Presentation to Mayor and Council For the year ended December 31, 2012 City of Duncan Presentation to Mayor and Council For the year ended December 31, 2012 Presented by: Cory Vanderhorst, CA Date: May 21, 2013

Topics Financial statement highlights Draft audit report Audit findings report Auditor independence Financial analysis

Financial Statement Highlights Statement of Financial Position Cash and investments $13,960,387 Total financial assets $15,252,188 Long-term debt $1,571,449 Total liabilities $6,075,559 Net financial assets $9,176,629 Tangible capital assets $22,091,705 Accumulated surplus $31,371,441

Financial Statement Highlights Statement of Operations Total revenue $11,295,806 Increase from PY & Budget Total expenses $6,958,331 Decrease from PY & Budget Annual surplus $4,337,475 Revenue increased due to: Explanation Expenses increased due to:

Financial Statement Highlights

Financial Statement Highlights

Financial Statement Highlights Statement of Change in Net Debt Purchases of capital assets $3,247,654 Donated capital assets $341,312 Net change in net debt/ net financial assets $1,897,411 Revenue increased due to: Explanation Expenses increased due to:

Financial Statement Highlights Statement of Cash Flows Provided by Operations $5,245,552 Provided/used by Capital $(3,214,154) Provided/used by Financing $(158,898) Net cash inflow/outflow $1,872,500 Revenue increased due to: Explanation Expenses increased due to:

Financial Statement Highlights Composition of accumulated surplus Invested in Capital Assets $20,445,988 Reserves $6,092,689 Operating fund (unappropriated) $4,570,451 Operating fund (appropriated) $262,313 Total accumulated surplus $31,371,441

Audit findings report Auditor responsibilities: Examining controls in place to ensure accurate reporting of financial results Sampling transactions throughout the year to form an audit opinion Auditors do NOT look at every transaction to form the audit opinion

Audit findings report Engagement status Audit is complete and we have signed the audit report; an unqualified opinion is provided Materiality used in the audit was $150,000 There were no limitations placed on the performance of our audit

Audit findings report Engagement status (cont’d) We did not find: Irregularities materially impacting the statements Evidence of conflicts of interest, unusual related party transactions, or illegal or questionable payments

Audit findings report During the audit we discussed matters with: Tom Ireland Peter de Verteuil Marisa Paitson We would like to formally acknowledge the excellent cooperation and assistance from management and staff

Audit findings report Areas of audit emphasis Financial Statement Presentation and Disclosure Contingencies, Lawsuits and Commitments Fraud and error

Auditor Independence We confirm that MNP LLP is independent with respect to the City of Duncan within the meaning of the Rules of Professional Conduct of the Institute of Chartered Accounts of British Columbia as of May 21, 2013

Financial Analysis Sustainability – the degree to which a government can maintain its existing financial obligations both in respect of its service commitments to the public and financial commitments to creditors, employees, etc. without increasing the debt or tax burden on the local economy.

Financial Analysis Sustainability Assets to liabilities: illustrates the extent the government has financed its operations with debt. Assets to liabilities ratio is greater than 1 and increased to 6.16 from prior year of 5.14. Healthy indicator that City has more assets than debt.

Financial Analysis Sustainability Financial assets to liabilities: a ratio greater than 1 means financial resources are available to finance future operations. A ratio less than 1 means future revenues are required to pay for past transactions. Financial assets to liabilities has increased to 2.51 from 2.11 in prior year and is also greater than 1. This suggests healthy sustainability and financial resources are available to finance future operations.

Financial Analysis Sustainability Net debt to total annual revenue: Provides a measure of future revenue required to pay for past events. Net financial asset position has increased by $2 million from last year and no significant increases in debt being carried by the City.

Financial Analysis Overall conclusion on sustainability We can conclude that financial sustainability of the City is healthy and has shown to be trending in a positive direction.

Financial Analysis Flexibility The degree to which a government can change its debt or tax burden on the local economy to meet existing financial obligations.

Financial Analysis Flexibility Public debt charges to revenues: Illustrates the extent to which past borrowing decisions put a constraint on the government’s ability to meet financial and service commitments in the current year. Public debt charges (i.e., interest) compared to revenue has decreased slightly from 0.69% in prior year to 0.61%, reflecting the increase in revenue this year in proportion to the decrease in debt. This ratio is still very low.

Financial Analysis Flexibility Net book value of capital assets to cost of capital assets: Reports the extent to which estimated useful lives of capital assets are available to provide services. Carrying value (or depreciated value) of capital assets has increased slightly to 51% of the original cost from the 48%. This means that there is still significant value in older assets and reflects that future costs of capital are remaining steady.

Financial Analysis Flexibility Own source revenues to taxable assessment: Reports relationship between user fees and tax base. Own-source revenues to taxable assessment has increased from 89% to 99%. With minor change in the tax base, this ratio has increased slightly, indicating that the City does not have a great deal of flexibility (on the other hand, given the assumptions involved in this calculation, it does not necessarily mean that the City has no flexibility in tax rates).

Financial Analysis Overall conclusion on flexibility We can conclude that flexibility indicators of the City has been trending in a positive direction.

Financial Analysis Vulnerability The degree to which a government is dependent on sources of funding outside its control. The ratio of government transfers to total revenues increased to 27% in 2012 from 20% in 2011. In 2010, the ratio was 10%. The percentage is increasing over the last 3 years. This means that the City has been increasing vulnerability to the fiscal decisions of other levels of government.

Financial Analysis Overall conclusion on vulnerability We can conclude that vulnerability and dependence on other funding sources has been increasing.

Conclusion Thank you We would like to take this opportunity to answer any questions you have regarding the matters presented Presenter: Cory Vanderhorst, CA