Nova Scotia Municipal
Finance Corporation
Financial Statements
March 31, 2007
Contents
Page
Auditors’ Report
1
Balance Sheet
2
Statements of Revenue, Expenditure and Reserve Fund
3
Statement of Cash Flows
4
Notes to the Financial Statements
5-9
Grant Thornton LLP
Chartered Accountants
Management Consultants
Auditors’ Report
To the Directors of
Nova Scotia Municipal Finance Corporation
We have audited the balance sheet of the Nova Scotia Municipal Finance Corporation as at
March 31, 2007 and the statements of revenue, expenditure and reserve fund and cash flows
for the year then ended. These financial statements are the responsibility of the Corporation’s
management. 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 plan and perform an audit to obtain reasonable assurance
whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement
presentation.
In our opinion, these financial statements present fairly, in all material respects, the financial
position of the Corporation as at March 31, 2007 and the results of its operations and its cash
flows for the year then ended in accordance with Canadian generally accepted accounting
principles.
April 18, 2007
Halifax, Nova Scotia
Grant Thornton LLP
Chartered Accountants
Suite 1100, Cogswell Tower
2000 Barrington Street
Halifax, NS B3J 3K1
T (902) 421-1734
F (902) 420-1068
E Halifax@GrantThornton.ca
W www.GrantThornton.ca
Canadian Member of Grant Thornton International
1
Nova Scotia Municipal Finance Corporation
Balance Sheet
Year Ended March 31
2007
ASSETS
CURRENT
Cash and cash equivalents
Accrued interest receivable
HST receivable
Accounts receivable
Principal due within one year on loans to units
$
LONG-TERM
Loans to units (Note 3)
Less principal included in current assets
DEFERRED CHARGES:
Discount on debenture debt
Less accumulated amortization
LIABILITIES AND EQUITY
CURRENT
Accounts payable
Due to municipal units
Accrued interest payable
Principal due within one year on debentures
5,753,494
10,021,832
1,031
353
92,686,851
108,463,561
2006
$
5,323,186
9,883,629
673
87,451,864
102,659,352
642,193,561
92,686,851
549,506,710
621,331,159
87,451,864
533,879,295
2,073,267
1,685,856
387,411
2,388,291
1,847,055
541,236
$
658,357,682
$
637,079,883
$
32,155
42,500
9,992,434
92,662,848
102,729,937
$
32,413
140,402
9,851,847
87,177,723
97,202,385
Employee obligations (Note 8)
LONG-TERM
Debentures payable (Note 5)
Less principal included in current liabilities
DEFERRED CREDITS
Discount on loans to units
Less accumulated amortization
EQUITY
Reserve Fund
$
87,636
80,520
642,206,880
92,662,848
549,544,032
621,069,953
87,177,723
533,892,230
2,067,170
1,683,014
384,156
2,381,966
1,844,595
537,371
5,611,921
5,367,377
658,357,682
$
637,079,883
See accompanying notes to the financial statements.
On behalf of the Board
Director
Director
2
Nova Scotia Municipal Finance Corporation
Statements of Revenue, Expenditure and Reserve Fund
March 31
REVENUE
Interest on loans to units
Amortization of discount on loans to units
Interest on short term investments
Recovery of issue costs
Reserve fee
2007
$
EXPENDITURE
Interest on debenture debt and short term loans
Amortization of discount on debenture debt
Debenture issue expenses
Administrative expenses (Note 6)
NET REVENUE
RESERVE FUND, BEGINNING OF YEAR
RESERVE FUND, END OF YEAR
$
32,924,738
153,215
240,185
350,685
379,101
34,047,924
2006
$
32,778,611
188,299
163,390
369,393
392,170
33,891,863
32,921,473
153,824
349,528
378,555
33,803,380
32,763,270
188,917
367,209
282,552
33,601,948
244,544
289,915
5,367,377
5,077,462
5,611,921
$
5,367,377
See accompanying notes to the financial statements.
3
Nova Scotia Municipal Finance Corporation
Statement of Cash Flows
Year Ended March 31
2007
2006
Cash provided by (used for)
Operations
Net revenue
Add (deduct) non-cash items
Amortization of discount on loans to units
Amortization of discount on debenture debt
Amortization of premiums on investments
Change in non-cash working capital (Note 7)
Increase in accrued public service award
$
Investments
Issue of loans
Principal received on loans to units
Principal received on maturing investments
Financing
Issue of debentures
Principal payments on debenture debt
INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR
END OF YEAR
244,544
$
289,915
(153,215)
153,824
(96,487)
7,116
155,782
(188,299)
188,917
8,811
3,381
6,000
308,725
(108,314,265)
87,451,864
(20,862,401)
(112,048,474)
81,038,164
433,000
(30,577,310)
108,314,650
(87,177,723)
21,136,927
112,048,000
(80,999,290)
31,048,710
430,308
780,125
5,323,186
4,543,061
$
5,753,494
$
5,323,186
$
126,494
5,627,000
5,753,494
$
21,820
5,301,366
5,323,186
Cash and cash equivalents includes:
Cash
Short term investments (Note 9)
$
$
See accompanying notes to the financial statements.
4
Nova Scotia Municipal Finance Corporation
Notes to the Financial Statements
March 31, 2007
The Corporation was created by the Municipal Finance Corporation Act which was proclaimed
on July 31, 1979. The Corporation began operations on January 1, 1980 and has a March 31
fiscal year-end. The objective of the Corporation is to provide financing of approved capital
projects for municipalities, municipal enterprises, regional school boards, and hospitals
through a central borrowing authority. The Corporation is not subject to provincial or federal
income taxes.
1.
Summary of significant accounting policies
A)
Discounts on debenture debt and loans to units made prior to the fall issue in 2004 are
being amortized over the life of the debentures payable and the loans receivable to
which they relate, using the debentures outstanding method. All debenture debt and
loans to units since the fall issue in 2004 are issued at par.
B)
The Reserve Fund represents accumulated surpluses and interest earnings on funds
which had been advanced by the Province of Nova Scotia and interest on other surplus
funds. The purpose of the Reserve Fund is to provide a capital base for the
Corporation, as well as to provide funds which may be required for administrative
purposes and timing differences.
C)
Canadian generally accepted accounting principles require management to make
estimates and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Management does not anticipate that actual
results will differ materially from those estimates.
D)
The Corporation recognizes revenue and expenditures on an accrual basis.
E)
Cash and cash equivalents include cash on hand, balances with banks, and short term
deposits with original maturities of three months or less.
2.
Financial instruments
Fair value
The fair values of accrued interest receivable, other receivables, accounts payable, due to
municipal units, accrued interest payable and principal due within one year on loans to units
and debenture debt are assumed to approximate their carrying amounts because of their
short term to maturity. The fair value of investments are disclosed in the financial statements.
As the Corporation is a special purpose entity, and there is no comparable outside market,
the fair value of the loans receivable and debentures payable was not determinable.
Interest rate risk
The Corporation’s mandated rate of interest charged on loans to units is directly matched to
its cost of borrowing, thereby providing a hedge against equity erosion.
5
Nova Scotia Municipal Finance Corporation
Notes to the Financial Statements
March 31, 2007
2.
Financial instruments (continued)
Credit risk
Due to existing statutory provision for the recovery of any defaults by units, an allowance for
doubtful accounts is not required.
It is management’s opinion that the Corporation is not exposed to significant interest or credit
risks arising from financial instruments.
3.
Loans to units
Loans to units are made on the security of their debentures, due in annual instalments for
periods up to a maximum of twenty years. Interest rates on the loans range from 1.0% to
7.0%.
4.
Principal payments
Principal payments receivable from units and debentures payable in the next five years are as
follows:
Receivable
Payable
2008
2009
2010
2011
2012
$
$
$
$
$
92,686,851
78,614,312
74,041,528
60,325,885
55,427,150
$
$
$
$
$
92,662,848
78,606,807
74,094,144
60,324,942
55,422,287
6
Nova Scotia Municipal Finance Corporation
Notes to the Financial Statements
March 31, 2007
5.
Debentures payable
The debenture debt outstanding at March 31, 2007 totalling $642,206,880 (2006 $621,069,953) is in Canadian funds and is fully guaranteed by the Province of Nova Scotia,
with the exception of Series “AT” and the FCM loans which are private placements.
Series
Date Issued
Maturity Date
Interest Rate
AM *
AN *
AP *
AQ
AR *
AS *
AT
AU *
AV *
AW *
AX *
AY *
AZ *
BA *
BB *
BC *
BD *
BE *
BF *
BG *
BH *
BI *
BJ*
BK*
FCM-A
FCM-B
May 12/97
Oct. 17/97
Jan. 30/98
May 15/98
Dec. 1/98
May 17/99
May 28/99
Dec. 22/99
June 1/00
Nov. 9/00
May 29/01
Nov. 7/01
May 15/02
Nov. 7/02
Jan. 9/03
May 28/03
Oct. 15/03
June 10/04
Sept 1/04
Nov 25/04
June 1/05
Nov 22/05
June 1/06
Oct 24/06
Oct 31/06
Mar. 5/07
2007
2007
2008 to 2019
2007 to 2008
2007 to 2008
2007 to 2009
2007 to 2015
2007 to 2009
2007 to 2010
2007 to 2010
2007 to 2011
2007 to 2011
2007 to 2012
2007 to 2017
2007 to 2023
2007 to 2018
2007 to 2018
2007 to 2019
2007 to 2024
2007 to 2019
2007 to 2020
2007 to 2020
2007 to 2021
2007 to 2021
2007 to 2016
2008 to 2017
7.000
6.250
5.750-6.125
5.375-5.500
5.625
5.250-5.375
1.000
6.625-6.750
6.75-6.875
6.250-6.375
5.875-6.250
5.250-6.000
5.375-6.125
4.625-6.000
5.913
4.375-5.750
3.750-5.375
3.750-5.750
3.985-5.940
3.805-5.325
3.215-4.880
3.760-4.830
4.285-5.080
4.095-4.590
2.550
2.620
Debt Outstanding
8,879,000
14,231,000
32,330,000
9,335,000
17,366,000
19,192,000
1,518,750
15,156,000
10,845,000
11,956,000
17,202,000
10,523,000
34,850,000
19,597,000
9,823,480
36,305,000
16,175,000
21,603,000
99,000,000
24,883,000
49,749,000
53,373,000
51,873,000
55,287,000
830,800
323,850
$
642,206,880
* Placed directly with the Province of Nova Scotia.
Interest is payable semi-annually, except for Series “AT”, which is payable annually.
7
Nova Scotia Municipal Finance Corporation
Notes to the Financial Statements
March 31, 2007
6.
Administrative expenses
2007
Budget
Salaries and benefits
Travel
Equipment and maintenance
Printing
Postage
Telecommunications
Stationery and supplies
Professional services
Bank charges
Directors’ fees and expenses
Professional development
Dues and subscriptions
Insurance
Other
Special projects
Sponsorship projects
7.
2007
Actual
$
300,023
6,400
5,300
3,500
1,400
4,500
3,800
25,480
3,045
6,800
7,500
2,600
990
500
12,000
8,000
$
288,822
3,750
4,861
3,466
1,981
3,963
2,186
24,430
3,326
4,647
11,165
2,583
891
2,952
12,532
7,000
$
205,159
4,463
4,116
2,716
1,655
3,732
2,459
24,380
2,804
5,778
6,057
1,792
873
28
11,040
5,500
$
391,838
$
378,555
$
282,552
Change in non-cash working capital
Accrued interest receivable
HST receivable
Accounts receivable
Accounts payable
Accrued interest payable
Due to municipal units
2006
Actual
2007
$
$
2006
(138,203)
(358)
(353)
(258)
140,587
(97,902)
$
(96,487)
$
106,123
(179)
(2,059)
(104,689)
4,185
3,381
8
Nova Scotia Municipal Finance Corporation
Notes to the Financial Statements
March 31, 2007
8.
Employee obligations
Public service awards
As at March 31, 2007, the Corporation has recorded a liability in the amount of $87,636 (2006
- $80,520) in respect of the provincial public service award for the employees of the
Corporation.
Employee future benefits / pension
Permanent employees are members of the Nova Scotia Public Service Superannuation Plan.
The cost of pension benefits is the responsibility of the Province of Nova Scotia and
accordingly no provision is included in the Corporation’s financial statements for pension
related amounts. The pension related assets and liabilities are accounted for in the Public
Accounts of Nova Scotia.
9.
Short-term investments
The Corporation holds short term investments. The investments mature at various intervals
during 2007 with interest rates ranging from 4.27% to 5.00% with market values equal to
carrying values in 2007 and 2006 fiscal years.
9