Provision of External Audit Services

Feb 11, 2019 12:00:00 PM (local time) Children's Aid Society of London and Middlesex Prequalification required: No Copies of the RFP, addendum and Financial Statements can be requested by emailing maranda.king@caslondon.on.ca or viewed on our External website - www.caslondon.on.ca REQUEST FOR PROPOSALS EXTERNAL AUDIT SERVICES Issue Date: Tuesday January 22, 2019 Address for Submissions: Children’s Aid Society of London and Middlesex 1680 Oxford Street East P.O. Box 7010 London, ON N5Y 5R8 Two (2) Proposal Packages should be submitted and clearly marked: “Proposal – External Audit Services” Attention: Maranda King, Comptroller Closing Date for Submissions: Monday February 11, 2019 12:00 pm Contact: Maranda King Comptroller Phone: 519-455-9000 ext. 2388 Email: maranda.king@caslondon.on.ca CONTENTS A. GENERAL INSTRUCTIONS A.1

Invitation A.2 Proposal Documents, Delivery and Deadline A.3 Inquiries B. BACKGROUND INFORMATION B.1 Activities and Structure B.2 Finance Team C. SCOPE OF SERVICES D. SUBMISSION REQUIREMENTS D.1 General D.2 Submission Framework, Proposal Content & Evaluation Criteria E. EVALUATION PROCESS F. GENERAL CONDITIONS A. GENERAL INSTRUCTIONS A.1. Invitation: The Children’s Aid Society of London and Middlesex (the Society) is soliciting proposals from qualified firms for the provision of External Audit Services. The engagement is for the fiscal period beginning April 1st, 2019 and ending March 31st, 2020 and for the subsequent two years, with the option to renew for an additional two years. The successful bidder will be appointed on an annual basis and the Finance Committee of the Society will reserve the right not to recommend/reappointment to the Society’s Board of Directors. It is the Society’s planned practice to review this type of engagement every three years. A.2. Proposal Documents, Delivery and Deadline: Proponents are requested to submit two (2) hard copies of their proposal in a sealed package marked “Proposal – External Audit Services”, to the attention of the Comptroller, to be received at 1680 Oxford Street East, London, Ontario, N5Y 5R8 before 12:00 p.m., Friday, February 8, 2019. Proponents are requested to include in the sealed package one (1) electronic storage media device containing a complete electronic copy of the submission. The name and address of the Proponent must be clearly indicated on the face of the sealed package containing the proposal. The total content of the proposal, including any appendices and attachments, should be outlined in a Table of Contents at the front of the proposal. Proposals sent by fax or e-mail will not be accepted. Proponents may not make modifications to their proposal after the closing date and time. Neither the Society’s Finance Committee, nor the Society’s Board of Directors shall be obligated in any way by any Proponent’s response to this Request for Proposals, nor shall the Society be liable for any costs incurred by any Proponent in the preparation of their proposal. All information provided in the Proponent’s proposal will be considered confidential. A.3. Inquiries: All inquiries regarding this Request for Proposal shall be directed by e-mail only to maranda.king@caslondon.on.ca. Inquiries must be received by 12:00 p.m. Wednesday, January 30, 2019. Management’s answers to all inquiries shall be provided to all Proponents no later than the end of day Friday, February 1, 2019. B. BACKGROUND B.1. Activities & Structure: The Children’s Aid Society of London and Middlesex is a registered Charity, whose principal mandate is to protect the children and youth in our community from all forms of abuse and neglect and to promote the healthy development of children, families and community. The Society’s principal funding is provided by the Province of Ontario as determined by a Funding Framework based on socio-economic factors and service volumes. Under the provisions of the Child and Youth Family Services Act (“CYFSA”), the Ministry of Children and Youth Services of Ontario (the “Ministry”) contracts with the Children’s Aid Society of London and Middlesex as a transfer payment agency for the delivery of legislated Child Welfare Services in the London and Middlesex area. As a consequence of the contractual relationship between the Society and the Ministry, the Ministry conducts regular reviews and audits of the Society in order to determine funding requirements and to exercise due diligence on behalf of the Government of Ontario. Under Ontario law, the Society is also subject to audits performed by the Auditor General of Ontario on a schedule determined by the Auditor General. The Children’s Aid Society of London and Middlesex operates at arm’s length from the Ministry and are governed by an independent volunteer Board of Directors. This structure allows the Children’s Aid Society of London and Middlesex to be accountable to the Ministry, and yet retain a degree of operational autonomy and flexibility. The Board of Directors is a Policy Governance Board with up to 16 members and possesses the multi-discipline representation necessary for effective governance. The Board of Directors has established a Finance Committee. The Finance Committee and the Board meet monthly with management. During its fiscal year ended March 31, 2019 the Children’s Aid Society of London and Middlesex received $58,215,226 in transfer payments from the Ministry for the delivery of Child Welfare services. Additional funding is made up of Expenditure Recoveries and Other Revenue/Grants of $1,836,000 mainly for payments made to the Society while a child is in care (i.e. Children’s Special Allowance). The Society’s year-end financial statements are included within its Annual General Report, and are prepared in English and French. Please find included with this Request for Proposal a copy of our Financial Statements for the year ended March 31, 2018. Other useful information may be obtained from our website at www.caslondon.on.ca. B.2. Finance Department: The Society’s Finance department is led by the Comptroller, reporting to the CFO/Senior Director of Corporate Services. The Society’s financial system is Oracle. The Payroll Department is under the Senior Director of Human Resources and is performed in-house using Avanti Software. C. SCOPE OF SERVICES TO BE PROVIDED Commencing with the fiscal year beginning April 1, 2019 and ending March 31, 2020, and for two (2) subsequent years, the Auditor shall perform an examination of the records and financial statements of the Society in accordance with Canadian Auditing Standards to express an opinion on the financial statements. In March, the Auditors will be required to provide a comprehensive risk-based audit plan for the Society which will be presented to and approved by the Finance Committee and the Board. In addition to interim work which will be scheduled at a mutually convenient time, the Auditors should be prepared to commence year-end audit work starting the first week of May. Draft financial statements and a management letter shall be ready for presentation to the Finance Committee in mid-May. The Auditors shall prepare and deliver to the CFO/Senior Director of Corporate Services a draft management letter and provide management with an opportunity to discuss the issues before final content of the management letter is determined. This letter will include recommendations that may result from findings during the course of the annual audit. At a meeting in May, the Auditor shall meet with the Finance Committee to discuss the audit and contents of the management letter, and also be prepared to attend if necessary the Annual General Meeting of the Society held each June. D. SUBMISSION REQUIREMENTS D.1 General Proponents are requested to submit a written proposal that describes how the services as outlined in Section C will be provided. In order to facilitate the evaluation of proposals, Proponents are requested to organize their proposal as per the Submission Framework below. Proponents will be evaluated based on the following criteria: • Capability and experience of the audit team • Proposed audit approach and scheduling • Audit price • Overall quality D.2 Submission Framework, Proposal Content & Evaluation Criteria Capability and Experience of the Audit Team: 25 points • Information as to the location of the office which would be responsible for the audit, the names of the partner(s), and senior staff who will be assigned; • Ability to meet independence requirements; • Capacity to staff for the size of this engagement; • Industry experience; • Experience with similar not-for-profit organizations (please include references); • Please provide specific examples of audits performed within the public sector of similar scope and complexity completed within the last two years, including references; • Details of team skills or experience (i.e. with fund accounting) which are directly relevant to the team’s capacity to conduct the audit; • Experience, qualifications and continuity of audit personnel; and, • Capacity to provide assistance in other areas, e.g. commodity tax specialist. Proposed Audit Approach and Scheduling: 25 points • Your audit approach i.e. organization of the audit team, use of specialists; • Availability and timely response to discuss complex accounting, tax and reporting issues; • Approach to resolution of accounting and disclosure issues; • Approach to post-audit/management letters; • Ability to meet our deadlines and confirmation of understanding of and ability to meet all other elements of the scope of services to be provided as outlined in section C herein; • Clearly articulated expectations of the Society’s finance staff with respect to interim and year-end preparation work; • Scope, timing and nature and percentage of work you plan to perform on an interim basis; and, • What, if any special services differentiate your firm from your competitors. Audit Price: 40 points • A firm quotation for fees charged in the first year (excluding out-of-pocket expenses and taxes) and estimated fees for the two subsequent years; • The firm’s “Out-of-Pocket Expense” policy (i.e. actual expenses incurred based on receipts, a flat fee, percentage, other); • An estimate of hours and rates per hour broken down between various staff required to carry out the audit; • Periodically, it may be necessary for management to discuss accounting and reporting matters with your firm. Please provide your policy on billing for routine telephone consultations and inquiries; • Please provide a detailed schedule of your hourly rates by position level for advisory work outside the scope of the audit; • Information regarding any advisory services that may be available to the organization free of charge on routine matters. These services may include staff assistance, seminars, and/or publications relating to sales tax, goods and services tax, employee remuneration and benefits, accounting changes, etc; and, • A focus on reducing overall cost of external audit services to the Society while at the same time maintaining /enhancing value. Overall Quality of Submission: 10 points Total criteria: 100 points E. EVALUATION PROCESS The Finance Committee shall evaluate the proposals. A matrix will be used to compare the scores given to each Proponent by each member of the Committee, and a consensus will then be reached through discussion internal to the Committee. An initial evaluation conducted during the period from February 11, 2019 to February 28, 2019, will result in a ‘short list’ of the highest scoring Proponents. Final selection is subject to the approval of the Society’s Board of Directors. It is expected that approval from the Board of Directors will occur no later than March 27, 2019. Unsuccessful Proponents will be notified in writing by April 5, 2019. Unsuccessful Proponents will have the opportunity to request a debriefing meeting with members of the evaluation team to discuss their submission. F. PRELIMINARY TIMELINES SUMMARY Activity End Date RFP Issue Date Tuesday January 22, 2019 Final Date for Inquiries Wednesday January 30, 2019 Inquiry answers provided to all Proponents Friday February 1, 2019 Proponent Submission Due Date Friday February 8, 2019 Short List Developed/Proponents Contacted Friday March 1, 2019 Interviews Arranged (if required) Monday March 4, 2019 Final Selection/Board Approval Wednesday March 27, 2019 Notification of Unsuccessful Proponents Friday April 5, 2019 G. GENERAL CONDITIONS 1) The proposal is to be prepared in accordance with the conditions outlined in this and any associated documents. 2) The Society is not responsible for any expenses incurred by Proponents in preparing and submitting a response to this Request for Proposals. 3) The completed response, terms, instructions, specifications and any attachments shall become part of any agreement entered into between the Society and the successful Proponent. 4) It is understood that the proposals submitted by Proponents will remain open for acceptance for a period of not less than 60 days from the closing date of this Request for Proposals. 5) Proposal pricing must include all charges excluding taxes (HST). 6) It is understood that certain elements of the successful proponent’s submission, including information as to fees, could potentially be publicly disclosed as a result of the public nature and governance structures of the Society. 7) The successful Proponent agrees to: a. Supply trained and well-qualified personnel to the Society with the required skills who can work on the audit consistently; b. Ensure personnel assigned to the Society are well informed on the business processes of the Society prior to field work being conducted; c. Communicate effectively and in a timely manner with Society personnel; d. Meet no less than once per annum to review current services requirements, quality of service and procedures related to the agreement between the Society and the successful Proponent; e. It is expected that the audit will be completed within the time frames set out herein for the first effective year of the agreement with the successful Proponent and within similar time frames for successive years of the agreement term. 8) The Proponent’s response to this proposal must be signed by an authorized representative of the Proponent. 9) The Society shall: a. Designate a contact person(s) for the purposes of audit coordination and special or accounting services; b. Pay all invoices for services within the payment terms specified on the invoice; c. Provide the successful Proponent with a suitable place to work on Society premises in the performance of the services to be rendered; d. Provide adequate instruction, assistance, and time for the employees of the successful Proponent to perform the audit services required in an efficient and effective manner. 10) Either the Society or the successful Proponent may, without cause, effect cancellation of any agreement between the parties at any time prior to the expiry date thereof by giving at least thirty (30) days prior written notice to the other and no financial compensation will be exercised by either party as a result of such cancellation. 11) The Society reserves the right to: • alter specified dates or to cancel this Request for Proposals for any reason without incurring any liability, cost or penalty to the Society, at any time prior to the execution of any written contract; • modify the terms of this Request for Proposals at any time and at its sole discretion; • not accept the lowest price or any proposal; • conduct negotiations with more than one bidder; • disqualify any quotation that is incomplete or is otherwise not submitted in accordance with the terms, conditions, and provisions of this Request for Proposals. Submissions received after the specified due date and time will be automatically disqualified; and, • retain all submissions and use any ideas contained in a submission regardless of whether the submitter is selected as the successful Proponent. 12) The Society shall not be held liable for any error or omission in any part of this Request for Proposals. The information contained in the Request for Proposals is supplied solely as a guideline for Proponents and is not guaranteed or warranted to be accurate, nor is it necessarily comprehensive or exhaustive. Nothing in this Request for Proposals is intended to relieve Proponents from forming their own opinions and conclusions with respect to matters addressed in this Request for Proposals. 13) The Society is obliged to comply with the Broader Public Sector Accountability Act, 2010 and as such, we must comply with the requirements of the BPS Procurement Directive and the BPS Expense Directive. The Directives impose additional accountabilities and requirements specifically related to consulting services. Please visit https://www.doingbusiness.mgs.gov.on.ca/mbs/psb/psb.nsf/EN/bps-procurementdirective for further information on these Directives. ADDENDUM Response to Inquiries Request for Proposals - External Audit Services Q: Do you anticipate any significant changes in operations for fiscal 2020? A: We do not anticipate any significant changes in operations for 2020. Q: Based on prior years audit process, how many audit staff are typically on site during interim and year end fieldwork and for how many days? A: Interim is two staff – junior and senior – 3 days on site Year end is two staff – junior and senior – 5 days on site Q: How many adjusting entries are typically completed during the year end audit? What is the nature of these entries? A: There are typically no adjusting entries. Q: Was there any audit findings in the prior year reported to management and the board? A: There were no audit findings reported to management or the Board last year. Q: Please confirm closing date as there were two dates noted in the RFP: Monday, February 11th @ 12:00 p.m. or Friday, February 8th @ 12:00 p.m.? A: Submission deadline is Monday, February 11th at 12:00 p.m. Q: Financial statements copy A: Copy of prior year financial statements attached. ADDENDUM Response to Inquiries Request for Proposals - External Audit Services Q: Do you anticipate any significant changes in operations for fiscal 2020? A: We do not anticipate any significant changes in operations for 2020. Q: Based on prior years audit process, how many audit staff are typically on site during interim and year end fieldwork and for how many days? A: Interim is two staff – junior and senior – 3 days on site Year end is two staff – junior and senior – 5 days on site Q: How many adjusting entries are typically completed during the year end audit? What is the nature of these entries? A: There are typically no adjusting entries. Q: Was there any audit findings in the prior year reported to management and the board? A: There were no audit findings reported to management or the Board last year. Q: Please confirm closing date as there were two dates noted in the RFP: Monday, February 11th @ 12:00 p.m. or Friday, February 8th @ 12:00 p.m.? A: Submission deadline is Monday, February 11th at 12:00 p.m. Q: Financial statements copy A: Copy of prior year financial statements attached. Financial statements of Children’s Aid Society of London & Middlesex March 31, 2018 Independent Auditor’s Report ................................................................. 1 Statement of financial position ............................................................. 2–3 Statement of operations and changes in fund balances ............................... 4 Statement of cash flows ......................................................................... 5 Notes to the financial statements ....................................................... 6–14 Schedule 1 – Statement of net expenses – operating fund ......................... 15 Schedule 2 – Statement of financial activity – A346 Child Abuse Program ..... 16 Schedule 3 – Statement of financial activity – 8847 Adult Community Living – Transitional Aged Youth Program ................................................ 17 Independent Auditor’s Report To the Board of Directors of The Children’s Aid Society of London & Middlesex We have audited the accompanying financial statements of the Children’s Aid Society of London & Middlesex, which comprise the statement of financial position as at March 31, 2018, and the statements of operations and changes in fund balances 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. Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of the Children’s Aid Society of London & Middlesex as at March 31, 2018 and the results of its operations and its cash flows for the year then ended, in accordance with Canadian public sector accounting standards. Chartered Professional Accountants Licensed Public Accountants May 23, 2018 Member of Deloitte Touche Tohmatsu Limited Deloitte LLP One London Place 255 Queens Avenue Suite 700 London ON N6A 5R8 Canada Tel: 519-679-1880 Fax: 519-640-4625 www.deloitte.ca Children’s Aid Society of London & Middlesex Statement of financial position As at March 31, 2018 Operating fund Capital fund Restricted funds Total Notes 2018 2017 2018 2017 2018 2017 2018 2017 $ $ $ $ $ $ $ $ Assets Current assets Cash 2 ,943 3 ,904 — — 987,374 997,995 9 90,317 1 ,001,900 Restricted cash 4 — — — — 1,009,957 937,206 1 ,009,957 9 37,206 Accounts receivable and receivables from the Ministry 4 71,649 1 69,021 — — — — 4 71,649 1 69,021 Statutory government remittances receivable 6 85,684 3 90,475 — — — — 6 85,684 3 90,475 Interfund balances 4,266,104 3 ,977,200 ( 4,257,341) (3,977,200) ( 8,763) — — — Prepaid expenses 3 85,080 3 98,630 — — — — 3 85,080 3 98,630 5,811,460 4,939,230 ( 4,257,341) (3,977,200) 1,988,568 1 ,935,202 3 ,542,687 2 ,897,232 Property, buildings and equipment 5 — — 3,377,206 3,628,486 — — 3 ,377,206 3 ,628,486 5,811,460 4,939,230 (880,135) (348,714) 1,988,568 1 ,935,202 6 ,919,893 6 ,525,718 Page 2 Children’s Aid Society of London & Middlesex Statement of financial position (continued) As at March 31, 2018 Operating fund Capital fund Restricted funds Total Notes 2018 2017 2018 2017 2018 2017 2018 2017 $ $ $ $ $ $ $ $ Liabilities Current liabilities Bank indebtedness 6 1,825,758 2,330,941 — — — — 1,825,758 2 ,330,941 Accrued vacation pay 2,333,033 2,351,087 — — — — 2,333,033 2 ,351,087 Accrued payroll 5 94,905 572,311 — — — — 5 94,905 5 72,311 Due to Ministry of Children and Youth Services 8 9,735 772,423 — — — — 8 9,735 7 72,423 Other accounts payable and accrued liabilities 15 4,191,657 3,233,652 — — 1 28,066 1 37,035 4,319,723 3 ,370,687 Statutory government remittances payable 3 72,783 346,046 — — — — 3 72,783 3 46,046 RESP Funds in trust 4 — — — — 609,052 571,252 6 09,052 5 71,252 OCBe Funds in trust – savings program 4 — — — — 400,905 365,954 4 00,905 3 65,954 9 ,407,871 9 ,606,460 — — 1,138,023 1 ,074,241 1 0,545,894 1 0,680,701 Accrued benefit obligation 7 1 ,172,301 1,093,875 — — — — 1,172,301 1 ,093,875 10,580,172 1 0,700,335 — — 1,138,023 1 ,074,241 1 1,718,195 1 1,774,576 Commitments 10 Fund balances Externally restricted 8 — — — — 8 50,545 8 60,961 8 50,545 8 60,961 Accumulated deficit 9 (4,768,712) (5,761,105) (880,135) ( 348,714) — — (5,648,847) ( 6,109,819) (4,768,712) ( 5,761,105) (880,135) ( 348,714) 8 50,545 8 60,961 (4,798,302) ( 5,248,858) 5 ,811,460 4 ,939,230 (880,135) ( 348,714) 1,988,568 1 ,935,202 6,919,893 6 ,525,718 The accompanying notes are an integral part of the financial statements. Approved by the Board _______________________________, Director _______________________________, Director Page 3 Children’s Aid Society of London & Middlesex Statement of operations and changes in fund balances Year ended March 31, 2018 Operating fund Capital fund Restricted funds Total Notes 2018 2017 2018 2017 2018 2017 2018 2017 $ $ $ $ $ $ $ $ Revenue Government funding 11 5 9,361,930 59,284,713 9 ,000 — — — 5 9,370,930 5 9,284,713 Family allowances – federal government 1 ,656,827 1,823,581 — — — — 1 ,656,827 1 ,823,581 Recharges, recoveries and other 9 58,070 988,714 — — — — 9 58,070 9 88,714 Contributions and fundraising — — — — 1 08,940 106,447 1 08,940 1 06,447 Interest 1 1,233 8,362 — — 8 ,621 6,486 1 9,854 1 4,848 Gain on disposal of property, — buildings and equipment — — — 3 ,487 — — — 3 ,487 6 1,988,060 6 2,105,370 9 ,000 3 ,487 1 17,561 1 12,933 6 2,114,621 6 2,221,790 Expenses Net expenses – operating fund (Schedule 1) 6 0,995,667 59,893,554 — — — — 6 0,995,667 5 9,893,554 Other interest — — — — — — — — Prevention programs and awards — — — — 1 27,977 129,121 1 27,977 1 29,121 Amortization — — 5 28,657 5 30,917 — — 5 28,657 5 30,917 Loss on disposal of property, buildings and equipment — — 1 1,764 — — — 1 1,764 — 60,995,667 59,893,554 540,421 530,917 1 27,977 1 29,121 6 1,664,065 6 0,553,592 Surplus (deficiency) of revenue over expenses 9 92,393 2,211,816 ( 531,421) ( 527,430) ( 10,416) ( 16,188) 4 50,556 1 ,668,198 Fund balances, beginning of year ( 5,761,105) (7,972,921) ( 348,714) 178,716 8 60,961 877,149 ( 5,248,858) (6,917,056) Fund balances, end of year ( 4,768,712) ( 5,761,105) ( 880,135) ( 348,714) 8 50,545 8 60,961 ( 4,798,302) ( 5,248,858) The accompanying notes are an integral part of the financial statements. Page 4 Page 5 Children’s Aid Society of London & Middlesex Statement of cash flows Year ended March 31, 2018 Notes 2018 2017 $ $ Operating activities Surplus of revenues over expenses 4 50,556 1,668,198 Less items not affecting cash Amortization of property, building and equipment 5 28,657 530,917 Loss (gain) on disposal of property, building and equipment 11,764 (3,487) Increase (decrease) in accrued benefit obligation 78,426 (24,341) Net change in non-cash working capital balances 13 (213,913) 208,558 8 55,490 2,379,845 Investing activities Acquisition of property, building and equipment 5 (297,989) (395,027) Proceeds on disposition of property, building and equipment 5 8,850 3,487 (289,139) (391,540) Financing activities Decrease (increase) in restricted cash (72,751) 587 Decrease in bank indebtedness (505,184) (2,035,287) (577,935) (2,034,700) Net change in cash (11,584) (46,395) Cash, beginning of year 1,001,900 1,048,295 Cash, end of year 9 90,317 1,001,900 The accompanying notes are an integral part of the financial statements. Children’s Aid Society of London & Middlesex Notes to the financial statements March 31, 2018 Page 6 1. Purpose of the organization Funded under the Child and Family Services Act, The Children’s Aid Society of London & Middlesex (the “Society”) provides child welfare services, including child protection, family assistance, parental relief, foster care, group care, institutional care, and adoption programs to children and families in the designated area. The Society is exempt from income taxes under section 149(1)(d) of the Canadian Income Tax Act. 2. Summary of significant accounting policies The financial statements have been prepared by management of the Society in accordance with Canadian public sector accounting standards and reflect the following significant accounting policies: Fund accounting In order to ensure observance of limitations placed on the use of resources available to the Society, the accounts of the Society are maintained in accordance with the principles of “fund accounting”. Under these principles, resources for various purposes are classified for accounting and reporting purposes into funds that are in accordance with activities or objectives specified. The operating fund accounts for the Society’s operating activities. The capital fund accounts for the society’s real estate activities and capital equipment. The balance in this fund represents the net investment in capital assets. The restricted funds account for endowments, trusts and other charitable activities which are distinct from the operating activities of the Society. Cash Cash includes cash on hand and balances with banks, net of bank overdrafts. Bank borrowings are considered to be financing activities. Restricted cash Restricted cash consists of externally restricted funding by the Ministry of Children and Youth Services (the “Ministry”) for directives such as the Registered Education Savings Plans (RESPs) and Ontario Child Benefit equivalent (OCBe) programs. Property, buildings and equipment Purchased capital assets are recorded at cost. Contributed assets are recorded at fair value at the date of the contribution. Amortization is provided using the straight line method over the estimated useful lives of the assets, at the following annual rates using the half-year rule during the year of acquisition. Buildings 4% Equipment 10-20% Leasehold improvements 5% Vehicles 30% Children’s Aid Society of London & Middlesex Notes to the financial statements March 31, 2018 Page 7 2. Summary of significant accounting policies (continued) Assets under capital leases Assets under capital leases are accounted for at cost. Amortization is provided using the straight line method and is based on their estimated useful life using the following methods and rates: Building equipment 4% Equipment – computer hardware 20% Contributed services The work of the Society is partly dependent on the voluntary services of members of the community. Donated services are not recognized in these financial statements due to the difficulty in determining their fair value. Financial instruments Financial assets and financial liabilities are initially recognized at fair value when the Society becomes a party to the contractual provisions of the financial instrument. Subsequently, all financial instruments are measured at amortized cost which approximates fair value. With respect to financial assets measured at cost or amortized cost, the Society recognizes in net earnings an impairment loss, if any, when there are indicators of impairment and it determines that a significant adverse change has occurred during the period in the expected timing or amount of future cash flows. When the extent of impairment of a previously written-down asset decreases and the decrease can be related to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed to net earnings in the period the reversal occurs. Future benefits – non-vesting sick leave benefits On retirement, the Society provides for the payout of a portion of accrued sick pay for management and other eligible employees. Defined benefit plan retirement costs are calculated using the projected benefit method pro-rated on services and actuarial assumptions which reflect management’s best estimate of the effects of future events. Market related values are used in the valuation of retirement fund assets. Use of estimates The preparation of these financial statements requires management to make estimates and assumptions that affect revenues and expenditures during the reporting periods. These estimates include amortization of property and equipment, accrued vacation pay, accrued payroll, accrued benefit obligations, and other accruals. Actual results could differ from these estimates. Children’s Aid Society of London & Middlesex Notes to the financial statements March 31, 2018 Page 8 3. Contracts with Ministry of Community and Society Services/Ministry of Children and Youth Services The Society has service contracts with the Ministry of Community and Social Services/Ministry of Children and Youth Services. One requirement of the contracts is the production by management of a Transfer Payment Annual Reconciliation (TPAR) which shows a summary by service of all revenues and expenditures and any resulting surplus or deficit that relates to the contract. The Fund Balance shows the surplus (deficit) position under these contracts as at March 31, 2018. The surplus (deficit) in a TPAR report will generally differ due to specific instructions for TPAR preparation. 4. Restricted cash 2018 2017 $ $ RESP funds in trust 609,052 571,252 OCBe funds in trust – savings program 400,905 365,954 1,009,957 937,206 Pursuant to Ministry Policy Directive CW005-16, the Society sets aside a portion of Children’s Special Allowance Funds, equivalent to the former federal UCCB payment, to establish Registered Education Savings Plans (RESPs) for eligible children in care. Restricted cash related to RESPs held in trust represent such funding not yet contributed to an RESP. At March 31, 2018, $609,052 ($571,252 in 2017) of funds are held in trust as the recipients of these funds are not eligible to set up an RESP account. OCBe savings program Similarly, a portion of the OCBe relating to children aged 15-17 is being held as savings per a 2008 Ministry of Children and Youth Services directive. The Ministry updated the directive in 2014. OCBe activities program Not all OCBe funds are required to be held in trust for the children and can be spent on children in the Society’s care as long as they are younger than 18 years of age. In the current year, $21,210 (nil in 2017) of OCBe funds have not been spent on eligible children and are recorded in accounts payable. Children’s Aid Society of London & Middlesex Notes to the financial statements March 31, 2018 Page 9 5. Property, buildings and equipment 2018 2017 Accumulated Net book Net book Cost amortization value value $ $ $ $ Land 1,030,000 — 1,030,000 1,030,000 Buildings 9,022,226 7,403,669 1,618,557 1,824,819 Equipment 3,349,447 2,812,576 536,871 538,274 Leasehold improvement 289,274 105,046 184,228 198,693 Vehicles 13,729 6,179 7,550 36,700 13,704,676 10,327,470 3,377,206 3,628,486 Included in property, buildings and equipment is a parcel of land donated to the Society by the Province of Ontario for consideration in the amount of $1. The land is recorded at the appraised value of $1,030,000 at the time of the donation. In the event of its future sale by the Society, all proceeds of disposition realized at that time must be returned to the Province of Ontario. In addition, a portion of the costs of construction of the Society’s building on the land were contributed by the Province of Ontario, the City of London and the County of Middlesex. In the event of a future sale of the building by the Society, the proceeds of disposition are to be returned to the Province of Ontario, the City of London and the County of Middlesex in proportion to their contributions. Included in capital assets are additions of $297,989 ($395,027 in 2017). 6. Bank indebtedness The Society has bank indebtedness of $1,825,758 ($2,330,941 in 2017). In the current year, the Society has available to it a revolving demand loan facility of $3,000,000 ($3,000,000 in 2017). The secured facility bears interest of prime less 0.25%. 7. Pension plan and other employee future benefits OMERS pension plan The Society makes contributions to the Ontario Municipal Employees Retirement System (“OMERS”) pension fund, which is a multi-employer plan, on behalf of 375 of its staff. The plan is a defined benefit plan, which specifies the amount of retirement benefit to be received by the employees, based on the length of service and rates of pay. The amount contributed to OMERS for fiscal 2018 was $2,496,556 ($2,514,692 in 2017) for current service costs and is included as an expense in the statement of operations. Children’s Aid Society of London & Middlesex Notes to the financial statements March 31, 2018 Page 10 7. Pension plan and other employee future benefits (continued) Non-vesting sick leave benefits The eligibility and coverage are: ? All full-time bargaining unit employees hired prior to May 12, 2009, and all management members are eligible for a credit of 2 sick days for each month of service. The unused portion of an employee’s sick leave will accrue up to a maximum of 120 days. ? All full-time bargaining unit employees hired after May 12, 2009 are eligible for a credit of 2 sick days for each month of service. The unused portion of an employee’s sick leave will accrue up to a maximum of 90 days. ? All full-time bargaining unit employees hired prior to June 27, 2000 and all management members, that have 10 or more years of continuous service, and cease to be employed because of pensionable retirement to OMERS due to age, disability or death, will be paid an amount equal to 50 % of their accumulated sick leave at their current salary or wage rate not to exceed 50% of the employee’s annual salary or wage. The Society measures the accrued benefit obligation for accounting purposes as at March 31 of each year. 2018 2017 $ $ Opening balance 1,093,875 1,118,216 Accrual for service, net of benefits taken 68,942 54,531 Interest on accrued benefits 43,755 44,729 Benefit payments (34,271) (123,601) Ending balance 1,172,301 1,093,875 The significant assumptions used to determine the accrued benefit obligation are as follows: 2018 2017 Discount rate 5.00% 5.00% Estimated retirement age 60 years 60 years 2018 2017 $ $ Benefit expense 112,697 99,260 8. Restrictions on use of fund balances Restricted funds Various restrictions apply to the externally restricted and endowment fund balances. For certain bequests, the previous year’s interest and 10% of the previous year’s principal may be expended annually on a service or project for families and children “not in care” for a period of three years. For bequests for special needs of family and children, the previous year’s interest and 10% of the previous year’s principal may be applied for the purpose of meeting special needs of families and children being served by the Society for a period of three years. Children’s Aid Society of London & Middlesex Notes to the financial statements March 31, 2018 Page 11 8. Restrictions on use of fund balances (continued) Funds held in trust At March 31, 2018 there were 595 children (559 in 2017) with RESP accounts, with $307,659 ($375,446 in 2017) of funding contributed to these RESP accounts in the current year. These funds are held in trust in the children’s’ names and are not included in the Society’s assets. 9. Operating fund deficit Government funding does not provide for vacation pay or accrued benefits that have been incurred but not paid. However, funding is provided for these obligations as payments are made. The accumulated operating fund deficit is comprised of: 2018 2017 $ $ Accrued vacation and compensation time 2,429,953 2,472,073 Accrued benefit obligation 1,172,301 1,093,875 Accrued health spending 485,500 367,902 Accumulated operating deficit 680,958 1,827,255 4,768,712 5,761,105 10. Commitments The Society leases certain premises, computer equipment and office equipment under operating leases. Future lease payments are for an aggregate amount of $925,679 and include the following amounts payable over the next five years: $ 2018/19 4 28,458 2019/20 1 54,831 2020/21 1 13,248 2021/22 1 14,176 2022/23 114,966 11. Government funding 2018 2017 $ $ Operating fund Child Welfare Program – Province of Ontario 59,370,930 5 9,284,713 Children’s Aid Society of London & Middlesex Notes to the financial statements March 31, 2018 Page 12 11. Government funding (continued) The Society is dependent on the Province of Ontario for its future funding requirements. Government funding consists of the following: Notes 2018 2017 $ $ Capital funding 12 9,000 — A760 funding Volume-based allocation 26,074,026 2 7,567,254 Socio-economic allocation 19,366,784 1 9,557,774 Pre-formula adjustment 10,343,732 1 0,343,732 Mitigation component 3,027,867 2 ,543,902 Policy priority 6 27,680 1 ,555,333 Structural debt 2 80,710 9 90,742 Balanced budget funding withdrawal 5 01,908 — Bill-89 1 03,469 — In-year surplus (964,246) ( 3,274,024) 59,370,930 5 9,284,713 The 2017 in-year surplus consists of 2016/17 surplus of $3,272,116 and 2015/16 surplus of $1,908 12. Ministry services contracts During the year, funds are provided by the Province of Ontario under the terms of the various service contracts and the amounts expended by the Society during the year. As these funds do not directly relate to the operations of the Society, the funds received and distributed are excluded from the statement of revenues and expenses, with the exception of the A710 contract. The revenue related to capital funding was recognized in the statement of revenues and expenses since the item was set up as a capital asset. For all contracts, if all funds were not spent by year-end, the funds are payable back to the Province of Ontario and are presented in accounts payable. The funds received and distributed for the programs are disclosed in schedules 2 and 3. Children’s Aid Society of London & Middlesex Notes to the financial statements March 31, 2018 Page 13 13. Net change in non-cash working balances related to operations 2018 2017 $ $ (Increase) decrease in accounts receivable and receivables from the Ministry ( 302,628) 4 10,595 (Increase) decrease in statutory government remittances receivable ( 295,209) 8 ,858 Decrease in prepaid expenses 13,548 5 10,872 Decrease in accrued vacation pay ( 18,054) ( 49,011) Increase in accrued payroll 22,594 9 0,148 (Decrease) increase in due to Ministry of Children and Youth Services ( 682,689) 1 04,531 Increase (decrease) in other accounts payable and accrued liabilities 949,037 ( 846,815) Increase (decrease) in statutory government remittances payable 26,737 ( 20,033) Increase in RESP funds in trust 37,800 6 ,707 Increase (decrease) in OCBE funds in Trust 34,951 ( 7,294) ( 213,913) 2 08,558 14. Financial instruments Interest rate risk Interest rate risk refers to the consequences of interest rate changes on the bank indebtedness. The demand loan secured facility bears interest of prime less 0.25%. This floating rate instrument subjects the Society to a cash flow risk. Credit risk The Society collects balances from the Province of Ontario in the normal course of its operations and due to the nature of the receivables, the Society does not need to maintain a provision for losses. Liquidity risk Liquidity risk is the risk of being unable to meet a demand for cash or fund obligations as they come due. The Society manages its liquidity risk by constantly monitoring forecasted and actual cash flow and financial liability maturities. Accounts payable and accrued liabilities are generally repaid within 30 days. As for the revolving demand credit facility the bank can demand repayment and/or cancel the availability of the facility at any time in its sole discretion. 15. Contingent liabilities The Society has accrued for $10,000 ($70,000 in 2017) in other accounts payable and accrued liabilities on the statement of financial position for the deductible portion of outstanding claims for which the Agency is fully insured. Children’s Aid Society of London & Middlesex Notes to the financial statements March 31, 2018 Page 14 16. Comparative figures Certain comparative figures have been reclassified to conform to the current year’s presentation. Children’s Aid Society of London & Middlesex Schedule 1 – Statement of net expenses – operating fund Year ended March 31, 2018 2018 2017 $ $ Expenses Salaries 24,941,333 23,769,994 Boarding rate payments 18,590,989 19,395,508 Employee benefits 7,004,627 6,442,158 Client's personal needs 3,083,245 2,837,329 Building occupancy 1,385,921 1,307,306 Travel 1,277,544 1,306,525 Technology 1,122,573 1,111,005 Medical and related services 1,028,629 1,143,760 Professional services - client 699,077 4 35,266 Office administration 476,363 4 02,657 Transition costs - severance 296,133 7 88,687 Insurance 264,072 2 62,205 Miscellaneous 212,928 2 24,229 Financial assistance 177,444 1 73,280 Training, education and conferences 175,784 1 30,243 Professional services - non-client 171,312 1 16,368 Program expenses 67,099 28,722 Promotion and publicity 20,594 18,312 60,995,667 59,893,554 Page 15 Children's Aid Society of London & Middlesex Schedule 2 – Statement of financial activity A346 Child Abuse Program year ended March 31, 2018 Notes 2018 2017 $ $ Revenue - 6 ,250 - 6,250 Expenses Project coordination costs - 2 ,244 Miscellaneous - 7 65 - 3,009 Excess of revenues over expenses 12 - 3 ,241 Page 16 Children's Aid Society of London & Middlesex Schedule 3 – Statement of financial activity 8847 Adult Community Living – Transitional Aged Youth Program year ended March 31, 2018 Notes 2018 2017 $ $ Revenue 1,143,662 1 ,429,208 Expenses Per diems and miscellaneous 1,143,662 1,429,208 Excess of expenses over revenues 12 - - Page 17 Contact Information: Children's Aid Society of London and Middlesex 1680 Oxford Street East P.O. Box 7010 London, Ontario N5Y 5R8 Canada Phone: (519) 455-9000 ext. 2388 Fax: (519) 455-4355 maranda.king@caslondon.on.ca Contact: Maranda King