclosures in the financial statements, in accordance with the relevant financial reporting framework.

16) In arriving at these assumptions, management has obtained the advice of Mercer (Canada) Limited but has retained the final responsibility for them.

17) The source data and plan provisions provided to the actuary for preparation of the actuarial valuation are accurate and complete.

18) All changes to plan provisions or events occurring subsequent to the date of the actuarial valuation and up to the date of this letter have been considered in the determination of pension costs and obligations and as such have been communicated to you as well as to the actuary.

19) The extrapolations are accurate and properly reflect the effects of changes and events that occurred subsequent to the most recent valuation and that had a material effect on the extrapolation.

20) We agree with the findings of Mercer (Canada) Limited as management’s expert in preparing the actuarial valuation of employee future benefits. We did not give or cause any instructions to be given to specialists with respect to the values or amounts derived in an attempt to bias their work, and we are not otherwise aware of any matters that have had an impact on the independence or objectivity of the specialists.

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Environmental Matters:

21) The City has appropriately recognized, measured and disclosed environmental matters in the financial statements.

Other:

22) We have appropriately prepared the Form C2 – Home Owner Grant: Treasurer/Auditor Certification in accordance with the financial reporting provisions of Section 12(l) of the Home Owner Grant Act.

23) We have complied with subsection 2 and 3 section 124 of Part 8 of the School Act.

Yours very truly,

_______________________________________ Mr. John Leeburn, Chief Administrative Officer

_______________________________________ Ms. Karen Grommada, Director of Finance

_______________________________________ Ms. Sharleen Karamanian, Manager of Accounting Services

cc: Finance & Intergovernmental Committee of the Corporation of the City of Port Coquitlam

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Attachment I – Definitions

MATERIALITY

Certain representations in this letter are described as being limited to matters that are material. Misstatements, including omissions, are considered to be material if they, individually or in the aggregate, could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. Judgments about materiality are made in light of surrounding circumstances, and are affected by the size or nature of a misstatement, or a combination of both.

FRAUD & ERROR

Fraudulent financial reporting involves intentional misstatements including omissions of amounts or disclosures in financial statements to deceive financial statement users.

Misappropriation of assets involves the theft of an entity’s assets. It is often accompanied by false or misleading records or documents in order to conceal the fact that the assets are missing or have been pledged without proper authorization.

An error is an unintentional misstatement in financial statements, including the omission of an amount or a disclosure.

RELATED PARTIES

In accordance with Public Sector Accounting Standards related party is defined as:

• "when one party has the ability to exercise, directly or indirectly, control, joint control or significant influence over the other. Two or more parties are related when they are subject to common control, joint control or common significant influence. Two not-for-profit organizations are related parties if one has an economic interest in

In accordance with Public Sector Accounting Standards a related party transaction is defined as:

• "a transfer of economic resources or obligations between related parties, or the provision of services by one party to a related party, regardless of whether any consideration is exchanged. The parties to the transaction are related prior to the transaction. When the relationship arises as a result of the transaction, the transaction is not one between related parties"

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Attachment II – Summary of Audit Misstatements Schedule

Summary of Corrected Audit Misstatements

No corrected audit misstatements were identified.

Summary of Uncorrected Audit Misstatements

Accounts and Description

Annual surplus

Debit (Credit)

Accumulated surplus at period end

Debit (Credit)

Financial Assets

Debit (Credit) Liabilities

Debit (Credit)

Non-Financial Assets

Debit(Credit)

1 DR Accrued receivable CR Other income (recovery) To accrue for recovery of misappropriated funds

- (175,000)

- (175,000)

175,000- -

- -

- -

2 DR Sale of services revenue CR Accumulated surplus Difference in sale of services revenue in current year as a result of deferred revenues recognized in the current year relating to the prior year

289,000 -

289,000 (289,000)

- -

- -

- -

TOTAL 114,000 (175,000) 175,000 - -

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Appendix 2: Audit Quality and Risk Management KPMG maintains a system of quality control designed to reflect our drive and determination to deliver independent, unbiased advice and opinions, and also meet the requirements of Canadian professional standards.

Quality control is fundamental to our business and is the responsibility of every partner and employee. The following diagram summarises the six key elements of our quality control systems.

Visit our Audit Quality Resources page for more information including access to our audit quality report, Audit quality: Our hands-on process.

Independence, integrity, ethics and objectivity

Personnel management

Acceptance & continuance of

clients / engagements

Engagement performance

standards

Independent monitoring

Other risk management

quality controls

– Other controls include:

– Before the firm issues its audit report, the Engagement Quality Control Reviewer reviews the appropriateness of key elements of specified client audits.

– Technical department and specialist resources provide real-time support to audit teams in the field.

– We conduct regular reviews of engagements and partners. Review teams are independent and the work of every audit partner is reviewed at least once every three years.

– We have policies and guidance to ensure that work performed by engagement personnel meets applicable professional standards, regulatory requirements and the firm’s standards of quality.

– All KPMG partners and staff are required to act with integrity and objectivity and comply with applicable laws, regulations and professional standards at all times.

– We do not offer services that would impair our independence.

– The processes we employ to help retain and develop people include:

– Assignment based on skills and experience;

– Performance evaluation; – Development and training; and – Appropriate supervision and

coaching.

– We have policies and procedures for deciding whether to accept or continue a client relationship or to perform a specific engagement for that client.

– Existing audit relationships are reviewed annually and evaluated to identify instances where we should discontinue our professional association with the client.

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Appendix 3: Background and professional standards Internal control over financial reporting As your auditors, we are required to obtain an understanding of internal control over financial reporting (ICFR) relevant to the preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances for the purpose of expressing an opinion on the financial statements, but not for the purpose of expressing an opinion on internal control. Accordingly, we do not express an opinion on the effectiveness of internal control.

Our understanding of ICFR was for the limited purpose described above and was not designed to identify all control deficiencies that might be significant deficiencies and therefore, there can be no assurance that all significant deficiencies and other control deficiencies have been identified. Our awareness of control deficiencies varies with each audit and is influenced by the nature, timing, and extent of audit procedures performed, as well as other factors.

The control deficiencies communicated to you are limited to those control deficiencies that we identified during the audit.

Documents containing or referring to the audited financial statements We are required by our professional standards to read only documents containing or referring to audited financial statements and our related auditors’ report that are available through to the date of our auditors’ report. The objective of reading these documents through to the date of our auditors’ report is to identify material inconsistencies, if any, between the audited financial statements and the other information. We also have certain responsibilities, if on reading the other information for the purpose of identifying material inconsistencies, we become aware of an apparent material misstatement of fact.

We are also required by our professional standards when the financial statements are translated into another language to consider whether each version, available through to the date of our auditors’ report, contains the same information and carries the same meaning.

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Appendix 4: Current developments The following is a summary of current developments that are relevant to the City since the developments discussed in our audit planning report:

Asset Retirement Obligations ― A new standard is under development addressing the recognition, measurement, presentation and disclosure of legal obligations associated with

retirement of tangible capital assets in productive use. PSAB currently contains no specific guidance in this area. ― In March 2017, PSAB issued an exposure draft Asset Retirement Obligations with deadline for comments to PSAB by June 15, 2017.

The proposed standard would require recognition of an asset retirement obligation (“ARO”) liability with a corresponding increase to the carrying amount of the related tangible capital asset. The asset recognized is expensed in a rational and systematic manner.

The proposed standard would apply to fiscal years beginning on or after April 1, 2021 and would be effective for the City’s fiscal 2022 year-end.

― As a result of the proposed standard, the City will have to: consider how the additional liability will impact net debt, as a new liability will be recognized with no corresponding increase in a financial

asset; carefully review legal agreements, senior government directives and legislation in relation to all controlled TCA to determine if any legal

obligations exist with respect to asset retirements; begin considering the potential effects on the organization as soon as possible to coordinate with resources outside the finance department

to identify AROs and obtain information to estimate the value of potential AROs to avoid unexpected issues. Revenue

― A new standard is under development to propose a single framework to categorize revenues to enhance the consistency of revenue recognition and its measurement.

― In May 2017, PSAB issued an exposure draft Revenue with deadline for comments to PSAB by August 15, 2017. The proposed standard would require revenues be categorized into exchange transactions and unilateral transactions. Revenue from

exchange transactions is recognized when the performance obligations are satisfied. Revenue from unilateral transactions is recognized when there is authority to claim or retain the revenue and an event has occurred that gives rise to the claim to the revenue.

The proposed standard would apply to fiscal years beginning on or after April 1, 2021 and would be effective for the City’s fiscal 2022 year-end. The proposed standard would be accounted for as a change in accounting policy applied retroactively with restatement for prior periods.

― As a result of the proposed standard, the City will have to assess its current accounting policies and practices.

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Employee Future Benefit Obligations ― Given the complexity of issues involved and potential implications of any changes that may arise from review of PS3250 Retirement Benefits and

PS3255 Post-Employment Benefits, PSAB is undertaking this project in phases. Phase I will address specific issues related to measurement of employment benefits. Phase II will address accounting for plans with risk sharing features, multi-employer defined benefit plans and sick leave benefits.

― An Invitation to Comment was issued in November 2016 and closed in March 2017, seeking guidance on whether the deferral provisions in existing public sector standards remain appropriate and justified and the appropriateness of accounting for various components of changes in the value of the accrued benefit obligation and plan assets.

― Separate invitations to comment will be issued in the future on discount rate and other aspects of the PSAB project. ― The ultimate objective of this project is to issue a new employment benefits section to replace existing guidance.

PSAB Strategic Plan

― In October 2016, PSAB issued an Invitation to Comment seeking feedback on its 2017-2020 draft strategic plan and how it can best serve public interest through improving information for accountability and decision-making.

― PSAB reviewed responses to its draft strategic plan at its December 2016 meeting and approved its 2017-2020 strategic plan in March 2017 and anticipates to issue the strategic plan in Q2 2017.

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KPMG LLP, an Audit, Tax and Advisory firm (kpmg.ca) and a Canadian limited liability partnership established under the laws of Ontario, is the Canadian member firm of KPMG International Cooperative (“KPMG International”).

KPMG member firms around the world have 174,000 professionals, in 155 countries.

The independent member firms of the KPMG network are affiliated with KPMG International, a Swiss entity. Each KPMG firm is a legally distinct and separate entity, and describes itself as such.

© 2016 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

kpmg.ca/audit

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REPORT TO FIG

DATE:

June 14, 2016

TO:

Finance and Intergovernmental Committee

FROM:

Transportation Solutions and Public Works Committee

SUBJECT: KINGSWAY BOAT LAUNCH REINSTATEMENT

RECOMMENDATION:

That the boat launch remains barricaded and closed until further notice.

BACKGROUND/DISCUSSION:

At the April 19, 2017 TSPW Committee meeting, a report seeking direction on the future

of the Kingsway Avenue boat launch was received. The report outlined the cost of safely

opening the existing boat launch, and recommended permanent closure. Committee

discussed future opportunities for the boat launch should the area be redeveloped, and

discussed that perhaps the recommendation could be amended to remove the wording

“permanently closed” and replaced with “closed until further notice.” The above

recommendation has been amended to reflect this discussion. Committee directed staff to

bring the report forward to the Finance and Intergovernmental Committee for further

discussion with all members of Council.

Respectfully Submitted by:

_____________________________

On behalf of the Transportation Solutions and Public Works Committee

Attachment: 2017 04 19 Kingsway Boat Launch Reinstatement

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Report to Committee

DATE:

April 19, 2017

TO:

Transportation Solutions & Public Works Committee

FROM:

Ross Maki

Section Manager of Streets

SUBJECT:

KINGSWAY BOAT LAUNCH REINSTATEMENT

EXECUTIVE SUMMARY:

Public Works staff closed the boat launch located at the foot of Kingsway Avenue and Fremont

Drive on the Pitt River in early 2016 due to concern of liability to the City if damages or injuries

were to occur to the public as the result of using the launch. The boat launch remains closed to

date. In 2017, R.F. Binnie & Associates consulting engineers were retained to review the site

and provide an assessment of the requirements and costs to reinstate the boat launch to a safe

standard.

RECOMMENDATION:

That the boat launch remains barricaded and permanently closed.

BACKGROUND:

The boat launch has been in existence for many years (1980’s) but to our knowledge has not

received much usage, if any, in recent years. The area is a frequent site of homeless camps and

launching a boat is difficult due to the geometry of the approach ramp, and the proximity of a

nearby dock to which several structures have been moored. The dock has not been maintained or

repaired for several years and is now in poor condition. R.F. Binnie and Associates were hired to

review the site and provide a preliminary upgrade design and an assessment of the environmental

requirements that may be necessary prior to upgrading the boat launch. The report is provided as

Appendix A to this report.

DISCUSSION:

The boat launch is in very poor condition. Public Works is aware of only one resident that was

concerned that the boat launch was blocked off shortly after it was closed. We have not received

any other communications requesting the ramp to be re-opened. Other boat launch options do

exist nearby for Port Coquitlam residents. The nearest public boat launch to Port Coquitlam on

the North side of the Pitt River/Fraser River is located under the Port Mann Bridge in Coquitlam,

approximately 9km (10 mins) from the subject site, and there is currently no charge for its use. 90

KINGSWAY BOAT LAUNCH REINSTATEMENT

Page 2

OPTIONS:

There are two options available for committee to consider:

1. Reconstruct the existing boat launch from the top of dike to the low water mark

approximately 35 meters at an estimated cost of $88,200. Included in the costs are

the design drawings, construction and inspection fees along with the environmental

approvals as required. The concern with this option is that it does not address the

grades of the approach on the land side of the dike. With the steep approach grade

on the land side of the boat lunch and the water side grade along with the short high

point that is created, likely some boat trailers would have very limited clearance, as

little as 5 centimeters in some cases, from bottom out, and potentially causing

damage to the boat launch surface and the tow vehicle and trailer. Even with a

signage identifying the hazards of use, it could still expose the City to a potential

liability risk.

2. Leave the boat launch permanently closed. There would be no liability risks to the

City (recommended).

CONCLUSION:

This report highlights the considerations and potential options for the future of the boat launch in

Port Coquitlam. Given the low usage and the high cost to upgrade, staff are recommending that

the boat launch be permanently closed. Should committee wish to upgrade the boat launch as

contemplated in Option 1, the project would be referred to the Budget and Infrastructure

Committee for consideration as part of a future capital plan.

Ross Maki

Section Manager of Streets

Approved by Kristen Meersman, P. Eng., MBA

Director of Engineering & Public Works

Attachment: Appendix A - Design Brief - Boat Launch Reinstatement Approvals

- R.F. Binnie & Associate

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DESIGN BRIEF

City of Port Coquitlam

Boat Launch Reinstatement Approvals Kingsway Extension

February 27, 2017

Reviewed by: John Kupskay, P.Eng

Project Manager

Prepared by:Melchor Mateo III, EIT

Junior Engineer

Binnie File No. 16-0826-05

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DESIGN BRIEF CITY OF PORT COQUITLAM BOAT LAUNCH REINSTATEMENT APPROVALS; KINGSWAY EXTENSION

i

TABLE OF CONTENTS

1 INTRODUCTION ..................................................................................... 1

1.1 Background ......................................................................................................................1

2 SITE INSPECTION ................................................................................... 2

2.1 Site Photographs ............................................................................................................3

3 SCOPE OF WORK .................................................................................... 3

4 ENVIRONMENTAL REVIEW AND ASSESSMENT .................................... 4

5 ENVIRONMENTAL MANAGEMENT ........................................................ 5

6 COST ESTIMATE ..................................................................................... 6

APPENDICES Appendix A: Boat Launch Ramp (Parking Pads Specification - Kon Kast Item 1418)

Appendix B: Figure 1 - Drawing 16-0826 Kingsway Boat Launch Upgrading

Appendix C: SER Environmental Assessment

Appendix D: Probable Construction Cost Estimate

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1

1 INTRODUCTION

R.F. Binnie & Associates Ltd. (Binnie) is pleased to provide the City of Port Coquitlam (the City) with a Design Brief for the reinstatement of the boat launch at the Pitt River dike. This report outlines necessary approvals and the cost of both engineering and environmental approvals for reinstating the boat launch. This report has been completed in conjunction with SER Environmental Management Ltd. (SER), who completed the required environmental assessment for this project.

1.1 Background

The site is on the downstream side of the Pitt River Bridge, located at the extension of Kingsway located south of the Pitt River Bridge at the Pitt River dike, as illustrated in the following photos. The proposed upgrading will require an environmental assessment during the design phase in order to determine whether notification or application to the Port Metro Vancouver Environmental Division and the Ministry of Forests, Lands and Natural Resource Operations (under the BC Water Sustainability Act, Section 9) will be needed. This determination will depend upon upgrading option(s). Application for review under the federal Fisheries Act may also be required. This can be accomplished at the same time as the Water Act notification/application to the Ministry of Forests, Lands and Natural Resources. If optional design work for streambank erosion protection/fish habitat enhancement involves instream works, application to undertake the works will be required at both provincial and federal levels. Because the Pitt River is navigable, approval will also be required from Transport Canada under the federal Navigable Waters Act. Approvals/notifications can be coordinated through the Port.

The boat launch had been in use, but was recently closed due to safety and access concerns.

Figure 1-1: Project Location

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2

Boat Launch – looking east from dike Boat Launch – looking west from Pitt River

2 SITE INSPECTION

On September 28, 2016, a site inspection was completed by Steve Brown of the City of Port Coquitlam and John Kupskay, P.Eng., of Binnie.

The inspection included a review of parameters provided by the City:

Width of new boat launch to match existing pavement width at top of dike

Design new asphalt pavement from end of sound pavement to boat launch no parking sign

New pavement structure to be 100 mm thick asphalt pavement overlain by 50 mm layer of 25 mm minus road mulch over 300 mm thick layer of 75 mm clear crushed gravel

From “End of Road” sign (in foreground below) to second abandoned vertical pile in foreshore, add 300 mm thickness of 75 mm clear crushed gravel overlain with doublewide precast concrete pads - 3.05 metre long 355 mm wide parking pads together to provide boat launch ramp (parking pads specification - Kon Kast Item 1418 or equal, per attachment in Appendix A)

Design — drawing (attached in Appendix B) and the construction cost estimate for inclusion and possible capital works for later tendering

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2.1 Site Photographs

Existing Site Existing Boat Ramp

Deterioration and Debris Existing Pavement at Top of Ramp

3 SCOPE OF WORK

The scope of work included the following:

Perform field assessment and review site concerns

Review existing record information (roads, sanitary, storm, water, and other utilities)

Assess need for any changes to work

Produce a 1:500 scale plan drawing c/w detail specifications

Prepare environmental assessment and process approvals

One design drawing was generated from existing CAD files supplemented by additional topographic survey. Design drawing was completed in accordance with good engineering practices using Master Municipal Construction Documents (MMCD) Standards and the City of Port Coquitlam’s Current Subdivision Servicing Bylaw. Technical specifications will be provided.

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4

4 ENVIRONMENTAL REVIEW AND ASSESSMENT

SER Environmental Management Ltd. has reviewed the environmental sensitivities of the site, as well as adjacent greenspace, constructed compensation habitat, private properties where impacts could occur from the proposed construction, and future operations and maintenance.

Their work included a site visit to verify background data, as well as to collect any additional information required to evaluate the potential environmental impacts and effects of boat launch upgrading design(s), future construction and subsequent operations, and maintenance on fish and wildlife and their habitats—including at-risk species that could be present.

A design drawing showing proposed boat launch improvements including removal of existing asphalt, stripping and regrading of site, and supply and placement of pavement structure (granular subbase, granular base, and precast concrete pavement slabs from high water level and into water) was provided to SER for their use at this stage.

SER’s Review and Assessment report is included in Appendix C.

5 DESIGN VEHICLE

We have performed a review of the vertical profile to ascertain whether a vehicle pulling a boat trailer may bottom out between the new boat launch and the existing roadway. The review was performed using 3 design vehicles in AutoTURN 10, to check the profile in addition to the horizontal turning paths. The 3 design vehicles are as follows based on the AASHTO 2011(US) vehicle library:

P-B, a passenger vehicle pulling a boat trailer

MH-B, a RV pulling a boat trailer

A custom vehicle representing a CUV, i.e., a Honda CRV, pulling a boat trailer

For the AASHTO P-B vehicle, the wheelbase was noted to be long and the vehicle is also low (0.21 m ground clearance). Based on the AutoTURN review, the tightest clearance with the existing profile was estimated to be 0.05 m.

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For the AASHTO MH-B vehicle, the wheelbase was noted to be long but the vehicle has a higher vertical clearance (0.38 m ground clearance). Based on the AutoTURN review, the tightest clearance with the existing profile was estimated to be 0.11 m.

For the custom vehicle representing a CUV, the wheelbase was noted to be shorter than the P-B design vehicle but it has a similar vertical clearance (0.21 m ground clearance). Based on the AutoTURN review, the tightest clearance with the existing profile was estimated to be 0.05 m.

The tightest clearance point exists on the current vertical profile and most vehicles should be able to clear it. However, slight rounding of the profile may benefit the manoeuvre more for the boat launch users.

6 ENVIRONMENTAL MANAGEMENT

During the tendering and construction phase, a Construction Environmental Management Plan will be prepared as part of the environmental assessment package for inclusion in the tender documentation in order to provide guidance to tenderers on means of maintaining compliance with environmental regulations and best management practices during construction. Erosion and sediment control planning recommendations will be included for incorporation into the construction design drawings and other documentation.

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7 COST ESTIMATE

Below is a summary of probable engineering and construction costs for this project. A detailed construction cost estimate is included in Appendix D.

Project Stage Fees

EngineeringPreliminary Design $2,150Permit Processing and coordination $1,900Engineering Drawings $2,106Approvals $1,300Disbursements $2,544Site survey $1,750Report and cost estimate $3,000Construction ServicesDrawing and Tender Document $3,000Tendering $1,000Construction Inspection and Contract Administration $5,250Construction (including 20% contingency) $60,000Sub-total $84,000GST $4,200Total Cost $88,200

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APPENDIX A BOAT LAUNCH RAMP (PARKING PADS SPECIFICATION - KON KAST ITEM 1418)

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APPENDIX B FIGURE 1

KINGSWAY BOAT LAUNCH UPGRADING

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APPENDIX C SER ENVIRONMENTAL ASSESSMENT

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SER Environmental Management Ltd. 24265 –60 Avenue

Langley, BC V2Z 2G5 Telephone: 604 789 2582

October 31, 2016 via email Mr. John Kupskay R.F. Binnie & Associates Ltd. 205 – 4946 Canada Way Burnaby, BC V5G 4H7 Dear Sir: Re: City of Port Coquitlam – Kingsway Boat Launch Rehabilitation (Your file# 16-0826) SER Environmental Management Ltd. reviewed the Kingsway Avenue boat launch site (see attached location figure for context) during a low day-time tide on October 25, 2016, with respect to potential environmental effects of the proposed reconstruction, based on the preliminary design provided by R.F. Binnie & Associates (attached for reference, along with site photographs taken on October 25). Existing Conditions The boat launch is located at the end of Kingsway Avenue on the Pitt River, where Holland Avenue intersects and provides access to the mill, south of the boat launch. Holland Avenue is a pedestrian path way only from the boat launch north to the Pitt River Bridge (part of the Traboulay trail system). The boat launch is currently blocked off by concrete barriers. The upland portion of the ramp from the barriers to Holland Avenue is being used for RV parking (occupied) and tool and materials storage. There is an existing access wharf along the south side of the launch leading to offshore floats (boat moorage). At the time of the site visit, a cabin cruiser style boat was grounded on the foreshore on the north side of the boat launch, and other small craft and debris grounded along the north side of the existing boat launch, as well as stored on the upland area to the north of the existing ramp. There are a few old creosote-treated timber piles (heavily weathered) along what would have been the edge of the old intertidal launching area. The north side of the boat launch is vegetated with trees (cottonwoods), shrubs (mainly salmonberry and invasive blackberry, with more native species such as red osier dogwood and snowberry to the north along the trail) from the high water mark to the Holland Avenue trailhead. The foreshore on the north side of the boat launch is marsh bench, with the area immediately at the end of the existing ramp and to the south (under the wharf) consisting of muddy substrate with some embedded gravel to cobble-sized rocks and asphalt chunks. Some clumps of mixed grasses have established along the edges of the boat ramp area at the high water mark.

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Port Coquitlam – Kingsway Boat Launch Rehabilitation October 31, 2016

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SER Environmental Management Ltd. 24265 – 60 Avenue


Environmental Effects and Mitigative Strategies Rehabilitation of the boat launch involves the removal of old asphalt on the upland portion and replacement with new asphalt pavement tied into the end of Kingsway Avenue down to the current position of the concrete barriers. This work would occur solely on upland within existing paved or heavily impacted parking/storage area. Construction of the ramp section from the upland asphalt to the foreshore end would require shallow excavation and re-grading to remove the existing asphalt. A layer of crushed gravel would then be placed and the pre-cast paving mats laid and backfilled with gravel. The two old timber piles would be removed at the time and disposed of off-site at an appropriate facility as they were creosote-treated. Potential short-term environmental effects of construction would centre on erosion and sediment control during surficial soil disturbance. In order to avoid sediment generation and potential oily run-off from asphalt paving activities, works should be undertaken during a warm, dry weather period. Excavation/removal of surface material for the lower ramp section and placement of crushed gravel layer/pre-cast mats should be undertaken during a low tide cycle to allow stabilization of disturbed surfaces prior to inundation. Minor amounts of sediment resuspension will occur from placement of new materials on freshly exposed foreshore substrate, but will be detained along the edge of the river by rising tide and will move south with river outflow currents. The shallow foreshore and marina to the south will serve to capture sediments within the immediate area and prevent dispersal downstream (the muddy nature of the foreshore along this wide section of the river indicates that it is depositional due to slow water movements). In order to avoid potential impacts of accidents and malfunctions, excavation spoils and old asphalt should be hot-loaded and removed off-site for disposal. Deliveries of new materials should be to the existing asphalt and/or within the construction limits for immediate placement. Excavators, rollers or other heavy machinery should work from within the construction limits to avoid impact to existing vegetation and substrates. Emergency response spill kits must be available for immediate deployment. Positive environmental effects of boat launch rehabilitation may occur from removal of debris, stored/grounded boats and tools, etc., and prevention of unauthorized parking/long-term occupation on the ramp sloping to the river.

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Page 3 of 5



Environmental Regulatory Requirements Under the new federal Fisheries Act legislation, this project does not require project review or authorization as it falls under the self-assessment protocol and will not result in a change in footprint below the high water mark, nor in serious harm to fish as long as the measures to avoid harm are followed (copy attached; available at http://www.dfo-mpo.gc.ca/pnw-ppe/measures-mesures/index-eng.html). The extent of the boat launch footprint should be confirmed as being within the City of Port Coquitlam waterlot tenure. If it is not, then amendment of the waterlot tenure may be required for use of Crown Land through the provincial Land Tenures Branch (see http://www2.gov.bc.ca/gov/content/industry/natural-resource-use/land-use/crown-land/crown-land-uses/commercial-uses/marinas-yacht-clubs for more information). Sincerely, Shawna E. Reed, Ph.D., R.P. Bio. Manager, Environmental Services attachments

cc: Steve Brown, Operations Manager, City of Port Coquitlam Melchor Mateo III, Project Engineer, R.F. Binnie

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http://www.dfo-mpo.gc.ca/pnw-ppe/measures-mesures/index-eng.html

http://www2.gov.bc.ca/gov/content/industry/natural-resource-use/land-use/crown-land/crown-land-uses/commercial-uses/marinas-yacht-clubs

http://www2.gov.bc.ca/gov/content/industry/natural-resource-use/land-use/crown-land/crown-land-uses/commercial-uses/marinas-yacht-clubs


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(Top) View of boat launch approach from Kingsway and Holland avenues intersection. (Bottom) View of boat launch ramp looking toward upland: asphalt is cracked and crumbling at edges and in patches.

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Page 5 of 5



(Top) View of boat launch to low water (Vancouver 0830, 5.48’) on October 25, 2016: new boat launch surfacing will extend to the water’s edge where broken-off timber pile will be removed (red arrow). (Bottom) View of boat launch with Pitt River in background to north and marina on south side.

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(Top) View of riparian vegetation band on north side and (Bottom) marshy bench on foreshore, with grasses at high water mark. The rehabilitation of the boat launch will not affect the riparian or marsh bench to the north.

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Home Projects Near Water Measures to Avoid Causing HarmFisheries and Oceans Canada (/index-eng.htm)

If you are conducting a project near water, it is your responsibility to ensure you avoid causing seriousharm to fish (/pnw-ppe/pol/index-eng.html#ch82) in compliance with the Fisheries Act (http://laws-lois.justice.gc.ca/eng/acts/F-14/). The following advice will help you avoid causing harm and complywith the Act.

PLEASE NOTE: This advice applies to all project types and replaces all “Operational Statements”previously produced by DFO for different project types in all regions.

Project Planning

Timing

Time work in water to respect timing windows (/pnw-ppe/timing-periodes/index-eng.html)to protect fish, including their eggs, juveniles, spawning adults and/or the organisms uponwhich they feed.Minimize duration of in-water work.Conduct instream work during periods of low flow, or at low tide, to further reduce the riskto fish and their habitat or to allow work in water to be isolated from flows.Schedule work to avoid wet, windy and rainy periods that may increase erosion andsedimentation.

Site Selection

Design and plan activities and works in waterbody such that loss or disturbance to aquatichabitat is minimized and sensitive spawning habitats are avoided.Design and construct approaches to the waterbody such that they are perpendicular to thewatercourse to minimize loss or disturbance to riparian vegetation.Avoid building structures on meander bends, braided streams, alluvial fans, activefloodplains or any other area that is inherently unstable and may result in erosion andscouring of the stream bed or the built structures.Undertake all instream activities in isolation of open or flowing water to maintain thenatural flow of water downstream and avoid introducing sediment into the watercourse. 113

Contaminant and Spill Management

Plan activities near water such that materials such as paint, primers, blasting abrasives,rust solvents, degreasers, grout, or other chemicals do not enter the watercourse.Develop a response plan that is to be implemented immediately in the event of a sedimentrelease or spill of a deleterious substance and keep an emergency spill kit on site.Ensure that building material used in a watercourse has been handled and treated in amanner to prevent the release or leaching of substances into the water that may bedeleterious to fish.

Erosion and Sediment Control

Develop and implement an Erosion and Sediment Control Plan for the site that minimizes riskof sedimentation of the waterbody during all phases of the project. Erosion and sedimentcontrol measures should be maintained until all disturbed ground has been permanentlystabilized, suspended sediment has resettled to the bed of the waterbody or settling basinand runoff water is clear. The plan should, where applicable, include:

Installation of effective erosion and sediment control measures before starting work toprevent sediment from entering the water body.Measures for managing water flowing onto the site, as well as water beingpumped/diverted from the site such that sediment is filtered out prior to the waterentering a waterbody. For example, pumping/diversion of water to a vegetated area,construction of a settling basin or other filtration system.Site isolation measures (e.g., silt boom or silt curtain) for containing suspendedsediment where in-water work is required (e.g., dredging, underwater cable installation).Measures for containing and stabilizing waste material (e.g., dredging spoils,construction waste and materials, commercial logging waste, uprooted or cut aquaticplants, accumulated debris) above the high water mark of nearby waterbodies toprevent re-entry.Regular inspection and maintenance of erosion and sediment control measures andstructures during the course of construction.Repairs to erosion and sediment control measures and structures if damage occurs.Removal of non-biodegradable erosion and sediment control materials once site isstabilized.

Shoreline Re-vegetation and Stabilization

Clearing of riparian vegetation should be kept to a minimum: use existing trails, roads or cutlines wherever possible to avoid disturbance to the riparian vegetation and prevent soilcompaction. When practicable, prune or top the vegetation instead of grubbing/uprooting.Minimize the removal of natural woody debris, rocks, sand or other materials from the banks,

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the shoreline or the bed of the waterbody below the ordinary high water mark. If material isremoved from the waterbody, set it aside and return it to the original location onceconstruction activities are completed.Immediately stabilize shoreline or banks disturbed by any activity associated with the projectto prevent erosion and/or sedimentation, preferably through re-vegetation with native speciessuitable for the site.Restore bed and banks of the waterbody to their original contour and gradient; if the originalgradient cannot be restored due to instability, a stable gradient that does not obstruct fishpassage should be restored.If replacement rock reinforcement/armouring is required to stabilize eroding or exposedareas, then ensure that appropriately-sized, clean rock is used; and that rock is installed at asimilar slope to maintain a uniform bank/shoreline and natural stream/shoreline alignment.Remove all construction materials from site upon project completion.

Fish Protection

Ensure that all in-water activities, or associated in-water structures, do not interfere with fishpassage, constrict the channel width, or reduce flows.Retain a qualified environmental professional to ensure applicable permits for relocating fishare obtained and to capture any fish trapped within an isolated/enclosed area at the work siteand safely relocate them to an appropriate location in the same waters. Fish may need to berelocated again, should flooding occur on the site.Screen any water intakes or outlet pipes to prevent entrainment or impingement of fish.Entrainment occurs when a fish is drawn into a water intake and cannot escape.Impingement occurs when an entrapped fish is held in contact with the intake screen and isunable to free itself.

In freshwater, follow these measures for design and installation of intake end of pipefish screens to protect fish where water is extracted from fish-bearing waters:

Screens should be located in areas and depths of water with low concentrationsof fish throughout the year.Screens should be located away from natural or artificial structures that mayattract fish that are migrating, spawning, or in rearing habitat.The screen face should be oriented in the same direction as the flow.Ensure openings in the guides and seals are less than the opening criteria tomake “fish tight”.Screens should be located a minimum of 300 mm (12 in.) above the bottom of thewatercourse to prevent entrainment of sediment and aquatic organismsassociated with the bottom area.Structural support should be provided to the screen panels to prevent saggingand collapse of the screen.Large cylindrical and box-type screens should have a manifold installed in them toensure even water velocity distribution across the screen surface. The ends of thestructure should be made out of solid materials and the end of the manifoldcapped.

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Heavier cages or trash racks can be fabricated out of bar or grating to protect thefiner fish screen, especially where there is debris loading (woody material, leaves,algae mats, etc.). A 150 mm (6 in.) spacing between bars is typical.Provision should be made for the removal, inspection, and cleaning of screens.Ensure regular maintenance and repair of cleaning apparatus, seals, and screensis carried out to prevent debris-fouling and impingement of fish.Pumps should be shut down when fish screens are removed for inspection andcleaning.

Avoid using explosives in or near water. Use of explosives in or near water produces shockwaves that can damage a fish swim bladder and rupture internal organs. Blasting vibrationsmay also kill or damage fish eggs or larvae.

If explosives are required as part of a project (e.g., removal of structures such as piers,pilings, footings; removal of obstructions such as beaver dams; or preparation of a riveror lake bottom for installation of a structure such as a dam or water intake), thepotential for impacts to fish and fish habitat should be minimized by implementing thefollowing measures:

Time in-water work requiring the use of explosives to prevent disruption ofvulnerable fish life stages, including eggs and larvae, by adhering to appropriatefisheries timing windows (/pnw-ppe/timing-periodes/index-eng.html).Isolate the work site to exclude fish from within the blast area by using bubble/aircurtains (i.e., a column of bubbled water extending from the substrate to the watersurface as generated by forcing large volumes of air through a perforatedpipe/hose), cofferdams or aquadams.Remove any fish trapped within the isolated area and release unharmed beyondthe blast area prior to initiating blastingMinimize blast charge weights used and subdivide each charge into a series ofsmaller charges in blast holes (i.e., decking) with a minimum 25 millisecond(1/1000 seconds) delay between charge detonations (see Figure 1).Back-fill blast holes (stemmed) with sand or gravel to grade or to streambed/waterinterface to confine the blast.Place blasting mats over top of holes to minimize scattering of blast debris aroundthe area.Do not use ammonium nitrate based explosives in or near water due to theproduction of toxic by-products.Remove all blasting debris and other associated equipment/products from theblast area.

Figure 1: Sample Blasting Arrangement

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Per Fig. 1: 20 kg total weight of charge; 25 msecs delay between charges and blast holes; anddecking of charges within holes.

Operation of Machinery

Ensure that machinery arrives on site in a clean condition and is maintained free of fluidleaks, invasive species and noxious weeds.Whenever possible, operate machinery on land above the high water mark, on ice, or from afloating barge in a manner that minimizes disturbance to the banks and bed of the waterbody.Limit machinery fording of the watercourse to a one-time event (i.e., over and back), and onlyif no alternative crossing method is available. If repeated crossings of the watercourse arerequired, construct a temporary crossing structure.Use temporary crossing structures or other practices to cross streams or waterbodies withsteep and highly erodible (e.g., dominated by organic materials and silts) banks and beds.For fording equipment without a temporary crossing structure, use stream bank and bedprotection methods (e.g., swamp mats, pads) if minor rutting is likely to occur during fording.Wash, refuel and service machinery and store fuel and other materials for the machinery insuch a way as to prevent any deleterious substances from entering the water.

Date modified:

2013-11-25

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APPENDIX D PROBABLE CONSTRUCTION COST ESTIMATE

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Project: 16-0826

updated: February 15, 2017

ITEM NO. MMCD REF DESCRIPTION OF WORK UNIT QUANTITYUNIT

PRICEAMOUNT

Lane West of 3700 Block Coast Meridian Road

(#3735)

1.01 Mobilization/Demobilization

a) Mobilization/Demobilization Lump Sum 100% $4,000.00 $4,000.00

1.02 Concrete Walks, Curbs & Gutters

03 40 01SS 1.4.5 a) Remove and Dispose Existing Concrete Barriers Lump Sum 100% $2,000.00 $2,000.00

03 40 01SS 1.4.6b) 3.05m x 0.355m Kon Kast Item 1418 or Approved

Equal doublewide precast concrete padsEach 70.00 $350.00 $24,500.00

1.03 Common Excavation

31 24 13 1.8.5.4 a) Off-Site Disposal (truck box volume) Cubic Metre 30 $75.00 $2,250.00

31 24 13 1.8.9 b) Subgrade Preparation Square Metre 70 $15.00 $1,050.00

31 24 13SS 1.8.14c) Remove and Dispose Existing Abandoned Vertical

PileLump Sum 100% $2,000.00 $2,000.00

1.04 Granular Materials

32 11 16.1 1.4.1 & .2a) 300mm of 75mm clear crushed gravel for new

pavement structureTonne 50 $55.00 $2,750.00

32 11 23 1.4.1b) 50mm of 25mm Minus Road Mulch for new

pavement structureTonne 10 $55.00 $550.00

32 11 16.1 1.4.1 & .2c) 300mm of 75mm Clear Crushed Gravel under

Boat Launch PadsTonne 60 $55.00 $3,300.00

1.05 Reshaping Existing Subgrade

31 22 16.1 1.4.2 a) Remove unsuitable subgrade & dispose off site Cubic Metre 10 $75.00 $750.00

1.06 Asphaltic Concrete

32 12 16 1.5.1 & .2 a) Lane - Upper Course #2 (50mm) Tonne 10 $200.00 $2,000.00

32 12 16 1.5.1 & .2 b) Lane - Lower Course #2 (50mm) Tonne 10 $200.00 $2,000.00

1.07 Signs

01 58 01 1.3.1 a) Construction Signs Each 2 $250.00 $500.00

b) Remove and Reinstate Signs Each 2 $425.00 $850.00

c) WA-25 Pavement Ends Sign as per manual of

Uniform Traffic Control Devices for Canada A3.4.8Each 1 $500.00 $500.00

d) IC-15 Boat Launch Ramp Sign as per Manual of

Uniform Traffic Control Devices for Canada

A4.5.5.5

Each 1 $500.00 $500.00

e) Custom Blank Color Border with Text Only Sign Each 1 $500.00 $500.00

$50,000.00

20% Contingency $10,000.00

Subtotal $60,000.00

GST 5% $3,000.00

$63,000.00


16-0826 Kingsway Boat Launch Upgrading

QUANTITIES AND PRICES

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