D'ANGELA SORRENTI PALOMBO LLP CHARTERED ACCOUNTANTS THE VITANOVA FOUNDATION Auditors' Report Financial Statements March 31, 2013
D'ANGELA SORRENTI PALOMBO LLP CHARTE R ED ACCOUNTANTS 3800 Steeles Ave. West West Building, Suite 400 Woodbridge, Ontario Canada L4L 4G9 Tel. 905/851-5000 Fax. 905/851-9288 Toronto Line 416n98-7843 INDEPENDENT AUDITORS' REPORT To the Members of The Vitanova Foundation : We have audited the accompanying financial statements of The Yitanova Foundation which comprise the statement of financial position as at March 31, 2013 and the statements of operations and accumulated operating surplus and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian generally accepted accounting principles, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors' Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of 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 auditor's 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 auditor considers internal control relevant to the entity's preparation and fair representation 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 controls. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that the audit evidence we have obtained in our audit is sufficient and appropriate to provide a basis for our audit opinion. Basis for Qualified Opinion In common with many not-for-profit organizations, the Yitanova Foundation derives revenues from the general public in the form of donations and fundraising functions, the completeness of which is not susceptible to satisfactory audit verification. Accordingly, our verification of revenues was limited to the amounts recorded in the records of the Yitanova Foundation. Therefore, we were not able to determine whether any adjustments might be necessary to revenues, revenues over expenses and cash flows from operations for the year ended, current assets and surplus as at March 31, 2013. Qualified Opinion In our opinion, except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph, the financial statements present fairly, in all material respects, the financial position of the Yitanova Foundation as at March 31,2013 and the results of its operations and its cash flows for the year then ended in accordance with Canadian generally accepted accounting principles. CHARTERED ACCOUNTANTS Licensed Public Accountants Toronto, Canada June 18, 2013
Balance Sheet March 31. 2013 2013 2012 Assets Current assets Cash and cash equivalents (note 6) $ 290,382 $ 138,247 HST receivable 26,162 25,993 Prepaid expenses 1,526 1,526 318,070 165,766 Investments (note 7) 79,307 Capital assets (note 8) 267,670 299,338 $ 585,740 $ 544,411 Liabilities Current liabilities Accounts payable and accrued liabilities Current portion of vehicle loan payable (note 9) Employee tax deductions payable Vehicle loan payable (note 9) $ 13,342 $ 18,851 7,264 7,034 11,564 11,718 32,170 37,603 9,977 17,241 42,147 54,844 Accumulated surplus 543,593 489,567 $ 585,740 $ 544,411 ON Director Director See accompanying notes. Page 1
Statement of Operations and Accumulated Operating Surplus 2013 2012 Revenues Donations and fundraising activities (note 2) $ 401,888 $ 431,690 Government grants (note I 0) 662,714 683,189 Other revenue-ontario Works 43,691 29,299 1,108,293 1,144,178 Expenditures Accounting, audit and legal 40,284 37,540 Advertising and promotion 10,917 3,216 Amortization 53,135 59,217 Auto lease, repairs and travel 15,777 15,261 Consulting fees 17,275 11,803 Domiciliary 24,867 29,938 Insurance 12,604 12,298 Interest on long term lease 683 728 Office and general 27,694 18,169 Fundraising expenses 49,221 66,804 Program and housekeeping 14,674 19,871 Rent and utilities (note 5) 126,245 126,668 Salaries and benefits 607,061 603,733 Telephone 11,801 10,312 Realty taxes 18,386 17,355 Repairs and maintenance 23,643 26,265 1,054,267 1,059,178 Operating surplus 54,026 85,000 Accumulated operating surplus, beginning of year 489,567 404,567 Accumulated operating surplus, end of year $ 543,593 $ 489,567 See accompanying notes. Page 2
THE VITANOV A.FOlJNJJATlUN Statement of Cash Flows 2013 2012 Operating activities Operating surplus $ 54,026 $ 85,000 Items not requiring an outlay of funds Amortization 53,135 59,217 107.161 144.217 Changes in non-cash working capital HST receivable (169) (8,973) Accounts payable and accrued liabilities (5,663) 9,801 Vehicle loan payable (7,034) (6,891) 94.295 138.154 Investing activities Acquisition of capital assets (21,467) (50,787) Redemption (purchase) ofterm deposits 79,307 (20,808) 57,840 (71,595) Increase in cash and cash equivalents 152,135 66,559 Cash and cash equivalents, beginning of year 138.247 71.688 Cash and cash equivalents, end of year $ 290.382 $ 138.247 See accompanying notes. Page 3
Notes to Financial Statements 1. Purpose, objects and operations of the Foundation The Vitanova Foundation ("the Foundation") is a not-for-profit organization dedicated to helping people in Canada and around the world who suffer from alcohol and substance abuse and seek treatment. The Vitanova Foundation was incorporated by letters patent as a corporation without share capital in the Province of Ontario on July 20, 1988. The corporation commenced operations on July 20, 1988. A) The objects for which the Corporation is incorporated are: a) to establish, maintain and administer a residence to offer a rehabilitation programme directed to the needs of persons dependent upon drugs or alcohol; b) to establish, maintain and administer assessment, rehabilitation and counselling programmes for persons dependent upon drugs or alcohol; c) to establish, maintain and administer counselling programmes for families of persons dependent upon drugs or alcohol; d) to establish, maintain and administer a community re-integration programme for persons dependent upon drugs or alcohol; e) to promote continuing improvement in the quality of rehabilitation programmes for persons dependent upon drugs or alcohol; f) to promote the development of professional skills and sensttlvttles in people who provide services to persons dependent upon drugs or alcohol; g) further to the objects of the corporation and as incidental and ancillary thereto, to interact with the municipal, provincial and federal governments and other agencies in developing policies conducive to the rehabilitation of persons dependent upon drugs or alcohol; h) to establish maintain and administer a residence and counselling program for the members of the families of persons dependent upon drugs or alcohol, which members have been the victim of abuse relating to such dependency. B) The Corporation is subject to the following terms and conditions: a) To invest and re-invest the funds of the corporation in such manner as determined by the Directors, and in making such investments, the Directors shall not be limited to investments authorized by law for Trustees, provided such investments are reasonable, prudent and sagacious under the circumstances and do not constitute, either directly or indirectly, a conflict of interest; Page 4
-Notes to Financial Statements Year Ended March 31. 2013 1. Purpose, objects and operations, continued b) To accept donation gifts, legacies and bequests in furtherance of the corporation's objects; c) The corporation shall be carried on without the purpose of gain for its members and any profits or other accretions to the corporation shall be used in promoting its objects; d) The corporation shall be subject to the Charities Accounting Act and the Charitable Gifts Act; e) The directors shall serve as such without remuneration, and no director shall directly or indirectly receive any profit from their position as such; provided that directors may be paid reasonable expenses incurred by them in the performance of their duties; f) The borrowing power of the corporation pursuant to any by-law passed and confinned in accordance with section 59 of the Corporations Act shall be limited to borrowing money for current operating expenses, provided that the borrowing power of the corporation shall not be so limited if it borrows on the security of real or personal property. 2. Significant accounting policies Basis of presentation These financial statements present, in accordance with Canadian generally accepted accounting principles, the assets, liabilities, revenue, expenses and cash flows of the Vitanova Foundation. Cash and cash equivalents The Foundation considers deposits in bank, certificates of deposit and other short-term investments with original maturities of 90 days or less at the date of acquisition as cash and cash equivalents. Investments Investments are classified as available-for-sale and stated at fair value determined on the basis of market value. Investment purchases and sales transactions are accounted for on the settlement date. Page 5
-Notes to Financial Statements Year Ended March 31. 2013 2. Significant accounting policies - continued Foreign currency Monetary assets and liabilities in foreign currencies are translated at the exchange rate in effect at the balance sheet date. Other assets and liabilities are translated at the exchange rate in effect at the transaction date. Items appearing in the current year's income statement, except for the cost of amortization translated at historic rate, are translated at average year rates. Exchange gains and losses are included in the income statement. There were no foreign cmtency transactions during the year. Financial instruments other than investments The following policies and assumptions were used to determine the fair value of each class of financial assets and financial liabilities. Cash and cash equivalents, HST receivable, accounts payable, accrued liabilities and current portion of vehicle loan payable are financial assets and liabilities held for trading are measured at their carrying amount since it is comparable to their fair value due to the approaching maturity of these financial instruments. Revenue recognition Government grants are recognized as revenue when received or receivable if the amount to be received can be reasonably estimated and collection is reasonably assured. Donations and fundraising activities, other revenue- Ontario Works are recorded when received. Investment income, such as interest income, is recorded on the accrual basis. The Foundation follows the deferral method of accounting for revenues. Capital assets Capital assets are recorded at cost. Amortization of furniture and fixtures and equipment under capital lease equipment is provided on the declining balance at an annual rate of 20 %.Computer and farm equipment and vehicle is provided on the declining balance at an annual rate of 45%, 30 % and 30%, respectively. Leasehold improvements are amortized on a straight-line basis over 10 years. Page 6
Notes to Financial Statements 2. Significant accounting policies - continued Use of estimates The preparation of financial statements in conformity with Canadian generally accepted accounting principles for not-for-profit organizations requires management to make estimates and assumptions which affect the amounts reported in the financial statements and the accompanying notes. These estimates are based on management's best knowledge of current events and actions that the organization may undertake in the future. Due to the inherent uncertainty involved with making such estimates, actual results reported in future years may differ from those estimates. Government grants Government grants are recorded as revenue. Specific grants and the related expenses are deferred until completion of the project. There were no specific grants in the current year. Income taxes The Foundation is a registered charity under the provisions of the Income Tax Act and is therefore not liable for either federal or provincial income taxes. Donated services Some of the work of the Foundation is dependent on voluntary services offered by volunteers. Since these services are not normally purchased by the Foundation and because of the difficulty of determining their fair value, donated services of this kind are not recognized in these financial statements. 3. Subsequent events a) Amendments to accounting standards that apply to not-for-profit organizations Effective April 1, 2012, the Foundation adopted the CICA amendments to Section 4400, Financial Statement Presentation by Not-for-Profit Organizations, of the CICA Handbbook. Amongst other items, these amendments eliminate the requirement to show net assets invested in capital assets as a separate component of net assets, clarify the requirement for revenue and expenses to be presented on a gross basis when the not-for-profit organization is acting as principal and require a statement of cash flows. Adoption of these recommendations had no significant impact on the financial statements for the year ended March 31, 2013. Page 7
-Notes to Financial Statements 3. Subsequent events - continued b) Amendments to Section 1000, Financial Statement Concepts ( "Section 1000"): Effective Aprill, 2012, the Foundation adopted the CICA amendments to Section 1000 ofthe CICA Handbook. These amendments clarified the criteria of an asset or liability, removing the ability to recognize assets or liabilities solely on the basis of matching of revenue and expense items. Adoption of these recommendations had no effect on the financial statements for the year ended March 31, 2013. 4. Capital management The Foundation defines its capital as the amounts included in its net assets. The Foundation's objective when managing its capital is to safeguard the Foundation's ability to continue as a going concern so that it can continue to provide the appropriate level of benefits and services to the public. The Foundation monitors its capital by reviewing various financial metrics, including cash flows and variances to forecasts and budgets. Capital management objectives, policies and procedures are unchanged since the preceding year. 5. Due to related entity The amount due to Vitanova Shelter Corporation is non-interest bearing, unsecured and has no fixed terms for repayment.it has been classified as long-term because they have indicated they have no intention of demanding repayment within the next fiscal year. The related entities have common management. The Vitanova Shelter Corporation charges rent to the Vitanova Foundation (2013-$ 72,000; 2012-$ 72,000). The rent is in the normal course ofbusiness and is measured at the exchange amount, which is the amount of consideration established and agreed to by the related entities. In 2013, the amount due to Vitanova Shelter Corporation was donated to the Vitanova Foundation. 6. Cash and cash eqivalents The cost and fair value of cash and equivalents in 2013 was$ 290,382 ( 2012- $ 138,247). 7. Investments There were no investments outstanding at yearend 2013. The cost of the GIC in 2012 was$ 79,307 and the fair value ofthe GICs in 2012 was$ 79,321. Page 8
Notes to Financial Statements 8. Capital assets 2013 2012 Net Net Accumulated Book Book Cost Amortization Value Value Furniture and fixtures $ 138,283 $ (93,389) $ 44,894 $ 56,118 Vehicle 41,178 (29,172) 12,006 17,151 Leasehold improvements 468,934 (271,911) 197,023 215,061 Computer equipment 87,978 (76,143) 11,835 8,476 Farm equipment 5,909 (5,255) 654 934 Equipment under capital lease 6,788 (5,530) 1,258 1,598 $ 749,070 $ (481,400) $ 267,670 $ 299,338 9. Vehicle loan payable 2013 2012 Line of credit, bearing interest at 3.25%, payable in monthly blended payments of principal and interest in the amount of $ 643 commencing November 7, 2009 and due August 7, 2015, secured by the vehicle. $ 17,241 $ 24,275 Current portion (7,264) (7,034) $ 9,977 $ 17,241 The yearly amount of principal payments required to retire the loan is as follows: 2014 7,264 2015 7,502 2016 2,475 The debt is secured by the vehicle $ 17,241 Page 9
Notes to Financial Statements 10. Government grants 2013 2012 Operating grant, Ministry of Health $ 612,254 $ 612,254 One-time capital grant, Ministry of Health 20,475 United Way of York Region 50,460 50,460 $ 662,714 $ 683,189 The purpose of the operating grant received from the Ministry of Health is to fund the day to day expenditures required to maintain the Foundation. The purpose of the one-time capital grant from the Ministry of Health in 2012 was to replace existing appliances and for upgrades and renovations to the facility. The purpose of the United Way of York Region grants are to provide funds towards the operation ofthe domiciliary shelter program. 11. Economic Dependence The Foundation is economically dependent on the continued support of the Ministry of Health and the United Way. 12. Remuneration of Board of Directors Members of the Board of Directors are volunteers who served without remuneration for acting as directors. 13. Financial Instruments Fair values The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, and current portion of vehicle loan payable approximate their fair value due to the relatively short periods to maturity of the instruments. Refer to Note 7 for a fair value related to the Foundation's investments. Market risk The Foundation's investments are GICs held by a major Canadain bank and therefore not exposed to major investment risks as the capital is guaranteed by the Federal Deposit Insurance Corporation. Credit risk The HST receivable is due entirely from the Government and, accordingly, presents no credit risk to the Foundation. Page 10
Notes to Financial Statements Year Ended March 31. 2013 13. Financial Instruments- continued Interest rate risk Interest rate risks refer to adverse consequences of interest rate changes on the Foundation's cash flows, financial position, investment income and interest expense. The Foundation's investments are exposed to no interest rate changes and therefore pose no risk. The vehicle loan payable is exposed to interest rate changes but, the impact of adverse changes in rates is not considered material. 14. Comparative figures Certain comparative figures have been reclassified to conform with the presentation adopted in the current year. Page 11