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4. 2007 City of OTTAWA CONSOLIDATED
FINANCIAL STATEMENTS ÉTATS FINANCIERS CONSOLIDÉS DE 2007
DE LA VILLE D’OTTAWA |
Committee
Recommendation
That Council approve the 2007 City of Ottawa Consolidated Financial Statements.
Recommandation
du comité
Que le Conseil approuve les états financiers
consolidés de 2007 de la Ville d’Ottawa.
Documentation
1. City
Treasurer’s report dated 3 June 2008 (ACS2008-CMR-FIN-0029).
2. Extract of Draft Minutes 27, Corporate Services and Economic Development Committee meeting of Tuesday, 17 June 2008.
Report to/Rapport à
Corporate Services and Economic Development Committee/
Comité des services organisationels et du
développement économique
and
Council/ et au Conseil
Submitted
by/Soumis par : Marian Simulik, City
Treasurer/Tresorière municipale
Contact/Personne ressource: Wayne Martin, Manager, Accounting and Financial Reporting/Gestionnaire, Vérification et rapports
580-2424,
ext./poste 25183, wayne.martin@ottawa.ca
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SUBJECT: |
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OBJET : |
REPORT RECOMMENDATION
That the Corporate Services
and Economic Development Committee and Council approve the 2007 City of Ottawa Consolidated Financial
Statements.
RECOMMANDATION DU RAPPORT
Que le Comité des services organisationnels et du développement
économique et le Conseil approuvent les états financiers consolidés de 2007 de
la Ville d’Ottawa.
BACKGROUND
The Municipal Act
requires that the City prepare annual audited financial statements in
accordance with accounting policies prescribed by the Public Sector Accounting
Board of the Canadian Institute of Chartered Accountants. These audited financial statements must be
published publicly.
On September 13, 2006,
Ernst & Young LLP was appointed as the external auditors of the City of
Ottawa for the five year term ending December 31, 2010. On November 6, 2007 Ernst & Young LLP
provided a planning memo outlining the scope and key issues affecting the 2007
audit for the information of Committee and Council. The 2007 audit is now complete and Ernst & Young LLP is
providing the attached audited consolidated financial statements and audit
results of the City of Ottawa for the year ended December 31, 2007.
DISCUSSION
The Financial Statements
have been prepared in accordance with the accounting policies prescribed by the
Public Sector Accounting Board of the Canadian Institute of Chartered
Accountants. These accounting policies
require the reporting of revenues and expenditures on the accrual basis of
accounting. The accrual basis of
accounting recognizes revenues, as they are earned and measurable; expenditures
are recognized, as they are incurred and measurable as the result of the
receipt of goods and services and the creation of a legal obligation to
pay. The City’s Operating and Capital
Budgets are based upon a modified cash basis of accounting. This results in significant differences
between the City’s external financial statements and its Operating and Capital
Budgets.
These differences are
reported as Amounts to be Recovered in Future Years and represent the timing
difference between when expenditures are recognized under the accrual method of
accounting and when they are funded through property taxes and rates as part of
the Operating Budget. Specific details on
the Amounts to be Recovered in Future Years are provided in note 14 to the
Financial Statements.
CONSULTATION
Not Required.
FINANCIAL IMPLICATIONS
Not applicable.
Document
1 - 2007 City of Ottawa Consolidated
Financial Statements
Document
2 - Ernst & Young Audit Results -
Year Ended December 31, 2007
Following consideration by Corporate Services and Economic
Development Committee, this report will be forwarded to Council for its
consideration.
2007 City
of OTTAWA CONSOLIDATED FINANCIAL STATEMENTS
ÉTATS FINANCIERS CONSOLIDÉS DE 2007 DE LA VILLE D’OTTAWA
ACS2008-CMR-FIN-0029 city-wide / À
l’Échelle de la ville
Ms. Marian
Simulik, City Treasurer, spoke to a PowerPoint presentation in which she
provided Committee with an overview of the report. A copy of her presentation is held on file with the City Clerk.
Ms. Simulik then
responded to questions from Committee members.
The following summarizes the main points raised.
Speaking to
post-retirement costs, Ms. Simulik referred to page 70 of the agenda package
and the note contained therein (note 8), which explained the change in the
post-retirement. She indicated some
funding for post-retirement benefits had been removed from the agreement but
that it had been put back in as a result an arbitrator’s ruling. Adding to this, Mr. Kent Kirkpatrick, City
Manager, acknowledged that the increase was significant. However, he noted that it was a liability to
be funded over a generation. Therefore,
the annual impact to the City was something in the order of $1M to $1.5M. He explained that in their brief to the
arbitrator, the union had taken the position that those post-retirement
benefits should continue and, after looking at all the issues that were put in
front of him, the arbitrator awarded that benefit to the union. Consequently, the post-retirement benefit
liability had to be recalculated by the actuaries and included as an unfunded
liability in these statements. Ms.
Simulik explained the distinction between post-retirement benefits and post-employment
benefits, citing long term disability as one example of a situation where the
City had post-employment obligations.
Responding to
some final questions on this issue, Ms. Simulik confirmed that these numbers
were sensitive to both interest rates and inflation and she indicated there was
$1.9M of funding set aside for these but otherwise, they were unfunded
liability.
Ms. Simulik
explained that sinking funds were not consolidated because, by by-law, those
funds had been set aside by the City to pay the debt they services. Therefore, including these would be a bit of
a misrepresentation of the cash the City had available.
In reply to a
question with respect to having easy access to three (3) numbers (total cash
from all sources, total debt, and total money owed to the City), Ms. Simulik
noted the consolidated statements she had seen for cities having gone through
the tangible capital assets had not provided that type of easy analysis. However, she indicate staff could look at a
way of putting this together, perhaps in the financial discussion and analysis
section of the annual report. However,
she suggestion what Council needed to be concerned about, when looking at the
cash, was the uncommitted cash.
In terms of the
decision to do a valuation of City assets and include it in the financial
statements, Ms. Simulik explained this was a new requirement of the Public
Service Accounting Board (PSAB). She
indicated the values would be historical values as opposed to current market
values. She discussed the rationale for
including these in the financial statements and she spoke to the process for
undertaking these valuations, which would involve a cross-departmental project
team led by Financial Services.
Speaking to
changes in landfill closure and post-closure liabilities, Ms. Simulik
referenced note 9, contained on page 73 of the agenda package. She noted that, even after landfills were
closed, the City would continue to have an obligation to take care of those
properties. She acknowledged that the
City’s adoption of a soure separated organics program would hopefully increase
the lifespan of landfills and reduce the liability. However, she maintained that these would not be factored in until
the program was actually in place and its impact evident.
Responding to
questions with respect to revenues generated through building permit fees, Ms.
Simulik indicated that current legislation restricted the use of such
funds. She explained that such revenues
could only be used for providing building services: capital costs related to providing the services, potential
lawsuits, etc.
Speaking to the
City’s financial credit rating, Ms. Simulik confirmed that the consolidated
financial statements were some of the key documents used by credit raters to
assess the City’s financial position and she indicated she expected the rating
agencies to make pronouncements on the City’s credit rating in late summer,
early fall and that she expected to have a continuation of the current rating.
In response to a
question with respect to the different interest rates for various loan
agreements reported in the financial statements, Ms. Simulik explained the
differences related to timing; whether interest rates were higher or lower at
the time the debt was incurred.
That
the Corporate Services and Economic Development Committee and Council
approve the 2007 City of Ottawa Consolidated Financial Statements.
CARRIED