directions to 101 exchange avenue, vaughantrca.on.ca/dotasset/208806.pdf · directions to 101...

Directions to 101 Exchange Avenue, VaughanFrom Hwy 400: Exit at Regional Road (Hwy) 7 and go east. Go south on Interchange Way. When it ends at IKEA, turn right onto Interchange Way. After IKEA, turn right to access the TRCA parking lot, opposite the IKEA.

From Steeles or Hwy 407: Go north on Jane Street. Turn right on Peelar Road. When it ends turn right onto Exchange Avenue and go under Jane Street. Go straight through at the stop sign, past IKEA, into the TRCA parking lot, opposite the IKEA.

Budget Audit Advisory BoardAgenda

#2/15

June 26, 20158:30 A.M.

HEAD OFFICE, 101 EXCHANGE AVENUE, VAUGHANPages

1. MINUTES OF MEETING #1/15, HELD ON APRIL 10, 2015http://www.trca.on.ca/dotAsset/204746.pdf

2. BUSINESS ARISING FROM THE MINUTES

3. DISCLOSURE OF PECUNIARY INTEREST AND THE GENERAL NATURE THEREOF

4. DELEGATIONS

5. PRESENTATIONS

5.1 A presentation by Michelle Sautner and Anita Ferrari, Grant Thornton LLP inregards to 2014 Audited Financial Statements

6. CORRESPONDENCE

7. SECTION I - ITEMS FOR AUTHORITY ACTION

7.1 2014 AUDITED FINANCIAL STATEMENTS 2

8. SECTION IV ITEMS FOR THE INFORMATION OF THE BOARD

9. NEW BUSINESSNEXT MEETING OF THE BUDGET/AUDIT ADVISORY BOARD #3/15, TO BE HELDON FRIDAY, OCTOBER 16, 2015 AT 8:30 A.M. AT HEAD OFFICE, 101 EXCHANGEAVENUE, VAUGHAN

Brian Denney, Chief Executive Officer

/jr

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Item BAAB7.1 TO: Chair and Members of the Budget/Audit Advisory Board Meeting #2/15, June 26, 2015

FROM: Rocco Sgambelluri, Chief Financial Officer

RE: 2014 AUDITED FINANCIAL STATEMENTS ________________________________________________________________________KEY ISSUE: The 2014 audited financial statements are recommended for approval.

RECOMMENDATION

THE BOARD RECOMMENDS TO THE AUTHORITY THAT the transfer of funds from surplus to reserves in the amount of $1,989,000.00, as outlined in Note 8(a), "Continuity of reserves" to the financial statements, be approved;

AND FURTHER THAT the 2014 audited financial statements, as presented in Attachment 1, be approved, signed by the Chair and Secretary-Treasurer of Toronto and Region Conservation Authority (TRCA), and distributed to each member municipality and the Minister of Natural Resources and Forestry, in accordance with subsection 38 (3) of the Conservation Authorities Act.

RATIONALEThe 2014 TRCA audited financial statements are presented for approval. The accounting firm Grant Thornton LLP has completed its audit and has included with the financial statements an unqualified independent auditor's report. The audited financial statements are presented as Attachment 1 to the report. A representative from Grant Thornton LLP will be in attendance to present the auditor's report on the 2014 financial statements.

Auditor Communication on Audit Strategy and Results Included as Attachment 2 is a report from Grant Thornton LLP addressed to the Budget/Audit Advisory Board (BAAB), entitled, "Report to the Budget/Audit Advisory Board - communication of audit strategy and results". This report addresses various matters, including the auditors approach to the audit, quality control and independence, audit results, reportable matters, status report on the audit process and other matters which may be of interest to the members.

The section of the above-noted report to BAAB entitled "Reportable Matters" includes one internal control recommendation. It is recommended that bank reconciliations be prepared on a more timely basis. During 2013 the delays noted by the auditors were mainly due to issues associated with the implementation of the bank reconciliation module in the new financial reporting system, and more recently the ramp up in web and eCommerce activities required a "catch up" period as revenue reporting structures had to be updated to capture, report and properly post the new revenue details from online sales. Management is in agreement with the auditor recommendation and has put in place the required changes in process to ensure that bank reconciliations are completed on a more timely basis. In fact, the changes that have been recently implemented have resulted in a significant improvement in the time that it takes to complete the reconciliation process.

Financial Statement Structure

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The Statement of Operations and Accumulated Surplus reports revenues, expenses and surplus position for the year, excluding the impact of tangible capital asset (TCA) expenditures and disposals. The Statement of Financial Position reports financial assets and liabilities, defining the net assets of the organization. Further, the Statement of Financial Position discloses non-financial assets. The Statement of Changes in Net Financial Assets reconciles the surplus for the year to the change in net assets. Finally, the Statement of Cash Flows itemizes the sources of cash inflows and outflows during the year, classified as operating, investing or capital in nature.

The Statement of Operations and Accumulated Surplus and the supporting schedules do not include tangible capital asset expenditures. Note 12 in the audited financial statements explains the modifications to the approved budget required in order to provide a more meaningful comparison to actual operating results. Also, to assist with the comparison of results to budget, the actual amortization for the year has been added to the approved budget.

Consistent with the approach started in 2013, the supporting "Schedules of Operations" have been organized to conform to the business plan format included within the 2014 approved TRCA budget. Each schedule represents a Service Area within the business plan. This approach allows for a consistency in financial reporting.

Tangible Capital AssetsEffective January 1, 2009, financial statement presentation for public services bodies requires the inclusion of TCA additions on the statement of financial position. TCA are non-financial assets that have a physical substance and have useful economic lives which extend beyond the current accounting period. Excluded from the definition of TCA are a number of intangible assets such as trademarks, patents and the cost of easements. Before these changes were introduced, expenditures on the acquisition of TCA were expensed in the year incurred. Starting in 2009 TCA costs are amortized over the years that the asset is considered to have a useful life. The balance of the asset costs which have yet to be amortized are reported on the statement of financial position as non-financial assets and offset within the "accumulated surplus" section.

As at December 31, 2014, the gross book value of the tangible capital assets was $573.4 million of which $137.4 million has been amortized. The unamortized balance of $436.0 million is reported in the statement of financial position as the net book value of tangible capital assets. Land, which is carried on the books at a cost of $340.3 million is not amortized.

During 2014, $14.6 million in TCA was acquired and assets having a book value (original cost) of $1.0 million have been disposed. The schedule of "Tangible Capital Assets" included in Note 6 to the audited financial statements itemizes the various components of TCA, including contributed TCA in the amount of $1.1 million.

Operating Surplus / Deficit PositionUsing a "cash basis" approach which compares available funding to actual expenditures incurred including TCA, the same basis upon which the annual budget was developed and presented to the members for approval, TRCA's operating deficit position as of December 31, 2014 is $994,000.00 This amount is reported in Note 8 of the financial statements under the caption of "Unallocated accumulated (deficit) surplus". In 2014 TRCA incurred expenditures in advance of the related funding in the approximate amount of $1.4 million, which amount will be recovered from municipal levies and other sources in 2015. If this funding had been available in

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2014, the organization would have reported a cumulative unallocated surplus position of approximately $400,000.

Reserves:The status of TRCA reserves is presented in Note 8 of the financial statements. Some of the more significant reserve transactions that occurred in 2014 are as follows:

• Vehicle and Equipment Reserve: the cost of capital acquisitions and the cost of operations exceeded usage charges to programs by an amount of $390,000, decreasing the reserve balance from $517,000 to $127,000, reflecting an above average acquisition program for the fleet, as has been the case for the last several years. For 2015, it is estimated that program recoveries based on usage will be sufficient to support ongoing fleet operating costs as well as planned capital expenditures and therefore no adjustment to the reserve balance is recommended at this time. Staff will continue to monitor the status of this reserve and will recommend adjustments as necessary.

• Funds Held Under Provincial Revenue Sharing Policy: As noted in the auditor's communication on audit strategy and results to the board, management has decided to change the treatment of the funds held under the revenue sharing policy. Retroactive to 2013, funds in this account will no longer be considered to be held in reserve and will be treated as deferred revenue. Note 7 to the financial statements explains the rules which govern the use of funds under this policy and itemizes the transactions which flowed through the accounts during the year.

• The operating contingency reserve was drawn down by $368,000, from $3,704,000 to $3,336,000. Approximately $226,000 was spent on a feed-in-tarriff (FIT) installation under Ontario Power Authority guidelines which will produce a net positive cash flow of approximately $350,000 over the 20 year contract period.

• For 2014 a new reserve is recommended to meet the need for corporate head office space. The initial contribution to this reserve from unallocated surplus is in the amount of $2,747,000 and consists of two components. The first is an allocation of $2,510,000 which is the estimated amount required to complete the move to the 101 Exchange Avenue office. The costs for the move include a new telephone system, furniture and provide for the retrofit of approximately 60,000 square feet of existing office space, as previously reported to the Authority. The second component sets aside actual surplus funds from the previous lease arrangement for the Downsview Office, which will be applied in the latter years of the current lease agreement in order to ease the impact of the lease on future budgets.

SUMMARYFrom a "bottom line" perspective the 2014 operating results are very favourable. It was possible to establish an office accommodation reserve with an initial contribution of $2,747,000. The unallocated deficit of $994,000 is more than offset by the anticipated receipt of funds in 2015 to pay for expenditures incurred in 2014.

Report prepared by: Rocco Sgambelluri, extension 5232 Emails: [email protected] For Information contact: Janice Darnley, extension 5768 Emails: [email protected]; [email protected] Date: June 17, 2015 Attachments: 2

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Attachment 1

Financial Statements

Toronto and Region Conservation Authority

December 31, 2014

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

Contents

Page Independent Auditor’s Report 1 - 2 Statement of Financial Position 3 Statement of Operations and Accumulated Surplus 4 Statement of Changes in Net Financial Assets 5 Statement of Cash Flows 6 Notes to the Financial Statements 7 - 15 Schedules of Operations Introduction 16 - 17 Schedule of Operations – Watershed Studies and Strategies 18 Schedule of Operations – Water Risk Management 19 Schedule of Operations – Regional Biodiversity 20 Schedule of Operations – Land Securement and Management 21 Schedule of Operations – Tourism and Recreation 22 Schedule of Operations – Planning and Development Review 23 Schedule of Operations – Education and Outreach 24 Schedule of Operations – Sustainable Communities 25 Schedule of Operations – Corporate Services 26

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Grant Thornton LLP Suite 200 15 Allstate Parkway Markham, ON L3R 5B4

T +1 416 366 0100 F +1 905 475 8906 www.GrantThornton.ca

1

Independent Auditor’s Report

To the Members of the Toronto and Region Conservation Authority We have audited the accompanying financial statements of Toronto and Region Conservation Authority (“TRCA”), which comprise the statement of financial position as at December 31, 2014, and the statements of operations and accumulated surplus, changes in net financial 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 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 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 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.

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Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of TRCA as at December 31, 2014, and the results of its operations, changes in net financial assets, and its cash flows for the year then ended in accordance with Canadian public sector accounting standards.

Markham, Canada Chartered Accountants June 26, 2015 Licensed Public Accountants

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See accompanying notes to the financial statements. 3

Toronto and Region Conservation Authority Statement of Financial Position (in thousands of dollars) December 31 2014 2013 Financial Assets Cash and cash equivalents $ 9,958 $ 9,313 Restricted cash (Note 3) 948 812 Marketable securities (Note 4) 19,187 18,030 Receivables (Note 5) 15,868 14,856 45,961 43,011 Liabilities Payables and accruals 15,863 11,654 Deferred revenue Municipal capital levies 11,018 13,200 Capital, special projects and other (Note 7) 16,694 14,715 43,575 39,569 Net Financial Assets 2,386 3,442 Non-Financial Assets Inventory 403 378 Prepaids 549 243 Tangible capital assets (Note 6) 435,959 428,213 436,911 428,834 Accumulated surplus (Note 8) $ 439,297 $ 432,276 Contingent liabilities and commitments (Note 10) On behalf of TRCA

Director Director

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Toronto and Region Conservation Authority Statement of Operations and Accumulated Surplus (in thousands of dollars) Year Ended December 31 2014 2014 2013 Budget Actual Actual (Note 12) Revenue Municipal Operating levies $ 12,851 $ 12,851 $ 12,496 Capital levies 49,016 36,065 24,778 Other 3,821 2,108 2,976 Government grants Provincial 3,646 4,160 4,004 Federal 1,480 1,974 2,277 User fees, sales and admissions 18,101 17,684 16,610 Contract services 24,965 19,809 18,235 Rent and property interests 3,168 2,984 2,649 Fundraising Donations 3,446 659 82 The Living City Foundation 1,424 1,781 1,543 Income from marketable securities 540 591 594 Net (gain) loss on sale of tangible capital assets - (74) (274) Sundry 3 283 437 122,461 100,875 86,407 Expenses (Pages 18 – 26) Watershed Studies and Strategies 4,597 3,919 3,417 Water Risk Management 23,837 18,011 13,753 Regional Biodiversity 15,805 12,620 10,581 Land Securement and Management 7,891 6,164 6,270 Tourism and Recreation 25,902 23,892 24,802 Planning and Development Review 7,610 7,344 6,841 Education and Outreach 8,510 8,287 7,002 Sustainable Communities 7,368 6,121 5,681 Corporate Services 7,606 7,496 6,798 109,126 93,854 85,145 Net Surplus $ 13,335 $ 7,021 $ 1,262 Accumulated surplus, beginning of year 432,276 432,276 431,014 Accumulated surplus, end of year (Note 8) $ 445,611 $ 439,297 $ 432,276

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Toronto and Region Conservation Authority Statement of Changes in Net Financial Assets (in thousands of dollars) Year Ended December 31 2014 2014 2013 Budget Actual Actual (Note 12) Net surplus for the year $ 13,335 $ 7,021 $ 1,262 Acquisition of tangible capital assets (19,790) (13,528) (6,671) Contributed tangible capital assets - (1,114) (1,368) Loss on disposal of tangible capital assets - 74 274 Proceeds on disposal of tangible capital assets - 51 - Amortization 6,771 6,771 6,444 Change in inventory - (25) 50 Change in prepaids - (306) (67) (Decrease) increase in net financial assets in the year 316 (1,056) (76) Net financial assets, beginning of year 3,442 3,442 3,518 Net financial assets, end of year $ 3,758 $ 2,386 $ 3,442

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Toronto and Region Conservation Authority Statement of Cash Flows (in thousands of dollars) Year Ended December 31 2014 2013 Increase (decrease) in cash and cash equivalents Operating Net surplus for the year $ 7,021 $ 1,262 Non-cash charge to operations Amortization 6,771 6,444 Loss on disposal of tangible capital assets 74 274 Contributed tangible capital assets (1,114) (1,368) 12,752 6,612 Change in non-cash operating working capital (Increase) in receivables (1,012) (2,032) (Increase) decrease in inventory (25) 50 (Increase) in prepaids (306) (67) Increase (decrease) in payables and accruals 4,209 (1,386) Decrease (increase) in deferred revenue (203) 4,918 15,415 8,095 Investing Proceeds on maturities of marketable securities 3,867 5,187 Purchase of marketable securities (5,024) (7,249) (Increase) decrease in restricted cash (136) 1,189 (1,293) (873) Capital Proceeds on disposal of tangible capital assets 51 - Purchase of tangible capital assets (13,528) (6,671) (13,477) (6,671) Net increase in cash and cash equivalents 645 551 Cash and cash equivalents, beginning of year 9,313 8,762 Cash and cash equivalents, end of year $ 9,958 $ 9,313

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Toronto and Region Conservation Authority Notes to the Financial Statements (in thousands of dollars) December 31, 2014

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1. Nature of operations Toronto and Region Conservation Authority (“TRCA”) is established under the Conservation Authorities Act of Ontario to further the conservation, restoration, development and management of natural resources, other than gas, oil, coal and minerals for the nine watersheds within its area of jurisdiction. TRCA’s area of jurisdiction includes areas in the City of Toronto, the Regions of Durham, Peel and York, and the Township of Adjala-Tosorontio and Town of Mono. 2. Summary of significant accounting policies Basis of accounting and management responsibility The financial statements are the responsibility of and prepared by management in accordance with Canadian Public Sector Accounting Standards as established by the Public Sector Accounting Board. Significant aspects of the accounting policies adopted by TRCA are as follows: Accrual accounting Items recognized in the financial statements are accounted for in accordance with the accrual basis of accounting. The accrual basis of accounting recognizes the effect of transactions and events in the period in which the transactions and events occur, regardless of whether there has been a receipt or payment of cash or its equivalent. Accrual accounting recognizes a liability until the obligation or condition(s) underlying the liability is partly or wholly satisfied. Accrual accounting recognizes an asset until the future economic benefit underlying the asset is partly or wholly used or lost. Use of estimates The preparation of financial statements in accordance with Public Sector Accounting Standards 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 revenue and expenses during the year. Accounts subject to significant estimates include receivables and tangible capital assets. Actual results could differ from those estimates. Cash and cash equivalents TRCA considers deposits in banks, certificates of deposit and short term investments with original maturities of 90 days or less as cash and cash equivalents.

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2. Summary of significant accounting policies (continued) Marketable securities Marketable securities consist of Guaranteed Investment Certificates and bonds. These investments are carried at cost. Investment income is recognized when earned. For fixed term securities, any discount or premium arising on purchase is amortized over the period to maturity. When there has been a loss in value of a portfolio investment that is other than a temporary decline, the investment is written down to recognize the loss. The write-down is included in the statement of operations. Inventory Inventories of goods for resale are valued at the lower of cost and net realizable value. Nursery inventory is valued at the lower of cost and replacement value. Cost is determined on a first-in, first out basis. Tangible capital assets Tangible capital assets are recorded at cost less accumulated amortization and write-downs, if any, which includes all amounts directly attributable to acquisition, construction development or betterment of the asset. Contributed tangible capital assets are recorded at fair market value at the date of contribution. Amortization is provided on a straight-line basis over the estimated useful life for all assets (except land which is not amortized and vehicles which are amortized on a declining balance basis) as follows: Land improvements 20-40 years Buildings and building improvements 10-55 years Machinery and equipment 5-12 years Vehicles 20-30% declining balance Infrastructure 10-50 years Assets under construction are not amortized until the asset is available for productive use. TRCA has a collection of art and historical buildings. These are not recognized in the financial statements. When a capital asset no longer contributes to TRCA’s ability to provide services or the value of future economic benefits associated with the capital asset is less than its net book value, the carrying value of the capital asset is reduced to reflect the assets value.

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2. Summary of significant accounting policies (continued) Revenue recognition Government transfers received, including municipal levies, are recognized in the financial statements as revenue when the transfers are authorized and all eligibility criteria have been met except when there is a stipulation that gives rise to an obligation that meets the definition of a liability. In that case, the transfer is recorded as deferred revenue and recognized as revenue as the stipulations are met. User charges, including property rental income, and contract services revenue are recognized as revenue in the period in which the related services are performed. Amounts collected for which the related services have not been performed are recognized as deferred revenue and recognized as revenue when the related services are performed. Donations are recorded as revenue in the period they are received or receivable, when a reasonable estimate can be made of the amount involved, unless the donation is designated by an external party for a specific purpose or purposes; in that case, the donation is deferred until it is used for the purpose or purposes specified upon which it is recognized as revenue. Donated property, plant, and equipment are recorded at fair market value when fair value can be reasonably estimated. Reserves The Board has segregated portions of its accumulated surplus for future expenses and contingencies. Increases and decreases in reserves are not recorded in the statement of operations. Reserves are held for the purposes described below:

Vehicle and equipment - Funds held in this reserve are used to finance the cost of new and replacement units. The change in the reserve is an allocation of usage net of costs incurred during the year, as shown in the statement of operations. Tree donation program - Funds held in this reserve were donated by The Living City Foundation to assist with the maintenance of trees planted under the TRCA Tree Donation Program. Operating contingency - Funds held in this reserve may be used to provide a measure of financial relief in the event of a significant loss of revenues or other financial emergency for which no other source of funding is available.

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2. Summary of significant accounting policies (continued) Donated materials and services Donated materials and services are not recorded. Volunteers contribute significant time to the governance and delivery of Toronto and Region Conservation Authority programs. Due to the difficulty in determining the fair value of these contributions, contributed services are not recognized in the financial statements. Pension plan The costs of the multi-employer benefit plan benefits are recognized as the required contributions for employees’ services rendered in the period. 3. Restricted cash The restricted cash is related to funds set aside to fund a specific program. These funds are externally restricted by the Ministry of Natural Resources for the Source Water Protection program. 4. Marketable securities The fair market value of the marketable securities at December 31, 2014 is $19,364 (2013 -$18,139). 5. Receivables 2014 2013 City of Toronto $ 3,685 $ 3,054 Employee Loans 81 100 Government of Canada 1,065 588 Interest receivable 11 9 Province of Ontario 1,180 1,729 Durham Region - including lower tier municipalities 1,461 2,099 Peel Region – including lower tier municipalities 382 195 York Region - including lower tier municipalities 1,538 1,279 The Living City Foundation 1,463 897 Trade and other 3,223 4,441 Waterfront Toronto 1,779 465 $ 15,868 $ 14,856

16

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7. Deferred revenue – capital, special projects and other Continuity of funds held on behalf of the Ministry of Natural Resources: 2014 2013 Balance, beginning of year $ 941 $ 997 Net proceeds from sale of properties 987 - Interest 10 11 Applications: Greenspace acquisition project (151) (56) Revised Project for the Etobicoke Motel Strip (6) (11) Balance, end of year $ 1,781 $ 941 The Ministry of Natural Resources reserves the right to direct the purpose to which the provincial share of funds may be applied or to request a refund. The proceeds on the sale of properties are attributed to the province and the member municipalities on the basis of their original contribution when the properties were acquired. The balance must always be maintained in proportion to the original contribution by the province and TRCA, represented by the member municipalities. TRCA is permitted to withdraw the municipal share of the funds provided that the corresponding provincial share is either matched by other sources of funding or returned to the province. Interest at prevailing market rates must be imputed on the unspent balance (if any) of the funds. 8. Accumulated surplus and reserve continuity 2014 2013 TRCA has internally allocated accumulated surplus as follows: Tangible capital assets $ 435,959 $ 428,213 Reserves (part (a) below) 6,219 4,230 Unallocated accumulated (deficit) surplus (994) 1,395 Amount to be funded in future periods (1,887) (1,562) $ 439,297 $ 432,276 (a) Continuity of reserves Balance Beginning Appropriations Balance End of Year to (from) of Year Vehicle and equipment $ 517 $ (390) $ 127 Tree donation program 9 - 9 Operating contingency 3,704 (368) 3,336 Office accommodation - 2,747 2,747 $ 4,230 $ 1,989 $ 6,219

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9. Pension agreements

TRCA makes contributions to the Ontario Municipal Employees Retirement System (“OMERS”), which is a multi-employer plan, on behalf of full-time members of staff and eligible part-time staff. The plan is a defined benefit pension plan, which specifies the amount of the retirement benefit to be received by the employees based on the length of service and rates of pay. Contributions made by TRCA to OMERS for 2014 were $3,678 (2013 - $3,223). 10. Contingent liabilities and commitments (a) Legal actions and claims:

TRCA has received statements of claim as defendant under various legal actions resulting from its involvement in land purchases, fatalities, personal injuries and flooding on or adjacent to its properties. TRCA maintains insurance coverage against such risks and has notified its insurers of the legal actions and claims. It is not possible at this time to determine the outcome of these claims and, therefore, no provision has been made in these financial statements.

(b) The TRCA has completed the acquisition of lands required to undertake various projects.

There are 3 projects where TRCA has acquired lands under the Expropriations Act. The first project is the Revised Project for the Etobicoke Motel Strip. Properties required for this project were obtained through expropriation from five owners. Funding was obtained from the City of Etobicoke and the Municipality of Metropolitan Toronto (now collectively known as the City of Toronto) and the Province of Ontario. To date four of the expropriations have been settled and the compensation has been paid.

The second project is the Port Union Improvement Project. This project is funded by the Toronto Waterfront Revitalization Corporation. One property was expropriated for this project and one property was acquired under Section 30 of the Expropriations Act which allows the owner to consent to the acquisition but still arbitrate the compensation. The expropriation has been settled and the compensation has been paid. TRCA is also responsible for the payment of the owner's costs associated with the Section 30 settlement. The matter of costs has not been finalized.

The third project is the Mimico Waterfront Linear Park Project. This project is funded by the Toronto Waterfront Revitalization Corporation. One property was expropriated for this project and one property was acquired under Section 30 of the Expropriations Act. Both transactions have been settled and compensation has been paid. The additional compensation for costs associated with the expropriated property has not been finalized.

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10. Contingent liabilities and commitments (continued) (c) Lease commitments

TRCA has entered into agreements to lease premises and equipment for various periods until 2021. Minimum lease payments in aggregate and for each of the next five years are as follows: 2015 $ 608 2016 1,067 2017 1,067 2018 1,010 2019 979 Thereafter 1,468

$ 6,199 (d) Loan guarantee

TRCA and the City of Toronto have jointly and severally provided a loan guarantee in the amount of $7.5 million to the Evergreen Foundation for the Don Valley Brick Works restoration project. The loan guarantee was renegotiated in 2014, reducing the amount of the guarantee to $4.3 million for 2015. As of December 31, 2014, Evergreen Foundation had received advances in the amount of $4.3 million ($4.8 million as of December 31, 2013) from its financing institutional lender. The agreement requires annual reductions in the amounts guaranteed until June 30, 2023.

11. Trust funds 2014 2013

Greater Toronto Area Agricultural Action Committee $ 79 $ 40

$ 79 $ 40 These funds which are held in trust by TRCA for the benefit of the Greater Toronto Area Agricultural Action Committee are not presented as part of TRCA’s financial position or financial activities.

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12. Budget figures Public Sector Accounting Standards require a comparison of the results for the period with those originally planned on the same basis as that used for actual results. The budget in the statement of operations has been adjusted to be presented on a consistent basis as actual results. Below is a reconciliation of the figures from the approved budget to the budget over the financial statements: Approved budget per Approved Capital financial Budget Reclassification Amortization assets statements

Total revenues $ 126,279 $ (3,818) $ - $ - $ 122,461 Expenses Watershed Studies and Strategies 7,227 (2,636) 10 (4) 4,597 Water Risk Management 21,932 - 1,984 (79) 23,837 Regional Biodiversity 15,794 294 55 (338) 15,805 Land Securement and Management 12,279 153 906 (5,447) 7,891 Tourism and Recreation 33,773 (4,142) 2,595 (6,324) 25,902 Planning and Development Review 7,214 404 14 (22) 7,610 Education and Outreach 10,912 (1) 343 (2,744) 8,510 Sustainable Communities 7,073 269 34 (8) 7,368 Corporate Services 9,757 1,841 830 (4,822) 7,606 $ 125,961 $ (3,818) $ 6,771 $ (19,788) $ 109,126 Net surplus for the year $ 318 $ 13,335 The approved budget listed above excludes $630 in amounts coming from reserves to fund projects during the year. The resulting surplus approved by the Board on April 25, 2014 is $944. 13. Comparative figures Certain comparative figures have been reclassified to conform with the financial statement presentation adopted in the current year.

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Toronto and Region Conservation Authority Schedules of Operations Information (in thousands of dollars) December 31, 2014 Certain allocation methodologies are employed in the preparation of the schedules of operations. Government grants, user charges, and other revenues are allocated to the specific program or service they relate to. Activity based costing is used to allocate internal support costs to departments. These costs include the net expenses for departments, such as human resources, information systems, finance and others, commonly referred to as overhead. TRCA reports on its activities in nine service areas which are reported in the accompanying supplementary schedules to the financial statements. Below is a description of each of these service areas: Watershed Studies and Strategies Watershed studies and strategies provide comprehensive, integrated policy and technical direction to other TRCA service areas and to partner municipalities related to integrated watershed management and regional sustainability. Main program areas include regular updates of watershed and subwatershed studies to meet municipal official plan and provincial policy requirements, comprehensive reporting of the health of TRCA watersheds and the Lake Ontario waterfront and risk analysis and modelling of the impacts of urban growth and climate change. Water Risk Management The service area is concerned with the management of water resources for the purpose of reducing risk to life and property. Main program areas include real time flood forecasting and warning, management and maintenance of flood control infrastructure, identification and management of erosion hazards and flood mitigation within flood vulnerable areas. Water risk management activities provide critical information on risks and hazards for the Planning and Development Review programs of the TRCA and of partner municipalities. Further, this service area provides support to municipal and provincial emergency management programs related to extreme weather risks. Regional Biodiversity The main program areas included with Regional Biodiversity are monitoring of ecological conditions and ecosystem trends, ecosystem planning and research, habitat restoration and regeneration, and forest management. The Regional Biodiversity service area supports partner municipalities in establishing and working towards goals for biodiversity, natural heritage, and community well-being through environmental health. Land Securement and Management This service area is focussed on the securement of environmentally significant and hazard sensitive lands within TRCA’s jurisdiction in order to protect natural functions and eco-system services. In addition to securement of lands key programs include the management and maintenance of the existing holdings. A primary goal is the integration of activities with local and regional municipally approved land management and planning frameworks.

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Toronto and Region Conservation Authority Schedules of Operations Information (in thousands of dollars) December 31, 2014 Tourism and Recreation The Tourism and Recreation service area provides memorable experiences for guests in nature-based settings, which make positive contributions to community health and well-being, while advancing the economic development goals of partner municipalities. Programs include management, maintenance and enhancement of conservation parks and recreation facilities including campgrounds and the Black Creek Pioneer Village. TRCA delivers these services through leveraging public and private partnerships that focus on community development, tourism and recreational offerings. Planning and Development Review Planning and Development Review programs provide input and technical support in the development and implementation of municipal official plans, secondary plans, subdivision studies and reports, and special by-laws. Support is provided to growth management and special policy studies as well as support for municipal infrastructure and growth planning through the environmental assessment review process. TRCA provides technical expertise, information and advice on flood control, stormwater management and the protection and conservation of natural systems and their functions within its watersheds. Education and Outreach Education and Outreach programs support municipal and provincial objectives for environmental education in schools, build professional capacity and competitiveness in the region’s sustainable economic sectors, and engage the broader population to become active in developing healthy, sustainable communities. Formal and non-formal education and training is delivered to develop a culture of life-long learning by for residents of all ages at TRCA education centres, academic institutions and in the community. Programs include school-based education programs, and professional training and development, and programs for residents. Sustainable Communities Sustainable Communities programs facilitate and advance regional sustainability through unique collaborations with public-private and non-profit sectors and engagement of watershed communities and support municipal economic development goals through transition of our region towards a green economy. The scope of the service area is broad, encompassing programs that address neighbourhood and sector specific eco-efficiencies (water, energy, waste and greenhouse gas emissions), awareness of and need for resilience to extreme weather, catalyzing the green economy with sustainable technologies, addressing food security through near urban agriculture, and engaging residents in awareness and sustainability action to foster a caring and involved citizenry. Corporate Services Corporate Services include financial, administrative and technical support services that enable TRCA staff to efficiently and effectively deliver TRCA activities.

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Toronto and Region Conservation Authority Schedule of Operations – Watershed Studies and Strategies (in thousands of dollars) Year Ended December 31 2014 2014 2013 Budget Actual Actual (Note 12) Revenue Municipal Operating levies $ 1,745 $ 1,745 $ 1,437 Capital levies 1,580 1,064 842 Other 28 28 5 Government grants Provincial 330 600 298 Federal 299 340 267 User fees, sales and admissions 2 2 11 Contract services 255 174 169 Fundraising Donations 238 - 25 The Living City Foundation 121 137 143 $ 4,598 $ 4,090 $ 3,197 Expenses Watershed and Waterfront Plans Watershed Plan Updates and Follow-up $ 2,610 $ 2,110 $ 1,935 Integrated Shoreline Management Plans 1,153 1,015 897 3,763 3,125 2,832 Report Cards 70 52 58 Climate and Extreme Weather Impacts 754 732 516 Amortization 10 10 11 Total Expenses 4,597 3,919 3,417 Net Surplus (Deficit) $ 1 $ 171 $ (220)

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Toronto and Region Conservation Authority Schedule of Operations – Water Risk Management (in thousands of dollars) Year Ended December 31 2014 2014 2013 Budget Actual Actual (Note 12) Revenue Municipal Operating levies $ 679 $ 679 $ 681 Capital levies 16,305 12,185 6,855 Other 31 - 118 Government grants Provincial 996 1,570 1,315 Federal 1 - 3 User fees, sales and admissions 33 31 21 Contract services 4,108 4,715 4,370 Investment income - 10 17 Sundry - (5) - $ 22,153 $ 19,185 $ 13,380 Expenses Technical Services Groundwater Strategies $ 773 $ 764 $ 512 Source Water Protection Strategy 996 1,041 1,229 Regional Monitoring 647 605 560 Hydrology 7 71 81 Stormwater Management 670 839 506 Flood Plain Mapping 340 369 223 3,433 3,689 3,111 Erosion Management Capital Works 12,255 9,326 4,687 Hazard Monitoring 1,830 535 334 14,085 9,861 5,021 Flood Management Flood Forecasting and Warning 337 335 350 Flood Risk Management 2,957 1,057 1,588 Flood Infrastructure and Operations 1,041 1,084 1,662 4,335 2,476 3,600 Amortization 1,984 1,985 2,021 Total Expenses 23,837 18,011 13,753 Net Surplus (Deficit) $ (1,684) $ 1,174 $ (373)

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Toronto and Region Conservation Authority Schedule of Operations – Regional Biodiversity (in thousands of dollars) Year Ended December 31 2014 2014 2013 Budget Actual Actual (Note 12) Revenue Municipal Operating levies $ 285 $ 285 $ 511 Capital levies 8,584 5,952 5,197 Other 292 296 287 Government grants Provincial 301 402 128 Federal 382 603 383 User fees, sales and admissions 70 29 19 Contract services and property interests 6,114 4,105 3,836 - Fundraising Donations 17 2 - The Living City Foundation 79 535 126 Investment income - 6 1 Sundry - 2 - $ 16,124 $ 12,217 $ 10,488 Expenses Biodiversity Monitoring Regional Monitoring $ 704 $ 695 $ 580 Activity Based Monitoring 843 710 555 Terrestrial Inventory and Assessment 310 338 213 1,857 1,743 1,348 Ecosystem Management Research and Directions Aquatic System Priority Planning 201 243 228 Terrestrial (and Integrated) Ecosystem Management 970 683 809 Compensation Restoration 27 9 29 1,198 935 1,066 Forest Management 1,000 631 574 Restoration and Regeneration Natural Channel Design 514 246 237 Propagation and Sale of Plants 160 111 (155) Inland and Lakefill Soil Management 265 262 269 Shoreline Restoration 1,052 780 598 Wetlands Restoration 317 338 387 Riparian and Flood Plain Restoration 1,139 644 533 Natural Channel and Stream Restoration 2,457 1,390 956 Terrestrial Planting 2,334 653 764 Wildlife Habitat 208 371 222 Watershed Restoration 2,389 3,730 3,113 Private Land Stewardship 860 731 613 11,695 9,256 7,537 Amortization 55 55 56 Total Expenses 15,805 12,620 10,581 Net (Deficit) Surplus $ 319 $ (403) $ (93)

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Toronto and Region Conservation Authority Schedule of Operations – Land Securement and Management (in thousands of dollars) Year Ended December 31 2014 2014 2013 Budget Actual Actual (Note 12) Revenue Municipal Operating levies $ 347 $ 347 316 Capital levies 2,760 2,598 2,556 Other 1,600 47 1,278 Government grants Provincial 5 53 - Federal 6 71 41 User fees, sales and admissions 40 37 16 Contract services 1,923 1,540 717 Rent and property interests 3,123 2,319 2,457 Fundraising Donations 3,000 618 1 The Living City Foundation 5 16 6 Investment income - 5 - Net gain/loss on sale of tangible capital assets - (41) (43) Sundry - 117 76 $ 12,809 $ 7,727 7,421 Expenses Land Securement $ 116 $ 261 156 Land Management Archaeology 578 476 522 Property Taxes and Insurance 610 543 561 Resource Management Planning 748 982 752 Inventory and Audit 65 123 131 Implementation 2,224 785 1,141 Hazard Management - 35 - 4,225 2,944 3,107 Rental Properties 2,644 2,053 2,074 Amortization 906 906 933 Total Expenses 7,891 6,164 6,270 Net Surplus $ 4,918 $ 1,563 1,151

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Toronto and Region Conservation Authority Schedule of Operations – Tourism and Recreation (in thousands of dollars) Year Ended December 31 2014 2014 2013 Budget Actual Actual (Note 12) Revenue Municipal Operating levies $ 3,008 $ 3,008 $ 3,022 Capital levies 6,380 3,456 2,228 Other - 661 223 Government grants Provincial 324 298 227 Federal 13 25 131 User fees, sales and admissions 8,979 8,881 8,374 Contract services 10,726 8,342 8,274 Rent and property interests - 175 71 Fundraising Donations 11 - 8 The Living City Foundation 64 128 221 Net gain/loss on sale of tangible capital assets - (26) (171) Sundry - - 3 $ 29,505 $ 24,948 $ 22,611 Expenses Waterfront Parks General maintenance $ 240 $ 266 $ 267 Park planning 7,436 4,954 6,852 7,676 5,220 7,119 Conservation Parks 5,133 5,456 4,976 Trails Trail Development 1,983 1,129 900 Trail Management 170 258 99 Trail Planning 906 561 573 3,059 1,948 1,572 Bathurst Glen Golf Course 1,269 1,152 1,191 Black Creek Pioneer Village 3,740 3,582 3,882 Public Use Infrastructure Pan-Am Games - 660 654 Arsenal Lands 30 104 130 Parks Infrastructure 238 748 451 268 1,512 1,235 Events and Festivals 2,162 2,427 2,427 Amortization 2,595 2,595 2,400 Total Expenses 25,902 23,892 24,802 Net Surplus (Deficit) $ 3,603 $ 1,056 $ (2,191)

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Toronto and Region Conservation Authority Schedule of Operations – Planning and Development Review (in thousands of dollars) Year Ended December 31 2014 2014 2013 Budget Actual Actual (Note 12) Revenue Municipal Operating levies $ 478 $ 478 $ 1,037 Capital levies 942 825 899 Other 1,194 915 958 Government grants Provincial -- 150 - User fees, sales and admissions 4,978 5,228 4,936 Contract services 26 180 94 $ 7,618 $ 7,776 $ 7,924 Expenses Development Planning and Regulation Permitting Planning $ 1,419 $ 1,333 $ 1,060 Permitting 1,093 1,074 974 Technical Services 1,047 988 1,002 Development Enforcement and Compliance 403 366 325 3,962 3,761 3,361 Environmental Assessment Planning and Permitting Planning 715 651 577 Permitting 726 729 686 Development Enforcement and Compliance 269 241 296 Technical Services 1,177 1,306 1,140 2,887 2,927 2,699 Policy Development and Review 747 642 769 Amortization 14 14 12 Total Expenses 7,610 7,344 6,841 Net Surplus $ 8 $ 432 $ 1,083

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Toronto and Region Conservation Authority Schedule of Operations – Education and Outreach (in thousands of dollars) Year Ended December 31 2014 2014 2013 Budget Actual Actual (Note 12) Revenue Municipal Operating levies $ 616 $ 616 $ 582 Capital levies 4,107 3,145 2,072 Other 505 - 19 Government grants Provincial 775 818 815 Federal 87 31 185 User fees, sales and admissions 3,499 3,037 2,826 Contract services 519 92 5 Fundraising Donations 55 4 27 The Living City Foundation 931 739 889 Investment income - 2 3 Net gain/loss on sale of tangible capital assets - (14) (35) $ 11,094 $ 8,470 $ 7,388 Expenses Educational Infrastructure Retrofits $ 1,042 $ 223 $ 74 Bolton Camp Development 45 870 90 1,087 1,093 164 School Programs Field Centres 2,476 2,275 2,287 Kortright 787 905 805 Black Creek 331 387 326 Other School Programs 822 835 676 Outreach Educations 874 760 737 5,290 5,162 4,831 Professional Training and Development 1,790 1,689 1,706 Amortization 343 343 301 Total Expenses 8,510 8,287 7,002 Net Surplus $ 2,584 $ 183 $ 386

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Toronto and Region Conservation Authority Schedule of Operations – Sustainable Communities (in thousands of dollars) Year Ended December 31 2014 2014 2013 Budget Actual Actual (Note 12) Revenue Municipal Capital levies $ 4,540 $ 3,468 $ 3,177 Other 171 161 88 Government grants Provincial 141 149 447 Federal 576 818 1,267 User fees, sales and admissions 347 293 333 Contract services 1,175 988 603 Rent and property interests - 90 Fundraising - Donations 125 35 21 The Living City Foundation 224 226 158 Net gain/loss on sale of tangible capital assets - - (2) $ 7,299 $ 6,138 $ 6,182 Expenses Living City Transition Program Sustainable Neighbourhood Action Plans $ 1,048 $ 1,106 $ 821 Community Transformation 916 880 812 Partners in Project Green 1,471 1,137 928 Urban Agriculture 209 91 99 Sustainable Technology Evaluation Program 1,167 1,095 1,196 4,811 4,309 3,856 Community Engagement Multicultural Connections Program 135 116 108 Stakeholder Engagement 1,193 506 476 Community Stewardship 1,195 1,151 1,211 Environmental Volunteer Network - 5 - 2,523 1,778 1,795 Amortization 34 34 30 Total Expenses 7,368 6,121 5,681 Net Surplus (Deficit) $ (69) $ 17 $ 501

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Toronto and Region Conservation Authority Schedule of Operations – Corporate Services (in thousands of dollars) Year Ended December 31 2014 2014 2013 Budget Actual Actual (Note 12) Revenue Municipal Operating levies $ 5,693 $ 5,693 $ 4,910 Capital levies 3,818 3,372 952 Government grant Provincial 774 120 774 Federal 116 86 - User fees, sales and admissions 153 146 74 Contract services 119 121 167 Rent and property interests 45 42 31 Investment income 540 568 573 Net gain/loss on sale of tangible capital assets - 7 (23) Sundry 3 169 358 $ 11,261 $ 10,324 $ 7,816 Expenses Financial Management $ 1,577 $ 1,653 $ 1,497 Corporate Management and Governance 1,528 1,591 1,279 Human Resources 788 841 593 Communications 1,421 1,376 1,364 Information Infrastructure and Management 1,693 2,055 1,783 Office Services 2,439 2,671 2,431 9,446 10,187 8,947 Project Recoveries (2,082) (2,985) (2,266) Vehicles and Equipment (588) (535) (566) Amortization 830 829 683 Total Expenses 7,606 7,496 6,798 Net Surplus $ 3,655 $ 2,828 $ 1,018

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CONFIDENTIAL

Attachment 2

Report to the Budget/Audit Advisory Board—communication of audit strategy and results Toronto and Region Conservation AuthorityFor the year ended December 31, 2014

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Audit • Tax • Advisory© Grant Thornton LLP. A Canadian Member of Grant Thornton International. All rights reserved.

Grant Thornton LLPSuite 20015 Allstate ParkwayMarkham, ONL3R 5B4T +1 416 366 0100F +1 905 475 8906www.GrantThornton.ca

June 26, 2015 To the members of the Budget/Audit Advisory Board of Toronto and Region Conservation Authority

We are pleased to report that we have now substantially completed our audit of the financial statements of Toronto and Region Conservation Authority (hereinafter the "Authority") for the year ended December 31, 2014. We enclose this report as a means to engage in effective two way communication with you regarding our financial statement audit. This communication will assist the Budget/Audit Advisory Board (hereinafter referred to as the Committee) in understanding our overall audit strategy and results of audit procedures and includes comments on misstatements, significant accounting policies, sensitive estimates and other matters.

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 Committee, Board of Directors 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

Anita Ferrari, BComm, FCPA, FCA Client Services Partner Michelle Sautner, CPA, CA Assurance Services Partner cc: Brian Denney, Chief Executive Officer Rocco Sgambelluri, Chief Financial Officer

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Audit • Tax • Advisory© Grant Thornton LLP. A Canadian Member of Grant Thornton International. All rights reserved. CONFIDENTIAL

Contents

Page

Achieving effective governance 1

Quality control and independence 2

Our audit approach 3

Status of the audit 6

Audit results 7

Reportable matters 8

Technical updates 10

Appendix A—Draft Management representation letter 11

Appendix B—PSAB Accounting developments 15

Appendix C—Engagement Letter 17

35

Report to the Budget/Audit Advisory Board —communication of audit strategy and resultsToronto and Region Conservation AuthorityFor the year ended December 31, 2014

1


Achieving effective governance

There are several fundamental components of effective governance. Those charged with governance play a key role in achieving strong governance, particularly with respect to financial reporting.

Roles in ensuring strong financial reporting

Role of the Committee

Help set the tone for the organization by emphasizing honesty, ethical behaviour and fraud preventionOversee management, including ensuring that management establishes and maintains internal controls to provide reasonable assurance regarding reliability of financial reportingRecommend the nomination and compensation of external auditors to the Board of DirectorsDirectly oversee the work of the external auditors including reviewing and discussing the audit plan

Role of the Board of Directors

Help set the tone for the organization by emphasizing honesty, ethical behaviour and fraud preventionOversee management, including ensuring that management establishes and maintains internal controls to provide reasonable assurance regarding reliability of financial reportingOversee 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 standardsDesign, implement and maintain effective internal controls over financial reporting processes, including controls to prevent and detect fraud Exercise sound judgment in selecting and applying accounting policiesPrevent, detect and correct errors, including those caused by fraudProvide representations to external auditorsAssess quantitative and qualitative impact of misstatements discovered during the audit on fair presentation of the financial statements

Role ofGrant Thornton LLP

Provide an audit opinion that the financial statements are in accordance with Canadian public sector accounting standardsConduct our audit in accordance with Canadian generally accepted auditing standardsMaintain independence and objectivityBe a resource to management and to those charged with governanceCommunicate matters of interest to those charged with governanceEstablish 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.

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2


Quality control and independence

Quality controlGrant 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.

IndependenceWe 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 Authority;

Confirming the independence of our engagement team members.

Grant Thornton LLP has a robust quality control program

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3


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 Authority 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 scepticism, recognizing the possibility that a material misstatement due to fraud could exist notwithstanding our past experiences with the Authority or our beliefs about management’s honesty and integrity.

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4


Internal controlOur audit includes gaining an understanding of the Authority’s internal control over financial reporting. Our understanding is focused 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.

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 Authority’s operations or compliance which may also be relevant to the Authority's objectives. Therefore, management and those charged with governance cannot solely rely on our findings to discharge their responsibilities in this area.

Please see the Reportable matters section for our internal control findings.

Risk assessmentOur risk assessment process identified the following areas where we focused our attention:

Risk area Audit procedures

Revenue generated from municipal levies, contracts, grants and special projects

Municipal levies were agreed to billings for the year and subsequent receipts. We tested a sample of expenditures on the deferred municipal levy schedule to test revenue recognition. Similar testing was completed for contract revenue and grant revenue.

Confirmed a sample of accounts receivable balances, and performed alternative procedures (subsequent receipts) if positive confirmation was not received for the balances sampled. Analytical review of revenue and various reconciliations as well as deferred revenue schedules were performed to identify any additional balances that required investigation.

Employee Compensation We reviewed the T4 summary and general ledger reconciliation for reasonableness and investigated unusual items. Payroll accruals were examined and both payables and compensation expenses were analytically reviewed. The underlying data used for analytical review was tested.

Tangible Capital Assets Examined supporting documentation for significant capital asset additions. Ensured that assets were capitalized in the proper class and that those expenditures not capitalized were properly considered. Amortization was tested to ensure it was applied in accordance with the amortization policy.

Operating Expenses Performed detailed analytical review comparing operating expenses to prior year and investigating and corroborating variances. Also, substantively tested various expense accounts to ensure appropriate recognition. Viewed support for significant payables and accruals and tested cut-off.

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5


MaterialityThe purpose of our audit is to provide an opinion as to whether the financial statements are prepared, in all material respects, in accordance with the applicable financial reporting framework. 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 an auditor 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 considerationsWe 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. Inquiring as to whether you have knowledge of any actual, suspected or alleged fraud affecting the Authority.

The following provides a summary of some of the fraud related procedures performed 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. 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 regulationsOne of the auditor’s objectives in the audit is to 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. We would like to know if you are aware of instances of the Authority not being in compliance with laws and regulations.

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

We would like to obtain your input on these matters.

We would like to obtain your input on these matters.

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6


Status of the audit

Outstanding items We have substantially completed our audit of the financial statements of the entity and the results of that audit are included in this report. Our draft independent auditor’s report accompanies the draft financial statements. We will finalize the report once the Board of Directors has approved the financial statements.

The following items were outstanding as at the date of this report:

Approval of the financial statements by the Board of Directors; Receipt and evaluation of legal letters; Procedures regarding subsequent events; and Receipt of signed management representation letter (draft has been attached in the appendices).

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7


Audit results

Summary of misstatements There were no non-trivial unadjusted misstatements identified as a result of our audit.

Summary of adjusting entries Our audit identified only one item which was adjusted for, which was an overstatement of receivables and Federal government grants revenue in the amount of $303,000. Additionally, management identified and provided us with thirty journal entries during the course of the audit. These adjustments were as expected and related primarily to adjustments to the tangible capital assets accounts as well as adjustments to bring the year end deferred revenue accounts in line.

Summary of disclosure mattersOur audit identified the unadjusted non-trivial misstatements from disclosure matters noted below.

The Authority has an operating line of credit with a limit of $1M that is not disclosed in the financial statement notes. Management has chosen not to disclose this information on the basis that its omission is not material to the users of the financial statements and we are in agreement with that assessment.

Due to difficulty in obtaining budget numbers by object for the current and prior year, the Authority has not disclosed expenses by object in the notes of the financial statements. We have considered this omission, and have determined this is an immaterial departure from Canadian Public Sector Accounting Standards.

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8


Reportable matters

Internal controlIf we become aware of a deficiency in your internal controls systems, auditing standards requires us to communicate those deficiencies we consider significant. A financial statement audit is not designed to provide assurance on internal control.

During the course of performing our audit, we did not identify any significant deficiencies in internal control.

However, during the course of performing our audit, we did identify the following matter which is a significant deficiency in internal control which we want to bring to the attention of the Committee.

During the course of our audit, it was noted that bank reconciliations had not been completed in a timely manner throughout the fiscal year. We did, however, note that there was an improvement over the previous year. Without timely monthly reconciliations, the risk exists that the interim information provided to management and the Board of Directors could be misstated, and banking errors would not be identified for correction with your financial institutions in a timely manner. Based on our observations, the lack of timely bank reconciliations did not misstate the interim information of the Authority during the 2014 fiscal year. We would recommend that monthly bank reconciliations be performed in a more consistently timely manner, for example, within one month of the month end date. This recommendation has been discussed with management and management has indicated that improvements have already been made to their bank reconciliation process which will result in more timely preparation.

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9


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

Significant findings Considerations and results

Significant new accounting policies

None identified.

Acceptable alternative accounting policies

None identified.

Significant transactions Provincial revenue sharingThe Ministry of Natural Resources reserves the right to direct the purpose to which the provincial share of land sale proceeds funds may be applied or torequest a refund. These monies (2014 - $1,781,000, 2013 - $941,000) had previously been recorded within the Authority’s reserves. After discussion with management in the prior year, it was determined that these reserves were actually deferred revenue; however, due to the immaterial nature, this was reported as an unadjusted misstatement in 2013. The Canadian Public Sector Accounting Standards require that items reported as uncorrected misstatements in previous years that are adjusted for in future years, must flow through the current year’s earnings and cannot be recorded as a prior period adjustment. Accordingly, the correction of this prior period error in the current year has not been reflected in the current year’s identified misstatements. The effect of the correction of the error in the current year financial statements is that contract revenue and net surplus have been decreased by $941,000 and opening deferred revenue – capital special projects and other has been increased by $941,000.

Sensitive accounting estimates and disclosures

Capitalization of tangible capital assetsManagement follows a methodology to ensure that all constructed capital assets are reviewed to ensure that the appropriate assets and amounts are properly capitalized as tangible capital assets.We reviewed management’s methodology, and on a sample basis have tested the capitalization of tangible capital assets. We agree with the method and amounts capitalized as tangible capital assets.

Contributed assets recorded at fair valueManagement obtains appraisal reports to support the fair values assigned to contributed property.On a test basis we reviewed the appraisal reports supporting the additions tested. The amounts recorded for contributed assets were derived from the valuation reports.

Fraud and illegal acts We did not identify any fraud or illegal acts.

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10


Technical updates

Accounting standardsAccounting standards issued by the Accounting Standards Board which may affect your business in the current year and future years include:

Section PS 3260 – “Liability for contaminated sites” which will be effective for TRCA for the year ending December 31, 2015 (earlier adoption is encouraged). This section which will be applied retroactively with restatement of prior periods may have a significant impact on the TRCA financial statements.

Further details of the changes to accounting standards are included in the Appendices. If you have any questions about these changes we invite you to raise them during our next meeting. We will be pleased to address your concerns.

Auditing standardsThere are no new auditing standards that will have a material impact on the Authority.

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Report to the Budget/Audit Advisory Board—communication of audit strategy and resultsToronto and Region Conservation AuthorityFor the year ended December 31, 2014

11


Appendix A—Draft Management representation letter

June 26, 2015 Grant Thornton LLP Suite 200 15 Allstate Parkway Markham, ON L3R 5B4 Dear Sir/Madam:

We are providing this letter in connection with your audit of the financial statements of Toronto and Region Conservation Authority (“TCRA”) as of December 31, 2014, and for the year then ended, for the purpose of expressing an opinion as to whether the financial statements present fairly, in all material respects, the financial position, results of operations, changes in net financial assets and cash flows of Toronto and Region Conservation Authority in accordance with Canadian public sector accounting standards.

We acknowledge that we have fulfilled our responsibilities for the preparation of the financial statements in accordance with Canadian 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 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 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 financial statements would influence the decision of a reasonable person relying on the financial statements.

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We confirm, to the best of our knowledge and belief, as of June 26, 2015, the following representations made to you during your audit.

Financial statements1 The financial statements referred to above present fairly, in all material respects, the financial

position of the entity as at December 31, 2014 and the results of its operations, changes in net financial assets and its cash flows for the year then ended in accordance with Canadian public sector accounting standards, as agreed to in the terms of the audit engagement.

Completeness of information2 We have made available to you all financial records and related data and all minutes of the meetings

of members, directors, and committees of directors, 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 Board and Committee actions are included in the summaries.

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 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 made to correct a material misstatement in the prior period 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 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.

10 You provided a non-audit service by assisting us with drafting the financial statements and related notes. In connection with this non-audit service, we confirm that we have made all management decisions and performed all management functions, have the knowledge to evaluate the accuracy

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and completeness of the financial statements, and accept responsibility for such financial statements.

Fraud and error11 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 financial statements.

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

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

14 We believe there are no uncorrected financial statement misstatements both individually and in the aggregate, to the financial statements taken as a whole.

Recognition, measurement and disclosure15 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 financial statements, are reasonable and appropriate in the circumstances.

16 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 financial statements.

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

18 The nature of all material measurement uncertainties has been appropriately disclosed in the 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 financial statements.

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 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 financial statements.

21 With respect to environmental matters:

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

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

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

22 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 under the Evergreen Loan Guarantee which is accurately described below:

a) TRCA and City of Toronto has jointly and severally provided a loan guarantee in the amount of $7.5 million to the Evergreen Foundation for the Don Valley Brick Works restoration project. As of December 31, 2014, the balance of the loan outstanding covered by the guarantee was $4.3million ($4.8 million as of December 31, 2013).

23 We have disclosed to you, and the entity has complied with, all aspects of contractual agreements that could have a material effect on the financial statements in the event of non-compliance, including all covenants, conditions or other requirements of all outstanding debt.

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

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

26 There have been no events subsequent to the balance sheet date up to the date hereof that would require recognition or disclosure in the 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.

Other27 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,

Brian Denney, Chief Executive Officer Rocco Sgambelluri, Chief Financial Officer

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Appendix B—PSAB Accounting developments

Public Sector Accounting Board Effective date

Section PS 3450 Financial instruments, Section PS 2601 Foreign currency translation and Section PS 1201 Financial statement presentationPS 3450 Financial instruments is 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 investments revises and replaces Section PS 3040 Portfolio investments.The issuance of these new sections also includes consequentialamendments to

Introduction to accounting standards that apply only to government not-for-profit organizationsPS 1000 Financial statement conceptsPS 1100 Financial statement objectivesPS 2125 First-time adoption by government organizationsPS 2500 Basic principles of consolidationPS 2510 Additional areas of consolidationPS 3050 Loans receivablePS 3060 Government partnershipsSection PS 3070 Investments in government business enterprisesPS 3230 Long-term debtPS 3310 Loan guaranteesPS 4200 Financial statement presentation by not-for-profit organizations

PSG-6 Including results of 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, 2016.For government organizationsthat applied the CPA CanadaHandbook – Accounting prior to their adoption of the CPA Canada Public Sector Accounting Handbook - Fiscal years beginning on or after April 1, 2012.For all other government organizations - Fiscal years beginning on or after April 1, 2016. This effective date was changed in May 2013 from fiscal years beginning on or after April 1, 2012.Earlier adoption is permitted.

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Public Sector Accounting Board Effective date

Section PS 3260 Liability for contaminated sitesThis Section establishes the recognition, measurement and disclosure requirements for reporting liabilities associated with remediation of contaminated sites. The Section does not deal with tangible capital asset retirement obligations, liabilities associated with the disposal or sale of a tangible capital asset and acquisition/betterment costs for tangible capital assets that are less than the future economic benefits.An entity will be required to recognize a liability if they have contamination at a site that exceeds an environmental standard, the entity is responsible/accepts responsibility, the entity expects to have to give up future economic benefits and the amount can be reasonably estimated. If an entity cannot reasonably estimate the amount, they must still provide disclosures concerning the liability.

Fiscal years beginning on or after April 1, 2014.Earlier adoption is encouraged.

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

Fiscal years beginning on or after April 1, 2017. Earlier adoption is permitted.

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Appendix C—Engagement Letter

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