Loading...
HomeMy WebLinkAbout2023 Financial Statements Kneehill County Financial Statements For the year ended Kneehill County Financial Statements For the year ended Contents Auditors' Report Financial Statements Statement of Financial Position 3 Statement of Operations 4 Statement of Change in 5 Statement of Cash Flows 6 Summary of Significant Accounting Policies 7 - 10 Notes to the Financial Statements 10-37 Kneehill County Statement of Financial Position December 31 2023 2022 Restated Financial assets Cash and cash equivalents $21,733,613 Investments 51,511,836 Taxes receivable 1,295,534 Accounts receivable 5,979,653 Land held for resale 75,899 80,596,535 Liabilities Accounts payable and accrued liabilities 1,903,674 Employee benefit obligation 786,437 Deposit liabilities 110,000 Deferred revenue 4,502,450 Asset retirement obligation 6,812,895 Liability for contaminated sites (Note 9)428,907 14,544,363 Net financial assets 66,052,172 Non-financial assets Tangible capital assets 113,990,731 Inventory for consumption 7,645,837 Prepaid expenses 319,395 121,955,963 Accumulated surplus (Note )$188,008,135 Debenture debt limits (Note ) Contingencies (Note ) Commitments (Note 21) 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 2023 2022 Restated Revenue Net municipal taxes $24,573,268 Government transfers for operating 709,810 Sales and user fees 2,010,642 Rental revenue 132,144 Investment income 3,126,948 Penalties and costs on taxes 140,441 Fines and costs 5,044 Other 182,514 Local improvement tax 322,495 Sales to other governments 112,755 Gain/(loss) on disposal of assets 7,247 31,323,308 Expenditures (Note 17) Legislative 1,069,908 Administration and assessment 4,008,931 Protective services 2,274,875 Transportation 12,779,808 Water and wastewater 3,157,321 Waste management 558,958 Public health and welfare 187,118 Planning and development 608,385 Economic/ agricultural development 949,844 Parks, recreation and culture 912,483 26,507,631 Excess of revenue over expenditures - before other 765,668 4,749,490 Other Government transfers for capital 2,621,390 Excess of revenue over expenditures 3,965,668 5,560,232 Accumulated surplus, beginning of year 180,571,068 Accumulated surplus, end of year $188,008,135 The accompanying summary of significant accounting policies and notes are an integral part of these financial statements 4 Kneehill County Statement of Change in Budget For the year ended Restated Excess of revenue over expenditures $7,437,067 Acquisition of tangible capital assets (6,140,707) Amortization of tangible capital assets 6,035,960 Net on sale of tangible capital assets (7,247) Proceeds on sale of tangible capital assets 479,272 Write-down on cost of tangible capital assets - 7,804,345 Change in prepaid expenses (46,588) Purchase inventory for consumption (3,888,862) Use inventory for consumption 4,639,194 Net change in (5,034,061)10,123,020 , beginning of year 57,544,083 Net financial assets, end of year $66,052,172 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 2023 Restated Operating transactions Excess of revenue over expenditures $7,437,067 Items not involving cash Amortization 6,035,960 Net on disposal of tangible capital assets (7,247) Write-down of tangible capital assets - Changes in non-cash operating balances Taxes receivable (271,453) Accounts receivable (2,117,438) Asset retirement obligation 185,565 137,749 Prepaid expenses (46,588) Accounts payable and accrued liabilities 145,207 Inventory for consumption 750,332 Employee benefit obligation (48,640) Deferred revenue (1,159,770) Liability for contaminated sites 12,432 10,915,427 Capital transactions Acquisition of tangible capital assets (6,140,707) Proceeds on sale of tangible capital assets 479,272 (5,661,435) Investing transactions (Purchase)/sale of short term investments (9,613,425) Net change in cash and cash equivalents 19,532,991 Cash and cash equivalents, beginning of year 26,093,046 Cash and cash equivalents, end of year $21,733,613 Cash and cash equivalents is comprised of: Cash and cash equivalents $21,733,613 Less: restricted (345,453) $21,388,160 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 Management's Responsibility for the Financial Statements The financial statements of the 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 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. Kneehill County Summary of Significant Accounting Policies Financial Instruments Cash and equity instruments quoted in an active market are measured at fair value (hierarchy level one – quoted market prices). All other financial instruments, are measured at cost or amortized cost. The carrying amount of each of these financial instruments is presented on the statement of financial position. Unrealized gains and losses from changes in the fair value of financial instruments are recognized in the statement of remeasurement gains and losses. Upon settlement, the cumulative gain or loss is reclassified from the statement of remeasurement gains and losses and recognized in the statement of operations. Interest and dividends attributable to financial instruments are reported in the statement of operations. When investment income and realized and unrealized gains and losses from changes in the fair value of financial instruments are externally restricted, the investment income and fair value changes are recognized as revenue in the period in which the resources are used for the purpose specified. For financial instruments measured using amortized cost, the effective interest rate method is used to determine interest revenue or expense. For portfolio measurements measured at cost, the cost method records the initial investment at cost and earnings from such investments are recognized only to the extent received or receivable. When an investment is written down to recognize an impairment loss, the new carrying value is deemed to be the new cost basis for subsequent accounting purposes. All financial assets are tested annually for impairment. When financial assets are impaired, impairment losses are recorded in the statement of operations. Transaction costs are added to the carrying value for financial instruments measured using cost or amortized cost. Transaction costs are expensed for financial instruments measured at fair 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. Kneehill County Summary of Significant Accounting Policies 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. If the actual levy is less than the requisition, the under-levy is accrued as a receivable and as an increase in property tax revenue. Requisition tax rates in the subsequent year are adjusted for any excess collections or under-levies. 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 , 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 '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. Kneehill County Summary of Significant Accounting Policies Revenue Recognition Revenue from transactions with no performance obligation is recognized at realizable value when the commission has the authority to claim or retain an inflow of economic resources and identifies a past transaction or event giving rise to an asset. Revenue from transactions with performance obligations is recognized as the performance obligations are satisfied by providing the promised goods or services to the payor. User fees are recognized over the period of use, sales of goods are recognized when goods are delivered. Government transfers are the transfer of assets from senior levels of government that are not the result of an exchange transaction, are not expected to be repaid in the future, or are the result of a direct financial return. Government transfers are recognized in the financial statements as revenue in the period in which events giving rise to the transfer occur, providing the transfers are authorized, any eligibility criteria have been met and reasonable estimates of the amounts can be determined. Transfers where stipulations give rise to a liability are recognized as revenue as the stipulation liabilities are settled. Asset Retirement Obligation A liability for an asset retirement obligation is recognized at the best estimate of the amount required to retire a tangible capital asset at the financial statement date when there is a legal obligation for the County to incur retirement costs, the past transaction has or event giving rise to the liability has occurred, it is expected that future economic benefits will be given up, and a reasonable estimate of the amount can be made. The best estimate of the liability includes all costs directly attributable to asset retirement activities, based on information available at year-end. The County uses a cost escalation or current estimates, which approximates the estimated cost if work was to be completed as of the financial statement date. When a liability for an asset retirement obligation is initially recognized, a corresponding asset retirement cost is capitalized to the carrying amount of the related tangible capital asset. The asset retirement cost is amortized over the useful life of the related asset. At each financial reporting date, the County reviews the carrying amount of the liability. The County recognizes period-to-period changes to the liability due to the passage of time as accretion expense. Changes to the liability arising from revisions to either the timing, or the amount of the original estimate are recognized as an increase or decrease to the carrying amount of the related tangible capital asset. The County continues to recognize the liability until it is settled or otherwise extinguished. Disbursements made to settle the liability are deducted from the reported liability when they are made. Kneehill County Summary of Significant Accounting Policies Liability for Contaminated Sites Contaminated sites are a result of contamination being introduced into air, soil, water or sediment of a chemical, organic or radioactive material or live organism that exceeds an environmental standard. The liability is recorded net of any expected recoveries. A liability for remediation of a contaminated site is recognized when the County is either directly responsible or accepts responsibility and is management's estimate of the cost of post-remediation including operation, maintenance and monitoring. 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. Estimates are included in accounts receivable after evaluation as to their collectability, amortization based on the estimated useful lives of tangible assets, estimates included in asset retirement obligations, and sick leave benefit. Actual results could differ from management's best estimates as additional information becomes available in the future. 1. Change in Accounting Policy PS 3280 Asset Retirement Obligation (ARO) PS 3280 ARO, a new standard establishes guidance on the accounting and reporting of legal obligations associated with the retirement of tangible capital assets controlled by a government or government organization. Information presented for comparative purposes is restated unless the necessary financial data is not reasonably determinable. Effective January 1, 2023 the County adopted the new accounting standard PS 3280 Asset Retirement Obligations and applied the standard using the modified retroactive approach with restatement of prior year comparative information. On the effective date of the PS 3280 standard, the County recognized the following to conform to the new standard: asset retirement obligations adjusted for accumulated accretion to the effective date; asset retirement cost capitalized as an increase to the carrying amount of the related tangible capital assets in productive use; accumulated amortization on the capital cost; and adjustment to the opening balance of the accumulated surplus/deficit. Kneehill County Notes to Financial Statements Amounts are measured using information, assumptions and inflation rates where applicable that are current on the effective date of the standard. The amount recognized as an asset retirement cost is measured as of the date the asset retirement obligation was incurred. Accumulated accretion and amortization are measured for the period from the date the liability would have been recognized had the provisions of this standard been in effect to the date as of which this standard is first applied. Statement of Operations: expenditures of the year year Statement of Financial Position: Statement of Change in Net Financial Assets Excess of revenue over expenditures the year year PS 3450 Financial Instruments, provides guidance on the recognition, measurement, presentation, and disclosure of financial instruments including derivative instruments. The standard requires fair value measurements of derivative instruments and equity instruments; all other financial instruments can be measured at either cost or fair value depending upon elections made by the County. Management has reviewed the standard and all the financial statements and determined the County does not have derivative or equity instruments. The financial instruments have been measured based on the significant accounting policy. Refer to Note 26 on the County’s financial instrument risk. Kneehill County Notes to Financial Statements 2.Cash and Cash Equivalents 2023 2022 Current account $21,733,613 The 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. Municipal Sustainability Initiative - Capital 215,453 Other 110,000 Strategic Transportation Infrastructure Program 20,000 $345,453 3.Investments 2023 2022 Guaranteed investment certificates, bearing interest at rates of 1.75% to 6.05% and maturing between January of 2024 and July of 2025.$51,511,836 Kneehill County Notes to Financial Statements 4.Taxes Receivable 2023 2022 Current taxes and grants in place $1,198,577 Non-current taxes and grants in place 229,377 Less: Allowance for doubtful accounts (132,420) $1,295,534 5.Accounts Receivable 2023 2022 Trade receivables $5,795,428 GST receivable 184,225 $5,979,653 Kneehill County Notes to Financial Statements 6. Employee Benefit Obligation 2023 2022 Accrued early retirement program $82,527 Accrued vacation pay 239,054 Accrued sick leave benefit 464,856 $786,437 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. The early retirement program was an incentive for eligible employees to receive a percentage of their salary should they choose to retire before turning 65. Only employees hired prior to January 1, 2007 who are at least 55 years old were eligible. At December 31, 2023, all employees eligible for the early retirement benefit have retired. As such, the remaining expected cash outflows from this benefit are $58,074 in 2024 and $24,453 in 2025 Sick Leave Benefits The updated their sick leave policy as of November 30, 2021. Under the new policy the County provides paid sick leave at a rate of 12 days per year, which can accumulate from year to year to a total of 50 work days. Employees hired after November 1, 2021 are not entitled to payouts of accrued sick time. Employees hired prior to November 1, 2021 are entitled to sick time payout upon retirement or termination, at a rate equal to the top tier of their wage band as of November 30, 2021, regardless of future market changes or promotion. Upon 4 years of service, 50% of accrued days will be vested and can be paid out upon end of service to a maximum of 50 days. Upon 9 years of service, 75% of accrued days will be vested and can be paid out upon end of service to a maximum of 50 days At or after 15 years of service, upon retirement and receiving pension, 100% of accrued days will be vested and can be paid out upon end of service to a maximum of 50 days. Under the previous policy, employees were able to accrue up to 100 days vested based on the above. Under the transition to the new policy in 2021, employees vested sick time based on years of service and amount of sick time was recorded as at that date. Those employees with more than 50 days of accrued sick time at the time of the policy change received a payout of their accrued days in excess of 50 at their current pay rate. Kneehill County Notes to Financial Statements 7.Deferred Revenue Opening balance Contributions received recognized MSI Capital Deferred revenue relates to funding received or receivable in the current period that is related to the subsequent period. $4,156,997 of the deferred revenue is sitting in accounts receivable and the remaining $345,453 is sitting in cash. Municipal Sustainability Initiative Capital (MSI) The Government of Alberta provides conditional grant funding through this program to assist with various capital expenditures in the Municipality. The use of these funds is restricted to eligible expenditures as approved under the funding agreement. Canada Community Building Fund (CCBF) - Formerly Federal Gas Tax The Government of Canada provides Alberta Transportation with a grant restricted to eligible expenditures as approved under the funding agreement. Strategic Transportation Infrastructure Program (STIP) - Bridges The Government of Alberta provides conditional grant funding through this program to assist the development and maintenance of local transportation infrastructure. The use of these funds is restricted to eligible expenditures as approved under the funding agreement. Kneehill County Notes to Financial Statements 8. Asset Retirement Obligation Landfill 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 liability of the landfill is $232,117, which includes closure and post closure costs. The existing landfill site is expected to reach capacity in (approximately) 2028. Remaining The remaining tangible capital assets that contain an asset retirement obligation consist of machinery and equipment, engineered structures, land improvements, buildings and land. The estimated liability that makes up the remaining tangible capital assets are $6,580,778. The costs were calculated according to assumed construction quantities and the quantum of service associated with the demolition and disposal of each quantity. Remediation was calculated based on normal use of specific assets where the presence of contamination is expected, and the quantum of service associated with the remedial activities. Reclamation was calculated according to construction type, land use and disturbance area and the quantum of service associated with the activity. All calculations for Kneehill County use the cost escalation method using an inflation rate of 2.8%. The county has not designated assets for settling the abatement activities. ($) Restated 2022 ($) Balance, beginning of the year 6,627,330 185,565 Estimated total liability 6,812,895 Kneehill County Notes to Financial Statements 9. Liability for Contaminated Sites The 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 $428,907 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. Kneehill County Notes to Financial Statements 10.Tangible Capital Assets Land Land Improvements Buildings Engineered Structures Machinery and Equipment Vehicles Work in Progress Total Cost, beginning of year Additions progress Write-downs & disposals Cost, end of year Accumulated amortization, beginning of year Amortization Write-downs & disposals Accumulated amortization, end of year Net carrying amount, end of year Kneehill County Notes to Financial Statements 10. Tangible Capital Assets (continued) Land Land Improvements Buildings Engineered Structures Machinery and Equipment Vehicles Work in Progress Total Cost, beginning of year Cost, end of year Accumulated amortization, beginning of year Accumulated amortization, end of year Net carrying amount, end of year Kneehill County Notes to Financial Statements 11. Inventory For Consumption 2023 2022 Gravel $7,086,090 Other transportation amounts 392,075 General department 167,672 $7,645,837 12.Equity in Tangible Capital Assets 2023 2022 Restated Tangible capital assets $232,891,799 Accumulated amortization (118,901,068) Asset retirement obligation (6,812,895) $107,177,836 Kneehill County Notes to Financial Statements 13.Accumulated Surplus 2023 2022 Restated Equity in tangible capital assets $107,177,836 Equity in other non-financial assets 7,965,231 Unrestricted surplus 4,846,967 119,990,034 Reserves Operating Reserves: Contingency 2,123,754 Information Technology 260,947 Joint Community Summit - Doctor Recruitment - Gravel 2,349,528 Infrastructure 2,700,000 Planning 154,514 Parks 802,999 Transitional Funds 636,112 Revenue Stabilization Reserve 8,525,394 17,553,248 Capital Reserves: Capital Equipment Replacement 9,915,101 Buildings 2,417,460 Bridges 1,401,737 Roads 20,347,099 Water 4,570,644 Water Service Area 5,870,638 Environmental 1,950,541 Emergency Disaster 686,024 Hamlet Infrastructure 3,305,609 50,464,853 Total Reserves 68,018,101 $188,008,135 Reserves represents funds set aside by bylaw or council resolution for specific purposes. Kneehill County Notes to Financial Statements 14.Change in Accumulated Surplus Unrestricted surplus Reserves capital assets financial assets 2023 (restated) Balance, beginning of year $180,571,068 expenses 7,437,067 restricted surplus restricted surplus assets Change in accumulated surplus $7,437,067 Balance, end of year $188,008,135 Kneehill County Notes to Financial Statements 15.Taxation - Net Budget 2023 Taxation Farmland Residential Commercial Linear property Designated Industrial Minimum tax Grants in lieu Recreation levy Requisitions Alberta School Foundation Fund Kneehill Foundation Designated Industrial Property Available for general municipal purposes 16. Government Transfers Budget 2023 Operating Provincial government $709,810 Other local government - 709,810 Capital Provincial government 2,621,390 Total government transfers $3,331,200 Kneehill County Notes to Financial Statements 17.Expenses by Object Budget 2023 Salaries and wages $9,199,979 Contracted and general services 5,375,816 Materials, goods and utilities 4,861,876 Transfer to local agencies 720,518 Transfer to individuals and organizations 110,352 Operating bank fees 17,565 Amortization 6,035,960 Accretion Expense 185,565 $26,507,631 18. Municipal Employees Pension Plans Local Authorities Pension Plan Certain employees of the 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 274,151 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 contributes to the Plan at a rate of 8.45% of pensionable earnings up to the Canada Pension Plan Maximum Pensionable Earnings and 12.23% for the excess. Employees contribute to the Plan at a rate of 7.45% of pensionable earnings up to the Canada Pension Plan Maximum Pensionable Earnings and 11.23% for the excess. Contributions for the year were: Employer contributions $586,793 Employee contributions 534,727 $1,121,520 As this is a multi-employer pension plan, these contributions are the 's pension benefit expense. No pension liability for this type of plan is included in the 's financial statements. The most recent valuation as at December 31, 2022 indicates a surplus of $12.7 billion (2021 surplus - $11.9 billion) for basic pension benefits. The actuary does not attribute portions of the unfunded liability to individual employers. Kneehill County Notes to Financial Statements 19. 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 Allowances Total 2022 Division 1 (1 person)45,188 6,937 57,121 Division 2 (1 person)41,450 6,938 45,273 Division 3 (1 person)52,375 6,998 58,546 Division 4 (1 person)47,300 6,938 49,406 Division 5 (1 person)47,625 6,938 51,151 Division 6 (1 person)48,113 6,937 54,051 Division 7 (1 person)50,813 6,937 54,619 Chief Administration Officer 274,286 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. $28,248 of the CAO salary costs is paid by Aqua 7 for the Management Contract. Kneehill County Notes to Financial Statements 20.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 be disclosed as follows: Total debt limit $46,974,092 Total debt 20,000,000 Total debt limit available 26,974,092 Debt servicing limit 7,829,015 Total debt servicing limit available 7,829,015 The debt limit is calculated at 1.5 times revenue of the (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. The County has provided a loan guarantee in the amount of $20,000,000 to the Town of Trochu to support the potential building of Trochu Seniors Supportive Living Facility Project in the Town of Trochu. In compliance with Section 268 of the Municipal Government Act, the amount of the proposed loan guarantee does not cause the County to exceed it's debt limit. If the Town of Trochu is unable to meet the terms of the loan the County will utilize cash reserves or funds raised through taxation to honour the terms of the loan. Along with other conditions the County's commitment to enter a guarantee shall be conditional on the Town receiving firm financial capital grant commitments of at least $19,000,000 to undertake the project. As of December 31, 2023 the conditions of the loan guarantee have not been met. 21.Contingencies The is a member of the Alberta Local Municipal Insurance Exchange (Munix). Under the terms of membership, the 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. Kneehill County Notes to Financial Statements 22. Commitments Kneehill County has contracts for 2023 to provide peace officer and by-law enforcement services at a cost recovery for the following Municipalities: Town of Three Hills, 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, 2023 to December 31, 2025. The County will receive $86,450 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 2023 Kneehill County paid requisition of $253,254. Kneehill County extended their contract for assessment services until 2024. The total financial commitment from 2023 was $178,829 and is anticipated to be $180,936 in 2024. Kneehill County is part of a Master Fire Protection Agreement with the following Municipalities to provide fire protection services to rural residents in the County for 2023 inclusive, the total commitment is as follows: 2024 ($) 2023 ($) 52,000 54,111 46,371 45,408 49,142 Kneehill County is part of a Recreation Agreement with the following Municipalities to provide funding of recreation programs and facilities in the County for 2023 inclusive, the total commitment is as follows: 2024 ($) 2023 ($) 120,000 54,000 37,500 37,500 40,000 Kneehill County Notes to Financial Statements 23.Funds Held in Trust The holds assets for the benefit of and stand in fiduciary relationship to the beneficiaries. The following trust funds and assets are excluded from the ’s financial statements: 2023 Kneehill Regional Family & Community Support Services $301,360 Doctors Recruitment 79,586 Joint Community Summit 55,275 $436,221 Kneehill County Notes to Financial Statements 24.Budget The budget adopted by Council on March 28, 2023, 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 represent the budget adopted by Council on March 28, 2023, with adjustments as follows: Budget Amortization Allocation Budget per Financial Statements Actual per Financial Statements Revenues Total revenues Legislative development services Total Expenditures Excess of revenues over expenditures Net Revenue over Expenses 30 Kneehill County Notes to Financial Statements 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: Economic/Agricultural Development 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. General Government The General Government 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 GIS, 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.The amounts detailed in the report below are comprised of combined figures from two departments: the Legislative department and the Administration and Assessment department. Kneehill County Notes to Financial Statements 25. Segmented Information (continued) Protective Services Kneehill County’s Protective Services department 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. Kneehill County Notes to Financial Statements 25. 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. Kneehill County Notes to Financial Statements 25. Segmented Information (continued) For the year ended December 31 Protective Services Agricultural Development Transportation Services Environmental Services Planning and Development Recreation and Culture Public Health and Welfare General Government 2023 Total Revenue Taxation $-$-$-$-$-$-$-24,573,268 $24,573,268 Government transfers for operating capital Expenses Salaries and wages 834,489 328,618 3,800,118 963,883 502,456 317,606 53,096 2,399,713 9,199,979 Contracted and general services organizations Net surplus (deficit)$(2,157,330)$(710,494)$(12,026,517)$(1,949,898)$(484,871)$(818,795)$(85,294)$25,670,266 $7,437,067 34 Kneehill County Notes to Financial Statements 25. Segmented Information (continued) For the year ended December 31 Protective Services Agricultural Services Transportation Services Environmental Services Planning and Development Parks and Recreation Public Health and Welfare General Government 2022 Total Revenue Taxation $-$-$-$-$-$-$-$24,082,801 $24,082,801 Government transfers for operating capital Expenses Salaries and wages 778,906 339,770 3,467,750 1,027,509 470,045 304,323 47,698 2,143,579 8,579,580 Contracted and general services organizations Net surplus (deficit)$(2,035,606)$(511,900)$(10,968,695)$(1,879,215)$(413,403)$(1,127,434)$(92,517)$22,589,001 $5,560,232 35 Kneehill County Notes to Financial Statements 26. Financial Instruments The County is exposed to credit risk, liquidity risk, and interest rate risk from its financial instruments. This note describes the County’s objectives, policies, and processes for managing those risks and the methods used to measure them. Further qualitative and quantitative information in respect of these risks is presented below and throughout these financial statements. Credit risk: Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The County is exposed to credit risk through its cash, accounts receivable, and investments. The County manages its credit risk by credit approval process and holding cash at federally regulated chartered banks and cash accounts insured up to $100,000. The County measures its exposure to credit risk based on historical experience regarding collections. The maximum exposure to credit risk at the financial statement date is the carrying value of its cash and accounts receivable as outlined in Note 2. Accounts receivable arise primarily as a result of sales receivable. Based on this knowledge, credit risk of cash and accounts receivable are assessed as low. The County manages exposure to credit risk for portfolio investments by ensuring adequate diversification and by maintaining its investments are in compliance with County Investment Regulations. As a result, the County has reduced exposure to market or value risk. Liquidity risk Liquidity risk is the risk that the County will encounter difficulty in meeting obligations associated with financial liabilities. The County is exposed to liquidity risk through its accounts payable, long-term debt, and investments. The County manages this risk by maintaining a balance of short term or highly liquid investments and staggers maturity dates of investments for cash flow needs. Also to help manage the risk, the County has in place a planning, budgeting and forecasting process to help determine the funds required to support the normal operating requirements. The County measures its exposure to liquidity risk based on extensive budgeting. Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The County is exposed to interest rate risk through its value of portfolio investments. 36 Kneehill County Notes to Financial Statements 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.