FINANCIAL STATEMENTS For the year ended December 31, 2012
For the year ended December 31, 2012 INDEX Page INDEPENDENT AUDITORS' REPORT 1-2 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, 2012, 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, 2012, 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 9, 2013 CHARTERED ACCOUNTANTS Licensed Public Accountants Page 2
STATEMENT OF FINANCIAL POSITION As at December 31 2012 2011 ASSETS Current Assets Accounts receivable - rent 12,074 5,797 Prepaid expenses 13,415 12,393 Investments (Market value - $887,513; 2011 - $873,677) 906,971 886,458 932,460 904,648 Property, Plant and Equipment (Note 2) 3,156,909 3,408,736 4,089,369 4,313,384 LIABILITIES Current Liabilities Accounts payable and accrued expenses 8,088 8,614 Due to City of Brantford 490,768 347,620 Prepaid rent 4,888 5,295 Due to Service Manager - City of Brantford 59,185 134,430 Current portion of long term liabilities (Note 3) 259,652 251,827 822,581 747,786 Long Term Liabilities (Note 3) 2,504,345 2,763,997 Replacement Reserve Funds (Note 4 and Page 8) 328,213 377,825 Contributed Surplus 384,895 384,895 Net Assets - Page 4 49,335 38,881 3,266,788 3,565,598 4,089,369 4,313,384 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 2012 2011 Balance - Beginning of Year 38,881 37,442 Adjust for prior year settlement - Branlyn 390 - Excess of Revenue over Expenses (Expenses over Revenue) Branlyn Meadows Project - Shelter 10,064 1,439 Balance - End of Year 49,335 38,881 See accompanying notes Page 4
STATEMENT OF OPERATIONS - BECKETT PROJECT - SHELTER Budget Actual Actual For the year ended December 31 2012 2012 2011 (unaudited) Revenue Federal subsidies 86,367 86,367 86,367 Service manager subsidies 40,594 40,596 53,220 Current year subsidy adjustment - (42,814) (29,635) Rental - Market tenants 391,146 168,662 175,374 Rental - RGI tenants - 219,329 211,772 Other revenue 7,144 18,937 8,747 525,251 491,077 505,845 Expenses Amortization - net 141,228 141,229 137,570 Taxes paid on city owned property 73,656 68,280 72,567 Insurance 9,700 9,347 9,332 Interest on long term liability 29,889 29,565 33,245 Legal and audit 3,600 3,616 2,875 Office administration 4,840 3,607 4,805 Repairs and maintenance 113,928 107,117 110,547 Replacement reserve 36,545 36,545 35,654 Utilities 95,500 73,016 78,987 Wages and benefits 16,365 18,755 20,263 525,251 491,077 505,845 Excess of Revenue over Expenses - - - See accompanying notes Page 5
STATEMENT OF OPERATIONS - BECKETT PROJECT - NON-SHELTER For the year ended December 31 2012 2011 Revenue Contribution from Municipality 131,191 129,988 Expenses Insurance 2,563 2,559 Interest on long term liability 10,388 11,681 Legal and audit 1,270 1,010 Repairs and maintenance 21,281 24,841 Utilities 46,069 41,563 Amortization 49,620 48,334 131,191 129,988 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 2012 2012 2011 (unaudited) Revenue Service manager subsidy 140,629 140,629 135,853 Current year subsidy adjustment - (1,560) 15,167 Rental - Market tenants 111,000 54,669 52,669 - RGI tenants - 47,366 40,671 Other revenue 1,500 7,621 2,589 253,129 248,725 246,949 Expenses Amortization - net 60,977 60,978 58,416 Taxes paid on city owned property 39,208 39,212 38,629 Insurance 3,300 3,166 3,161 Interest on long term liability 59,301 59,211 61,500 Legal and audit 1,300 1,406 1,152 Bad debts and collection costs 4,800 2,622 9,472 Office administration 400 370 370 Repairs and maintenance 61,234 50,008 50,824 Replacement reserve 13,995 13,995 13,452 Utilities 2,250 1,472 1,669 Wages and benefits 6,364 6,221 6,865 253,129 238,661 245,510 Excess of Revenue over Expenses - Page 4-10,064 1,439 See accompanying notes Page 7
STATEMENT OF REPLACEMENT RESERVE FUNDS For the year ended December 31 2012 2011 Beckett Project Balance - Beginning of Year 265,747 182,864 Provision from operations (Note 4) 36,545 35,654 Provision grant - SHRRP 5,769 263,379 Interest 14,263 16,925 Repairs and maintenance expenditure (97,149) (233,075) Balance - End of Year 225,175 265,747 Branlyn Meadows Project Balance - Beginning of Year 112,078 114,424 Provision from operations (Note 4) 13,995 13,452 Provision grant - SHRRP - 21,164 Provincial energy grants - 3,615 Interest 6,250 8,545 Repairs and maintenance expenditure (29,285) (49,122) Balance - End of Year 103,038 112,078 Total 328,213 377,825 See accompanying notes Page 8
NOTES TO THE FINANCIAL STATEMENTS For the year ended December 31, 2012 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, 2012 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 surplus. 2. PROPERTY, PLANT Accumulated Net Book Value Net Book Value AND EQUIPMENT Cost Amortization 2012 2011 Beckett Project Land 384,895-384,895 384,895 Building 5,940,047 4,511,361 1,428,686 1,619,536 Furnishings 53,445 53,445 - - 6,378,387 4,564,806 1,813,581 2,004,431 Branlyn Meadows Project Land 490,126 169,851 320,275 334,815 Building 1,537,778 532,843 1,004,935 1,050,554 Furnishings 27,588 9,470 18,118 18,936 2,055,492 712,164 1,343,328 1,404,305 Total 8,433,879 5,276,970 3,156,909 3,408,736 Page 10
NOTES TO THE FINANCIAL STATEMENTS For the year ended December 31, 2012 3. LONG TERM LIABILITIES 2012 2011 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 1,428,299 1,619,148 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 1,335,698 1,396,676 2,763,997 3,015,824 Less: current portion 259,652 251,827 2,504,345 2,763,997 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: 2013-259,652 2014-267,679 2015-275,983 2016-284,545 2017-293,431 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 36,545 Branlyn Meadows Project 13,995 Page 11
NOTES TO THE FINANCIAL STATEMENTS For the year ended December 31, 2012 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 2012 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 For the year ended December 31, 2012 SCHEDULE 1 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 (3,377,956) (1,186,850) (4,564,806) Net Book Value 1,342,050 471,531 1,813,581 Less: Contributed surplus (284,822) (100,073) (384,895) Less: Recovery of interest at refinancing (286) (100) (386) Long Term Liability 1,056,941 371,359 1,428,299 Branlyn Meadows Project Property, plant and equipment - at cost 2,055,492-2,055,492 Less: Accumulated amortization (712,164) - (712,164) Net Book Value 1,343,328-1,343,328 Less: Interest equity on escrow fund (7,629) - (7,629) Long Term Liability 1,335,699-1,335,699 Page 13