The consolidated financial statements of the Regional Municipality of York are the representations of management prepared in accordance with generally accepted accounting principles for local governments established by the Public Sector Accounting Board (PSAB) of the Canadian Institute of Chartered Accountants.

The focus of PSAB financial statements is on the financial position of the Region and the changes thereto. The Consolidated Statement of Financial Position reports the financial assets and liabilities, and the non financial assets and liabilities of the Municipality. Financial assets are those assets which could provide resources to discharge existing liabilities or finance future operations. Municipal position represents the financial position and is the difference between assets and liabilities. This provides information about the Municipality’s overall future revenue requirements and its ability to finance activities and meet its obligations.

These consolidated financial statements reflect the assets, liabilities, sources of financing and expenditures in the Current Fund, Capital Fund, Reserves and Reserve Funds, and include the activities of all committees of Council, the York Region Police Services Board, Housing York Inc. and York Region Rapid Transit Corporation (Rapidco).

The 2003 comparative figures have been reclassified to conform to current presentation.

Investments
Investment income earned on surplus current fund, capital fund, reserves and reserve funds (other than development charges) are reported as revenue in the period earned. Investment income on the development charge reserve funds is added to the fund balance and form part of the respective deferred revenue balances.

Investments are carried at the lower of cost and market value. Any discount or premium is amortized over the remaining term of the investments.

Pensions and Employee Benefits
The Region accounts for its participation in the Ontario Municipal Employee Retirement System (OMERS), a multi-employer public sector pension fund, as a defined contribution plan. Vacation entitlements are accrued for as entitlements are earned. Sick leave benefits are accrued where they are vested and subject to pay out when an employee leaves the Region’s employ.

Other post-employment benefits are accrued in accordance with the projected benefit method prorated on service and management’s best estimate of salary escalation and retirement ages of employees. Actuarial valuations, where necessary for accounting purposes, are performed triennially. The discount rate used to determine the accrued benefit obligation was determined by reference to market interest rates at the measurement date on high-quality debt instruments with cash flows that match the timing and amount of expected benefit payments. Unamortized actuarial gains or losses are amortized on a straight-line basis over the expected average remaining service life of the related employee groups. Unamortized actuarial gains/losses for event-triggered liabilities, such as those determined as claims related to WSIB are amortized over the average expected period during which the benefits will be paid. The cost of plan amendments is accounted for in the period they are adopted.

Where applicable, the Region has set aside reserve funds intended to fund these obligations, either in full or in part. These reserve funds were created under municipal by-law and do not meet the definition of a plan asset under CICA PS 3250 Retirement Benefits. Therefore, for the purpose of these financial statements, the plans are considered unfunded.

The Regional Municipality of York’s Council completes a review of its operating and capital budgets each year. The approved operating budget for 2004 is reflected on the Consolidated Schedule of Current Fund Operations and is included in the budget figures presented in the Consolidated Statement of Financial Activities. The budget as approved by Regional Council includes those expenditures which are part of current tax levies and user charges. Figures are restated to include accruals for amounts accounted for in these financial statements subject to future funding.

Budgets established for the Capital Fund and Reserves and Reserve Funds are set on a project-oriented basis, spending of which may be carried out over one or more fiscal years. The budgets reflected in the Consolidated Schedule of Capital Fund Operations and the Consolidated Schedule of Reserves and Reserve Funds and included in the Consolidated Statement of Financial Activities is an annual budget only as required by the recommendations of the Public Sector Accounting Board of the Canadian Institute of Chartered Accountants.

Included in cash and cash equivalents are short-term investments of $705,715,095 (2003 - $682,142,615) with a market value of $705,599,263, (2003 - $682,114,755).

Long-term investments of $261,459,911 (2003 - $231,260,359) have a market value of $264,120,630 (2003 - $231,733,731).

Under legislation, $448,844,479 (2003 - $465,911,637), is comprised of both cash and cash equivalents and investments, is restricted as it is required to fund obligatory reserve funds.

Regional Operations
Commencing in 2000, the accumulated sick leave plan was replaced by a Short-term Disability plan for employees in Regional Operations. Under the plan, employees with five or more years of service were given the option of receiving a cash payout of fifty percent of the balance in their sick leave bank as at December 31, 1999 or deferring payment until termination of employment with the Region. The estimated value of the liability of the accumulated days for employees who chose the deferral option is $1,502,551 (2003 - $1,368,946) at the end of the year. Employees who had less than five years of service at December 31, 1999 are given the option on the fifth anniversary of their hire date to either receive payment for the value of accumulated sick days as at December 31, 1999 or defer payment until termination of their employment with the Region. A reserve has been established for the past service liability and is reported in the Consolidated Statement of Financial Position. The reserve balance at December 31, 2004 is $4,254,698 (2003 - $4,435,753).

Police Services
Under the sick leave benefit plan, unused sick leave can accumulate and employees may become entitled to a cash payment of one-half of the sick bank balance to a maximum of six months salary when they leave the municipality’s employ.

The liability for the accumulated days to the extent that they have vested and could be taken in cash by an employee on termination amounted to $10,485,919 (2003 - $9,863,304). A reserve was established to provide for a portion of the Police Services past service liability and the balance at the end of the year is $10,253,799 (2003 - $9,935,705) and is reported in the Consolidated Statement of Financial Position.

According to an independent actuarial valuation report dated March 4, 2005 the total estimated liability for both regional operations and police services is $11,988,470 (2003 - $11,232,250).

The Region contributes to the Ontario Municipal Employees Retirement System (OMERS), a multi-employer plan on behalf of approximately 3,487 members of its staff. The plan is a defined benefit plan and specifies the amount of the retirement benefit to be received by the employees based on length of credited service and average earnings.

The latest actuarial valuation dated February 19, 2004 indicates that current member and employer contribution rates are sufficient to fund future benefits. In 2004, contribution resumed to full levels in the amount of $13,935,255 (2003 - $3,910,242) and is included as an expenditure in the Consolidated Statement of Financial Activities.

Employees who retire under the OMERS pension plan at age fifty or greater with a minimum of twenty years of service with the Region, are entitled to continued coverage for extended health and dental benefits until they reach age sixty-five.

According to an independent actuarial valuation report dated March 4, 2005 the total future cost associated with these benefits is $20,948,661, (2003 - $19,074,511) and is reported in the Consolidated Statement of Financial Position.

Under the Workplace Safety and Insurance Act, the Region is a self-insured employer (Schedule II) for the majority of its employees.

According to an independent actuarial valuation dated March 4, 2005 the estimated liability for all claims incurred to December 31, 2004 is $2,255,934, (2003 - $1,927,488) and is reported in the Consolidated Statement of Financial Position. The unamortized actuarial loss as at December 31, 2004 is $456,935.

In 2002, the Region entered into a public-private partnership with York Consortium 2002 to implement the York Rapid Transit Plan (YRTP). The YRTP was developed from the Region’s Transportation Master Plan, which identified the need to implement a rapid network that would reduce the rate of traffic congestion and support economic and residential growth. Implementation of the York Rapid Transit Plan is estimated to cost $1.5 – 2.2 billion over the next 10 years and is contingent upon future funding agreements with the provincial and federal governments.

Funding agreements with the Province of Ontario and the Government of Canada were finalized in 2004 for the Quick Start portion of the YRTP. York Region Rapid Transit Corporation (Rapidco) was incorporated to implement the YRTP and commenced execution of its mandate in 2004.

Due to the closure of the Keele Valley Landfill Site at the end of 2002, the Region entered into agreements for the haulage and disposal of waste. The agreements, with Green Lane Landfill, Onyx Waste Services Inc. and Republic Services Inc., provide for waste to be hauled from the Region’s transfer stations to sites in Southwold Township, Ontario and Michigan, U.S.A. The initial term of the agreements is five years. In subsequent years, the rate change per tonne will be adjusted in accordance with the inflation rate.

Under provisions of the contracts in place with third parties for the disposal of waste, the Region has no obligations relating to the closure or post-closure maintenance of the disposal sites.

During 2004, the Region insured public liability through participation in a reciprocal insurance exchange, Ontario Municipal Insurance Exchange (OMEX).

Public liability insurance limits are at $50,000,000. The Region increased its level of self-insured retention, from the various deductible levels under the independent insurance policies, to $100,000 on January 1, 1998 under the OMEX policies.

Insurance premiums, claims under the deductible provisions of policies and claims in excess of insurance limits are paid from a Self Insurance Reserve Fund established by the Region. The Region makes annual contributions to the reserve on the basis of type of coverage, deductibles and insurance limits. Contributions in 2004 were $3,710,929, (2003 - $1,883,612) and are reported in the Consolidated Statement of Financial Activities.

The Region estimates that the liability as at December 31, 2004 for all outstanding public liability claims is $2,901,100, (2003 - $3,465,500).

Environmental impairment liability is fully self-insured by the Region. Total reserve available for public liability and environmental impairment is $3,309,445, (2003 - $3,458,596).

Current liabilities include a $4,205,415 (2003 - $6,146,720) obligation due to the Province for Local Service Realignment costs for Social Assistance and Social Housing attributed to Greater Toronto Area (GTA) Pooling.

Annual Local Service Realignment costs for 2004 have been included as expenditures in the Consolidated Statement of Financial Activities based on billings from the Province for Social Assistance, an interim agreement with the Province for Social Housing payments, and estimates for unbilled amounts relating to 2004.

The total obligation for 2004 will not be confirmed until the final billings for 2004 GTA Pooling costs are received from the Province.

The Region administers prosecutions and the collection of related fines and fees under the authority of the Provincial Offences Act (“POA”). The POA is a procedural law for administering and prosecuting provincial offences, including those committed under the Highway Traffic Act, Compulsory Automobile Insurance Act, Trespass to Property Act, Liquor Licence Act, Municipal By-laws and minor federal offences. Offenders may pay their fines at any court office in Ontario, at which time their receipt is recorded in the Integrated Courts Offences Network system (“ICON”). The Region recognizes fine revenue when the receipt of funds is recorded by ICON regardless of the location where payment is made.

The gross revenues consist of fines levied under Part I, II and III (including delay penalties) for POA charges and amount to $6,758,975 (2003 - $6,236,304). The net loss amounts to $1,911,503 (2003 - $1,833,151). Balances arising from operation of the POA offices are consolidated with these financial statements.

The Region has service contracts with the Ministry of Community and Social Services (MCSS) and Ministry of Children and Youth Services (MCYS). One requirement of the service contracts is the production of a report by management, Annual Program Expenditure Reconciliation (APER) which shows a summary by service of all revenues and expenditures and any resulting surpluses and deficits that relate to the service contracts.

A review of these reports shows the following services to be in a surplus position for the year ended December 31, 2004

The surplus amounts due back to MCSS and MCYS are reflected in the corporate liabilities account. Subsidy revenue has been recognized as earned according to the anticipated service contact and still pending upon finalization of 2004 financial records, was not based on cash flowed. Global budgeting provisions for the Child Care contract have not been finalized in 2004.

Revenue recognized in 2004 matched the Homelessness service contract. However, actual Ministry revenue cash flow resulted in a net payable of $57,226.

As part of the tax reform, the Province established a program through amendments to the Municipal Act (“the Act”) which require municipalities to cap any annual tax increase resulting from reassessment at 5% for Commercial, Industrial, and Multi-residential classes for the 2001 taxation year and beyond. The Act also provides that the costs of capping can be funded through retaining assessment related property decreases.

The Region is also required by the Act to perform a “bankering” role for the local municipalities to ensure that they would neither benefit nor lose as a result of this process. The Region will only transfer funds between area municipalities as part of the tax related adjustments and does not incur any direct financial costs to area municipalities.