FINANCIAL STATEMENTS 31 DECEMBER 2016
Financial Statements Contents Independent Auditors' Report Statement of Financial Position 4 Statement of Changes in Net Assets Statement of Operations 5 6 Statement of Cash Flows 7 8-19
INDEPENDENT AUDITORS' REPORT To the Members of, British Columbia Conference Property Development Council of The United Church of Canada Report on the Financial Statements We have audited the accompanying financial statements of British Columbia Conference Property Development Council of The United Church of Canada, which comprise the statement of financial position as at 31 December 2016 and the statements of operations, changes in net assets 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 financial statements in accordance with Canadian accounting standards for not-for-profit organizations, and for such internal control as management determines is necessary to enable the preparation of financial statements that are fi'ee from material misstatement, whether due to fraud or error. Auditors' Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free fi-om 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 auditors' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fi-aud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
INDEPENDENT AUDITORS' REPORT - continued Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of British Columbia Conference Property Development Council of The United Church of Canada as at 31 December 2016, and the results of its operations and its cash flows for the year then ended in accordance with Canadian accounting standards for not-for-profit organizations. Report on Other Legal and Regulatory Requirements As required by the Society Act of British Columbia, we report that, in our opinion, the accounting principles in Canadian accounting standards for not-for-profit organizations have been applied, on a basis consistent with that of the preceding year. CHARTERED PROFESSIONAL ACCOUNTANTS Vancouver, Canada 25 May 2017
Statement of Financial Position 31 December 2016 2016 2015 Assets Current Accounts receivable Due from British Columbia Conference (Note 4) Land and buildings held for use in operations (Note 5) Land and buildings held for redevelopment (Note 6) Land and buildings under redevelopment (Note 7) 82.994 $ 1,220,462 13,088,209 5 15.182.125 1,463,071 13,126,821 5 $ 29.573.795 $ 14.589.897 Liabilities Current Accounts payable and accrued liabilities Due to B.C. Housing Management Commission (Note 8) Deferred capital contributions (Note 9) 174,162 $ 18,368 1,070,187 18,368 735.000 770,000 1.805.187 788.368 Net Assets Internally restricted for land and buildings Unrestricted 26,566,514 12,356,826 1.202.094 1,444,703 27.768.608 13.801,529 $ 29.573.795 $ 14.589.897 ON BEHALF OF THE COUNCIL: Executive Secretary Financial Manager The accompanying notes are an integral part of these financial statements. 4
Statement of Changes in Net Assets Internally Restricted Land and Buildings Unrestricted 2016 2015 Balance - beginning of year $ 12,356,826 $ 1,444,703 $ 13,801,529 $ 16,792,458 Deficiency of revenues over expenses for the year (246,221) (246,221) (2,990,929) Amortization of deferred capital contributions (Note 9) 35,000 (35,000) Amortization of buildings (38,612) 38,612 Transfer of land and buildings at nominal value for redevelopment - St. Andrew's United Church Port Moody and St. Andrew's United Church North Vancovuer (Note 6) Transfer of land and building at fair value for redevelopment - Como Lake United Church (Note 7) 3,681,000 3,681,000 Fair value adjustment to land and buildings - Brighouse United Church and Brechin United Church (Note 7) 10,532,298 10,532^98 Transfer - capitalized costs for land and buildings under redevelopment (Note 7) 968,825 (968,825) Transfer - fiinding for redevelopment (968.825) 968.825 Balance - end of year S 26.566.514 $ 1.202.094 $ 27.768.608 $ 13.801.529 The accompanying notes are an integral part of these financial statements. 5
THE BRITISH COLUMBIA CONFERENCE IMF Statement of Operations 2016 2015 Revenue Property resource team Amortization of deferred capital contributions (Note 9) Net realized gain on sale of properties held for resale 93,619 35,000 34,031 35,000 128,619 739,776 Expenses Property resource team (Note 11) Repairs and maintenance - First United Professional fees Wages and benefits Office and other Property sales (recoveiy) Grants made (recovery) Amortization 202,935 182,023 63,735 85,655 39,740 10,134 31,000 31,000 124 37 - (3,352) (1,306) 3,386,596 38.612 38.612 374,840 3,730,705 (Deficiency) of revenues over expenses for the year $ (246,2211 :S (2.990,929) The accompanying notes are an integral part of these financial statements. 6
CANADA Statement of Cash Flows 2016 2015 Operating activities Deficiency of revenues over expenses for the year Items not involving cash: Amortization of deferred capital contributions Net realized gain on sale of properties held for resale Amortization Changes in non-cash working capital balances Accounts receivable Due from British Columbia Conference Accounts payable Investing activities Capitalized costs for land and buildings held for redevelopment Net proceeds from sale of properties held for resale (246,221) $ (2,990,929) (35,000) (35,000) (670,745) 38.612 (242,609) (3,658,062) (82,994) 242,609 166,495 155.794 72.800 (3.491.567) (968,825) 3.491.567 (968.825) 3.491.567 Financing activities Increase in BCHMC loan 896.025 Net change in cash during the year Cash - beginning of year Cash - end of year The accompanying notes are an integral part of these financial statements. 7
BffiP'O' BRITISH COLUMBIA CONFERENCE Purpose of the Organization The mandate of British Columbia Conference Property Development Council of The United Church of Canada (the "Council") is to carry on church extension work in such areas within British Columbia as may be defined by the British Columbia Conference, The United Church of Canada (the "Conference") and in accordance with the regulations made or to be made by the Conference. The mandates of the Council are to locate, erect, and purchase, hold, sell or develop land and buildings to carry on the work of The United Church and to receive contributions and grants and to apply these as the Council sees fit. The financial objective of the Council is to invest and use resources as effectively as possible to advance the Council mission recognizing that assessment of effectiveness may be based on church values that differ from typical profit maximization. The Council is a registered Canadian charity, is incorporated under the Society Act of British Columbia and is not subject to income taxation. The Council is controlled by the Conference. 2. Summary of Significant Accounting Policies These financial statements are prepared in accordance with Canadian accounting standards for not-forprofit organizations. The significant policies are detailed as follows: (a) Financial Instruments i. Measurement of Financial Instruments The Council initially measures its financial assets and liabilities at fair value and subsequently measures all of its financial assets and financial liabilities at amortized cost. Changes in fair value are recognized in the statement of operations. Financial assets measured at amortized cost include accounts receivable and amounts due fi-om the British Columbia Conference. Financial liabilities measured at amortized cost include accounts payable and accrued liabilities and BC Housing loan. Interest related to loans on property under development or construction is capitalized.
2. Summary of Significant Accounting Policies - continued (a) Financial Instruments - continued ii. Impairment Financial assets measured at cost are tested for impairment when there are indicators of impairment. The amount of the write-down is recognized in the statement of operations. The previously recognized impairment loss may be reversed to the extent of the improvement, directly or by adjusting the allowance account, provided it is no greater than the amount that would have been reported at the date of the reversal had the impairment not been recognized previously. The amount of the reversal is recognized in the statement of operations. iii. Transaction Costs The Council recognizes its transaction costs in the statement of operations in the period incurred. However, financial instruments that will not be subsequently measured at fair value are adjusted by the transaction costs that are directly attributable to their origination, issuance or assumption. (b) Net Assets The Council has categorized its net assets for the following purposes: Net assets invested in land and buildings includes the cost of land and buildings of the Council net of deferred capital contributions. Additions are funded through financing activities, loans, amounts donated to the Council, or amounts transferred from the unrestricted fiind as approved by the Board of Trustees. Disposals must be approved by the Board of Trustees. Unrestricted net assets are established for the general operations of the Council. All operations transactions are recorded in the accounts of this fiind. (c) Land and Buildings Land and buildings are recorded at cost or the fair value on the date of donation or the date of change in use. Buildings used in operations are amortized on a straight-line basis at 4% per annum. Buildings held for resale or redevelopment are not amortized. Land is not amortized.
Summary of Significant Accounting Policies - continued (d) Revenue Recognition The Council follows the deferral method of accounting for contributions. Contributions of non-depreciable assets are recognized as direct increases in net assets. Contributions of depreciable assets are deferred and recognized as revenue on the same basis as the amortization expense related to the contributed capital assets. Realized gains and losses on the sale of land and buildings is recognized at the closing date of the sale when collectability is reasonably assured. Other income is recognized as earned when collectability is reasonably assured. (e) Volunteer Services The Council receives the benefit of the contribution of significant time by many volunteers. Because of the difficulty in determining the fair value of the time, volunteer services are not recognized in these financial statements. (f) Use of Estimates The preparation of the financial statements in conformity with Canadian accounting standards for not-for-profit organizations requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items requiring the use of management estimates include the determination of useful lives of buildings for purposes of amortization, recognition of accrued liabilities and the transfer value of land and buildings. Actual results may differ from those estimates. (g) Related Party Transactions Related party transactions are recorded at the exchange value, which represents the amount of consideration established and agreed to by the related parties. 10
3. Financial Instruments The Council is exposed to various risks through its financial instruments. The following analysis provides a measure of the Council's risk exposure and concentrations at the statement of financial position date, 31 December 2016. (a) Liquidity Risk Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. The Council is exposed to this risk mainly in respect of its accounts payable and accrued liabilities and loan payable to BC Housing Management Commission. These liabilities are of a short-term nature and management does not believe they represent a significant risk to the Council. (b) Credit Risk Credit risk is the risk that one party to a fmancial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Council's main credit risk relates to amounts due from the Conference. The receivable from the Conference can be received on request. The Council is not subject to significant credit risk. (c) Market Risk Market risk is the risk that the fair value or future cash flows of a fmancial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: currency risk, interest rate risk and other price risk. The Council is exposed to interest rate risk. (d) Interest Rate Risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Council is exposed to interest rate risk on its fixed and floating interest rate financial instruments. Fixed-rate instruments subject the Council to a fair value risk while the floating-rate instruments subject it to a cash flow risk. The BC Housing loan has a variable interest rate. Changes in the bank's prime lending rate can cause fluctuations in interest payments and cash flows. Management does not believe the interest rate risk represents a significant risk to Council. II
5)[{iapif BRITISH COLUMBIA CONFERENCE 4. Due from British Columbia Coufereuce The Conference controls the Council. The Conference has advanced funds for the purchase of properties and to cover operating costs. The Council incurs certain costs which the Conference pays for on behalf of the Council. The proceeds received on the sale of the land and buildings are held by the Conference as the Council does not have a bank account. The receivable from the Conference can be received on request. These transactions are recorded at the exchange amounts established and agreed to between the entities. These advances have no specific terms of repayment and bear no interest. Laud aud Buildiugs Held for use iu Operatious The Council holds various properties on behalf of the Conference. These properties are made available to various United Church ministries in British Columbia for use in their religious programs. If properties are not required for the work of the church community, they may be developed or sold. Effective 1 January 2008, donated properties for use in operations are recorded at fair value. Prior to 1 January 2008, donated properties were recorded at cost, if known, or at the value of advances provided for their acquisition, or at $1 if the value was not readily determinable. The Council's interest in the properties located in British Columbia may be shared with the congregation, the presbytery or other parties as determined by the Council and any interested party. 12
291 BRITISH COLUMBIA CONFERENCE Land and Buildings Held for use in Operations - continued Properties held for use in operations Camp Fircom, Squamish - Land Building 2017 Assessment Value Original Cost Accumulated Amortization Net Book Value 2016 2015 $ $ $ $ $ 7,010,500 492,700 5,776,001 475,000 76,000 5,776,001 399,000 5,776,001 418,000 Longhouse United Church at 2595 Franklin Street, Vancouver - Land Building 2,517,000 101,000 1,216,000 90,300 25,284 1,216,000 65,016 1,216,000 68,628 First United Church at 320 Hastings Street, Vancouver - Land Building 5,482,800 424,000 2,789,900 400,000 64,000 2,789,900 336,000 2,789,900 352,000 Rock Lake Camp, Kootenay - Land and building 1,857,800 1 _ 1 1 _ Koolaree Camp, Nelson - Land and building 1,488,100 291 291 Camp Pringle, Shawnigan Lake - Land and buildings 2,203,300 2,506,000 2,506,000 2,506,000 21.577.200 13.253,493 165,284 13,088,209 13.126,821 13
Land and Buildings Held for Redevelopment The legal title for the land and buildings of certain congregations (the "development properties") were transferred to the Council from the congregations holding these assets. In these transactions the Council will temporarily take title to these properties until an agreement to develop the properties is entered into between the parties involved at which time the title to the development properties will be temporarily transferred to a property developer for the duration of the project. When the project is completed or dissolved the developer will transfer the title of the development properties to the Council, and the Council will in turn transfer title back to the congregation. The objectives of each project are to replace aging church properties with new church space, generate cash proceeds from the redevelopment projects, and minimize the financial and operational risks to the congregations and the Council. To facilitate and streamline the property redevelopment process, the Council is acting as an agent on behalf of the following: 2016 2015 West Bumaby United Church (Note 6(a)) Oakridge United Church (Note 6(a)) White Rock United Church (Note 6(a)) St. Andrew's United Church Port Moody (Note 6(b)) St. Andrew's United Church North Vancouver (Note 6(c)) Brechin United Church (Note 7) Brighouse United Church (Note 7) $ 1 $ 1 1 I 1 1 1 1 I I A. J $_ Each development property received by the Council is recorded at $ 1. As of 31 December 2016, the legal title of these five development properties is still retained by the Council, and is being recorded at a total cost of $5. (a) West Bumaby United Church, Oakridge United Church and White Rock First United Church In 2014, the legal title for the land and buildings of the Oakridge United Church, West Bumaby United Church, and White Rock First United Church were transferred to the Council from the congregations holding these assets. In these transactions the Council will temporarily take title to these properties until an agreement to develop the properties is entered into between the parties involved at which time the title to the development properties will be temporarily transferred to a property developer for the duration of the project. When the project is completed or dissolved the developer will transfer the title of the development properties to the Council, and the Council will in tum transfer title back to the congregation. 14
Land and Buildings Held for Redevelopment - continued (a) West Bumaby United Church, Oakridge United Church and White Rock First United Church - continued In 2014 and 2015, the Council entered into three separate development agreements with developers on behalf of Oakridge United Church, West Bumaby United Church and White Rock First United Church. As certain milestones are met, the Council will earn a fixed service fee and will receive a participation payment equal to 2% of the aggregate transaction value which is defined as cash proceeds received and the in-kind value of the new church space. The maximum amount for participation payment for the redevelopment at the White Rock First United Church is $50,000. The service fee and participation payment become collectible by the Council when the cash proceeds are received from the developer and the legal title of the new church is transferred by the Council to the congregation. If cash proceeds are not paid from the developer to the Council then the service fee and participation payments will not be paid to the Council. (b) St. Andrew's United Church Port Moody In 2016, the legal title for the land and building of the St. Andrew's United Church (Port Moody) was transferred to the Council from the congregation holding these assets. In the same year, the Council entered into a Joint Venture agreement with another non-profit society to jointly develop a mixed-use building on the congregational property. The objectives of this project are to obtain new church space and a certain number of residential units for the congregation. As a Joint Venturer, the Council will temporarily hold title of this property and take on development or construction loans for the duration of the project. The loan in the Joint Venture is secured by the congregational property. As of 31 December 2016, the Joint Venture had a loan balance of $100,663 that is payable on demand with interest of 2% per annum. The 2017 property assessed value of the congregational property is $1,467,499. When the project is completed the Joint Venture will transfer the title of the hew church space to the Council, and the Council will in turn transfer title back along with its Joint Venture interest in residential units to the congregation. As certain milestones are met, the Council will earn a fixed service fee and will receive a pre determined amount of expense reimbursement. The service fee and cost recovery pajonent becomes collectible by the Council when the construction financing for the project is approved. If the construction financing is not achieved then the PDC service fee and cost recovery payments will not be paid to the Council. The management of the Council has assessed the arrangement between the Council and the congregation and concluded that, based on the terms and structure of the contractual arrangements, the Council is acting in an agency arrangement with the congregation in this transaction. As a result, the Council's proportionate share of the assets, liabilities, revenues and expenses in the Joint Venture are not recognized in these financial statements. 15
Land and Buildings Held for Redevelopment - continued (c) St. Andrew's United Church North Vancouver In 2016, the legal title for the land and building of the St. Andrew's United Church North Vancouver was transferred to the Council from the congregation holding these assets. In this transaction the Council will temporarily take title to this heritage property until an agreement to revitalize the property is entered into between the parties involved at which time the title to the development property will be temporarily transferred to a property developer for the duration of the project. As of 31 December 2016, the Council has not entered into an agreement with a developer. If the development property eventually proceeds to the construction stage, the Council will recover certain costs as part of the total project costs. The specific terms of cost-recovery will be negotiated between the Council and the congregation once the development agreement with a developer is in place. If the project does not proceed beyond the planning phase, the Council will not receive any reimbursement. 7. Land and Buildings Under Redevelopment In 2014, the legal title for the land and buildings of the Brighouse United Church and Brechin United Church were transferred to the Council from the congregations holding these assets. At the time, it is the Council' s intention to temporarily take title to these properties until an agreement to develop the properties is entered into between the parties involved at which time the title to the development properties will be temporarily transferred to a property developer for the duration of the project. As such it is determined that the Council was acting as an agent on behalf of these two congregations and their properties received by the Council were originally recorded at $1 each. In 2016, the legal title for the land and building of the Como Lake United Church was transferred to the Council from the congregation holding these assets. During the year, the Council engaged a property management company to redevelop the three congregational properties at Brighouse United Church, Brechin United Church and Como Lake United Church (the "3-Point Project" properties). The objective of the 3-Point Project is to develop mixed-use residential buildings which will be comprised of new church space and affordable rental housing. When the project is completed the legal title of the new church space will be transferred to the respective congregations from the Council; the Council will own and operate the residential housing; and the Council will pay cash payments to each participating congregation on an annual basis when the rental housings are in operations. The 3-Point Project properties will be redeveloped over the next several years. The Council will be responsible for all expenses, including any mortgages or loans (Note 8), in connection with residential housing and will be entitled to all of the income generated from the residential housing after fulfilling the commitment of annual cash payment. 16
3,681,000 10,052,499 479,799 221,984 BRITISH COLUMBIA CONFERENCE Land and Buildings Under Redevelopment - continued The Council is acting as a principal in these transactions as it is substantially exposed to all of the risks and benefits of ownership of the development properties. Each 3-Point Project property received by the Council is recorded at fair value either on the date of donation or the date of change in use. All costs associated with the redevelopment will be capitalized. These costs could include amounts paid to contractors for construction, borrowing costs, planning and design costs, costs of site preparation, professional fees for legal and accounting services, construction overheads and other related costs. In management's view, completion occurs upon completion of construction and receipt of all necessary occupancy and other material permits. Amortization commences upon completion of redevelopment. It is management's intention to transfer the title of the 3-Point Project properties to a housing society in the subsequent year(s), as a result the contributed land and buildings were recorded as direct increase in net assets in the statement of changes in net assets and statement of financial position and did not impact the statement of operations. Fair value Historical Fair value on date of adjustment on date of Capitalized development 31 December Cost donation change in use expenses 2016 Properties under redevelopment $ $ $ $ $ Brighouse United Church 1 - Brechin United Church 1 - Como Lake United Church - - 467,422 10,519,922 279,419 759,219 3,902,984 2 3,681,000 10,532,298 968,825 15,182,125 During 2016, interest of $40,546, and included above, was capitalized to properties under redevelopment (2015 - SNil). 17
@. BRITISH COLUMBIA CONFERENCE 8. Due to British Columbia Housing Management Corporation ("BCBDVIC") During the year, the Council entered into a $2,828,219 development funding loan agreement with BCHMC in connection with the proposed housing projects at Brighouse United Church, Brechin United Church and Como Lake United Church (Note 7). The loan is payable on demand and bears a variable interest rate ranging from 0.75% to 1.02% per annum. The properties located at 8131-8151 Bermett Road in Richmond, 2020 Estevan Road in Nanaimo, and 1110 King Albert Avenue in Coquitlam are pledged as security against the BCHMC loan. The development funds will be advanced by BCHMC as required to facilitate payment of costs to complete the design, approval and pre-construction work directly related to the projects based on claims submitted by the Council. As part of the agreement the entire loan will be repaid from proceeds of the first mortgage loan advance if the proposed housing projects obtain a construction or term loan. As at 31 December 2016, the loan balance was $896,025 (2015 - SNil), which include accrued interest of $40,546. Deferred Capital Contributions Deferred capital contributions consist of the fair value of buildings donated to the Council. The change in the balance consists of the following: 2QM 2015 Balance - beginning of year Less: amounts amortized to revenue Balance - end of year $ 770,000 $ 805,000 (35,000) (35,000) $ 735.000 $ 770.000 10. Economic Dependence The Council is economically dependent on the financial support of the Conference. The Conference has indicated it will continue to support the Council financially for the foreseeable future. 18
11. Property Resource Team A property resource team, consisting of consultants and Council staff support, are working formally with a number of congregations and informally with others. Their mandate is to provide facilities for mission as well as financial assets for congregational life. Currently they are assessing the best use of congregational and Council properties - through redevelopment, sale, lease or other property use. A budget of $200,000 for the 2017 fiscal year and $200,000 for the 2018 fiscal year has been approved for this initiative to provide cash flow with the intent that funds will be recovered by the Council through future transactions. Property resource team expenses: im 2015 Salaries and benefits (Note 12) Consultants General $ 101,780 $ 99,767 86,978 58,045 14,177 24,211 S 202.935 $ 182.023 12. The British Columbia Societies Act The new British Columbia Societies Act ("new Act") came into effect on 28 November 2016. The new Act requires a society (other than a society designated as a member-funded society) to include, in its financial statements, the disclosure of any remuneration paid to its directors, and remuneration paid to employees and contractors earning more than $75,000 during the fiscal year. For the fiscal year ended 31 December 2016, the Council had one employee with remuneration in excess of $75,000, and the total amount of remuneration is $101,780 (Note 11). The directors of the Council did not receive any remuneration during the 2016 fiscal year. 19