SAMPLE PSAB HOSPITAL
ILLUSTRATIVE FINANCIAL STATEMENTS
For the year ended March 31, 2014
SAMPLE PSAB HOSPITAL
Illustrative PSAB Financial Statements
For the year ended March 31, 2014
The purpose of this publication is to assist Hospitals in preparing their Public Sector Accounting
Standards (PSAB) financial statements for the year ended March 31, 2014.
These financial statements are based on the following assumptions about the example Hospital:
-
The Hospital follows PSAB plus the 4200 series of standards applicable to government not-forprofit organizations.
The Hospital has employment contracts with staff offering both vesting and non-vesting sick leave
benefits available to certain employee groups.
The Hospital’s Foundation has an independently elected board and is not controlled by the
Hospital in any other manner.
The Hospital’s capital assets do not include any assets under capital lease.
The Hospital has selected its internal rate of borrowing to be its discount rate for retirement
benefit calculations (PSAB for government NPOs allows the rate of return on plan assets to be
used alternatively).
There is not a material difference between the interest income and expense and cash flows
requiring separate disclosure in the statement of cash flows.
The Hospital has included a statement of management responsibility with their financial
statements. PS 1201 requires an explicit statement either within the financial statements or
accompanying them that the Hospital is responsible for the preparation of the financial
statements. Some Hospitals and NPOs currently present this in the form of a narrative that
accompanies the financial statements indicating the roles and responsibilities of the Hospital in
preparing the financial statements. This could also be included in the notes to the financial
statements.
Note that assumptions concerning discount rates and other inputs into the determination of liabilities for
post-employment benefits and compensated absences are not based on actual figures and should not be
relied upon.
This publication has been carefully prepared, but it has been written in general terms and should be seen
as broad guidance only. The publication cannot be relied upon to cover specific situations and you should
not act, or refrain from acting, upon the information contained therein without obtaining specific
professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your
particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume
any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance
on the information in this publication or for any decision based on it.
BDO Canada LLP, a Canadian limited liability partnership, is a member of BDO International Limited, a UK
company limited by guarantee, and forms part of the international BDO network of independent member
firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms.
BDO Canada LLP
SAMPLE PSAB HOSPITAL
Statement of Financial Position
As at March 31,
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Accounts receivable (Note 4)
Inventory
Prepaid expenses
March 31, 2014
$
DUE FROM SAMPLE HOSPITAL FOUNDATION (Note 3)
LONG-TERM RESTRICTED INVESTMENTS (Note 2)
CAPITAL ASSETS (Note 6)
$
March 31, 2013
$
12,500,000
3,250,000
3,750,000
19,500,000
5,750
16,537,500
3,000,000
3,638,250
23,181,500
2,750,000
6,467,500
160,798,500
189,516,000 $
2,500,000
6,092,500
157,298,500
189,072,500
4,091,000 $
32,500,000
350,000
200,000
37,141,000
36,222,500
350,000
200,000
36,772,500
LIABILITIES
CURRENT LIABILITIES
Bank indebtedness (Note 7)
Accounts payable and accrued liabilities (Note 5)
Deferred contributions (Note 9)
Current portion of long-term debt (Note 7)
$
LONG-TERM DEBT (Note 7)
POST-EMPLOYMENT BENEFITS AND COMPENSATED ABSENCES (Note 8)
DEFERRED CONTRIBUTIONS (Note 9)
DEFERRED CAPITAL CONTRIBUTIONS (Note 10)
INTEREST RATE SWAP (Note 7)
2,200,000
4,700,000
7,250,000
87,900,000
425,000
139,616,000
2,400,000
4,600,000
7,100,000
82,900,000
350,000
134,122,500
(19,966,000)
(15,591,000)
69,098,500
49,132,500
70,398,500
54,807,500
NET ASSETS (DEFICIT)
OPERATING
INVESTED IN CAPITAL ASSETS (Note 11)
ACCUMULATED REMEASUREMENT GAINS
$
The accompanying notes are an integral part of these financial statements
767,500
49,900,000
189,516,000 $
-
142,500
54,950,000
189,072,500
-
BDO Canada LLP
Page 1 of 23
SAMPLE PSAB HOSPITAL
Statement of Operations
2014
For the year ended March 31,
2013
REVENUE
Ontario Ministry of Health and Long-term Care
Patient services
Realized gains on sale of temporary investments
Interest income
Ancillary and other income
$
101,000,000 $
102,500,000
50,000
1,650,000
17,750,000
222,950,000
100,200,000
101,300,000
42,500
1,500,000
18,150,000
221,192,500
140,050,000
48,175,000
11,200,000
14,000,000
1,125,000
200,000
6,500,000
221,250,000
139,185,000
48,100,000
11,100,000
13,200,000
1,200,000
215,000
6,400,000
219,400,000
1,700,000
1,792,500
6,000,000
(13,375,000)
5,600,000
(12,000,000)
EXPENSES
Salaries and benefits
General supplies and other
Medical and surgical supplies
Drugs
Amortization of operating equipment
Interest and bank charges
Ancillary operations
EXCESS OF REVENUE OVER EXPENSES BEFORE BUILDING AMORTIZATION
Amortization of deferred contributions for buildings (Note 10)
Amortization of buildings
DEFICIENCY OF REVENUE OVER EXPENSES FOR THE YEAR
The accompanying notes are an integral part of these financial statements
$
(5,675,000) $
BDO Canada LLP
(4,607,500)
Page 2 of 23
SAMPLE PSAB HOSPITAL
Statement of Changes in Net Assets
March 31, 2014
Invested in
Capital Assets
(Note 11)
Unrestricted
BALANCE, BEGINNING OF YEAR
$ (15,591,000)
$ 70,398,500
2,825,000
(8,500,000)
(7,200,000)
7,200,000
$ (19,966,000)
$ 69,098,500
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENSES
INVESTMENT IN CAPITAL ASSETS
BALANCE, END OF YEAR
Total
$
54,807,500
(5,675,000)
$
49,132,500
March 31, 2013
Invested in
Capital Assets
Unrestricted
Interest
Rate Swap
Operating
BALANCE, BEGINNING OF YEAR
$
RECLASSIFICATION OF UNREALIZED
LOSSES ON DERIVATIVE DUE TO
ADOPTION OF PS 3450
$ (375,000)
2,992,500
INVESTMENT IN CAPITAL ASSETS
$
375,000
-
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENSES
BALANCE, END OF YEAR
(8,130,000)
(Note 11)
(15,591,000)
$
(7,600,000)
-
59,040,000
375,000
-
(10,453,500)
$
67,545,000
Total
(4,607,500)
10,453,500
$
-
The accompanying notes are an integral part of these financial statements
$
-
70,398,500
$
54,807,500
BDO Canada LLP
Page 3 of 23
SAMPLE PSAB HOSPITAL
Statement of Cash Flows
March 31,
2014
2013
NET INFLOW (OUTFLOW) OF CASH RELATED
TO THE FOLLOWING ACTIVITIES
OPERATING
Deficiency of revenue over expenses
Items not involving cash:
Realized gains on sale of temporary investments
Amortization of capital assets
Amortization of deferred capital contributions
Deferred contributions recognized as revenue in the year
$
Accrual for post-employment benefits and compensated absences
Deferred contributions
Changes in non-cash working capital items:
Accounts receivable
Inventory
Prepaid expenses
Accounts payable and accrued liabilities
FINANCING
Increase in bank indebtedness
Repayment of long-term debt
CAPITAL
Contributions received for capital purposes
Purchase of capital assets
INVESTING
Due from Sample Hospital Foundation
Proceeds on sale of temporary investments
NET CASH OUTFLOW
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS, END OF YEAR
Cash and cash equivalents consist of:
Cash
Term deposits
$
$
$
The accompanying notes are an integral part of these financial statements
(5,675,000)
$ (4,607,500)
(50,000)
14,500,000
(6,000,000)
(1,750,000)
(42,500)
13,200,000
(5,600,000)
(1,650,000)
100,000
1,900,000
85,000
1,850,000
4,037,500
(250,000)
(111,750)
(3,722,500)
2,978,250
(787,500)
(100,000)
(173,250)
8,722,500
10,896,750
4,091,000
(200,000)
3,891,000
(200,000)
(200,000)
11,000,000
(18,000,000)
(7,000,000)
8,275,000
(19,628,500)
(11,353,500)
(250,000)
375,000
125,000
(5,750)
(150,000)
192,500
42,500
(614,250)
5,750
-
-
$
$
$
BDO Canada LLP
620,000
5,750
3,000
2,750
5,750
Page 4 of 23
SAMPLE PSAB HOSPITAL
Statement of Remeasurement Gains and Losses
2014
March 31,
Accumulated remeasurement losses at beginning of year
$
Adjustment upon adoption of PS 3450 - Financial Instruments
Unrealized gains attributable to:
Long-term restricted investments
Derivative - interest rate swap
Amounts reclassified to the statement of operations:
The accompanying notes are an integral part of these financial statements
142,500
$
-
Disposition of long-term investments
Net remeasurement gains for the year
Accumulated remeasurement gains at end of year
2013
$
(90,000)
750,000
(75,000)
250,000
25,000
(50,000)
625,000
(42,500)
142,500
767,500
$
BDO Canada LLP
142,500
Page 5 of 23
SAMPLE PSAB HOSPITAL
Notes to Financial Statements
For the year ended March 31, 2014
1.
SIGNIFICANT ACCOUNTING POLICIES
Description of
Organization
Sample PSAB Hospital (“the Hospital”), established in 1967,
provides health care services to the residents of City and
surrounding areas. The Hospital, incorporated without share
capital under the Corporations Act of Ontario, is a charitable
organization within the meaning of the Income Tax Act (Canada).
The Hospital is a not-for-profit organization and, as such, is
exempt from income taxes under the Income Tax Act (Canada).
Basis of
presentation
The financial statements of the Hospital have been prepared in
accordance with Canadian public sector accounting standards for
government not-for-profit organizations, including the 4200 series
of standards, as issued by the Public Sector Accounting Board
(“PSAB for Government NPOs”). The Sample Foundation is a
separate entity whose financial information is reported separately
from the Hospital.
Contributed
services
Volunteers contribute numerous hours to assist the Hospital in
carrying out certain charitable aspects of its service delivery
activities. The fair value of these contributed services is not
readily determinable and, as such, is not reflected in these
financial statements.
Cash and cash
equivalents
Revenue
recognition
Cash and cash equivalents includes cash on hand, deposits at call
with banks, other short-terms highly liquid investments with
original maturities of three months or less.
The Hospital follows the deferral method of accounting for
contributions, which include donations and government grants.
Under the Health Insurance Act and Regulations thereto, the
Hospital is funded primarily by the Province of Ontario in
accordance with budget arrangements established by the Ministry
of Health and Long-term Care (“MOHLTC”), and the Local Health
Integration Network (“LHIN”). The Hospital has entered into a
Hospital Service Accountability Agreement (the “H-SAA”) for fiscal
2014 with the Ministry and LHIN that sets out the rights and
obligations of the parties to the H-SAA in respect of funding
provided to the Hospital by the Ministry/LHIN. The H-SAA also sets
out the performance standards and obligations of the Hospital
that establish acceptable results for the Hospital’s performance in
a number of areas.
If the Hospital does not meet its performance standards or
obligations, the Ministry/LHIN has the right to adjust funding
received by the Hospital. The Ministry/LHIN is not required to
communicate certain funding adjustments until after the
submission of year-end data. Since this data is not submitted until
after the completion of the financial statements, the amount of
Ministry/LHIN funding received by the Hospital during the year
may be increased or decreased subsequent to year end.
BDO Canada LLP
Page 6 of 23
SAMPLE PSAB HOSPITAL
Notes to Financial Statements
For the year ended March 31, 2014
1.
SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue
recognition
(continued)
Grants approved but not received at the end of an accounting
period are accrued. Where a portion of a grant relates to a future
period, it is deferred and recognized in that subsequent period.
Unrestricted contributions are recognized as revenue when
received or receivable if the amount can be reasonably estimated
and collection is reasonably assured.
Restricted contributions for the purchase of capital assets are
deferred and amortized into revenue at a rate corresponding with
the amortization rate for the related capital assets.
Amortization of buildings is not funded by the LHIN and
accordingly the amortization of buildings has been reflected as an
undernoted item in the statement of operations with the
corresponding realization of revenue for deferred contributions.
Externally restricted investment income is accounted for as a
liability until the restrictions imposed on the income have been
met by the Hospital.
Revenue from patient services is recognized when the service is
provided.
Ancillary revenue consists of parking, food and gift shop sales and
revenue is recognized when the goods are sold and services
provided.
Inventory
Inventories are valued at the lower of cost and net realizable
value. Cost is determined on the first-in first-out basis. Inventory
consists of medical and general supplies that are used in the
Hospital’s operations and not for resale purposes.
Capital assets
Purchased capital assets are recorded at cost less accumulated
amortization. Contributed capital assets are recorded at fair value
at the date of contribution. Repairs and maintenance costs are
charged to expense. Betterments that extend the estimated life of
an asset are capitalized. When a capital asset no longer
contributes to the Hospital’s ability to provide services or the
value of future economic benefits associated with the capital asset
is less than its net book value, the carrying value of the capital
asset is reduced to reflect the decline in the asset’s value.
Construction in progress is not amortized until construction is
substantially complete and the assets are ready for use.
Capital assets are capitalized on acquisition and amortized on a
straight-line basis over their useful lives, which has been
estimated to be as follows:
Buildings and building service equipment
Operating equipment
-
20 to 40 years
3 to 20 years
BDO Canada LLP
Page 7 of 23
SAMPLE PSAB HOSPITAL
Notes to Financial Statements
For the year ended March 31, 2014
1.
SIGNIFICANT ACCOUNTING POLICIES (continued)
Retirement and
post-employment
benefits and
compensated
absences
The Hospital provides defined retirement and post-employment
benefits and compensated absences to certain employee groups.
These benefits include pension, health and dental, vesting sick
leave and non-vesting sick leave. The Hospital has adopted the
following policies with respect to accounting for these employee
benefits:
(i) The costs of post-employment future benefits are
actuarially determined using management’s best estimate
of health care costs, disability recovery rates and discount
rates. Adjustments to these costs arising from changes in
estimates and experience gains and losses are amortized
to income over the estimated average remaining service
life of the employee groups on a straight line basis. Plan
amendments, including past service costs are recognized
as an expense in the period of the plan amendment.
(ii) The costs of the multi-employer defined benefit pension
are the employer’s contributions due to the plan in the
period.
(iii) The cost of vesting and non-vesting sick leave benefits are
actuarially determined using management’s best estimate
of salary escalation, employees’ use of entitlement and
discount rates. Adjustments to these costs arising from
changes in actuarial assumption and/or experience are
recognized over the estimated average remaining service
life of the employees.
(iv) The discount rate used in the determination of the abovementioned liabilities is equal to the Hospital’s internal
rate of borrowing.
Financial
instruments
The Hospital classifies its financial instruments as either fair value
or amortized cost. The Hospital’s accounting policy for each
category is as follows:
Fair value
This category includes cash and cash equivalents, bank
indebtedness and derivatives. The Hospital has designated its
bond portfolio (restricted investments) that would otherwise be
classified into the amortized cost category at fair value as the
Hospital manages and reports performance of it on a fair value
basis. They are initially recognized at cost and subsequently
carried at fair value. Changes in fair value are recognized in the
statement of remeasurement gains and losses until they are
realized, at which time they are transferred to the statement of
operations. Changes in fair value on restricted assets are
recognized as a liability until the criterion attached to the
restrictions has been met.
BDO Canada LLP
Page 8 of 23
SAMPLE PSAB HOSPITAL
Notes to Financial Statements
For the year ended March 31, 2014
1.
SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial
instruments
(continued)
Fair value (continued)
Transaction costs related to financial instruments in the fair value
category are expensed as incurred.
Where a decline in fair value is determined to be other than
temporary, the amount of the loss is removed from accumulated
remeasurement gains and losses and recognized in the statement
of operations. On sale, the amount held in accumulated
remeasurement gains and losses associated with that instrument is
removed from net assets and recognized in the statement of
operations.
Amortized cost
This category includes accounts receivable, due from Sample
Hospital Foundation, accounts payable and accrued liabilities, and
long term debt. They are initially recognized at cost and
subsequently carried at amortized cost using the effective interest
rate method, less any impairment losses on financial assets,
except for contributions, which are initially recognized at fair
value.
Transaction costs related to financial instruments in the
amortized cost category are added to the carrying value of the
instrument.
Write-downs on financial assets in the amortized cost category are
recognized when the amount of a loss is known with sufficient
precision, and there is no realistic prospect of recovery. Financial
assets are then written down to net recoverable value with the
write-down being recognized in the statement of operations.
Management
estimates
The preparation of financial statements in conformity with PSAB
for Government NPOs requires management to make estimates
and assumptions that affect the reported amount of assets and
liabilities, the disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of
revenue and expenses during the period. Actual results could
differ from these estimates. Areas of key estimation include
determination of allowance for doubtful accounts, amortization of
capital assets and actuarial estimation of post-employment
benefits and compensated absences liabilities.
BDO Canada LLP
Page 9 of 23
SAMPLE PSAB HOSPITAL
Notes to Financial Statements
For the year ended March 31, 2014
2. FINANCIAL INSTRUMENT CLASSIFICATION
The following table provides cost and fair value information of financial instruments by category. The
maximum exposure to credit risk would be the carrying value as shown below.
Fair Value
Accounts receivable
Due from Sample Hospital Foundation
Restricted investments
Bank indebtedness
Accounts payable and accrued liab.
Long-term debt
Interest rate swap
$
$
6,467,500
4,091,000
425,000
10,983,500
Fair Value
Cash and cash equivalents
Accounts receivable
Due from Sample Hospital Foundation
Restricted investments
Accounts payable and accrued liab.
Long-term debt
Interest rate swap
$
$
5,750
6,092,500
350,000
6,448,250
2014
Amortized Cost
$
$
12,500,000
2,750,000
32,500,000
2,400,000
50,150,000
Total
$
$
2013
Amortized Cost
$
$
16,537,500
2,500,000
36,222,500
2,600,000
57,860,000
12,500,000
2,750,000
6,467,500
4,091,000
32,500,000
2,400,000
425,000
61,133,500
Total
$
$
5,750
16,537,500
2,500,000
6,092,500
36,222,500
2,600,000
350,000
64,308,250
In March 2011, the Hospital received from MOHLTC a Planning Grant of $49,000,000 to assist with
developing the Hospital’s new restructuring project. The balance of the investments is held in bonds.
These investments are restricted and expected to be used in the capital development of the new
hospital and therefore have been shown as long term.
The following table provides an analysis of financial instruments that are measured subsequent to
initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value
is observable:
- Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active
markets for identical assets or liabilities using the last bid price;
- Level 2 fair value measurements are those derived from inputs other than quoted prices included
within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices); and
- Level 3 fair value measurements are those derived from valuation techniques that include inputs for
the asset or liability that are not based on observable market data (unobservable inputs).
BDO Canada LLP
Page 10 of 23
SAMPLE PSAB HOSPITAL
Notes to Financial Statements
For the year ended March 31, 2014
2. FINANCIAL INSTRUMENT CLASSIFICATION (continued)
2014
Bank indebtedness
Restricted investments
Interest rate swap
Total
$
$
Level 1
4,091,000
4,091,000
Level 2
$
$
Level 3
6,467,500
6,467,500
$
$
425,000
425,000
$
$
Total
4,091,000
6,467,500
425,000
10,983,500
2013
Level 1
Cash and cash equivalents
Restricted investments
Interest rate swap
Total
$
$
5,750
5,750
Level 2
$
$
6,092,500
6,092,500
Level 3
$
$
350,000
350,000
Total
$
$
5,750
6,092,500
350,000
6,448,250
There were no transfers between Level 1 and Level 2 for the years ended March 31, 2014 and 2013.
There were also no transfers in or out of Level 3. For a sensitivity analysis of financial instruments
recognized in Level 3, see Note 13 – Interest rate risk, as the prevailing interest rate is the most
significant input into the fair value of the instrument.
3. SAMPLE HOSPITAL FOUNDATION
The Foundation is an independent corporation incorporated without share capital which has its own
independent Board of Directors and is a registered charity under the Income Tax Act. The Foundation
receives and maintains funds for charitable purposes, which it donates to the Hospital for the use of
operations, renovations, maintenance and equipment of the Hospital.
At March 31, 2014, the Hospital has a receivable from the Foundation of $2,750,000 (2013 $2,500,000). Total funds received from the Foundation for fiscal 2014 amounts to $2,250,000 (2013 –
$2,150,000).
BDO Canada LLP
Page 11 of 23
SAMPLE PSAB HOSPITAL
Notes to Financial Statements
For the year ended March 31, 2014
4. ACCOUNTS RECEIVABLE
2014
2013
OHIP
Ministry of Health and Long-term Care/LHIN
$
6,500,000
3,250,000
$ 10,000,000
3,500,000
Patient services
Other
950,000
1,800,000
$ 12,500,000
1,000,000
2,037,500
$ 16,537,500
5. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
2014
Ministry of Health and Long-term Care/LHIN
Trade
Wages and other accruals
$
$
2,450,000
21,000,000
9,050,000
32,500,000
BDO Canada LLP
2013
$
2,500,000
24,571,750
9,150,750
$ 36,222,500
Page 12 of 23
SAMPLE PSAB HOSPITAL
Notes to Financial Statements
For the year ended March 31, 2014
6. CAPITAL ASSETS
2014
Cost
Land
Buildings and building
service equipment
Operating equipment
Construction in progress
$
5,000,000
Accumulated
Amortization
$
-
Net Book
Value
$
5,000,000
190,100,000
135,463,500
29,000,000
80,540,000
118,225,000
-
109,560,000
17,238,500
29,000,000
$ 359,563,500
$ 198,765,000
$ 160,798,500
2013
Accumulated
Amortization
Cost
Land
Buildings and building
service equipment
Operating equipment
Construction in progress
$
5,000,000
$
189,100,000
130,463,500
17,000,000
$
341,563,500
-
Net Book
Value
$
67,165,000
117,100,000
$
184,265,000
5,000,000
121,935,000
13,363,500
17,000,000
$
157,298,500
BDO Canada LLP
Page 13 of 23
SAMPLE PSAB HOSPITAL
Notes to Financial Statements
For the year ended March 31, 2014
7. LONG-TERM DEBT AND BANK INDEBTEDNESS
The long-term debt outstanding at year-end is owed to a major financial institution and is party to an
interest rate swap derivative, which swaps the variable rate inherent in the debt for a fixed rate of
5.85%. The derivative matures simultaneously with the long-term debt.
2014
Loan bearing interest at prime minus 25bps, repayable in monthly
instalments of $16,667 excluding interest through 2027. This
loan is secured by a general security agreement on specified
assets related to the debt
$ 2,400,000
Less: amounts scheduled for repayment within one year
(200,000)
$ 2,200,000
2015
$
2016
2017
2018
2019
Thereafter
Total
$
2013
$ 2,600,000
(200,000)
$ 2,400,000
200,000
200,000
200,000
200,000
200,000
1,400,000
2,400,000
The Hospital has a line of credit to a maximum of $5,000,000. It bears interest at prime plus 1.00%
and is unsecured. At year end the hospital has drawn $4,491,000 (2013 - NIL) on this line of credit.
BDO Canada LLP
Page 14 of 23
SAMPLE PSAB HOSPITAL
Notes to Financial Statements
For the year ended March 31, 2014
8. POST-EMPLOYMENT BENEFITS AND COMPENSATED ABSENCES LIABILITY
The following tables outline the components of the Hospital’s post-employment benefits and
compensated absences liabilities and the related expenses.
2014
Post-employment Non-vesting sick
Benefits
leave
Accrued employee future
benefits obligations
$
Value of plan assets
Unamortized actuarial
losses
Total liability
3,200,000
$
1,300,000
(140,000)
$
Vesting sick
leave
$
775,000 $
-
(225,000)
2,835,000 $
Total liability
-
(40,000)
1,260,000 $
(170,000)
605,000 $
5,275,000
(140,000)
(435,000)
4,700,000
2013
Post-employment Non-vesting sick
Benefits
leave
Accrued employee future
benefits obligations
$
Value of plan assets
Unamortized actuarial
losses
Total liability
3,225,000
$
(150,000)
$
(245,000)
2,830,000 $
1,200,000
Vesting sick
leave
$
-
(45,000)
1,155,000 $
Total liability
780,000 $
-
(165,000)
615,000 $
BDO Canada LLP
5,205,000
(150,000)
(455,000)
4,600,000
Page 15 of 23
SAMPLE PSAB HOSPITAL
Notes to Financial Statements
For the year ended March 31, 2014
8. POST-EMPLOYMENT BENEFITS AND COMPENSATED ABSENCES LIABILITY (continued)
2014
Current year
benefit cost
Post-employment
Benefits
Non-vesting sick
leave
$
$
255,000
825,000
Vesting sick
leave
$
Total expense
110,000 $
1,190,000
Interest on accrued
benefit obligation
325,000
57,500
55,000
437,500
Plan amendments
250,000
-
-
250,000
Amortized actuarial
losses
Total expense
25,000
855,000
18,000
900,500
17,250
182,250
60,250
1,937,750
Current year
benefit cost
$
$
$
Post-employment
Benefits
2013
Non-vesting sick
leave
Vesting sick leave
$
$
235,000
800,000
$
$
Total expense
100,000 $
1,135,000
Interest on accrued
benefit obligation
250,000
55,000
50,000
355,000
Plan amendments
200,000
-
-
200,000
Amortized actuarial
losses
Total expense
21,400
706,400
17,300
872,300
16,800
166,800
55,500
1,745,500
$
$
$
$
Above amounts exclude pension contributions to the Hospitals of Ontario Pension Plan (“HOOP”), a
multi-employer plan, described below.
BDO Canada LLP
Page 16 of 23
SAMPLE PSAB HOSPITAL
Notes to Financial Statements
For the year ended March 31, 2014
8. POST-EMPLOYMENT BENEFITS AND COMPENSATED ABSENCES LIABILITY (continued)
Retirement Benefits
HOOP Pension Plan
Substantially all of the full-time employees and some of the part-time employees are members of
HOOP. The plan is a multi-employer plan and therefore the Hospital’s contributions are accounted for
as if the plan were a defined contribution plan with the Hospital’s contributions being expensed in the
period they come due. Contributions made to the plan during the year by the Hospital and employees
amounted to $4,600,000 (2013 - $4,500,000) and $4,200,000 (2013 - $4,100,000) respectively.
Post-Employment Benefits
The Hospital extends post employment life insurance, health and dental benefits to certain employee
groups subsequent to their retirement. The Hospital recognizes these benefits as they are earned
during the employees’ tenure of service. The related benefit liability was determined by an actuarial
valuation study.
The major actuarial assumptions employed for the valuations are as follows:
a)
Discount rate
The present value as at March 31, 2014 of the future benefits was determined using a discount
rate of 4.10% (2013 – 4%).
b)
Drug Costs
Drug costs were assumed to increase at a 10.25% rate for 2014 (2013 – 10.5%) and decrease
proportionately thereafter to an ultimate rate of 4.75% in 2026 for fiscal 2014 (2013 – 4.5%).
c)
Hospital and other medical
Hospital and other medical costs were assumed to increase at 4.5% per annum in 2014 (2013 –
4.5%).
Medical premium increases were assumed to increase at 8.15% per annum in 2014 (2013 – 8.0%)
and decrease proportionately thereafter to an ultimate rate of 4.5% in 2026 for fiscal 2014
(2013 – 4.5%).
d)
Dental costs
Dental costs were assumed to increase at 7.5% per annum in 2014 (2013 - 7.25%) and decrease
proportionately thereafter to an ultimate rate of 4.5% in 2023 for fiscal 2014 benefits cost (2013
– 4.5%).
BDO Canada LLP
Page 17 of 23
SAMPLE PSAB HOSPITAL
Notes to Financial Statements
For the year ended March 31, 2014
8. POST-EMPLOYMENT BENEFITS AND COMPENSATED ABSENCES LIABILITY (continued)
Compensated Absences
Vesting and Non-Vesting Sick Leave
The Hospital allocates to certain employee groups a specified number of days each year for use as
compensated absences in the event of illness or injury. Employees are permitted to accumulate their
unused allocation each year, up to the allowable maximum provided in their employment agreements.
Accumulated days may be used in future years to the extent that the employees’ illness or injury
exceeds the current year’s allocation of days. Sick days are paid out at the salary in effect at the time
of usage. The related benefit liability was determined by an actuarial valuation study.
For certain employee groups these sick days vest and are eligible for cash reimbursement upon
retirement up to a prescribed maximum described in their employment agreements.
The assumptions used in the valuation of vesting and non-vesting sick leave are the Hospital’s best
estimates of expected rates of:
2014
Wage and salary escalation
Discount rate
2013
1.85%
4.10%
1.75%
4.00%
The probability that the employee will use more sick days than the annual accrual and the excess
number of sick days used are within ranges of 0% to 39.2% and 0 to 19.3 days respectively for age
groups ranging from 20 and under to 65 and over in bands of 5 years.
9. DEFERRED CONTRIBUTIONS
Deferred contributions represent unspent externally restricted funding that has been received and
relates to a subsequent year. Changes in the contributions deferred to future periods are as follows:
2014
2013
Balance, beginning of year
Less amounts recognized as revenue in the year
Add amounts received during the year
$
7,450,000
(1,750,000)
1,900,000
$ 7,250,000
(1,650,000)
1,850,000
Balance, end of year
$
7,600,000
$ 7,450,000
BDO Canada LLP
Page 18 of 23
SAMPLE PSAB HOSPITAL
Notes to Financial Statements
For the year ended March 31, 2014
9. DEFERRED CONTRIBUTIONS (continued)
Deferred contributions are comprised of:
2014
Local health initiatives
Children's nutrition
Other
$
Less: current portion
$
7,065,000
425,000
110,000
7,600,000
350,000
7,250,000
2013
$
6,950,000
400,000
100,000
7,450,000
350,000
7,100,000
$
10. DEFERRED CAPITAL CONTRIBUTIONS
Deferred capital contributions represent the unamortized amount and unspent amount of donations
and grants received for the purchase of capital assets. The amortization of capital contributions is
recorded as revenue in the statement of operations.
2014
2013
Balance, beginning of year
Less: amortization of deferred capital contributions
Add: contributions received for capital purposes
$
82,900,000
(6,000,000)
11,000,000
$ 80,225,000
(5,600,000)
8,275,000
Balance, end of year
$
87,900,000
$ 82,900,000
As at March 31, 2014 there was $2,000,000 (2013 - $1,000,000) of deferred capital contributions
received which were not spent.
11. INVESTMENT IN CAPITAL ASSETS
A.
Investment in capital assets represents the following:
2014
Capital assets
Less amounts financed by:
Accounts payable and accrued liabilities (Note 5)
Long-term debt (Note 7)
Deferred capital contributions - spent (Note 10)
Balance, end of year
$ 160,798,500
$
3,400,000
2,400,000
85,900,000
69,098,500
2013
$
157,298,500
$
2,400,000
2,600,000
81,900,000
70,398,500
BDO Canada LLP
Page 19 of 23
SAMPLE PSAB HOSPITAL
Notes to Financial Statements
For the year ended March 31, 2014
11.
B.
INVESTED IN CAPITAL ASSETS (continued)
Change in net assets invested in capital assets is calculated as follows:
2014
Deficiency of revenues over expenditures:
Amortization of deferred capital contributions
related to capital assets
Amortization of capital assets
$
Net change in investment in capital assets:
Purchase of capital assets
Amounts funded by deferred capital contributions
Accounts payable and accrued liabilities
Repayment of term debt
$
6,000,000
(14,500,000)
2013
$
5,600,000
(13,200,000)
(8,500,000)
(7,600,000)
18,000,000
(10,000,000)
(1,000,000)
200,000
19,628,500
(6,975,000)
(2,400,000)
200,000
7,200,000
(1,300,000)
10,453,500
2,853,500
$
12. CONTINGENCIES AND COMMITMENTS
The Hospital has been named defendant in certain legal actions. The final liability, if any, of these
claims is indeterminable as the Hospital has established defense actions and further, in the opinion of
legal counsel and the Hospital's insurance adjustors, should any claim be successful, it would be
subject to material coverage by the hospital's policies of insurance.
The Hospital participates in the Healthcare Insurance Reciprocal of Canada, a pooling of the public
liability insurance risks of its hospital members. Members of the pool pay annual premiums, which are
actuarially determined. Members are subject to assessment for losses, if any, experienced by the pool
for the year in which they were members. No assessments have been made to March 31, 2014, with
respect to claims.
The Hospital is committed to estimated minimum annual payments under operating lease agreements
over the next two years as follows:
Equipment and
services
2015
2016
$
1,200,000
1,300,000
BDO Canada LLP
Page 20 of 23
SAMPLE PSAB HOSPITAL
Notes to Financial Statements
For the year ended March 31, 2014
13. FINANCIAL INSTRUMENT RISK MANAGEMENT
Credit risk
Credit risk is the risk of financial loss to the Hospital if a debtor fails to make payments of interest and
principal when due. The Hospital is exposed to this risk relating to its cash and cash equivalents, debt
holdings in its investment portfolio, due from Sample Hospital Foundation and accounts receivable.
The Hospital holds its cash accounts with federally regulated chartered banks who are insured by the
Canadian Deposit Insurance Corporation. In the event of default, the Hospital’s cash accounts are
insured up to $300,000 (2013 - $300,000).
The Hospital’s investment policy operates within the constraints of the investment guidelines issued by
the MOHLTC in relation to the funding agreements described in Note 2 and puts limits on the
investment portfolio including portfolio composition limits, issuer type limits, bond quality limits,
aggregate issuer limits, corporate sector limits and general guidelines for geographic exposure.
The maximum exposure to investment credit risk is outlined in Note 2.
Accounts receivable are primarily due from OHIP, the Ministry of Health and Long-Term Care and
patients. Credit risk is mitigated by the financial solvency of the provincial government and the highly
diversified nature of the patient population.
The Hospital measures its exposure to credit risk based on how long the amounts have been
outstanding. An impairment allowance is set up based on the Hospital’s historical experience regarding
collections. The amounts outstanding at year end were as follows:
Past Due
As at March 31, 2014
Total
OHIP
$
6,500,000
Current
$
1 - 30 days
6,500,000
$
-
31 - 60 days
$
61 - 90 days
-
$
-
91 - 120 days
$
-
MOH/LHIN
3,250,000
3,250,000
-
-
-
-
Patient services
1,135,000
450,000
25,000
75,000
85,000
500,000
Other
1,800,000
1,800,000
-
-
-
-
12,685,000
12,000,000
25,000
75,000
85,000
-
-
-
-
Gross receivables
Less: impairment allowances
Net receivables
(185,000)
$
25,000
$
75,000
$ 12,500,000
$ 12,000,000
Total
Current
$ 10,000,000
$ 10,000,000
MOH/LHIN
3,500,000
3,500,000
-
-
-
-
Patient services
1,175,000
600,000
25,000
100,000
100,000
350,000
Other
Gross receivables
Less: impairment allowances
Net receivables
85,000
$
315,000
Past Due
As at March 31, 2013
OHIP
$
500,000
(185,000)
1 - 30 days
$
-
31 - 60 days
$
-
61 - 90 days
$
-
91 - 120 days
$
-
2,037,500
2,037,500
-
-
-
-
16,712,500
16,137,500
25,000
100,000
100,000
350,000
(175,000)
$ 16,537,500
$ 16,137,500
$
25,000
$
100,000
$
100,000
(175,000)
$
175,000
The amounts aged greater than 90 days owing from patients that have not had a corresponding
impairment allowance setup against them are collectible based on the Hospital’s past experience.
Management has reviewed the individual balances and based on the credit quality of the debtors and
their past history of payment.
BDO Canada LLP
Page 21 of 23
SAMPLE PSAB HOSPITAL
Notes to Financial Statements
For the year ended March 31, 2014
13. FINANCIAL INSTRUMENT RISK MANAGEMENT (continued)
Credit risk (continued)
There have been no significant changes from the previous year in the exposure to risk or policies,
procedures and methods used to measure the risk.
Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate as
a result of market factors. Market factors include three types of risk: interest rate risk, currency risk
and equity risk. The Hospital is not exposed to significant currency or equity risk as it does not transact
materially in foreign currency or hold equity financial instruments.
There have been no significant changes from the previous year in the exposure to risk or policies,
procedures and methods used to measure the risk.
Interest rate risk
Interest rate risk is the potential for financial loss caused by fluctuations in fair value or future cash
flows of financial instruments because of changes in market interest rates.
The Hospital is exposed to this risk through its interest bearing investments and term debt. The
Hospital mitigates interest rate risk on its long-term debt through a derivative financial instrument
that exchanges the variable rate inherent in the term debt for a fixed rate (see Note 7). Therefore,
fluctuations in market interest rates would not impact future cash flows and operations relating to the
term debt.
At March 31, 2014, a 1% fluctuation in interest rates, with all other variables held constant, would have
an estimated impact on the fair value of bonds and the interest rate swap of $875,000 and $200,000
respectively (2013 - $850,000 and $225,000).
There have been no significant changes from the previous year in the exposure to risk or policies,
procedures and methods used to measure the risk.
Liquidity risk
Liquidity risk is the risk that the Hospital will not be able to meet all cash outflow obligations as they
come due. The Hospital mitigates this risk by monitoring cash activities and expected outflows through
extensive budgeting and maintaining investments that may be converted to cash in the near-term if
unexpected cash outflows arise. The follow table sets out the contractual maturities (representing
undiscounted contractual cash-flows of financial liabilities):
BDO Canada LLP
Page 22 of 23
SAMPLE PSAB HOSPITAL
Notes to Financial Statements
For the year ended March 31, 2014
13. FINANCIAL INSTRUMENT RISK MANAGEMENT (continued)
Liquidity risk (continued)
Accounts payable
Long-term debt
Within
6 months
$ 22,500,000
100,000
$ 22,600,000
2014
6 months to
1 year
1 - 5 years
$
10,000,000 $
100,000
800,000
$
10,100,000 $
800,000
> 5 years
$
1,400,000
1,400,000
$
2013
Accounts payable
Long-term debt
Within
6 months
$ 25,222,500
100,000
$ 25,322,500
6 months to
1 year
$
11,000,000
100,000
$
11,100,000
1 - 5 years
800,000
$
800,000
$
> 5 years
$
$
1,600,000
1,600,000
Maturity profile of bonds held is as follows:
Carrying value
Percent of Total
Carrying value
Percent of Total
$
$
Within
1 year
3,967,500 $
61%
2 to 5
years
2,500,000 $
39%
Within
1 year
3,000,000 $
49%
2 to 5
years
3,092,500 $
51%
2014
6 to 10
years
Over 10
years
-
$
Total
$ 6,467,500
-
0%
0%
2013
6 to 10
years
Over 10
years
-
$
Total
$ 6,092,500
-
0%
0%
Derivative financial liabilities mature as described in Note 7.
There have been no significant changes from the previous year in the exposure to risk or policies,
procedures and methods used to measure the risk.
BDO Canada LLP
Page 23 of 23
Mississauga
National
Erica Teklits
Partner
National Leader – Not-for-Profit Sector
905 272 7809
eteklits@bdo.ca
Armand Capisciolto
Partner
National Accounting Standards
416 369 6937
acapisciolto@bdo.ca
To locate a BDO representative in your area, please visit www.bdo.ca