CANADIAN HEALTH SERVICES RESEARCH FOUNDATION/FONDATION CANADIENNE DE LA RECHERCHE SUR LES SERVICES DE SANTÉ

Transcription

1 Financial Statements of CANADIAN HEALTH SERVICES RESEARCH FOUNDATION/FONDATION CANADIENNE DE LA RECHERCHE SUR LES

2 INDEPENDENT AUDITORS' REPORT To the Members of the Canadian Health Services Research Foundation We have audited the accompanying financial statements of the Canadian Health Services Research Foundation/Fondation canadienne de la recherche sur les services de santé, which comprise the statement of financial position as at December 31, 2011, the statements of operations, deferred contributions and cash flows for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian generally accepted accounting principles, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility 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 comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

3 Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of the Canadian Health Services Research Foundation/Fondation canadienne de la recherche sur les services santé as at December 31, 2011 and its results of operations and its cash flows for the year then ended in accordance with Canadian generally accepted accounting principles. As required by the Canada Corporations Act, we report that, in our opinion, these principles have been applied on a basis consistent with that of the preceding year. Other Matter The financial statements of Canadian Health Services Research Foundation/Fondation canadienne de la recherche sur les services de santé as at and for the year ended December 31, 2010 were audited by another auditor who expressed an unmodified opinion on those statements on March 24, Chartered Accountants, Licensed Public Accountants March 22, 2012 Ottawa, Canada

4 Statement of Financial Position December 31, 2011, with comparative figures for 2010 Assets Current assets: Cash $ 1,597,762 $ 807,753 Co-sponsor contributions receivable (note 5) 1,105, ,829 Accounts receivable 472, ,458 Prepaid expenses 129, ,406 Short-term investments (note 2) 11,095,119 17,855,598 14,400,635 20,370,044 Investments (note 2) 36,405,592 42,926,900 Capital assets (note 3) 377, ,786 Pension asset (note 4) 583, ,661 Liabilities and Deferred Contributions $ 51,767,035 $ 64,248,391 Current liabilities: Accounts payable and accrued liabilities $ 1,698,340 $ 1,692,598 Deferred contributions from co-sponsors (note 5) 601, ,769 Deferred revenue 154, ,017 Current portion of obligations under capital lease (note 6) 15,187 15,516 2,469,950 2,719,900 Obligations under capital lease (note 6) 7,823 24,964 Deferred lease inducement 52,688 75,269 Deferred contributions (note 7) 49,236,574 61,428,258 Commitments (note 13) See accompanying notes to financial statements. $ 51,767,035 $ 64,248,391 Approved by the Board: Dr. Brian D. Postl, Chair, Board of Trustees Dr. Morris L. Barer, Chair, Finance and Audit Committee Ms. Maureen O'Neil, President, O.C. Ms. Nancy Quattrocchi, Vice-President, Corporate Services 1

5 Statement of Operations, with comparative figures for 2010 Revenue: Amortization of deferred contributions relating to operations $ 13,782,631 $ 14,344,157 Amortization of deferred capital contributions relating to capital assets 173, ,744 Program support revenue 951, ,773 Other revenue 319, ,741 Revenue from co-sponsors 1,248,843 2,101,709 16,475,687 17,396,124 Expenses: Strategic Priority #1: Engaging and Supporting Citizens 1,845,142 1,351,502 Strategic Priority #2: Accelerating Evidence-Informed Change: Executive Training for Research Application (EXTRA) 2,886,578 2,787,300 Capacity Development 2,129,336 3,465,421 Change Initiatives 1,648,908 2,280,768 Strategic Priority #3: Promoting Policy Dialogue 4,764,911 3,422,322 Strategic evaluation 514, ,709 Communications 358, ,706 Administration 795, ,812 Amortization of capital assets 173, ,744 Investment management fees 108, ,131 Co-sponsor s program expenses 1,248,843 2,171,709 16,475,687 17,396,124 Excess of revenue over expenses $ $ See accompanying notes to financial statements. 2

6 Statement of Deferred Contributions, with comparative figures for 2010 Balance, beginning of year $ 61,428,258 $ 74,324,540 Amortization of deferred contributions relating to operations (13,782,631) (14,344,157) Amortization of deferred contributions relating to capital assets (173,838) (199,744) Realized investment income (note 8) 1,356,832 4,188,136 Net unrealized gain (loss) on investments (note 8) 379,741 (2,128,763) Change in allowance for uncollectability of investments (note 8) 2,036 (411,754) Return of funds relating to the Open Grants Competition of Canadian Institute of Health Research 26,176 Balance, end of year $ 49,236,574 $ 61,428,258 See accompanying notes to financial statements. 3

7 Statement of Cash Flows, with comparative figures for 2010 Cash provided by (used in): Operating activities: Excess of revenue over expenses $ $ Items not involving cash: Amortization of capital assets 173, ,744 Amortization of deferred contributions relating to capital assets (173,838) (199,744) Amortization of deferred contributions relating to operations of the current year (13,782,631) (14,344,157) Amortization of deferred lease inducement (22,581) (22,581) Change in non-cash operating working capital: Decrease (increase) in co-sponsor contributions receivable (156,476) 65,505 Decrease in accounts receivable 146,487 24,698 Decrease in prepaid expenses 8,928 49,709 Increase in pension asset (144,496) (150,411) Increase payable and accrued liabilities 5, ,988 Decrease in deferred contributions from co-sponsors (263,196) (511,835) Increase (decrease) in deferred revenue 7,833 (19,666) (14,200,390) (14,118,750) Investing activities: Capital asset acquisitions (38,703) (336,440) Withdrawals from investments 15,020,396 14,075,857 Return of funds relating to the Open Grants Competition 26,176 15,007,869 13,739,417 Financing activities: Repayment of obligations under capital lease (17,470) (14,408) Increase (decrease) in cash 790,009 (393,741) Cash, beginning of year 807,753 1,201,494 Cash, end of year $ 1,597,762 $ 807,753 Supplemental cash flow information: Interest paid $ 1,369 $ 1,974 See accompanying notes to financial statements. 4

8 Notes to Financial Statements The Canadian Health Services Research Foundation ( CHSRF ) is an independent, not-for-profit organization that is dedicated to accelerating healthcare improvement and transformation for Canadians. CHSRF is a registered charity under the Income Tax Act, and accordingly, is exempt from income taxes. CHSRF became operational in fiscal 1997 and is incorporated under the Canada Corporations Act. Under the Federal Budget, 1996, the Government authorized Health Canada to pay $55,000,000 to CHSRF over a five-year period. As part of the same agreement, the Medical Research Council ("MRC") agreed to pay CHSRF $10,000,000 and the Social Sciences and Humanities Research Council of Canada ("SSHRC") agreed to pay CHSRF $1,500,000 over the same five-year period. In 1999, the Federal Government granted $35,000,000 to CHSRF for participation in the Canadian Institutes of Health Research (this partnership led to the development and implementation of the Capacity for Applied and Developmental Research and Evaluation (CADRE) program), and another $25,000,000 to support a ten-year nursing research fund. In 2003, the Government provided a grant of $25,000,000 to CHSRF to implement the Executive Training for Research Application ("EXTRA") program over a thirteen-year period. In 2009, CHSRF entered into a Comprehensive Funding Agreement with Health Canada. This agreement supersedes the previous agreements. Under this agreement CHSRF is directed to hold all investments in fixed income securities within a single investment portfolio. The agreement has enabled CHSRF to report their operations under a single program. CHSRF is in the process of transitioning its investments to meet this agreement and anticipates completing this transition by Significant accounting policies: The financial statements have been prepared in accordance with Canadian generally accepted accounting principles and include the following significant accounting policies: (a) Basis of presentation: CHSRF uses the deferral method of accounting for contributions for not-for-profit organizations. (b) Revenue recognition: Unrestricted contributions are recognized as revenue when received or receivable. Externally-restricted contributions are deferred and recognized as revenue in the year in which the related expenses are incurred. Externally-restricted contributions applied towards the acquisition of capital assets are deferred and amortized to revenue, at a rate corresponding with the amortization rate of the related capital assets. 5

9 1. Significant accounting policies (continued): (b) Revenue recognition (continued): CHSRF receives contributions from third-party co-sponsors to fund research initiatives. Revenue from co-sponsors is deferred and amortized to revenue as related expenses are incurred. Investment income earned is restricted to be used for the specific purpose of the related externally-restricted contribution. Investment income earned is initially recorded in deferred contributions and is recognized as revenue in the year the related expenses are incurred. (c) Financial instruments: (i) Investments: Investments are designated as held for trading and are measured at fair value. Purchases and sales of investments are recorded on the settlement date. Transaction costs related to the acquisition of investments are expensed. Fair values of investments are determined by reference to published quotations in an active market at year-end. For investments in pooled funds where a quoted market price is not available, the fair value of CHSRF's investment represents CHSRF's proportionate share of the fair value of the underlying net assets of the pooled fund at year-end. Approximately 5% of CHSRF's investments are valued at the fair value reported by a Fund Manager. These investments are not readily marketable and their estimated value is subject to uncertainty and therefore may differ from the investments' realizable value. (ii) Derivative financial instruments: CHSRF is party to derivative financial instruments which are used to manage CHSRF s exposure to market risks from foreign exchange rates. CHSRF s policy is not to utilize derivative financial instruments for trading or speculative purposes. CHSRF's investment in derivatives are classified as held for trading financial assets and are recorded at fair value on the statement of financial position. Changes in fair value of these derivatives are recognized in realized investment income on the statement of deferred contributions. 6

10 1. Significant accounting policies (continued): (c) Financial instruments (continued): (iii) Other financial instruments: CHSRF has classified co-sponsor contributions receivable and accounts receivable as loans and receivables and accounts payable and accrued liabilities as other liabilities. Upon initial recognition, these financial assets and liabilities are measured at fair value. Subsequent to initial recognition, these financial assets and liabilities are measured at amortized cost using the effective interest method of amortization. (d) Capital assets and amortization: Purchased capital assets are recorded at cost. Repair and maintenance costs are charged to expense. When a capital asset no longer contributes to CHSRF's ability to provide services, its carrying amount is written-down to its residual value. Capital assets are amortized on a straight-line basis over the following useful lives: Asset Computer software Computer equipment Telephone equipment Furniture and fixtures Leasehold improvements Useful life 3 years 3 years 4 years 5 years Lease term Capital assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimate undiscounted cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. (e) Leases: Leases are classified as either capital or operating in nature. Capital leases are those which substantially transfer the benefits and risks of ownership to the lessee. Assets acquired under capital leases are amortized at the rates for their capital asset class as described in note 1(d). Obligations recorded under capital leases are reduced by the principal portion of lease payments. The imputed interest portion of lease payments is charged to expense. 7

11 1. Significant accounting policies (continued): (f) Deferred lease inducement: The value received by CHSRF represented by a rent-free period relating to leased premises is deferred and amortized over the term of the lease. (g) Employee future benefits: CHSRF has a defined benefit pension plan for its employees. The benefits are based on years of service and the employee's compensation. The cost of this program is currently being funded by CHSRF and its eligible employees. The cost of defined benefit pension benefits earned by employees is actuarially determined using the projected accrued benefit method prorated on the employees length of service and is charged to operating expense as services are rendered. This cost is actuarially determined using CHSRF's best estimate assumptions of the pension plan's expected investment yields, salary escalations, mortality of members, terminations and the ages at which members will retire. Adjustments arising from plan amendments, experience gains and losses and changes in assumptions are amortized over the expected average remaining service life of the employee group. Actuarial gains or losses on the accrued benefit obligation arise from differences between actual and expected experience and from changes in the actuarial assumptions used to determine the accrued benefit obligation. The excess of the net accumulated actuarial gains or losses over 10 percent of the greater of the accrued benefit obligation and the fair value of plan assets is amortized over the average remaining service period of active employees. For the purpose of calculating the expected return on plan assets, those assets are valued at fair value. (h) Allocation of general support costs: CHSRF presents its statement of operations by function, except for amortization of capital assets and investment management fees. CHSRF incurs general support costs that are common to the administration of CHSRF and each of its functions. General support costs include occupancy costs, personnel, finance, information technology, human resources and legal costs. CHSRF allocates these general support costs from the Administration and Communications functions to the other functions on a per employee basis. These usage rates are used to allocate all the general support costs to administration and each of its functions. 8

12 1. Significant accounting policies (continued): (i) Foreign currency transactions: Foreign currency transactions of CHSRF are translated using the temporal method. Under this method, transactions are initially recorded at the rate of exchange prevailing at the date of the transaction. Thereafter, monetary assets and liabilities are adjusted to reflect the exchange rates in effect at the statement of financial position date. Gains and losses resulting from the adjustment are included in realized investment income in the statement of deferred contributions. (j) Use of estimates: The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. These estimates are reviewed annually and as adjustments become necessary, they are recognized in the financial statements in the period they become known. Significant management estimates include assumptions used in determining the net pension asset. 2. Investments: Fair value Cost Fair value Cost Cash and cash equivalents $ 172,109 $ 172,109 $ 1,642,703 $ 2,076,754 Fixed income securities 45,400,802 45,519,143 56,372,976 56,371,879 Equity securities 1,928,027 1,809,346 2,726,377 2,618,253 Derivative financial instruments (227) 40,442 47,500,711 47,500,598 60,782,498 61,066,886 Less: short-term investments (11,095,119) (11,403,901) (17,855,598) (18,247,569) $ 36,405,592 $ 36,096,697 $ 42,926,900 $ 42,819,317 9

13 2. Investments (continued): Investments are managed as a pool by investment managers who are under the direction of the Investment Committee reporting to the Board of Trustees. Investments include: (a) Cash and cash equivalents: Cash and cash equivalents are comprised of cash and debt securities with a variety of interest rates and having original maturity dates of less than 90 days. (b) Fixed income securities: Fixed income securities consist of Canadian and United States government and commercial bonds or funds investing primarily in fixed income securities with various interest rates and terms to maturity. The fixed income securities have effective interest rates ranging from 1.50% to 9.10% with maturity dates ranging from one month to five years. The value of these securities is subject to interest rate and exchange rate fluctuations. (c) Equity securities: Equity securities consist of funds invested primarily in equity securities. These securities are subject to market value and exchange rate fluctuations. As at December 31, 2011, $2,337,745 ( $3,138,131) of the organization's equity investments were denominated in US dollars. Of this amount, $409,718 ( $411,754) has been allowed for uncollectability as disclosed in note 8 to these financial statements. (d) Derivative financial instruments: CHSRF has entered into a forward exchange contract as part of a specific investment strategy of CHSRF designed to reduce its exposure to the US-Canadian dollar fluctuations. The forward contract obliges CHSRF to sell US dollars and purchase Canadian dollars in the future at predetermined exchange rates. The amount of US currency exposure is determined by CHSRF's investment in United States securities. It is the intent of CHSRF to meet any loss on the maturity of the forward contract by selling part of the US dollar investments. At December 31, 2011, CHSRF has purchased contracts to sell $1,200,000 US at a rate of $ CDN in the next year. (e) Short-term investments: Short-term investments consist of cash and fixed income securities maturing within the next fiscal year. 10

14 3. Capital assets: Accumulated Net book Net book Cost amortization value value Computer software $ 383,021 $ 383,021 $ $ 720 Computer equipment 597, ,364 68,025 92,323 Telephone equipment 95,448 76,551 18, Furniture and fixtures 322, ,624 15,407 21,297 Equipment under capital lease 63,773 40,367 23,406 38,189 Leasehold improvements 719, , , ,016 $ 2,181,252 $ 1,803,601 $ 377,651 $ 512,786 Cost and accumulated amortization at December 31, 2010 amounted to $2,142,549 and $1,629,763 respectively. 4. Pension asset: (a) Plan assets and obligations: CHSRF administers the Canadian Health Services Research Foundation, which is a defined benefit plan that covers most of its employees. CHSRF has adopted a measurement date of December 31 for estimating the plan assets and obligation. The reconciliation of the funded status of the defined benefit pension plan to the amount recorded in the financial statements is as follows: Plan assets at fair value $ 5,615,279 $ 5,308,614 Accrued benefit obligation (7,358,043) (5,761,197) Funded status plan deficit (1,742,764) (452,583) Unamortized past service costs 84,030 89,633 Unamortized net actuarial loss 2,241, ,611 Pension asset $ 583,157 $ 438,661 11

15 4. Pension asset (continued): (b) Plan assets: Plan assets at fair value, beginning of year $ 5,308,614 $ 4,310,799 Actual gain (loss) on plan assets (230,869) 360,004 Employer contributions 563, ,709 Employee contributions current service 262, ,514 Employee contributions past service 137,330 Benefits paid (288,926) (227,742) Plan assets at fair value, end of year $ 5,615,279 $ 5,308,614 (c) Accrued benefit obligation: Accrued benefit obligation, beginning of year $ 5,761,197 $ 4,620,655 Current service cost 727, ,165 Past service cost contributed by employees 137,330 Interest cost 313, ,401 Benefits paid (288,926) (227,742) Actuarial loss 844, ,388 Accrued benefit obligation, end of year $ 7,358,043 $ 5,761,197 (d) Net pension benefit cost: Current service cost $ 727,004 $ 602,165 Employee contributions current service (262,551) (236,514) Interest cost 313, ,401 Expected gain on plan assets (376,473) (312,505) Amortization of past service costs 5,603 5,603 Amortization of actuarial losses 11,868 2,148 $ 419,413 $ 341,298 12

16 4. Pension asset (continued): (e) Assumptions: The significant assumptions used in the actuarial valuation of the defined benefit plan at December 31 are as follows: Discount rate 4.65% 5.25% Rate of compensation increases 3.50% 3.50% Expected long-term rate of return on plan assets 6.50% 6.75% Rate of inflation 2.50% 2.50% (f) Defined benefit plan funded status: The latest actuarial valuation of the pension plan for funding purposes was performed as at June 1, The next actuarial valuation is required to be completed as at June 1, 2014, in accordance with the requirements of the Pension Benefits Act (Ontario). As part of the regulations governing provincially regulated pension plans, pension plans must meet certain solvency requirements, which assume the plans, are wound up/liquidated as of the valuation date. The actuarial valuation performed as at June 1, 2011 reported a solvency surplus of $8,281 and a going concern deficiency of $346,288, based on economic assumptions applicable at June 1, CHSRF is required to make minimum additional contributions of $37,992 per annum in future years to eliminate the going concern deficiency under the Pension Benefits Act (Ontario). CHSRF reviews the performance of the plan on a quarterly basis to determine if additional payments should be made to the plan. In fiscal 2011, CHSRF made additional contributions of $95,

17 5. Deferred contributions from co-sponsors: For certain funding initiatives CHSRF receives contributions from third party co-sponsors. CHSRF recognizes revenue associated with these co-sponsor contributions when the funds are disbursed. The nature and amount of changes associated with restricted co-sponsor contributions are outlined below: Net restricted co-sponsor contributions receivable (deferred co-sponsor contributions), beginning of period $ 84,060 $ (362,270) Contributions received during the year (1,780,403) (2,085,152) Amounts recognized as co-sponsor revenue 1,248,843 2,101,709 Amounts recognized as program support revenue 951, ,773 Net restricted co-sponsor contributions receivable, end of period $ 503,732 $ 84,060 Presented in CHSRF s statement of financial position as: Co-sponsor contributions receivable: Health Canada $ 504,243 $ Canadian Institutes of Health Research 344, ,244 Other 256, ,585 1,105, ,829 Deferred contributions from co-sponsors: Canadian Institutes of Health Research 200, ,376 Canadian Patient Safety Institute 45,047 93,411 Alberta Innovates Health Solutions 175, ,734 Other 181,114 73, , ,769 Net restricted co-sponsor contributions receivable $ 503,732 $ 84,060 14

18 6. Capital lease obligations: Future lease payments under capital lease in existence at December 31, 2011 are as follows: 2012 $ 15, ,941 23,822 Less amount representing deemed interest at 4% ,010 Current portion 15,187 Long-term portion $ 7,823 The lease term is August 2009 to August The effective annual interest rate is 4%. The capital lease is secured by photocopiers that have an approximate net book value of $23, Deferred contributions: All of the deferred contributions of CHSRF are subject to externally imposed restrictions in accordance with the related Comprehensive Funding Agreement. Investment income earned on the grants received from the Government of Canada is also restricted. Accordingly, these amounts are deferred and recognized as revenue as the related expenses are incurred resulting in CHSRF having no net asset balance at the end of the year. 8. Investment income: Investment income earned consists of the following: Interest and dividends $ 2,164,711 $ 2,578,567 Gain (loss) on sale of investments (838,250) 15,824 Gain on sale of derivative instruments 30,371 1,593,745 $ 1,356,832 $ 4,188,136 15

19 8. Investment income (continued): Unrealized gain (loss) on investments consists of the following: Unrealized investment income (loss) $ 420,410 $ (686,887) Unrealized loss on derivative financial instruments (40,669) (1,441,876) $ 379,741 $ (2,128,763) Allowance for uncollectability: Allowance for uncollectability (USD) $ 402,869 $ 402,869 Foreign exchange to CDN$ 6,849 8,885 Allowance for uncollectability (CDN$) $ 409,718 $ 411,754 Included in CHSRF's investments is $2,337,745 ( $3,138,131) that is in the process of being liquidated. In 2010, CHSRF was made aware that the collectibility of $402,869 USD of these investments was uncertain and as a result an allowance for uncollectability was recognized for this amount. 9. Allocation of general support costs: General support costs of $2,714,500 ( $2,548,000) have been allocated to specific functions from administration and communications as follows: Strategic Priority #1: Engaging and Supporting Citizens $ 486,600 $ 425,400 Strategic Priority #2: Accelerating Evidence-Informed Change: Executive Training for Research Application (EXTRA) 354, ,600 Capacity Development 387, ,100 Change Initiatives 225, ,500 Strategic Priority #3: Promoting Policy Dialogue 1,261, ,400 $ 2,714,500 $ 2,548,000 16

20 10. Capital disclosures: CHSRF considers its capital to consist of its unused externally restricted contributions which are presented as deferred contributions in the statement of financial position. CHSRF's objectives with respect to managing capital are to comply with externally imposed restrictions which fund its ongoing operations. CHSRF monitors its capital requirements and objectives through its budgeting process, its financial statement review process and reviews of the terms and conditions contained in its agreement with Health Canada. CHSRF is also subject to external restrictions on its capital with respect to requirements to fund post-retirement benefits in accordance with related regulations. CHSRF monitors its compliance with these requirements by following the funding recommendations provided by the plan's actuary. The Board of Trustees believes that CHSRF has adhered to all externally imposed restrictions. CHSRF s approach to capital management has not changed from the prior year. 11. Financial instruments and risk management: (a) Fair values: The carrying values of cash, co-sponsor contributions receivable, accounts receivable, and accounts payable and accrued liabilities, approximate their fair value due to the relatively short periods to maturity of the instruments. The carrying value of the obligation under capital leases approximates its fair value as the terms are at market rates. The fair value of investments is disclosed in note 2. (b) Credit and interest rate risk: CHSRF is exposed to credit and interest rate risk with respect to its interest-bearing investments, as disclosed in note 2. CHSRF is also exposed to credit risk relating to its receivables. CHSRF reduces its credit risk by dealing with creditworthy counterparties. Management does not believe CHSRF is exposed to significant credit risk from its receivables. (c) Foreign currency risk: CHSRF is exposed to foreign currency risk with respect to its investments and derivative financial instrument, as disclosed in note 2. 17

21 12. Comparative figures: Certain comparative figures have been reclassified to conform with the financial statement presentation adopted in the current year. 13. Commitments: (a) Operating: CHSRF is committed to payments under operating leases for premises. At the current rate of operating costs the amount of the rent is approximately: 2012 $ 470, , ,000 $ 1,018,000 In 2012, CHSRF has entered into negotiations for a 30-month extension on its premises. In the normal course of business, CHSRF has entered into a lease agreement for the rental of their premises. It is common in such lease transactions for CHSRF as the lessee to agree to indemnify the lessor for liabilities that may arise from the use of the leased premises. The maximum amount potentially payable under the foregoing indemnities cannot be reasonably estimated. CHSRF has liability insurance that relates to the indemnifications described above. 18

22 13. Commitments (continued): (b) Grant funding: Funding is provided by CHSRF to researchers in the field of health services and nursing. The following are the commitments of CHSRF in regards to these grants as at December 31, 2011: Applied Collaborations EXTRA Patient Research for Primary Regional Regional Commissioned Engage- and Innovation Post- Health Mentoring Training Research ment Policy and Doctoral Care/Home LEAD REISS Centers Centers* Chairs* Projects* Projects Analysis Improvement Awards* Care* Awards* Awards* Total 2012 $ 35,000 $ 68,375 $ 126,900 $ 111,100 $ 489,835 $ 90,708 $ 150,000 $ 21,250 $ 138,900 $ 30,000 $ 483,528 $ 1,745, , ,548 50, ,000 35, , ,677 50,000 80,677 $ 35,000 $ 68,375 $ 164,400 $ 111,100 $ 671,383 $ 171,385 $ 150,000 $ 21,250 $ 288,900 $ 30,000 $ 518,528 $ 2,230,321 Other sponsors have also made commitments for the above-noted programs; however, these commitments have not been included in these financial statements. *Funding for these legacy projects relate to CHSRF s previous strategic directions ( ). 19