FINANCIAL STATEMENTS For the year ended December 31, 2011
For the year ended December 31, 2011 INDEX Page INDEPENDENT AUDITORS' REPORT 1 FINANCIAL STATEMENTS Statement of Financial Position 3 Statement of Changes in Net Assets 4 Statement of Operations - Beckett Project - Shelter 5 Statement of Operations - Beckett Project - Non-Shelter 6 Statement of Operations - Branlyn Meadows Project - Shelter 7 Statement of Replacement Reserve Funds 8 Notes to the Financial Statements 9-12 Schedule of Property, Plant and Equipment and Other Long Term Liabilities - Shelter and Non-Shelter 13
P.O. Box 367, 96 Nelson Street Brantford, Ontario N3T 5N3 Telephone: (519) 759-3511 Facsimile: (519) 759-7961 INDEPENDENT AUDITORS' REPORT To the Chair and Members of the Brantford Municipal Non-Profit Housing Corporation We have audited the accompanying financial statements of Brantford Municipal Non-Profit Housing Corporation, which comprise the statement of financial position as at December 31, 2011, the statement of changes in net assets, the statements of operations of Beckett Project - Shelter, Beckett Project - Non-Shelter, and Branlyn Meadows Project - Shelter, the statement of replacement reserve funds, and a summary of significant accounting policies and other explanatory information. The financial statements have been prepared by management of Brantford Municipal Non-Profit Housing Corporation based on the financial reporting provisions of the Ontario Ministry of Municipal Affairs and Housing. Management's Responsibility for the Financial Statements Management is responsible for the preparation of these financial statements in accordance with the financial reporting provisions of the Ontario Ministry of Municipal Affairs and Housing, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors' Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' 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 of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements of Brantford Municipal Non-Profit Housing Corporation for the year ended December 31, 2011, are prepared, in all material respects, in accordance with the financial reporting provisions of the Ontario Ministry of Municipal Affairs and Housing. Page 1
Basis of Accounting and Restriction on Distribution and Use Without modifying our opinion, we draw attention to Note 1 to the financial statements, which describes the basis of accounting. The financial statements are prepared to assist Brantford Municipal Non-Profit Housing Corporation to comply with the financial reporting provisions referred to above. As a result, the financial statements may not be suitable for another purpose. Our report is intended solely for the Directors of Brantford Municipal Non-Profit Housing Corporation, the service manager, and the Ontario Ministry of Municipal Affairs and Housing and should not be distributed or used by parties other than the Directors of Brantford Municipal Non-Profit Housing Corporation, the service manager, and the Ontario Ministry of Municipal Affairs and Housing. April 25, 2012 CHARTERED ACCOUNTANTS Licensed Public Accountants Page 2
STATEMENT OF FINANCIAL POSITION As at December 31 2011 2010 ASSETS Current Assets Accounts receivable - rent 5,797 9,962 Prepaid expenses 12,393 12,573 Investments (Market value - $873,677; 2010 - $847,644) 886,458 860,989 904,648 883,524 Property, Plant and Equipment (Note 2) 3,408,736 3,653,056 4,313,384 4,536,580 LIABILITIES Current Liabilities Accounts payable and accrued expenses 8,614 9,394 Due to City of Brantford 347,620 530,168 Prepaid rent 5,295 7,535 Due to Service Manager - City of Brantford 134,430 9,714 Current portion of long term liabilities (Note 3) 251,827 244,304 747,786 801,115 Long Term Liabilities (Note 3) 2,763,997 3,015,840 Replacement Reserve Funds (Note 4 and Page 8) 377,825 297,288 Contributed Surplus 384,895 384,895 Net Assets - Page 4 38,881 37,442 3,565,598 3,735,465 4,313,384 4,536,580 Approved on behalf of the Board... Director... Director See accompanying notes Page 3
STATEMENT OF CHANGES IN NET ASSETS For the year ended December 31 2011 2010 Balance - Beginning of Year 37,442 44,768 Adjust for prior year settlement - Branlyn - (6,594) Excess of Revenue over Expenses (Expenses over Revenue) Beckett Project - Shelter - 2,739 Branlyn Meadows Project - Shelter 1,439 (3,471) Balance - End of Year 38,881 37,442 See accompanying notes Page 4
STATEMENT OF OPERATIONS - BECKETT PROJECT - SHELTER Budget Actual Actual For the year ended December 31 2011 2011 2010 (unaudited) Revenue Federal subsidies 86,367 86,367 86,367 Service manager subsidies 53,224 53,220 52,367 Current year subsidy adjustment - (29,635) (27,990) Rental - Market tenants 371,054 175,374 175,590 Rental - RGI tenants - 211,772 203,430 Other revenue 8,745 8,747 14,100 519,390 505,845 503,864 Expenses Amortization - net 137,564 137,570 132,615 Taxes paid on city owned property 73,000 72,567 71,878 Insurance 9,300 9,332 9,035 Interest on long term liability 33,553 33,245 38,323 Legal and audit 3,600 2,875 2,790 Office administration 4,540 4,805 3,830 Repairs and maintenance 109,076 110,547 104,037 Replacement reserve 35,654 35,654 34,829 Utilities 98,500 78,987 87,185 Wages and benefits 14,603 20,263 16,603 519,390 505,845 501,125 Excess of Revenue over Expenses - Page 4 - - 2,739 See accompanying notes Page 5
STATEMENT OF OPERATIONS - BECKETT PROJECT - NON- SHELTER For the year ended December 31 2011 2010 Revenue Contribution from Municipality 129,988 149,927 Expenses Insurance 2,559 2,477 Interest on long term liability 11,681 13,465 Legal and audit 1,010 980 Repairs and maintenance 24,841 36,735 Utilities 41,563 49,676 Amortization 48,334 46,594 129,988 149,927 Excess of Revenue over Expenses - - See accompanying notes Page 6
STATEMENT OF OPERATIONS - BRANLYN MEADOWS PROJECT - SHELTER Budget Actual Actual For the year ended December 31 2011 2011 2010 (unaudited) Revenue Service manager subsidy 135,852 135,853 151,688 Current year subsidy adjustment - 15,167 (14,941) Rental - Market tenants 111,000 52,669 62,075 - RGI tenants - 40,671 48,941 Other revenue 1,500 2,589 5,175 248,352 246,949 252,938 Expenses Amortization - net 58,415 58,416 55,945 Taxes paid on city owned property 37,933 38,629 37,372 Insurance 3,300 3,161 3,060 Interest on long term liability 61,863 61,500 64,128 Legal and audit 1,200 1,152 1,120 Bad debts and collection costs 4,800 9,472 4,354 Office administration 400 370 370 Repairs and maintenance 59,117 50,824 68,778 Replacement reserve 13,452 13,452 13,201 Utilities 2,250 1,669 2,629 Wages and benefits 5,622 6,865 5,452 248,352 245,510 256,409 Excess of Revenue over Expenses - Page 4-1,439 (3,471) See accompanying notes Page 7
STATEMENT OF REPLACEMENT RESERVE FUNDS For the year ended December 31 2011 2010 Beckett Project Balance - Beginning of Year 182,864 493,410 Provision from operations (Note 4) 35,654 34,829 Provision grant - SHRRP 263,379 35,617 Interest 16,925 22,336 Repairs and maintenance expenditure (233,075) (403,328) Balance - End of Year 265,747 182,864 Branlyn Meadows Project Balance - Beginning of Year 114,424 101,896 Provision from operations (Note 4) 13,452 13,201 Provision grant - SHRRP 21,164 104,911 Provincial energy grants 3,615 50,470 Interest 8,545 7,144 Repairs and maintenance expenditure (49,122) (163,198) Balance - End of Year 112,078 114,424 Total 377,825 297,288 See accompanying notes Page 8
NOTES TO THE FINANCIAL STATEMENTS For the year ended December 31, 2011 Brantford Municipal Non-Profit Housing Corporation is incorporated as a not-for-profit organization without share capital. The main purpose of the Corporation is to provide affordable housing to residents of Brantford and Brant County. 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) (i) (ii) (iii) Basis of Accounting These financial statements have been prepared in accordance with the significant policies set out below to comply with reporting requirements of the Ministry of Municipal Affairs and Housing. The basis of accounting used in these financial statements materially differs from Canadian generally accepted accounting principles because: Amortization is provided on the Branlyn Meadows Project land, building, and furnishings and the Beckett Project building at a rate equal to the annual principal reduction of the mortgage rather than estimated useful life of the specific asset. Also, the Branlyn Meadows Project land is considered to have a limited life. Property, plant and equipment purchased after their initial project construction are funded from and charged against Replacement Reserve Funds rather than being capitalized on the statement of financial position and amortized over their estimated useful lives. Transfers to Replacement Reserve Funds are accounted for on the statement of operations, rather than as an inter-fund transfer in the statement of changes in net assets. (iv) Financial instruments are recorded at their historical cost unless there is evidence of a permanent impairment. (b) (c) (d) Measurement Financial statements are based on representations that may require estimates to be made in anticipation of future transactions and events and include measurement that may, by their nature, be approximations. Income Recognition Revenue and expenses are recognized utilizing the accrual method whereby revenue is recorded when earned and expenses are recorded when incurred. Investments The investments are held with Phillips, Hager & North in accordance with the Social Housing Reform Act. Investments are stated at the lower of cost and market value, when a decline in market value is considered permanent in nature. Page 9
NOTES TO THE FINANCIAL STATEMENTS For the year ended December 31, 2011 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D) (e) (f) Property, Plant and Equipment and Amortization Beckett Project - Property, plant and equipment are stated at historical cost. Amortization on furnishings is calculated on a straight line basis over ten years. Building amortization is provided for in the accounts in annual amounts equal to the principal repayments on the mortgage during the year. Branlyn Meadows Project - Property, plant and equipment are stated at historical cost. Amortization is provided for in the accounts in annual amounts equal to the principal mortgage repayments during the year. Contributed Surplus The Corporation purchased land from the Corporation of the City of Brantford which in turn granted the total purchase price to the Corporation. The total amount of costs related to the purchase of the land has been credited to contributed to surplus. 2. PROPERTY PLANT AND EQUIPMENT Accumulated Net Book Value Net Book Value Cost Amortization 2011 2010 Beckett Project Land 384,895-384,895 384,895 Building 5,940,047 4,320,511 1,619,536 1,805,442 Furnishings 53,445 53,445 - - 6,378,387 4,373,956 2,004,431 2,190,337 Branlyn Meadows Project Land 490,126 155,311 334,815 348,744 Building 1,537,778 487,224 1,050,554 1,094,256 Furnishings 27,588 8,652 18,936 19,719 2,055,492 651,187 1,404,305 1,462,719 Total 8,433,879 5,025,143 3,408,736 3,653,056 Page 10
NOTES TO THE FINANCIAL STATEMENTS For the year ended December 31, 2011 3. LONG TERM LIABILITIES 2011 2010 Beckett Project 2.65% first mortgage loan to Canada Mortgage Housing Corporation, due February 2015, payable in monthly installments of $19,270 on account of principal and interest 1,619,148 1,805,054 Branlyn Meadows Project 4.37% first mortgage loan to Canada Mortgage and Housing Corporation, due March 2018, payable in monthly installments of $10,023 on account of principal and interest 1,396,676 1,455,090 3,015,824 3,260,144 Less: current portion 251,827 244,304 2,763,997 3,015,840 The corporation's land and buildings are pledged as security on the mortgages. Minimum principal repayment requirements on the mortgages are as follows, assuming the mortgages will be refinanced at similar rates on maturity: 2012-251,827 2013-259,660 2014-267,688 2015-275,980 2016-283,618 4. REPLACEMENT RESERVE FUNDS In accordance with the terms of agreements with Canada Mortgage and Housing Corporation and the Ministry of Municipal Affairs and Housing, the Corporation is required to establish a separate replacement reserve fund and to account for these funds, including interest. The use of these funds is restricted to the repair and replacement of specific items as permitted by the Ministry of Municipal Affairs and Housing. The annual contribution for these projects made as directed by the Ministry of Municipal Affairs and Housing is: Beckett Project 35,654 Branlyn Meadows Project 13,452 Page 11
NOTES TO THE FINANCIAL STATEMENTS For the year ended December 31, 2011 5. RELATED PARTY TRANSACTIONS The Board of Directors of the Corporation consists of Brantford City Council appointees to the Social Services Sector Committee. Upon dissolution, after the payments of its liabilities, the Corporation's remaining property shall be distributed to, or disposed of, by the City of Brantford. All financial transactions are made on behalf of the Brantford Municipal Non-Profit Housing Corporation by the City of Brantford. Additionally, the staff of the City of Brantford perform all the management functions of the Corporation. 6. STATEMENT OF CHANGES IN FINANCIAL POSITION A statement of changes in financial position is not required for Ministry of Municipal Affairs and Housing reporting purposes. 7. EMPLOYEE COMPENSATION As required by the Public Sector Salary Disclosure Act, 1996, no employees were paid a salary of $100,000 or more in 2011 by the Brantford Municipal Non-Profit Housing Corporation. 8. FINANCIAL INSTRUMENTS Fair Value The fair value of financial instruments, such as cash and bank, investments, accounts receivable, accounts payable and mortgages payable are determined to approximate their recorded values. Interest Rate Risk The Corporation's interest rate risk relates to the refinancing of the Corporation's two mortgages and is dependant on the available interest rates at the time of renewal. Credit Risk The Corporation's credit risk relates to its accounts receivable. The risk of significant loss is considered remote. Page 12
SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT AND OTHER LONG TERM LIABILITIES SHELTER AND NON-SHELTER SCHEDULE 1 For the year ended December 31, 2011 Property, Plant and Equipment and Long Term Liabilities Shelter Non-Shelter Total Beckett Project Property, plant and equipment - at cost 4,720,006 1,658,381 6,378,387 Less: Accumulated amortization (3,236,727) (1,137,229) (4,373,956) Net Book Value 1,483,279 521,152 2,004,431 Less: Contributed surplus (284,822) (100,073) (384,895) Less: Recovery of interest at refinancing (287) (101) (388) Long Term Liability 1,198,170 420,978 1,619,148 Branlyn Meadows Project Property, plant and equipment - at cost 2,055,492-2,055,492 Less: Accumulated amortization (651,187) - (651,187) Net Book Value 1,404,305-1,404,305 Less: Interest equity on escrow fund (7,629) - (7,629) Long Term Liability 1,396,676-1,396,676 Page 13