2016 Financial Statement

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian public sector accounting standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors' Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit.  We conducted our audit in accordance with Canadian generally accepted auditing standards.  Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.  The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control.  An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. 

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements present fairly, in all material respects, the financial position of Kingston, Frontenac and Lennox and Addington Public Health as at December 31, 2016, and its
results of operations and its cash flows for the year then ended in accordance with Canadian public
sector accounting standards.

Chartered Professional Accountants, Licensed Public Accountants

April 26, 2017
Kingston, Canada

As at December 31, 2016, with comparative information for 2015

See accompanying notes to financial statements.

 Year ended December 31, 2016, with comparative information for 2015

See accompanying notes to financial statements.

Year ended December 31, 2016, with comparative information for 2015

See accompanying notes to financial statements.

Year ended December 31, 2016, with comparative information for 2015.

See accompanying notes to financial statements.

Year ended December 31, 2016

1. Significant accounting policies:
   The financial statements of Kingston, Frontenac and Lennox and Addington Public Health (the "Agency") are the representation of management prepared in accordance with Canadian public sector accounting standards for local governments as recommended by the Public Sector Accounting Board of the Chartered Professional Accountants Canada ("CPA"). Significant aspects of the accounting policies adopted by the Agency are as follows:
   1. Basis of presentation: The financial statements reflect the assets, liabilities, revenue and expenses of the reporting entity.
   2. Deferred revenue:
      Deferred revenue represents special program grants which have been received but for which related program costs have yet to be incurred.  These amounts will be recognized as revenue in the fiscal year that the program costs are incurred.
   3. Use of estimates:
      The preparation of financial statements in conformity with Canadian public sector accounting standards requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. These estimates are reviewed annually and as adjustments become necessary, they are recognized in the financial statements in the period in which they become known.
   4. Government transfers: Government transfers received relate to health programs.  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 and eligibility criteria have been met and reasonable estimates of the amounts can be made.
   5. Investments: Investments are recorded at cost plus accrued interest which approximates market value.
   6. Non-financial assets: Non-financial assets are not available to discharge existing liabilities and are held for use in the provision of services. They have useful lives extending beyond the current year and are not intended for sale in the ordinary course of operations. Tangible capital assets: Tangible capital assets are recorded at cost which includes amounts that are directly attributable to acquisition, construction, development or betterment of the asset. The cost, less residual value, of the tangible capital assets, excluding land are amortized on a straight-line basis over their estimated useful lives as follows:
      

      Useful life in Years

      Asset	Useful Life - Years
      Buildings	40
      Land improvements	15
      Furniture and fixtures	10
      Equipment - industrial/general	10
      Equipment - specialized/office/audio/video	5
      Computer - hardware	3

      Assets under construction are not amortized until the asset is available for productive use.
2. Investments: 
   Investments, which consist of term deposits with maturity dates greater than three months, are recorded on the "Statement of Financial Position" at cost plus accrued interest, which approximates market value.
3. Pension agreements:  The Agency makes contributions to the Ontario Municipal Employees Retirement Fund (OMERS), which is a multi-employer plan, on behalf of 193 (2015 - 190) members of its staff. The plan is a contributory defined benefit plan, which specifies the amount of the retirement benefit to be received by the employees based on the length of service and rates of pay. The amount contributed to OMERS for current services in 2016 was $1,441,451 (2015 -$1,415,319) and is included as an expense on the "Statement of Operations and Accumulated Surplus".
4. Long-term liabilities:
   1. The long-term liabilities reported on the "Statement of Financial Position" are made up of the following:
      

      Fixed Rate Term Loan Liability

      Item	2016	2015
      Fixed rate term loan	$5,255,170	$5,532,789

      
      This debt instrument has a fixed interest rate of 6.09% until the terms for interest rate are renewed in December 2018, and is secured by a first collateral mortgage on the Agency's land and building and a general security agreement.  Debt repayment costs will be recovered from future revenue.
   2. Principal due on long-term liabilities is summarized as follows:
      

      Principal Due Dates

      Year	Amount Due
      2017	$297,000
      2018	$316,000
      2019	$340,000
      2020	$362,000
      2021	$387,000
      2021 and thereafter	$3,553,170
      Total Due	$5,255,170

   3. Interest rate risk management:
      The Agency entered into an interest rate swap agreement for the entire principal balance to reduce its exposure to fluctuations in interest expense over a 25 year period.  This agreement allows them to raise the above long-term borrowings at floating rates and effectively swap the debt into fixed rates.  Under the interest rate swap, the Agency agrees with the counterparty to exchange the difference between fixed-rate and floating-rate interest amounts calculated by reference to the notional amount.  The net interest receivable or payable under the contract, including a 0.5% stamping fee, is settled monthly with the counterparty, which is a Canadian chartered bank.
5. Lease commitment:
   The Agency leases a branch office in Napanee at an annual rental of $44,278 (2015 - $43,731). The lease was renewed on July 1, 2013 for a term of five years ending on June 30, 2018 and will be adjusted annually on July 1 based on the consumer price index.
   
6. Deferred revenue:
   Received in the deferred revenue is monies received int he current and prior years for services to be provided in a fuure year. Details of the year-end balance are as follows:
   

   Deferred Revenue for 2016 and 2015

   Item	2016	2015
   Unexpended transfer from the Board of Health Reserve Fund	$117,628	$199,589
   Unexpended revenue for specific programs	$284,635	$487,311
   Total Deferred Revenue	$402,263	$686,900

7. Provincial grants:
   Provincial grants received from the Ministry of Health and Long-Term Care and the Ministry of Children and Youth Services are subject to annual final reviews and approval by the Ministries. Any adjustments resulting from the review will be reflected in the year of Ministry approvals as an adjustment to provincial grant revenue on the "Statement of Operations and Accumulated Surplus".
   
8. Fair value of financial instruments:
   The carrying values of cash, sundry accounts receivable, accounts payable and accrued liabilities, and due to the Province of Ontario approximate their fair values due to the relatively short periods to maturity of these financial instruments.
   
   The carrying value of long-term liabilities at December 31, 2016 approximates its fair value as the terms and conditions of the borrowing arrangements are comparable to current market terms and conditions for similar items.
9. Accumulated surplus:
   Accumulated surplus consists of individual surplus as follows:
   

   Accumulated Surplus for 2016 and 2015

   Surplus	2016	2015
   Invested in tangible capital assets	$3,036,098	$3,011,189
   Board of Health Reserve Fund (note 10)	$879,155	$979,387
   Excess recoveries for private sewage system programs	$70,434	$125,123
   Capital fund reserve (note 11)	$1,457,261	$1,314,911
   Unrestricted surplus	$655,051	$414,195
   Total accumulated surplus	$6,097,999	$5,844,805

   1. Board of Health Reserve Fund:
      The Agency approved to set up the Board of Health Reserve Fund to enable funds to be maintained and used for contingency or emergency expenses.  Any excess in the municipal levy received in any year shall be paid into the Board of Health Reserve Fund in accordance with Board policy, including any transfers in and transfers out of the Board of Health Reserve Fund.
      
      The change in municipal excess of recoveries over allowable costs retained for future requirements is as follows:

      Board of Health Reserve Fund 2016 and 2015

      Item	2016	2015
      Balance, beginning of year	$979,387	$852,686
      Interest earned	$7,391	$8,619
      Municipal surplus	$10,299	$118,082
      Transfer to Capital Fund Reserve	($117,922)	N/A
      Balance, end of year	$879,155	$979,387

10. Capital Fund Reserve:
    The Agency approved the establishment of a capital funding plan, on October 26, 2011, that utilizes the balance in the Capital Fund Reserve of $1,457,261 (2015 - $1,314,911).
    
    The change in the capital fund reserve is as follows:

    Capital Fund Reserve 2016 and 2015

    Item	2016	2015
    Balance, beginning of year	$1,314,911	$1,285,497
    Solar panel revune (sale of generator - 2015)	$14,418	$17,369
    Interest	$10,010	$12,045
    Transfer from Board of Health Reserve Fund	$117,922	-
    Balance, end of year	$1,457,261	$1,314,911

11. Budget figures:
    The budget data presented in these financial statements is based upon the 2016 operating budgets approved by the Board of Health on November 25, 2015 and amended to include actual costs and recoveries for Special Project Grants and annual amortization.
    
    The Board of Health reviews its operating budgets annually. The approved budgets for 2016 are reflected on the "Statement of Operations and Accumulated Surplus".
    
    Reconciliation of the approved budget to the budget figures reported in these financial statements is as follows:

    Budget Figures 2016 and 2015

    Item	2016	2015
    Revenue	$22,917,859	$23,785,198
    Expenses - Cost-shared operating budget	$15,120,258	$15,715,454
    Expenses - Amortization expense	$578,613	$528,626
    Expenses - Other Programs	$7,506,324	$7,950,126
    Total Expenses	$23,205,195	$24,194,206
    Annual deficit	($287,336)	($409,008)

12. Tangible capital assests:
    

    Tangible Capital Assets

    Cost	Balance as at  December 31, 2015	Additions	Disposals	Balance at December 31, 2016
    Furniture and fixtures	$653,103	-	-	$653,103
    Industrial/general equipment	$125,375	23,854	$19,000	$130,229
    Specialized equipment	$480,057	$23,000	$19,243	$483,814
    Computer hardware	$746,529	$279,050	$17,417	$1,008,162
    Office equipment and audio visual	$346,363	-	$121,967	$224,396
    Building - Kingston	$10,798,494	-	-	$10,798,494
    Land improvements - Kingston	$148,000	-	-	$148,000
    Building - Cloyne	$119,000	-	-	$119,000
    Building - Sharbot Lake	$23,800	-	-	$23,800
    Land - Kingston	$16,000	-	-	$16,000
    Land - Cloyne	$21,000	-	-	$21,000
    Land - Sharbot Lake	$4,200	-	-	$4,200
    Total	$13,481,921	$325,904	$177,627	$13,630,198

    Accumulated amortization (table 1 of 2)

    Item	Balance as at  December 31, 2015	Disposals	Amortization expense	Balance at December 31, 2016
    Furniture and fixtures	$577,393	-	$20,630	$598,023
    Industrial/general equipment	$71,448	$19,000	$12,031	$64,479
    Specialized equipment	$371,571	$19,243	$82,256	$434,584
    Computer hardware	$657,768	$17,417	$160,849	$801,200
    Office equipment and audio visual	$280,262	$121,967	$19,448	$177,743
    Building - Kingston	$2,816,053	-	$269,962	$3,086,015
    Land improvements - Kingston	$113,469	-	$9,867	$123,336
    Building - Cloyne	$31,238	-	$2,975	$34,213
    Building - Sharbot Lake	$18,742	-	$595	$19,337
    Total	$4,937,944	$177,627	$578,613	$5,338,930

    
    

    Accumulated amortization (table 2 of 2)

    Item	Net book value  December 31, 2015	Net book value December 31, 2016
    Furniture and fixtures	$75,710	$55,080
    Industrial/general equipment	$53,927	$65,750
    Specialized equipment	$108,486	$49,230
    Computer hardware	$88,761	$206,962
    Office equipment and audio visual	$66,101	$46,653
    Building - Kingston	$7,982,441	$7,712,479
    Land improvements - Kingston	$34,531	$24,664
    Building - Cloyne	$87,762	$84,787
    Building - Sharbot Lake	$5,058	$4,463
    Land - Kingston	$16,000	$16,000
    Land - Cloyne	$21,000	$21,000
    Land - Sharbot Lake	$4,200	$4,200
    Total	$8,543,977	$8,291,268

13. Comparative information:
    Certain 2015 comparative information has been reclassified to conform to the financial statement presentation adopted for the current year.