agenda audit standing committee - st. john's · 1 minutes audit standing committee meeting...

AGENDA

Audit Standing Committee

Wednesday, September 26, 2018 11:00 a.m.

Conference Room A 4th Floor, City Hall

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AGENDA

AUDIT AND ACCOUNTABILITY COMMITTEE MEETING

September 26, 2018 – 11:00 a.m. – Conference Room A, 4th Floor, City Hall

1. Call to Order

2. Approval of the Agenda

3. Adoption of the Minutes

a. Minutes of June 13, 2018

4. Delegation

a. Presentation by Grant Thornton

• Report to those charged with Governance – Communication of audit Strategy and Results

• Consolidated Financial Statement of City of St. John’s – December 31, 2017

5. Business Arising

6. New Business

7. Other Business

8. Date of Next Meeting

9. Adjournment

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MINUTES

AUDIT STANDING COMMITTEE MEETING

June 13, 2018 – 12:00 p.m. – Conference Room A, 4th Floor, City Hall

Present: Councillor Debbie Hanlon, Chairperson Councillor Jamie Korab Councillor Ian Froude Councillor Maggie Burton (arrived at 12:26 pm) Kevin Breen, City Manager

Jason Sinyard, Deputy City Manager of Planning, Engineering & Regulatory Services

Tanya Haywood, Deputy City Manager of Community Services Elaine Henley, City Clerk Judy Tobin, Manager of Housing Derek Coffey, Deputy City Manager - Financial Services

David Royle, Senior Internal Auditor Sean Janes, City Internal Auditor

Kathy Driscoll, Legislative Assistant

ADOPTION OF AGENDA

The Agenda was adopted as presented.

CARRIED UNANIMOUSLY

ADOPTION OF MINUTES

The minutes of October 3, 2017 were adopted as presented.

CARRIED UNANIMOUSLY

DELEGATION/PRESENTATION

Presentation – What is Internal Audit and What do we do

As this was the first meeting for the Audit Standing Committee with a new Council, Sean Janes provided a PowerPoint to explain the role of Internal Audit with the City.

BUSINESS ARISING

Information Note dated March 5, 2018 re: Summary of Outstanding

Recommendations

The above noted was provided for information purposes providing a summary of outstanding recommendations.

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Decision Note dated May 9, 2018 re: LVPO Investigation

Sean Janes spoke to the above noted advising the City’s current practice of the Office of the City Internal Auditor is to remove a report from the follow-up list after five (5) years stating the reasoning as per the following:

• Changes occurring in an area over five years can make recommendations outdated

• Perceived lack of importance of recommendations that are not acted upon over such a long period

• Lack of resources available to internal audit that could be better used in other areas

Given the LVPO investigation is over six years old it was recommended it be removed from the list.

Recommendation:

Moved – Councillor Korab; Seconded Councillor Hanlon

To approve the removal of the LVPO Investigation report from the Internal

Audit follow-up list.

CARRIED UNANIMOUSLY

Information Note dated May 9, 2018 re: Status of Previously Issued Audit

Reports

The following was considered for information purposes only providing an update since the previous update in April 2017.

Information Note dated March 5, 2018 re: Summary of 2017 Audit Activities

The above noted was considered for information purposes only to provide a summary of activities carried out by the Office of the City Internal Auditor during the 2017 year.

NEW BUSINESS

Decision Note dated May 10, 2018 re: e-Tendering Audit Report

The above noted was discussed and the following motion was made:

Recommendation:

Moved – Councillor Hanlon; Seconded Councillor Korab

To approve the e-Tendering and the associated action plans put forth by

management.

CARRIED UNANIMOULSY

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Decision Note dated May 9,2018 re: Three-year Audit Plan (2018-2020)

The following audit objectives were noted in relation to the above:

• To ensure services are managed with due regard to significant risks that could possibly have a negative impact on the ability of the division or department to meet its objectives.

• To ensure services are delivered in accordance with prescribed policies, procedures and Council or Board directives.

• To ensure that processes are implemented to inform, direct, manage and monitor activities that are intended to facilitate the achievement of the City’s strategic goals.

Further, in addition to program reviews, follow-up reviews and reporting will be conducted in accordance with generally accepted internal auditing standards on areas that were the subject of a prior program review. The following motion was made:

Recommendation:

Moved Councillor Hanlon; Seconded Councillor Korab

To approve the Three-year Audit Plan (2018-2020)

CARRIED UNANIMOUSLY

Other Business

8. Date of Next Meeting

9. Adjournment

The meeting adjourned at 1:41 p.m. Coucillor Hanlon Chairperson

Report to those charged with governance—communication of audit strategy and results City of St. John’s For the year ended December 31, 2017

Grant Thornton LLP Suite 300 15 International Place St. John's, NL A1A 0L4 T +1 709 778 8800 F +1 709 722 7892 www.GrantThornton.ca

Audit • Tax • Advisory Grant Thornton LLP. A Canadian Member of Grant Thornton International Ltd

September 26, 2018 To the members of the audit committee of City of St. John’s

We are pleased to report that we have now substantially completed our audit of the consolidated financial statements (hereinafter the “financial statements”) of the City of St. John’s (hereinafter the “entity”) for the year ended December 31, 2017. We enclose our Report to those charged with governance - Communication of audit results to continue our dialogue with the committee on the audit of the entity. This report provides an overview of the results of our audit including comments on misstatements, significant accounting policies, sensitive accounting estimates, and other matters that may be of interest to the committee.

This communication has been prepared to comply with the requirements outlined in CAS 260 Communication with those Charged with Governance. The information in this document is intended solely for the information and use of the Audit Committee and management. It is not intended to be distributed or used by anyone other than these specified parties.

We express our appreciation for the cooperation and assistance received from the management and staff of the entity during the course of our audit.

If you have any particular comments or concerns, please do not hesitate to raise them at our scheduled meeting.

Yours sincerely, Grant Thornton LLP

Chris Brake, CPA, CA Partner


Contents

Page

Achieving effective governance 1

Quality assurance, independence and communication 2

Our audit approach 3

Audit results 7

Reportable matters 8

Status of the audit 10

Technical updates 11

Appendix A – Audit engagement letter A

Appendix B – Draft independent auditor’s report B

Appendix C – Draft Management representation letter C

Appendix D – Internal control letter D

Appendix E – Letter of independence E

Appendix F – Accounting developments F

Appendix G – Auditing developments G

Report to those charged with governance – Communication of audit results City of St. John’s For the year ended December 31, 2017

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Achieving effective governance

There are several fundamental components of effective governance. The audit committee plays a key role in achieving strong governance, particularly with respect to financial reporting.

Roles in ensuring strong financial reporting

Role of the Council

Set the tone for the organization by emphasizing honesty, ethical behaviour and fraud prevention

Establishes and maintains internal controls to provide reasonable assurance regarding reliability of financial reporting

Approve the nomination and compensation of external auditors

Review and approve annual financial statements

Role of the Audit Committee

Help set the tone for the organization by emphasizing honesty, ethical behaviour and fraud prevention

Oversee management, including ensuring that management establishes and maintains internal controls to provide reasonable assurance regarding reliability of financial reporting

Recommend the nomination and compensation of external auditors to the Council

Directly oversee the work of the external auditors including reviewing and discussing the audit plan

Role of management

Prepare financial statements in accordance with Canadian public sector accounting standards

Design, implement and maintain effective internal controls over financial reporting processes, including controls to prevent and detect fraud

Exercise sound judgement in selecting and applying accounting policies

Prevent, detect and correct errors, including those caused by fraud

Provide representations to external auditors

Assess quantitative and qualitative impact of misstatements discovered during the audit on fair presentation of the financial statements

Role of Grant Thornton LLP

Provide an audit opinion that the financial statements are in accordance with Canadian public sector accounting standards

Conduct our audit in accordance with Canadian GAAS

Maintain independence and objectivity

Be a resource to management and to those charged with governance

Communicate matters of interest to those charged with governance

Establish an effective two-way communication with those charges with governance, to report matters of interest to them and obtain their comments on audit risk matters.

The audit committee helps set the tone for the organization by emphasizing honesty, ethical behaviour and fraud prevention


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Quality assurance, independence and communication

Quality control Grant Thornton LLP has a robust quality control program that forms a core part of our client service. We combine internationally developed audit methodology, advanced technology, rigorous review procedures, mandatory professional development requirements, and the use of specialists to deliver high quality audit services to our clients. In addition to our internal processes, we are subject to inspection and oversight by standard setting and regulatory bodies. We are proud of our firm’s approach to quality control and would be pleased to discuss any aspect with you at your convenience.

Independence We have a rigorous process where we continually monitor and maintain our independence. The process of maintaining our independence includes, but is not limited to

Identification of threats to our independence and putting into place safeguards to mitigate those threats. For example, we evaluate the independence threat of any non-audit services provided to the entity; and

Confirming the independence of our engagement team members.

We have attached our letter of independence in Appendix E.

Grant Thornton LLP has a robust quality control program


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Our audit approach

An understanding of your entity and your business drives the Grant Thornton LLP audit approach. The audit methodology is risk based and specifically tailored to the entity as depicted below:

Our tailored audit approach results in procedures designed to respond to an identified risk. The greater the risk of material misstatement associated with the account, class of transactions or balance, the greater the audit emphasis placed on it in terms of audit verification and analysis.

Throughout the execution of the audit approach, we will maintain our professional skepticism, recognizing the possibility that a material misstatement due to fraud could exist notwithstanding our past experiences with the entity or our beliefs about management’s honesty and integrity.

Risk Assessment Process

MaterialityUse of estimatesKey audit risksFraud risks

Measurement uncertaintyComplex transactions

Understand your entity

Understand the business and industry Understand accounting

systems, policies and internal controls

Risk‐based audit approach


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Internal control Our audit includes gaining an understanding of the entity’s internal control over financial reporting. Our understanding will focus on processes associated with the identified risk areas (see below). We use this understanding to determine the nature, extent and timing of our audit procedures.

Our understanding may also result in valuable internal control findings for your consideration. Note that the auditor’s objectives with regards to internal control are different from those of management and those charged with governance. For example, we primarily target controls that relate to financial reporting and not those that relate to the entity’s operations or compliance which may also be relevant to the entity's objectives. Therefore, management and those charged with governance cannot solely rely on our findings to discharge their responsibilities in this area.

See the Reportable matters section for our internal control findings.

Risk assessment Our risk assessment process has identified the following areas where we will focus our attention:

Risk area Audit procedures

Capital assets – valuation gross Perform test of controls relating to capital asset purchases.

Perform a detailed analysis of capital asset additions, which will include test of details on a sample basis.

Capital assets – valuation net Perform a detailed analytical of depreciation expense.

Payables – completeness Perform a search for unrecorded liabilities and other various cutoff procedures.

Revenues – valuation net Perform a detailed analytical of allowance for doubtful accounts and bad debts.

Examine write-offs which occurred during the year and ensure they were approved by council.

Revenues – existence/occurrence Perform a detailed analysis of revenue accounts, which will include test of details and substantive analytical procedures.

Perform recalculation of tax revenues based on assessed values.

Examine subsequent receipts relating to accounts receivable balances.

Debt – completeness Confirm debt balances with financial institutions.

Employee compensation – existence/occurrence Perform test of controls relating to payroll processes.

Perform a detailed analysis of employee compensation, which will include reconciling the sub ledger to the general ledger.

Employee compensation - completeness Review of actuary reports with respect to defined benefit plan, other post-retirement benefits and sick and severance accruals to determine whether the estimates are in accordance with public sector accounting standards.

Test of underlying data provided to the actuary and used in the actuary’s computations of the liability.

Through discussions with management, we have agreed to use for accounting purposes, the actuary valuations for the


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Risk area Audit procedures

defined benefit plan and the sick and severance accruals based on extrapolated information.

Controlled businesses not accounted for/disclosed

Through reading of the minutes, reviewing the listing of approved contributions for the year to determine if the level of funding for each organization was reasonable with respect to the population.

Materiality The purpose of our audit is to provide an opinion as to whether your financial statements are prepared, in all material respects, in accordance with Canadian public sector accounting standards as of December 31, 2017. Therefore, materiality is a critical auditing concept and as such we apply it in all stages of the engagement.

The concept of materiality recognizes that the audit team cannot verify every balance, transaction or judgment made in the financial reporting process. During audit planning, we made a preliminary assessment of materiality for the purpose of developing our audit strategy, including the determination of the extent of our audit procedures. During the completion stage, we consider not only the quantitative assessment of materiality, but also qualitative factors, in assessing the impact on the financial statements, our audit opinion and the matters brought to your attention.

Fraud risk factor considerations We are responsible for planning and performing the audit to obtain reasonable assurance as to whether the financial statements are free of material misstatement caused by error or by fraud. Our responsibility includes:

The identification and assessment of the risks of material misstatement of the financial statements due to fraud through procedures including discussions amongst the audit team and specific inquires of management;

Obtaining sufficient appropriate audit evidence to respond to the fraud risks noted; and Responding appropriately to any fraud or suspected fraud identified during the audit. With this regard, we are required to communicate with you on fraud-related matters, including:

Obtaining an understanding of how you exercise oversight of management's processes for identifying and responding to the risks of fraud in the entity and the internal control that management has established to mitigate these risks; and

Inquiring as to whether you have knowledge of any actual, suspected or alleged fraud affecting the entity.

We would like to obtain your input on these matters.

Fraud can occur in any entity, at any time, and can be perpetrated by anyone.


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The following provides a summary of some of the fraud related procedures we plan to perform during the audit:

Test the appropriateness of journal entries recorded in the general ledger and other adjustments made in the preparation of the financial statements;

Review accounting estimates for biases; and Evaluate the business rationale (or the lack thereof) for significant transactions that are or appear to

be outside the normal course of business.

Laws and regulations During the course of our audit, we will perform specified audit procedures to help identify instances of non-compliance with laws and regulations that may have a material effect on the financial statements. An audit of financial statements is not designed to detect all instances of non-compliance with laws and regulations and does not represent an audit of the Entity’s compliance with applicable laws and regulations. In this respect, we would like to know if you are aware of instances of the entity not being in compliance with laws and regulations.

Use of experts We used the work of independent third party specialists for the following:

Asset retirement obligations; and Future employee benefits.

We would like to obtain your input on these matters.


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Audit results

Summary of misstatements We have no non-trivial unadjusted misstatements to report.

Summary of disclosure matters Our audit did not identify any unadjusted non-trivial misstatements from disclosure matters.


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Reportable matters

Internal control Management is responsible for the design and operation of an effective system of internal control that provides reasonable assurance that the accounting system provides timely, accurate and reliable financial information, and safeguards the assets of the entity.

The audit is designed to express an opinion on the financial statements. Our understanding of internal control is sufficient to enable us to plan the audit and to determine the nature, timing and extent of tests to be performed. If we become aware of a deficiency in your internal controls systems, auditing standards requires us to communicate to the audit committee those deficiencies we consider significant or material. However, a financial statement audit is not designed to provide assurance on internal control.

During the course of performing our audit, we identified the following deficiencies in internal control:

The financial application does not restrict A/P clerks from adjusting the discount terms of an invoice without secondary approval.

Our comments and recommendations, along with the City’s response on these matters, have been provided in an internal control letter and attached in the appendices.


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Significant findings from the audit As part of the audit, we identified the following significant items we wanted to discuss:

Significant new accounting policies

There were no significant new accounting policies noted in the year.

Significant transaction There were no significant transactions noted in the year.

Sensitive accounting estimates and disclosures

The City’s Pension Plan for employees and Mayor/Councillor’s, along with the Sick and Severance Leave liability and Post-Retirement Benefits are significant sensitive accounting estimates that are actuarially determined based on assumptions made by management. During our audit, the assumptions used for 2017 were compared against the actuarial reports and discussions we had with the actuary to determine that the information provided by management was accurate and complete. No exceptions were identified in the information provided to the actuary by management.

The City’s allowance for doubtful accounts is a significant sensitive accounting estimate that is determined based on a combination of general and specific allowance provisions for a receivable’s age outstanding. During our audit, the allowance was recalculated based on management’s provisions and the underlying data was tested for accuracy and completeness. No exceptions were identified in management’s calculation of the allowance for doubtful accounts.

The City’s asset retirement obligation with respect to the Robin Hood Bay Landfill is a significant sensitive accounting estimate. The City engaged Kendell Engineering in 2013 to assess the costs associated with the post closure costs. As part of our audit procedures, we reviewed the work performed by Kendell Engineering and evaluated the reasonableness of the underlying data and assumptions provided by management. No exceptions were identified in the information provided by management. We do recommend that the City engage a firm to determine if the costs estimated for post closure going forward is appropriate.

Fraud and illegal acts There were no possible fraud or illegal acts noted in the year.

Other matters to discuss The following table outlines additional matters we would like to bring to your attention:

Related party transactions not in the normal course of business

There were no related party transactions not in the normal course of business noted in the year.

Association with annual reports As part of our audit procedures, we are required to consider information other than the annual financial statements that management has prepared and included in the Management Discussion and Analysis report.


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Status of the audit

Outstanding items We have substantially completed our audit of the financial statements of the entity for the year ended December 31, 2017 and the results of that audit are included in this report.

We have attached our draft auditors’ report in the appendices. We will finalize the report once City Council has approved the financial statements. The following items were outstanding as at the date of this report:

Receipt of signed management representation letter (attached in the Appendices); and Approval of the financial statements by City Council.


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Technical updates

Accounting and auditing standards Accounting standards issued by the Public Accounting Sector Standards Board which may affect your organization for the current and future years include:

PS 2200 Related party disclosures PS 3210 Assets PS 3230 Long-term debt PS 3320 Contingent assets PS 3380 Contractual rights PS 3420 Inter-entity transactions PS 3430 Restructuring transactions

Further detail of the changes to the accounting and auditing standards is included in Appendix F and G. If you have any questions about these changes we invite you to raise them during our meeting. We will be pleased to address your concerns.

Reporting environment We are not aware of any changes in the regulatory environment that will affect the City of St. John’s.

Report to those charged with governance – Communication of audit results City of St. John’s For the year ended December 31, 2017 A


Appendix A – Audit engagement letter

Grant Thornton LLP Suite 300 15 International Place St. John's, NL A1A 0L4

T +1 709 778 8800 F +1 709 722 7892


Dear Sir,

Thank you for reappointing Grant Thornton LLP (“Grant Thornton”, “we”, “us” “our”) to perform the audit

of the consolidated financial statements and other related services for the City of St. John’s (“the City”,

“you” or “your”) for the year ending December 31, 2017 (collectively, the “Services”). The purpose of this

letter and the attached Schedule A (the “Engagement”) is to outline the nature of the Services and the

terms under which you are engaging us to perform those Services.

Objective, scope and limitations

You have requested that we audit the consolidated financial statements of the City of St. John’s, as well

as, Robin Hood Bay Regional Waste Management Facility, Regional Water Supply System, Regional

Fire Department, Regional Wastewater System, Accommodation Tax Account, Annual Expenditure and

Compliance for Gas Tax Agreement and Urban Living Non-Profit Housing Fund, collectively referred to

as (the “City”), which comprise the consolidated statement of financial position as at December 31,

2017, and the results of operations and statement of changes in net debt and cash flow statement for

the year then ended, and a summary of significant accounting policies and other explanatory

information. We are pleased to confirm our acceptance and our understanding of this Engagement by

means of this letter agreement. Our audit will be conducted with the objective of our expressing an

opinion on the financial statements.

The audit will not be planned or conducted in contemplation of reliance by any third party or with respect

to any specific transaction. Therefore, items of possible interest to a third party will not be specifically

addressed and matters may exist that would be assessed differently by a third party, possibly in

connection with a specific transaction.

Requests for additional services may arise while we are performing the Services that are specifically

identified in this Engagement, including general business advice. The provision of additional services by

us does not relieve management of their responsibility for determining what actions the City should take

and performing adequate research and/or due diligence in relation to their decisions, including obtaining

separate formal written advice from us in relation to complex or significant matters. Unless covered

under a separate engagement letter, this Engagement will cover any such additional services we

provide you, which will be billed at our standard hourly rates for the type of services requested.

Notwithstanding anything to the contrary herein, we shall bear no responsibility in the event that

management makes significant decisions on the basis of advice provided by us that is not formal written

advice (for greater certainty, e-mail does not constitute formal written advice for the purposes of this

section).

May 29, 2018

City of St. John’s

10 New Gower Street

PO Box 908

St. John’s, NL A1C 5M2

Attention: Mr. Danny Breen

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Our responsibilities

We will conduct 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 consolidated 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 the auditor's judgment, including the

assessment of the risks of material misstatement of the financial statements, whether due to fraud or

error. 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.

Because of the inherent limitations of an audit, together with the inherent limitations of internal control,

there is an unavoidable risk that some material misstatements may not be detected, even though the

audit is properly planned and performed in accordance with Canadian generally accepted auditing

standards.

In making our risk assessments, we consider internal control relevant to the City's preparation 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 City's internal control. However,

we will communicate to you in writing concerning any significant deficiencies in internal control relevant

to the audit of the financial statements that we have identified during the audit.

Management’s responsibilities and identification of applicable financial reporting

framework

Our audit will be conducted on the basis that the City’s management and, where appropriate, those

charged with governance acknowledge and understand that they have responsibility:

a) for the preparation and fair presentation of the financial statements in accordance with Canadian

public sector accounting standards;

b) 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; and

c) to provide us with:

i. Access to all information of which the City’s management is aware, that is relevant to the

preparation of the financial statements such as records, documentation and other matters;

ii. Additional information that we may request from the City’s management for the purpose of

the audit; and

iii. Unrestricted access to persons within the City from whom we determine it necessary to

obtain audit evidence.

As part of our audit process, we will request from the City’s management and, where appropriate, those

charged with governance written confirmation concerning representations made to us in connection with

the audit. Those representations may include:

Financial statements

a) communicating that all responsibilities, as set out in the terms of this Engagement, for the

preparation of the financial statements in accordance with Canadian public sector accounting

standards, in particular, the financial statements are fairly presented;

b) communicating its belief that significant assumptions used in making accounting estimates,

including those measured at fair value are reasonable;

c) acknowledging that all events subsequent to the date of the financial statements and for which

Canadian public sector accounting standards require adjustment or disclosure have been adjusted

or disclosed;

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Completeness of information

d) providing us with and making available complete financial records and related data, and copies of

all minutes of meetings of councilors, finance and administration, and audit committees;

e) acknowledging that all transactions have been recorded and are reflected in the financial

statements;

f) providing us with information relating to any known or probable instances of non-compliance with

legislative or regulatory requirements, including financial reporting requirements;

g) providing us with information relating to any illegal or possibly illegal acts, and all facts related

thereto;

h) acknowledging that all related party relationships and related party transactions have been

appropriately accounted for and disclosed in accordance with the requirements of Canadian public

sector accounting standards;

Fraud and error

i) the design and implementation of internal controls to prevent and detect fraud and error;

j) an assessment of the risk that the financial statements may be materially misstated as a result of

fraud;

k) providing us with information relating to fraud or suspected fraud affecting the City involving:

i. management;

ii. employees who have significant roles in internal control; or

iii. others, where the fraud could have a material effect on the financial statements;

l) providing us with information relating to any allegations of fraud or suspected fraud affecting the

City's financial statements communicated by employees, former employees, analysts, regulators, or

others;

m) communicating its belief that the effects of any uncorrected financial statement misstatements

aggregated during the audit are immaterial, both individually and in the aggregate, to the financial

statements taken as a whole. A list of the uncorrected misstatements will be attached to the

representation letter;

Recognition, measurement and disclosure

n) providing us with its assessment of the reasonableness of significant assumptions underlying fair

value measurements and disclosures in the financial statements;

o) providing us with any plans or intentions that may affect the carrying value or classification of assets

or liabilities;

p) providing us with an assessment of all areas of measurement uncertainty known to management

that are required to be disclosed in accordance with MEASUREMENT UNCERTAINTY, CPA

CANADA HANDBOOK – ACCOUNTING Section 2130;

q) acknowledging that no subsequent events occurred that require adjustment to the accounting

estimates and disclosures included in the financial statements.

r) providing us with information relating to claims and possible claims, whether or not they have been

discussed with the City’s legal counsel;

s) providing us with information relating to other liabilities and contingent gains or losses, including

those associated with guarantees, whether written or oral, under which the City is contingently

liable;

t) providing us with information on whether or not the City has satisfactory title to assets, liens or

encumbrances on assets, and assets pledged as collateral;

u) providing us with information relating to compliance with aspects of contractual agreements that

may affect the financial statements;

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v) providing us with information concerning subsequent events; and

Written confirmation of significant representations

w) providing us with written confirmation of significant representations provided to us during the

Engagement on matters that are:

i. directly related to items that are material, either individually or in the aggregate, to the

financial statements; and

ii. not directly related to items that are material to the financial statements but are significant,

either individually or in the aggregate, to the Engagement.

The City’s management agrees to make available draft financial statements, including appropriate note

disclosures and any accompanying other information in time to allow for the audit to be completed within

the proposed timeframe. In addition, the City’s management agrees to inform us of any factors or

circumstances that come to their attention during the period from the date of the auditor’s report to the

date financial statements are issued that may impact the financial statements; including their

disclosures.

It is agreed that for any electronic distribution of your financial statements and our report thereon,

management is solely responsible for the accurate and complete reproduction of the financial

statements and our report thereon.

While the report may be sent to the City electronically by us for your convenience, only the signed

(electronically or manually) report constitutes the City’s record copy.

If the management intends to publish or otherwise reproduce our report (or otherwise make reference to

Grant Thornton LLP) in a document(s) that contains other information (including in a document(s) that

will be used in connection with a public offering of securities), the City’s management agrees to (a)

provide Grant Thornton with a draft of such document(s) to read, and (b) obtain our approval for

inclusion of our report in such document(s), before the document(s) are finalized and distributed. The

City’s management also agrees that if our name is to be used in connection with the financial

statements, it will attach our auditors’ report when distributing the financial statements to any third

parties. The City’s management agrees to provide us with adequate notice of the preparation of such

document(s).

We look forward to full cooperation from your staff during our audit.

Reporting

Unless unanticipated difficulties are encountered, our report will be substantially in the following form:

INDEPENDENT AUDITOR’S REPORT

To His Worship the Mayor and Councillors


We have audited the accompanying consolidated financial statements of the City of St. John’s,

which comprise the statement of financial position as at December 31, 2017, and the consolidated

results of operations, changes in net debt and cash flows for the year then ended, and a summary of

significant accounting policies and other explanatory information.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated 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.

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Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated 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 consolidated financial statements are free from

material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures

in the consolidated financial statements. The procedures selected depend on the auditor’s judgment,

including the assessment of the risks of material misstatement of the consolidated financial

statements, whether due to fraud or error. In making those risk assessments, the auditor considers

internal control relevant to the City’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 City’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 consolidated

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 consolidated financial statements present fairly, in all material respects, the

financial position of the City of St. John’s as at December 31, 2017, and the results of its operations,

changes in net debt and its cash flows for the year then ended in accordance with Canadian public

sector accounting standards.

Grant Thornton LLP

Date

St. John’s, Newfoundland and Labrador

The form and content of our report may need to be amended in the light of our audit findings.

Fees

Our fees and expenses for the year ended December 31, 2017 are outlined in our response to your

request for proposal dated July 16, 2013.

Any fee estimates by Grant Thornton take into account i) the agreed-upon level of preparation and

assistance from your personnel; and ii) the hourly rates for our professionals that will be providing the

Services. Grant Thornton undertakes to advise the City’s management on a timely basis should this

preparation and assistance not be provided or should any other circumstances arise which cause actual

time to exceed that estimate.

Other services

Depending on the nature and significance of requests for additional services, we may issue a separate

engagement letter to cover the additional services and/or provide a fee estimate before we invest

significant professional time in providing the additional services. As noted above, in the absence of

such a separate engagement letter, the provisions of this Engagement shall apply to the additional

services, which will be billed at our standard hourly rates for the types of services requested unless

otherwise specified in a fee estimate.

City consent to production

The City hereby acknowledges that we may from time to time receive requests or orders from

professional (provincial institutes) or other regulatory or governmental authorities (including the Canada

Revenue Agency) to provide them with information and copies of documents in our files including

working papers and other work-product relating to the City’s affairs. The City consents to us providing or

producing, as applicable, these documents and information without further reference to, or authority

from, you.

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When a regulatory authority requests access to our working papers and other work-product relating to

the City’s affairs, we will, on a reasonable efforts basis, refuse access to any document over which the

City has expressly informed us at the time of delivery that the City asserts privilege, except where

disclosure of documents is required by law or requested by a provincial Institute/Order of Canadian

Chartered Professional Accountants pursuant to its statutory authority in which event the City expressly

consents to such disclosure. The City must mark any document over which it asserts privilege as

privileged and inform us of the grounds for the City’s assertion of privilege (such as whether it claims

solicitor-client privilege or litigation privilege).

We may also be required to provide information relating to the fees that we collect from the City for the

provision of audit services, other accounting services and non-audit services, and the City consents to

the disclosure of that information as may be required by the regulatory authority.

The City agrees to reimburse us, upon request, at our standard billing rates for our professional time

and expenses, including reasonable legal fees, incurred in dealing with the matters described above.

Release and indemnification

You agree to release, indemnify and hold harmless Grant Thornton, its affiliates and their respective

directors, officers, partners, principals, employees, consultants and contractors from any and all claims,

liabilities, costs and expenses (including any and all legal expenses incurred by Grant Thornton) arising

out of or based upon:

a) any misstatement or omission in any material, information or representation supplied or approved

by you;

b) any third party claim relating to or arising out of this Engagement; or

c) any other matter related to or arising out of this Engagement, except to the extent finally determined

to have resulted from the negligence, wilful misconduct or fraudulent behaviour of Grant Thornton.

Limitation of liability

In any action, claim, loss or damage arising out of the Engagement, you agree that Grant Thornton’s

liability will be several, and not joint and several and you may only claim payment from Grant Thornton

of its proportionate share of the total liability based on degree of fault as finally determined. Any action

against us must be commenced on or before the date which is the earlier of i) eighteen months from the

completion of the Services; and ii) the date by which an action must be commenced under any

applicable legislation other than limitation legislation.

The total liability assumed by Grant Thornton for any claim, loss or damage arising out of or in

connection with the Engagement, regardless of the form of action, claim, loss or damage be it tort,

contract or otherwise, shall in no event exceed the aggregate of the professional fees paid to Grant

Thornton for that portion of the Services that has given rise to the claim. In addition, Grant Thornton

shall not under any circumstances be liable for any special, indirect or consequential damages, including

without limitation, lost profit or revenue, or similar damages.

Standard terms and conditions

This letter and our standard terms and conditions attached as Schedule A, shall form the basis of the

Engagement.

Survival of terms

This engagement letter will continue in force for subsequent audits unless terminated by either party by

written notice prior to the commencement of the subsequent audit.

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Acceptance of engagement letter

Please confirm your acceptance of this Engagement by signing below and returning this letter to us.

We are proud to serve you and we appreciate your confidence in our work.

Yours sincerely,

Grant Thornton LLP

Kim Simms, FCPA, FCA

Principal

The services and terms as set forth in this letter are agreed to.


By:

(Signature)

(Name)

(Title)

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Schedule A

Terms and conditions

Except as otherwise specifically stated in the

Engagement, the following general terms and conditions

apply to and shall form part of the Engagement.

Responsibilities – Grant Thornton shall use all

reasonable efforts to complete the Services within the

time-frame, if any, stipulated in the Engagement. Grant

Thornton shall not be liable for failures or delays in

performance of the Services that arise from causes

beyond its control, including the untimely performance by

the City of the City’s obligations and responsibilities as

set out in the Engagement.

Information and announcements – The City shall

cause to be provided or provide Grant Thornton with all

material information in its possession or control or to

which it has access and such other information as Grant

Thornton deems relevant for the purposes of completing

the Services contemplated by the Engagement. The City

shall also provide where applicable, access to its

directors, officers or professional advisers as required by

Grant Thornton in order for it to complete the Services.

The City undertakes that if anything occurs after the

supply of any such information or documents which

would render same inaccurate, untrue, unfair or

misleading it will promptly notify Grant Thornton and shall

take all such steps as Grant Thornton may require to

correct such information or documents.

Unless otherwise contemplated or permitted by the

Engagement, any advice, reports (including the audit

report), compiled or reviewed financial statements,

information or opinions, whether written or oral, rendered

or provided by Grant Thornton to the City (and/or its

affiliates) (“Deliverables”), or any communications

between Grant Thornton and the City (and/or its

affiliates) in connection with the Engagement may not be

disclosed to any third party without the prior written

consent of Grant Thornton with the exception of, any

applicable taxing authorities and the City’s financial

institution. Any Deliverables shall be solely for the benefit

of the City and not for the benefit of any third party and

may be relied upon only for the purpose for which the

Deliverable is intended as contemplated and/or defined

within the Engagement. Grant Thornton recognizes no

responsibility whatsoever, other than that owed to the

City as at the date on which the Deliverable is given to

the City by Grant Thornton, for any unauthorized use of

or reliance on any Deliverables.

Independent contractor – Grant Thornton shall provide

all services as an independent contractor and nothing in

this Engagement shall be construed as to create a

partnership, joint venture or other similar relationship with

the City or any other party. Neither the City nor Grant

Thornton shall have the right, power or authority to

obligate or bind the other in any manner.

Subcontracting – The City agrees that Grant Thornton

may authorize, allow or require its affiliates and

contractors to assist in the performance of the Services

and to share in Grant Thornton’s rights under the

Engagement, including any protections available

hereunder, provided that such party(ies) shall commit (as

applicable) to be bound by the obligations set forth in the

Engagement.

Grant Thornton International Ltd – Grant Thornton is a

Canadian member of Grant Thornton International Ltd., a

global organization of member firms in over 100

countries. Member firms are not members of one

international partnership or otherwise legal partners with

each other. There is no common ownership, control,

governance, or agency relationship between member

firms.

Assisting firms – Unless otherwise stipulated within the

Engagement, this Engagement is with Grant Thornton. In

the course of providing the Services, we may at our sole

discretion, draw upon the resources of or subcontract a

portion of the Services to another entity (including a

partnership) which may carry on business under the

name which may include within its name “Grant

Thornton” or be another member firm of the worldwide

network of Grant Thornton International Ltd. member

firms (hereinafter “GT Affiliates”).

Unless a GT Affiliate is contracted by you to provide any

of the Services which are subject to this Engagement,

the provision of those Services remain the responsibility

of Grant Thornton and the City agrees that it will not bring

any claim, whether in contract, tort (including negligence)

or otherwise against any GT Affiliate in respect of this

Engagement or the Services defined herein. In these

circumstances, any GT Affiliate that deals with you for

the purpose of completing the Services does so on

behalf of Grant Thornton. The provisions of this clause

have been stipulated for the benefit of GT Affiliates. GT

Affiliates will have the right to rely on this clause as if

they were parties to the Engagement and will have the

right (subject to the discretion of the courts) to a stay in

proceedings if you bring any claim against any GT

Affiliates in breach of this clause.

Non-solicitation – In addition to any further non-

solicitation rights as may be defined within the

Engagement, the City agrees that it shall not solicit for

employment or hire any of the partners, principals,

employees or consultants of Grant Thornton or GT

Affiliates who are involved in the performance of the

Services during the term of the Engagement and for a

period of twelve (12) months thereafter, without our

express written consent.

Confidentiality – All information which Grant Thornton

receives from the City or the City’s directors, officers,

agents, advisors or counsel in connection with the

performance of the Services and which is for the time

being confidential (“Confidential Information”), will be

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held in strict confidence, provided that Grant Thornton

shall be free to, without the requirement to seek any

further consent or authorization from the City, make

disclosures (a) as a result of any applicable law, court or

other order binding upon it, under the laws of, or

pursuant to any governmental action (including requests

and orders), regulatory requirement, or professional

standard obligations (including disclosure to a provincial

institute of Canadian chartered professional

accountants); (b) of such information to any professional

advisers, consultants and/or contractors, including GT

Affiliates it may consult in connection with the

Engagement and the performance of the Services; and

(c) as set out in the Engagement.

Grant Thornton may disclose Confidential Information to

GT Affiliates for the purposes of fulfilling its professional

obligations to manage conflicts of interest and to

maintain auditor independence. Confidential Information

may also be disclosed as part of compliance reviews or

to implement standardized performance measurement,

client relationship management and documentation

systems within the global Grant Thornton network. The

Confidential Information disclosed may include

ownership information and information about related

entities and such information may be stored, processed

and accessed from locations outside of Canada.

Notwithstanding anything to the contrary contained within

the Engagement, Grant Thornton shall not be obligated

to treat as confidential, or otherwise be subject to any

restrictions on use, disclosure or treatment as contained

within the Engagement, of any information disclosed by

the City which, (i) is rightfully known by Grant Thornton

on a non-confidential basis prior to its disclosure by the

City; (ii) is independently developed by Grant Thornton

without reference to or use of the City’s Confidential

Information; (iii) is or later becomes publicly available

without violation of the Engagement; or (iv) is lawfully

obtained by Grant Thornton from another party.

Working papers/reports – The advice or opinions of

Grant Thornton, including all materials, reports,

information, data, and work created, developed or

performed by Grant Thornton during the course of the

Engagement (“the Grant Thornton Materials”) shall

belong to Grant Thornton, with the exception of final tax

returns (if applicable), original contracts, other

documents of title held to the City's order and any

documents the return of which the City has stipulated, on

or prior to their release to Grant Thornton (the “City

Materials”). Notwithstanding the foregoing, (i) Grant

Thornton may retain a copy of any or all of the City

Materials (including Confidential Information) as required

by Grant Thornton, in its sole discretion, to meet any

obligations imposed by professional standards; and (ii)

nothing shall require the return, erasure or destruction of

back-ups made in accordance with Grant Thornton’s

document-retention procedures.

Conflict of interest – Grant Thornton, its associated

entities and GT Affiliates are involved in a wide range of

financial advisory activities out of which conflicting

interests or duties may arise. Within Grant Thornton, its

associated entities and GT Affiliates, practices and

procedures are maintained to restrict the flow of

information and thereby manage or assist in managing

such conflicts in a proper manner. Nothing within this

Engagement will be interpreted to preclude Grant

Thornton, its associated entities or GT Affiliates from

engaging in any transaction or representing any other

party at any time or in any capacity, provided that Grant

Thornton shall not, knowingly provide services to another

party under circumstances which would place Grant

Thornton in a direct conflict of interest during the term of

the Engagement without the City’s prior written consent.

In the event Grant Thornton becomes conflicted, as

determined in its discretion, Grant Thornton shall be

permitted, but not obligated to, terminate this

Engagement without any additional liability to the City,

upon fourteen (14) days prior written notice.

Independence – In the event the City is (i) an entity that

is registered with the United States Securities and

Exchange Commission; or (ii) an affiliate of a registrant,

and a provision(s) contained within the Engagement

would be prohibited by, or impair the independence of,

any member firm of Grant Thornton International Ltd

(“Grant Thornton International”) under any law or

regulation applying to the Client, such provision(s) shall

not apply to the Engagement to the extent that is

necessary to avoid the prohibition against or impairment

of the referenced independence of the respective Grant

Thornton International member firm.

Access to and disclosure of information – Grant

Thornton is committed to the protection of personal

information. During the course of planning, performing

and reporting the result of the Services or as otherwise

permitted under this Engagement, Grant Thornton, its

employees, partners, contractors, consultants, and GT

Affiliates may need to obtain, use and disclose City

information (including Confidential Information and

personal information) in the possession of, or under the

control of the City. The City acknowledges this potential

use and/or disclosure and agrees that it is responsible for

obtaining, where required under applicable law or

regulation, a court order or consent from any party

(including third parties) in order to permit Grant Thornton,

its employees, partners, contractors, consultants, and/or

GT Affiliates, to access, obtain, use and/or disclose City

information (including Confidential Information and

personal information) accessed by us or provided to us

by the City or a party authorized by the City for the

purposes of completing the Services, other disclosure so

defined within the Engagement or for those additional

purposes as more fully explained within Grant Thornton’s

privacy policy, as it may be amended from time to time

and available at www.grantthornton.ca.

http://www.grantthornton.ca/

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Electronic communication – Grant Thornton and the

City may need to electronically transmit confidential

information to each other and to other entities engaged

by either party during the Engagement. Electronic

methods include, but are not limited to telephones,

cellular telephones external hard drives, electronic mail

and facsimiles. These technologies provide for a fast and

convenient way to communicate. However, all forms of

communications have inherent security weaknesses and

the risks of compromised confidentiality cannot be

eliminated. Notwithstanding the inherent risks, the City

agrees to the use of such electronic methods to transmit

and receive information (including confidential

information), between Grant Thornton and the City and

between Grant Thornton and outside specialists,

contractors or other entities engaged by either Grant

Thornton or the City. The City further agrees that Grant

Thornton shall not be liable for any loss, damage,

expense, inconvenience or harm resulting from the loss,

delay, interception, corruption or alteration of any

electronic communication due to any reason whatsoever.

The City also agrees that Grant Thornton professionals

shall be authorized to connect their computers to the

City’s IT network, subject to any specific restrictions the

City provides to Grant Thornton. Connecting to the City’s

IT network or the internet via this network, while at the

City’s premises, will be primarily for the purpose of

conducting normal business activities, and those relating

to the completion of the Services.

Expenses – If applicable, the City will reimburse Grant

Thornton for all reasonable out-of-pocket expenses

incurred by Grant Thornton in entering into and

performing the Services, whether or not it is completed,

including but not limited to, travel, telecommunications

costs, fees and disbursements of other professional

advisers, and other disbursements customary in

engagements of this nature. Normal administrative

expenses are charged on the basis of a percentage of

professional costs. The administrative fee is equal to 7%

of the total professional fees invoiced during the

Engagement. All other out-of-pocket expenses will be

charged at cost as incurred by Grant Thornton.

Taxes – All fees and other charges payable to Grant

Thornton do not include any applicable federal,

provincial, or other goods and services tax or sales tax,

or any other taxes or duties whether presently in force or

imposed in the future. All sums payable to Grant

Thornton hereunder shall be paid in full without

withholding or deduction.

Billing – All invoices issued by Grant Thornton

hereunder are due within 30 days of the invoice date.

Interest will be charged on all overdue accounts at a rate

of 1.5% per month (18% per annum) until paid. Fees paid

or payable to Grant Thornton under this Engagement are

non-refundable and shall not be subject to set-off. Unless

otherwise directed by Grant Thornton, all fees, expenses

and other sums will be billed and payable in Canadian

Dollars.

Termination – Either the City or Grant Thornton may

terminate the Engagement upon fourteen (14) days prior

written notice to the other party. In addition to the

foregoing, Grant Thornton may also terminate the

Engagement in the event of a breach of any term of the

Engagement by the City which is not cured by the City

within ten (10) days of receipt of written notice as to the

breach. Upon termination for any reason, the parties

shall return each other’s confidential information, except

that Grant Thornton may retain one copy for its working

papers and one copy of the City Materials even if same

may contain confidential information of the City. In

addition to its rights of termination provided herein and

notwithstanding anything to the contrary in the

Engagement, Grant Thornton shall also have the right (i)

upon five (5) days prior written notice to the City to

suspend or terminate its Services in the event the City

fails to pay Grant Thornton any amount due to it under

the terms of the Engagement; or (ii) immediately upon

written notice to the City terminate its Services in the

event Grant Thornton discovers any information which

Grant Thornton determines, in its sole discretion, may

affect its reputation, integrity, or independence. In the

event of termination, the City agrees to compensate

Grant Thornton for all time expended and costs incurred

up to and including the date of termination.

In the event neither the City or Grant Thornton exercise

any of their respective rights regarding termination of the

Engagement, the Engagement will continue in full force

and effect for the year ending noted within the

Engagement and until such time as the Engagement is

superseded or replaced by another Engagement.

Severability – Each provision of this Engagement is

severable and if any provision (in whole or in part) is or

becomes invalid or unenforceable or contravenes any

applicable regulations or laws, the remaining provisions

and the remainder of the affected provision (if any) will

not be affected.

Assignment – No assignment shall be made by either

party of their respective obligations under this

Engagement without the prior written consent of the other

party.

Publication – Unless otherwise permitted by the

engagement, under no circumstances without the

express prior written consent of Grant Thornton, shall the

City disclose, release, use, make reference to, or quote

Grant Thornton’s name, logo or any Deliverable (whether

written or verbal) within any press release, press

conference, website update, media release or any other

form of public disclosure (“Disclosure Document”) other

than for litigation purposes, but only to the extent and in

the manner that such use is contemplated by the

Engagement. In the event the City wishes to seek Grant

Thornton’s consent as required by the Engagement, the

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City shall provide to Grant Thornton a copy of such

Disclosure Document for prior approval, which approval

may be unreasonably withheld.

City representations, warranties and covenants – The

City represents, warrants and covenants to Grant

Thornton that:

a. the execution, delivery and performance of the

Engagement has been duly authorized and does

not conflict with or violate any contractual, statutory,

common law, legal, regulatory or other obligation by

which the City is bound; and

b. the Engagement is the legal, valid and binding

obligation of the City, enforceable in accordance

with its terms.

Grant Thornton representations, warranties and

covenants – Grant Thornton represents, warrant and

covenants to the City that Grant Thornton will provide the

Services described within the Engagement in a

professional and competent manner. Grant Thornton

makes no other representation or warranties and

explicitly disclaims all other warranties and

representations whether expressed or implied by law,

usage of trade, course of dealing or otherwise.

Surviving provisions – The City’s obligations in respect

of confidentiality, payment of fees and expenses, City

consent to production, release and indemnification, and

limitation of liability as outlined within the Engagement

shall survive termination of the Engagement.

Governing law and forum – The Engagement, including

these terms and conditions shall be governed by and

construed in accordance with the laws of the Province in

which the Engagement was signed by Grant Thornton.

Other matters – The failure of either party to insist on

strict performance of the Engagement, or to exercise any

option herein, shall not act as a waiver of any right,

promise or option, but the same shall be in full force and

effect. No waiver of any term or provision or of any

breach or default shall be valid unless in writing and

signed by the party giving such waiver, and no such

waiver shall be deemed a waiver of any other term or

provision or any subsequent breach or default of the

same or similar nature.

Complete agreement – This Engagement, including

these terms and conditions and any schedules, sets forth

the entire understanding of the parties relating to the

subject matter hereof and supersedes and cancels any

prior communications, understandings, and agreements

between the parties. This Engagement may not be

amended or modified except in writing between the

parties and shall inure to the benefit of and be binding

upon the parties and their respective successors.

B Report to those charged with governance – Communication of audit results City of St. John’s For the year ended December 31, 2017


Appendix B – Draft independent auditor’s report


T +1 709 778 8800 F +1 709 722 7892 www.GrantThornton.ca


Independent auditors’ report

To His Worship the Mayor and Councillors

City of St. John’s We have audited the accompanying consolidated financial statements of the City of St. John’s, which comprise the consolidated statement of financial position as at December 31, 2017, and the consolidated statements of operations, change in net debt and cash flow for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management’s responsibility for the financial statements Management is responsible for the preparation and fair presentation of these consolidated 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.

Auditor’s responsibility Our responsibility is to express an opinion on these consolidated 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 the auditor’s 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, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the [consolidated] 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.

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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 consolidated financial statements present fairly, in all material respects, the financial position of the City of St. John’s, as at December 31, 2017, and the results of its operations, changes in net debt, and its cash flows for the year then ended in accordance with Canadian public sector accounting standards.

St. John’s, Canada

September XX, 2018 Chartered Professional Accountants

C Report to those charged with governance – Communication of audit results City of St. John’s For the year ended December 31, 2017


Appendix C – Draft Management representation letter

September XX, 2018 Grant Thornton LLP 15 International Place, Suite 300 St. John’s, NL A1A 0L4 Dear Sir/Madam,

We are providing this letter in connection with your audit of the consolidated financial statements of City of St. John’s as of December 31, 2017, and for the year then ended, for the purpose of expressing an opinion as to whether the consolidated financial statements present fairly, in all material respects, the financial position, results of operations, and cash flows of City of St. John’s in accordance with public sector accounting standards.

We acknowledge that we have fulfilled our responsibilities for the preparation of the consolidated financial statements in accordance with public sector accounting standards and for the design and implementation of internal controls to prevent and detect fraud and error. We have assessed the risk that the consolidated financial statements may be materially misstated as a result of fraud, and have determined such risk to be low. Further, we acknowledge that your examination was planned and conducted in accordance with Canadian generally accepted auditing standards (GAAS) so as to enable you to express an opinion on the consolidated financial statements. We understand that while your work includes an examination of the accounting system, internal controls and related data to the extent you considered necessary in the circumstances, it is not designed to identify, nor can it necessarily be expected to disclose, fraud, shortages, errors and other irregularities, should any exist.

Certain representations in this letter are described as being limited to matters that are material. An item is considered material, regardless of its monetary value, if it is probable that its omission from or misstatement in the consolidated financial statements would influence the decision of a reasonable person relying on the consolidated financial statements.

We confirm, to the best of our knowledge and belief, as of September xx, 2018, the following representations made to you during your audit.

Financial statements 1 The consolidated financial statements referred to above present fairly, in all material respects, the

financial position of the entity as at December 31, 2017 and the results of its operations and its cash flows for the year then ended in accordance with public sector accounting standards, as agreed to in the terms of the audit engagement.

Completeness of information 2 We have made available to you all financial records and related data and all minutes of the meetings of

councillors, finance and administration, and audit committees as agreed in the terms of the audit engagement. Summaries of actions of recent meetings for which minutes have not yet been prepared have been provided to you. All significant council and committee actions are included in the summaries.

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3 We have provided you with unrestricted access to persons within the entity from whom you determined it necessary to obtain audit evidence.

4 There are no material transactions that have not been properly recorded in the accounting records underlying the consolidated financial statements. The adjusting journal entries which have been proposed by you are approved by us and will be recorded on the books of the entity.

5 There were no restatements as a result of error made to correct a material misstatement in the prior period consolidated financial statements that affect the comparative information.

6 We are unaware of any known or probable instances of non-compliance with the requirements of regulatory or governmental authorities, including their financial reporting requirements.

7 We are unaware of any violations or possible violations of laws or regulations the effects of which should be considered for disclosure in the consolidated financial statements or as the basis of recording a contingent loss.

8 We have disclosed to you all known deficiencies in the design or operation of internal control over financial reporting of which we are aware.

9 We have identified to you all known related parties and related party transactions, including sales, purchases, loans, transfers of assets, liabilities and services, leasing arrangements guarantees, non-monetary transactions and transactions for no consideration.

Fraud and error 10 We have no knowledge of fraud or suspected fraud affecting the entity involving management; employees

who have significant roles in internal control; or others, where the fraud could have a non-trivial effect on the consolidated financial statements.

11 We have no knowledge of any allegations of fraud or suspected fraud affecting the entity’s consolidated financial statements communicated by employees, former employees, analysts, regulators or others.

12 We acknowledge our responsibility for the design, implementation and maintenance of internal control to prevent and detect fraud.

13 We believe that the effects of the uncorrected financial statement misstatements summarized in the accompanying schedule are immaterial, both individually and in the aggregate, to the consolidated financial statements taken as a whole.

Recognition, measurement and disclosure 14 We believe that the significant assumptions used by us in making accounting estimates, including those

used in arriving at the fair values of financial instruments as measured and disclosed in the consolidated financial statements, are reasonable and appropriate in the circumstances.

15 We have no plans or intentions that may materially affect the carrying value or classification of assets and liabilities, both financial and non-financial, reflected in the consolidated financial statements.

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16 All related party transactions have been appropriately measured and disclosed in the consolidated financial statements.

17 The nature of all material measurement uncertainties has been appropriately disclosed in the consolidated financial statements, including all estimates where it is reasonably possible that the estimate will change in the near term and the effect of the change could be material to the consolidated financial statements.

18 Any goodwill or intangibles on the books of the entity are evaluated whenever events or changes in circumstances indicated the carrying amount may not be recoverable to determine whether or not they have been impaired, and an appropriate loss provision is provided in the accounts where there has been a permanent impairment.

19 All outstanding and possible claims, whether or not they have been discussed with legal counsel, have been disclosed to you and are appropriately reflected in the consolidated financial statements. Refer to Note 14 in the consolidated financial statements.

20 All liabilities and contingencies, including those associated with guarantees, whether written or oral, have been disclosed to you and are appropriately reflected in the consolidated financial statements.

21 All “off-balance sheet” financial instruments have been properly recorded or disclosed in the consolidated financial statements.

22 With respect to environmental matters:

a) at year end, there were no liabilities or contingencies that have not already been disclosed to you;

b) liabilities or contingencies have been recognized, measured and disclosed, as appropriate, in the consolidated financial statements; and

c) commitments have been measured and disclosed, as appropriate, in the consolidated financial statements.

23 The entity has satisfactory title to (or lease interest in) all assets, and there are no liens or encumbrances on the entity’s assets nor has any been pledged as collateral except as identified in Note 8.

24 We have disclosed to you, and the entity has complied with, all aspects of contractual agreements that could have a material effect on the consolidated financial statements in the event of non-compliance, including all covenants, conditions or other requirements of all outstanding debt. Refer to Note 7, Note 8, Schedule 2 and Schedule 3 in the consolidated financial statements.

25 The Goods and Services Tax (GST) and Harmonized Sales Tax (HST) transactions recorded by the entity are in accordance with the federal and provincial regulations. The GST and HST liability/receivable amounts recorded by the entity are considered complete.

26 Employee future benefit costs, assets, and obligations have been determined, accounted for and disclosed in accordance with the requirements of Section 3250 Retirement Benefits of the Chartered Professional Accountants of Canada (CPA Canada) Handbook for Public Sector Accounting.

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27 There have been no events subsequent to the balance sheet date up to the date hereof that would require recognition or disclosure in the consolidated financial statements. Further, there have been no events subsequent to the date of the comparative financial statements that would require adjustment of those financial statements and related notes.

28 All information relating to Treasury Bonds, including number and amount outstanding, have been disclosed to you and are appropriately reflected in the consolidated financial statements.

Other 29 We have considered whether or not events have occurred or conditions exist which may cast significant

doubt on the Company’s ability to continue as a going concern and have concluded that no such events or conditions are evident.

Yours very truly,

Deputy City Manager, Financial Management Manager – Financial Services

City of St. John'sDecember 31, 2017Passed journal entries

Number Date Account Debit Credit

PAJE 1 December 31, 2017 Discount on non-interest bearing loan 344,000 PAJE 1 December 31, 2017 Loan receivable 344,000

To record discount on non-interest bearing loan issued for Soccer field

PAJE 2 December 31, 2017 Accumulated surplus 1,330,323 PAJE 2 December 31, 2017 Interest on debenture debt 1,330,323

To adjust for no interest accrual recorded in fiscal 2016 on the $120,000,000 bond (recorded in 2017 is approximately 15 months of interest).

PAJE 3 December 31, 2017 Accumulated surplus 1,457,822 PAJE 3 December 31, 2017 Federal gas tax revenue 1,457,822

To adjust for Gas tax funding received in fiscal 2016 that should have been deferred in 2016; however, deferral set-up in 2017

D Report to those charged with governance – Communication of audit results City of St. John’s For the year ended December 31, 2017


Appendix D – Internal control letter

Grant Thornton LLP Suite 300 15 International Place St. John's, NL A1A 0L4 T +1 709 778 8800 F +1 709 722 7892 www.GrantThornton.ca


Management and the Audit Committee of City of St. John’s City of St. John’s 10 New Gower Street PO Box 908 St. John’s, NL A1C 5M2

September 26, 2018 Dear Sir/Madam,

Re: Internal control findings from the 2017 audit

Receiving observations and findings on your financial reporting processes and controls is one of the benefits of an annual financial statement audit. Grant Thornton LLP has implemented processes and technology to address the changing standards of conducting a financial statement audit. This approach includes an increased emphasis on internal control. Our procedures identified a number of items that we need to bring to your attention.

Our audit is planned and conducted to enable us to express an audit opinion on the annual financial statements. The matters dealt with in this letter came to our attention during the conduct of our normal examination, and as a result, this letter does not necessarily include all matters that would be uncovered through a more extensive or special engagement.

The standards of the public accounting profession require us to report annually to you our findings on certain weaknesses and deficiencies in your internal controls. We have categorized our findings as follows:

• Material weaknesses (individual or aggregated deficiencies that could result in a material misstatement in the financial statements due to fraud or error)

• Significant deficiencies

• Other deficiencies and advisory comments

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Other deficiencies and advisory comments

Discounts on Payables

Observation The financial application does not restrict A/P clerks from adjusting the discount terms of an invoice without secondary approval.

Recommendations to strengthen internal control Controls should be designed and implemented to either prevent a clerk from adjusting the discount terms when entering invoices and/or to detect and report on all adjustments to vendor invoice terms.

City’s response In the absence of implementing controls to restrict AP Clerks ability to adjust the discount terms of an invoice without secondary approval, we are currently looking at setting up a process of reporting on discounts taken for comparison to vendor discount terms and payment dates.

Other Advisory Comments In our letter dated September 29, 2017 we communicated the following other advisory comment. Based on discussion with management, this matter has not yet been addressed.

Whistleblower line Observation Best practices in governance indicate that whistleblower lines identify 43% of employee fraud. Furthermore, public companies are required by securities legislation to provide a whistleblower service to their employees. We understand that the City of St. John’s does not currently have an independent, anonymous reporting line for this purpose. Many organizations committed to offering an ethical and positive work environment for their employees have such lines in place, which also serve to maintain their reputation with customers and suppliers. Current policy, under Whistle Blower Protection By-Law 1552, provides employee protection and allows employees to file a complaint with the City Manager or Mayor or City Clerk. It is our understanding that the City is currently exploring options for the implementation of a whistleblower line.

City’s response The Division of Internal Audit will develop, in consultation with other departments/divisions, a comprehensive fraud policy for the organization, including a review or current Whistle Blower policy.

Councillor’s allowance We would also like to bring your attention to a change in the Income Tax Act effective 2019. Currently, the Income Tax Act Subsection 83(3) allows a councillor’s allowance not to be included in their income, provided it does not exceed 50% of the councillor’s taxable remuneration for the year. This exemption will be repealed effective January 1, 2019. Therefore, the allowance provided to elected municipal officials will be included in their income once the exemption has been repealed.

3


The City’s written response to the internal control matters identified herein has not been subjected to our audit procedures and accordingly, we express no opinion on it.

It is management’s responsibility to weigh the costs of implementing controls against the benefits that the controls will achieve. The purpose of this letter is to provide you with the information related to the identified risks so that you can make the necessary decisions.

The matters discussed herein are those that have been noted as of September 26, 2018. In addition, this communication is prepared solely for the information of management and is not intended for any other purposes. We wish to acknowledge the co-operation and assistance provided by you and your staff during our recent visits to your offices and thank you for the opportunity to contribute to the present and future success of the company. Should you have any questions regarding the above or any other matters, please do not hesitate to contact us at your convenience.


Chris Brake, CPA, CA Partner /tb

E Report to those charged with governance – Communication of audit results City of St. John’s For the year ended December 31, 2017


Appendix E – Letter of independence


T +1 709 778 8800 F +1 709 722 7892 www.GrantThornton.ca


City of St. John’s 10 New Gower Street PO Box 908 St. John’s, NL A1C 5M2

September 26, 2018 The Audit Committee of City of St. John’s

Dear Audit Committee Members,

We have been engaged to audit the consolidated financial statements of the City of St. John’s (the City) for the year ending December 31, 2017.

Canadian generally accepted auditing standards require that we communicate at least annually with you regarding all relationships between the City, its subsidiaries, St. John’s Transportation Commission and St. John’s Sports and Entertainment and affiliates, City’s Urban Living Non-Profit Housing, Regional Fire Department, Regional Waste Water System, Regional Water Supply System and Robin Hood Bay Regional Waste Management Facility, and Grant Thornton LLP that, in our professional judgment, may reasonably be thought to bear on our independence.

In determining which relationships to report, these standards require us to consider relevant rules and related interpretations prescribed by the appropriate provincial institute / order and applicable legislation, covering such matters as:

a holding a financial interest, either directly or indirectly, in a client; b holding a position, either directly or indirectly, that gives the right or responsibility to exert

significant influence over the financial or accounting policies of a client; c personal or business relationships of immediate family, close relatives, partners or retired

partners, either directly or indirectly, with a client; d economic dependence on a client; and e provision of services in addition to the audit engagement.

We have prepared the following comments to facilitate our discussion with you regarding independence matters arising since September 5, 2017.


2

We are not aware of any relationships between the City, its subsidiaries, St. John’s Transportation Commission and St. John’s Sports and Entertainment and affiliates, City’s Urban Living Non-Profit Housing, Regional Fire Department, Regional Waste Water System, Regional Water Supply System and Robin Hood Bay Regional Waste Management Facility, and Grant Thornton LLP that, in our professional judgment, may reasonably be thought to bear on our independence.

We confirm that we are independent with respect to the City within the meaning of the Rules of Professional Conduct of the Institute of Chartered Accountants of Newfoundland and Labrador that have occurred from September 5, 2017 to September 26, 2018.

This report is intended solely for the use of the audit committee, council, management, and others within the City and should not be used for any other purposes.

We look forward to discussing with you the matters addressed in this letter.


Chris Brake CPA, CA Partner /tb

F Report to those charged with governance – Communication of audit results City of St. John’s For the year ended December 31, 2017


Appendix F – Accounting developments



Public Sector Accounting Board – [updated June 30, 2017] Effective date

Section PS 3450 Financial instruments, Section PS 2601 Foreign currency translation, Section PS 1201 Financial statement presentation, and PS 3041 Portfolio investments

PS 3450 Financial instruments in a new Section that establishes standards for recognizing and measuring financial assets, financial liabilities and non-financial derivatives.

PS 2601 Foreign currency translation revises and replaces Section PS 2600 Foreign currency translation.

PS 1201 Financial statement presentation revises and replaces Section PS 1200 Financial statement presentation.

PS 3041 Portfolio investment revises and replaces Section PS 3040 Portfolio investments.

The issuance of these new sections also includes consequential amendments to

Introduction to accounting standards that apply only to government not-for-profit organizations

PS 1000 Financial statement concepts

PS 1100 Financial statement objectives

PS 2125 First-time adoption by government organizations

PS 2500 Basic principles of consolidation

PS 2510 Additional areas of consolidation

PS 3050 Loans receivable

PS 3060 Government partnerships

PS 3070 Investments in government business enterprises

PS 3230 Long-term debt

PS 3310 Loan guarantees

PS 4200 Financial statement presentation by not-for-profit organizations

PSG-6 Including results or organizations and partnerships applying fair value measurement was withdrawn as a result of the issuance of these sections.

The new requirements are all required to be applied at the same time.

For governments – Fiscal years beginning on or after April 1, 2019. This effective date was amended in September 2015.

Section PS 2200 Related party disclosures

This Section defines a related party. It also establishes the disclosures required for related party transactions, including disclosure of information about an entity’s related party transactions and the relationship between the related parties when the transactions:

have occurred at a value different from that which would have been arrived at if the parties were unrelated; or

have or could have, a material financial effect on the financial statements.

As a result of the issuance of Section 2200, the Public Sector Accounting Board (PSAB) approved the withdrawal of Section PS 4260 Disclosure of related party transactions by not-for-profit organizations since PS 2200 contains similar disclosure requirements.

Fiscal years beginning on or after April 1, 2017.

Earlier adoption is permitted.

Section PS 4260 will remain in effect for GNPOs reporting under PSAS plus the PS 4200 series until Section PS 2200 must be adopted for fiscal periods beginning on or after April 1, 2017.

Early adoption is permitted.

Section PS 3420 Inter-entity transactions

This Section establishes how to account for and report transactions between public sector entities that comprise a government's reporting entity from both a provider and recipient perspective (i.e., related parties within a government reporting entity). The main features of the new Section are:

• Transactions are measured at their carrying amounts, except in specific circumstances.

• Transactions occurring on similar terms and conditions as an arm’s length transaction are measured at the exchange amount.

• Cost allocation and recovery is the allocation of costs of activities associated with providing goods or services to another entity and the recovery of the costs incurred from the other entities. Under a policy of cost






allocation, revenues and expenses are recognized on a gross basis at their exchange amount.

• Unallocated costs are the cost of resources recorded by the providing entity in its operating activities that are incurred on behalf of a recipient entity. A recipient may choose to recognize unallocated costs for the provision of goods and services and measure them at their carrying amount, fair value or other amount dictated by policy, accountability structure or budget practice.

• The transfer of an asset or liability for nominal or no consideration is measured by the provider at its carrying amount and by the recipient at its carrying amount or fair value.

• Inter-entity transactions must be disclosed in accordance with Section PS 2200 Related party disclosures.

Section PS 3210 Assets

This new Section provides guidance for applying the definition of an asset set out in Section PS 1000 Financial statement concepts and establishes general disclosure standards for assets.

Disclosure of information about the major categories of assets that are not recognized is required. When an asset is not recognized because a reasonable estimate of the amount involved cannot be made, the reason(s) for this should be disclosed.



Section PS 3320 Contingent assets

This new Section defines and establishes disclosure standards for contingent assets.

Contingent assets are possible assets arising from existing conditions or situations involving uncertainty. That uncertainty will ultimately be resolved when one or more future events not wholly within the public sector entity's control occur or fail to occur and that resolution will confirm the existence or non-existence of an asset.

Disclosure of information about contingent assets is required when the occurrence of the confirming future event is likely.



Section PS 3380 Contractual rights

This new Section defines and establishes disclosure standards on contractual rights. Contractual rights are rights to economic resources arising from contracts or agreements that will result in both an asset and revenue in the future.

Disclosure of information about contractual rights is required, including a description about their nature and extent and the timing.



Section PS 3430 Restructuring transactions

This new Section defines a restructuring transaction and establishes standards for recognizing and measuring assets and liabilities transferred in a restructuring transaction.

A restructuring transaction is a transfer of an integrated set of assets and/or liabilities, together with related program or operating responsibilities without consideration based primarily on the fair value of the individual assets and individual liabilities transferred. The main requirements in the new Section are:

• The net effect of a restructuring transaction is recognized as revenue or an expense by the entities involved (transferor/recipient).

• The recipient must recognize the individual assets and liabilities received in a restructuring transaction at their carrying amounts with applicable adjustments at the restructuring date.

• The transferor and recipient cannot restate their financial position or results of operations as if the transaction had happened from inception.






• The transferor and recipient must disclose sufficient information to enable users to assess the nature and financial effects of a restructuring transaction on their financial position and operations.

The issuance of this new Section also resulted in consequential amendments to Section PS 3050 Loans receivable.

G Report to those charged with governance – Communication of audit results City of St. John’s For the year ended December 31, 2017


Appendix G – Auditing developments



anadian Auditing Standards (CASs) and other Canadian Standards issued by the AASB Effective date

Amendments to CAS 250, Consideration of Laws and Regulations in an Audit of Financial Statements

The amendments to this standard have not changed the work effort of the auditor and serve to clarify existing guidance. The key changes are intended to: help the auditor decide whether to report identified or suspected non-

compliance to authorities outside the entity

clarify the auditor’s duty of confidentiality and any additional responsibilities the auditor may have according to laws, regulations and relevant ethical requirements

enhance consideration of the implications of non-compliance with laws and regulations for the audit

emphasize the fact that, in certain cases, communication with management or those charged with governance may be restricted or prohibited by law or regulation

CAS 250 (revised) applies to audits of financial statements for periods ending on or after December 15, 2018.

Amendments to CAS 700 and other standards pertaining to Reporting on Audited Financial Statements and adoption of 701, Communicating Key Audit Matters in the Independent Auditor’s Report The key changes to the existing Canadian standards as a result of adopting CAS 700 (revised) and CAS 701 are as follows:

Expanded disclosures regarding management’s responsibilities related to going concern, specifically: the responsibility to assess the entity’s ability to continue as a going concern and whether the use of the going concern basis of accounting is appropriate as well as disclosing, if applicable, matters relating to going concern.

Expanded disclosures regarding the auditor’s responsibilities related to going concern, specifically: the requirement to conclude on the appropriateness of management’s use of the going concern basis of accounting and, if based on the audit evidence obtained, whether the auditor concludes a material uncertainty exists related to events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern. If the auditor concludes that a material uncertainty exists, the auditor is required to draw attention in their report to the related disclosures.

Disclosure of the engagement partner’s name in auditor’s reports for audits of listed entities.

Changes to the descriptions of the responsibilities of management, the auditor and those charged with governance, including a reference to who within the entity is responsible for overseeing the reporting process (when those charged with governance are distinct from management) (ISA 700)

Adoption of a new standard (CAS 701) that deals with the requirements when the auditor will be communicating the matters judged to be most significant to the audit in the audit report, either because the auditor has chosen to do so or because law or regulation requires key audit matters to be described in the auditor’s report.

It is believed that these changes will enhance the communicative value of the auditor’s report and also improve the overall quality of the audit and financial reporting.

The new reporting standards apply for periods ending on or after December 15, 2018, with earlier application permitted.



anadian Auditing Standards (CASs) and other Canadian Standards issued by the AASB Effective date

Amendments to CAS 720, The Auditor’s Responsibilities Relating to Other Information The main changes are as follows:

broadening and clarifying the scope of other information by linking it to the concept of an “annual report”

enhancing the auditor’s work effort with respect to other information; and providing transparency by requiring reporting on the auditor’s work relating to

other information.

The concept in extant CAS 720 that other information is not audited (i.e. that auditors do not provide assurance on the other information) has been retained.

CAS 720 applies for periods ending on or after December 15, 2018, with earlier application permitted.

Amendments to CAS 810, Engagements to Report on Summary Financial Statements

The key changes are as follows:

The requirements of extant CAS 810 have been amended to require a material misstatement related to going concern or a material misstatement of other information to be highlighted in the CAS 810 report, if these items have been highlighted separately in the auditor’s report on the related audited financial statements in accordance with the new reporting format.

A new requirement has been introduced for CAS 810 reports to include a reference to the communication of key audit matters in the auditor’s report on the audited financial statements

The layout of the CAS 810 illustrative auditor’s report has been altered to be consistent with those in CAS 700 (Revised).

CAS 810 applies for periods ending on or after December 15, 2018, with earlier application permitted.

Amendments to CAS’s related to the subject of Addressing Disclosures in the Audit of Financial Statements The AASB has approved certain changes to the standards that clarify how auditors should address the audit of financial statement disclosures. The changes include:

Clarifying the meaning of “Disclosure”(CAS 200)

Providing guidance to auditors to address audit considerations relating to disclosures early in the Audit (CAS 210, 260, 300)

Disclosure considerations in identifying, assessing and responding to risks of material misstatement (CAS 240, 315, 320 and 330)

Clarifying and elaborating on expectations of the auditor when evaluating misstatements and forming an opinion (CAS 450 and 700)

These revised standards apply for periods ending on or after December 15, 2018, with earlier application permitted.

Replacement of Section 5020, Association with CSOA 5000, Use of the Practitioner’s Communication or Name The AASB has the replacement of Section 5020 with a new standard to address a number of issues that were raised by practitioners and other Canadian stakeholders. The key issues that are now addressed in CSOA 5000 include:

Determining the meaning of “association”

Identifying when a practitioner becomes associated with information

Establishing the work effort required and the communications needed in the context of the nature and extent of the practitioner’s association with information

Determining how this standard should interrelate with other standards

CSOA 5000 is effective for consents provided on or after June 1, 2017 with early adoption permitted.

Consolidated Financial Statements of

CITY OF ST. JOHN’S December 31, 2017

CITY OF ST. JOHN’S December 31, 2017

Table of Contents PAGE Statement of Responsibility 1 Independent Auditor’s Report 2 Consolidated Statement of Operations and Accumulated Surplus 3 Consolidated Statement of Financial Position 4 Consolidated Statement of Changes in Net Debt 5 Consolidated Statement of Cash Flows 6 Notes to the Consolidated Financial Statements 7 – 26 Supplementary Schedules Consolidated Schedule of Tangible Capital Assets 27 Consolidated Schedule of Debenture Debt 28 Consolidated Schedule of Long-Term Debt 29 Consolidated Schedule of Mortgages – Urban Living Non-Profit Housing 30 Consolidated Schedule of Revenues 31 - 32 Consolidated Schedule of Expenditures 33 - 34 Consolidated Schedule of Segmented Information 35 Consolidated PSAB Budget 36 Consolidating Entries and PSAB Adjustments 37

Statement of Responsibility The accompanying financial statements are the responsibility of the management of the City of St. John’s (the "City") and have been prepared in compliance with legislation, and in accordance with generally accepted accounting principles established by the Public Sector Accounting Board of the Chartered Professional Accountants of Canada.

In carrying out its responsibilities, management maintains appropriate systems of internal and administrative controls designed to provide reasonable assurance that transactions are executed in accordance with proper authorization, that assets are properly accounted for and safeguarded, and that financial information produced is relevant and reliable.

Prior to their submission to Council, the City’s Audit Committee met with management and its external auditors to review a draft of the financial statements and to discuss any significant financial reporting or internal control matters prior to their approval of the finalized financial statements.

Grant Thornton LLP, as the City’s appointed external auditors, has audited the financial statements. The auditor's report is addressed to the Mayor and Councillors and appears on the following page. Their opinion is based upon an examination conducted in accordance with Canadian generally accepted auditing standards, performing such tests and other procedures as they consider necessary to obtain reasonable assurance that the financial statements are free of material misstatement and present fairly the financial position and results of the City in accordance with Canadian public sector accounting standards.

________________________________________ Mayor Deputy City Manager, Finance & Administration

CITY OF ST. JOHN'SConsolidated Statement of Operations and Accumulated SurplusYear ended December 31, 2017 Budget Actual Actual

2017 2017 2016$ $ $

(Schedule 8)

Revenues (Schedule 5)Taxation 199,351,655 200,491,472 210,151,372 Grants in lieu of taxes 8,450,000 8,802,225 9,157,840 Grants and transfers 9,811,815 11,182,937 26,053,311 Sales of goods and services 52,928,167 53,755,973 50,074,150 Other revenue from own sources 26,745,843 25,718,683 22,747,761

297,287,480 299,951,290 318,184,434

Expenditures (Schedule 6)General government services 46,779,868 51,343,983 57,912,287 Fiscal services 22,686,477 24,128,944 20,670,747 Transportation services 57,445,923 59,605,756 56,732,273 Protective services 35,234,897 37,033,335 35,884,930 Environmental health services 48,114,873 42,617,381 43,942,210 Recreation and cultural services 31,759,126 31,098,990 29,526,962 Environmental development services 6,689,252 7,920,076 7,716,720 Amortization and allowances 48,685,469 48,096,718 47,723,099

297,395,885 301,845,183 300,109,228

Excess of (expenditures over revenues) revenues over expenditures (108,405) (1,893,893) 18,075,206 Accumulated surplus, beginning of year 843,256,729 843,256,729 825,181,523 Accumulated surplus, end of year (Note 12) 843,148,324 841,362,836 843,256,729

See accompanying notes to the consolidated financial statements

Page 3

CITY OF ST. JOHN'SConsolidated Statement of Financial PositionAs at December 31, 2017

2017 2016$ $

Financial assets Cash and cash equivalents (Note 2) 69,477,496 77,026,947

Accounts receivable - current (Note 3) 41,574,625 38,434,721

Accounts receivable - long-term (Note 4) 9,058,720 12,622,856 Investment in rental housing projects 113,579 157,912 Portfolio investments (Sinking funds) (Note 12 and Schedule 2) 139,844,295 121,830,054

260,068,715 250,072,490

Financial liabilities Payables and accruals (Note 5) 68,581,589 64,736,351 Employee benefits (Note 6) 204,753,978 204,616,492 Debenture debt (Note 7 and Schedule 2) 444,500,000 444,500,000 Long-term debt (Note 8) 14,980,887 17,453,292 Trust funds payable 31,379 31,084

732,847,833 731,337,219

Net debt (472,779,118) (481,264,729)

Non-financial assets Tangible capital assets (Schedule 1) 1,307,592,977 1,318,572,837 Inventory of materials and supplies 3,273,903 3,097,525

Prepaid expenditures 3,275,074 2,851,096 1,314,141,954 1,324,521,458

Accumulated surplus (Note 12) 841,362,836 843,256,729

Contingencies and commitments (Note 14)


On behalf of Council

_____________________________________ __________________________________________Mayor Deputy City Manager, Finance & Administration

Page 4

CITY OF ST. JOHN'SConsolidated Statement of Changes in Net DebtYear ended December 31, 2017 Budget

2017 2017 2016$ $ $

Excess of (expenditures over revenues) (108,405) (1,893,893) 18,075,206 revenues over expenditures

Changes in tangible capital assets Acquisition of tangible capital assets (64,922,248) (36,407,567) (64,922,248)

Net book value of tangible capital assets disposals/adjustments 1,343,229 415,831 1,343,229 Amortization of tangible capital assets 46,971,596 46,971,596 44,032,757 Decrease (increase) in net book value of tangible capital assets (16,607,423) 10,979,860 (19,546,262)

Changes in other non-financial assets Change in prepaid expenditures - (423,978) 692,708 Acquisition of inventory and supplies, net of usage - (176,378) (30,881) (Increase) decrease in other non-financial assets - (600,356) 661,827

Decrease (increase) in net debt (16,715,828) 8,485,611 (809,229) Net debt, beginning of year (481,264,729) (481,264,729) (480,455,500) Net debt, end of year (497,980,557) (472,779,118) (481,264,729)


Page 5

CITY OF ST. JOHN'SConsolidated Statement of Cash FlowsYear ended December 31, 2017

2017 2016$ $

Operating transactions Excess of (expenditures over revenues) revenues over expenditures (1,893,893) 18,075,206 Non-cash charges to operations:

Amortization of tangible capital assets 46,971,596 44,032,757 Employee benefits 137,486 12,889,092 Loss on disposal of tangible capital assets 363,873 1,255,517

45,579,062 76,252,572

Net change in other (Note 13) 104,978 (12,350,973) 45,684,040 63,901,599

Capital transactions Acquisition of tangible capital assets (36,407,567) (64,922,248) Proceeds from sale of tangible capital assets 51,958 87,712

(36,355,609) (64,834,536)

Financing transactions Decrease in long-term accounts receivable 3,564,136 6,982,807

Issuance of debenture debt - 120,000,000 Repayment of long-term debt (2,472,405) (3,399,090) Decrease in bank indebtedness - (70,000,000)

1,091,731 53,583,717

Investing transactions Increase in sinking fund investments (18,014,241) (15,758,742)

Increase in trust funds payable 295 233 Decrease in investment in rental housing projects 44,333 41,522

(17,969,613) (15,716,987)

(Decrease) increase in cash and cash equivalents (7,549,451) 36,933,793 Cash and cash equivalents, beginning of year 77,026,947 40,093,154 Cash and cash equivalents, end of year 69,477,496 77,026,947

Supplementary cash flow information (Note 13)


Page 6

CITY OF ST. JOHN’S Notes to the Consolidated Financial Statements December 31, 2017

Page 7

1. SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements have been prepared in accordance with Canadian public sector accounting standards (“PSAS”) as recommended by the Public Sector Accounting Board (“PSAB”) of the Chartered Professional Accountants of Canada and reflect the following significant accounting policies:

Basis of consolidation

The consolidated financial statements include all the accounts of the City of St. John’s (the “City”), St. John’s Transportation Commission (the “Commission”) and St. John’s Sports & Entertainment Ltd., which are wholly-owned and operated by the City. Any inter-company transactions have been eliminated on consolidation. Any internal revenue and expenses for the City’s Urban Living Non-Profit Housing Fund, Regional Fire Department, Regional Waste Water System, Robin Hood Bay Regional Waste Management Facility, and Regional Water Supply System have also been eliminated on consolidation.

Revenue recognition

Revenues are recognized as earned and when collection is reasonably assured. Property tax billings are prepared by the City based on the assessed values of the respective property. The tax rates are approved annually by Council. Government grants and transfers are recognized as revenue in the financial period in which events give rise to the transfer occurring, providing the transfers are authorized, any eligibility criteria have been met including performance and return requirements, and reasonable estimates of the amount can be determined.

Cash and cash equivalents

Cash and cash equivalents include cash on hand, balances with banks (net of overdrafts) and short-term deposits with original maturities of three months or less. Bank borrowings are considered to be financing activities.

Inventories

Inventories of material and supplies are carried at the lower of cost and net realizable value.

Investments in rental housing projects

Investments in rental housing projects are recorded at cost.

Short-term investments

Short-term investments consist of City bonds and are recorded at cost plus accumulated interest.


Page 8

1. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Tangible capital assets

Tangible capital assets are recorded at cost which includes all amounts that are directly attributable to acquisition, construction, development or betterment of the asset. The cost, less residual value, of the tangible capital assets is amortized on a straight-line basis over their estimated useful lives as follows: Buildings 25-45 years Parking spaces - garage 50-75 years Vehicles Transit buses 7-12 years Vehicles 7-20 years Computer hardware and software 5 years Other Machinery and equipment 10-30 years Water and waste plants and networks Underground networks 75 years Sewage treatment plants and lift stations 45 years Water pumping stations and reservoirs 45 years Flood stations and other infrastructure 45 years Waste management facility and infrastructure 10-40 years Transportation Roads 15-35 years Bridges and structures 50 years One-half of the annual amortization is charged in the year of acquisition and in the year of disposal. Assets under construction are not amortized until the asset is available for productive use.

Contribution of tangible capital assets

Contributions of tangible capital assets are recorded at fair value at the date of receipt. The contribution is recorded as revenue.

Leases

Leases are classified as capital or operating leases. Leases which transfer substantially all the benefits and risks incidental to ownership of property are accounted for as capital leases. All other leases are accounted for as operating leases and the related lease payments are charged to expense.

Assessments

Assessments for water and sewer installations and street improvements are recorded on an accrual basis.


Page 9


Portfolio investments (Sinking funds)

Sinking funds established for the retirement of debentures are held and administered by a third party and accounted for in the City’s records on an accrual basis.

Reserve for snow and ice management

The City has established a snow and ice management reserve, to a maximum of $2,000,000, to accumulate funds to be used in years of severe winter conditions.

Reserve for Civic Centre financing

The City has established a Civic Centre financing reserve to accumulate its share of revenue received from the accommodation tax. The accommodation tax, which was legislated effective January 1, 1999, represents a four percent room levy on all fixed roof accommodations in the City of St. John’s. The funds in the reserve are used to reduce the debt related to the construction of the St. John’s Convention Centre and to pay for capital improvements for the facility.

Solid waste landfill closure and post-closure costs

The liability for closure and post-closure care of the City’s Robin Hood Bay landfill is recognized as the landfill site’s capacity is used. Closure costs are included in annual operating costs as each section of the landfill site is filled and placed out of service. The present value of the estimated annual post-closure costs is being accrued over the remaining life of the landfill site.

Severance & Accrued Sick Leave Benefits

The cost and obligation of severance and accrued non-vesting sick leave benefits earned by employees are actuarially determined using the projected accrued benefit method prorated on service and management’s best estimate of assumptions of future service, future benefit usage, salary changes, and retirement ages of those employees.

The discount rate used for determining the benefit obligation is the City’s cost of borrowing.

Past service costs resulting from changes to these benefits are recognized at the date of amendment.


Page 10


Accrued pension benefits

The cost and obligation of pension benefits, earned by employees and members of Council, are actuarially determined using the accrued benefit method prorated on service and management’s best estimate of assumptions of future investment returns for funded plans, salary changes and retirement ages of employees. For the purpose of calculating the expected return on plan assets, those assets are valued at fair value. The discount rate used for determining the benefit obligation is the expected rate of return on plan assets or the City’s cost of borrowing. Past service costs resulting from plan amendments are recognized at the date of amendment. The excess of the net actuarial gain (loss) is amortized over the average remaining service period of active employees which is 15 years for the employee plan and 2 years for the Mayor and Councillors’ plan.

Employee future benefits

The City provides post-retirement benefits in the form of extended life and health coverage to employees. The cost and obligations of these benefits earned by employees are actuarially determined using the accrued benefit method prorated on service and management’s best estimate of assumptions and future claim rates and costs. There is no requirement to fund these future obligations on a current basis.

Use of estimates

In preparing the City’s financial statements in conformity with PSAS, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenue and expenses during the year. Items subject to management estimate include allowance for doubtful accounts, useful life of tangible capital assets, impairment of assets, employee future benefits, and closure and post-closure costs related to Robin Hood Bay Landfill. Actual results could differ from these estimates.


Page 11

2. CASH AND CASH EQUIVALENTS

2017 2016$ $

Cash 42,967,797 57,857,784 Restricted cash deposits:

Accommodation tax 1,605,846 2,507,020 Robin Hood Bay post closure costs (Note 15) 10,789,883 9,447,459 Robin Hood Bay equipment replacement 4,224,534 3,699,855 Riverhead waste/water equipment replacement 1,700,037 1,274,965 Advance payments from developers 31,379 31,084 Federal gas tax fund 5,939,399 - Urban living non-profit housing:

Tenants' security deposits 111,173 112,453 Replacement reserve fund 2,107,448 2,096,327

26,509,699 19,169,163 69,477,496 77,026,947

The City has agreements with Canada Mortgage and Housing Corporation (“CMHC”) and Newfoundland and Labrador Housing Corporation (“NLHC”) which stipulate that cash be set aside for a replacement reserve fund. As at December 31, 2017 the City held cash of $2,107,448 (2016 -$2,096,327).

3. ACCOUNTS RECEIVABLE – CURRENT

2017 2016$ $

Taxes 26,835,047 24,681,134 Other governments 13,287,729 12,626,180 Other 11,401,868 10,615,761 Allowance for doubtful accounts (9,950,019) (9,488,354)

41,574,625 38,434,721


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4. ACCOUNTS RECEIVABLE - LONG-TERM

The Government of Canada, through CMHC, has agreed to pay grants to the City as a share of the cost of the Rennies River trunk sewer. The Province of Newfoundland and Labrador has agreed to pay grants to the City as a share of the costs of water and sewer, street paving and reconstruction, and recreational facilities. These grants are payable by annual instalments and have maturity dates to December, 2026.

2017 2016$ $

Government of Canada Rennies River trunk sewer - 31,638

Government of Newfoundland and Labrador Water and sewer projects 8,608,956 12,144,447

8,608,956 12,144,447

Other Civic Assessments 449,764 446,771

9,058,720 12,622,856

The Provincial government’s share of cost shared loans is recorded in the accounts of the City as debt charges recoverable. For the next four years the amounts are as follows: Provincial Total $ $

2018 3,349,218 3,349,218 2019 2,588,221 2,588,221 2020 1,734,096 1,311,556 2021 937,421 937,421


Page 13

5. PAYABLES AND ACCRUALS

2017 2016$ $

Trade 34,097,294 36,375,130 Deposits and prepayments 30,431,730 25,682,366 Accrued interest 3,897,377 2,569,305 Other governments 155,188 109,550

68,581,589 64,736,351

6. EMPLOYEE BENEFITS

2017 2016$ $

Employee future benefits (Note 10) 160,961,458 153,809,617 Accrued pension benefits (Note 9) 15,108,441 22,646,527 Severance & sick leave benefits (Note 11) 28,684,079 28,160,348

204,753,978 204,616,492

7. DEBENTURE DEBT

2017 2016

$ $

Debenture debt outstanding (Schedule 2) 444,500,000 444,500,000 Less: debt charges recoverable from the Province of

Newfoundland and Labrador (Schedule 2) 8,608,956 12,144,447 Less: sinking fund investments available (Schedule 2) 139,844,295 121,830,054

296,046,749 310,525,499


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7. DEBENTURE DEBT (Continued)

The annual requirements over the next five years and thereafter relating to scheduled sinking funds less debt charges recoverable from the Province of Newfoundland and Labrador (the “Province”) are as follows:

Sinking Fund Newfoundland Net Year Requirements and Labrador Amount

$ $ $

2018 11,112,500 (3,349,218) 7,763,282 2019 11,112,500 (2,588,221) 8,524,279 2020 11,112,500 (1,734,096) 9,378,404 2021 10,937,500 (937,420) 10,000,080 2022 10,356,250 - 10,356,250 Thereafter 87,237,500 - 87,237,500

8. LONG-TERM DEBT

2017 2016$ $

Long-term debt (Schedule 3) 206,513 64,243

Mortgages - Urban living non-profit housing (Schedule 4) 6,426,374 8,024,049St. John's Transportation Commission 8,348,000 9,365,000

14,980,887 17,453,292

Less: debt charges recoverable (Schedule 3) - (31,638) 14,980,887 17,421,654


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8. LONG-TERM DEBT (Continued)

Annual principal repayments over the next five years and thereafter relating to retirement of long-term debt are as follows:

Non-ProfitHousing Net

Year Mortgages Amount$ $

2018 1,480,179 1,480,179 2019 1,100,914 1,100,914 2020 794,298 794,298 2021 726,123 726,123 2022 601,763 601,763 Thereafter 1,723,097 1,723,097

Mortgages of the Urban Living Non-Profit Housing Fund are secured by specific rental properties situated in St. John’s and an assignment of rental income. The Commission has access to a $15,000,000 credit facility, guaranteed by the City, for capital expenditures. Under the terms of its lending arrangements, the Commission issues banker’s acceptances. At December 31, 2017 the outstanding banker’s acceptances bear interest at 2.42% and mature on January 29, 2018. The credit facility, which was renewed on May 28, 2018, bears interest at 2.65% and matures on June 28, 2018.

9. ACCRUED PENSION BENEFITS

2017 2016$ $

City of St. John's - Employees 9,249,300 17,512,400

City of St. John's - Mayor and Councillors 4,492,100 4,320,500

St. John's Transportation Commission 1,367,041 813,627 15,108,441 22,646,527


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9. ACCRUED PENSION BENEFITS (Continued)

Pension plans

The City maintains a defined benefit plan which provides pension benefits to its employees and the employees of St. John’s Sports & Entertainment Ltd. The City also maintains a supplementary retirement arrangement for the members of Council. Both plans provide benefits based on length of service and average earnings. An actuarial valuation of the plans was completed as at December 31, 2015 for Council and December 31, 2016 for employees and the supplementary plan. All plans were extrapolated to December 31, 2017.

EmployeesMayor and Councillors

Supplementary Plan 2017 2016

$ $ $ $

Accrued benefit obligation

Balance, beginning of year 367,100,800 4,505,400 1,681,700 373,287,900 335,109,900 Current service cost 15,232,600 113,300 29,600 15,375,500 13,791,200

Interest cost 21,066,000 189,600 64,400 21,320,000 19,265,300

Benefits paid (13,808,500) (203,300) (364,500) (14,376,300) (11,469,000)

Past services and Flexible Ancillary Benefit Account ("FABA") contributions (1,416,600) - - (1,416,600) 755,100

Actuarial loss (gain) (133,400) 362,500 768,300 997,400 15,835,400 Balance, end of year 388,040,900 4,967,500 2,179,500 395,187,900 373,287,900

Plan assets

Fair value, beginning of year 312,897,300 - - 312,897,300 285,629,300 Return on plan assets 32,468,400 - - 32,468,400 13,759,800

Benefits paid (13,808,500) - - (13,808,500) (11,284,400)

City contributions to plan 24,155,700 - - 24,155,700 17,119,300 Employee contributions to plan 6,645,500 - - 6,645,500 6,918,200

Past services and FABA contributions 63,400 - - 63,400 755,100 Fair value, end of year 362,421,800 - - 362,421,800 312,897,300 Funded status - deficit 25,619,100 4,967,500 2,179,500 32,766,100 60,390,600 Unamortized amounts (16,765,100) (475,400) (1,784,200) (19,024,700) (38,557,700)

Accrued benefit liability 8,854,000 4,492,100 395,300 13,741,400 21,832,900


Page 17


EmployeesMayor and Councillors

Supplementary Plan 2017 2016

$ $ $ $Significant assumptions used for 2017Discount rate 5.75% 3.50% 3.50%Expected long-term rate of return on plan assets 5.75% - - Rate of compensation increase 5.00% 5.00% 5.00%Average remaining service period of active

15 years 2 years 6 yearsSignificant assumptions used for 2016Discount rate 5.75% 4.25% 4.25%Expected long-term rate of return on plan assets 5.75% - - Rate of compensation increase 4.00% 4.00% 4.00%Average remaining service period of active

15 years 2 years 5 years

Net benefit expense for the year

Current service cost 15,232,600 113,300 29,600 15,375,500 13,791,200

Interest cost 21,066,000 189,600 64,400 21,320,000 19,265,300

Amortization of losses 4,632,100 72,000 359,900 5,064,000 3,751,300

Employee contributions (6,645,500) - - (6,645,500) (6,918,200)

Expected return on plan assets (18,482,000) - - (18,482,000) (16,812,000) Net benefit expense 15,803,200 374,900 453,900 16,632,000 13,077,600

employees

employees


Page 18


St. John’s Transportation Commission (“Commission”)

Defined benefit pension plans The Commission maintains two defined benefit plans which provide pension benefits to its union and non-union employees. The plans provide benefits based on length of service and average earnings.

An actuarial valuation of the employee plans was completed as at December 31, 2016 and extrapolated to December 31, 2017. The supplementary plan estimate was prepared using the same actuarial assumptions used for the Non-Union plan with the exception of the discount rate.

EmployeesSupplementary

Plan 2017 2016

$ $ $ $Accrued benefit obligation

Balance, beginning of year 49,614,179 97,687 49,711,866 48,526,390 Current service cost 1,856,492 4,170 1,860,662 1,917,777 Interest cost 2,677,802 4,240 2,682,042 2,503,817

Benefits paid (2,071,571) - (2,071,571) (2,016,931) Cost of plan amendments - - - 95,035 Actuarial (gain) loss 508,099 38,071 546,170 (1,314,222)

Balance, end of year 52,585,001 144,168 52,729,169 49,711,866

Plan assets

Fair value, beginning of year 46,010,699 - 46,010,699 43,134,988 Return on plan assets 4,268,842 - 4,268,842 3,097,544

Benefits paid (2,071,571) - (2,071,571) (2,016,931) Employer contributions to plan 1,145,838 - 1,145,838 1,006,032 Employee contributions to plan 780,186 - 780,186 789,066

Fair value, end of year 50,133,994 - 50,133,994 46,010,699

Funded status - deficit 2,451,007 144,168 2,595,175 3,701,167 Unamortized amounts (1,190,063) (38,071) (1,228,134) (2,887,540) Accrued benefit liability 1,260,944 106,097 1,367,041 813,627

Significant assumptions used

Discount rate 5.50% 3.50% 5.50%Expected long-term rate of return on plan assets 5.50% 4.25% 5.25%Rate of compensation increase 4.00% 4.00% 4.00%

Average remaining service period of active employees 16.0 years 10.0 years 15.8 years


Page 19


EmployeesSupplementary

Plan 2017 2016$ $

Net benefit expense for the year

Current service cost 1,856,492 4,170 1,860,662 1,917,777 Interest cost 2,677,802 4,240 2,682,042 2,503,817 Amortization of losses 424,073 - 424,073 598,591 Cost of plan amendments - - - 95,035 Employee contributions (780,186) - (780,186) (789,066) Expected return on plan assets (2,487,339) - (2,487,339) (2,224,693) Net benefit expense 1,690,842 8,410 1,699,252 2,101,461

During 2016 the Commission agreed on a new pension plan structure for both union and non-union groups. The agreement effectively closed the defined benefit plan to new entrants as of May 1, 2016. Employees in the defined benefit plan as of that date will continue to accrue benefits under the defined benefit plan. Employees hired on or after May 1, 2016 will be enrolled under a defined contribution pension plan. A Supplementary Executive Retirement Plan (SERP) was established on September 1, 2016 to provide retirement benefits to members of the Non-Union Plan in respect to earnings in excess of those on which benefits can be provided under the defined benefits provisions of the Non-Union Plan.


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10. EMPLOYEE FUTURE BENEFITS The City and the Commission provide post-retirement health and life benefits to their retired employees. An actuarial valuation of the plans was completed as at December 31, 2016 for the City and December 31, 2015 for the Commission and both extrapolated to December 31, 2017.

2017 2016City Commission Total Total

$ $ $ $Accrued benefit obligationBalance, beginning of year 156,691,900 13,472,054 170,163,954 174,656,994

Current period benefit cost 4,037,800 459,892 4,497,692 6,986,628 Interest cost 5,504,900 573,762 6,078,662 6,700,852 Benefit payments (3,386,000) (393,881) (3,779,881) (3,615,726) Past service amendment (1,159,100) - (1,159,100) - Actuarial (gain) loss (3,098,500) 1,797,598 (1,300,902) (14,564,794)

Balance, end of year 158,591,000 15,909,425 174,500,425 170,163,954

Funded status - deficit 158,591,000 15,909,425 174,500,425 170,163,954 Unamortized amounts (9,846,600) (3,692,367) (13,538,967) (16,354,337) Accrued benefit liability 148,744,400 12,217,058 160,961,458 153,809,617

Significant assumptions used for 2017Discount rate 3.50% 3.50%Average remaining service period of active employees 12 years 13.9 years

Significant assumptions used for 2016Discount rate 4.25% 4.25%Average remaining service period of active employees 12 years 13.9 yearsNet benefit expense for the yearCurrent period benefit cost 4,037,800 459,892 4,497,692 6,986,628 Cost of past service amendment (1,159,100) - (1,159,100) - Amortization of actuarial losses 1,272,100 242,368 1,514,468 4,910,874 Interest cost 5,504,900 573,762 6,078,662 6,700,852 Net benefit expense 9,655,700 1,276,022 10,931,722 18,598,354


Page 21

11. SEVERANCE AND SICK LEAVE BENEFITS The City provides severance for employees hired before December 31, 1979 as a payout of their accumulated sick leave upon retirement or termination. Severance for those hired after December 31, 1979 consists of one week’s salary for each year worked and is only paid upon retirement. These employees are also allowed to accumulate sick leave which is non-vesting. An actuarial valuation of the plan was completed as at December 31, 2016 and extrapolated to December 31, 2017.

2017 2016Severance Sick leave Total Total

$ $ $ $Accrued benefit obligationBalance, beginning of year 20,152,800 6,561,800 26,714,600 26,641,537

Current period benefit cost 1,234,000 763,600 1,997,600 1,954,049 Past service amendment (95,500) 689,600 594,100 - Interest cost 863,200 330,700 1,193,900 1,008,730 Benefit payments/contributions (2,789,400) (859,800) (3,649,200) (2,146,062) Actuarial loss (gain) 1,031,600 578,000 1,609,600 (743,637)

Balance, end of year 20,396,700 8,063,900 28,460,600 26,714,617

Funded status - deficit 20,396,700 8,063,900 28,460,600 26,714,617 Unamortized amounts (1,128,200) (586,000) (1,714,200) (360,062) Accrued benefit liability 19,268,500 7,477,900 26,746,400 26,354,555

Significant assumptions usedDiscount rate 3.50% 4.25%Average remaining service period of active employees 13 years 13 yearsNet benefit expense for the yearCurrent period benefit cost 1,234,000 763,600 1,997,600 1,954,049 Amortization of actuarial losses 107,100 52,900 160,000 110,099 Cost of past service amendment - 689,600 689,600 - Interest cost 863,200 330,700 1,193,900 1,008,730 Net benefit expense 2,204,300 1,836,800 4,041,100 3,072,878

St. John’s Transportation Commission As of June 1, 2015, retiring employees of the St. John’s Transportation Commission who have completed at least 10 years of service will be paid a severance equal to 1 day for each year of service. The liability at December 31, 2017 is $379,016 (2016 - $361,206).


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11. SEVERANCE AND SICK LEAVE BENEFITS (Continued)

Sick pay benefits accrue to employees of the St. John’s Transportation Commission at the rate of 12 days per year. Employees can accumulate up to 30 days of sick pay benefits to be paid to them upon retirement, termination, or illness. Any excess is paid out to the employee annually. The liability at December 31, 2017 is $1,051,423 (2016 - $980,155). St. John’s Sports and Entertainment St. John’s Sports and Entertainment provides severance for full time employees and part time box office employees consisting of one week’s salary for each year of service and is only paid upon retirement. Sick leave benefits accrue to employees at the rate of 12 hours per month up to a maximum of 2,080 hours. An actuarial valuation of the plan was completed as at December 31, 2015 and extrapolated to December 31, 2017.

2017 2016

Severance Sick leave Total Total$ $ $ $

Accrued benefit obligationBalance, beginning of year 360,419 99,850 460,269 468,796

Current period benefit cost 30,620 15,743 46,363 47,182 Interest cost 15,780 4,263 20,043 17,673 Benefit payments/contributions (8,883) (14,763) (23,646) (54,608) Actuarial loss (gain) 29,401 4,113 33,514 (18,774)

Balance, end of year 427,337 109,206 536,543 460,269

Funded status - deficit 427,337 109,206 536,543 460,269 Unamortized amounts (40,675) 11,372 (29,303) 4,163 Accrued benefit liability 386,662 120,578 507,240 464,432

Significant assumptions usedDiscount rate 3.50% 4.25%Average remaining service period of active employees 12 years 12 yearsNet benefit expense for the yearCurrent period benefit cost 30,620 15,743 46,363 47,182 Amortization of actuarial losses (gains) 1,704 (1,656) 48 1,613 Interest cost 15,780 4,263 20,043 17,673 Net benefit expense 48,104 18,350 66,454 66,468


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12. ACCUMULATED SURPLUS

2017 2016$ $

Accumulated surplus, beginning of year 843,256,729 825,181,523 Excess of (expenditures over revenues)

revenues over expenditures (1,893,893) 18,075,206 Accumulated surplus, end of year 841,362,836 843,256,729

Appropriated surplus Sinking fund - reserve for retirement of debentures 139,844,295 121,830,054 Reserve for Shoal Bay treatment plant 303,369 493,000 Reserve for landfill capital improvements 2,640,597 2,640,597 Urban living non-profit housing - replacement reserve 2,107,448 2,096,327 Reserve for snow and ice management 2,000,000 2,000,000 Reserve for salt savings 646,591 646,591 Reserve for Civic Centre financing 6,021,286 6,399,064 Reserve for capital 22,250,044 19,484,189 Reserve for employee benefits stabilization fund 1,997,091 1,997,091 Reserve for Robin Hood Bay equipment replacement 4,224,534 3,699,855 Reserve for Robin Hood Bay post-closure costs (Note 15) 10,789,882 9,447,459 Reserve for Riverhead Waste/water equipment replacement 1,700,037 1,274,965

194,525,174 172,009,192 Unappropriated surplus 646,837,662 671,247,537

841,362,836 843,256,729


Page 24

13. SUPPLEMENTARY CASH FLOW INFORMATION

2017 2016$ $

Changes in other balances:Accounts receivable (3,139,904) 58,011 Inventory of materials and supplies (176,378) (30,881) Prepaid expenditures (423,978) 692,708 Payables and accruals 3,845,238 (13,070,811)

104,978 (12,350,973)

Interest paid 24,068,317 20,266,586

14. CONTINGENCIES AND COMMITMENTS

Expropriation and other claims

The City has received notices of claims. No provision has been made for these claims either because the City is not expected to incur any significant liability, or because an estimate of loss, if any, is not determinable at this time. The Commission is contingently liable for claims below $50,000 for all incidents prior to December 1, 2010 and claims below $100,000 after that date which are not covered under its current insurance policy.

Lease commitments

Under the terms of long-term operating leases on equipment, the City is required to make annual lease payments for the next five years:

2017 2,351,516 2018 2,097,968 2019 1,845,300 2020 556,446 2021 504,072 Thereafter 470,622

15 Covenant Square

During 2016 the City accepted a donation of land and building which will be redeveloped as affordable housing for seniors. The donation stipulates that if at any time the property is not used for the aforementioned purpose $1.4 million in compensation will be payable to the donor.


Page 25

15. ROBIN HOOD BAY CLOSURE AND POST-CLOSURE COSTS

The liability for closure and post-closure care of the Robin Hood Bay landfill is recognized as the landfill site’s capacity is used. Closure costs include the final cover and landscaping while post-closure costs include cap maintenance, groundwater and leachate monitoring, continued gas management operations, inspections and annual reports. The liability recognized in the consolidated financial statement is subject to measurement uncertainty. The recognized amounts are based on the City’s best information and judgement. Amounts could materially change in the long-term.

Estimated closure and post-closure costs over the next 31 years $47,000,000 Discount rate 5% Discounted cost $10,356,895 Expected year capacity will be reached 2049 Percent utilized 22.5% Liability based on the percentage utilized $2,330,301 The tipping fees charged by the City to all users, including the City itself, other municipalities and commercial users include a provision for closure and post-closure costs which is contributed to an interest-bearing reserve to accumulate the funds that will be required at each closure and post-closure phase. The balance in the reserve at December 31, 2017 was $10,789,883 (2016 - $9,447,459).

16. SEGMENTED INFORMATION

The Consolidated Statement of Operations and Accumulated Surplus has been prepared in accordance with PSAB Handbook Section 2700 (PS 2700) Segment Disclosures. The segments selected enhance the ability to understand the City’s major revenue and expense activities (Schedule 7). For each reported segment, revenues and expenses represent amounts directly attributable to each segment. The segments have been selected based on there being a functional difference within the segments. Each segment has its own budget and financial reporting process. The segments include: City of St. John’s includes those operations primarily funded through property tax revenues.

Non-Profit Housing includes revenues and expenses related to the provision of housing to qualifying individuals. This segment includes Federal assistance through Canada Mortgage and Housing Corporation as well as through Newfoundland and Labrador Housing Corporation to reduce the operating costs for certain City projects.


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16. SEGMENTED INFORMATION (Continued)

St. John’s Transportation Commission includes those revenues and expenses related to provision of public transit services.

St. John’s Sports & Entertainment Ltd. includes those revenues and expenses related to the operation of Mile One Centre and the St. John’s Convention Centre.

17. EXPENDITURES BY OBJECT

2017 2016$ $

Personnel 146,762,184 150,250,945 Contractual services 53,321,462 47,124,798 Materials and supplies 23,754,745 23,900,892 Grants and subsidies 2,759,351 6,145,575 Financial charges 26,257,806 22,741,746 Amortization and allowances 47,732,846 47,723,100 Other 1,256,789 2,222,172

301,845,183 300,109,228

18. COMPARATIVE FIGURES

Comparative figures have been adjusted to conform to changes in the current year presentation.

CITY OF ST. JOHN'S Schedule 1

Consolidated Schedule of Tangible Capital AssetsYear Ended December 31, 2017

Urban LivingBuildings & Roads & Equipment, Fire Department Non-profitPermanent Capital Lease- Underground Vehicles & Buildings & Work in Housing 2017 2016

Land Improvements Parking Spaces Networks Moveable Plant Equipment Process Buildings Totals Totals$ $ $ $ $ $ $ $ $

Cost Balance, beginning of year 64,105,385 459,571,691 8,452,167 923,704,600 220,064,772 34,599,778 53,661,479 46,437,136 1,810,597,008 1,752,193,971 Add: Additions during the year 543,626 41,660,344 - 16,421,657 11,305,526 468,280 40,910,077 - 111,309,510 118,539,454 Less: Disposals during the year - (1,134,374) - (808,752) (2,681,119) (942) - - (4,625,187) (6,519,211) Adjustments - - - - (2,931) 2,931 (74,901,943) - (74,901,943) (53,617,206) Balance, end of year 64,649,011 500,097,661 8,452,167 939,317,505 228,686,248 35,070,047 19,669,613 46,437,136 1,842,379,388 1,810,597,008

Accumulated amortization Balance, beginning of year - 95,656,916 322,168 260,800,996 102,715,957 11,287,522 - 21,240,612 492,024,171 453,167,396 Add: Additions during the year - 11,656,005 146,723 20,272,125 12,444,784 1,174,803 - 1,277,156 46,971,596 44,032,757 Less: Disposals during the year - (1,062,313) - (467,868) (2,678,233) (942) - - (4,209,356) (5,175,982) Adjustments - - - - - - - - - - Balance, end of year - 106,250,608 468,891 280,605,253 112,482,508 12,461,383 - 22,517,768 534,786,411 492,024,171 Net book value of tangible capital assets 64,649,011 393,847,053 7,983,276 658,712,252 116,203,740 22,608,664 19,669,613 23,919,368 1,307,592,977 1,318,572,837

Page 27


Consolidated Schedule of Debenture DebtDecember 31, 2017

Sinking Sinking Fund Sinking Sinking FundDate of Interest Amount Amount Funds Requirement Funds RequirementMaturity Rate Issued Outstanding Available in 2018 Available in 2017

$ $ $ $ $ $

Dec. 2020 6.840% 7,000,000 7,000,000 6,361,559 175,000 5,951,294 175,000 Dec. 2021 7.380% 15,000,000 15,000,000 12,990,654 375,000 11,945,364 375,000 Apr. 2022 7.250% 16,500,000 16,500,000 12,403,175 412,500 11,420,709 412,500 Feb. 2023 6.680% 11,000,000 11,000,000 9,133,950 275,000 8,272,710 275,000 Feb. 2024 6.162% 25,000,000 25,000,000 16,477,895 625,000 14,875,394 625,000 June 2025 5.534% 18,000,000 18,000,000 10,881,660 450,000 9,768,513 450,000 Mar. 2026 5.300% 25,000,000 25,000,000 12,643,367 625,000 11,257,814 625,000 Dec. 2026 4.975% 35,000,000 35,000,000 22,725,437 875,000 20,714,717 875,000 Dec. 2027 5.400% 15,000,000 15,000,000 4,913,533 375,000 4,319,728 375,000 Nov. 2029 5.539% 27,000,000 27,000,000 6,655,089 675,000 5,680,455 675,000 Aug. 2031 4.622% 70,000,000 70,000,000 13,663,476 1,750,000 11,392,535 1,750,000 Dec. 2033 4.500% 60,000,000 60,000,000 6,433,655 1,500,000 4,730,420 1,500,000 Mar. 2036 4.215% 120,000,000 120,000,000 4,560,845 3,000,000 1,500,401 3,000,000

444,500,000 444,500,000 139,844,295 11,112,500 121,830,054 11,112,500

20162017

For the debenture debt that matures in 2021, 2023, 2024, 2025, and 2026, there are debt recoverable charges from the Province of Newfoundland and Labrador of $382,542, $1,545,288, $2,001,953 and $4,679,173 respectively, for a total of $8,608,956.

Page 28


Consolidated Schedule of Long-Term DebtDecember 31, 2017

2017 2016Principal Principal

Date of Interest Amount Amount Requirement Amount RequirementMaturity Rate Issued Outstanding in 2018 Outstanding in 2017

$ $ $ $ $Capital LeaseCisco Phone Equipment Nov. 2022 2.037% 170,560 170,560 32,793 - - Canlease Office Trailer Nov. 2021 12.975% 39,544 35,953 7,671 - -

Canada Mortgage and Housing Corporation

Rennies River trunk sewer Oct. 2017 9.750% 681,350 - - 63,277 63,277 Wedgewood Park water and sewer Jan. 2017 7.875% 12,410 - - 966 966

903,864 206,513 40,464 64,243 64,243

For the long-term debt that matured in 2017, there was a debt recoverable charge from the Government of Canada of $31,638.

Page 29


Consolidated Schedule of Mortgages - Urban Living Non-Profit Housing

December 31, 20172017 2016

Date of Interest Amount Amount AmountMaturity Rate Issued Outstanding Outstanding

$ $ $

Newfoundland & Labrador Housing Corporation

Hamlyn Road Aug. 1, 2022 2.040% 2,207,290 536,583 645,077 Infill 1987 Apr. 1, 2023 2.040% 2,070,285 568,809 668,754 Gear Street - Infill 1988 Sept. 1, 2025 2.040% 1,929,560 721,664 806,768 Brookfield Road Dec. 1, 2025 2.040% 2,203,600 841,161 937,007 Cochrane Street Nov. 1, 2027 1.710% 745,887 322,810 353,794 Infill 1990 Nov. 1, 2026 1.640% 1,628,008 644,891 712,645 Campbell Avenue Feb. 1, 2028 1.620% 968,952 440,949 480,556 Infill 1992 Dec. 1, 2028 2.040% 1,682,553 696,764 752,719

Canada Mortgage and Housing Corporation

Forest Road Jan. 1, 2018 1.620% 1,647,890 8,300 110,014 Cuckholds Cove Road Apr. 1, 2018 1.670% 804,200 16,260 64,518 Infill 1982 July 1, 2018 2.350% 651,550 23,577 63,274 Rawlins Cross Dec. 1, 2018 2.110% 1,249,485 75,661 149,790 Hamilton Avenue - Riverhead Towers Feb. 1, 2019 1.920% 3,736,230 251,031 461,761 Fahey's Row - Infill 1983 May 1, 2019 1.820% 962,163 84,481 142,835 Alexander Street - Hamilton Avenue June 1, 2019 1.820% 1,920,998 177,424 293,076 Carnell Street - Larkin Square Jan. 1, 2020 1.120% 1,910,065 236,077 352,220 Carter's Hill Jan. 1, 2020 1.390% 1,406,630 181,841 267,281 Infill 1985 Apr. 1, 2021 2.260% 880,530 171,338 221,579 Carter's Hill - Sebastian Court Aug. 1, 2021 1.800% 2,031,175 426,753 540,381

30,637,051 6,426,374 8,024,049

Current portion 1,480,179 1,594,349

Mortgages are secured by specific rental properties situated in St. John's and assignment of rental income.

Page 30


Consolidated Schedule of RevenuesYear ended December 31, 2017

2017 2016$ $

TaxationReal property and business 161,384,744 167,377,204 Water 29,536,232 31,675,399 Utility 6,169,771 7,276,962 Accommodation 3,400,725 3,821,807

200,491,472 210,151,372

Grants in lieu of taxesGovernment of Canada 4,978,900 5,089,203 Government of Canada agencies 970,565 971,178 Water tax grant 2,852,760 3,097,459

8,802,225 9,157,840

Grants and transfersGovernment of Canada Capital grant 1,513,322 257,852

St. John's Transportation Commission 187,708 110,869 Gas tax funding - 4,368,046

Other federal grants 2,606,347 961,916 Government of Newfoundland and Labrador

Gas tax funding 727,259 727,259 Municipal capital grant 2,383,599 9,931,434 Capital Grant - Non-Profit Housing 66,457 341,829 Recovery of debt charges 631,858 843,887 Rental housing projects 1,120,952 1,208,873 Other provincial grants - 160,760

City of Mount Pearl and Town of ParadiseCapital contribution 42,810 -

City of Mount Pearl public transit contribution 1,265,334 1,110,603 Capital contribution from Developers 65,349 5,442,070 Other grants 571,942 587,913

11,182,937 26,053,311

Sales of goods and servicesEnvironmental health services

Water sales - commercial and shipping 7,077,039 8,027,053 Tipping fees 10,869,898 11,449,451 Recycling materials 1,143,137 750,461 Regional Fire recovery 10,901,365 8,514,058

Page 31

CITY OF ST. JOHN'S Schedule 5 (continued)

Consolidated Schedule of RevenuesYear ended December 31, 2017

2017 2016$ $

Sales of goods and services (continued)Environmental health services (continued)

Regional Water recovery 6,735,254 6,956,923 Regional Waste Water recovery 6,774 1,461,401 Other 2,599,528 1,153,522

General government services 1,016,373 1,048,776 Transportation services

Parking meters 1,188,207 1,727,517 Parking permits 319,502 316,399 Other 66,700 45,080

Third party charges 549,711 326,933 Sale of land 201,323 14,716 Recreation, parks and tourism 1,836,694 1,314,294 St. John's Sports & Entertainment Ltd. 7,201,342 6,322,842 Railway Coastal Museum 97,116 108,653 Other general services 1,946,010 536,071

53,755,973 50,074,150

Other revenue from own sourcesInterest on tax arrears 2,659,337 2,254,534 Interest earned on portfolio investments 6,066,870 5,319,041 Fines 2,063,467 2,006,967 Construction and other permits 3,863,563 2,964,771 Interest earned 957,791 649,551 Business and amusement licenses 163,992 168,028 Rents, concessions and franchises 87,902 98,892 Apartment rentals 3,122,012 3,153,885 St. John's Transportation Commission

Passenger fares 5,893,539 5,315,978 Charters 80,840 61,814 Transit advertising 202,622 262,079 Sundry 181,770 153,766

Civic assessments 293,799 327,802 Sub - division assessments 81,179 10,653

25,718,683 22,747,761 Total revenue 299,951,290 318,184,434

Page 32


Consolidated Schedule of ExpendituresYear ended December 31, 2017

2017 2016$ $

General government servicesLegislative 877,621 887,903 General government 27,164,668 23,146,527 Engineering services 5,793,977 5,240,992 Pensions and employee benefits 20,060,906 17,255,042 Employee future benefits (3,547,882) 7,193,241 Other general government 994,693 867,191

51,343,983 54,590,896

Fiscal servicesInterest on debenture debt 23,748,973 19,889,650 Long-term debt interest 6,396 10,747 Non-Profit Housing mortgage interest 125,602 160,104 St. John's Transportation Commission interest 187,310 197,477 Interest on temporary bank loans 36 8,609 Other debt charges 60,627 404,160

24,128,944 20,670,747

Transportation servicesRoad transport

Administration 2,297,312 2,638,858 Fleet services 1,566,038 863,329 Snow clearing 15,223,919 15,122,780 Streets, roads and sidewalks 8,201,487 7,834,716 Maintenance depot 1,222,012 1,779,690 Traffic services 3,720,590 3,321,391 Street cleaning 237,981 233,635

Street lighting 4,196,306 4,250,368 St. John's Transportation Commission 22,487,723 20,753,070 St. John's Para-Transit System - 3,051,784 Parking meters 452,388 204,043

59,605,756 60,053,664

Page 33


Consolidated Schedule of ExpendituresYear ended December 31, 2017

2017 2016$ $

Protective servicesFire protection 29,969,553 27,924,245 Protective inspections 3,604,841 4,024,346 Traffic enforcement 2,183,908 2,653,214 Animal and pest control 1,275,033 1,283,125

37,033,335 35,884,930

Environmental health servicesWater supply and distribution 16,123,744 15,524,229 Regional Water system 6,223,254 6,538,291 Regional Waste Water system 3,846,480 4,046,843 Regional Robin Hood Bay landfill 12,015,879 13,314,379 Garbage, waste collection and disposal 4,408,024 4,518,468

42,617,381 43,942,210

Recreation and cultural servicesParks and open spaces 9,268,417 9,471,578 Recreation 8,222,925 7,422,070 St. John's Sports & Entertainment Ltd. 9,041,059 8,280,466 Railway Coastal Museum 472,087 468,825 Destination St. John's 1,620,406 1,763,888 Other recreation and cultural services 2,474,096 2,120,135

31,098,990 29,526,962

Environmental development servicesEnvironmental planning and zoning 1,669,458 1,533,005 Housing and real estate 3,758,449 3,937,814 Other environmental development services 2,492,169 2,245,901

7,920,076 7,716,720

Amortization and allowancesAllowance for uncollectible accounts 672,473 2,413,771 Allowance for obsolete inventory 88,776 21,054 Loss on disposal fixed assets 363,873 1,255,517 Amortization 46,971,596 44,032,757

48,096,718 47,723,099 Total expenditures 301,845,183 300,109,228

Page 34


Consolidated Schedule of Segmented InformationYear ended December 31, 2017

CityNon Profit Housing

St. John's Transportation Commission

St. John's Sports & Entertainment Ltd.

Non Profit Housing

eliminations

St. John's Transportation Commission eliminations

St. John's Sports & Entertainment Ltd.

eliminationsConsolidated

2017 2016

$ $

Revenue (Schedule 5)

Taxation 201,141,282 - - - (649,810) 200,491,472 210,151,372 Grants in lieu of taxes 8,802,225 - - - 8,802,225 9,157,840 Grants and transfers 8,617,334 1,176,236 18,572,405 2,865,104 (304,510) (17,119,363) (2,624,269) 11,182,937 26,053,311 Sales of goods and services 47,121,571 - - 7,201,342 (566,940) 53,755,973 50,074,150 Other revenue from own sources 16,074,308 3,281,668 6,377,220 - (14,513) 25,718,683 22,747,761

281,756,720 4,457,904 24,949,625 10,066,446 (1,535,773) (17,119,363) (2,624,269) 299,951,290 318,184,434

Expenditure (Schedule 6)

General government services 52,873,380 52,873,380 57,912,287 Fiscal services 23,816,032 430,112 187,310 (304,510) 24,128,944 20,670,747 Transportation services 51,483,502 23,712,220 (17,119,363) 58,076,359 56,732,273 Protective services 37,033,335 37,033,335 35,884,930 Environmental health services 42,617,381 42,617,381 43,942,210 Recreation and cultural services 24,441,365 9,281,894 (2,624,269) 31,098,990 29,526,962 Environmental development services 6,091,755 3,059,584 (1,231,263) 7,920,076 7,716,720 Amortization and allowances 39,921,730 1,277,157 3,390,573 3,507,258 48,096,718 47,723,099

278,278,480 4,766,853 27,290,103 12,789,152 (1,535,773) (17,119,363) (2,624,269) 301,845,183 300,109,228

Excess of revenues over expenditures 3,478,240 (308,949) (2,340,478) (2,722,706) - - - (1,893,893) 18,075,206 (expenditures over revenues)

Accumulated surplus, beginning of year 843,256,729 825,181,523 Accumulated surplus, end of year (Note 12) 841,362,836 843,256,729

Page 35


Consolidated PSAB Budget Year ended December 31, 2017

City

St. John's Transportation

Commission

St. John's Sports &

Entertainment Ltd.

Adopted Budget

Consolidating Entries and

PSAB Adjustments

(Page 37)Consolidated

Budget

$ $ $ $ $ $

Revenues Taxation 220,881,954 220,881,954 (21,530,299) 199,351,655 Grants in lieu of taxes 8,450,000 8,450,000 - 8,450,000 Grants and transfers 26,920,610 15,894,866 1,989,899 44,805,375 (34,993,560) 9,811,815 Sales of goods and services 23,467,676 7,251,176 30,718,852 22,209,315 52,928,167 Other revenue from own sources 14,681,068 7,315,350 21,996,418 4,749,425 26,745,843

294,401,308 23,210,216 9,241,075 326,852,599 (29,565,119) 297,287,480

ExpendituresGeneral government services 42,678,765 42,678,765 4,101,103 46,779,868 Fiscal services 34,595,901 231,020 34,826,921 (12,140,444) 22,686,477 Transportation services 51,828,915 22,979,196 74,808,111 (17,362,188) 57,445,923 Protective services 30,548,475 30,548,475 4,686,422 35,234,897 Environmental health services 72,673,523 72,673,523 (24,558,650) 48,114,873 Recreation and cultural services 23,137,992 9,241,075 32,379,067 (619,941) 31,759,126 Environmental development services 11,681,199 11,681,199 (4,991,947) 6,689,252 Amortization and allowances 27,256,538 27,256,538 21,428,931 48,685,469

294,401,308 23,210,216 9,241,075 326,852,599 (29,456,714) 297,395,885

Excess of revenues over expenditures - - - - (108,405) (108,405)

Council approved the City's 2017 budget on December 12, 2016

Page 36


Consolidating Entries and PSAB AdjustmentsYear ended December 31, 2017

$Revenues

1. Eliminate transfers from reserves (1,293,445) 2. Eliminate grants to SJSE (2,490,000) 3. Eliminate grants to SJTC (16,692,103) 4. Eliminate subsidy to NPH (24,000) 5. Eliminate property taxes paid by City entities (648,345) 6. Eliminate water revenue paid by City entities (4,287,258) 7. Eliminate tipping fees paid by City entities (2,249,296) 8. Eliminate general government charges (2,651,624) 9. Eliminate debt charges recoverable (20,412,126) 10. Record provincial capital grants 2,450,055 11. Record federal capital grants 1,513,322 12. Record other capital grants 571,942 13. Record capital contribution from developers 65,350 14. Record recovery of fire protection services 10,314,216 15. Record interest earned on sinking funds 6,066,870 16. Record gain on sale of capital assets 201,323

(29,565,119)

Expenses1. Eliminate transfers from reserves (3,833,183) 2. Eliminate grants to SJSE (2,490,000) 3. Eliminate grants to SJTC (16,692,103) 4. Eliminate subsidy to NPH (24,000) 5. Eliminate property taxes paid by City entities (648,345) 6. Eliminate water revenue paid by City entities (4,287,258) 7. Eliminate tipping fees paid by City entities (2,249,296) 8. Eliminate general government charges (2,651,624) 9. Eliminate debt charges recoverable (18,366,334) 10. Eliminate capital expenditures (21,201,729) 11. Eliminate sinking fund payments (11,926,611) 12. Eliminate principal payments on LTD (1,668,314) 13. Eliminate recovery of fire protection services 10,314,216 14. Record amortization of capital assets 46,971,596 15. Record employee post retirement benefits (703,729)

(29,456,714)

Excess of revenues over expenditures (108,405)

Page 37

agenda audit standing committee - st. john's · 1 minutes audit standing committee meeting...

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