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HomeMy WebLinkAbout2019 Financial Statements Kneehill County Financial Statements For the year ended December 31, 2019 Kneehill County Financial Statements For the year ended December 31, 2019 Contents Auditors' Report 1 Financial Statements Consolidated Statement of Financial Position 3 Consolidated Statement of Operations 4 Consolidated Statement of Change in Net Financial Assets 5 Consolidated Statement of Cash Flows 6 Summary of Significant Accounting Policies 7 - 9 Notes to the Financial Statements 10 - 29 Independent Auditor’s Report To the Reeve and Council of Kneehill County Opinion We have audited the consolidated financial statements of Kneehill County and its controlled or owned organizations (the Group), which comprise the consolidated statement of financial position as at December 31, 2019, and the consolidated statement of operations, consolidated statement of changes in net financial assets, and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies. In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2019 and its consolidated financial performance and its cash flows for the year then ended in accordance with Public Sector Accounting Standards. Basis for Opinion We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Emphasis of Matter – Restated Comparative Information We draw attention to Note 1 of the financial statements, which explains that certain comparative information for the year ended December 31, 2018 has been restated. Our opinion is not modified with respect of this manner. Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Public Sector Accounting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Group’s financial reporting process. Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Tel: 403 342 2500 Fax: 403 343 3070 www.bdo.ca BDO Canada LLP Suite 100 179D Leva Avenue Red Deer County AB T4E 1B9 Canada Independent Auditor’s Report, continued As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:  Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and  obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.  Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.  Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.  Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.  Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.  Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Chartered Professional Accountants, Red Deer, Alberta May 12, 2020 Kneehill County Statement of Financial Position December 31 2019 2018 Restated (see Note 1) Financial assets Cash and cash equivalents (Note 2)$51,776,035 $17,053,910 Short term investments (Note 3)-32,078,323 Taxes receivable (Note 4)7,159,514 2,698,241 Accounts receivable (Note 5)1,047,472 2,616,377 Land held for resale 822,714 822,714 Investments (Note 6)270 182 60,806,005 55,269,747 Liabilities Accounts payable and accrued liabilities 2,503,887 1,986,784 Employee benefit obligation (Note 7) 822,493 780,675 Deposit liabilities 130,000 40,000 Deferred revenue (Note 8) 3,104,236 1,432,295 Solid waste closure and post-closure liabilities (Note 9)438,013 403,455 Liability for contaminated sites (Note 9)397,400 397,400 7,396,029 5,040,609 Net financial assets 53,409,976 50,229,138 Non-financial assets Tangible capital assets (Note 11)112,788,495 110,192,674 Inventory for consumption (Note 12)5,629,160 7,164,023 Prepaid expenses 268,357 200,749 118,686,012 117,557,446 Accumulated surplus (Note 14)$172,095,988 $167,786,584 Debenture debt limits (Note 21) Contingencies (Note 22) Commitments (Note 22) The accompanying summary of significant accounting policies and notes are an integral part of these financial statements 3 Kneehill County Statement of Operations Budget For the year ended December 31 2019 2019 2018 Restated (see Note 1) Revenue Net municipal taxes (Note 16)$24,405,982 $24,547,044 $23,468,264 Government transfers for operating (Note 17)802,199 825,938 2,914,103 Sales and user fees 1,456,858 1,479,701 1,470,102 Rental revenue 166,296 198,962 222,471 Investment income 402,000 1,044,263 829,569 Penalties and costs on taxes 255,500 1,477,109 715,127 Fines and costs 20,200 19,263 24,006 Other 94,500 531,597 305,520 Local improvement tax 321,168 369,994 379,799 Drilling licenses 200,000 477,119 629,403 Sales to other governments 113,230 106,276 100,594 28,237,933 31,077,266 31,058,958 Expenditures (Note 18) Legislative 656,789 649,031 523,394 Administration and Assessment 4,950,396 5,340,110 5,057,813 Protective services 1,563,023 1,417,888 1,331,814 Transportation 13,654,829 13,736,139 14,106,462 Water and wastewater 2,666,692 2,520,819 2,643,317 Waste management 511,800 508,881 643,309 Public health and welfare 265,955 249,785 218,130 Planning and development 651,236 565,884 469,779 Economic/ Agricultural development 842,533 722,627 664,264 Parks, recreation and culture 964,992 899,903 954,566 Loss on disposal of tangible capital assets -156,795 249,609 26,728,245 26,767,862 26,862,457 Excess of revenue over expenditures - before other 1,509,688 4,309,404 4,196,501 Other Government transfers for capital (Note 17)2,698,429 -401,703 Contributed assets --190,117 Excess of revenue over expenditures 4,208,117 4,309,404 4,788,321 Accumulated surplus, beginning of the year as previously stated 167,786,584 167,786,584 162,157,496 Prior period adjustment (Note 1)--840,767 Accumulated surplus, beginning of year 167,786,584 167,786,584 162,998,263 Accumulated surplus, end of year $171,994,701 $172,095,988 $167,786,584 The accompanying summary of significant accounting policies and notes are an integral part of these financial statements 4 Kneehill County Statement of Change in Net Financial Assets Budget For the year ended December 31 2019 2019 2018 Restated (see Note 1) Excess of revenue over expenditures $4,208,117 $4,309,404 $4,788,321 Acquisition of tangible capital assets (22,756,598)(9,395,068)(5,183,006) Amortization of tangible capital assets 5,811,230 5,811,230 5,395,839 Net loss on sale of tangible capital assets -156,795 249,609 Proceeds on sale of tangible capital assets 998,345 831,222 477,242 Contributed assets --(190,117) (11,738,906)1,713,583 5,537,888 Change in prepaid expenses -(67,608)(4,877) Purchase inventory for consumption (2,217,504)(3,034,641)(4,576,281) Use inventory for consumption -4,569,504 4,556,049 Net change in net financial assets (13,956,410)3,180,838 5,512,779 Net financial assets, beginning of year 50,229,138 50,229,138 44,716,359 Net financial assets, end of year $36,272,728 $53,409,976 $50,229,138 The accompanying summary of significant accounting policies and notes are an integral part of these financial statements 5 Kneehill County Statement of Cash Flows For the year ended December 31 2019 2018 Restated (see Note 1) Operating transactions Excess of revenue over expenditures $4,309,404 $4,788,321 Items not involving cash Contributed assets -(190,117) Amortization 5,811,230 5,395,839 Net loss on disposal of tangible capital assets 156,795 249,609 Changes in non-cash operating balances Taxes receivable (4,461,273)(1,988,113) Accounts receivable 1,568,905 (2,117,163) Prepaid expenses (67,608)(4,877) Accounts payable and accrued liabilities 517,103 481,335 Inventory for consumption 1,534,863 (20,232) Employee benefit obligation 41,818 15,831 Deposit liabilities 90,000 (50,000) Deferred revenue 1,671,941 946,606 Solid waste closure and post closure liabilities 34,558 143,966 11,207,736 7,651,005 Capital transactions Acquisition of tangible capital assets (9,395,068)(5,183,006) Proceeds on sale of tangible capital assets 831,222 477,242 (8,563,846)(4,705,764) Investing transactions Purchase of short term investments -(2,035,746) Sale of short term investments 32,078,323 - Purchase of long term investments (88)(59) Net change in cash and cash equivalents 34,722,125 909,436 Cash and cash equivalents, beginning of year 17,053,910 16,144,474 Cash and cash equivalents, end of year $51,776,035 $17,053,910 Cash and cash equivalents is comprised of: Cash and cash equivalents $51,776,035 $17,053,910 Less: restricted (Note 2)(3,104,236)(1,432,295) $48,671,799 $15,621,615 The accompanying summary of significant accounting policies and notes are an integral part of these financial statements 6 Kneehill County Summary of Significant Accounting Policies December 31, 2019 Management's Responsibility for the Financial Statements The financial statements of the County are the responsibility of management. They have been prepared in accordance with Canadian generally accepted accounting principles established by the Public Sector Accounting Board of the Chartered Professional Accountants of Canada. Basis of Consolidation The financial statement reflect the assets, liabilities, revenue and expenses of all municipal organizations, committees and Boards which are owned or controlled by the County and are, therefore, accountable to the County Council for the administration of their financial affairs and resources. The schedule of taxes levied also includes operational requisitions for educational, health, social and other external organizations that are not part of the municipal reporting entity. The statement excludes trust assets that are administered for the benefit of external parties. Interdepartmental and organizational transactions and balances are eliminated. Cash and Cash Equivalents Management considers all highly liquid investments with maturity of three months or less at acquisition to be cash equivalents. Investments Investments are recorded at cost unless there has been a decline in the market value which is other than temporary in nature in which case the investments are written down to market value. Land Held for Resale Land held for resale is recorded at lower of cost or net realizable value. Cost includes costs for land acquisition and improvements required to prepare the land for servicing such as clearing, stripping and leveling charges. Related development costs incurred to provide infrastructure such as water and wastewater services, roads, sidewalks and street lighting are recorded as physical assets under their respective function. Inventory for Consumption Inventories of materials and supplies for consumption are valued at the lower of cost or replacement cost. Inventory of gravel is maintained by perpetual records and is recorded in the accounts to the extent of royalties, land costs, crushing costs incurred, hauling and equipment rentals. Excess Collections and Under-levies Excess collections arise from the difference between the actual levy made to cover each requisition and the actual amount requisitioned. If the actual levy exceeds the requisition, the excess collection is accrued as a liability and as a reduction in property tax revenue. Requisition tax rates in the subsequent year are adjusted for any excess collections. 7 Kneehill County Summary of Significant Accounting Policies December 31, 2019 Tangible Capital Assets Tangible capital assets are recorded at cost less accumulated amortization. Cost includes all costs directly attributable to acquisition or construction of the tangible capital asset including transportation costs, installation costs, design and engineering fees, legal fees and site preparation costs. Contributed tangible capital assets are recorded at fair value at the time of the donation, with a corresponding amount recorded as revenue. Amortization is recorded on a straight-line basis over the estimated life of the tangible capital asset commencing once the asset is available for productive use as follows: Land improvements 10 to 20 years Buildings 25 to 50 years Engineered Structures Water system 15 to 75 years Wastewater system 25 to 60 years Other engineered structures 6 to 100 years Machinery, equipment and furnishings 5 to 45 years Vehicles 5 to 20 years Assets under construction are not amortized until the asset is available for productive use. Tangible capital assets received as contributions are recorded at fair value at the date of receipt and are also recorded as revenue. Leased Assets Leases entered into that transfer substantially all the benefits and risks associated with ownership are recorded as the acquisition of a tangible capital asset and the incurrence of an obligation. The asset is amortized in a manner consistent with tangible capital assets owned by the County, and the obligation, including interest thereon, is liquidated over the term of the lease. All other leases are accounted for as operating leases, and the rental costs are expensed as incurred. Pension Expenditure The County's participates in a multi-employer defined benefit pension plan. The plan is accounted for as a defined contribution plan. Deferred Revenue Funds received for specific purposes which are externally restricted by legislation, regulation or agreement and are not available for general municipal purposes are accounted for as deferred revenue on the statement of financial position. The revenue is recognized in the statement of operations in the year in which it is used for the specified purpose. Government Transfers Government transfers, which include legislative grants, are recognized in the financial statements in the period in which events giving rise to the transfers occur, providing the transfers are authorized, any eligibility criteria have been met, and reasonable estimates of the amount can be made. 8 Kneehill County Summary of Significant Accounting Policies December 31, 2019 Revenue Recognition Taxes are recognized as revenue in the year they are levied. Charges for sewer and water usage are recorded as user fees. Connection fee revenues are recognized when the connection has been established. Conditional grant revenue is recognized to the extent the conditions imposed on it have been fulfilled. Unconditional grant revenue is recognized when monies are receivable. Grants for the acquisition of tangible capital assets are recognized in the period in which eligible expenditures are made. Sales of service and other revenue is recognized on an accrual basis. Landfill Closure and Post Closure Liability Pursuant to Alberta Environmental Protection and Enhancement Act, the County is required to fund the closure of its landfill site and provide for post-closure care of the facility. Closure and post-closure activities include, but are not limited to, final clay cover, landscaping, as well as surface and ground water monitoring, leachate control and visual inspection. The requirement is being provided for over the estimate of the remaining life of the landfill site based on usage. Liability for Contaminated Sites A contaminated site is a site at which substances occur in concentrations that exceed the maximum acceptable amounts under an environmental standard. Sites that are currently in productive use are only considered a contaminated site if an unexpected event results in contamination. A liability for remediation of contaminated sites is recognized when the organization is directly responsible or accepts responsibility; it is expected that future economic benefits will be given up; and a reasonable estimate of the amount can be made. The liability includes all costs directly attributable to remediation activities including post remediation operations, maintenance and monitoring. The liability is recorded net of any expected recoveries. Use of Estimates The preparation of financial statements in accordance with Canadian public sector accounting standards requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from management's best estimates as additional information becomes available in the future. 9 Kneehill County Notes to Financial Statements December 31, 2019 1. Prior Period Adjustment The County reviewed the capital assets that it had recorded in the financial statements and compared it to those that they hold title to; as a result of the review it was noted that a capital asset was missing dating back to 1998. 2018 as Reported Adjustment 2018 Restated Tangible capital assets $109,416,581 776,093 $110,192,674 Accumulated surplus, beginning of the year $(162,157,496)840,767 $(162,998,263) Accumulated surplus, end of the year $(167,010,491)(776,093)$(167,786,584) Amortization expense $5,331,161 64,680 $5,395,841 Revenues over expenditures $4,853,001 (64,680)$(4,788,321) 2. Cash and Cash Equivalents 2019 2018 Current account $51,776,035 $17,053,910 The County has an undrawn line of credit of $2,500,000 that is available should the need arise. The line of credit bears interest at prime minus 0.75%. Included in the above amounts are the following amounts received from the Government of Canada and the Province of Alberta as conditional grants held exclusively for future projects. 2019 2018 Municipal Sustainability Initiative - Operating $141,829 $144,468 Municipal Sustainability Initiative - Capital 2,397,291 1,257,327 Federal Gas Tax Fund 565,116 - Other -30,500 $3,104,236 $1,432,295 3. Short-term Investments 2019 2018 Guaranteed investment certificates, matured in 2019 $-$32,078,323 10 Kneehill County Notes to Financial Statements December 31, 2019 4. Taxes Receivable 2019 2018 Current taxes and grants in place $6,620,385 $3,205,622 Non-current taxes and grants in place 3,156,078 2,109,568 Less: Allowance for doubtful accounts (2,616,949)(2,616,949) $7,159,514 $2,698,241 5. Accounts Receivable 2019 2018 Trade receivables $888,901 $2,325,266 GST Receivable 158,571 291,111 $1,047,472 $2,616,377 6. Investments 2019 2018 Alberta Capital Finance Shares, at cost $121 $121 Servus Credit Union Membership Shares, at cost 149 61 $270 $182 7. Employee Benefit Obligation 2019 2018 Accrued vacation pay $252,470 $234,714 Accrued sick leave benefit 570,023 545,961 $822,493 $780,675 The vacation and sick benefits liability is comprised of vacation and sick days credits that employees are deferring to future years. Employees have either earned the benefits (and are vested) or are entitled to these benefits within the next budget year. 11 Kneehill County Notes to Financial Statements December 31, 2019 8. Deferred Revenue Opening balance Contributions received Revenue recognized Ending balance MSI Operating 144,468 141,829 (144,468)141,829 MSI Capital 1,257,327 1,548,836 (408,872)2,397,291 Gas Tax Fund -565,116 -565,116 ASB program -168,359 (168,359)- ASB environmental -50,000 (50,000)- Other 30,500 23,739 (54,239)- $1,432,295 2,497,879 (825,938)$3,104,236 Grants Under various grant agreements with the Government of Canada and the Province of Alberta, the County is required to account for grants provided and to complete the projects or program in accordance with standards detailed in the various agreements. If these requirements are not adhered to, grants provided will become repayable to the source government. Unexpended funds are repayable to the source government upon final accounting. Funds are deferred until related expenditures under the specific grant agreement have been incurred. 9. Landfill Closure and Post-Closure Liabilities Solid waste closure and post-closure care requirements have been defined in accordance with industry standards and include final covering and landscaping of the landfill, removal of ground water and leachates, and ongoing environmental monitoring, site inspection and maintenance. The estimated total liability is based on the sum of the discounted future cash flows for close and postclosure activities for 25 years after closure using a discount rate of 4.4% and assuming annual inflation of 3%. The accrued liability portion is based on the cumulative capacity used at year end compared to the estimated total landfill capacity. The total capacity of the site is estimated at 57,600 cubic metres. The existing landfill site is expected to reach capacity in (approximately) 2028. The County has not designated assets for settling closure and post closure liabilities. 2019 ($) 2018 ($) Estimated closure costs 545,235 536,787 Estimated post-closure costs 470,780 466,850 Estimated total liability 1,016,015 1,003,637 Liability accrued (438,013)(403,455) Balance of estimated cost to accrue 578,002 600,182 12 Kneehill County Notes to Financial Statements December 31, 2019 10. Liability for Contaminated Sites The County has one site that falls under this standard. This site was acquired through the tax recovery process. The contamination comes from an underground storage tank plus additional possible contamination from the former bulk fuel storage facility. Costs to reclaim were estimated using the soil vapour extraction and air sparging technology at an estimated cost of $397,400 over 3 years which includes costs to remove the tank, install equipment and operate the equipment for 3 years. Costs to reclaim have not been discounted. 13 Kneehill County Notes to Financial Statements December 31, 2019 11. Tangible Capital Assets 2019 Land Land Improvements Buildings Engineered Structures Machinery and Equipment Vehicles Work in Progress Total Cost, beginning of year $2,384,358 $2,868,706 $19,901,899 $154,129,884 $10,417,503 $8,816,842 $3,133,419 $201,652,611 Additions 353,746 -6,750,866 1,814,939 551,351 5,930,484 15,401,386 Change in work in progress ------(6,006,318)(6,006,318) Write-downs & disposals ---(366,773)(1,255,132)(643,935)-(2,265,840) Cost, end of year $2,384,358 $3,222,452 $19,901,899 $160,513,977 $10,977,310 $8,724,258 $3,057,585 $208,781,839 Accumulated amortization, beginning of year $-$1,150,542 $3,917,501 $78,272,730 $3,386,352 $4,732,812 $-$91,459,937 Amortization -134,483 438,251 3,898,798 654,657 685,041 -5,811,230 Write-downs & disposals ---(366,773)(493,182)(417,868)-(1,277,823) Accumulated amortization, end of year $-$1,285,025 $4,355,752 $81,804,755 $3,547,827 $4,999,985 $-$95,993,344 Net carrying amount, end of year $2,384,358 $1,937,427 $15,546,147 $78,709,222 $7,429,483 $3,724,273 $3,057,585 $112,788,495 14 Kneehill County Notes to Financial Statements December 31, 2019 11. Tangible Capital Assets (continued) 2018 Land Land Improvements Buildings Restated - Note 1 Engineered Structures Machinery and Equipment Vehicles Work in Progress Total Restated - Note 1 Cost, beginning of year $2,384,358 $2,515,749 $19,359,913 $153,400,886 $10,246,069 $8,796,551 $1,039,701 $197,743,227 Additions 356,617 541,986 772,999 990,613 430,619 2,280,289 5,373,123 Write-downs & disposals -(3,660)-(44,001)(819,179)(410,328)(186,571)(1,463,739) Cost, end of year $2,384,358 $2,868,706 $19,901,899 $154,129,884 $10,417,503 $8,816,842 $3,133,419 $201,652,611 Accumulated amortization, beginning of year $-$1,032,519 $3,479,244 $74,797,362 $3,099,908 $4,391,952 $-$86,800,985 Amortization 121,683 438,257 3,513,958 618,586 703,355 -5,395,839 Write-downs (3,660)-(38,590)(332,142)(362,495)-(736,887) Accumulated amortization, end of year $-$1,150,542 $3,917,501 $78,272,730 $3,386,352 $4,732,812 $-$91,459,937 Net carrying amount, end of year $2,384,358 $1,718,164 $15,984,398 $75,857,154 $7,031,151 $4,084,030 $3,133,419 $110,192,674 15 Kneehill County Notes to Financial Statements December 31, 2019 12. Inventory For Consumption 2019 2018 Gravel $5,064,900 $6,636,713 Other transportation amounts 361,566 389,397 Other 202,694 137,913 $5,629,160 $7,164,023 13. Equity in Tangible Capital Assets 2019 2018 Restated (see Note 1) Tangible capital assets $208,781,839 $201,652,611 Accumulated amortization (95,993,344)(91,459,937) $112,788,495 $110,192,674 16 Kneehill County Notes to Financial Statements December 31, 2019 14. Accumulated Surplus 2019 2018 Restated (see Note 1) Equity in tangible capital assets (Note 13)$112,788,495 $110,192,674 Equity in other non-financial assets 5,897,517 7,364,772 Unrestricted surplus 1,242,738 1,277,284 119,928,750 118,834,730 Reserves Operating Reserves: Contingency 2,603,772 2,605,372 Information Technology 190,065 274,624 Joint Community Support 31,641 31,641 Doctor Recruitment 154,680 156,747 Gravel 3,656,072 2,387,679 Planning 142,679 131,580 Parks 762,715 762,715 Transitional Funds 3,060,874 816,208 Revenue Stabilization Reserve 3,745,000 2,100,000 Hamlet Infrastructure 3,493,522 3,183,819 17,841,020 12,450,385 Capital Reserves: Capital Equipment Replacement 5,564,309 5,178,931 Buildings 763,000 381,500 Bridges 4,963,096 4,978,695 Roads 12,262,894 13,229,714 Water 3,587,107 3,587,107 Water Service Area 5,154,468 5,810,186 Environmental 2,031,344 2,066,937 Urban Sustainability -1,268,399 34,326,218 36,501,469 Total Reserves 52,167,238 48,951,854 $172,095,988 $167,786,584 The equity in tangible capital assets represents amounts already spent and invested in infrastructure. Reserves represents funds set aside by bylaw or council resolution for specific purposes. 17 Kneehill County Notes to Financial Statements December 31, 2019 15. Change in Accumulated Surplus Unrestricted surplus Reserves Equity in tangible capital assets Equity in other non- financial assets 2019 2018 (restated) Balance, beginning of year $1,277,284 $48,951,854 $110,192,674 $7,364,772 $167,786,584 $162,157,496 Prior peroid adjustment $-$-$-$-$-$840,767 Balance, beginning of year restated $1,277,284 $48,951,854 $110,192,674 $7,364,772 $167,786,584 $162,998,263 Excess of revenue over expenses 5,776,659 --(1,467,255)4,309,404 4,788,321 Net operating transfers to restricted surplus (3,215,384)3,215,384 ---- Capital transfers from restricted surplus ------ Acquisition of capital (9,395,068)-9,395,068 --- Disposals and write-down of assets 988,017 -(988,017)--- Amortization 5,811,230 -(5,811,230)--- Change in accumulated surplus $(34,546)$3,215,384 $2,595,821 $(1,467,255)$4,309,404 $4,788,321 Balance, end of year $1,242,738 $52,167,238 $112,788,495 $5,897,517 $172,095,988 $167,786,584 18 Kneehill County Notes to Financial Statements December 31, 2019 16.Taxation - Net Budget 2019 2019 2018 Taxation Farmland $1,141,707 $1,141,511 $1,420,312 Residential 1,399,252 1,397,564 2,481,735 Commercial 745,599 739,254 926,312 Linear property 20,111,957 20,116,104 17,026,326 Designated Industrial 5,337,576 5,449,010 5,882,930 Minimum tax 47,459 47,334 50,748 Grants in lieu 918 918 998 Water area special tax (rural)81,516 81,850 79,254 Water area special tax (non residential)1,032,829 1,038,178 995,838 Recreation levy 49,997 49,889 44,405 29,948,810 30,061,612 28,908,858 Requisitions Alberta School Foundation Fund 5,355,116 5,326,974 5,355,082 Kneehill Foundation 76,650 76,650 38,944 Designated Industrial Property 111,062 110,944 46,568 5,542,828 5,514,568 5,440,594 Available for general municipal purposes $24,405,982 $24,547,044 $23,468,264 Shallow Gas Tax Relief Initiative (SGTRI) The Government of Alberta enacted a program in 2019 to assist Shallow Gas Producers that resulted in a 35% reduction of their property taxes. The total property taxes were reduced by $2,326,446.44 and the County was credited an equal amount through the Provincial Education Requisition, creating a zero net impact to the County for 2019. The Property Tax Revenue in these statements for those producers are still shown as the amount originally levied. 17. Government Transfers Budget 2019 2019 2018 Operating Provincial government 802,199 825,938 2,914,103 Capital Provincial government $2,698,429 $-$401,703 19 Kneehill County Notes to Financial Statements December 31, 2019 18. Expenses by Object Budget 2019 2019 2018 Restated (see Note 1) Salaries and wages $8,986,481 $8,634,826 $8,076,559 Contracted and general services 6,748,310 8,303,256 8,334,040 Materials, goods and utilities 4,191,311 3,054,428 3,553,593 Transfer to local agencies 859,032 311,277 303,044 Transfer to individuals and organizations 122,511 485,364 939,183 Operating bank fees 9,370 10,687 10,588 Amortization 5,811,230 5,811,230 5,395,841 Loss on sale of assets -156,794 249,609 $26,728,245 $26,767,862 $26,862,457 20 Kneehill County Notes to Financial Statements December 31, 2019 19. Municipal Employees Pension Plans Local Authorities Pension Plan Certain employees of the County are eligible to be members of the Local Authorities Pension Plan (LAPP), a multi-employer pension plan which is covered by the Public Sector Pension Plans Act. The Plan serves about 265,813 people and over 420 employers. It is financed by employer and employee contributions and investment earnings of the LAPP Fund. The plan provides defined pension benefits to employees based on their length of service and rates of pay. The County contributes to the Plan at a rate of 9.39% of pensionable earnings up to the Canada Pension Plan Maximum Pensionable Earnings and 13.84% for the excess. Employees contribute to the Plan at a rate of 8.39% of pensionable earnings up to the Canada Pension Plan Maximum Pensionable Earnings and 12.84% for the excess. Contributions for the year were: 2019 2018 Employer contributions $552,742 $598,447 Employee contributions 502,344 546,617 $1,055,086 $1,145,064 As this is a multi-employer pension plan, these contributions are the County's pension benefit expense. No pension liability for this type of plan is included in the County's financial statements. The most recent valuation as at December 31, 2018 indicates a surplus of $3,469 million (2017 surplus - $4,835 million) for basic pension benefits. The actuary does not attribute portions of the unfunded liability to individual employers. 21 Kneehill County Notes to Financial Statements December 31, 2019 20. Salary and Benefits Disclosure Disclosure of salaries and benefits for municipal officials and designated officers as required by Alberta Regulation 313/2000 is as follows: Salary Benefits & Allowances Total 2019 Total 2018 Division 1 (1 person)54,042 6,906 60,948 42,922 Division 2 (1 person)48,408 6,876 55,284 44,253 Division 3 (1 person)64,569 7,116 71,685 52,267 Division 4 (1 person)51,969 6,636 58,605 43,987 Division 5 (1 person)48,628 3,972 52,600 32,163 Division 6 (1 person)56,900 7,296 64,196 47,966 Division 7 (1 person)56,762 6,906 63,668 48,261 Chief Administration Officer 198,344 22,728 221,072 339,075 Salary includes regular base pay, bonuses, overtime, lump sum payments, gross honoraria and any other direct cash remuneration. Benefits and allowances includes the employer's share of all employee benefits and contributions or payments made on behalf of employees including pension, health care, dental coverage, group life insurance, accidental disability and dismemberment, dental coverage, vision coverage, professional memberships, tuition, travel, cell phone, car allowances, and long and short term disability plans. 21. Debt Limits Section 276(2) of the Municipal Government Act requires that debt and debt limits as defined by Alberta Regulation 255/100 for the County be disclosed as follows: 2019 2018 Total debt limit $46,002,591 $42,217,283 Total debt limit available 46,002,591 42,217,283 Debt servicing limit 7,667,099 7,036,214 Total debt servicing limit available 7,667,099 7,036,214 The debt limit is calculated at 1.5 times revenue of the County (as defined in Alberta Regulation 255/00) and the debt service limit is calculated at 0.25 times such revenue. Incurring debt beyond these limitations requires approval by the Minister of Municipal Affairs. These thresholds are guidelines used by Alberta Municipal Affairs to identify municipalities which could be at financial risk if further debt is acquired. The calculation taken alone does not represent the financial stability of the municipality. Rather, the financial statements must be interpreted as a whole. 22 Kneehill County Notes to Financial Statements December 31, 2019 22. Contingencies The County is a member of the Alberta Local Municipal Insurance Exchange (Munix). Under the terms of membership, the County could become liable for its proportionate share of any claim losses in excess of the funds held by the exchange. Any liability incurred would be accounted for as a current transaction in the year the losses are determined. 23. Commitments Kneehill County has contracts for 2020 to provide peace officer and by-law enforcement services at a cost recovery for the following Municipalities: Town of Three Hills, Town of Trochu, Village of Linden, Village of Acme, Village of Carbon. Kneehill County is managing partner of the Aqua 7 Regional Water Services Commission. The current contract is from January 1, 2020 to December 31, 2022. The County will receive $81,464 in those three years for fees to provide support services to the Commission. Kneehill County is a partnering member of the Drumheller and District Solid Waste Management Association. In 2019 Kneehill County paid requisition of $199,040, and is expected to pay $206,941 in 2020. Kneehill County entered into a 2 year contract for assessment services in 2018. The total financial commitment from 2019 to 2020 will be approximately $190,000. Kneehill County is part of a Master Fire Protection Agreement with the following Municipalities to provide fire protection services to rural residents in the County for 2020 inclusive, the total commitment is as follows: 2020 ($) 2019 ($) Town of Three Hills 52,000 52,000 Town of Trochu 49,990 32,700 Town of Drumheller 10,000 10,000 Village of Acme 42,840 41,950 Village of Carbon 41,950 41,950 Village of Linden 45,400 45,400 23 Kneehill County Notes to Financial Statements December 31, 2019 24. Budget The budget adopted by Council on April 23, 2019, was not prepared on a basis consistent with that used to report actual results (Public Sector Accounting Standards). The budget was prepared on a modified accrual basis while Public Sector Accounting Standards now require a full accrual basis. The budget figures anticipated use of surpluses accumulated in previous years to fund current year operation and capital activities. In addition, the budget expensed all tangible capital asset expenditures rather than including amortization expense. As a result, the budget figures presented in the statements of operations and change in net financial assets represent the budget adopted by Council on April 23, 2019, with adjustments as follows: Budget Amortization Allocation Budget per Financial Statements Actual per Financial Statements Revenues $28,237,931 -28,237,931 $31,077,266 Government transfers for capital 2,698,429 -2,698,429 - Total revenues 30,936,360 -30,936,360 31,077,266 Legislative 656,789 -656,789 649,031 Administration 4,815,604 134,792 4,950,396 5,340,110 Protective services 1,345,300 217,723 1,563,023 1,417,888 Transportation 9,442,357 4,212,472 13,654,829 13,736,139 Water and Wastewater 1,775,116 891,576 2,666,692 2,520,819 Waste management 511,800 -511,800 508,881 Planning and development 651,236 -651,236 565,884 Parks, recreation and culture 765,050 199,942 964,992 899,903 Public health and welfare 167,802 98,153 265,955 249,785 Economic and agricultural development services 785,962 56,571 842,533 722,627 Loss on disposal of assets ---156,795 Total Expenditures 20,917,016 5,811,229 26,728,245 26,767,862 Excess of revenues over expenditures 10,019,344 (5,811,229)4,208,115 4,309,404 Reconciling: Payment of debentures Proceeds on disposal of capital 998,345 998,345 831,222 Capital expenditures (22,756,596)(22,756,596)(9,395,068) Contributed assets Purchase of gravel (408,872)-(408,872)(1,189,693) Inter-fund transfers 12,147,779 -12,147,779 (3,215,397) -(5,811,229)(5,811,229)(8,659,532) Add back non cash items: Change in closure/ post-closure ---34,558 Use of gravel ---2,761,505 Net change in non-gravel inventory ---(36,948) Net change in prepaids (67,608) Amortization 5,811,229 5,811,229 5,811,230 Change in gravel pit reclamation ---- Gain/ loss on disposal of capital 156,795 Net Revenue over Expenses $---$- 24 Kneehill County Notes to Financial Statements December 31, 2019 25. Segmented Information Situated in the heart of central Alberta, Kneehill County is a progressive rural municipality comprised of approximately 815,000 acres of land and 2,000 kilometres of developed roads. Agriculture remains the backbone of the local economy, complemented by a strong oil and gas industry. Kneehill County is first and foremost a rural community that values safety and good government for their citizens. Responsible development is encouraged that supports our resource-based economy, while at the same time investing in and enhancing infrastructure and services to citizens. Our municipality continues to promote environmental responsibility, prosperity, and positive relationships with citizens, private sector and government partners. A wide range of services are provided by departments and for management purposes, their operations and activities are organized and reported by fund. Certain departments that have been separately disclosed in the segmented information, along with the services they provide, are as follows: Agriculture Services The Agriculture Services Department focuses on the need to maintain agricultural production and profitability with an emphasis on helping farmers help themselves. It involves the participation of ratepayers and the cooperation of the Alberta Agriculture Food and Rural Development. The key priorities and goals of the department are to advise landowners concerning proper land utilization with a view of improving their economic well being. Priorities include advising landowners of effective methods to control weeds, diseases, insects and predators along with the prevention of soil and water degradation. Administration The Administration Department focuses on the delivery of quality services to customers at a reasonable cost. Along with meeting all of the financial reporting requirements, this department is also instrumental in ensuring legislative requirements are met associated with assessment and taxation. Additional support services initiated by this department include GPS, Records management, Information Technology and Human Resources. The goal of the Administration team is the delivery of customer service in a friendly, courteous and helpful manner guided by integrity and fairness. 25 Kneehill County Notes to Financial Statements December 31, 2019 24. Segmented Information (continued) Protective Services Kneehill County’s Protective Services section includes that of both Fire Services and Enforcement (Peace Officer) Services. Fire Services provides emergency fire protection and preventative services that mitigate loss of life and property with professionally trained volunteers and modern response equipment. Kneehill County support operating contracts with each of the six urban fire departments in addition to major contributions emergency response vehicles. Emergency preparedness planning is also led by Kneehill County through the implementation of a regional with all urban centres within our boundaries. Kneehill County identified a need for protection of municipal infrastructure and the need to enhance public safety. Our Peace Officers enhance some services provided by the local RCMP in addition to the protection of municipal infrastructure and enforcement of municipal bylaws. Enforcement assistance is also provided to other County departments such as Planning and Operations. Planning and Development The Planning and Development department promotes the incorporation of progressive planning and development practices into the organizations daily operations, along with orderly development and land use practices benefiting residents and minimizing conflicting uses. These practices centre around environmental stewardship, the notion of shared responsibilities in a global community, quality, livable communities and public participation. Recent initiatives of the department include the development of Inter-municipal Development Plans with neighbouring municipalities, an Environmentally Significant Areas Assessment and an Integrated Community Sustainability Plan. Long-term planning is supported by the Municipal Development Plan and Land Use Bylaw which reflect the vision and expectations of County residents. Transportation The Transportation department oversees many responsibilities including that of construction, maintenance and dust control of roads. Kneehill County has over 200 bridge crossing sites that are also maintained by this department. The oil and gas sector along with the development of large feedlots and new grain elevators have had significant impacts on the growth of the County and the resulting effects on our transportation corridors. In addition to the rural transportation routes, the Transportation department also provides services in five major hamlets located within our boundaries. 26 Kneehill County Notes to Financial Statements December 31, 2019 24. Segmented Information (continued) Water, Wastewater and Waste Managements Major infrastructure projects have taken place under the direction of Council in the area of potable water distribution. As a member of the Aqua 7 Regional Water Services Commission, the County has diligently worked to bring water to areas of the County where safe potable water is not available through the traditional well systems. Major completion of these distribution lines were completed in 2012. Other water distribution systems located throughout the County are also part of this operation. The wastewater needs of our local hamlets are also met by this department. As a member of the Drumheller and District Solid Water management Association, various transfer sites provide for the collection and disbursement of solid waste. Expansion to handle various recyclables at these stations along with initiatives in the areas of agricultural plastic recycling have also been facilitated through this relationship. Parks, Recreation and Culture Under the direction of the Transportation department, the County is responsible for the maintenance and operation of various municipal parks and campgrounds. Enhancements over the past several years have increased the level of services available at various locations. A Recreation Master Plan completed several years ago was the basis for the development of both major annual operating and capital contributions towards the various recreational facilities (arenas, swimming pools) located within our urban centres in Kneehill County. Public Health and Welfare Kneehill County has taken on the financial responsibility for the facility costs of the Kneehill Regional Medical Centre. In addition, the County controls operating expenses of 17 cemeteries, including the ground maintenance activities as provided within the Cemeteries Act, Provincial Statues and County Policies. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. In measuring and reporting segment revenue from transactions with other segments, inter-segment transfers have been eliminated. The revenues and expenses that are directly attributable to a particular segment are allocated to that segment. Taxation revenue has been allocated to general government except where specific tax revenues can be directly allocated to a service area. 27 Kneehill County Notes to Financial Statements December 31, 2019 25. Segmented Information (continued) For the year ended December 31 Protective Services Economic/ Agricultural Development Transportation Services Environmental Services Planning and Development Parks and Recreation Public Health and Welfare General Government 2019 Total Revenue Taxation $1,405,784 $780,169 $11,155,316 $2,504,439 $662,835 $819,883 $177,610 7,041,006 $24,547,042 Government transfers for operating 18,027 218,359 408,872 ----180,680 825,938 Sales and user fees 10,087 36,686 192,473 966,986 142,907 83,057 11,200 36,305 1,479,701 Investment income -------1,044,263 1,044,263 Fines and costs 19,263 --4,917 ---1,472,193 1,496,373 Rental revenue 9,055 350 97,057 ---92,500 -198,962 Licences and permits -------477,119 477,119 Other 74,941 -377,748 451,799 ---103,380 1,007,868 1,537,157 1,035,564 12,231,466 3,928,141 805,742 902,940 281,310 10,354,946 31,077,266 Expenses Salaries and wages 529,632 215,801 3,680,274 766,090 388,106 331,956 81,447 2,641,520 8,634,826 Contracted and general services 282,731 225,704 4,495,047 361,124 177,750 157,513 53,883 2,549,504 8,303,256 Materials, goods and utilities 173,802 224,551 1,348,345 941,710 28 108,093 16,302 241,597 3,054,428 Transfer to local agencies 214,000 ----49,889 -47,388 311,277 Transfers to individuals and organizations --363,654 69,199 -52,511 --485,364 Interest on long-term debt -------10,687 10,687 Amortization 217,723 56,571 4,212,472 891,576 -199,942 98,153 134,792 5,811,229 Loss on sale of capital assets (108,813)(36,561)290,567 --11,602 --156,795 1,309,075 686,066 14,390,359 3,029,699 565,884 911,506 249,785 5,625,488 26,767,862 Net surplus (deficit)$228,082 $349,498 $(2,158,893)$898,442 $239,858 $(8,566)$31,525 $4,729,458 $4,309,404 27 Kneehill County Notes to Financial Statements December 31, 2019 25. Segmented Information (continued) For the year ended December 31 Protective Services Agricultural Services Transportation Services Water and Wastewater Planning and Development Parks and Recreation Public Health and Welfare General Government 2018 Total (Restated) Revenue Taxation $1,217,179 $651,691 $12,480,801 $2,600,599 $513,583 $834,142 $131,163 $5,039,108 $23,468,266 Government transfers for operating 15,000 218,359 2,435,091 --75,000 -170,653 2,914,103 Government transfers for capital --401,703 -----401,703 Sales and user fees 3,075 21,145 371,618 826,566 229,350 165,205 7,450 35,810 1,660,219 Investment income -------829,569 829,569 Fines and costs 24,006 --3,665 ---711,459 739,130 Rentals 10,223 24,966 137,283 ---50,000 -222,472 Licences and permits -------629,403 629,403 Other 24,274 -262,260 475,284 ---24,095 785,913 1,293,757 916,161 16,088,756 3,906,114 742,933 1,074,347 188,613 7,440,097 31,650,778 Expenses Salaries and wages 491,693 207,867 3,528,979 696,461 356,144 342,131 75,577 2,377,707 8,076,559 Contracted and general services 252,099 220,461 5,136,388 486,508 113,635 218,529 32,401 1,874,024 8,334,045 Materials, goods and utilities 155,572 167,779 1,682,349 1,126,625 -106,622 11,998 302,648 3,553,593 Transfer to local agencies 214,000 ----44,405 -44,639 303,044 Transfers to individuals and organizations --818,674 69,199 -51,310 --939,183 Interest on long-term debt --293 ----10,295 10,588 Amortization 218,451 68,158 3,758,454 907,830 -191,569 98,153 153,221 5,395,836 Loss on sale of capital assets --249,609 -----249,609 Other --------- 1,331,815 664,265 15,174,746 3,286,623 469,779 954,566 218,129 4,762,534 26,862,457 Net surplus (deficit)$(38,058)$251,896 $914,010 $619,491 $273,154 $119,781 $(29,516)$2,677,563 $4,788,321 28 Kneehill County Notes to Financial Statements December 31, 2019 26. Subsequent Events Subsequent to year end, the impact of COVID-19 in Canada and on the global economy has increased. If the impacts of COVID-19 continue there could be further impact on the Municipality and its major customers, suppliers and other third party businesses and Municipality associates that could impact the time and amounts realized of the Municipality's assets and future profitability. At this time, the full potential impact of COVID-19 on the entity is not known. 27. Comparative Figures Wherever necessary, comparative figures have been reclassified to conform with current year financial statement presentation. 28. Approval of Financial Statements Council and Management approved these financial statements.