DOMINICA SOCIAL SECURITY BOARD ANNUAL REPORT

Transcription

1 DOMINICA SOCIAL SECURITY BOARD ANNUAL REPORT FOR the Year Ended December 31, 2009 TABLE OF CONTENTS PAGE NO. Transmittal Letter 2 Board of Directors 3 Corporate Information At A Glance 6 Chairperson s Review 7-9 Director s Report Index to Financial Statements 26 Auditor s Report F1

2 DOMINICA DSS SOCIAL SECURITY Dominica Social Security Telephone: (767) Cnr. Hanover & Hillsborough Streets Fax: (767) P. O. Box ROSEAU Website: Commonwealth of Dominica West Indies LETTER OF TRANSMITTAL 19 th May 2010 Honourable Roosevelt Skeritt, Prime Minister & Minister for Finance and Social Security, Prime Minister s Office, Financial Centre, ROSEAU Dear Honourable Minister, T R A N S M I T T A L L E T T E R In accordance with Section 17 (3) of Chapter of the revised laws of the Commonwealth of Dominica, I have the honour to submit the report of the Board on its activities during 2009 together with the Audited Financial Statements for the year ended 31 December We are grateful for the continued support of the Government of Dominica and in the face of the current and emerging challenges confronting Social Security we look forward to greater collaboration as we persist in our efforts to further strengthen the system. Yours truly, Hubert Mickey Joseph CHAIRMAN Social Security - Touching lives through the years! Dominica Social Security, 2009 Annual Report

3 BOARD OF DIRECTORS Mr. Hubert M. Joseph Chairman Ms. Marie-Therese Johnson Deputy Chairperson Mrs. Janice Jean-JacquesThomas Director Mr. Joseph Jean-Pierre Member Mr. Anthony Joseph Member Mr. Stephen Isidore Member B O A R D O F D I R E C T O R S Dr. Bernard Yankey Member Ms. Mandra Fagan Member Mr. Dermot Southwell Member Mr. Eric Marie Member Social Security, Your Shelter in Times of Need

4 DOMINICA DSS HEAD OFFICE BOARD OF DIRECTORS SOCIAL SECURITY Dominica Social Security Cnr. Hillsborough & Hanover Streets Box 772, Roseau Commonwealth of Dominica Tel: /3 Fax: dss@cwdom.dm Website: Mr. Hubert M. Joseph Chairperson Ms. Marie-Therese Johnson Deputy Chairperson Mrs. Janice Jean-Jacques Thomas Director C O R P O R A T E I N F O R M A T I O N Sub Office Dominica Social Security Baystreet Portsmouth Tel: /4100 Fax: dss@cwdom.dm Auditors KPB Chartered Accountants Pedro Investments Building Independence Street, P.O. Box 202, Roseau Commonwealth of Dominica Tel: /2 Attorney Heather Felix-Evans 65 King George V Street Roseau Commonwealth of Dominica Tel: Mr. Joseph Jean-Pierre Member Mr. Anthony Joseph Member Mr. Stephen Isidore Member Dr. Bernard Yankey Member Mr. Dermot Southwell Member Ms. Mandra Fagan Member Mr. Eric Marie Member Investment Committee Mr. Heskeith Brumant Chairman Mrs. Celia Nicholas Member Mr. Matthew Brade Member Mrs. Janice Jean-Jacques Thomas Director Dominica Social Security, 2009 Annual Report

5 CORPORATE INFORMATION SUB COMMITTEES OF THE BOARD 1. CLAIMS REVIEW Stephen Isidore (Chairman) Joseph Jean-Pierre Director Manager Compliance 2. FINANCE & AUDIT REVIEW Eddie Bruno (Chairman) Mandra Fagan Marie-Therese Johnson Celia Nicholas Verlie Shaw Joseph (from Sept.) Michel Williams (from Sept.) 3. HUMAN RESOURCE Marie-Therese Johnson (Chairperson) Janice Jean-Jacques Thomas Archille Chris Joseph Anthony Joseph Dermot Southwell 4. ACTUARIAL REVIEW / PENSION REFORM / PUBLIC RELATIONS Hubert Mickey Joseph (Chairman) Director Deputy Director Legal Officer Manager Actuarial Celia Nicholas Valda Henry Bernard Yankey Heskeith Brumant 5. COMPLIANCE COMMITTEE Anthony Joseph (Chairman) Chief Financial Officer Eric Marie Joseph Jean-Pierre Deputy Director MANAGEMENT Mrs. Janice Jean-Jacques Thomas Director Mr. Augustus Etienne Deputy Director Mrs. Missi Henderson Chief Financial Officer Mr. Jefferson Jno.Baptiste Internal Auditor Mrs. Johanna John-Bertrand Manager, Actuarial Services & MIS Ms. Celia M. Delauney Legal Officer Mr. Bernard Henry Manager, Compliance Mrs. Ignatis Morgan Administrator, Computer Systems Ms. Andrina Bellony Administrator, Contributions Mr. Blaize Jones Administrator, Benefits Ms. Eslyne Ryner Human Resource & Administration Officer Ms. Jo Ann Charles Administrator, Finance & Investments 6. APPEALS TRIBUNAL Justice Albert Matthew (Chairman) Audrey Thomas Bernard Nicholas Social Security, Your Shelter in Times of Need

6 DOMINICA DSS 2009 AT A GLANCE SOCIAL SECURITY Key Indicators % Change Short term Awards & G rants 9,025 7, Long term Beneficiaries 4,930 4, Benefit Paym ents ($M ) N ew claim s for Processing N ew C laim s Processed N ew C laim s Paid 9,710 9, ,511 8, ,482 8, % Change Active Insured persons 2 1,482 21, Active Em ployer Population 2,012 1, % Change C ontribution Incom e ($M ) % N et Investm ent Incom e ($M ) % Adm inistrative C ost ($M ) % Adm in C ost as a % of C ontribution Incom e 12.8% 13.1% -0.3% Adm in C ost as a % of Total Incom e 9.0% 9.3% -0.3% N et Yield of Portfolio 5.5% 5.3% 0.2% Total Fund R eserves ($M ) % Total Assets ($M ) % Dominica Social Security, 2009 Annual Report

7 C H A I R M A N S R E V I E W CHAIRMAN S REVIEW As has been intimated within the recent past, it is imperative that at this juncture in the life of the system the Dominica Social Security continues to undertake a series of reform measures aimed at ensuring the continued viability of the Fund for current and future generations of contributors. Towards that end, the non-implementation of two of the much anticipated reform measures i.e. the 1% increase in the employee contribution rate and the first move in the gradual increase in the retirement age (from 60 to 61) during 2009 has meant a drawback on whatever gains had been realized from the measures effected in the course of the preceding two years. Further, for the year under review, the Dominica Social Security has had to grapple with the major challenges which have impacted the financial and economic landscape within which businesses at the local, regional and international levels have had to operate. For, while it has been reported that Dominica may not have felt the full blunt of the global financial crisis, we have tangibly experienced its effects as, for example, evidenced by the recognition of the impairment in the value of our investments held with the CLICO and British American Insurance Companies consequent upon the collapse of CL Financial Ltd. In the prevailing circumstances, therefore, it is not surprising that the performance of the Social Security for the year 2009 has fallen short of expectations and the goal of the Social Security Board has been, as far as possible, to contain costs within reasonable levels while also exercising continued vigilance over its investment activities and the shoring up of its collection efforts. Thus, it is becoming more critical that the institution realizes every dollar of contribution that is out there and that pursuant to its theme for 2009 Social Security, your Shelter in Times of Need a larger percentage of the population will eventually come to avail themselves of the social shelter that the Social Security System provides. Indeed, there is room for the Social Security Programme to cover a wider percentage of the population particularly those involved in the selfemployed and informal sector. FINANCIAL PERFORMANCE In terms of the financial performance of the institution, total income for the year grew by 6.4% over the previous year, to record $56.358M 71% or $39.857M of which came from Contributions Income and $16.000M or 28.4% from Investment Returns. At the same time, total expenses of $44.986M reflected an increase of 12.8%--mainly because of a $2.7M impairment in Investments, a 6.5% increase in Benefit Expenses and a 3.1% increase in Administrative costs. The combined effect of this slight growth in income, coupled with such larger increase in expenses, has resulted in a decline of 13.4% in reported Net Income of $11.372M. As expected, Benefit Expenses continue to reflect an upward trend reaching $37.196M. Consistent with the trend of previous years, Long-term Benefits continue to make up the largest proportion of Benefit expenditure, accounting for 85.6% or $31.83M of such expenses for the year In total, Benefit expenses represented 93.3% of Contributions Income, leaving only 6.7 cents of every contribution dollar to go towards meeting the cost of Administration. In the circumstances, Investment Returns which registered a 6.5% increase and which should otherwise serve to enhance the Reserve Position of the Fund have had to subsidize the payment of current expenses. Social Security, Your Shelter in Times of Need

8 DOMINICA DSS At an amount of $ M, Total Assets registered a 3.7% increase with Investments making up 91.3% of SOCIAL SECURITY such assets. Meanwhile, the total reserves amounted to $ M, reflecting an improvement of $11.328M or 3.7%, of which the Long-term Benefits Reserve accounted for over 87%. Whereas this level of Reserves in the Long-term Branch appears to be high in relation to the other branches, there continues to be consistent growth in the value of long-term benefits being paid on an annual basis. Moreover, and considering that most of the institution s obligations are very long term, this state of affairs continues to signal the urgent need for strengthening the financing side of the Social Security equation because at all times benefits due have to be paid once insured persons satisfy the necessary qualifying conditions. In addition, the fact that over the years there have been continuous improvements in the benefits provisions without some level of increased financing has only served to worsen the situation. That is why, going forward, the Board and Management must continue to contemplate various strategies for improving on collections while also seeking the cooperation of all stakeholders in honouring their obligations to the programme. This is even more critical in the face of the prevailing uncertainties in the economic and financial environment where opportunities for suitable investments, if at all they exist, are becoming fewer and fewer. FUTURE OUTLOOK On the heels of the global financial meltdown and, more so, because of the need to mitigate the risks inherent in the investment portfolio, in its current form, the question of diversification will continue to command the attention of the administrators and policy makers in the months and years ahead. In that vein, members of the Board, Investment Committee and Management will, as far as practicable, be guided by international best practices when doing the necessary due diligence before deciding to pursue any particular investment. At the same time, and as has been demonstrated over the last several years, management will be required to continue to prudently manage the operations while also keeping Administrative Costs as low as possible. Further, and with regards to other emerging challenges to the various parameters that influence the functioning of the Social Security System, we are optimistic that the tenth Actuarial Review will adequately address same and, on that premise, serious consideration will be given to the implementation of whatever recommendations may emanate therefrom. Thus, we will continue to count on the support and cooperation of our various stakeholders Government, Employers, Employees, Self-employed persons, Pensioners, Beneficiaries as we seek to further strengthen the system for the benefit of contributors and their dependents. It is, therefore, incumbent on all of us to remain committed to, and interested in, the cause of Social Security. Let me, in closing, express on behalf of the Board, sincere appreciation to all stakeholders for their contribution towards the achievements of the organization during the past year. I wish to extend gratitude to the Ministry of Finance & Social Security and, by extension, the Government of Dominica, for their guidance and support during the year. Special thanks are also extended to the management and staff of the DSS for their demonstrated commitment and dedication to the mission of the organization, and, in the months and years ahead, I count on their continued resolve in the quest to confront the current and emerging challenges. Finally, I offer a personal word of commendation to my colleague Board Dominica Social Security, 2009 Annual Report

9 CHAIRMAN S REVIEW members, members of the Investment and other Subcommittees of the Board and other private individuals who placed their expertise at the disposal of the institution and, thus, facilitated the fulfillment of its role. Once again, heartfelt thanks to everyone! Cross Section of Annual Stakeholders Meeting - November 2009 Social Security, Your Shelter in Times of Need

10 DOMINICA DSS SOCIAL SECURITY I N T R O D U C T I O N AND OVERVIEW During the year under review, the Institution continued to deliver on the promise made to the insured population and its efforts at strengthening the Fund to ensure long-term sustainability. Growth was experienced in all key areas Contribution Income, Investment Income, Number of Beneficiaries, Number of Active Employers and Number of Active Insured. The increase in the number of beneficiaries reflects how better informed our contributing public has become in that benefits are claimed when due and generally in a more timely manner. Hence, we will continue our efforts, in that regard, until we are certain that all workers are so informed that they will ensure that their contributions are paid by their employers and, in so doing, minimize the incidence of delinquency. FINANCIAL OVERVIEW At the end of the year, total assets stood at $ M, an increase of 3.71% over the $ of FINANCIAL HIGHLIGHTS INCOME STATEMENT Amounts (in $Million) % Change C ontributions Investm ent Incom e O thers Total Income D I R E C T O R S R E P O R T Benefit Expenses Adm inistrative Expenses Investm ent Im pairm ent Investm ent Portfolio N et Assets The DSS program is generally financed through income received from contribution payments and in the form of returns on investments. At the end of each year, the surplus from these sources is allocated to the various branches and invested. The effective management of the Fund is critical in ensuring both Fund growth as well as income generation so that meaningful benefits can be paid in the short-term while, at the same time, providing adequately for the financing of long-term obligations. Total Fund Reserves grew by 3.7% from $ million in 2008 to $ in Total Assets grew from $ million in 2008 to $ million, an increase of $11.46 million or 3.7%. The Investment Portfolio experienced lower growth than what was experienced in 2008, and moved from $ million to $ million in Dominica Social Security, 2009 Annual Report

11 DIRECTOR S REPORT income For the year in review, it was anticipated that the second increase in the contribution rate would have taken effect. In the absence of such increase, contribution collected fell short of budgetary provisions. Income from contribution amounted to $ million, an increase of 6.4% over Further, despite the global challenges in the financial market, Investment income improved from last year and grew by 6.5% over 2008, from $ million to $ million. As a result, Total Income amounted to $ million. However, such growth fell short of what obtained last year, from 8.15% (2008/2007) to 6.3% (2009/2008). Expenditure Payouts to beneficiaries amounted to $ million and represented an increase of $2.265 million or 6.5%. Such growth is due mainly to increases in the payment of long-term benefits. Administrative Expenses registered the least growth of 3.2% over Overall, after deduction in respect of benefit payments, administrative costs and the provision for loss on investments of $2.701 million, amounts transferred to reserves at the end of 2009 stood at $11.37 million. This reflects a decrease over 2008 of 13.43%. The Table below depicts the reserve position over the last five years. Apart from the large portions transferred in 2008, emanating form the 8th actuarial review, the movement in all the branches stems from the 2009 net income proportioned and transferred at year end. As expected, the long-term branch reflects the largest amounts, representing almost 90% of the total reserves. RESERVE POSITION RESERVES $M $M $M $M $M Short-Term Benefit Long-Term Benefit Employment Injury Benefit Redundancy Benefit Special Benefit Revaluation Reserve TOTAL RESERVES REGISTRATION By the end of 2009 the statistics revealed a decline in registration of insured persons into the programme. When compared to 2008, new employees registering recorded a 2.8% decline. In 2009, a total of 1,466 employees were registered as compared with 1508 in Self-employed persons registering also declined by 2.2% over 2008; for whereas 134 new self-employed persons joined the programme in 2008, the number registering in 2009 was 131. For the year 2009, the total entrants continued the trend of 2008 where a greater number of males (838) were registered compared to females (759). The tables which follow show comparative statistics on new registrations by various categories for 2009/2008: Social Security, Your Shelter in Times of Need 11

12 DOMINICA DSS Table 1: New Registrations by Age Group Totals (2009, 2008) SOCIAL SECURITY Employees Self-Employed Age Group No. % of Total No. % of Total No. % of Total No. % of Total Total 1, , Em ployee Registrations by Age Group, 2009 Self-Em ployed Registration by Age Group, D I R E C T O R S R E P O R T Consistent with last year, the age group registering the largest number of entrants for coverage was the category. Of note, is the fact that the number of females registering within that age group continues to be higher than that of males. 12 Dominica Social Security, 2009 Annual Report

13 DIRECTOR S REPORT Table 2: New Registrations by Age Group & Sex (2009, 2008) Employees Self-employed All Insured Employees Self-employed All Insured Age Group Males Females Males Females Males Females Males Females Males Females Males Females Total New Registrations by Age Group & Sex, Age Group M ales Fem ales The table and chart which follows gives a historical perspective of new registrations for the period The experience has been mixed over the years with no particular trend developing in respect of the number of females registering as compared to males or vice versa. Social Security, Your Shelter in Times of Need 13

14 DOMINICA DSS Table 3: Insured Persons- New Registrations ( ) SOCIAL SECURITY New Registrations Employees Self -Employed All Insured Year Males Females Males Females Males Females Total , , , , ,597 New Registrations ( ) 1,750 No. of Registrations 1,500 1,250 1, Year Females Males D I R E C T O R S R E P O R T self-employed Persons While we continue to see a heightened interest in the program among self-employed persons, there was a slight decline in the number of such persons registering in 2009 as compared to Further, and in terms of self-employed persons actually contributing, 872 paid contributions during 2009 as compared to 889 in Efforts will continue in earnest to have more of the self-employed persons who are registered with the programme and still in operation to make payments. This will not only satisfy our goal to achieve wider coverage of the self-employed, but will also bring us one step closer to ensuring the accomplishment of the Dominica Social Security s desire of expanding coverage to the Dominican populace. 14 Dominica Social Security, 2009 Annual Report

15 DIRECTOR S REPORT Table 4: New Self-Employed Registrations by Economic Activity (2009, 2008, 2007) % of % of Economic Activity No. Total No. Total No. % of Total Agric., Hunting & Forestry Fishing Manufacturing Electricity, Gas & Water Construction Wholesale & Retail Hotels & Restaurants Transport, Storage & Com Financial Intermediation Real Estate, Rent & Business Public Admin. & Defense Education Health & Social Work Other Com., Social & Pers Private Households Not Classified Totals EMPLOYER REGISTRATION The number of new employers registered in 2009 amounted to 345. This reflects a decline of 29 or 7.8% from 2008 (374) while the number of active employers showed an increase of 3.2% over that of Consistent with the previous year, the sectors of Construction, Other Community, Social & Personal Services, Wholesale & Retail were among the economic activities recording the highest number of new employer registrants. At the same time, these sectors also reflected the highest number of active employers during Table 5: Employers - New Registrations & Active ( ) New Registrations Active Employers Year No. % Increase No. % Increase , , , , , Social Security, Your Shelter in Times of Need 15

16 DOMINICA DSS Employers - New Registrations & Active ( ) SOCIAL SECURITY Number Year New Registrations Active Employers Table 6: New and Active Employer by Economic Activity (2009, 2008) D I R E C T O R S R E P O R T New Employer Registrations Active Employer % of % of % of % of Economic Activity No. Total No. Total No. Total No. Total Agric., Hunting & Forestry Fishing Manufacturing Mining & Quarrying Electricity, Gas & Water Construction Wholesale & Retail Hotels & Restaurants Transport, Storage & Com Financial Intermediation Real Estate,Rent & Business Public Admin. & Defense Education Health & Social Work Other Com., Social & Pers Private Households Extra-Territorial Orgs Not Classified Totals , , Dominica Social Security, 2009 Annual Report

17 DIRECTOR S REPORT CONTRIBUTIONS COLLECTED During 2009, there was an increase both in the number of active insured persons and the number of active employers, resulting in a 6.4% increase in contributions. In 2009, a total of 21,482 insured persons (employees and self-employed persons) paid contributions as compared to 21,233 in 2008 an increase of 249 or 1.2%. Further, the number of active insured is likely to change with the possible discovery of employment which would have taken place but not reported on a timely basis. Table 7: Active Insured Population ( ) Active Population Active Self Employed Unregistered % % Year Males Females Total Increase No. Increase ,415 8, , ,294 8,928 1,032 19, ,875 9,409 1,338 20, ,885 9,761 1,587 21, ,961 9,914 1,607 21, (1.9) Active Insured Population ( ) No. of Insured 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2, Year Females M ales Table 8: Summary of Registration Statistics (2009, 2008) % Change N o. of new em ployee registrations 1,466 1, % N o. of new self-em ployed reg istrations % T otal active em ployee population 20,610 20, % T otal active self-em ployed population % N o. of new em ployer reg istrations % N o. of active em ployers , % Social Security, Your Shelter in Times of Need 17

18 DOMINICA DSS BENEFITS PROFILE A total of 13,955 benefit awards (allowances, pensions, SOCIAL SECURITY and grants) were made during 2009 an increase of 11.3% over the 12,540 paid in With the 17.4% increase experienced in the number of Sickness Claims paid, Short term awards reflected a 15.8% growth. Long term beneficiaries increased by 5.1% with Age Pensioners accounting for most of that increase. SHORT-TERM BENEFITS The year 2009 saw an increase in the number of Sickness Benefit Claims paid from 6,761 in 2008 to 7,937 in 2009 i.e. a 17.4% increase at a cost of $4.029M. The amount expended for Sickness Benefit during 2009 was 19.6% higher than that of Maternity Benefit awards declined in 2009 a total of 261 grants and 279 allowances were made during the year at a total cost of $0.858M as compared to 281 and 280 respectively in 2008 at a cost of $0.877M a decline of 2.2%. EMPLOYMENT INJURY BENEFITS Table 9 below gives a breakdown of the number of employment injury claims received by economic activity for the years In 2009, there was an increase in the number of claims awarded for employment injury from 165 in 2008 to 179 in 2009 or 8.5%. The Construction sector is, once again, the area with the highest incidence of accidents on the job, followed by the general classification of Other Community, Social and Personal Service Activities and the Wholesale & Retail Trade. Hence, we continue to urge employers to ensure that they provide a safe working environment inclusive of safety equipment and gear for their employees so as to minimize and even reduce the incidence of accidents on the job. Such accidents impact negatively on productivity and constitute a cost to the nation. D I R E C T O R S R E P O R T Table 9: Injury Benefit by Economic Activity (2009, 2008, 2007) Economic Activity Males Females Totals Males Females Totals Males Females Totals Agric., Hunting & Forestry Mining & Quarrying Manufacturing Electricity, Gas & Water Construction Wholesale & Retail Hotels & Restaurants Transport, Storage & Comm Financial Intermediation Real Estate, Rent & Business Public Admin. & Defense Education Health & Social Work Other Comm., Social & Pers Private Households Total Dominica Social Security, 2009 Annual Report

19 DIRECTOR S REPORT LONG-TERM BENEFITS A review of the benefit summary depicted in Table 10 confirms that the number of Age Pensioners continues to increase at a steady rate. The average rate of growth in Age Pensions over the course of the last five years was 6.8%. Table 10: Benefit Summary ( ) Short Term Benefits Long Term Pensions Employment Injury Benefits Maternity Year Sickness Allowance Maternity Grant Age Injury Invalidity Survivors Benefit Medical Expenses Disablement Pension Death Pension , , , , , , , , , , Note: Age, Invalidity, Survivors and Disablement Grants have not been included in the above table. The no. of age pensions for have been revised to reflect pensions which have been reopened Age Benefit continues to account for the largest share of benefit expenditure 75.5% of total expenditure and 88.2% of expenditure in the Long-Term Branch. There was a net increase of 199 or 5.3% in the number of persons receiving age pension in 2009 when compared to Table 11: Benefit Expenditure 2009 and 2008 Benefit No Grants Allowances/Pensions Total Grants Allowances/Pensions Total Value ($M) No Value ($M) Amount ($M) No Value ($M) No Value ($M) Amount ($M) Sickness 7, , Maternity Short Term , , Injury Disablement Death Medical Exp Emp. Injury Age , , Invalidity Survivors Funeral Refund of NPF Long Term , , Redundancy Totals , , Note: Figure for Age pensions for 2008 has been updated to include pensions which were temporarily closed for non-return of Certificate of Life Forms from 2005 Social Security, Your Shelter in Times of Need 19

20 DOMINICA DSS Pension Payments ( ) SOCIAL SECURITY 5,500 5,000 4,500 4,000 3,500 No. of Pensions 3,000 2,500 2,000 1,500 1, Year Death Pension Disablement Pension Survivors Invalidity Age BENEFIT EXPENDITURE vs contribution INCOME D I R E C T O R S R E P O R T The trend which was evident from four years ago, whereby contribution income exceeded benefit expenditure, continued in This, notwithstanding the fact that all measures which were meant to enhance the financing of the Fund have not been implemented chief of which is the anticipated gradual increase in retirement age which was due to commence in Management will, therefore, continue to ensure the prudent management of the Fund and greater compliance by employers so that this trend can be maintained. However, given the growth in benefit expenditure particularly in the Long Term Branch it is evident that further measures will have to be taken to shore up the finances of the institution. Table 12: Benefit Expenditure vs contribution income ( ) YEAR BENEFIT EXPENDITURE CONTRIBUTION INCOME Dominica Social Security, 2009 Annual Report

21 DIRECTOR S REPORT APPEAL TRIBUNAL Section 9 of the Social Security (Determination of Claims and Questions) Regulations provides for the appointment of an Appeal Tribunal whereby insured persons who are aggrieved by any decision regarding their benefit can petition to the tribunal for a resolution. During the year, one matter was referred to the Tribunal and the decision of the Tribunal was in support of the action taken by the institution. REPORT ON ADMINISTRATION ADMINISTRATIVE EXPENSES Efforts continued at keeping the increase in administrative expenses to a minimum. While, in absolute dollar terms, the cost of administration increased from $4.934M in 2008 to $5.089M in 2009, or $0.155M; the amount expended represented a continued decline in the actuarial limit experienced from 2007 to 2009 as per table below. Thus, we will persevere in the quest to minimize administrative expenses, even as we strive to continue managing the program in the most cost effective manner. TABLE 13: ADMINISTRATIVE EXPENSES AND ACTUARIAL LIMIT ACHIEVED ( ) PERIOD ADMINISTRATIVE EXPENSES BENEFITS + CONTRIBUTIONS OF PRIOR YEAR (Basis for Actuarial Limit) ACTUARIAL LIMIT ACHIEVED $M $M % TABLE 14: ADMINISTRATIVE EXPENSES vis-à-vis TOTAL EXPENSES & TOTAL INCOME ( ) YEAR Admin. Expenses ($M) Total Expenses ($M) Admin. Exp to Total Exp. (%) Total Income ($M) Admin. Exp. To Total Inc. (%) Social Security, Your Shelter in Times of Need 21

22 DOMINICA D I R E C T O R S R E P O R T DSS SOCIAL RESPONSIBILITY During the year, the institution again demonstrated its social responsibility, as a corporate citizen, by making a number of donations to institutions/organizations whose causes and mandate complement/supplement that of the institution. SOCIAL SECURITY LEGAL The year 2009 was marked by higher levels of delinquency as more and more business and other establishments felt the impact of the global financial crisis. Against that background, the Legal Department continued to grapple with the recovery of monies owed to the Social Security Fund. While unpaid Social Security Contributions accounted for the greatest share of such debt recovery, other sources included delinquent Student Loans, benefits which were paid to persons who were no longer entitled due to changes in their circumstances as well as redundancy payments, made directly from the Redundancy Fund, to former employees of various employers in accordance with the Protection of Employment Act. Although the Courts are used as a last resort, except in extenuating circumstances, success at recovery is generally achieved only when this avenue is utilized/ pursued. In that regard, the following is a summary of new matters filed in the Courts during 2009: Magistrate s Court: Type of Matter Number Summons 61 Application for Judgement Debtor Summons 13 Order of Commitment 10 TOTAL MATTERS FILED 84 High Court: Type of Matter Number Redundancy 3 Unpaid Social Security Contributions 13 TOTAL MATTERS FILED 16 Consistent with statistics regarding the administration of justice, the majority of civil cases are before the Magistrates Courts, however due to, inter alia, the inherent difficulties of the Magistracy, only a small percentage of the approximately 300 cases scheduled, were actually heard. Despite the challenges, we remain undaunted and steadfast in our efforts at debt recovery and, by so doing, ensuring the sustainability of the Fund and the fulfillment of the promise made to insured persons i.e. the payment of benefits in a timely manner to contributors who are entitled, if and when they are overtaken by the many contingencies covered under the Social Security Act. Compliance During the year 2009, the execution of the Compliance function i.e. ensuring that all stakeholders (employers, employees, self-employed persons, benefit recipients etc) comply with Social Security regulations was not without its challenges. Notwithstanding, in the course of their field activities, Compliance Officers determined new debts of $1.845M due from delinquent employers and collected $1.486M of overdue Contributions (arrears). In addition, Current contributions of $1.026M and Self employed contributions of $0.247M were also collected by Officers. Meanwhile, the department s main challenges continue to be that of dealing with employers who avoid paying contributions for their employees, and employers who evade liability by seeking to categorize legitimate 22 Dominica Social Security, 2009 Annual Report

23 DIRECTOR S REPORT employees as job workers. We believe that our success in dealing with these challenges is predicated on the extent to which our stakeholders are educated about the importance of Social Security in their lives. Hence, we are quite pleased that the Department s efforts are being complemented by the institution s educational programmes on the local radio stations, as well as sessions mounted for senior students at the various Secondary Schools on island and the Dominica State College and our town hall meetings within certain communities. We are, therefore, hopeful that this will ultimately translate into greater levels of compliance among our various stakeholder groups. HUMAN RESOURCES At the end of the year, there were 47 permanent members of staff and 3 persons who were engaged on a temporary basis to meet institutional needs from time to time. During the year under review, a number of staff were exposed to training in a variety of subject areas. The areas of training for staff and conferences attended by Management and Members of the Board are detailed below: ECSE s Director s Education & Accreditation Programme Caribbean Development Bank Workshop on Pension Fund Assets Strategic Human Resource Management Company Analysis International Social Security Conference for Social Security Actuaries CARICOM Heads of Social Security Meeting Diploma in Social Security Management BSC in Management Transformational Leadership Seminar Risk Analysis Conflict Resolution Customer Service Team Building IT and Project Management Workshop PUBLIC EDUCATION Our various strategies at informing and educating the general public about social security continued during the year. It is evident that more employees are being made aware of their rights and obligations and that of their employers, given the number of enquires being made as to the compliance status of their employers and the status of their contribution records. During the year, public education efforts included talks to senior students of the various secondary schools on the island, the students of the State College, Youth Skills and Social Centre Adolescence Programme as well as radio and television programmes. Talks were also held with various employee groups upon the invitation of their employers. We intend to continue our public education efforts as we believe that an informed population who can better appreciate the role of social security will lead to improved compliance. Participants working on simulation exercises at Employers Seminar in Portsmouth Social Security, Your Shelter in Times of Need 23

24 DOMINICA DSS Further, and as part of our thrust to provide stakeholders with a better understanding of Social Security D I R E C T O R S R E P O R T SOCIAL SECURITY requirements, the institution hosted a one-day seminar each for employers in the North of the Island and those operating in the area of Roseau and environs. Based on the interaction with, and the feedback from participants, the seminar was well received and highlighted the need to continue mounting such sessions periodically. FUTURE OUTLOOK As we await the outcome of the 10th Actuarial Review of the Fund, we envisage having to approach our stakeholders to advise them of the outcome of the review and any action that may be deemed necessary in the Report. We would once again solicit their support and understanding as we seek to ensure the long term sustainability of the Fund. In our continued efforts at cost containment, we will be requesting that all benefit payments including Shortterm benefits be paid into Financial Institutions on behalf of insured persons. This will aid in our continued thrust to be vigilant in keeping Administrative costs at a minimum while also ensuring the delivery of excellent customer service. It is also our vision that some action will be taken to liquidate some of the lands held by the institution so that the returns can be placed into income earning investments, thereby increasing the growth in reserves and the financial health of the Fund. Even greater emphasis will be placed on the Compliance Function as we recognize that, it is through effective compliance that we will be able to stem the level of employer delinquency and ensure the realization of all contributions due in respect of insured persons. APPRECIATION The Dominica Social Security has, over its 33 years of delivering income security to its insured population, strived to do so in a most cost effective manner. This would not have been possible without the contributions of a number of stakeholders. Firstly, we must commend the almost two thousand employers who paid contributions into the Fund during the year; the insured persons who continue to heed the call to be part of the programme; the Self-employed persons who continue to pay contributions and, particularly, those who urge others to join the programme; the small pool of Voluntary Contributors whose wish it is to remain insured. The oversight provided by the Prime Minister and Minister for Finance and Social Security, with the able assistance of the Financial Secretary, has been helpful in steering the institution in the right direction. We also appreciate the guidance provided by members of the Board, Investment Committee, Appeals Tribunal and various sub-committees of the Board. To other members of our many and varied stakeholder base including the Trade Unions, Media, Auditors, Actuaries, Employer Representatives, Pensioners and Beneficiaries we thank you for your cooperation and support in facilitating the fulfillment of our mandate. Members of management and staff from whom much is demanded must also be commended for their devotion in serving our insured population and, in the ensuing year, we will need to work even more closely and unstintingly towards the attainment of organizational goals. Once again, heartfelt thanks to all! 24 Dominica Social Security, 2009 Annual Report

25 DIRECTOR S REPORT SNAPSHOT OF DSS ACTIVITIES Members of the Public taking advantage of free health checks during DSS mounted Health Fair Future Contributors being exposed to the Operations of Social Security at Annual Stakeholders Meeting Cross section of participants at Employers Seminar held at DPSU Conference Centre The person who thought of Social Security must have a special place in heaven. Presentation of Annual Donation to the Education Trust Fund Sentiments of a Social Security Pensioner regarding the programme Promoting healthy eating, through display of various food groups, as part of DSS/Ministry of Health mounted Health Fair Social Security, Your Shelter in Times of Need 25

26 DOMINICA DSS SOCIAL SECURITY DOMINICA SOCIAL SECURITY BOARD Financial Statements For the Year Ended December 31, 2009 TABLE OF CONTENTS PAGE Auditors Report F1 Balance Sheet F2 Consolidated Income and Expenditure Account F3 Statement of Income, Expenditure and Reserve: F I N A N C I A L S T A T E M E N T S Long-term Benefit Branch Short-term Benefit Branch Employment Injury Benefit Branch Redundancy Fund Statement of Changes in Reserves Statement of Cash Flows Notes to the Financial Statements F4 F5 F6 F7 F8 F9 F10 - F22 26 Dominica Social Security, 2009 Annual Report

27 F I N A N C I A L S T A T E M E N T S To The Dominica Social Security Board We have audited the financial statements of Dominica Social Security Board set out on pages 2 to 22 for the year ended December 31, Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance 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 the auditors 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, the auditors 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. A U D I T O R S R E P O R T We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. As disclosed in note 4, there is uncertainty with regard to the realization on maturity of fixed deposits with certain regional insurance companies one of which is under judicial management. Because of this uncertainty, we are unable to satisfy ourselves as to the adequacy of the provision against those fixed deposits. Opinion In our opinion, except for the effect on the financial statements of the matter referred to in the preceding paragraph the financial statements present fairly, in all material respects, the financial position of Dominica Social Security Board as at December 31, 2009 and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards and comply with the Social Security Act, Chapter 31:01 of the Revised Laws of the Commonwealth of Dominica (1990 Edition). Roseau, Dominica May 27, 2010 KPB CHARTERED ACCOUNTANTS Pedro Investments Building, Independence Street, P.O. Box 202, Roseau, Commonwealth of Dominica Tel /2 Fax kpbdm@cwdom.dm Partners: Kieron Pinard-Byrne (CEO/Chairman), Marvlyn Estrado, Orlando Allan Richards P O L A R ISTM I N T E R N A T I O N A L Social Security, Your Shelter in Times of Need F1

28 DOMINICA DSS DOMINICA SOCIAL SECURITY BOARD Balance Sheet As At December 31, 2009 SOCIAL SECURITY (Expressed in Eastern Caribbean Dollars) Notes ASSETS Cash and cash resources 3(d) 115,567, ,851,215 Accounts receivable (net of Provision) 3(e) 15,698,891 15,404,671 Prepayment 294,229 84,670 Inventory 313, ,287 Electricity deposit 10,000 10,000 Original loans and advances 7 33,056,771 23,373,870 Investment Securities: held to maturity 4 112,355, ,546,703 Investment Securities: available -for-sale 6(a) 16,507,289 14,640,949 Investment Properties 5 21,133,338 21,133,338 Property and equipment 8 4,202,999 4,368,367 TOTAL ASSETS 319,140, ,680,070 LIABILITIES Accounts Payable and Accrued Expenses 9 2,359,180 2,227,284 TOTAL LIABILITIES 2,359,180 2,227,284 F I N A N C I A L S T A T E M E N T S RESERVES Long-term Benefit Reserve 275,651, ,973,578 Short-term Benefit Reserve 15,436,418 13,763,297 Employment Injury Benefit Reserve 15,363,162 13,981,572 Redundancy fund 7,154,111 6,558,702 Fair value reserve -available-for-sale investments 6(b) 3,175,637 3,175,637 TOTAL RESERVES 316,780, ,452,786 TOTAL LIABILITIES AND RESERVES 319,140, ,680,070 The accompanying notes form an integral part of these financial statements. THESE FINANCIAL STATEMENTS WERE APPROVED BY THE DIRECTORS ON MAY 27, 2010 AND SIGNED ON BEHALF OF THE BOARD BY: Hubert N. Joseph Chairman Janice Jean Jacques Thomas Director F2 Dominica Social Security, 2009 Annual Report

29 F I N A N C I A L S T A T E M E N T S DOMINICA SOCIAL SECURITY BOARD Consolidated Income and Expenditure Account For the Year Ended December 31, 2009 (Expressed in Eastern Caribbean Dollars) Notes Income Contributions 39,857,431 37,458,219 Other 10 16,500,507 15,541,984 56,357,938 53,000,203 Expenses Benefits Payments 37,195,808 34,930,668 Administrative and general expenses 5,088,870 4,934,320 Impairment on investments 4 2,701,096-44,985,774 39,864,988 NET INCOME FOR THE YEAR 11,372,164 13,135,215 TRANSFER TO RESERVE AND REDUNDANCY FUND Long-term benefit reserve 7,677,934 8,352,205 Short-term benefit reserve 1,673,121 2,237,620 Employment injury benefits reserve 1,381,590 1,882,194 Redundancy Fund 639, ,196 Net income for the year is arrived at after charging: 11,372,164 13,135,215 Depreciation 273, ,162 Audit fees 30,000 30,000 The accompanying notes form an integral part of these financial statements. Social Security, Your Shelter in Times of Need F3

30 DOMINICA DSS DOMINICA SOCIAL SECURITY BOARD Long-Term Benefit Branch Statement of Income, Expenditure and Reserve For the Year Ended December 31, 2009 (Expressed in Eastern Caribbean Dollars) SOCIAL SECURITY Note Income Contributions 31,025,952 29,223,619 Other 14,795,648 13,912,412 45,821,600 43,136,031 Expenses Benefit payments 31,823,308 30,278,768 Administrative and general expenses 4,645,678 4,505,058 Impairment on investments 1,674,680-38,143,666 34,783,826 NET INCOME FOR THE YEAR - transferred from/ to long- term reserves 7,677,934 8,352,205 F I N A N C I A L S T A T E M E N T S LONG-TERM BENEFIT RESERVE: Balance at beginning of the year 267,973, ,621,373 9 th Actuarial review recommended adjustment 12-85,000,000 Net income for the year 7,677,934 8,352,205 Balance at December 31, ,651, ,973,578 The accompanying notes form an integral part of these financial statements. F4 Dominica Social Security, 2009 Annual Report

31 F I N A N C I A L S T A T E M E N T S DOMINICA SOCIAL SECURITY BOARD Short-Term Benefit Branch Statement of Income, Expenditure and Reserve For the Year Ended December 31, 2009 (Expressed in Eastern Caribbean Dollars) Note Income Contributions 6,356,495 5,902,723 Other 817, ,875 7,173,897 6,684,598 Expenditure Benefits payments 4,887,672 4,245,333 Administrative and general expenses 207, ,645 Impairment on investments 405,164-5,500,776 4,446,978 NET INCOME FOR THE YEAR - transferred to Short-term benefit reserve 1,673,121 2,237,620 SHORT-TERM BENEFIT RESERVE Balance at beginning of the year 13,763,297 41,525,677 9 th Actuarial review recommended adjustment 12 - (30,000,000) Net income for the year 1,673,121 2,237,620 Balance at December 31, ,436,418 13,763,297 The accompanying notes form an integral part of these financial statements. Social Security, Your Shelter in Times of Need F5

32 DOMINICA DSS DOMINICA SOCIAL SECURITY BOARD Employment Injury Benefit Branch Statement of Income, Expenditure and Reserve For the Year Ended December 31, 2009 (Expressed in Eastern Caribbean Dollars) SOCIAL SECURITY Note Income Contributions 1,788,212 1,686,492 Other 849, ,201 2,637,897 2,498,693 Expenses Benefits payments 416, ,017 Administrative and general expenses 218, ,482 Impairment on investments 621,252-1,256, ,499 NET INCOME FOR THE YEAR - transferred to employment injury benefit reserve 1,381,590 1,882,194 F I N A N C I A L S T A T E M E N T S EMPLOYMENT INJURY BENEFIT RESERVE: Balance at beginning of the year 13,981,572 67,099,378 9 th Actuarial review recommended adjustment 12 - (55,000,000) Net income for the year 1,381,590 1,882,194 Balance at December 31, ,363,162 13,981,572 The accompanying notes form an integral part of these financial statements. F6 Dominica Social Security, 2009 Annual Report

33 F I N A N C I A L S T A T E M E N T S DOMINICA SOCIAL SECURITY BOARD Redundancy Fund Statement of Income, Expenditure and Reserve For the Year Ended December 31, 2009 (Expressed in Eastern Caribbean Dollars) Note Income Contributions 686, ,385 Other 37,772 35, , ,881 Expenses Benefits payments 67,856 1,550 Administrative and general expenses 17,169 16,135 85,025 17,685 NET INCOME FOR THE YEAR - transferred to redundancy reserve 639, ,196 REDUNDANCY RESERVE: Balance at beginning of the year as previously stated 6,558,702 5,890,360 Adjustment for redundancy receivable 14 (44,110) 5,146 Net income for the year 639, ,196 Balance at December 31, ,154,111 6,558,702 The accompanying notes form an integral part of these financial statements. Social Security, Your Shelter in Times of Need F7

34 DOMINICA DSS SOCIAL SECURITY F I N A N C I A L S T A T E M E N T S DOMINICA SOCIAL SECURITY BOARD Statement of Changes in Reserves For the Year Ended December 31, 2009 (Expressed in Eastern Caribbean Dollars) The accompanying notes form an integral part of these financial statements. F8 Dominica Social Security, 2009 Annual Report

35 F I N A N C I A L S T A T E M E N T S DOMINICA SOCIAL SECURITY BOARD Statement of Cash Flows For the Year Ended December 31, 2009 (Expressed in Eastern Caribbean Dollars) Note CASH FLOW FROM OPERATING ACTIVITIES Contributions receipts 39,857,431 37,458,219 Other income 503, ,568 Administrative expenses (4,815,392) (4,675,158) Benefit payments (37,195,808) (34,930,668) Impairment loss in investment (1,500,000) - Operating profits before changes in operating assets (3,149,770) (1,632,039) Short term funds and debtors (1,796,282) 2,154,863 Net cash from operating assets (4,946,052) 522,824 Increase (Decrease) in operating liabilities 131, ,099 Net cash from operating activities (4,814,156) 1,109,923 CASH FLOW FROM INVESTING ACTIVITIES Interest received 14,936,810 13,962,971 Dividend received 743, ,320 Rent 316, ,125 Staff mortgage and staff student loans (6,788) 89,587 Loans to Credit Unions 10,166 (195,656) Loans to Statutory Bodies (9,588,694) (725,227) Pool of secondary mortgages 191, ,172 Student loans 170, ,458 Trade Unions Loans 215, ,148 Private bodies loans (484,563) Acquisition of shares (1,866,340) (19,411) Investment properties - (136,593) Purchase of equipment and property (108,110) (451,470) Net cash from investing activities 4,530,649 14,149,424 Net increase in cash and cash equivalents (283,507) 15,259,347 Cash resources - beginning of year 115,851, ,591,868 Cash resources - end of year 3(d) 115,567, ,851,215 The accompanying notes form an integral part of these financial statements. Social Security, Your Shelter in Times of Need F9

36 DOMINICA DSS DOMINICA SOCIAL SECURITY BOARD Notes to the Financial Statements For the Year Ended December 31, 2009 SOCIAL SECURITY 1. Incorporation The Dominica Social Security Board is a body corporate established by the Social Security Act chapter 31:01 of the Revised Laws of the Commonwealth of Dominica (1990 Edition) to administer the Social Security Fund with the objectives of providing various insurance and retirement benefits to persons insured under the Act. 2. Adoption of Revised International Financial Reporting Standards The Dominica Social Security Board has adopted the revised standards and interpretations issued by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB that are relevant to its operations. The adoption of these revised standards and interpretations has resulted in changes to the organization s accounting policies in the following areas: $ Financial Instruments: Disclosure and Presentation (IAS 32) $ Financial Instruments: Recognition and Measurement (IAS 39) F I N A N C I A L S T A T E M E N T S IAS 32, Financial Instruments: Disclosure and Presentation The impact of this standard has been to expand the disclosures provided in these financial statements in relation to the financial assets of the Fund. IAS 39, Financial Instruments: Recognition and Measurement IAS 39 requires that financial assets be valued at fair market value such that the carrying amount of the asset is reduced through the use of provision. Subsequent recoveries are credited to the particular provision in the Statement of Income and Expenditure. The Dominica Social Security Financial Regulations does not allow for the write off of amounts receivable on the basis that all sums due to the Board shall be recoverable. Thus, an impairment reserve had been set up to adjust for additional impairment losses or recoveries of amounts previously deemed uncollectible. The Dominica Social Security Board has discontinued the treatment of impairment losses or recoveries as described in the preceding paragraph and has accordingly allocated the impairment balance to the Reserves by way of a prior period adjustment. F10 Dominica Social Security, 2009 Annual Report

37 F I N A N C I A L S T A T E M E N T S DOMINICA SOCIAL SECURITY BOARD Notes to the Financial Statements For the Year Ended December 31, Summary of Significant Accounting Policies The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. a. Basis of Accounting These financial statements are prepared in accordance with International Financial Reporting Standards on the basis of the historical cost convention and the Social Security (Financial and Accounting) Regulations in force. The preparation of financial statements in conformity with International Financial Reporting Standards requires management to use accounting estimates and to exercise its judgment in the process of applying the organization s accounting policies. b. Actuarial Review Triennial actuarial reviews are performed to assist the Board in assessing the financial condition of the fund and the adequacy or otherwise of contributions to support benefits. c. Property and Equipment Land and building comprise the Fund s offices. Land is not depreciated. Depreciable assets are recorded at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly related to the acquisition of the items. Depreciation is calculated on a straight line basis so as to write off their costs over their estimated useful lives as follows: Buildings 40 years Furniture & Fittings 5-10 years Computer equipment/systems 3-10 years Computer software 3-10 years Motor vehicles 5 years The assets residual value and useful lives are reviewed and adjusted if appropriate at each balance sheet date. Gains or losses arising from the disposal or retirement of an item are determined as the difference between the sales proceeds and the carrying amount of the asset and are recognized in the Statement of Income and Expenditure. All repairs and maintenance are charged to the statement of income and expenditure during the financial period in which they are incurred. Social Security, Your Shelter in Times of Need F11

38 DOMINICA DSS DOMINICA SOCIAL SECURITY BOARD Notes to the Financial Statements For the Year Ended December 31, 2009 SOCIAL SECURITY 3. Summary of Significant Accounting Policies cont d d. Cash and Cash Resources Cash and cash resources are carried on the balance sheet at cost. For the purpose of the cash flow statement, cash and cash resources comprise cash on hand and at bank and deposits held on call with banks and/or insurance companies Cash on hand and at bank 7,292,790 7,027,150 Fixed deposits (note 4(1) ) 108,274, ,824, ,567, ,851,215 e. Accounts Receivable A provision for non-collectable receivables is established when there is objective evidence that the institution will not be able to collect all amounts due according to the original terms of the receivable. F I N A N C I A L S T A T E M E N T S The amount of such provision is recognized in the statement of income and expenditure and represents the amount in respect of which the institution may not be able to enforce collection, legally. Thus, the provision made in respect of the current and previous years are reflected hereunder: Contribution: Government - 591,633 Contribution: Non-Government 8,987,566 8,827,652 Interest and investment income 8,818,581 6,965,112 Dominica Unit Trust Corporation 1,834,208 1,834,208 Staff vehicle loans and advances 648, ,865 20,288,786 18,793,470 Provision for impairment on contributions (1,360,665) (1,360,665) Provision for impairment on EFPA s (1,201,096) - Provision for impairment on DUTC (193,926) (193,926) Provision for impairment on DUTC (1,834,208) (1,834,208) (4,589,895) (3,388,799) Total (net of provisions) 15,698,891 15,404,671 F12 Dominica Social Security, 2009 Annual Report

39 F I N A N C I A L S T A T E M E N T S DOMINICA SOCIAL SECURITY BOARD Notes to the Financial Statements For the Year Ended December 31, Summary of Significant Accounting Policies cont d f. Financial Assets The fund classifies its financial assets into the following categories: $ Originated loans and advances $ Held to maturity investments $ Available for sale financial investments Management determines the classification of such investments at initial recognition and their designation is reevaluated at every subsequent reporting date. Originated Loans and Advances Originated loans and advances are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the fund advances cash to borrowers with no intention of trading the receivable. Held-to-Maturity Investments Held-to-Maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that management has the positive intent and ability to hold to maturity. Should management decide to sell other than an insignificant amount of such Held-to- Maturity investments, the entire category would be tainted and therefore, be classified as Available for Sale. Available for Sale Investments Available for Sale Investments are those intended to be held for an indefinite period of time, which may be sold in response to liquidity needs and/or changes in interest rates, exchange rates or equity prices. The purchase and sale of financial assets held-to-maturity and available for sale are recognized on the trade date, i.e. the date on which the organization commits to purchase or sell the asset. Financial Assets are initially recognized at fair value plus transaction cost. Such assets are unrecognized when rights to receive cash flows from them have expired or when the organization has substantially transferred all risks and rewards of ownership. Available-for-Sale assets are subsequently carried at fair value while Originated Loans and Advances and held-to-maturity investments are carried at their amortized cost using the effective interest rate method. Social Security, Your Shelter in Times of Need F13

40 DOMINICA DSS DOMINICA SOCIAL SECURITY BOARD Notes to the Financial Statements For the Year Ended December 31, 2009 SOCIAL SECURITY 3. Summary of Significant Accounting Policies cont d f. Financial Assets cont d Gains and losses arising from changes in fair value of available for sale financial assets are included in the statement of income and expenditure in the period in which they arise. The fair values of instruments quoted in active markets are based on current bid prices. If the market for the financial asset is not active, the organization establishes fair value by using available valuation techniques including the use of arm s length transactions, discounted cash flows and other valuation techniques commonly used by market participants. g. Impairment of Financial Assets At each balance sheet date, the organization assesses whether there is objective evidence that a financial asset or group of financial assets is impaired. F I N A N C I A L S T A T E M E N T S A financial asset or group of financial assets is impaired if there is objective evidence that the loss has occurred after the initial recognition of the asset and has an impact on the ability of management to reliably estimate future cash flows from the financial asset or group of assets. The organization assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. Impairment loss is recognized if there is objective evidence that impairment loss on held-to maturity investments carried at amortized cost has been incurred or that the organization will not be able to collect all amounts due according to the original contractual terms of the loans. The amount of the loss is measured as the difference between the carrying amount of the asset and the recoverable amount, being the present value of the estimated future cash flows discounted at the original effective rate of the financial asset. The carrying amount of the asset is reduced through the use of the provision for loan impairment with subsequent recoveries being credited to such provision in the statement of income and expenditure. F14 Dominica Social Security, 2009 Annual Report

41 F I N A N C I A L S T A T E M E N T S DOMINICA SOCIAL SECURITY BOARD Notes to the Financial Statements For the Year Ended December 31, Summary of Significant Accounting Policies cont d g. Impairment of Financial Assets cont d The methodology and assumptions used for estimating future cash flows are reviewed regularly by the organization in order to reduce any differences between loss estimates and actual loss experience. At each balance sheet date, the organization assesses whether there is objective evidence financial assets carried at fair value is impaired. Where there is a significant or prolonged decline in the fair value of the security below its cost, management determines whether the assets are impaired. In that regard, management determined that investments in DUTC, of principal and interest on fixed deposits with British American Insurance Company as well as amounts receivable from private sector delinquent employers are impaired, hence the provisioning in relation thereto. h. Investment in Real Estate Investment properties consists primarily of lands previously received in exchange for past due contributions and buildings being held for long-term rental yield and/or capital appreciation. Such properties are being treated as long term investments and carried at cost. Land and buildings are being leased for periods of between 3 and 15 years with an option to renew for further periods not exceeding the original term of the respective lease, at the expiration of each lease term. Social Security, Your Shelter in Times of Need F15

42 DOMINICA DSS DOMINICA SOCIAL SECURITY BOARD Notes to the Financial Statements For the Year Ended December 31, 2009 SOCIAL SECURITY F I N A N C I A L S T A T E M E N T S F16 Dominica Social Security, 2009 Annual Report

43 F I N A N C I A L S T A T E M E N T S DOMINICA SOCIAL SECURITY BOARD Notes to the Financial Statements For the Year Ended December 31, Investment Securities cont d Consequent upon Government s debt restructuring exercise, the interest rate on all government Bonds has been reduced to 3.5% while the tenure of such bonds is now 30 years. The effective interest rates and terms on investments held to maturity varies as follows:. Fixed Deposits: between 6% and 9.5% with maximum maturities of 3 years. Notes & Bonds: between 3.5% for 30 years, 8.25% for 5 years and 7% for 10 years Treasury Bills: 6.5% with maturities of 90 days. As at December 31, 2009, the investments with certain regional insurance companies were as follows: Colonial Life Insurance Company Limited (CLICO) 9,000,000. Of this amount 2,000,000 matured on July 18, The other investments will mature in November 2010 and April During the year, CLICO met their obligations with the exception of the 2,000,000 which matured on July 18, 2009 and past due interest of $406,375. British American Insurance Company Limited (BAICO) - Dominica Branch 5,000,000: The maturity date for those investments is March 23, Past due interest receivables of 1,068,750 as at December 31, 2009 was provided for in full. BAICO - Anguilla Branch 1,500,000: The maturity date for that investment was November 11, Past due interest receivable was 132,346 as at December Both the principal amount and interest receivable (1,632,346) were provided for in full. BAICO is under Judicial Management. The Dominica Social Security Board has received no indication of intention to settle amounts due from the Judicial Manager. 5. Investment Properties Land 17,457,489 17,457,489 Land and building 3,350,815 3,350,815 Land (with construction plans) 325, ,034 21,133,338 21,133,338 Social Security, Your Shelter in Times of Need F17

44 DOMINICA DSS DOMINICA SOCIAL SECURITY BOARD Notes to the Financial Statements For the Year Ended December 31, (a) Investment Securities: available-for-sale SOCIAL SECURITY Local AID Bank Ordinary Shares 5,000,000 5,000,000 NBD Ordinary Shares 2,002,850 2,002,850 DOMLEC Ordinary Shares (listed) see note 6(b) 6,250,371 6,250,371 DUTC Equity 1,000,000 1,000,000 Less provision for diminution of DUTC shares (825,000) (825,000) DUTC Growth Units 550, ,197 Less provision for diminution of DUTC Units (305,582) (305,582) Marpin 2K4 ordinary shares 2,258, ,713 15,931,249 14,265,549 Overseas ECHMB Shares 326, ,400 ECSE Shares 150, ,000 Anguilla National Bank Shares 100, ,000 F I N A N C I A L S T A T E M E N T S 6(b) Fair Value Reserve - available - for - sale investments 576, ,400 16,507,289 14,640, At beginning of year 3,175,637 4,196,531 Fair value adjustments - (1,020,894) At end of year 3,175,637 3,175,637 Equity in DOMLEC was previously shown at cost. As required by International Financial Reporting Standards, these ordinary shares are now shown at their fair value of $3.00 per share for 31/12/09, and 31/12/08 which are the prices quoted on the Eastern Caribbean Securities Exchange. The resulting revaluation reserve is shown retrospectively on restating the equity in DOMLEC at the market value at the balance sheet date. F18 Dominica Social Security, 2009 Annual Report

45 F I N A N C I A L S T A T E M E N T S DOMINICA SOCIAL SECURITY BOARD Notes to the Financial Statements For the Year Ended December 31, Originated Loans and Advances Statutory Bodies 29,523,588 19,934,894 Student 1,988,916 2,159,907 Private Bodies 484,563 - Credit Union 185, ,656 Trade Unions 108, ,151 Staff 766, ,262 33,056,771 23,373,870 The student loans represent funds disbursed to students, through the National Bank of Dominica, between 1990 and 1993 under the Dominica Social Security Student Loans Programme. The programme has since been discontinued; hence, new loans are not being issued. Loans are at interest rates ranging from 6.5% to 8% per annum with principal repayable over a 4 to 20 years period. 8. Property and Equipment Land Building Furniture & Fixtures Computer Equipment Motor Vehicles Total Year ended 31/12/2007 Opening net book amount 662,705 3,206, , ,634-4,176,059 Additions for the year - 282,792 54, , ,470 Depreciation charge for the year - (150,584) (46,668) (61,910) - (259,162) Net Book Amount 662,705 3,338, , ,134-4,368,367 As at 31/12/2007 Cost or valuation 662,705 5,674,926 1,589,545 3,490, ,000 11,546,841 Accumulated depreciation - (2,336,643) (1,398,300) (3,314,531) (129,000) (7,178,474) Net Book Amount 662,705 3,338, , ,134-4,368,367 Year ended 31/12/2008 Opening net book amount 662,705 3,338, , ,134-4,368,367 Additions for the year - 20,956 46,576 40, ,110 Depreciation charge for the year - (164,138) (41,632) (67,708) - (273,478) Net Book Amount 662,705 3,195, , ,004-4,202,999 As at 31/12/2009 Cost or valuation 662,705 5,695,882 1,636,121 3,531, ,000 11,654,951 Accumulated depreciation - (2,500,781) (1,439,932) (3,382,239) (129,000) (7,451,952) Net Book Amount 662,705 3,195, , ,004-4,202,999 Social Security, Your Shelter in Times of Need F19

46 DOMINICA DSS DOMINICA SOCIAL SECURITY BOARD Notes to the Financial Statements For the Year Ended December 31, Accounts Payable and Accrued Expenses SOCIAL SECURITY Provision for ex-gratia for staff in employment as at 1998 and prior years 656, ,303 Provision for migration grant 23,037 23,037 Claims payable 1,071, ,312 Provision for gratuities 72, ,020 Other accrued charges 534, , Other Income 2,359,180 2,227, F I N A N C I A L S T A T E M E N T S 11. Taxation Deposit interest 6,953,991 6,927,778 Treasury Bill interest 1,146,320 1,220,448 Bond interest 3,379,851 3,083,602 Loan interest 3,412,056 2,683,777 Dividend 743, ,320 Rent 316, ,125 Late fees 341, ,855 Interest on staff loans 45,793 47,635 Cash short/over 267 (18) Others 161, ,462 16,500,507 15,541,984 The income of the Dominica Social Security is exempt from tax under Section 25, (1) (Q) of the Income Tax Act Chapter 67:01 of the Revised Laws of the Commonwealth of Dominica (1990) edition. However, Value Added Taxation is included in service and supplies cost. 12. Reallocation of Reserves The Dominica Social Security Act makes provision for the fund to undergo an Actuarial Review every three years. The 9th Actuarial Review revealed that both the short-term and employment Injury Benefit Branches were significantly over funded, and therefore recommended the transfer of reserves from both F20 Dominica Social Security, 2009 Annual Report

47 F I N A N C I A L S T A T E M E N T S DOMINICA SOCIAL SECURITY BOARD Notes to the Financial Statements For the Year Ended December 31, 2009 these branches to the long-term branch. It should be noted that the reallocation has no impact on the present funded position of the Dominica Social Security, but better allocates the contribution income to what obtains with the payment of benefits. 13. Derivatives and Financial Instruments Credit and Risk Factors The notes to the financial statements present the fair values of the balance sheet financial instruments of the Dominica Social Security Board on the valuation methods and assumption indicated. There were no derivative instruments as at the balance sheet date. Under IFRS, fair values represent the amount at which the financial instrument could be bought, sold or exchanged in a current transaction, between willing parties, other than in liquidation. If available, the quoted market price in an active market is the best evidence of fair value and should be the basis for measurement. In the absence of quoted market price, an estimate may be obtained using the best available information. Quoted market prices are not available for a significant portion of the Dominica Social Security financial instruments. Fair values disclosed exclude the values of assets and liabilities that are not considered financial instruments but which add significant values to the Dominica Social Security. Due to their short-term maturity, the carrying values of assets of certain balance sheet financial instruments are assumed to approximate their fair values. These include cash resources. Notwithstanding, notes 3(a) & 3(e), certain accounts receivable are before the High Court for a determination. Although some measure of provisions has been made in the accounts as required by IFRS, nothing shall be construed as preventing the Board from recovering any sums due to the Fund by means of civil proceedings. 14. Redundancy Fund Provisions are made in the event that an employer is unable to pay redundancy benefit then the Redundancy Fund advances the sums due to the employee and in return, pursue the employer with the aim to recover all sums due. Management decided that any redundancy receivables should be netted against the redundancy fund. Social Security, Your Shelter in Times of Need F21

48 DOMINICA DSS DOMINICA SOCIAL SECURITY BOARD Notes to the Financial Statements For the Year Ended December 31, 2009 SOCIAL SECURITY 15. Contingent Liabilities/Commitments 1. Legal There are matters before the Courts for a determination wherein certain parties are claiming certain sums as general damages. 2. Other There were no capital commitments or material operating leases at year end. 16. Comparative Figures Certain of the comparative figures have been reclassified to conform to this year s presentation. F I N A N C I A L S T A T E M E N T S F22 Dominica Social Security, 2009 Annual Report