2023 Annual Report

Notes to the Consolidated Financial Statements Consolidated Financial Statements

3.

Financial I nst r uments ( cont ' d ) Credit Risk

Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The City is exposed to credit risk through its cash, accounts receivable and portfolio investments. The City manages this risk by holding cash at a Schedule 1 bank, as defined by the Federal Bank Act, investing funds in accordance with legislation as outlined in the Community Charter, refined by the City's policy No. 5.44 Investment of Municipal Funds and through limiting instances of issuing credit. Liquidity Risk Liquidity risk is the risk that the City will encounter difficulty in meeting obligations associated with financial liabilities. The City is exposed to liquidity risk through its accounts payable and debt. The City manages this risk by maintaining a balance of short term or highly liquid investments, staggering the maturity dates of portfolio investments for cash flow needs, and having the ability to increase tax rates by bylaw as part of the financial planning process in order to raise sufficient cash. In addition, the City has in place a robust planning, budgeting and forecasting process to help determine the funds required to support operating and capital requirements. These requirements are incorporated into the five-year financial plan bylaw that is adopted by Council. The City measures its exposure to liquidity risk based on the results of cashflow forecasting and extensive budgeting. Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The City is exposed to interest rate risk through its long-term debt and the value of certain portfolio investments. The City manages interest rate risk on its long-term debt by holding all debt through the Municipal Finance Authority (MFA) at a fixed rate, with refinancing typically being completed at the ten or fifteen year mark. Therefore, fluctuations in market interest rates would not impact future cash flows an operations relating to long term debt. See Note 12 for interest rates and maturity dates for long term debt. Investments that are subject to interest rate risk are MFA pooled investment funds. The risk is caused by changes in interest rates. As interest rates rise, the fair market value of the MFA pooled investment funds decrease and, as interest rates fall, the fair value of these investments increase. As a result of diversification, only a portion of the overall investment portfolio is exposed to interest rate risk, as described in Note 2. 4 . A ccounts Receivable 2 0 2 3 2022 Property Taxes $ 8 , 0 22,1 68 $ 6,400,737 Other Governments 6 ,54 9 , 3 24 6,343,201 General 3 ,74 3 ,252 3,771,574 Accrued Interest 8 , 8 4 0 , 603 4,900,585 Development Cost Charges 7, 60 1,75 8 4,077,852 3 4,757,1 0 5 25,493,949 Less: Allowance for Doubtful Accounts ( 227, 0 57 ) (210,429) $ 3 4,5 30 , 0 4 8 $ 25,283,520

5 .

Recove r able L ocal I mp r ovements The City provides interim financing for certain geographically localized capital projects. It recovers these amounts from benefiting property owners. Interest rates are established at the outset of the process and are a function of borrowing rates at the time. Repayment is typically made over fifteen years.

56 | City of Maple Ridge - 2023 Annual Report