Halton Healthcare Services Corporation · Oakville Hospital Foundation Milton District Hospital...

Halton Healthcare Services CorporationFinancial Statements

For the year ended March 31, 2016

Halton Healthcare Services Corporation

Statement of Financial Position(expressed in thousands)

As at March 31, 2016 2015

ASSETS

Current Assets

Cash 14,458$ 19,562$

Restricted cash (note 4) 86,417 48,792

Accounts receivable (note 2) 12,260 14,057

Due from Foundations (note 3) 474 584

Current portion of long‐term receivable (note 5b,c) 8,072 419,486

Inventories 2,402 2,422

Prepaid expenses 1,117 1,244

125,200 506,147

Restricted cash (note 4) ‐ 14,062

Long‐term receivable (note 5b,c) 692,125 600,405

Capital assets (note 5a) 1,558,464 1,332,268

2,375,789$ 2,452,882$

LIABILITIES AND NET ASSETS

Current Liabilities

Accounts payable and accrued liabilities (note 6) 48,970$ 56,862$

Current portion of obligations under capital leases (note 7) 299 274

Current portion of long‐term payable (note 5b,c) 13,628 630,989

62,897 688,125

Obligations under capital leases (note 7) 1,173 1,340

Deferred grants (note 12b) 1,474,300 1,186,454

Long‐term debt (note 13) 107,000 ‐

Long‐term payable (note 5b,c) 701,123 545,287

Interest rate swaps (note 13) 33,415 ‐

Post‐retirement and employment benefits (note 8) 9,358 8,600

2,389,266 2,429,806

Commitments and contingencies (note 5b and 10)

Net assets 19,938 23,076

Accumulated remeasurement losses (33,415) ‐

2,375,789$ 2,452,882$

On behalf of the Board of Directors:

Chair

Treasurer

The accompanying notes are an integral part of these financial statements.

3


Statement of Changes in Net Assets(expressed in thousands)

For the year ended

Balance, March 31, 2014 33,112$

Deficiency of revenues over expenses (10,036)

Balance, March 31, 2015 23,076$

Deficiency of revenues over expenses (3,138)

Balance, March 31, 2016 19,938$


4


Statement of Accumulated Remeasurement Losses(expressed in thousands)


Accumulated remeasurement losses, beginning of year ‐$

Unrealized losses attributable to derivative interest rate swaps (33,415)

Amounts reclassified to the statement of operations ‐

Net remeasurement losses for the year (33,415)

Accumulated remeasurement losses, end of the year (33,415)$


5

Halton Healthcare Services CorporationStatement of Operations(expressed in thousands)

For the year ended March 31, 2016 2015

Revenues

Ministry of Health and Long‐term Care 276,561$ 241,083$

Interest income 1,442 238

Other operational income 57,553 53,698

Deferred grant amortization 5,111 5,428

340,667 300,447

Expenses

Salaries, wages and benefits 245,510 225,454

Supplies and other expenses (note 13) 61,558 43,869

Medical and surgical supplies 19,288 17,057

Drugs 8,659 7,599

Equipment amortization 7,487 7,272

342,502 301,251

Deficiency of revenues over expenses before building interest and

amortization (1,835) (804)

Building interest and amortization, net (note 12a) (1,303) (9,232)

Deficiency of revenues over expenses (3,138)$ (10,036)$


6

Halton Healthcare Services CorporationStatement of Cash Flows(expressed in thousands)

For the year ended March 31, 2016 2015

Cash flows from operating activities

Deficiency of revenues over expenses (3,138)$ (10,036)$

Adjustment for items not affecting cash:

Amortization of capital assets 39,305 24,646

Loss on disposal of capital assets 285 ‐

Amortization of deferred grants (35,626) (13,570)

Post‐retirement and employment benefits 758 598

Changes in non‐cash working capital items:

Accounts receivable 1,797 (6,924)

Due from Foundations 110 (169)

Inventories 20 177

Prepaid expenses 127 104

Accounts payable and accrued liabilities (7,892) 19,547

(4,254) 14,373

Cash flows used in investing activities

Purchase of capital assets (172,020) (48,174)

Proceeds on disposal of capital assets 130 ‐

Increase in obligations under capital leases (142) 1,614

Increase in restricted cash (23,563) (38,396)

(195,595) (84,956)

Cash flows from financing activities

Decrease in long‐term receivable, net 246,626 ‐

Increase in long‐term debt 107,000 ‐

Decrease in long‐term payable, net (543,591) ‐

Increase in deferred grants 384,710 64,123

194,745 64,123

Decrease in cash, during the year (5,104) (6,460)

Cash, beginning of year 19,562 26,022

Cash, end of year 14,458$ 19,562$

Supplemental cash flow information

Capital asset acquisitions funded by long‐term payable 82,066$ 385,283$

Long‐term receivable related to capital asset purchases (73,068)$ (371,439)$


7

Halton Healthcare Services CorporationNotes to the Financial Statements

1. Nature of the Operations and Summary of Significant Accounting Policies


8

Halton Healthcare Services CorporationNotes to the Financial StatementsFor the year ended March 31, 2016

1. Nature of the Operations and Summary of Significant Accounting Policies (continued)

9



10



11

2. Accounts Receivable

Ministry of Health and Long‐term Care

Patients, net of allowance

Harmonized Sales Tax (HST) 2,885 2,881

Other

3. Related Party Balances

a) Due from Foundations

Oakville Hospital Foundation

Milton District Hospital Foundation

The Georgetown Hospital Foundation

b)

4. Restricted Cash

5. Capital Assets

a) CostAccumulated

Amortization Cost

Accumulated

Amortization

Land 31,396$ ‐$ 23,329$ ‐$

Land improvement 3,141 2,389 3,141 2,095

Buildings 1,366,618 54,496 141,697 128,110

Building service equipment 8,821 6,272 9,915 8,084

Major equipment 204,741 91,394 144,811 112,036

Capital projects in process 98,298 ‐ 1,259,700 ‐

1,713,015$ 154,551$ 1,582,593$ 250,325$

Net book value 1,558,464$ 1,332,268$

4,482$ 1,902$

2016 2015

Halton Healthcare Services CorporationNotes to Financial Statements(expressed in thousands)


2016

46

474$ 584$

2015

426$

106

52

368$

60

5,853

1,212

6,261

12,260$ 14,057$

841

As part of restricted cash and investment, HHSC holds funds for investment purposes on behalf of the Oakville

Hospital Volunteer Association (the ʺVAʺ) in the amount of $43 (2015 ‐ $228).

2016 2015

The Ministry has provided grants totaling $24,000 for the planning and design of the Milton site expansion (Note

5c). HHSC is actively engaged with the Ministry and Infrastructure Ontario in planning for the design and

construction of the facility. The amount recorded as restricted cash represents the unspent deferred capital grants.

Restricted cash also includes borrowings restricted by the board for capital projects.

12

5. Capital Assets (continued)

b)

Debt InterestOperating

CostsLife Cycle

2017 7,810$ 38,894$ 12,268$ 1,803$

2018 8,307 38,397 12,506 1,851

2019 8,835 37,868 12,738 1,855

2020 9,398 37,306 12,974 3,112

2021 9,996 36,708 13,270 5,232

Thereafter 582,614 553,834 411,608 260,594

626,960$ 743,007$ 475,364$ 274,447$

c)

During construction, HHSC retains title to the capital assets being constructed by Plenary Health. As a result, HHSC

records the value of the construction in progress based on the percentage of completion as certified periodically by the

independent certifier. As at March 31, 2016, the buildings are approximately 30% (2015 ‐ nil) complete. Costs totaling

$96,000 (2015 ‐ $nil) have been recorded as construction in progress. Based on the payment terms in the project

agreement, HHSC has recorded long‐term obligations to Plenary Health in the amount of $82,000, and a long‐term

receivable of $73,000 from the MOHLTC. These amounts are included in deferred grants. Interest totaling $3,800 has

been included in the above balances. A change in the estimated percentage completed by 1% would increase / decrease

the capital project in process by $2,700 with a corresponding increase / decrease in long‐term payable.

Milton District Hospital

On March 30, 2015, HHSC entered into a project agreement with a third party construction company, Plenary Health, to

design, build, finance, and maintain the Milton hospital redevelopment project. The total costs of construction and

financing of the building over the construction period is $273,000.



The debt, operating and maintenance services are repayable in blended monthly instalments of $5,100 and matures on

July 31, 2045. Part of the agreement with HIP requires that it provide certain operating and maintenance services. The

total cost of these services is estimated to be $332,000 over the term of the agreement. In addition, HHSC is committed to

making total payments of approximately $42,000 related to life cycle maintenance over the term of the agreement. These

payments are to be substantially funded by the MOHLTC and included in revenue from the MOHLTC.

Capital projects in process reflect monies expended on assets not yet in use including the planning and design phase of

the Georgetown Hospital expansion and the Milton District Hospital expansion. Included within the cost of land is a

parcel of land that was contributed to HHS by Ontario Realty Corporation (ʺORCʺ) on November 22, 2007, to

accommodate a public hospital on this land or part thereof.

New Oakville Trafalgar Memorial Hospital

In July 2011, HHSC entered into a project agreement with a third party construction company, Hospital Infrastructure

Partners Partnership (“HIP”), to design, build, finance, and maintain (for a 30‐year term) the Oakville hospital project.

Long‐term receivable related to the Oakville hospital project is $619,057 (2015 ‐ $600,405).

The balance of the amount due to HIP of $626,960 is related to the construction of the buildings and bears interest of

6.64% and is funded by the MOHLTC. The payments over the next five years are as follows:

13

6. Accounts Payable and Accrued Liabilities 2016 2015

Ministry of Health and Long‐term Care 5,288$ 4,022$

Trade 24,822 29,896

Harmonized Sales Tax (HST) ‐ 1,956

Wages, benefits and other accruals 18,860 20,988

48,970$ 56,862$

7. Obligations under Capital Leases 2016 2015

Current portion of obligations under capital leases 299$ 274$

Long‐term portion of obligations under capital leases 1,173 1,340

1,472$ 1,614$

Principal repayments over the next five years are as follows:

2017 299$

2018 299

2019 299

2020 299

2021 276

1,472$

The effective average rate of capital leases is 5.4% with an average term to maturity of six years.

8. Post‐retirement and Employment Benefits

Non‐Pension

The significant actuarial assumptions adopted in estimating HHSCsʹ accrued benefit obligations are as follows:


Substantially all of the employees of HHSC are members of the Hospitals of Ontario Pension Plan (the ʺPlanʺ), which is a

multi‐employer, final average earnings, contributory pension plan. The Plan is accounted for as a defined contribution plan.

During the year, employer contributions made by HHSC to the Plan amounted to $12,797 (2015 ‐ $11,484). HHSC

contributes to the Plan at the rate of 126% of the employee contributions. These amounts are included in salaries, wages and

benefits in the Statement of Operations. The most recent actuarial valuation of the Plan, at December 31, 2015, indicates the

Plan is 122% funded.


HHSC provides extended health care, dental and life insurance benefits to employees. At March 31, 2016, HHSCsʹ accrued

benefit liability, related to post‐retirement benefit plan is estimated to be $9,497 (2015 ‐ $10,143). The most recent actuarial

valuation of the plan was performed at March 31, 2016.

Pension

Included in salaries, wages and employee benefits in the Statement of Operations is an expense of $880 (2015 ‐

$754) regarding non‐pension future employee benefits.

Discount rate 3.25% (2015 ‐ 4.0%)

Dental benefits cost escalation 3.0% per annum

Medical benefits cost escalation Initial trend of 6.25%; decreasing by 0.25% per annum to an

ultimate rate of 4.5%

14

9. Financial Instrument Classification

Fair Value

Cash and cash equivalents 14,458$ ‐$

Accounts receivable ‐ 12,260

Long‐term receivable ‐ 700,197

Due from Foundations ‐ 474

Restricted cash 86,417 ‐

Accounts payable and accrued liabilities ‐ (48,970)

Long‐term debt ‐ (107,000)

Long‐term payable ‐ (714,751)

Derivative (33,415) ‐

Level 1 Level 2 Level 3 Total

Cash and cash equivalents 14,458$ ‐$ ‐$ 14,458$

Restricted cash 86,417 ‐ ‐ 86,417

Interest rate swaps ‐ ‐ 33,415 33,415

Total 100,875$ ‐$ 33,415$ 134,290$

10. Commitments and contingencies

a) Outstanding commitments for leased equipment and service contracts for the next five years are as follows:

2017

2018

2019

2020

2021

b)



4,366$

There were no transfers between Level 1 and Level 2 for the years ended March 31, 2016. There were also no

transfers in or out of Level 3 during the year.

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.

Amortized

Cost

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).

2,085

2,068

1,376

11,963$

The nature of HHSC activities is such that there is usually litigation pending or in prospect at any time. With respect

to claims and possible claims at March 31, 2016, management believes HHSC has valid defences and/or appropriate

insurance coverage in place. In the event any claims are successful, management believes that such claims are not

expected to have a material adverse effect on HHSCʹs financial position and results of operations.

2,068

15

11. Financial Instrument Risk Management

Credit risk

Total Current 30‐60 days 61‐90 days 91‐120 days 121 plus

Ministry / LHIN 1,902$ 1,902$ ‐$ ‐$ ‐$ ‐$

Patients 6,889 4,729 818 239 126 977

Other 4,097 4,097 ‐ ‐ ‐ ‐

Gross receviables 12,888 10,728 818 239 126 977

Less: impairment allowance (628) ‐ ‐ ‐ ‐ (628)

Net receivables 12,260$ 10,728$ 818$ 239$ 126$ 349$

Market risk

Interest rate risk

HHSCʹs investment policy operates within the constraints of the investment guidelines issued by the Ministry in relation

to the funding agreements, 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.

Accounts receivable are primarily due from the Ministry/LHIN. Credit risk is mitigated by the financial solvency of the

provincial government and highly diversified nature of the patient population.

HHSC measures its exposure to credit risk based on how long the amounts have been outstanding. An impairment

allowance is set up based on HHSCʹs historical experience regarding collections. The amounts outstanding at year end

were as follows;

The amounts greater than 90 days owing from patients that have not had a corresponding impairment allowance setup

against them are collectible based on HHSCʹs past experience. Management has reviewed the individual balances and

based on the credit quality of the debtors and their past history of payment have determined that the balances are

collectible.


Credit risk is the risk of financial loss to HHSC if a debtor fails to make payments of interest and principal when due.

HHSC is exposed to this risk relating to its cash and cash equivalents, long‐term receivables, due from Foundations and

accounts receivable. HHSC holds its cash accounts with federally regulated chartered banks who are insured by the

Canadian Deposit Insurance Corporation.


Past Due

Market risk is the risk that the fair value of 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. HHSC is not exposed

to significant currency or equity risk as it doesnʹt hold any equity or foreign instruments.

Interest rate risk is the potential for financial loss caused by fluctuations in fair value or future cashed flows of financial

instruments because of changes in market interest rates. HHSC is exposed to this risk through its interest bearing

investments. The risk on interest bearing investments is mitigated by the fact that HHSC holds only guaranteed

investment certificates. The risk over interest bearing debt is mitigated by the use of interest rate swaps to fix the interest

rate on the debt over a period of the obligation.

16

11. Financial Instrument Risk Management (continued)

Liquidity risk

12. Deferred Grants

a)

Building 2016 2015

Amortization 31,818$ 17,374$

Building grant amortization (30,515) (8,142)

1,303$ 9,232$

Interest on long‐term obligations related to building 2016 2015

Interest on long‐term obligations 26,094$ ‐$

Government contribution for interest on long‐term obligations (26,094) ‐

‐$ ‐$

b)

Grants

Ministry of Health and Long‐Term Care 1,362,819$ 1,182,357$

Regional Municipality of Halton 18,571 18,571

Town of Oakville 128,873 ‐

Capital donations 150,212 136,075

1,660,475 1,337,003

Accumulated Amortization

Building 98,713 68,198

Equipment 87,462 82,351

186,175 150,549

Balance, end of year 1,474,300$ 1,186,454$

In the Statement of Financial Position, deferred grants are net of accumulated amortization as follows:


In the Statement of Operations, building amortization is net of amortization of building deferred grants as follows:


Liquidity risk is the risk that HHSC will not be able to meet all cash outflow obligations as they come due. HHSC

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. Accounts payable and

accrued liabilities are due within the next 6 months.

There have been no significant changes from the previous year in the exposure to risk or policies, procedures and

methods used to measure risk.

17

13. Credit Facility

a)

b)

14. Related Parties



HHSC is related to the Oakville Hospital Volunteer Association (the ʺOakville VAʺ), Milton District Hospital

Auxiliary (the ʺMilton Auxiliaryʺ) and Georgetown Hospital Volunteer Association (the ʹGeorgetown VAʺ). The

Oakville VA, Milton Auxiliary and Georgetown VA are registered charities under the Income Tax Act. In

accordance with their by‐laws, all resources of the Oakville VA, Milton Auxiliary and Georgetown VA must be

provided to or used for the benefit of HHSCʹ Oakville, Milton and Georgetown sites.

In conjunction with two other hospitals, effective March 29, 2009, HHSC became a member of West GTA

Healthcare Shared Services Corporation, operating as Shared Services West (SSW). SSW is a non‐profit

corporation, administered by a board which includes representation from each of the three member hospitals. On

behalf of SSW, HHSC provided a guarantee of nineteen percent of a $2,500 credit facility. As at March 31, 2016,

the outstanding balance on this credit facility was zero (2015 ‐ $73).

As part of the New Oakville Trafalgar Memorial Hospital project, on July 28, 2011, HHSC entered into an

agreement with the Bank of Montreal (ʺBMOʺ) to establish a demand revolving credit facility (ʺFacility 1ʺ) in the

maximum principal amount of $5,000 at a variable interest rate of prime minus 0.5%, a committed non‐revolving

term credit facility (ʺFacility 2ʺ) for a maximum principal amount of $90,000 at a fixed interest rate of 4.72%, a

committed revolving credit facility (ʺFacility 3ʺ) for a maximum principal amount of $17,000 at a fixed interest

rate of 3.57%, a committed revolving credit facility (ʺFacility 4ʺ) for a maximum principal amount of $31,000 at a

floating interest rate and an ancillary treasury risk management facility. On July 28, 2011, HHSC entered into a

Rate Swap Agreement for the $90,000 and $17,000 loans for fixed terms. As at March 31, 2016 the $107,000 has

been drawn on Facility 2 and Facility 3. Interest only is payable on Facility 2 until May 2018 and on Facility 3 until

July 2017 at which time principal and interest payments will be required. Interest expense of $4,877 related to

Facility 2 and 3 has been reflected in supplies and other expenses on the statement of operations. The Interest Rate

Swap Agreements were utilized on July 31, 2015 and have a fair value loss of $33,400 which has been reflected on

the statement of accumulated remeasurement losses.

The Foundations are independent corporations incorporated without share capital which have their own Board of

Directors and are registered charities under the Income Tax Act. The Foundations receive and maintain funds for

charitable purposes for the use of operations, renovations, maintenance and equipment of the HHSC community

hospitals.

At March 31, 2016, HHSC has a receivable from the Foundation of $46 (2015 ‐ $52). As at March 31, 2016, the

Foundation had total fund balances of approximately $645 (2015 ‐ $818). Total funds received from the Foundation

for fiscal 2016 amounts to $1,226 (2015 – $1,225).

At March 31, 2016, HHSC had a receivable from the Foundation of $368 (2015 ‐ $426). As at March 31, 2016, the

Foundation had total fund balances of approximately $19,517 (2015 ‐ $20,916). Total funds received from the

Foundation for fiscal 2016 amounts to $16,145 (2015 – $43,088).

Georgetown Hospital Foundation

Oakville Hospital Foundation

HHSC also has a $5,000 unsecured demand operating line of credit, which bears interest based on the bankʹs

prime rate plus 0.5%. As at March 31, 2016, HHSC had not utilized any of the operating line of credit (2015 ‐ $nil).

18

14. Related Parties (continued)

15. Halton Healthcare LTC Inc.

Financial position: 2016 2015

Total assets 11,691$ 12,474$

Total liabilities 16,401 16,859

Net assets (deficiency) (4,710)$ (4,385)$

Results of operations:

Total revenues 9,096$ 9,080$

Total expenses 9,421 9,257

Deficiency of revenues over expenses (325)$ (177)$

LTC has not been consolidated in HHSCʹs financial statements. A financial summary of the non‐consolidated

entity for the current and previous year is as follows:



HHSC was awarded an opportunity by the Ministry of Health and Long‐Term Care to develop and operate a 128

bed long‐term care facility on its lands. HHSC assigned its rights to develop and manage the facility to LTC. In

an agreement commencing April 18, 2002, HHSC agreed to lease a parcel of its land to BPC Long‐Term Care

Facilities (Oakville) Inc. (ʺBPC Oakvilleʺ) for a 40‐year term. BPC Oakville agreed to sublease that parcel to LTC.

The facility opened in October 2003.

HHSC is related to Halton Healthcare LTC Inc. (ʺLTCʺ) as a result of common board members. LTC provides

residence and long‐term care. LTC, a non‐share capital charitable organization, is incorporated under the

Canada Corporations Act, is a non‐profit organization, and is exempt from income tax under the Income Tax Act.

Milton Hospital Foundation

At March 31, 2016, HHSC has a receivable from the Foundation of $60 (2015 ‐ $106). As at March 31, 2016, the

Foundation had total fund balances of approximately $11,039 (2015 ‐ $5,375). Total funds received from the

Foundation for fiscal 2016 amounts to $2,956 (2015 – $1,606).

19

Halton Healthcare Services Corporation · Oakville Hospital Foundation Milton District Hospital...

Documents

Transcript of Halton Healthcare Services Corporation · Oakville Hospital Foundation Milton District Hospital...