Item - 2021.AU9.1

The Audit Committee recommends that:

1.  City Council approve the 2020 Audited Consolidated Financial Statements in Appendix A to the report (June 22, 2021) from the Chief Financial Officer and Treasurer and the Controller.

2.  City Council approve the 2020 Audited Sinking Fund Financial Statements in Appendix C to the report (June 22, 2021) from the Chief Financial Officer and Treasurer and the Controller.

3.  City Council approve the 2020 Audited Consolidated Trust Funds Financial Statements in Appendix D to the report (June 22, 2021) from the Chief Financial Officer and Treasurer and the Controller.

The Director, Accounting Services, Finance and Treasury Services and the Manager, Analysis and Financial Reporting, Finance and Treasury Services gave a presentation on Year-End 2020: Our Story.

This report presents the City of Toronto's (City) Audited Consolidated Financial Statements (Statements), the Audited Sinking Fund Financial Statements (Sinking Funds) and the Consolidated Trust Funds Financial Statements (Trust Funds) for the year ended December 31, 2020, for approval, to the Audit Committee and City Council. The report provides highlights of financial performance and financial condition as at December 31, 2020. All City financial statements are prepared in accordance with Public Sector Accounting Standards (PSAS) established by the Public Sector Accounting Board (PSAB) of the Chartered Professional Accountants (CPA) of Canada.

The Statements include all City divisions and entities within the City's control; a full list is included in Note 1 accompanying the Statements. In 2020, the City recognized financial assets of $14.1 billion, liabilities of $22.7 billion, and non-financial assets, consisting mainly of the tangible capital assets necessary for the delivery of City services, of $37.0 billion. The City's net debt of $8.6 billion is the amount of future revenues required to fulfill current liabilities. The City's 2020 revenues of $14.0 billion include $1.1 billion from Safe Restart Funding ($913 million) received in response to pressures arising from the COVID-19 pandemic on municipal operations, transit services and public health efforts, along with Social Services Relief Funds ($165 million) for shelters.

Total expenditures recognized were $12.4 billion; the City managed its expenses in 2020 by implementing $559 million in cost mitigation strategies, such as workforce restraints and spending constraints, in order to address financial challenges caused by COVID-19. 

Consistent with municipalities across Canada, Toronto adopts a cash basis of accounting for budgeting purposes, however, the annual audited financial statements are reflected using an accrual basis of accounting consistent with Public Sector Accounting Standards. The reconciliation between the two methods is driven primarily by the capitalization of tangible capital assets and amortization. In the audited financial statements, the City recognized an accounting surplus of $1.6 billion reflective of the

capital asset investment during 2020.

The Sinking Funds build up and invest funds, which form part of the City's consolidated cash balances, used to repay City debt when it matures, reducing the amount of City own-source cash required to repay amounts borrowed.

The Trust Funds are assets benefitting the City and its agencies and corporations, mainly held in cash and investments, administered through the City and two of its related parties, the Toronto Police Services Board and the St. Lawrence Centre for the Arts (TO Live). Although these trust funds are assets to the City and its consolidated entities, they represent liabilities to third parties and therefore, are not included in the City's consolidated financial statements.

The City's management is responsible for preparing the Statements, Sinking Funds and Trust Funds in accordance with Public Sector Accounting Standards (PSAS), as well as ensuring that appropriate internal controls are in place to safeguard the City's assets and financial information.

The City's 2020 auditors, KPMG LLP (KPMG), are responsible for providing an opinion on the fair presentation of these financial statements in accordance with PSAS. KPMG performs audit procedures in order to gather sufficient and appropriate audit evidence with which to form an opinion on the City's statements. In performing their work, KPMG may recommend adjustments to balances or note disclosures, or process or internal control improvements.

The Audit Committee is responsible for approving the financial statements prior to City Council approval.

The Statements are attached as Appendix A. In addition, Appendix B - 2020 Financial Statement Review provides information about each statement and explains the City's revenue and expenditure activities and financial position for the audited fiscal year.

The Sinking Funds are attached as Appendix C.

The Trust Funds are attached as Appendix D. In addition, Appendix E details Trust Funds Account Descriptions as at December 31, 2020.

KPMG's Year End 2020 Audit Findings Report comprises a separate submission to the Audit Committee. KPMG has issued an unqualified audit opinion on the City's 2020 Statements, the Sinking Funds and the Trust Funds.