~ an 'ndeoendent O1emoe'01. St. Joseph's General Hospital FinancialStatements March3l,2006. MEYERS NORRIS PENNYl!? BAKER TILLY INTERNATIONAL

Transcription

1 . MEYERS NORRIS PENNYl!? St. Joseph's General Hospital FinancialStatements March3l,2006 ~ an 'ndeoendent O1emoe'01 BAKER TILLY INTERNATIONAL CHARTERED ACCOUNTANTS & BUSINESS ADVISORS 467 CUMBERLAND ROAD, COURTENAY, BC V9N 2C PH. (250) FAX (250)

2 Contents For the year ended March 31,2006 Management's Responsibility 1 Auditors' Report 2 Financial Statements Statement of Financial Position """"" 3 Statement of Operations 4 Statement of Changes in Net Assets..." 5 Statement of Cash Flows " 6 Notes to the Financial Statements 7 Page iti+p

3 Management's Responsibility To the Board of Directors of 5t. Joseph's General Hospital: Management is responsible for the preparation and presentation of the accompanying financial statements, including responsibility for significant accounting judgments and estimates in accordance with Canadian generally accepted accounting principles and ensuring that all information in the annual report is consistent with the statements. This responsibility includes selecting appropriate accounting principles and methods, and making decisions affecting the measurement of transactions in which objective judgment is required. In discharging its responsibilities for the integrity and fairness of the financial statements, management designs and maintains the necessary accounting systems and related internal controls to provide reasonable assurance that transactions are authorized, assets are safeguarded and financial records are properly maintained to provide reliable information for the preparation of financial statements. The Board of Directors and Audit Committee are composed of Directors who are neither management nor employees of the Hospital, with the exception of the President and Chief Executive Officer. The Board is responsible for overseeing management in the performance of its financial reporting responsibilities, and for approving the financial information included in the annual report. The Audit Committee has the responsibility of meeting with management and external auditors to discuss the internal controls over the financial reporting process, auditing matters and financial reporting issues. The Committee is also responsible for recommending the appointment of the Hospital's external auditors. Meyers Norris Penny LLP, an independent firm of Chartered Accountants, is appointed by the Directors to audit the financial statements and report directly to them; their report follows. The external auditors have full and free access to, and meet periodically and separately with, both the Committee and management to discuss their audit findings. May 3, 2006 /U~ 4iichael Pontus. Pr~sident and Chief Executive Officer ~ '~g~a Eric Macdonald, VP Finance, Capital and Support Services J,..,

4 Auditors' Report To the Directors of St. Joseph's General Hospital: We have audited the statement of financial position of St. Joseph's General Hospital as at March 31,2006 and the statements of operations, changes in net assets and cash flows for the year then ended. These financial statements are the responsibility of the Hospital's management. 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 plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. In our opinion, these financial statements present fairly, in all material respects, the financial position of the Hospital as at March 31, 2006 and the results of its operations and its cash flows for the year then ended in accordance with Canadian generally accepted accounting principles. Comparative figures were reported on by another accountant. Courtenay, May 3, 2006 British Columbia HorAJ~~~C~~~" 467 CumberlaTld Road. CourteTlay. British Columbill. V9N 2C5. Plume: (250) 33/ / IfA.p

5 51. Joseph's General Hospital Statement of Financial Position As at March 31,2006 Assets Current Cash Accounts receivable Inventory Prepaid expenses Capital assets (Note 5) (Note 4) 1,351,079 1,978,341 4,930,647 2,260,143 1,253,665 1,121, , ,243 7,688,425 5,499,992 23,593,350 23,690, ,281,775 29,190,095 Liabilities Current Accounts payable and accruals (Note 6) Accrued vacation pay Accrued wages and benefits Current portion of accrued sick and severance (Note 8) Deferred contributions for designated purposes Accrued sick and severance (Note 8) Deferred capital contributions (Note 7) Special purpose funds 1,915,119 1,867,734 1,587,477 1,592,866 3,588,834 1,812, , ,234 75, ,340 7,382,320 5,679,976 3,821,956 3,565,945 24,381,363 23,837,746 98,023 51,874 35,683,662 33,135,541 Contingencies and commitments (Note 10) Net assets (deficiency) Investment in capital assets (Note 14) Allowable unfunded deficit from operations (Note 9) Unrestricted deficit from operations 14,045 (3,026,013) (1,389,919) 14,045 (3,026,013) (933,478) (4,401,887) (3,945,446) 31,281,775 29,190,095 ~behalf of the B\oard. ~\)~ Director ~~ / Director nil! accompllllyif/k notes are an intekral part of these jilillllcilll statements 3 ~

6 Statement of Operations For the year ended March Revenue Vancouver Island Health Authority Union contracts signing bonus Outpatient - Medical Service Plan - BC Cancer Agency - Other Inpatient services Cafeteria Other Nursing training programs Emergency physician pilot project 41,424,863 39,882,141 2,622,699 5,408,541 5,272,253 1,375,681 1,119, , ,050 2,410,534 2,486, , , , , , ,366 1,135,212-57,032,649 50,613,038 Expenditures Administration and support Bad debts Drugs Emergency physician pilot project Employee benefits Expenses for designated purposes Foods services Linen and laundry Medical and surgical supplies Nursing training programs Patient care, diagnostic and therapeutic Plant maintenance and biomedical engineer Plant operating and housekeeping Professional services Salaries and wages Sick and severance Union contracts signing bonus 1,073, , ,070 76,324 2,416,069 2,194,123 1,262,632-7,027,626 6,444,977-70, , ,293 1,267,071 1,263,702 3,313,325 3,267, , ,323 2,196,563 1,911, , , , ,482 2,953,900 2,854,877 29,875,369 28,871, , ,434 2,622,699-57,489,090 50,559,213 Excess (deficiency) of revenue over expenditures before other items Investment in capital assets Amortization of deferred capital contributions Amortization of capital assets (456,441) 53,825 2,443,549 2,319,266 (2,443,549) (2,319,266) Excess (deficiency) of revenue over expenditures (456,441) 53,825 The accompanying notes are an inte!il" t/part of these j1nancial statements 4 IfA.p

7 Statement of Changes in Net Assets For the year ended March 3/,2006 Allowable Unrestricted Invested unfunded surplus (deficit) in capital deticit from from assets operations operations Total Total Balance, beginning of year 14,045 (3,026,013) (933,478) (3,945,446) (3,999,271) Excess (deficiency) of revenue over expenditures (456,441) (456,441) 53,825 Balance, end of year 14,045 (3,026,013 ) (1,389,919) (4,401,887) (3,945,446) 'fjte accompanying notes are WI integral part of these jinanc:ialwatements 5 IIAP

8 Statement of Cash Flows For the year ended March 31,2006 Cash provided by (used for) the following activities Operating activities Excess (deficiency) of revenue over expenditures Items not involving cash Amortization of capital assets Amortization of deferred capital contributions (456,441) 53,825 2,443,549 2,319,266 (2,443,549) (2,319,266) (456,441) 53,825 Changes in working capital accounts Accounts receivable Inventory Prepaid expenses Accounts payable and accruals Accrued vacation pay Accrued wages and benefits Accrued sick and severance Deferred contributions for designated purposes Special purpose funds Investing activities Purchase of capital assets (2,670,504) (459,788) (132,400) (69,376) (12,791) 106,812 47,384 (472,537) (5,389) 13,069 1,776, , , ,319 (73,146) 61,016 46,149 (373) (1,267,633) (219,812) (2,346,795) (3,233,405) Financing activities Deferred capital contributions received 2,987,166 2,791,363 Decrease in cash resources (627,262) (661,854) Cash resources, beginning of year 1,978,341 2,640,195 Cash resources, end of year 1,351,079 1,978,341 The IIccompuflyillg flotes lire on imegrul part of thesejlflllflcill/ statements 6 Nt+P

9 Notes to the Financial Statements For the year ended March 3/, Incorporation and operations St. Joseph's General Hospital (the "Hospital") is a denominational hospital wholly owned by the Bishop of Victoria, a Corporation Sole. St. Joseph's General Hospital is a strategic partner with Vancouver Island Health Authority ("VIHA"). The formal relationship is delineated within an affiliation agreement signed by the respective partners on January 14,2004. The affiliation agreement establishes accountability provisions, operating principles, funding guidelines, dispute mechanism, and termination rights between the Hospital and VIHA. The Hospital is registered as a charitable organization under the Income Tax Act. 2. Significant accounting policies The financial statements have been prepared in accordance with Canadian generally accepted accounting principles using the following significant accounting policies: Inventory Inventories of materials and supplies are recorded at the lower of average cost and replacement cost. Capital assets Capital assets are initially recorded at cost. Amortization is provided using the straight-line method at rates intended to amortize the cost of assets over their estimated useful lives. No amortization is provided on construction in progress until the project is completed. The annual amortization rates used are as follows: Buildings Land improvements Equipment 2.5-5% 10% 5-100% Revenue recognition The Hospital follows the deferral method of accounting for contributions which include government grants and donations. Under the Health Insurance Act and Regulations thereto, the Hospital is funded primarily by the Province of British Columbia in accordance with budget arrangements established and approved by the Ministry of Health (the "Ministry") and Vancouver Island Health Authority ("VIHA"). Approved operating grants are provided to the Hospital by the Ministry through VIHA and are recorded as revenue in the period to which they relate. Grants approved but not received at the end of an accounting period are accrued. Where a portion of a grant relates to a future period, it is deferred and recognized in the subsequent period. Unrestricted contributions are recognized as revenue when received or receivable if the amounts to he received can be reasonably estimated and collection is reasonably assured. Externally restricted contributions are recognized as revenue in the year in which the related expensesare incurred. 7 itl\p

10 Notesto the FinancialStatements For the year ended March 3/,2006 Revenue recognition (continued) Contributions externally restricted for the purchase of capital assets are deferred and amortized into revenue at a rate corresponding with the amortization rate for the related capital assets. Government assistance Government assistance for acquiring capital assets is recorded as deferred capital contributions and is amortized on the same basis and according to the same rates as the related capital assets. Measllrement uncertainty (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 tinancial statements, and the reported amounts of revenues and expenditures during the reporting period. Significant areas requiring the use of management estimates include the determination of useful lives for amortization of capital assets, estimates of accounts receivable collectibility and allowance for doubtful accounts, and the estimation of future employee benefits (sick and severance liability). Actual results could differ from those estimates. These estimates and assumptions are reviewed periodically and, as adjustments become necessary they are reported in earnings in the periods in which they become known. Employeefutllre benefits (accrued sick and.~everance liability) Under the term's of the Hospital's union contracts and non-contract agreements, employees with ten years of service and having reached a certain age are entitled to receive special payments upon retirement. These payments are based upon accumulated sick leave credits and entitlements for each year of service. The liability for amounts which may become payable to retiring employees is estimated based on the actuarial valuations. Actuarial gains and losses resulting from experience or changes in assumptions are recognized to the extent that such net gain (loss) exceeds ten percent of the accrued benefit obligation at the beginning of the year which is amortized over the average remaining service period of the active employees expected to receive benefits (ten years). Donation revenue - St. Joseph's General Hospital Foundation St. Joseph's General Hospital's primary source of donation revenue is the St. Joseph's General Hospital Foundation which commenced operations February 22, Since that time donations for the Hospital are received by the Foundation, which then makes donations to the Hospital as determined by the Foundation's board of directors. 8 i/\p

11 Notes to the Financial Statements For the year ended March 31,2006 Contributed services A substantial number of volunteers contribute a significant amount of their time each year. Due to the difficulty in determining fair value, contributed services are not recognized in the financial statements. Financial instruments Financial instruments consist of cash, accounts receivable, accounts payable and accruals, accrued vacation pay, accrued wages and benefits, and accrued sick and severance. The fair value of all financial instruments identified above except for accrued sick and severance approximates their carrying value due to their short-term nature. The fair value of accrued sick and severance approximates its carrying value because the discount rate is adjusted on a regular basis. Unless otherwise noted, it is management's opinion that St. Joseph's General Hospital is not exposed to significant interest rate, currency or credit risks arising from these financial instruments. 3. Health and benefit plan - unfunded liability The Hospital participates in a benetit plan with the Health Employers Association of British Columbiawhichadministers and funds long-term disability claimsof employees. Currently, the plan has no unfunded liability. 4. Accounts receivable Vancouver Island Health Authority Medical Services Plan of BC Other 3,259, , , ,548 1,135,628 1,566,662 4,930,647 2,260, Capital assets Accumulated Net book Net book Cost amortization value value Land 14,045-14,045 14,045 Buildings 30,405,398 15,427,172 14,978,226 14,600,570 Equipment 29,143,146 21,610,462 7,532,684 7,829,659 Land improvements 364, ,135 24,307 28,664 Construction in progress 1,044,088-1,044,088 1,217,165 60,971,119 37,377,769 23,593,350 23,690,103 9.

12 Notesto the Financial Statements For the year ended March Accounts payable and accruals Trade payables Other 1,747, ,191 1,628, ,915,119 I,867, Deferred capital contributions Deferred capital contributions related to capital assets represent the unamortized amount and unspent amount of grants and donations received for the purchase of capital assets. The amortization of capital contributions is recorded as revenue in the statement of operations. Balance, beginning of year Capital funding receipts: Vancouver Island Health Authority Ministry of Health Services Comox-Strathcona Regional Hospital District St. Joseph's General Hospital Foundation General donations Federal equipment grant Other Less: Balance, end of year Transfer to operations Amounts amortized to revenue 23,837,746 23,365,649 1,262,747 1,327, , , , , ,753 15,920 36, , , ,439 26,824,912 26,226,546-69,533 2,443,549 2,319,267 24,381,363 23,837,746 The balance of unamortized capital contributions consists of: Unamortized capital contributions used to purchase assets Restricted unspent contributions 23,579, ,058 23,676, ,688 Balance, end of year 24,381,363 23,837, Employee benefits Accrued sick and severance Under the terms of the employer's union contracts, employees with ten years of service and having reached a certain age are entitled to receive special payments upon retirement (or other circumstances specified in the collective agreement). These payments are based upon accumulated sick leave credits and entitlements for each year of service. The liability for amounts which may become payableto retiring employeeshavebeenestimatedby actuarialvaluationasat March 31, 2004, extrapolatedto March31, 2006,usingan earlymeasurementdateof December31, itatp

13 Notesto the Financial Statements For the year ended March 3 J Accrued sick and severance (continued) The accumulated follows: benefit obligation for sick leave and severance benefits as at March 3], 2006, is as Sick leave benefits Severance benefits Total unfunded obligation Accrued sick and severance liabilities - current Accrued sick and severance liabilities - long-term Total accrued sick and severance liabilities Sick and severance plan expense Benefits paid 1,602,337 1,467,706 2,088,615 1,944,047 3,690,952 3,41 ], , ,821,956 3,565,945 4,037,652 3,824, , , , ,070 The significant actuarial assumptions liabilities are as follows: Accrued bene tit obligation as at March 31 : Discount rate Rate of compensation adopted in measuring the Hospital's accrued sick and severance increase 5.00% 3.25% 5.50% 3.25% Benefit costs for years ended March 31: Discount rate Rate of compensation increase 5.50% 3.25% 5.75% 3.25% Prior to March 31, 200 I, $2,504,536 of the sick and severance liability has not been funded by the Ministry and is included in Note 9 together with the unfunded vacation pay liability. The unfunded accrued sick and severance amounts are as follows: Unfunded increase in liabilities resulting from 1989 change Directed by the Ministry of Health 667,238 April I, 1999 retroactive adjustment in accrued sick and severance Unfunded portion of sick and severance expense - year ended March 31,2000 Unfunded,Eortionof sick and severance expense - year ended March 31, 200 I The balance of sick and severance noted above is included in Note 9. 1,502, , ,878 2,504,536 Employee healthcare benefits The Healthcare Benefit Trust (the "Trust") administers long-term disability, group life insurance, accidental death and dismemberment, extended health and dental claims for certain employee groups of the Hospital and other provincially funded organizations. Effective March 31, 2004 the Trust was restructured from a multi-employer to a multiple-employer plan only with respect to long-term disability benefits initiated after September 30, The Hospital's assets and liabilities for these long-term disability benefits have been segregated. Accordingly, the Hospital's net liabilities are ret1ected in these financial statements. Il -.

14 Notes to the Financial Statements For the year ended March 31, 20~ Employee healthcare benefits (continued) The group life insurance, accidental death and dismemberment, pre-october I, 1997 long-term disability claims administered by the Trust continue to be structured as a multi-employer plan. Contributions to the Trust of $1,022,324 were expensed during the year. The most recent actuarial valuation for the plan at December 31, 2004 indicated a deficit of $6.4 million. The plan covers approximately 76,100 active employees of which approximately 523 are employees of the Hospital. The next required valuation will be as of December 3 I, WhiJe the Trust has been restructured, the Hospital and all other participating employers continue to be responsible for the liabilities of the Trust should any participating employers be unable to meet their obligation to the Trust. Employee pension benefits The Hospital and its employees contribute to the Municipal Pension Plan, a multi-employer plan governed by the BC Public Sector Pensions Act. defined benefit Employer contributions to the Municipal Pension Plan of $1,954,708 ( $ I,670,829) were expensed during the year. The most recent actuarial valuation for the plan at December 3 I, 2003 indicated an unfunded liability of $789 million. The plan covers approximately 130,000 active employees of which approximately 613 are employees of the Hospital. The next valuation will be as of December 3 I, Allowable unfunded deficit from operations Balance of $3,026,0 13 is unchanged from the previous fiscal year end and is comprised as follows: Unfunded increase in liabilities resulting from 1989 change Directed by the Ministry of Health Accrued vacation pay Accrued sick and severance - Note 8 Unfunded increase in liabilities relating to accrued sick and severance - Note 8 April I, 1999 retroactive adjustment in accrued sick and severance Accumulated unfunded portion of sick and severance expense Fiscal year ended March 31, 2000 Fiscal year ended March 31, 200 I 521, ,238 1,502, , ,878 3,026,013 The Hospital has recorded these expenseslliabilities in accordance with specific instructions/approval of the Ministry of Health. Government funding of these prior year items, however, was provided on a cash basis, instead of an accrual basis - so these items remain unfunded. Schedule III to the affiliation agreement between the Hospital and VIHA states that. "in the event of wind-up of the (hospital), VIHA will provide sufficient funding to satisfy outstanding sick leave, severance and vacation costs for employees of the (hospital)". 12 IIJt.p

15 Notesto the FinancialStatements For the year ended March 31, Contingencies and commitments Contractual obligation - Cumberland Regional Hospital Laundry Society St. Joseph's General Hospital and two other hospitals formed the Cumberland Regional Hospital Laundry Society in 1995 to purchase laundry facilities to service the three hospitals. Each of the three hospitals has guaranteed its share of the long-term debt incurred by the Society in connection with its purchase of the laundry facilities. St. Joseph's management expects the Society to fully service its debt from its operations revenue as derived from laundry service agreements with each of the hospitals. As at March 31, 2006, St. Joseph's General Hospital's share of the guaranteed debt is $ 1,286,331 (March 31, $1,394,710) representing 34.3% of the total debt. St. Joseph's General Hospital has entered into a laundry service agreement obligating the hospital to use the Cumberland Regional Hospital Laundry Society for principally all of its laundry and related services until March 16,2007. During the fiscal year, the Hospital paid $991,806 ( $1,025,460) to the Cumberland Regional Hospital Laundry Society for laundry and related services. Lease commitments The Hospital leases premises for some of its laboratory operations. Current lease contracts for premises and equipment expire during fiscal Minimum lease payments for each of the next five years ending March 31 are as follows: ,439 57,439 57,439 19, ,433 Litigation The nature of the Hospital's activities is such that there is usually a litigation pending or in process at any time. With respect to unsettled claims at March 31, 2006, management believes the Hospital has valid defenses and appropriate insurance coverage in place. In the event any claims are successful, management believes that such claims are not expected to have a material effect on the Hospital's financial position. 13 jj;p

16 11. Related party transactions St. Joseph's General Hospital Notes to the Financial Statements For the year ended March 31, 200~. St. J o...eplz'.~general 11o...pital Foundatioll The Foundation is a not-for-profit organization and a registered charity under the Income Tax Act. The Foundation was created to raise funds in the community for the purpose of furthering the interests and objectives of the Hospital. Although there is no common control of the Foundation through Board appointments or other forms of control, the Foundation is related to the Hospital by virtue of holding resources which are to be used to produce revenue or provide services for the Hospital. At March 31,2006 accounts receivable included $9,711 due from the Foundation and accounts payable include $20,546 due to the Foundation. Deferred capital contributions includes $550,651 of current year donations from the Foundation. Cumberland Regional Ho.~pital Laundry Society See Note 10 above for description of transactions with Cumberland Regional Hospital Laundry Society 12. Comparative figures Certain comparative presentation. figures have been restated, where necessary, to conform to the current year's 13. Economic dependence St. Joseph's General Hospital is economically dependent on the Vancouver Island Health Authority and Provincial Government's Ministry of Health Services for the provision of operating and capital funding. 14. Investment in capital assets Investment in capital assets is calculated as follows: Capital assets Amounts financed by unamortized capital contributions 23,593,350 (23,579,305) 14,045 23,690, I03 (23,676,058) 14,045 [4 Afp