Sunnybrook Health Sciences Centre. Consolidated Financial Statements March 31, 2017

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Transcription:

Sunnybrook Health Sciences Centre Consolidated Financial Statements

pwc June 15, 2017 Independent Auditor's Report To the Board of Directors of Swmybrook Health Sciences Centre We have audited the accompanying consolidated financial statements of Sunnybrook Health Sciences Centre, which comprise the consolidated statement of financial position as at and the consolidated statements of operations and changes in accumulated operating surplus, remeasurement gains and losses and cash flows for the year then ended, and the related notes, which comprise a summary of significant accounting policies and other explanatory information. Management's responsibility for the consolidated financial statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Canadian public sector accounting standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor's responsibility Our responsibility is to express an opinion on these consolidated 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 consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated 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 presentation of the consolidated 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 consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. PricewaterhouseCoopers LLP PwC Tower, 18 York Street, Suite 2600, Toronto, Ontario, Canada MsJ 0B2 T: +1 416 863 1133, F: +1 416 365 8215 "PwC" refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.

pwc Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Sunnybrook Health Sciences Centre as at and the results of its operations, its remeasurement gains and losses and its cash flows for the year then ended in accordance with Canadian public sector accounting standards. Chartered Professional Accountants, Licensed Public Accountants

Consolidated Statement of Financial Position As at 2017 2016 Assets Current assets Cash and cash equivalents Accounts receivable Inventories Prepaid expenses 192,161 64,995 11,525 7,874 276,555 169,298 70,171 10,823 5,043 255,335 Restricted investments (note 3) 184,816 Other non-current assets 5,736 Property, plant and equipment (note 4) 7181932 190,570 4,771 6901911 111861039 1,141,587 Liabilities Current liabilities Accounts payable and accrued liabilities (note 6) Current portion of long-term debt (note 7) Current portion of employee future benefits liability (note S(c)) Current portion of other long-term liabilities Long-tenn debt (note 7) Employee future benefits liability (note S(c)) Other long-term liabllltles Deferred contributions (note 9) Net Assets Net assets consist of Accumulated operating surplus Accumulated remeasurement losses 168,292 5,104 2,695 1,166 177,257 66,351 25,845 7,882 720,072 997,407 188,632 1,186,039 196,975 (8,343) 151,094 4,865 2,247 1 245 159,451 74,789 24,770 7,090 714,228 980,328 161,259 1,141,587 170,644 (9,385) Contingencies and commitments (note 11) Approved c Boa f Directors 188,632 161,259 ----~lip---"'"--=----~------ Director ----~- '---7'~--~ -... 9, Director The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Statement of Operations and Changes in Accumulated Operating Surplus For the year ended Revenues Toronto Central Local Health Integration Network/Ministry of Health and Long-Term Care Cancer Care Ontario Other agencies and patients Ancillary services and other sources Investment income Research grants and other revenue (note 9) Amortization of deferred contributions for equipment 2017 640,233 107,211 53,111 148,829 5,849 82,526 18,177 2016 629,631 101,540 48,269 136,972 4,741 84,548 18,105 1,055,936 1,023,806 Expenses Salaries, wages and employee benefits Medical and surgical supplies Drugs Other supplies and expenses Bad debts Interest Amortization of equipment 663,427 61,912 86,085 175,136 3,958 3,089 33,507 640,955 61,306 78,507 169,589 4,114 3,309 32 274 1027114 990,054 Excess of revenues over expenses before net building amortization Net building amortization Amortization of deferred contributions for buildings Amortization of buildings 28,822 33,752 21,468 20,856 (26,531) (25,850) Excess of revenues over expenses for the year Accumulated operating surplus - Beginning of year Transfer from consolidated statement of remeasurement gains and losses (5,063) 23,759 170,644 2,572 28,758 141,886 Accumulated operating surplus - End of year 196,975 170,644 The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Statement of Remeasurement Gains and Losses For the year ended 2016 Accumulated remeasurement losses - Beginning of year Change in fair value attributable to Derivatives Restricted investments Amount reclassified to the consolidated statement of operations and changes in accumulated operating surplus Loss on recognition of derivatives Gain on sale of restricted investments 414 1,081 2,920 (801) (6,882) (2,933) 281 3,117 (2,968) Net remeasurement gains (losses) for the year Transfer to accumulated operating surplus Accumulated remeasurement losses - End of year 3,614 (2,503) (2,572) (8,343) (9,385) The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Statement of Cash Flows For the year ended 2017 2016 Cash provided by (used in) Operating activities Excess of revenues over expenses for the year Items not affecting cash Amortization of property, plant and equipment Amortization of deferred contributions - property, plant and equipment Employee future benefits Change in non-current assets Change in deferred contributions for research and special purpose funds Change in other long-term liabilities Changes in non-cash working capital items Accounts receivable Inventories Prepaid expenses Accounts payable and accrued liabilities Investing activities Net proceeds from restricted investments Capital activities Net purchases of property, plant and equipment Financing activities Deferred contributions received for property, plant and equipment Repayment of long-term debt Increase (decrease) in cash and cash equivalents during the year Cash and cash equivalents - Beginning of year Cash and cash equivalents - End of year 23,759 60,038 (39,645) 1,523 45,675 (965) 3,869 713 5,176 (702) (2,831) 17,198 68,133 6,034 (88,059) 41,620 (4,865) 36.755 22,863 169 298 192,161 28,758 58,124 (38,961) 1,587 49,508 (554) (7,347) (353) (3,413) (1,147) 201 (18,726) 18,169 11 113 (67,271) 32,998 (4,638) 28,360 (9,629) 178,927 169 298 The accompanying notes are an integral part of these consolidated financial statements.

: 1 Nature of operations Sunnybrook Health Sciences Centre (the Hospital or SHSC) is an academic health sciences centre involved in providing patient care, teaching health-care professionals and conducting research. The Hospital is a registered charity under the Income Tax Act (Canada) and accordingly is exempt from income taxes, provided certain requirements of the Income Tax Act ( Canada) are met. Under the Health Insurance Act (Ontario) and the regulations thereunder, the Hospital is funded primarily by the Province of Ontario in accordance with funding arrangements established by the Ministry of Health and Long-Term Care (MOHL TC) and the Local Health Integration Network (LHIN). Any excess ofrevenues over expenses incurred during a fiscal year is not required to be returned and can be used in the reinvestment for capital needs of the Hospital. To the extent that deficits are incurred and not funded, future operations may be impacted. Net building amortization expense (building amortization net of related amortization of deferred contributions) is not funded by the LHIN. These consolidated financial statements include net building amortization of 5,063 (2016-4,994). 2 Summary of significant accounting policies Basis of presentation These consolidated financial statements are prepared in accordance with Canadian public sector accounting standards, including accounting standards that apply only to government not-for-profit organizations and include the assets, liabilities and operations of the following entities where the Hospital is the sole voting member: Sunnybrook Research Institute (SRI), a charitable non-share capital corporation incorporated under the Corporations Act of Ontario; and Sunnybrook Research Academy (SRA), a registered charity under the Income Tax Act (Canada), incorporated without share capital under the Canada Corporations Act. Also consolidated are the financial results of The Blyth wood Trust, a commercial entity dedicated to the development, operation and/or investment in commercial opportunities in the health-care sector. SHSC, SRI and the Sunnybrook Health Sciences Centre Foundation (Sunnybrook Foundation) are the beneficiaries of The Blythwood Trust. These consolidated financial statements do not include the assets, liabilities and operations of the following non-controlled not-for-profit entities: Sunnybrook Foundation; Sunnybrook Volunteer Association; St. John's Rehab Foundation; and St. John's Rehab Volunteer Association. (1)

Revenue recognition The Hospital follows the deferral method of accounting for contributions, donations and government grants. Unrestricted contributions are recognized as revenue when received or receivable if the amount to be received can be reasonably estimated and collection is reasonably assured. Externally restricted contributions are recognized as revenue in the year in which the related expenses are recognized. Grants that are approved but not received at the end of a period are accrued. Operating grants are recorded as revenue in the period to which they relate. Where a portion of a grant relates to a future period, it is deferred and recognized in the subsequent period. Contributions and investment income restricted for the purchase of property, plant and equipment are deferred and amortized into revenue on a straight-line basis, at a rate corresponding with the amortization rate for the related property, plant and equipment. Ancillary revenue is primarily derived from the Hospital's pharmacies, preferred accommodation, the Working Conditions Program, leasing revenue from parking, commission revenue from catering services at the Estates of Sunnybrook, and various service level agreements with other institutions. Revenue is recognized when services are performed or goods are delivered. Contributed assets, materials and services Volunteers contribute a significant amount of time each year. Due to the difficulty of determining the fair value, these contributed services are not recognized or disclosed in the consolidated financial statements and related consolidated financial statement notes. Contributed assets, materials and services are recorded, when received, at their fair value. Cash and cash equivalents Cash and cash equivalents include cash and short-term investments. Short-term investments are recorded at fair value. Interest is recorded on an accrual basis. Inventories Inventories are valued at the lower of cost and net realizable value. Cost is determined by the average cost method. Property, plant and equipment Purchased property, plant and equipment are recorded at cost. Contributed property, plant and equipment are recorded at fair value at the date of contribution. Betterments that extend the estimated life of an asset are capitalized. When property, plant and equipment no longer contribute to the Hospital's ability to provide services, their carrying amounts are written down to their residual value. (2)

Equipment leased on terms that transfer substantially all of the benefits and risks of ownership to the Hospital are capital leases, and are accounted for as though an asset had been purchased and a liability incurred. All other items of equipment held on lease are accounted for as operating leases. Construction-in-progress consists of direct construction, development costs and capitalized interest. No amortization is recorded until construction is substantially complete and the assets are brought into service. Property, plant and equipment are amortized on a straight-line basis using the following annual rates: Buildings 2.0%-20.0% Equipment 3.3% - 50.0% Building improvements 6.7% Parking structure 5.0% Employee benefit plans The Hospital accrues its obligations under employee benefit plans and the related costs. Multi-employer plan Substantially all of the employees of the Hospital are eligible to be members of the Healthcare of Ontario Pension Plan (HOOPP), which is a multi-employer, defined benefit, final average earnings, contributory pension plan. Defined contribution accounting is applied to HOOPP, whereby contributions are expensed when due. Superannuation defined benefit plan There are no active Hospital employees that are members of this superannuation defined benefit plan, and no new members can opt into this plan. The plan has been accounted for as ifit were on a defined contribution basis, whereby contributions are expensed when due. Other non-pension defined benefit plans For other non-pension defined benefit plans, the cost of retirement benefits earned by employees is actuarially determined using the accrued benefit method, pro-rated on service, and management's best estimate of salary escalation (where applicable), retirement ages of employees and expected health-care costs. The discount rate used to determine the accrued benefit obligation was determined by reference to the rate of return on provincial government and corporate bonds for varying durations based on the cash flows expected from the employee future benefits obligations. Actuarial gains and losses are amortized over the remaining service lives of the employees. Past-service costs relating to plan amendments are expensed when incurred. Sick days that accumulate, but do not vest, are recognized in the period in which employees have earned the related benefits in return for their services. The cost of sick leave benefits earned is actuarially determined using the projected benefits method pro-rated on service and using management's best estimate assumptions. (3)

Restricted investments Investments are carried at fair value. Interest is recorded on an accrual basis. The Hospital invests in a diversified portfolio of investment funds as outlined in note 3. Changes in fair value are recorded in the consolidated statement of remeasurement gains and losses until the restricted investment is settled. Transaction costs related to restricted investments are expensed as incurred. Interest, dividends and realized gains or losses attributable to restricted investments are reported in the consolidated statement of operations and changes in accumulated operating surplus. Derivatives Derivative financial instruments are utilized by the Hospital in management of its interest rate exposures. The Hospital does not enter into derivative financial instruments for speculative purposes. The Hospital enters into interest rate swaps in order to eliminate variability in future interest rate cash flows on its long-term debt (note 7). These instruments are measured at fair value. The change in fair value of the swaps is recorded in the consolidated statement of remeasurement gains and losses. Deferred contributions Contributions for the purpose of acquiring property, plant and equipment are deferred and amortized on the same basis, and over the same periods, as the related asset. Contributions for research and special purpose expenses are funded through various sources, including research grants and donations. They are recognized as revenue in the year in which the related expenses are incurred. Changes in fair value and investment income earned on amounts received for special purpose funds and unspent capital grants are recognized as an increase in deferred contributions and restricted for those purposes. Financial instruments and risk management The Hospital's financial instruments consist of cash and cash equivalents, restricted investments, accounts receivable, accounts payable and accrued liabilities, long-term debt and derivatives. The Hospital's financial instruments are measured as follows: Cash and cash equivalents Restricted investments Accounts receivable Accounts payable and accrued liabilities Long-term debt Derivatives fair value fair value amortized cost amortized cost amortized cost fair value

All non-derivative financial assets are assessed for impairment on an annual basis. When a decline in value is determined to be other than temporary, the amount of the loss is reported in the consolidated statement of operations and any unrealized gain or loss is removed from the consolidated statement of remeasurement gains and losses and changes in accumulated operating surplus. The following classification system is used to describe the basis of the inputs used to measure the fair values of financial instruments in the fair value measurement category: Level1- quoted prices (unadjusted) in active markets for identical assets or liabilities; Level2- market based inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and Level 3 - inputs for the asset or liability that are not based on observable market data; assumptions are based on the best internal and external information available and are most suitable and appropriate, based on the type of financial instrument being valued in order to establish what the transaction price would have been on the measurement date in an arm's length transaction. Use of estimates In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Accounts requiring significant estimates include collectibility of accounts receivable, accrued liabilities, deferred revenue and employee future benefits. The Hospital has entered into accountability agreements that set out the rights and obligations of the parties in respect of funding provided to the Hospital by the MOHLTC and the LHIN for the year ended. Included with the accountability agreements, or subsequent funding letters, are the base or one-time volume that if not achieved will result in an adjustment to the funding received. The availability of confirmed volumes lags the completion of the consolidated financial statements and hence the amount of the MOHLTC and LHIN volume funding received during a year may be increased or decreased subsequent to year-end. The amount of revenue recognized in these consolidated financial statements represents management's estimates of amounts that have been earned during the year. Cs)

3 Restricted investments Restricted investments are comprised of: Cash and cash equivalents BMO Harris Canadian Money Market Fund PH&N Canadian Money Market Fund PH&N Short-term Bond and Mortgage Fund PH&N Bond Fund Connor, Clark and Lunn All Strategies Fund Turtle Creek Equity Fund Galibier Canadian Equity Pool Gluskin Blair Franklin Global Credit Fund Burgundy Global Equity Burgundy Emerging Markets Burgundy Canadian Equity Bonavista Canadian Equity Bonavista US Equity Bonavista International Equity 2017 49,422 6,276 4,261 77,279 4,302 6,525 5,899 5,825 14,195 10,164 668 2016 54,203 6,225 4,786 87,875 5,099 3,306 6,736 7,804 570 3,064 8,056 1,347 1,499 184,816 190,570 Restricted investments are for capital construction, the purchase of equipment and expenses of future periods. Specifically, the funds held in a BMO Harris Canadian Money Market Fund represent funds restricted in accordance with the Development Accountability Agreement in place with the MOHLTC for the M-Wing vertical enhancement. The restricted investments also include 78,081 (2016-73,669) restricted for research expenditures. 4 Property, plant and equipment 2017 Accumulated Cost amortization Net Land 973 973 Buildings 865,888 387,057 478,831 Equipment 452,984 305,536 147,448 Parking structure 45,414 26,136 19,278 Construction-in-progress 72 402 72,402 1,437,661 718,729 718 932 (6)

2016 Land Buildings Equipment Parking structure Construction-in-progress Cost 973 845,206 418,987 45,414 39 022 Accumulated amortization Net 973 360,526 484,680 273,981 145,006 24,184 21,230 39,022 1,349,602 658,691 690,911 Property, plant and equipment include land and buildings, carried at a cost of nil, which are leased for nominal consideration to the Hospital by the University of Toronto. Construction-in-progress relates to infrastructure and information technology related projects with approximately 77,791 in costs remaining as at. 5 Operating line of credit The Hospital has an unsecured operating line of credit to a maximum of 30,000, which bears interest at the prime rate (2.70% as at ) less 0.75% and is due on demand. The credit facility is subject to the Hospital maintaining certain covenants. The Hospital is in compliance with such covenants as at March 31, 2017. As at and 2016, the Hospital had not drawn against any of this facility. 6 Accounts payable and accrued liabilities 2017 2016 Accounts payable 58,318 48,462 Deferred revenue 20,166 18,304 Accrued liabilities Salaries, wages and employee benefits 75,528 70,489 Other 14,280 13,839 168 292 151,094 Deferred revenue includes funds received from government agencies and miscellaneous other agencies. Deferred revenue is subject to a settlement process and is repayable to the funder or the funder may approve the funds for future use. (7)

7 Long-term debt The long-term debt is unsecured and consists of: Term loan with variable to fixed interest rate swap to 20 years resulting in an effective interest rate of 4.94%, monthly principal repayments vary over the term of this loan; average principal repayments are 270 per month, due on the f irst working day of each month and will conclude on June 1, 2028 (see (a) below) Term loan with variable to fixed interest rate swap to eight years resulting in an effective interest rate of 4.88%, principal repayments of 68 per month and will conclude on November 1, 2018 (see (a) below) Interest free loan with quarterly payments of 10, quarterly principal payments commenced on January 1, 2010 and will conclude on October 1, 2029 (see (b) below) Interest free loan with quarterly payments of 25, quarterly principal payments commenced on January 1, 2010 and will conclude on October 1, 2019 (see (b) below) Fair value of interest rate swaps (notional value of 60,013) Less: Current portion 2017 58,321 1,692 492 250 60,755 10,700 5,104 2016 62,096 2,643 531 350 65,620 14,034 4,865 66,351 74,789 a) The Hospital has a term loan credit facility for a maximum borrowing of 83,000. The term loan is currently financing the physical facilities expansion at the Bayview campus in addition to the refinancing of prior existing loans. b) In September 2009, the Hospital obtained two loans from the City of Toronto's Sustainable Energy Funds loan program. The loans were provided interest free as the proceeds were spent on approved energy saving initiatives. The following is a schedule of the required principal payments due under the various debt agreements: 2018 5,104 2019 5,002 2020 4,457 2021 4,649 2022 4,876 Thereafter 36,667 60,755 (8)

8 Employee future benefits a) Multi-employer plan Employer contributions made to HOO PP during the year by the Hospital amounted to 39,819 (2016 38,549). These amounts are included in salaries, wages and employee benefits expense in the consolidated statement of operations and changes in accumulated operating surplus. As at December 31, 2016, HOOPP was 122% (2015-122%) funded. b) Superannuation defined benefit plan As at December 31, 2016, the plan has assets, at fair value, of 4,283 (2015-4,616). In the current year, 80 (2015-81) in contributions was made and expenses of 73 (2015 - nil) have been incurred. c) Employee future benefits The Hospital provides extended health-care, dental, life insurance and sick leave benefits to substantially all retired employees. The plan is unfunded and requires no contributions from employees. The Hospital's accrued benefit liability relating to employee future non-pension benefit plans has been calculated by the accrued benefit method pro-rated on service. The average remaining service period of employees at the date of valuation was 16 years for Hospital employees. Information about the Hospital's employee future benefits is as follows: 2017 2016 Accrued benefit obligation 41,397 34,416 Unamortized actuarial losses (12,857} (7,399} Employee future benefits liability 28,540 27,017 Less : Current portion 2,695 2 247 Long-term portion 25,845 24770 (9)

The movement in the employee future benefit liability during the year is as follows: 2017 2016 Employee future benefits liability as at April 1 27,017 25 430 Current service cost 2,047 2,064 Interest cost 1,148 1,066 Amortization of actuarial losses - net 575 645 30,787 29,205 Benefits paid {2,247} (2,188) Employee future benefits liability as at March 31 28,540 27,017 The significant actuarial assumptions adopted in estimating the Hospital's accrued benefit liability are of a long-term nature consistent with the nature of employee future benefits, as follows: 2017 2016 Discount rate for accrued benefit obligation 3.25% 3.00-3.25% Discount rate for net benefit cost 3.30% 3.25 3.50% Dental benefits cost escalation 2.75% 3.75% Medical benefits cost escalation - extended health care 6.0% in 2019, 7.5% in 2015, decreasing decreasing by 0.25% per by 0.25% per annum to an annum to an ultimate rate ultimate rate of 4.50% per of 5.0% annum 9 Deferred contributions 2017 2016 Research 78,081 73,699 Special purpose funds 62,901 63,414 Property, plant and equipment 579,090 577,115 720,072 714,228 As at, total deferred contributions for property, plant and equipment include 37,719 held in restricted cash (2016-47,341), which will be utilized to fund capital expenditures in future years and amounts that are subject to a settlement process. During the year, the Hospital received 92,102 and recognized as grants and other revenue from deferred contributions or spent on capital 88,233 (2016-85,980 and 93,327, respectively). These revenues have been offset by related expenses. Special purpose funds are funds provided by third parties and are held by the Hospital for specific purposes. (10)

10 Related party transactions Related party transactions not separately disclosed in the consolidated financial statements include the following: During the year, the Hospital received donations of 36,960 (2016-28,610) from Sunnybrook Foundation and nil (2016-379) from the St. John's Rehab Foundation; these amounts were primarily used to fund research and building and equipment purchases. On May 1, 2010, the Hospital entered into a ten-year sublease agreement for its parking facilities with Sunnybrook Foundation. During the year, the Hospital earned 12,420 (2016-12,420) in leasing revenue and 3,438 (2016-3,465) as service fees. Additional surplus generated of 2,917 (2016-3,437) was gifted to the Hospital and included in donations. In addition, relating to the parking operations, as at, the Hospital had an outstanding receivable from Sunnybrook Foundation of 1,614 (2016-3,440) and an outstanding liability with Sunnybrook Foundation of 525 (2016-511). As at, included in accounts receivable is 1,045 (2016-537) due from Sunnybrook Foundation relating to non-parking expenses paid on its behalf and nil (2016-91) due from St. John's Rehab Foundation for administrative services provided and outstanding reimbursements. 11 Contingencies and commitments a) Contractual commitments to various parties amount to approximately 22,677 (2016-24,986) and primarily relate to capital projects. b) A group of hospitals, including the Hospital, are members of the Health Care Insurance Reciprocal of Canada (HIROC). HIROC is a pooling of the public liability insurance risks of its members. All members of the pool pay annual deposit premiums, which are actuarially determined and are expensed in the current year. These premiums are subject to further assessment for experience gains and losses, by the pool, for the years in which the Hospital was a member. As at, no negative assessments have been received. The Hospital has an arrangement with HIROC to self-insure legal and adjusting costs through an agency /trust relationship. The benefit of this arrangement is to reduce overall legal and adjusting expenses for the Hospital. c) From time to time, the Hospital is named in lawsuits related to its activities. These claims are at various stages and therefore it is not possible to determine the merits of these claims or to estimate the possible financial liability, if any, to the Hospital. Accordingly, no provision has been made for loss in these consolidated financial statements, but in management's view, these claims should not have a material adverse effect on the financial position of the Hospital. d) The Hospital has an agreement with Plexxus, a not-for-profit shared services organization whose primary responsibility is to provide material management services to the Hospital and its other members through a (11)

cost-saving model. It also provides certain information technology services with the support of CGI Group Inc. and is paid a service fee by its members to pay for supply chain services and to support and maintain the financial reporting system (SAP). e) The Hospital has outstanding letters of guarantee totalling 2,106 (2016-2,106) in support of performance guarantees in favour of the City of Toronto and the Toronto Transit Commission. f) Due to the nature of its operations, the Hospital is periodically subject to grievances filed by its various unions. In the opinion of management, the resolution of any current grievances should not have a material effect on the financial position or results of operations. g) The Hospital has entered into various operating lease arrangements, which expire at various dates up to 2024. The minimum rental payments for the next five fiscal years and thereafter are as follows: 2018 1,323 2019 1,250 2020 1,382 2021 897 2022 1,005 Thereafter 1,173 12 Financial instruments and risk management Within the fair value hierarchy, as at and 2016, the restricted investments (note 3) are classified as Level 1 and the derivatives (note 7) are classified as Level 2. Risk management The Hospital is exposed to a variety of financial risks, including market risk, interest rate risk, credit risk and liquidity risk. The Hospital's overall risk management program focuses on managing risks across the Hospital. Market risk 7,030 The Hospital is exposed to market risk through the fluctuation of financial instrument fair values due to changes in market prices. The significant market risks to which the Hospital is exposed are interest rate and other price risks. Interest rate risk Interest rate risk is the risk the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Hospital is exposed to interest rate risk as a result of cash balances and debt. Of these risks, the Hospital's principal exposure is that increases in the floating interest rates on its debt, if unmitigated, could lead to a decrease in cash flow, and a decrease in the excess of (12)

revenues over expenditures. The Hospital has effectively fixed its interest rate on the majority of long-term debt by entering into interest rate swaps. As at, the Hospital's estimate of the exposure to interest rate risk and the effect on net assets is not material. Credit risk The majority of the Hospital's receivables are due from the MOHLTC or other government agencies. As at, the Hospital's exposure to credit risk in the event of non-payment by patients and other non-government parties is not material. Liquidity risk Liquidity risk results from the Hospital's potential inability to meet its obligations associated with financial liabilities as they come due. The Hospital monitors its operations and cash flows to ensure current and future obligations will be met. The Hospital believes its current sources of liquidity are sufficient to cover its known short and long-term cash obligations. The maturity analysis of the Hospital's long-term debt is described in note 7. The majority of accounts payable and accrued liabilities are expected to be settled in the next fiscal year. 13 Summary of hospital operations The following is a summary of the stand-alone operations of the Hospital. Revenues LHIN/MOHL TC Cancer Care Ontario Other agencies and patients Ancillary services and other sources Investment income Grants and other revenue Amortization of deferred contributions for equipment 2017 640,233 107,211 53,111 147,478 2,980 9,749 11,455 2016 629,631 101,540 48,269 134,056 1,772 10,959 11 444 972,217 937,671 (13)

2017 2016 Expenses Salaries, wages and employee benefits Medical and surgical supplies Drugs Other supplies and expenses Bad debts Interest Amortization of equipment 607,178 586,045 61,812 61,218 86,001 78,377 154,638 147,756 3,825 4,185 3,089 3,309 26,671 25,523 943,214 906,413 Excess of revenues over expenses before net building amortization 29,003 31,258 Net building amortization Amortization of deferred contributions for buildings Amortization of buildings 21,468 (26,531) 20,856 (25,850) (5,063) (4,994) Excess of revenues over expenses for the year 23,940 26,264 (14)