- :-.~'SIRY OF HE:Ai7:. ~ RECEIVED Iy JUN 1 8 Z008 ST. MICHAEL'S CENTRE COMBINED FINANCIAL STATEMENTS 31 MARCH 2008
Combined Financial Statements Contents Auditors' Report Combined Balance Sheet Combined Statement of Earnings Combined Statement of Changes in Net Assets Combined Statement of Cash Flows Notes to the Combined Financial Statements Schedule 1 - Combined Schedule of Revenue Schedule 2 - Combined Schedule of Expenses - Operations 3 4 5 6 7-12 13 14
BENSON * 1400-900WestHastingsStreet Vancouver, B.G.V6G1E3 Telephone: 604-684-1101 Fax:604-684-7937 E-mail:admin@rolfebenson.com *a partnershipof incorporatedprofessionals AUDITORS' REPORT To the Members, St. Michael's Centre We have audited the combined balance sheet of St. Michael's Centre as at 31 March 2008 and the combined statements of earnings, changes in net assets and cash flows for the year then ended. These combined financial statements are the responsibility of the Centre's management. Our responsibility is to express an opinion on these combined 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 combined financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the combined 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 combined financial statements present fairly, in all material respects, the financial position of the Centre as at 31 March 2008 and the results of its operations and its cash flows for the year then ended in accordance with Canadian generally accepted accounting principles. As required by the Society Act of British Columbia, we report that, in our opinion, these principles have been applied on a basis consistent with that of the preceding year. ~~I f5~ Vancouver, Canada 16 May 2008
Combined Balance Sheet Assets Current Cash and short-term investments Accounts receivable Inventory Prepaid expenses Restricted cash and short-term Resident trust funds Replacement reserve Unspent capital Seniors' Initiative Property and equipment (Note 5) investments 2008 2007 $ 1,592,738 $ 1,169,340 123,887 128,366 39,761 42,465 26.061 33,484 1.782.447 1,373,655 10,232 11,402 137,397 126,728 36,470 123,498 165.620 299,012 349.719 560,640 8.753.869 8,901,809 $ 10.886.035 $ 10.836.104 Liabilities Current Accounts payable and accrued liabilities Salaries payable Accrued vacation payable Mortgage payable - current portion (Note 7) Accrued employee future benefits (Note 6) Resident trust funds Mortgage payable (Note 7) Deferred capital contributions (Note 9) Commitments (Note 8) Net assets (deficiency) Invested in property and equipment (Note 10) Replacement reserve Unrestricted operating deficit $ 474,876 470,698 448,959 86.442 1,480,975 $ 444,428 318,168 441,378 76,546 1,280,520 1,039,274 10,232 701,293 7.541.526 10.773.300 626,701 137,397 (651.363) 112.735 $ 10.886.035 961,904 11,402 787,454 7,816,109 10,857,389 644,211 126,728 (792,224) (21,285) $ 10.836.104 APPROVED BY THE DIRECTORS: ~.,.~\~t-~~uca Director ~ Director The accompanying notes are an integral part of these combined financial statemnts. 3 IIJ~ ROlFE, BENS ON
ST. MICHAEL'S CENTRE Combined Statement of Earnings 2008 2007 Revenue - Schedule I Resident care Amortization of deferred capital contributions Other income Expenses - Schedule 2 Salaries, wages and employee benefits Patient services and supplies General services Physical plant services and supplies Food and dietary Administrative Mortgage interest Amortization Excess of revenue over expenses for the year $ 11,166,617 $ 11,037,916 603,811 416,000 384.312 296,448 12.154.740 11.750,364 10,067,983 9,650,798 260,880 253,685 201,256 200,306 288,525 294,921 332,255 316,377 316,639 318,596 34,827 43,465 518.355 507,552 12.020.720 11,585,700 $ 134.020 $ 164.664 The accompanying notes are an integral part of these combined financial statements. 4
Combined Statement of Net Assets Invested in Property and Equipment Replacement Reserve Unrestricted Operating Deficit 2008 2007 Balance - beginning of year $ 644,211_- $ 126,728- $ (792,224) $ _(21.285) $ (185.949) Excess of revenue over expenses for the year Amortization of property and equipment Amortization of deferred capital contributions Mortgage principal payments Interest earned on replacement reserve Transfer annual replacement reserve Current operations funded by restricted contributions (518,355) 603,811 76,265 134,020 518,355 (603,811) (76,265) 4,351 (4,351) 6,318 (6,318) 134,020 164,664 (179,231) - 179.231 Q2jlQ~ - 10,662 140,B61 _134,020 164.664 Balance - end ofvear $ 626.701 $ 137.397 $ (65L.163) - $ _112.735 $ (21.285) n ::1::1 :; :: 0 r- :;;.,., m m 0, > n c::i n m g Z Z (J) ~ 0 ;;: z The accompanying notes are an integral part of these combined financial statements. 5
Statement of Cash Flows 2008 2007 Cash provided by (used in): Operating activities Excess of revenue over expenses for the year $ 134,020 $ 164,664 Items not involving cash Amortization of property and equipment 518,355 507,552 Amortization of deferred capital contributions (603,811) (416,000) 48,564 256,216 Changes in non-cash working capital balances Accounts receivable 4,479 834,632 Inventory 2,704 (7,701) Prepaid expenses 7,423 (19,634) Accounts payable and accrued liabilities 30,448 165,643 Salaries payable 152,350 (789,393) Accrued vacation payable 7,581 46,159 Accrued employee future benefits 77,370 48,429 330,919 534,351 Financing activities Repayment of mortgage (76,265) (70,395) Contributions received for property and equipment purchases 319,808 176,621 Resident funds 0,170) (2,060) 242,373 104.166 Investing activities Purchase of property and equipment (360,815) (148,583) Net increase in cash 212,477 489,934 Cash - beginning of year 1,729,980 1,240,046 Cash - end of year $ 1.942.457 $ 1.729.980 Represented by: Cash and short-term investments $ 1,592,738 $ 1,169,340 Resident trust funds 10,232 11,402 Restricted cash 339,487 549,238 $ 1.942.457 $ 1.729.980 The accompanyingnotesareanintegralpartof thesecombinedfinancialstatements. 6
Notes to the Financial Statements 1. Operations (a) Current The St. Michael's Centre Hospital Society and St. Michael's Centre Intermediate Care Society operate a hospice and an extended care facility located in Burnaby under the name St. Michael's Centre ("the Centre"). Both societies are incorporated under the Society Act of British Columbia as non-profit organizations. St. Michael' s Centre Hospital Society is a registered charity under the Income Tax Act. The facility operates in affiliation with the Fraser Health Authority, the principal funding agency. (b) Future The Centre has an unrestricted operating deficit of $651,363 (2007 - $792,224) and long-tenn accrued employee future benefits obligations of$1,039,274 (2007 - $961,904). Continued operations as a going concern depend upon receiving sufficient support from the principal funding agency to reduce the unrestricted operating deficit. 2. Changes in Accounting Policy On 1 April 2007, the Centre adopted CICA Handbook Section 3855, "Financial Instruments-recognition and measurement," Section 3862, "Financial Instruments - disclosures," and Section 3863, "Financial Instruments - presentation". These standards provide recommendations on recognizing and measuring financial assets and liabilities and non-financial derivatives. The adoption by the Centre of these new standards on financial instruments has resulted in changes in accounting for financial instruments. The main changes in accounting for financial instruments resulting from the adoption of these accounting standards are described below. With the adoption of these new standards, the Centre classified its cash, restricted cash and short-tenn investments, accounts receivable, accounts payable and accrued liabilities, salaries and accrued vacation payable, accrued employee future benefits and resident trust funds as financial assets and liabilities held for trading and classified mortgage payable as other financial liability. No adjustments were required to be made to the carrying value of these financial instruments as a result of these new standards. 3. Summary of Significant Accounting Policies (a) Basis of Presentation These financial statements have been prepared in accordance with Canadian generally accepted accounting principles. In preparing these financial statements, managements has made estimates andassumptionsthat affect the amounts reported. Actual results could differ from those estimates. 7
Notes to the Financial Statements 3. Summary of Significant Accounting Policies-continued (b) Combination These financial statements combine the results of St. Michael' s Centre Hospital Society and St. Michael's Centre Intermediate Care Society. This combination is appropriate as the two societies share the same premises and employees. (c) Revenue The Centre follows the deferral method of accounting for contributions. Restricted contributions are recognized as revenue in the year in which the related expenses are incurred. Unrestricted contributions are recognized as revenue when received or receivable ifthe amount to be received can be reasonably estimated and collection is reasonably assured. (d) Inventory Inventory consists of consumables and is valued at the lower of cost and replacement cost. (e) Property and Equipment Property and equipment are recorded at cost. Amortization is provided using the straight-line method at the following rates: Buildings Leasehold improvements Furniture and equipment Computers 2% - 4% 7% 10% 20% (f) Accrued Retiring Allowance Under the terms of the employers 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 payable to retiring employees have been estimated by actuarial valuation as at 31 March 2007. (g) Replacement Reserve The replacement reserve is established for future replacement of items of a capital nature. Under the terms of the agreement with Canada Mortgage and Housing Corporation (CMHC) the replacement reserve is to be funded with an annual provision in the amount of $6,330 from the operating budget plus an allocation for interest. The funds in the account may only be used for expenditures approved by CMHC. 8
Notes to the Financial Statements 3. Summary of Significant Accounting Policies-continued (h) Income Taxes The Centre is exempt from federal and provincial income taxes. 4. Financial Instruments (a) Fair Value The following policies and assumptions were used to determine the fair value of each class of financial assets and financial liabilities. (i) (ii) Cash and restricted cash, accounts receivable, accounts payable and accrued liabilities, salaries and accrued vacation payable, accrued employee future benefits and resident trust funds are classified as held for trading and are measured at their carrying amount since it is comparable to their fair value due to the approaching maturity of these financial instruments. Short-term investments are classified as held for trading and are measured at fair value, determined on the basis of market value. (iii) Mortgage payable is carried at cost. The fair value of the mortgage payable has not been determined as the rate to renew the mortgage is not known. (b) Financial Risk Unless otherwise noted, it is management's opinion that the Centre is not exposed to significant interest, currency or credit risks arising from these financial statements. 5. Property and Equipment Accumulated Net Book Value Cost Amortization 2008 2007 Land and improvements $ 442,959 $ - $ 442,959 $ 442,959 Buildings 12,442,935 5,111,824 7,331,111 7,703,209 Furniture and equipment 3,343,810 2,591,843 751,967 713,674 Computers 21,115 6,335 14,780 19,004 Leasehold improvement 222,037 8,985 213,052 22,963 $16.472.856 $ 7.718.987 $ 8.753.869 $ 8.901.809 The Centre tests long-lived assets for impairment when events or circumstances indicate that their carrying amount may not be recoverable. Impairment exists when the carrying value of the asset is greater than the undiscounted future cash flows expected to be provided by the asset. The amount of impairment loss, if any, is the excess of the carrying value over its fair value and the loss is recorded in the period when it is determined. The Centre assesses fair value based on discounted future cash flows. No impairment losses were determined by management to be necessary for the year. 9
Notes to the Financial Statements 6. Accrued Employee Future Benefits Part of the accrued liabilities relating to employees consists of a provision for sick leave and severance payments. Under the terms of the Centre'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, as determined by the Ministry of Health, for amounts which may become payable to retiring employees is based on an actuarial valuation as at 31 March 2007, extrapolated to 31 March 2008, using an early measurement date of 31 December 2007. The key assumptions made in the valuation were as follows:. an interest (discount) rate of5.00% per annum, based on market interest rates as at 31 December 2007; this is an increase from the discount rate of 5.00% as at 31 December 2006; demographic assumptions (mortality rates, retirement rates, etc.), that are in accordance with the assumptions used for the valuation ofliabilities for the British Columbia Municipal Pension Plan as at 31 December 2003; utilization of sick leave time based on an extensive study of experience covering the first nine months of the calendar year 2006; and a long-term base wage inflation assumption of 3.25% per annum, reflecting a Consumer Price Index (CPI) growth of 2.25% per annum and wage productivity of 1% per annum. 2008 2007 Accrued retiring allowance Less: current portion $ 1,124,252 $ 1,046,813 (84,978) (84,909) $ 1,039,274 $ 961,904 7. Mortgage Payable On 1 October 2006, the Centre renewed its mortgage payable to Canada Mortgage and Housing Corporation. The mortgage is repayable at $9,281 per month including interest at 4.26% for a term of five years, with a renewal date of 1 October 2011. Property at 7451 Sussex Avenue, Bumaby, B.C. is pledged as security for the mortgage. A portion of the mortgage is covered under agreements with Canada Mortgage and Housing Corporation and funding is provided to reduce interest on that portion to 2% (see Note 11). Effective 1 January 2007, the mortgage is administered by the British Columbia Housing Management Corporation. Estimated principal repayments in each of the next four years are as follows: 2009 2010 2011 2012 Thereafter $ 86,442 76,315 86,633 37,540 5ill4EflL $ 7R7,7?'5 10
Notes to the Financial Statements 8. Commitments The Centre entered into two lease obligations for computer equipment during the 2005 fiscal year. Future minimum lease payments are $2,710 until November 2009 and $1,444 thereafter. The Centre entered into a new lease for additional computer equipment in 2008. Future minimum lease payments are $389 until January 2011. Total future minimum lease payments are expected to be $81,706. 9. Deferred Capital Contributions Deferred capital contributions includes the unamortized amount of grants and donations received for the purchase of property and equipment as well as unspent grants and donations. The amortization of capital contributions is recorded as revenue in the statement of earnings. Balance, beginning of year Contributions received for property and equipment acquisitions Fraser Health Authority Other Less: amounts amortized to revenue Balance, end of year 2008 $ 7,816,109 133,149 196,078 8,145,336 (603,811) $ 7,')41,')2') -- 2007 $ 8,055,488 117,277 59,344 8,232, 109 (416,000) $ 7,RI6,109 The balance of unamortized capital contributions consists of the following: 2008 2007 Unamortized capital contributions used to purchase property and equipment Unspent contributions $ 7,339,434 $ 7,393,599 202,091 422,510 $ 7,'541,')2') $ 7,RI6,109 10. Investment in Property and Equipment The balance consists of grants received for the purchase ofland and the unamortized balance of self- funded purchase of property and equipment. 11. Canada Mortgage and Housing Corporation Subsidy The Centre receives federal assistance through Canada Mortgage and Housing Corporation pursuant to Section 56.1 of the National Housing Act to reduce mortgage interest expense to 2% to enable the Centre to provide resident care to low-income patients. 11
Notes to the Financial Statements 12. St. Michael's Centre Foundation St. Michael's Centre Foundation raises funds from the community. The Foundation is incorporated under the Society Act of British Columbia and is a registered charity under the Income Tax Act. All resources of the Foundation are provided to the Centre or used for the Centre's benefit. The Foundation has not been consolidated in the Centre's financial statements. Condensed financial information is as follows: 2illl8 2illl1 (unaudited) Financial position Net assets $ 106,600 $ 196,723 Results of operations Total revenues Contribution to the Centre and expenses Increase in net assets 111,356 (213,942) (10? 5Rh).$.$ 160,458 (91,706) 682S2 13. Related Party Transactions During the year, the Foundation donated $170,161 (2007 - $55,505) to the Centre and reimbursed the Centre $43,781 (2007 - $18,156) for salary and administrative costs that the Centre had incurred on behalf of the Foundation. At year end, the Centre had a receivable from the Foundation in the amount of$9,963 (2007 - $37,053). 14. Pension Plan The Centre is a member of the Municipal Pension Plan which is open to eligible employees of health care facilities, local governments, schools districts, colleges and a number of small public bodies. The Municipal Pension Plan is a contributory defined benefit pension plan and provides pension benefits based on various factors including age, earnings and length of service. The Centre contributes 8.69% (2007-8.53%) and the employees contribute 6.99% (2007-6.99%) on the first $41,400 (2007 -$41,100) of their salaries to the plan and 8.49% (2007-8.49%) of salary in excess of$41,400 (2007 - $41,100). An actuarial valuation of the Municipal Pension Plan's assets and pension liabilities is performed at least every three years. The most recent full actuarial valuation for funding purposes available was prepared as at 31 December 2006. The valuation disclosed a surplus for basic pension benefits of $438 million in the plan. Contributions to the plan are expensed in the year made and in the current year amounted to $556,119 (2007 - $527,775). 12
Schedule 1 -Combined Schedule of Revenue 2008 2007 Resident care Grants Self pay Amortization of deferred capital contributions $ 9,449,037 $ 9,214,576 1.717.580 1,823,340 11.166.617 11,037,916 603.811 416,000 Other income Interest subsidy, CMHC Interest Other 26,558 32,475 63,816 56,309 293.938 207,664 384,312 296,448 $ 12.154.740 $ 11.750.364 13 14
Schedule 2-Combined Schedule of Expenses -Operations 2008 2007 Salaries, wages and employee benefits Salaries and wages Employee benefits Patient services and supplies General services Housekeeping and laundry Physical plant services and supplies Utilities Maintenance, security and supplies Furniture and equipment replacements Food and dietary Administrative, Data processing Other fees Miscellaneous Education Office, including printing, stationery and postage Audit and legal Telephone Bad debt expense Association membership fees Travel Advertising Mortgage interest Amortization $ 7,933,368 $ 7,676,206 2.134.615 1;974,592 10,067.983 9,650,798 260.881 253,685 201.256 200,306 193,328 196,228 90,812 88,211 4.385 10,482 288.525 294,921 332.255 316,377 97,365 84,636 66,613 72,032 37,521 37,286 36,037 7,393 23,927 24,878 17,446 52,885 16,617 16,010 10,000 8,000 6,717 9,949 2,339 4,040 2.056 1,487 316.638 318,596 34.827 43,465 518.355 507,552 $ 12.020.720 $ 11.585.700 14