Vodden,Benderseebach LLP

Vodden,BenderSeebach LLP

Chartered Accountants

P.O.Box758

41OntarioStreet

CLINTON,ONTARIONOM1LO Tel: (519)482-7979

Fax:(519)482-5761

INDEPENDENTAUDITOR'SREPORT

TotheMembersofCouncil,InhabitantsandRatepayers oftheCorporationoftheMunicipality ofMorris-Turnberry

WehaveauditedtheaccompanyingfinancialstatementsoftheCorporation oftheMunicipalityofMorris­ Turnberry,whichcomprisethestatementoffinancialpositionasat December31,2012,andthestatements ofoperations,changeinnetfinancialassetsandcashflowsfortheyearthenended,andasummary of significantaccountingpoliciesandotherexplanatoryinformation.

Management'sResponsibility fortheFinancialStatements

Management isresponsibleforthepreparation andfairpresentation ofthese financialstatements in accordance withCanadian generally accepted accounting principles,and forsuch internalcontrol as managementdeterminesisnecessarytoenablethepreparationoffinancialstatementsthatarefreefrom materialmisstatement,whetherduetofraudorerror.

Auditor'sResponsibility

Ourresponsibilityistoexpressanopiniononthesefinancialstatementsbasedonouraudit.Weconducted ourauditinaccordancewithCanadiangenerallyacceptedauditingstandards.Thosestandardsrequirethat wecomplywithethicalrequirementsandplanandperformtheaudittoobtainreasonableassuranceabout whetherthefinancialstatementsarefreefrommaterialmisstatement.

Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttpeamountsanddisclosuresinthe financialstatements.The proceduresselecteddependontheauditor'sjudgment,includingtheassessment oftherisksof materialmisstatement ofthefinancialstatements,whetherduetofraudorerror. Inmaking thoseriskassessments, theauditorconsidersinternalcontrolrelevanttotheentity's preparationandfair presentation ofthefinancialstatements inordertodesign<)IUditprocedures thatareappropriate inthe

circumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheentity'sinternal

I

control. Anaudit also includes evaluating theappropriatenessof accounting policies used and the

reasonablenessofaccountingestimates -madebymanagement, aswellasevaluating theoverall presentationofthefinancialstatements.

Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforour auditopinion.

Opinion

Inouropinion,thefinancialstate entspresentfairly,inallmaterialrespects,thefinancialpositionofthe Corporation oftheMunicipality'of Morris-Turnberry as atDecember 31, 2012 and the results ofits operations,changes innetfinancial assetsandcashflowsfortheyearthenended inaccordance with Canadiangenerallyacceptedaccountingprinciples.

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CharteredAccountants LicensedPublicAccountants Clinton,Ontario

February22, 2013

STATEMENT OFFINANCIALPOSITION
asatDecember31 / 2012 / 2011
FinancialAssets
Cash / 208,288 / 290,258
Investments / 82,565 / 81,505
Taxesreceivable / 529,301 / 492,134
Accountsreceivable / 481,097 / 357,132
Inventoriesforresale / 64,250 / 69,800
Loansreceivable / note4 / 1,011,371 / 1,077,387
2,376,872 / 2,368,216
Liabilities
Accountpayableandaccruedliabilities / 307,445 / 270,507
Deferredrevenue / schedule2 / 365 / 365
Landfillclosureandpostclosureliability / note5 / 298,446 / 222,274
Municipaldebt / note6 / 1,154,547 / 1,211,373
1,760,803 / 1,704,519

Netfinancialassets616,069663,697

Non-financialassets

Tangiblecapitalassetsschedule316,094,84915,715,207

Accumulatedsurplus$16,710,918$16,378,904

Theaccompanyingnotesandschedulesareanintegralpartofthesefinancialstatements

STATEMENTOFOPERATIONS
fortheyearendedDecember31 / 2012Budget / 2012 Actual / 2011Actual
Revenue
Taxationformunicipalpurposes / 2,067,911 / 2,038,539 / 1,720,486
Userfees / 1,366,552 / 892,285 / 850,420
Governmenttransfers / 1,645,099 / 1,654,115 / 1,752,615
Otherrevenue / 115,948 / 122,857 / 109,731
5,195,510 / 4,707,796 / 4,433,252
Expenditure
Generalgovernment / 554,105 / 526,178 / 593,743
Protectiontopersonsandproperty / 697,229 / 710,847 / 710,475
Roadways / 1,370,500 / 1,914,542 / 1,940,870
Environmentalservices / 496,272 / 696,323 / 657,947
Healthservices / 2,600 / 1,385 / 2,520
Recreationandculture / 239,183 / 261,219 / 224,466
Planninganddevelopment / 393,300 / 265,288 / 326,735
3,753,189 / 4,375,782 / 4,456,756
Annualsurplus(deficit) / 1,442,321 / 332,014 / (23,504)
Accumulatedsurplusbeginningofyear / 16,378,904 / 16,378,904 / 16,402,408
Accumulatedsurplusendofyear / $17,821,225 / $16,710,918 / $16,378,904

Theaccompanyingnotesandschedulesareanintegralpartofthesefinancialstatements

Annualsurplus(deficit) / 1,442,321 / 332,014 / (23,504)
Amortizationoftangiblecapitalassets / 719,521 / 710,434
Acquisitionoftangiblecapitalassets / (1,413,623) / (1,099,163) / (988,726)
Proceedsfromsaleoftangiblecapitalassets
(Gain)lossondispositionoftangiblecapitalassets / 2,998
Increase(decrease)innetfinancialassets / 28,698 / (47,628) / (298,798)
Netfinancialassetsbeginningofyear / 663,697 / 962,495
Netfinancialassetsendofyear / $616,069 / $663,697

Theaccompanyingnotesandschedulesareanintegralpartofthesefinancialstatements

Operating activities

Annualsurplus / 332,014 / (23,504)
Decrease(increase)intaxesreceivable / (37,167) / (66,176)
Decrease(increase)inaccountsreceivable / (57,949) / 185,782
Decrease(increase)in inventoriesforresale / 5,550 / 42,420
Increase(decrease)inaccountspayable / 36,938 / (161,584)
Increase(decrease)indeferredrevenue
Increase(decrease)inlandfillclosureliability / 76,172 / (104,387)
23,544 / (103,945)
Non-cashchargestooperations
Amortization / 719,521 / 710.434
Workingcapitalfromoperations / 1,075,079 / 582,985

Capital

Acquisitionoftangiblecapitalassets / (1,099,163) / (988,726)
(Gain)lossondisposaloftangiblecapitalassets / 2,998
Netinvestmentintangiblecapitalassets / (1,099,163) / (985,728)

Investing

Netdecrease(increase)ininvestments

Financing

(1,060)(513)

Debtissued / 57,400
Debtprincipalpayments / (56,826) / (39,510)
Netincrease(decrease)incashfromfinancing / (56,826) / 17,890
Netincrease(decrease)incash / (81,970) / (385,366)
Netcashlessbankindebtedness beginningofyear / 290,258 / 675,624

Netcashlessbankindebtedness endofyear

$208,288$290,258

Theaccompanying notesandschedulesareanintegralpartofthesefinancialstatements

..

MUNICIPALITYOFMORRIS-TURNBERRY NOTESTOFINANCIALSTATEMENTS

Fortheyearended December31,2012

1. Accountingpolicies

TheconsolidatedfinancialstatementsoftheMunicipalityofMorris-Turnberryaretherepresentationof managementpreparedinaccordancewithgenerallyacceptedaccountingprinciplesforlocalgovernments as recommendedbythePublicSectorAccountingBoard(PSAB)oftheCanadianInstituteofChartered Accountants.

Significantaspectsofaccountingpoliciesadoptedbythemunicipalityareasfollows:

a) Reportingentity

Theconsolidatedfinancialstatementsreflectthefinancialassets,liabilities, operatingrevenueand expenditures,reservesandreservefundsandchangesininvestmentintangiblecapitalassetsofthe reportingentity. Thereportingentityiscomprisedofallorganizations andenterprisesaccountable fortheiradministrationoftheirfinancialaffairsandresourcestothemunicipalityandwhichare owned orcontrolledbythemunicipality. Inadditiontogeneralgovernment tax-supportedoperations,they includewatersystemsoperatedbythemunicipalityandthemunicipality'sproportionateshareofjoint localboards.

Inter-departmentalandinter-organizationaltransactionsandbalancesareeliminated.

Thestatementsdonotincludetrustfundsthatareadministered forthebenefitofexternalparties. b) Basisofaccounting

I) Accrualbasisofaccounting

Sourcesoffinancingandexpendituresarereportedontheaccrualbasisofaccounting. Revenues arerecognized astheyareearned andmeasurable. Expendituresarerecognized astheyare incurredandmeasurableasaresult ofreceiptofgoods orservices andthecreationofalegal obligationtopay.

ii) Non-financialassets

Non-financial assets arenotavailable todischargeexisting liabilities andareheldforuseinthe provisionofservices.Theyhaveusefullivesextending beyondthecurrentyear,andarenotintended forsaleintheordinarycourseofoperations. Thechangeinnon-financialassetsduringtheyear, togetherwiththeexcessofrevenuesoverexpenses,providesthechangeinnetfinancialassetsfor theyear.

a)Tangiblecapitalassets

Tangible capital assets are recorded at cost, which includes all amounts that aredirectly attributabletoacquisition,construction,developmentorbettermentoftheasset. Thecost,less residualvalue,ofthetangiblecapitalassetsareamortizedona straight-linebasisovertheir estimatedusefullivesasfollows:

Landimprovements -30years

Buildings-50-60years

Buildingimprovements-25years

Transportationroadsinfrastructure-10-100years

Watersystem-30-80years

Vehiclesandheavyequipment -8-18years

Otherequipment -5-20years

Assetsunderconstructionarenotamortizeduntiltheassetisavailableforproductiveuse,atwhich timetheyarecapitalized.

..

MUNICIPALITYOFMORRIS-TURNBERRY

NOTESTOFINANCIALSTATEMENTS-2-December31,2012

Activelandfillsareamortizedannuallyonthebasisontonnagetippedduringthe year,asa percentageoftheestimatedtotalcapacityofthefacility.Theestimatedcoststocloseandmaintain currentlyactivelandfillsitesarebasedonestimatedfutureexpensesincurrentdollars,adjusted forestimatedinflation,andarechargedtoexpenseasthelandfillsitescapacityisused.

Themunicipality hasacapitalizedthresholdof$2,000 forland,$15,000forbuildings and transportationinfrastructureand$1,000-$5,000forvarioustypesofequipment,sothat individual tangiblecapitalassetsoflesservalueare expensed,unlesstheyarepooledbecause,collectively, theyhavesignificant value,orforoperationalreasons. Examplesofpooledassetsarecomputer systems,equipment,furnitureandfixtures.

b)Contributionoftangiblecapitalassets

Tangiblecapitalassetsreceivedascontributions arerecorded attheirfairvalueatthedateof receipt,andthatfairvalue isalsorecordedasrevenue.Similarly,transfersofassetstothirdparties arerecordedasanexpenseequaltothenetbookvalueoftheassetasofthedateoftransfer.

c)Leases

Leasesareclassifiedascapitaloroperatingleases.Leaseswhichtransfersubstantially allofthe benefitsandrisksincidentaltoownershipofpropertyareaccountedforascapitalleases.Allother leasesareaccounted forasoperatingleases andtherelatedlease payments arecharged to expensesasincurred.

d)Inventories

Inventoriesheldforconsumptionarerecordedatthelowerofcostornetrealizable value. iii) Reservesforfutureexpenditures

Certainamounts,asapprovedbyCouncil,aresetasideinreservesforfutureoperatingandcapital

expenditure. Transfers to or from reserves are reflected as adjustments to the respective appropriatedequity.

iv) Pensionandemployeebenefits

ThemunicipalityaccountsforitsparticipationintheOntarioMunicipalEmployeesRetirementSystem (OMERS),amulti-employerpublicsectorpensionfund,asadefinedcontribution plan. Theplan specifiestheretirementbenefitstobereceivedbyemployeesbasedonlengthofserviceandpay rates.

v)Deferredrevenue

Amountsreceivedandrequired bylegislation,regulationoragreementtobesetasideforspecific, restrictedpurposes arereportedinthestatementoffinancialpositionasdeferredrevenueuntilthe obligationisdischarged.These amountswillberecognizedasrevenuesintheperiodinwhichrelated expenditureareincurred.

vi) Investments

Investmentsarerecordedatcostplusaccruedinterestlessamountswrittenofftoreflectapermanent declineinvalue.

vii) Governmenttransfers

Governmenttransfers arerecognizedintheintheperiodinwhicheventsgivingrisetothetransfer occur,providingthetransfersareauthorized,anyeligibilitycriteriaaremet,andreasonableestimates canbemade.

viii)Useofestimates

ThepreparationoffinancialstatementsinconformitywithCanadiangenerallyacceptedaccounting principlesrequiresmanagementtomakeestimatesandassumptionsthataffect thereportedamounts reportedinthefinancial statementsandaccompanying notes. Duetotheinherentuncertainty in makingestimates,actualresultscoulddifferfromthoseestimates.

MUNICIPALITY OFMORRIS-TURNBERRY

NOTESTOFINANCIALSTATEMENTS-3-December31,2012

2.Transactionsonbehalfofothers

Taxationleviedforschoolboardandcountypurposesarenotreflectedinthefinancialstatements. The amountsleviedwere$840,142(2011:$834,368)for schoolboardsand$1,500,581(2011:$1,488,577) fortheCountyofHuron.

3.Pensionagreements

Themunicipalitymakescontributionstoamulti-employerpensionplanonbehalfofmembersof itsstaff. Theplanisa definedbenefitplanwhichspecifiestheamountoftheretirementbenefittobereceivedby theemployeesbasedonthelengthofserviceandratesofpay.Theamountcontributedfortheyearwas

$64,473(2011:$55,057) forcurrentservicesandisincluded asanexpenditureontheconsolidated statementoffinancialactivities.

4.Lo

5.Landfillclosureandpostclosurecostliability

Aliabilityforthecostsofsolidwastelandfillclosureandpostclosurecarerequirements accruesasthe capacityofsitesisused.Carerequirementsincludefinalcovering,landscaping,removalofgroundwater andleachatesandongoingmonitoringandmaintenance. Theestimatedliabilityisthepresentvalueof futurecashflowsrelatedtocapacityusedtodatediscountedattherateof2%. Therecordedliabilityis

$298,446(2011:$222,274).

6.Municipaldebt

Debtpayable

Waterdebenture

Tiledrainloandebentures

Principalpaymentsdueinthenextfiveyearsareasfollows:

2012

962,724

191.823

$1,154,547

2011

980,050

231,323

$1,211,373

2013:$49,2032014:$51,9202015:$49,0122016:$45,391

2017:$46,321

7.Contingentliabilities

Themunicipalityhasbeennotifiedofliabilityclaims. Becausesettlement amounts,ifany,cannotbe determinedorbecause claims areexpectedtobewithinthemunicipality's insurance coverage,no provisionhasbeenmadeforthecontingencyinthefinancialstatements.

Themunicipality isliable forlong-termliabilities withrespecttoloansforwhich theresponsibilityfor paymentofprincipalandinteresthasbeenassumedbyothers. Paymentsonmunicipaldebtfor water systemcapitalcostsandtiledrainage loans arerecoverable bypayments onloansreceivable from propertyowners. Howeverthemunicipalityhasprimeresponsibility tomeetthedebtpayments.

MUNICIPALITYOFMORRIS-TURNBERRY

NOTESTOFINANCIALSTATEMENTS4December31,2012

8.Contractualobligations

Themunicipalityhasenteredintocertaincontractsforservicesforfutureyearsincluding operationof watersystematabasecostof$32,500withadjustmentsforchangesintheconsumer priceindex.

Themunicipalityhascontractedwithothermunicipalitiesforfireprotectionserviceswithautomaticannual renewalsbutsubjecttotermination onnoticewithinspecifictimeperiods. Costsarepartlyfixedwith adjustmentsforconsumer priceindexincreasesandpartlyvariable basedonsharedcosts.

9.Tangiblecapitalassets

Schedule2providesinformationonthetangiblecapital assetsofthemunicipalitybymajorclassandby businesssegment,aswellasforaccumulatedamortizationoftheassetscontrolled.

I) Contributedtangiblecapitalassets

Themunicipalityrecordsalltangiblecapitalassetscontributed byexternalpartiesatfairvalue. ii) Tangiblecapitalassetsrecognizedatnominalvalue

Certainassetshavebeenassigneda nominalvalueof$1becauseofthedifficultyof determining a

tenablevaluation.

10.Budgetamounts

Undergenerallyacceptedaccountingprinciples,budgetamountsaretobereportedon theconsolidated statementsofchangeinnetassetsandoperationsforcomparativepurposes.The2012budgetamounts forthemunicipalityhavebeenapprovedbyCouncil. Certainamountshavebeenreclassifiedtoconform tothebasisofpresentationoftherevenuesandexpendituresontheconsolidatedstatementofactivities. Thebudgetfigureshavenotbeenaudited.

11.Scheduleofaccumulatedsurplus

Reserves

Surpluses

Investedintangiblecapitalassets Generalrevenuefunddeficit Unfinanced

Solidwastelandfillclosureandpost-closurecosts

Accumulatedsurplus

2012

1,135,119

16,094,849 (220,604)

(298.446)

15,575,799

$16,710,918

2011

871,286

15,715,207

14,685

(222,274)

15.507.618

$16.378.904

MunicipaltyofMorris-Turnberry

ScheduleofContinuityofReservesand ReserveFundsSchedule1

FortheYearEndedDecember31,2012

b

Forgeneralgovernment14,86371,88571,885-86,748

Forprotectionservices281,134-42,19742,197238,937

Fortransportationservices166,614340,625340,625-507,239

Forenvironmentalservices154,303-107,232107,23247,071

Forhealthservices36,045--36,045

Forrecreationandculturalservices177,704752752-178,456

Forplanninganddevelopment40,623--40,623

871,286413,262-413,262149,429-149,429$1,135,119

MunicipaltyofMorris-Turnberry

ScheduleofDeferredRevenue

FortheYearEndedDecember31,2012

Schedule2

b

FederalGasTaxFunds365104,387104,387104,387104,387$365

MunicipaltyofMorris-Turnberry

ScheduleofTangibleCapitalAssetsSchedule3A FortheYearEndedDecember31,2012

Cost

GeneralInfrastructure

PlantsandUndergroundBridgesTotalTotal

LandBuildingsMachineryVehiclesFacilitiesRoadsandotherandotherNetBookValueNetBook Value

EquipmentNetworksStructures20122011

Balance,beginningofyear356,8601,004,538546,0681,654,3121,751,19812,330,4591,751,1987,131,18026,525,81325,575,882

Add:Additionsduringtheyear252,70810.03633,513--588,869-214,0371,099,163988,726

Less:Disposalsduringtheyear--(3,256)--(15,620)-(18,876)(38,795)

Other:donationsandtransfers

Balance,endofyear609,5681,014,574576,3251,654,3121,751,19812,903,7081,751,1987,345,21727,606,10026,525,813

Accumulatedamortization

Balance,beginningofyear391,659259,895866,591308,2104,926,406131,3403,926,50510,810,60610,135,969

Add:Amortizationduringtheyear32,2235,49134,18490,677-359,74373,259123,944719,521710,434

Less:Accumulatedamortization

ondisposals--(3,256)--(15,620)(18,876)(35,797)

Balance,endofyear32,223397,150290,823957,268308,2105,270,529204,5994,050,44911,511,25110,810,606

NetBookValueof

TangibleCapitalAssets577,345617,424285,502697,0441,442,9887,633,1791,546,5993,294,768$16,094,849$15,715,207

••

MunicipaltyofMorris-Turnberry
ScheduleofTangibleCapitalAssets / Schedule3B
FortheYearEndedDecember31,2012
Total / Total
General / Protection / Roads / Water / Landfill / Health / Recreation / NetBookValue / NetBookValue
Government / system / andCultural / 2012 / 2011
Cost
Balance,beginningofyear632,486 / 203,915 / 21,586,076 / 3,550,000 / 222,412 / 2,099 / 328,825 / 26,525,813 / 25,575,882
Add:Additionsduringtheyear12,034 / 3,089 / 828,104 / - / 249,919 / (300) / 6,317 / 1,099,163 / 988,726
Less:Disposals duringtheyear(3,256) / - / (15,620) / - / - / - / - / (18,876) / (38,795)
Other:donationsandtransfers
Balance,endofyear641,264 / 207,004 / 22,398,560 / 3,550,000 / 472,331 / 1,799 / 335,142 / 27,606,100 / 26,525,813
AccumulatedAmortization
Balance,beginningofyear272,556 / 6,181 / 9,930,846 / 439,550 / 52,605 / - / 108,868 / 10,810,606 / 10,135,969
Add:Amortizationduring theyear18,415 / 1,791 / 591,963 / 73,259 / 15,839 / - / 18,254 / 719,521 / 710,434
Less:Accumulatedamortization
ondisposals(3,256) / - / (15,620) / - / - / - / (18,876) / (35,797)
Balance,endofyear287,715 / 7,972 / 10,507,189 / 512,809 / 68,444 / - / 127,122 / 11,511,251 / 10,810,606
NetBookValueof
TangibleCapitalAssets353,549 / 199,032 / 11.891,371 / 3,037,191 / 403,887 / 1,799 / 208,020 / $16,094,849 / $15,715,207

MunicipaltyofMorris-Tumberry

SegmentedInformationSchedule4

FortheYearEndedDecember31,2012

Revenue

GeneralPoilceFireBuildingOtherRoadsandWaterWasteOtherHealthRecreation ZoningandTotalTotal

Government ProtectionProtectionInspectionProtectionSreetlightsSystemDisposal EnvironmentalandCulture Development20122011

Taxation2.038,5392,038,5391,720,486

Usercharges24,n853,23113.549151,27580,012316,42616,123236,891892,285850,420

Grants1,476,59512,64714,832121,75628,2851,654,1151,752,615

Interestandpenalties122,857122,857109,731

3,662,76953,23113,549163,92294,844438,18216.123265,1764,707,7964,433,252

Operatingexpenditure

Wages,salariesandbenefits359,94914,33792,440489,2105,20038,89528.61013,5001,042,141999,919

Contractservices29,375230,292238,0724,50059,483580,355107,168306,069244.409251,7882,051,5111.523.452

Suppliesandmaterials107,24433,25024.05512,627251,43626,n289,1645,3471,38511,329562,6091,222,803

Amortization29,6101,791593.54173,25915,8395,481719,521719,521

526,178230,292285,659122,78672.1101,914,542212,399449,96733.9571,385261,219265.2884,375,7824,465,695

Netrevenue(expense)3,136,591(230,292)(285,659)(69,555)(58,561)(1.750.620)(117,555)(11,785)(33.957)(1,385)(245,096)(112)332,014(32,443)

MUNICIPALITYOFMORRIS-TURNBERRY

ONTARIOHOMERENEWALPROGRAMTRUSTFUND

STATEMENTOFCONTINUITY
FortheYearEnded December31 / 2012 / 2011
Balancebeginningofyear / $175 / $352
Expenditure
RepaymentstoProvince / 166 / 166
Administrationfee / 9 / 11
175 / 177

Balanceendofyear$0$175

Liabilities

Theaccompanying notesareanintegral partofthisfinancialstatement