ASSOCIATION OF ALBERTA MUNICIPALITIES

Notes to the Consolidated Financial Statements

Year ended December 31, 2022

23.

Commitments (continued):

ABmunis has entered into a Financial Letter of Agreement with a group benefits plan administrator whereby, in the event of termination of the group benefits plan, ABmunis is required to pay an amount equal to the accumulated plan deficit at the time of termination, up to 25% of the annualized premium. The Agreement continues from year to year unless either party delivers the prescribed notice to terminate. The Agreement has not been terminated and there is no obligation at December 31, 2022.

24. Financial risks and concentration of credit risk:

(a) Currency risk:

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign currency rates.

ABmunis is exposed to currency risk as a result of exchange rate fluctuations and the volatility of these rates. In the normal course of business, ABmunis procures information technology support services in U.S. dollars and holds global investments including holdings denominated in U.S. dollars. ABmunis does not currently enter into forward contracts to mitigate this risk.

There has been no change to currency risk from the prior year.

(b) Liquidity risk:

Liquidity risk is the risk that ABmunis cannot meet its obligations as they become due. ABmunis manages its liquidity risk by monitoring its operating requirements, and by preparing and monitoring budget and cash forecasts to ensure it has sufficient funds to fulfill its obligations.

There has been no change to liquidity risk from the prior year.

(c) Credit risk:

Credit risk refers to the risk that a counterparty may default on its contractual obligations resulting in a financial loss. ABmunis is exposed to credit risk with respect to cash on deposit, deposits with property manager, ASO funds held on deposits, investments and accounts receivable.

ABMunis's accounts receivable consist primarily of amounts due from various provincial municipalities who are members of ABMunis, and billed and unbilled energy retail fees from municipalities participating in the energy retail program. ABmunis assesses accounts receivable on a continuous basis, and provides for any amounts that are not collectible in the allowance for doubtful accounts.

Cash, deposits with property manager, and ASO funds on deposit are maintained with federally regulated financial institutions.

Investments include domestic and foreign debt and equity based pooled funds, which are widely held and diversified. Fair value is based on the underlying securities held by the funds which are of commercial and government grade bonds, debentures, mortgage funds and shares of publicly traded companies whose shares are traded on domestic and global exchanges. Changes in the credit quality of bond issuers can result in a change in fair value.

There has been no change to credit risk from the prior year.