2010 Annual Report - City of Vernon

RELATIONSHIP WITH LOCAL AND REGIONAL GOVERNMENTSThe City is a member of the Regional District of North Okanagan with three of the thirteen members of the Board of Directors. The City is also amember of two regional hospital districts – the North Okanagan Regional Hospital District and the North Okanagan/Columbia Shuswap RegionalHospital District. The City is responsible for its proportionate share of all operating and capital costs of these regional agencies determined bythe City’s proportionate share of assessed values for certain services. Funds for the City’s share of these services are raised through propertytaxation via annual tax requisitions.The City has a contract with the Regional District of North Okanagan for the operation of City parks and recreation services. Agreements alsoexist between the City, the Regional District and the District of Coldstream for operation of the water system. All City costs relating to thefunctions of parks, recreation, and water are reimbursed by the Regional District. The District of Coldstream utilizes the Vernon WaterReclamation Plant for treatment and disposal of sanitary effluent. The City is reimbursed for costs associated with the proportionate share ofColdstream effluent.Public transit is provided through a partnership between the City, the Regional District, the District of Coldstream, and BC Transit. Operation ofthe transit system is provided under contract by First Canada ULC. The City is also a member of the Okanagan Regional Library.FINANCIAL MANAGEMENT AND POLICIESPreparation of the audited financial statements, schedules, supplementary financial information, and statistical information is the responsibilityof the City’s Finance Division. Although close liaison exists with the City’s auditors, management is responsible for the form and content offinancial information presented in the Annual Report.The City maintains systems of internal budgetary and accounting controls that provide assurance of safeguarding of assets and reliability ofinformation. The City annually prepares a five-year budget based on management estimates of revenues and expenses for services mandated byCouncil. Included in each five-year budget are several budgetary policy statements designed to provide added context to the budget.Determination of annual property tax rates, tax rate ratios between assessment classes, and utility rates are approved by Council based onrecommendations from management and existing policies.AUDITPursuant to provincial legislation, Council – through the City’s Audit Committee - must appoint an independent auditor to audit the accounts ofthe City as well as to examine certain internal controls implemented by management. The role of the Audit Committee is to oversee the auditfunction by reviewing the annual audit reports and management letter and by keeping abreast of emerging issues in local government financialreporting and auditing. The audit firm, BDO Canada LLP, was appointed to express an opinion on whether the consolidated financial statementspresent fairly, in all material respects, the financial position of the City of Vernon and the results of its operations. The City received a clean auditopinion for 2010. The City’s Audit Committee has reviewed and approved the 2010 audited financial statements.2010 FINANCIAL RESULTS & FUTURE OUTLOOKThe 2010 change in the City’s financial position was mixed with net debt decreasing from $14.9 million to $11.9 million. Cash and cashequivalents experienced a net decrease of $3.9 million in 2010. The City’s book value of tangible capital assets increased from $518.6 million in2009 to $522.0 million in 2010. A total of $10.8 million in tangible capital asset amortization expense was recognized. Consolidated revenue for2010 was 103.7% of budget; expenses were 106.5% of budget resulting in an overall consolidated surplus of $4.2 million. Major consolidatedvariances in 2010 were as follows:• Higher than budgeted capital contributions ( $1.0 million) from development cost charge deferred revenue due to additional capitalprojects• overage of $409,000 in sanitary sewer fee revenue• short-fall of $674,000 in senior government capital and operating grant revenue• overage of $2.6 million in tangible capital asset amortization expense and losses on disposal of infrastructure combined• short-fall of $407,000 in police service expenses• overage of $1.1 million in road transportation expenses due to additional capital projectsThe financial outlook for the next five years remains stable with continued economic recovery taking place in the region. The current majorcapital investments in our community such as the hospital expansion, the new library and Nixon Wenger buildings as well as the new VernonSenior Secondary school continue to benefit the local economy.On behalf of the Finance Division, I would like to take the opportunity to express appreciation to Council and staff for their efforts in achievingfavourable results in 2010.Kevin Bertles, CGA Finance ManagerPAGE 11CITY OF VERNON 2010 ANNUAL REPOR