2010-03-31 - Charity Focus

F I N A N C I A L S T A T E M E N T S 

For 

CAREFOR HEALTH & COMMUNITY SERVICES 

For year ended 

MARCH 31, 2011 

Welch LLP 

An Independent Member of BKR International

Welch LLP 

INDEPENDENT AUDITOR'S REPORT 

To the Members of 


We have audited the accompanying financial statements of Carefor Health & Community Services, which 

comprise the statement of financial position as at March 31, 2011 and the statements of operations, 

changes in net assets 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 from material misstatement. 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in 

the financial statements. The procedures selected depend on the 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 presentation of the financial statements in order to design audit procedures that are 

appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of 

the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies 

used and the reasonableness of accounting estimates made by management, as well as evaluating the 

overall presentation of the financial statements. 

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for 

our audit opinion. 

Opinion 

In our opinion, the financial statements present fairly, in all material respects, the financial position of the 

organization as at March 31, 2011 and the results of its operations, the changes in its net assets and its 

cash flows for the year then ended in accordance with Canadian generally accepted accounting principles. 

Chartered Accountants 

Licensed Public Accountants 

Ottawa, Ontario 

June 22, 2011 

Welch LLP – Chartered Accountants 

1200-151 Slater Street, Ottawa, ON K1P 5H3 

T: 613 236 9191 F: 613 236 8258 W: www.welchllp.com 

An Independent Member of BKR International 

Page 1 of 12


STATEMENT OF FINANCIAL POSITION 

MARCH 31, 2011 

ASSETS 

2011 2010 

CURRENT ASSETS 

Cash $ 1,739,277 $ 1,546,108 

Accounts receivable 1,966,511 1,252,048 

Prepaid expenses 287,319 165,739 

3,993,107 2,963,895 

INVESTMENTS (note 5) 4,563,014 4,347,782 

CAPITAL ASSETS (note 7) 5,592,673 5,894,704 

ACCRUED PENSION BENEFIT ASSET (note 8) 1,381,800 948,000 

LIABILITIES AND NET ASSETS 

$ 15,530,594 $ 14,154,381 

CURRENT LIABILITIES 

Accounts payable and accrued liabilities $ 3,068,986 $ 3,115,978 

DEFERRED CONTRIBUTIONS (note 10) 565,203 375,414 

DEFERRED CONTRIBUTIONS RELATED TO 

CAPITAL ASSETS (note 11) 3,282,051 3,153,983 

NET ASSETS 

Unrestricted 5,180,571 3,608,211 

Invested in capital assets - internally restricted 2,310,622 2,740,721 

Endowment (note 12) 200,000 200,000 

Internally restricted (note 13) 923,161 960,074 

8,614,354 7,509,006 

$ 15,530,594 $ 14,154,381 

Approved: 

MARGARET DUNN 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Director 

KEN JOHNSON 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Director 

(See accompanying notes) 

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STATEMENT OF CHANGES IN NET ASSETS 

YEAR ENDED MARCH 31, 2011 

Invested 

in capital 

assets 

- internally Internally Total Total 

Unrestricted restricted Endowment restricted 2011 2010 

(note 12) (note 13) 

Balance, beginning of year $ 3,608,211 $ 2,740,721 $ 200,000 $ 960,074 $ 7,509,006 $ 6,413,366 

Net revenue (expenses) 1,418,969 (313,621) - 1,105,348 1,095,640 

Release of internally imposed 

restrictions 36,913 (36,913) 

Purchase of capital assets from 

unrestricted funds (62,016) 62,016 

Receipt of funds attributable to 

capital assets purchased in a 

prior year 178,494 (178,494) 

Balance, end of year $ 5,180,571 $ 2,310,622 $ 200,000 $ 923,161 $ 8,614,354 $ 7,509,006 


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STATEMENT OF OPERATIONS 



Revenue 

Fees for services rendered $ 25,236,924 $ 25,618,989 

Investment income 41,856 54,405 

Grants: 

Program funding - Champlain Local Health Integration Network 3,473,629 3,239,566 

Program funding - Going Home and GEM projects 1,525,515 1,247,864 

Other 295,282 325,933 

Support from the general public: 

United Way 29,000 30,125 

Donations 528,475 622,680 

Fund raising activities 499,182 127,499 

Amortization of deferred contributions (note 11) 221,677 115,703 

Other 276,408 212,068 

32,127,948 31,594,832 

Expenses 

Salaries and benefits 24,123,524 23,818,213 

Transportation 994,833 926,777 

Direct program supplies and expense 2,333,446 1,782,042 

Occupancy cost 1,081,849 1,104,543 

Office and general expense 2,005,769 2,514,400 

Fund raising activities 122,672 236,319 

Special projects - 26,000 

Amortization 535,298 457,261 

31,197,391 30,865,555 

Net revenue before change in fair value of investments 930,557 729,277 

Change in fair value of investments (note 6) 174,791 366,363 

Net revenue $ 1,105,348 $ 1,095,640 


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STATEMENT OF CASH FLOWS 



CASH PROVIDED (USED) 

Operations 

Net revenue $ 1,105,348 $ 1,095,640 

Items not affecting cash: 

Amortization of deferred contributions related to capital assets (221,677) (115,703) 

Amortization of capital assets 535,298 457,261 

Deferred contributions recognized as revenue in the year (680,747) (243,871) 

Unrealized gains arising in the year (174,791) (366,363) 

Excess of pension funding over current expense (433,800) (825,400) 

129,631 1,564 

Cash provided from (used for) changes in the level of: 

Accounts receivable (714,463) (90,904) 

Prepaid expenses (121,580) (3,982) 

Accounts payable and accrued liabilities (46,992) (431,153) 

(753,404) (524,475) 

Investing 

Decrease (increase) in investments (40,441) 1,922,290 

Purchase of capital assets (233,267) (2,630,059) 

(273,708) (707,769) 

Financing 

Deferred contributions received 870,536 920,981 

Deferred contributions received related to capital assets 349,745 20,956 

1,220,281 941,937 

INCREASE (DECREASE) IN CASH 193,169 (290,307) 

CASH, beginning of year 1,546,108 1,836,415 

CASH, end of year $ 1,739,277 $ 1,546,108 


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NOTES TO FINANCIAL STATEMENTS 


1. PURPOSE OF THE ORGANIZATION 

Carefor Health & Community Services has been providing community based health services since 1898 

through its predecessor organizations. The organization was formed by Letters Patent of Amalgamation 

on April 1, 2007, under the laws of the Province of Ontario, as a non-profit charitable organization 

without share capital. It is registered with Canada Revenue Agency as a charity and, as such, is not 

subject to income taxes. 

2. SIGNIFICANT ACCOUNTING POLICIES 

(a) 

Revenue recognition 

Carefor Health & Community Services follows the deferral method of accounting for contributions. 

Restricted contributions are recognized as revenue in the year in which the related expenses are 

incurred. Unrestricted contributions are recognized as revenue when received or receivable if the 

amount to be received can be reasonably estimated and collection is reasonably assured. Bequests and 

pledges are not recognized until funds are received. Endowment contributions are recognized as direct 

increases in the endowment fund balance. 

Restricted investment income in respect of the endowment fund is recognized as revenue in the year in 

which the related expenses are incurred. Unrestricted investment income is recognized as revenue 

when earned. 

Revenue from fees for services rendered is recognized when the service is provided. 

(b) 

Investments 

The organization designates its portfolio investments as held for trading and records them at their fair 

value. The organization classifies its investment in a private company that possesses the characteristics 

of debt instruments as held to maturity and records this investment at amortized cost using the effective 

interest method. 

Fair values of fixed income securities and equities are determined by reference to published price 

quotations in an active market at year-end. Term deposits and other short-term debt instruments are 

stated at cost, which together with accrued interest income approximates fair value given the short-term 

nature of these investments. Since the investment in a private company is not a publicly traded entity, 

the fair value of this investment is not determinable. The terms and conditions of this investment are 

disclosed in note 5. 

The purchase and sale of investments are accounted for using settlement date accounting. 

Investment management fees are expensed as incurred. 

(c) 

Capital assets and amortization 

Capital assets are recorded at cost. Amortization is provided on a straight-line basis over ten to twentyfive 

years in the case of buildings, five years in the case of furniture and equipment, three years in the 

case of computer equipment, two years in the case of computer software, five years in the case of 

automotive equipment, and over the life of the lease in the case of leasehold improvements. In the year 

of acquisition, amortization is provided for at one-half the annual amount. 

(d) 

Use of estimates 

The preparation of financial statements in conformity with Canadian generally accepted accounting 

principles requires management to make estimates and assumptions that affect the reported amounts of 

assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial 

statements and the reported amounts of revenues and expenses during the reporting period. Actual 

results could differ from those estimates. 

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NOTES TO FINANCIAL STATEMENTS - Cont'd. 


2. SIGNIFICANT ACCOUNTING POLICIES - Cont'd. 

(e) 

Contributed services and materials 

A substantial number of volunteers contribute a significant amount of their time each year. Because of 

the difficulty of determining the fair value, contributed services are not recognized in the financial 

statements. 

The value of donated materials is recorded in the financial statements when the fair value of the 

materials can accurately be determined. No such amounts have been recognized in the year. 

(f) 

Employee pension plan 

The organization has a defined benefit pension plan, and has adopted the following policies: 

- The cost of the pension benefits is actuarially determined using the projected unit 

credit actuarial cost method. 

- For the purpose of calculating the expected return on plan assets, those assets are 

valued at fair value. 

- Past service costs arising from plan initiation are amortized straight-line over the 

average remaining service period of active employees. 

- The excess of the net accumulated actuarial gains (losses) over 10% of the greater 

of the accrued benefit obligation and the fair value of plan assets is amortized over 

the average remaining service period of active employees, currently 6.75 years. 

3. FUTURE ACCOUNTING STANDARDS FOR THE NOT-FOR-PROFIT SECTOR 

The Accounting and Standards Board of the Canadian Institute of Chartered Accountants recently 

approved a financial reporting framework designed specifically to meet the needs of the users of 

financial statements prepared by not-for-profit organizations. Not-for-profit organizations are also given 

the option to adopt International Financial Reporting Standards (IFRS) instead of the new not-for-profit 

accounting standards. One of these new frameworks must be applied by the organization by its March 

31, 2013 fiscal year-end and the organization is permitted to adopt these standards earlier, if desired. 

Management is currently evaluating the impact of these new reporting frameworks on their financial 

statements. 

4. FINANCIAL INSTRUMENTS 

The organization's cash and portfolio investments are designated as held-for-trading and are measured 

at fair value. The investment in a private company is classified as held to maturity, and along with 

accounts receivable which are classified as loans and receivables, are measured at amortized cost. The 

organization's accounts payable and accrued liabilities are classified as other financial liabilities and are 

measured at amortized cost. The fair value of the organization's accounts receivable, accounts payable 

and accrued liabilities approximate their carrying value due to their short term nature. The fair value of 

the organization's accrued benefit pension asset cannot practically be determined because there is no 

active market for this type of asset. Unless disclosed elsewhere in the notes to the financial statements, 

it is management's opinion that the organization is not exposed to significant interest rate, currency or 

credit risks arising from these financial instruments. 

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5. INVESTMENTS 

Investments held for trading 


Fair 

Fair 

value Cost value Cost 

Cash held for reinvestment $ 25,617 $ 25,617 $ 29,847 $ 29,847 

Fixed income 255,651 250,000 250,234 250,000 

Deposit notes 2,300,699 2,454,661 2,260,476 2,458,252 

Canadian equities 1,415,387 1,373,457 1,283,818 1,336,651 

U.S. and international equities 424,089 404,662 386,971 395,882 

Investments held to maturity 

4,421,443 $ 4,508,397 4,211,346 $ 4,470,632 

Amortized 

Amortized 

cost 

cost 

Shares in private company 141,571 136,436 

$ 4,563,014 $ 4,347,782 

During a prior year shares in a private company were donated to the organization and recorded at their fair 

value at the time the donation was made. As per the terms of the agreement, these shares are redeemable 

by the organization for $180,000 at September 22, 2017 and cannot be redeemed before this date. Income 

from this investment of $5,135 (2010 - $4,949) is included in investment income on the statement of 

operations. 

Investments are managed by investment managers who are under the direction of the Finance, Human 

Resources and Risk Management Committee reporting to the Board of Directors. Investments include 

equity securities, deposit notes, and fixed income securities. Equity securities consist of common and 

preferred shares of publicly traded corporations, publicly traded income trust units, or mutual funds investing 

primarily in equity securities. Deposit notes guarantee the repayment of principal by maturity, which varies 

from October 2013 to April 2018, plus indeterminate income returns based on the performance of certain 

equity and other securities to which they are linked. Fixed income securities may consist of term deposits 

with Canadian Chartered Banks, government and commercial bonds of Canadian entities, and short term 

commercial paper. The fixed income securities have an effective interest rate of 1.7% and mature in 

October 2011. 

The organization has an investment policy which requires that at least 55% of the organization's investment 

portfolio be invested in a combination of fixed income securities and principal-protected deposit notes, with 

a target of 60%. 

Interest rate risk 

The organization relies on varying maturity dates and terms to maturity to manage the interest rate risk 

exposure of its fixed income securities. 

Currency risk 

The organization's U.S. and international equities are denominated in foreign currencies. The organization 

minimizes its currency risk exposure by limiting U.S. and international equities to between 25% and 35% of 

the total portfolio, with a target of 30%. 

Credit and market risk 

Risk and volatility of investment returns are mitigated through diversification of investments in different 

countries, business sectors and corporation sizes. 

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6. CHANGE IN FAIR VALUE OF INVESTMENTS 


Adjustment to carrying value of held for trading investments $ 172,331 $ 386,324 

Less realized losses (gains) (2,460) 19,961 

Change in fair value of investments during year $ 174,791 $ 366,363 

7. CAPITAL ASSETS 


Accumulated 

Accumulated 

Cost amortization Cost amortization 

Land $ 345,030 $ - $ 345,030 $ - 

Buildings 6,071,156 1,636,840 6,060,095 1,383,509 

Furniture and equipment 1,473,622 941,503 1,392,030 770,119 

Computer equipment 871,486 819,593 859,610 761,528 

Automotive equipment 525,655 327,351 396,916 278,481 

Leasehold improvements 47,577 16,566 147,815 113,155 

9,334,526 $ 3,741,853 9,201,496 $ 3,306,792 

Accumulated amortization 3,741,853 3,306,792 

8. EMPLOYEE BENEFITS 

$ 5,592,673 $ 5,894,704 

The organization has a defined benefit pension plan which provides benefits to employees based on 

years of service and best consecutive five-year average earnings. The Carefor Health & Community 

Services Pension Plan (the Carefor Plan) mirrors the benefits previously provided to employees under 

the VON Canada Pension Plan prior to October 16, 2006. Benefits payable under the Carefor Plan are 

calculated including credit for service and earnings prior to October 16, 2006 under the VON Canada 

Pension Plan, less any benefits payable under that plan. 

The last actuarial valuation of the Carefor Plan occurred as of September 30, 2009 and showed an 

unfunded liability of $1,286,000 on a going concern basis. The next actuarial valuation for funding 

purposes will be performed as at September 30, 2012. The following actuarial calculations are based on 

projections to March 31, 2011: 


Accrued benefit obligation $ 7,961,900 $ 6,592,000 

Fair market value of plan assets (61% equity securities, 

37% debt securities, 2% other) 7,236,500 5,137,700 

Funded status - plan deficit 725,400 1,454,300 

Balance of unamortized amounts 2,039,800 2,342,400 

Accrued benefit asset $ 1,314,400 $ 888,100 

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8. EMPLOYEE BENEFITS - Cont'd. 

The accrued benefit asset is included in the organization's balance sheet as follows: 

Accrued pension benefit asset $ 1,381,800 $ 948,000 

Accounts payable and accrued liabilities (67,400) (59,900) 

The significant actuarial assumptions in measuring the 

organization's accrued pension benefit asset are as follows: 

$ 1,314,400 $ 888,100 


Discount rate 5.75 % 6.00% 

Expected long-term rate of return on plan assets 6.00 % 6.00% 

Rate of compensation increase 3.00 % 3.00% 

Other information about the organization's defined benefit plan is as follows: 

Employer contributions $ 1,049,700 $ 1,255,500 

Employee contributions 909,600 870,200 

Benefits paid 237,800 123,900 

Current year's expense 615,900 430,100 

9. AVAILABLE LINE OF CREDIT 

The organization has a credit facility available of up to $500,000, which would bear interest at prime plus 

0.5% if drawn upon and is secured by a general security agreement. No balance is outstanding at March 

31, 2011. 

10. DEFERRED CONTRIBUTIONS 

Deferred contributions relate to various grants and funding received for operating expenses but not 

recognized as revenue until related expenses are incurred, as well as externally restricted donations and 

fundraising. Changes in the deferred contributions balance are as follows: 


Balance, beginning of year $ 375,414 $ 883,464 

Contributions received in year 870,536 920,981 

Less amount recognized as revenue in the year (680,747) (243,871) 

Less amount invested in capital assets - (1,185,160) 

Balance, end of year $ 565,203 $ 375,414 

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11. DEFERRED CONTRIBUTIONS RELATED TO CAPITAL ASSETS 


Balance, beginning of year $ 3,153,983 $ 2,063,570 

Funding received for current year capital asset purchases 171,251 20,956 

Funding received for prior year capital asset purchases 178,494 - 

Restricted contributions invested in capital assets - 1,185,160 

Less amount amortized to revenue in the year (221,677) (115,703) 

Balance, end of year $ 3,282,051 $ 3,153,983 

12. ENDOWMENT 

The organization holds the following endowment contribution invested to provide revenue for purchasing 

medical equipment and providing education and training in "high tech" equipment for the visiting nursing 

program: 


Evelyn Smith Endowment Fund $ 200,000 $ 200,000 

No encroachment on capital is permitted. 

13. INTERNALLY RESTRICTED NET ASSETS 

Internally restricted net assets are net assets that have been restricted by the board of directors for 

various specific purposes and are not available for other purposes without approval. 

14. COMMITMENTS 

a) The organization has two leases on premises expiring January 31, 2014 and September 30, 2019. 

The estimated minimum payments (excluding sales taxes) for these leases in each fiscal year are 

as follows: 

2012 $ 336,559 

2013 336,559 

2014 326,396 

2015 275,583 

2016 275,583 

2017 through 2019 964,541 

b) The organization leases the land for Hospice Cornwall from The Trustees of St. Matthew's 

Evangelical Lutheran Church at Cornwall for $1 per year until 2048. 

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15. ECONOMIC DEPENDENCE 

Approximately 76% (2010 - 78%) of the organization's service revenues are received from the 

Champlain Community Care Access Centre, under contracts expiring beginning June 30, 2012. 

16. SUBSEQUENT EVENT 

An agreement was reached in a prior year with VON Canada regarding the transfer of past service 

assets and liabilities from the VON Canada Pension Plan to the Carefor Pension Plan (see note 8) for 

the organization's current and former employees that are members of the VON Canada Pension Plan. 

The transfer has not been approved by the Superintendent of the Financial Services Commission of 

Ontario (FSCO), and the amount of the past service assets and liabilities to be transferred has not been 

determined. Based on values as at September 30, 2009, management estimates that transferring past 

service liabilities and assets of current and former employees of Carefor would increase the going 

concern unfunded deficit of the Carefor Pension Plan by approximately $8.9 million. Under an 

agreement with FSCO, Carefor began making additional contributions of $46,700 monthly, effective 

January 2011, into the Carefor Pension Plan towards Carefor's portion of the solvency deficit of the VON 

Canada Plan, estimated to be $2.8 million. These figures will be updated once the transfer has actually 

taken place, which is expected to occur within the next fiscal year. The increase in the going concern 

unfunded deficit would increase the pension expense to be recognized over the average remaining 

service life of active employees (currently 6.75 years) beginning in the year following the fiscal year in 

which the transfer occurs. A solvency deficit requires the organization to fund the deficit with payments in 

excess of the current employer cost over a maximum of five years, which will not affect income directly 

but will reduce the going concern unfunded deficit. 

17. CAPITAL DISCLOSURES 

The organization defines capital as its net assets and its externally restricted contributions which are 

classified as deferred contributions in the statement of financial position. The organization’s objectives 

with respect to managing capital are to comply with externally imposed restrictions and to hold sufficient 

unrestricted net assets to fund ongoing operations. The organization monitors its capital requirements 

and objectives through its budgeting process, its financial statement review process and reviews of the 

terms and conditions contained in its funding agreements. The external restrictions imposed on these 

contributions are disclosed in notes 10, 11 and 12. Management believes that the organization has 

adhered to all externally imposed restrictions. 

18. COMPARATIVE FIGURES 

Comparative figures have been reclassified where necessary to conform to the presentation adopted for 

the current year. 

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2010-03-31 - Charity Focus

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