2021 Audited Financial Statements - Consolidated City, Sinking Funds, and Consolidated Trust Funds

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 Consolidated Statements include all City divisions and entities within the City's control; a full list is included in Note 1 accompanying the Consolidated Statements. Highlights of 2021's financial results are as follows: - Statement of Financial Position: the City recognized financial assets of $14.9 billion, liabilities of $23.3 billion, net debt of $8.4 billion, and non-financial assets, comprised mainly of the City's tangible capital assets used to support the delivery of City services, of $38.8 billion. - Although the City's net debt decreased by $0.2 billion, the balance of $8.4 billion continues to signify that the City will need to identify future sources of revenue to settle its liabilities given that the City does not currently have sufficient financial assets to settle anticipated expenditures in future fiscal periods; and - Statement of Operations: the City recognized revenues of $15.2 billion, which included $1.8 billion of government grants provided by senior levels of government, such as those provided under the Safe Restart arrangement and the Province of Ontario's vaccination program, to support the City's pandemic efforts, in addition to supportive housing and refugee costs. . The City also incurred expenses of $13.2 billion, which reflects costs incurred in 2021 to provide critical frontline services to residents and businesses within public health guidelines. Consistent with other Canadian municipalities, the City is legislatively required to have a balanced budget and therefore, is prohibited to budget for a deficit. In order to comply with these legislative requirements, the City uses a cash basis of accounting for budgeting purposes; however, the Consolidated Statements are prepared and presented using an accrual basis of accounting, which is required under PSAS. As the City uses a different methodology to prepare the budget versus the financial statements, financial statement users may note that the way in which the City calculates its budget in each of these financial documents is different. As a result, the City includes a separate reconciliation to illustrate key differences in accounting principles, such as the recognition of tangible capital assets and associated amortization costs on the Consolidated Statements, and explains why an accounting surplus is recognized. In the Consolidated Statements, the City recognized an accounting surplus of $2.0 billion in the current year. The Sinking Funds, which form part of the City's consolidated cash balances, are a significant financial resource for the City, especially as these assets are ultimately used to discharge the City's debt in accordance with the timing of when its loans mature. The Sinking Funds are accumulated and invested throughout the year and reduce the City's reliance on its own-source cash when making its debt repayments. The Trust Funds are assets benefiting the City and its Agencies and Corporations, mainly held in cash and investments and administrated through the City and the Toronto Police Services Board. 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 Statements. The City's management team is responsible for preparing the Consolidated Statements (Appendix A), SF Statements (Appendix B), and the TF Statements (Appendices C and D) in accordance with PSAS, as well as ensuring that appropriate internal controls are in place to safeguard the City's assets and financial information. The City's external auditors, KPMG LLP (KPMG), are responsible for providing an opinion on the fair presentation of the above financial statements in accordance with PSAS. KPMG executes audit procedures in order to gather sufficient and appropriate audit evidence with which to form an opinion on the City's financial statements. In performing their work, KPMG may recommend adjustments to the City's balances or note disclosures included in its financial statements, or improvements to management's internal processes and internal controls. KPMG's Year End 2021 Audit Findings Report comprises a separate submission to the Audit Committee. KPMG has issued an unqualified audit opinion on the City's 2021 Consolidated Statements, SF Statements, and TF Statements. The Audit Committee is responsible for approving the financial statements prior to City Council's approval.

4. City Council authorize the Chief Financial Officer and Treasurer, or designate, to reallocate surplus cash resulting from the closure of any sinking funds after the debt for which the sinking fund was established has been fully paid, to another active sinking fund. 5. City Council approve the 2021 Audited Consolidated Trust Funds Financial Statements in Appendix C to this report.