City of Guelph 2025 Consolidated Financial Statements and External Audit Findings Report, dated June 23, 2026, be approved.

27:01Welcome

27:02Good evening mayor Guthrie members of council and members of the public who are joining us

27:15I am pleased to be here today to present highlights from the 2025 consolidated financial statements

27:20I would like to thank all members of staff and our consolidated entities for their contributions to the city's audit and consolidated statements

27:28The audit process and preparation of the financial statements is a significant undertaking

27:32And I truly appreciate all the communication and collaboration with staff across the city and with our local boards

27:39The municipal act requires the city to engage independent auditors to an express and

27:44To express an opinion as to whether the financial statements fairly present the city's financial results for the year

27:51Every five years we put the audit work out to tender and 2025 is the first year of the new cycle

27:57The city undertook a competitive RFP process in 2025 for the appointment of the city's auditors for a five-year contract ending in

28:042029

28:06LLP was a successful

28:09Proponent and at the conclusion of my presentation Brendan Hall partner at KPMG will present the findings from their audit

28:16The consolidated financial statements present a full picture of the city and its consolidated entities finances which includes its assets

28:23liabilities revenues and expenses

28:27Last month the city presented the year-end budget focused results for operating capital reserves and debt

28:33The consolidated financial statements use the same set of data

28:36But adds in our consolidated entities results and presents the information in accordance with public sector accounting standards

28:47Along with the city's financials the consolidated statements include the Elliott community the downtown Guelph business Association

28:54Wellington Dufferin Guelph public health the Guelph Public Library Board the Guelph police services board Guelph Junction Railway and Guelph municipal holdings

29:03The statements are prepared by city staff in accordance with public sector accounting standards, which we refer to as PSAS

29:13These standards are set by the public sector accounting board of CPA Canada and require full accrual accounting

29:19Which differs from the city's budget focused reporting particularly in the areas of capital asset accounting debt and reserve transfers

29:27The financial statements received an unqualified opinion from KPMG

29:31Confirming they present fairly in all material respects the financial position and results of operations for the city

29:37As part of the audit process three corrected misstatements were identified all were below

29:43Materiality and were fully resolved before the draft financial statements were prepared

29:47Two of these were identified early in the audit by KPMG and staff are confident

29:51These would have also been identified through our normal year-end closed processes

29:55The third related to a capital project progress payment was identified through KPMG year-end transaction review

30:03Staff have developed enhanced processes to proactively identify similar items in future audits

30:09Overall the city maintains a strong system of internal controls and structured year-end closed processes

30:15Supported by multiple levels of review throughout the year as reported and approved by council in May for the 2025 year-end

30:26The city changed the revenue recognition method for development charge funded projects that are debt financed

30:32Under the revised revenue recognition policy

30:35Development charge reserve funds are drawn down as debt principle and interest payments are made

30:40This change improves alignment between cash flows and debt repayment more accurately reflects the actual availability of

30:47Development charge reserve fund balances and better aligns financial forecasting and financial reporting

30:53This required a retrospective restatement and the 2024 year-end balances have been restated accordingly

30:59The statement of financial position is a snapshot of what the city and its consolidated entities own along with everything that is owed

31:10In 2025 the city continued the trend of increasing financial assets faster than financial liabilities

31:17Overall net financial assets increased by 14.5 million as growth in financial

31:22assets outpaced increases in financial liabilities on

31:26The financial assets side growth and accounts receivables related to grants from upper levels of government

31:31the timing of debt issuance for major capital projects under construction and strong 2025

31:37financial performance from gjr and gmhi contributed to the increase on

31:42The financial liability side the city's debt balance increased due to new debentures issued to fund the south end community center and Baker district projects

31:51Employee future benefits increased by 8.3 million largely due to an updated wsib actuarial valuation

31:58reflecting current claims experience a

32:00Reduction in the deferred contribution liability

32:03Offset those increases mainly due to a recognition of development charge revenues for growth related infrastructure

32:09The investment in tangible capital assets increased by a hundred seventeen million year over year a

32:18Significant driver of this increase is progress on the construction of the south end community center and Baker district

32:24The city continues to invest heavily in its capital program

32:27Which will result in a changing financial position over the coming years

32:31Including drawing down capital reserves and increased reliance on debt financing consistent with the debt with the approved debt strategy

32:38The city may transition into a net debt position over time as capital investment continues

32:43But is well positioned to manage these transitions

32:46The statement of operations lists all revenues earned and expenses incurred within the fiscal year

32:57Overall revenues increased by seventy nine point five million in twenty twenty five compared with twenty twenty four

33:02The key revenue lines contributing to this increase are grant revenues which increased by twenty six point eight million as a result of multiple grants from provincial and federal

33:11Governments that are supporting capital investment in the golf community

33:15Taxation revenues which increased by twenty four and a half million and development charge revenues which increased by twelve point six million

33:22This slide shows the city's revenues by type from the chart

33:29We can see that taxation and user charge revenues account for the majority of revenue that the city receives

33:35These two sources alone make up approximately sixty seven percent of total revenues

33:39We can also see the significant increase in government contributions and developer revenues from twenty twenty four to twenty twenty five

33:55Overall expenses increased by thirty one point six million in twenty twenty five

33:59With twenty five point eight million of that growth attributable to compensation

34:04As noted in last month's year-end operating budget report key drivers include new collective agreements for QP 973 and 241

34:12increased temporary staffing

34:14Overcomplement hires and overtime to support city operations amidstaffed leaves and recruitment challenges

34:21Employee future benefits, which is also reported in the compensation section of the funding of the statement of operations

34:27Rows by eight point three million primarily due to higher workplace safety and insurance board claims

34:33Outside of compensation

34:35operational expenses vary year to year based on service needs in

34:392025 purchase services increased mainly due to overall higher capital projects spending a

34:44Portion of which is not defined as tangible capital assets under p.s. S

34:49This chart shows expenses by type and we can clearly see that compensation remains the largest driver of year-over-year expense growth

35:00followed by purchase services as a reminder

35:10Sustainability vulnerability and flexibility are the city's three long-term financial framework pillars used to assess financial health and resilience

35:18I will now go through a few key metrics that we have not already already previously discussed through the budget reporting last month

35:25The first metric under the sustainability pillar is the cash and investments to reserve and reserve funds ratio

35:35The cash to reserves ratio is the indicator of the city's ability to meet its obligations

35:40The minimum target for this ratio is one to one which means for every dollar in reserve and reserve funds

35:45The city has one dollar in cash and reserves a higher ratio indicates stronger ability to meet current obligations in

35:522025 the cash and investments to reserve and reserve funds ratio is one point zero two to one

35:58Which remains above the minimum target?

36:00This is a decrease when compared to 2024 and as a result of new debt issuances in 2025 and the change in revenue recognition

36:07policy for development charge debt

36:10The next metric is net financial assets

36:13Total consolidated net assets increased by fourteen point five million in 2025. This increase was due to financial assets increasing more than financial

36:22Liability this sorry this increase was due to financial assets increasing more than financial liabilities

36:28Due to gross and accounts receivable the cash and investments balance as well as the city's investments in GMH and GJR

36:36The final metric under this pillar is the asset consumption ratio

36:39Which tells us how our assets have aged in the fiscal year an increasing consumption ratio tells us that our assets are aging faster than we are replacing them

36:48The asset consumption ratio decreased in 2025 which tells us that the cities

36:53The the cities invested in capital assets at a higher rate than previous years

37:03Within the vulnerability pillar the first metric is federal and provincial contributions as a percentage of total revenues and

37:102025 the contributions from federal and provincial governments increased to 18.5 percent of revenue

37:15This increase is related to several investments in capital infrastructure from upper levels of government

37:21This percentage can vary year to year based on the type and amount of government funding received in the year and the timing of revenue

37:28recognition for capital projects which is linked to the execution of capital projects that the grant funding is supporting

37:35These grants are extremely helpful to move the city's capital program forward

37:39However a significant number of these grants provided our application based one-time grants rather than stable ongoing sources of funding

37:47The city monitors this metric to maintain visibility over reliance on grant funding versus own source revenues

37:55Taxers as a percentage of taxes levy is an important financial indicator of municipal economic health and

38:01Indicates the ability of taxpayers to meet their financial obligations

38:05This metric decreased to three point two nine percent in 2025 from three point six three percent in 2024

38:11In comparison with other municipalities the cities continues to have extremely low levels of tax arrears

38:17Further information on the city's taxes receivable can be found in the 2025 property tax receivables and collection information report

38:25released in February 2026

38:27The final metric undervolunt vulnerability is the return on investment the city's return on investment was three point five six percent in

38:352025 which is a decrease from 2024 the decrease is primarily driven by declining market rates as

38:43well as

38:44strategic investment

38:46dispositions for one time realized gains in 2024

38:50The third pillar of the long-term financial framework is flexibility

38:54The metrics associated with this pillar are related to the city's reserve and reserve funds

38:58Which were included in the 2025 year and reserve and reserve fund report provided in May

39:03So we have not included those metrics in today's presentation

39:10Thank you for the opportunity to present highlights from the 2025 consolidated financial statements

39:15My hope is that you were able to take away that the city remains in a stable position at the end of 2025

39:21Although there are challenges ahead on many fronts

39:23We continue to monitor and manage risk

39:25Report on progress and provide our best advice to council as we work towards sustainable delivery for our community

39:32Today we are asking you to approve the consolidated financial statements and attachment one of the staff report. I

39:38Will now turn the presentation over to Brendan Hall partner at KPMG to discuss the findings from the 2025 audit at the conclusion of his

39:46Presentation both Brendan and staff will be happy to answer any questions you have. Thank you

39:53Thank you very much

39:54Just looking can my slides come up or just looking to confirm the presentation here

40:28Maybe just give us a minute or two. We'll make sure we can pull up the right for it. Thanks

40:57Perfect. Thank you very much. Thank you for the introduction as well Teja. So my name is Brendan Hall

41:02I'm a partner with KPMG and with me

41:04I have Madhu who is a senior manager and an instrumental on the audit this year for Guelph and many of the

41:10subsidiary entities as well that are consolidated into these consolidated financial statements

41:15Our plan will be to walk through our audit findings report and happy to take any questions that

41:22That you may have so really as overall highlights here

41:32Teja indicated we do have some corrected adjustments that have been reflected in in the consolidated financial statements

41:39We're gonna walk through some of the significant risks that we

41:43Operated with during the audit and we're also gonna focus on what we refer to as areas of audit focus where the team spent

41:49large areas of time based on either materiality levels or

41:54Areas that are deemed to be a bit more complex within the financial statements in terms of the status of where we are at today

42:08We are what I would call at the 95%

42:11Completion standpoint so there are few administrative elements that we would expect to be

42:15Outstanding at this stage

42:17Receive a few of the final legal letters

42:19So we communicate with the lawyers that the city uses to ensure we're aware of any outstanding litigations

42:25And in topics of such the other items on here with respect to the testing of journal entries testing of TCA additions and

42:33Development charges I can happily report have all been completed in the past week since this report was shared

42:38For mailing purposes, so we're getting very close to being in a position to issue our opinion on the financial statements

42:44And Madhu I'll get you to walk through a couple slides and then I'll take it back over

42:53Thanks Brenda

42:55Starting with management override of controls

42:57this is a presumed risk in all the audits and we have completed the procedures

43:04Now since we issued the report for the for the filing purposes

43:09So the procedures included we tested the design and implementation over the controls around the journal entries and

43:16We selected procedures the selected journal entries where we think the significant risk and

43:23We tested hundred percent of all the high risk criteria journal entries and we perform

43:30completeness procedures over the journal entries and

43:33There were no issues or findings identified in this procedure and the next one is the

43:45Post-employment benefits this area involves significant estimate and

43:51management we assessed the key assumptions used to

43:56Come up with the post-employment benefits

43:58We tested the underlying data and leveraged the actual real specialist as a part of the procedure

44:04Based on the completed audit work. We did not identify any audit findings or misstatements in this area

44:11Now I'll hand it over back to Brenda. Thank you

44:16Tangible capital assets is a very material number in the consolidated financial statements

44:22And we do a number of procedures to ensure that that figure is accurate

44:27Additions the city each year obviously constructs significant assets

44:32Also does repairs and maintenance to existing assets

44:35So we have a few different procedures that the engagement team performs

44:37We run statistical sampling on the additions that have been capitalized during the year to ensure that those meet the definition of a

44:44Tangible capital asset and shouldn't have been expensed in the statement of operations

44:48We also on the inverse side of that

44:51We're looking at what has been expensed in repairs and maintenance type general ledger accounts to ensure there aren't items that are

44:58Actually being expensed that would have a multi-year benefit

45:01It should have been capitalized onto the balance sheet. We also perform

45:06Substantive analytical procedures on the amortization expense that's recorded during the year so again

45:12Under PSAB were required to capitalize those capital assets and then we basically reflect the consumption

45:19Or deterioration of those assets over a period of time so in these financial statements

45:23You have amortization expense a sizable number. That's really a non-cash expense

45:28But reflecting the utilization of your assets over time so in capital assets. We perform a number of different procedures

45:36Again really from the standpoint that that's such a large number on your on your statement of financial position

45:41No issues were identified in the performance of our testing in this area

45:48obligatory reserve funds and deferred revenue again significant topic as Tisha indicated the city went through a process this year

45:56in terms of changing their accounting policy for the recognition of

46:01Development charges specifically related to projects that are funded

46:04With external with external debt and so our team was involved in working through that adjustment

46:10That's reflected in the financial statements, but on a recurring

46:15Normal side of the testing

46:17There's again a host of procedures that we are doing so our team again on a statistical sample basis was involved in testing

46:25What I'll use casual language and refer to the inflows to the obligatory reserve so testing the developers

46:31Contributions the DC collections ensuring we're vouching those back to cash

46:35And and executed agreements and then on the other side the realization of of DC revenue

46:41ensuring that there's evidence that

46:44Projects were expended within fiscal 2025 and those projects met met the definition

46:51And were development in nature right so the only way that we can record that DC revenue is if the funding was used for a DC

46:57eligible

46:59Expenditure so testing is performed on both sides

47:01The inflows and the outflows

47:04To get comfortable with the ending balance of the obligatory reserves as at December 31st 2025

47:13Contaminated sites was was a new accounting standard that came into into play a couple years ago

47:18Again there. There's definitely estimation involved there the activity in terms of the 2025 financial statements

47:25For the most part reflect accretion or the passage of time and so our team

47:30Reviewed the entries that have been recorded to increase that obligation on your financial statements to reflect that

47:37obligations

47:38To to satisfy today are more expensive than they would have been a year ago

47:42So that accounting standard requires us to present value those obligations

47:46And so you would expect that that obligation is going to accrete or grow over time until

47:52elements are settled

47:56asset retirement obligations

47:59Some similarities to arrow. Sorry to contaminated sites

48:03Again, we reviewed management estimates for the arrow

48:07We tested any of the new additions to the arrow and we tested the calculations with respect to the accretion of those

48:14Obligations in the financial statements and we did not identify any issues in the performance of our testing procedures

48:21Cash and investments a large asset on your balance sheet or statement of financial position

48:28our team maintains full custody of

48:31Confirming those balances with the financial institutions that hold the city of Guelph's investments and cash balances

48:37We maintain the submission and receipt of those of those

48:41Confirmations and we ensure that what is reflected in the city's financial statements and general ledgers consistent with what we're receiving directly from

48:48Those financial institutions and there were no no issues identified with respect to those procedures

48:54We also tested significant government contributions

49:00To ensure that the criteria in those transfer agreements have been met by the city in order to realize the revenue that's been recorded in fiscal

49:082025 in addition to testing the revenues that are recorded in 2025

49:13Our team specifically around revenue and grants in particular

49:17We focus on a cutoff standpoint as well

49:19So we actually look at some of the transactions that are happening late in 2025 to ensure that they are appropriate to be recorded in

49:262025 and we also actually look at some of the first transactions in

49:292026 to make sure those shouldn't have actually been accrued for or reflected in 2025 and we didn't identify

49:36Issues with respect to the testing in those procedures either so we don't have any new accounting policies

49:45We do have a change with respect to the

49:48Development charges that we've spoke to and that Tisha spoke to as well before our presentation

49:53But really not a new standard year like some of the previous years have been with respect to contaminated sites

50:00arrow financial instruments

50:02And things like that quieter year on the PSAS PSAS front

50:06So the last section that I will

50:13Plan to walk through here

50:15Just trying to get to the slide

50:18Would be with respect to the adjustments that Tisha indicated have been corrected for in these financial statements

50:23So again, I would agree with the statement that a couple of these adjustments really were identified as we're performing

50:31Testing on the general ledger balances and I do feel that a couple of them would have been identified through the consolidation process

50:38again the

50:40One related to just a reclass between where an entry was parked so

50:45Accounts receivable as opposed to inventory no impact on the statement of operations or the P&L

50:51The item three on the list is with respect to again, I would call that a bit of a cutoff

50:58Timing entry so there's TCA that we feel were understated at the end of the year and also in a cruel

51:03So we've got an asset and a liability

51:05No impact on the statement of operations and then the first item on the list

51:09Was really a duplication of an entry that again?

51:13I think would have been identified at the consolidated

51:16Level but again, we found it in our testing and we have to report it to this group

51:20So I'd be happy to answer any questions if there are any from the group

51:26Okay. Thank you very much the presentation. Are there any questions for the

51:33Councillor Karen

51:36Yes, thank you a great presentation and

51:39As chair of corporate services, I'm not surprised at the at the results because I know you're measuring not just our statements themselves

51:46But all the processes and in the background of the foundation of how they're built and I know we have an amazing

51:54Financial team at the city. So this just underlines the good work that they're doing

51:59My question is, you know, one of the things that this council is very proud of

52:04And that we work really hard to protect is our triple a credit rating

52:08And I just wondered whether there was and debt to reserve ratio and our processes are part of what what is built into those standards and

52:18Poor's measurements and I know you are not standards and poor's but I'm just wondering if there's anything and anything you found

52:24That might have impact on us maintaining our triple a credit rating

52:30Yeah, so I

52:32As an auditor, I don't know that's really an area that I can speak to in terms of the credit rating

52:37I think you know when I'm looking at a set of financial statements, and I'm seeing you know positive positive incomes generated growth in financial

52:45Assets as the finance team indicated those would be two positive

52:50indicators in my in my view, but really don't feel I'm kind of

52:54Credited to speak to how a credit rating would would be derived, right? Yeah, no, I understood I just

53:01Any of those flags in a report like this

53:05We would take back to our finance team in order to protect that credit rating

53:08So thanks very much for your findings and good news all around

53:13And thank you mayor Guthrie

53:16question

53:19Thank You Madam Chair

53:21No, I just wanted to

53:24Quickly respond to councillor Caron, which is not a question to our good people of auditing

53:30So I will stop there and let you continue with counselors that might have questions

53:35But come back to me for a comment if you don't mind before wrap up

53:39I'll think about that

53:42Is there any other questions for

53:47Particia or Brendan

53:50Seeing none Wow, I think we're all talked out

53:53So

53:56Okay, thank you very much and we'll go right to our motion. Thank you for your time. Thank you

54:06So we do have a motion to

54:09For the it to be approved for their consolidated financial statements and external audit finding report be approved

54:16We have somebody online who wants to do that

54:19Councillor Billings seconded by mayor Guthrie

54:25Okay, so I'll go to you mayor Guthrie. Okay. Thanks madam chair

54:34Look, look just this is a reminder to everybody

54:38For two years in a row now at every budget

54:42Council has passed unanimously a recognition

54:46That our triple-a credit rating may be under risk

54:50It was a unanimous vote of everyone

54:54Because of the efforts we've been putting into infrastructure and the housing crisis and

55:01We were balancing the acts of of sort of what we could do within our pro policy within the capacity that we have

55:09Which by the way were under

55:12Policy from the province well under sort of that space that capacity that's there

55:17We're very financially good there

55:20but

55:22You know, I will say it was

55:25It's something that is you know on our minds and on our radars both collectively as a council and as staff

55:32Two years in a row now and it's been maintained as a triple-a credit rating

55:38Which is we should all celebrate in high five and virtual high five to everybody on that

55:43but

55:44just I just want to make sure that

55:46I just want to make sure that there's a little bit of a nudge here for all us to recall

55:51that

55:52We have unanimously two years in a row stated there could be

55:56A little bit of a a change in our credit rating, but it was methodical

56:02It was a

56:03Balanced risk as to the why

56:06We would do that for the good reasons and benefits as to why so just want to make sure that that was reminded

56:14To everybody before we kind of move forward just in case in august

56:19is when the credit ratings come out for us and

56:24You know, what's you know, we'll hope that everything is fine there, but uh, you know, just just be aware and

56:30I can leave it with staff if they think i'm saying something wrong

56:33But I just wanted to make sure that reminder was was tabled just because the conversation was brought up. Thank you

56:42Thank you. Does anybody on staff want to say anything to add to that?

56:48Through you or to chair downer to the mayor

56:51Yeah, thank you for saying that the only thing I would add is just that also the

56:55In our strategic plan the strategic priority in the the kpi is actually to

57:00To at least maintain a double a plus rating and so we are above our target

57:06And so just just to add to the the data side of of that

57:12We are targeting we are above our target right now. So thank you

57:17Thank you. Are there any other questions?

57:22Okay, so we'll let's go right to the vote is um, is anyone opposed

57:28To the motion on the floor. Okay. Nope that carries. Thank you. Thank you very much for coming out tonight

57:35And I gain apologies for having to wait so long