Non-Consolidated Financial Statements of THE OTTAWA HOSPITAL Year ended March 31, 2010 KPMG LLP Telephone (613) 212-KPMG (5764) Chartered Accountants Fax (613) 212-2896 Suite 2000 Internet www.kpmg.ca 160 Elgin Street Ottawa, ON K2P 2P8 Canada AUDITORS' REPORT TO THE BOARD OF GOVERNORS We have audited the non-consolidated statement of financial position of The Ottawa Hospital as at March 31, 2010 and the non-consolidated statements of operations, changes in net assets and cash flows for the year then ended. These non-consolidated financial statements have been prepared for reporting purposes to the Ministry of Health and Long-Term Care of Ontario. These non-consolidated financial statements are the responsibility of the Hospital’s management. Our responsibility is to express an opinion on these non-consolidated financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. In our opinion, these non-consolidated financial statements present fairly, in all material respects, the financial position of the Hospital as at March 31, 2010 and the results of its operations and its cash flows for the year then ended in accordance with the basis of accounting described in note 1(a). These non-consolidated financial statements, which have not been, and were not intended to be, prepared in accordance with Canadian generally accepted accounting principles since they have been prepared on a non-consolidated basis, are intended for reporting by the Hospital with the Ministry of Health and Long-Term Care of Ontario and may not be appropriate for any other purposes. These non-consolidated financial statements have been prepared in accordance with the basis of accounting described in note 1(a). Chartered Accountants, Licensed Public Accountants Ottawa, Canada May 14, 2010 THE OTTAWA HOSPITAL Non-Consolidated Statement of Financial Position March 31, 2010, with comparative figures for 2009 (In thousands of dollars) 2010 2009 Assets Current assets: Short term investments $ 1,308 $ 860 Accounts receivable (note 3(a)) 48,084 38,143 Inventories 10,696 9,623 Prepaid expenses 5,035 4,509 65,123 53,135 Capital grants receivable (note 3(b)) 17,754 15,407 Investments held for capital purchases (note 10(c)) 74,966 61,392 Capital assets (note 4) 516,777 451,832 Receivable from Royal Ottawa Health Care Group – vested benefits (note 5) 325 493 Cash held in trust (note 8(a)) 25,544 22,822 $ 700,489 $ 605,081 Liabilities, Deferred Contributions and Net Assets Current liabilities: Bank indebtedness (note 6) $ 50,347 $ 38,844 Accounts payable and accrued liabilities 194,155 191,750 Payable to The Ottawa Hospital Residence Corporation (note 13(d)) 3,656 1,929 248,158 232,523 Long-term liabilities: Employee future benefits (note 7) 20,704 17,824 Deferred contributions related to capital assets (note 8(b)) 364,295 294,343 Deferred contributions related to trust funds (note 8(a)) 25,544 22,822 Net assets: Investment in capital assets (note 10(a)) 182,615 182,532 Unrestricted deficiency (140,827) (144,963) 41,788 37,569 Commitments, contingencies and guarantees (note 15) $ 700,489 $ 605,081 See accompanying notes to non-consolidated financial statements. On behalf of the Board: ____________________ Chairman ____________________ President and CEO THE OTTAWA HOSPITAL Non-Consolidated Statement of Operations Year ended March 31, 2010, with comparative figures for 2009 (In thousands of dollars) 2010 2009 Revenue: Patient care: Ministry of Health and Long-Term Care $ 784,166 $ 742,756 Other 117,045 108,149 Recoveries and other 40,145 40,245 Other funding 13,441 14,436 Marketed services 8,689 8,479 Investment 388 1,298 Amortization of deferred contributions related to equipment (note 8(b)) 5,116 6,496 968,990 921,859 Expenses: Salaries and wages 513,980 479,255 Employee benefits 130,703 119,539 Supplies and other 117,241 118,651 Medical staff remuneration 72,638 68,535 Drugs 56,723 53,236 Medical and surgical 51,578 53,541 Interest on bank indebtedness 41 152 Amortization of equipment 25,419 22,998 968,323 915,907 Excess of revenue over expenses before undernoted items 667 5,952 Parking revenues 14,434 14,075 Parking expenses (3,950) (3,793) Amortization of deferred contributions related to buildings (note 8(b)) 9,867 9,395 Amortization of buildings and land improvements (16,799) (17,169) Excess of revenue over expenses $ 4,219 $ 8,460 See accompanying notes to non-consolidated financial statements. THE OTTAWA HOSPITAL Non-Consolidated Statement of Changes in Net Assets Year ended March 31, 2010, with comparative figures for 2009 (In thousands of dollars) Investment in capital assets Total Total (note 10) Unrestricted 2010 2009 Balance, beginning of year $ 182,532 $ (144,963) $ 37,569 $ 28,249 Excess of revenue over expenses – 4,219 4,219 8,460 Change in unrealized gain on short-term investments – – – 860 Net change in investment in capital assets (note 10(b)) 83 (83) – – Balance, end of year $ 182,615 $ (140,827) $ 41,788 $ 37,569 See accompanying notes to non-consolidated financial statements. THE OTTAWA HOSPITAL Non-Consolidated Statement of Cash Flows Year ended March 31, 2010, with comparative figures for 2009 (In thousands of dollars) 2010 2009 Cash provided by (used for): Operating activities: Excess of revenue over expenses $ 4,219 $ 8,460 Items not involving cash: Amortization of capital assets 42,218 40,167 Amortization of deferred contributions related to capital assets (14,983) (15,891) Loss on disposal of assets 56 – Decrease in Royal Ottawa Health Care Group – Vested benefits 168 – Net increase in employee future benefits (note 7) 2,880 1,865 Net change in non-cash working capital (note 14) (12,305) 12,361 22,253 46,962 Financing activities: Deferred contributions related to capital assets received 84,935 40,408 Increase in deferred contributions related to trust funds 2,722 2,594 Increase (decrease) in payable to The Ottawa Hospital Residence Corporation 1,727 (460) Proceeds on disposal of equipment 96 – 89,480 42,542 Investing activities: Purchase of capital assets (107,315) (57,197) Net increase in capital grants receivable (2,347) (1,908) Net increase in investments (13,574) (17,933) (123,236) (77,038) Net decrease (increase) in bank indebtedness (11,503) 12,466 Bank indebtedness, beginning of year (38,844) (51,310) Bank indebtedness, end of year $ (50,347) $ (38,844) See accompanying notes to non-consolidated financial statements. THE OTTAWA HOSPITAL Notes to Non-Consolidated Financial Statements Year ended March 31, 2010 (In thousands of dollars) The Ottawa Hospital (the “Hospital”) is an academic health sciences centre and is principally involved in providing health care services to the City of Ottawa. The Hospital is a registered charity under the Income Tax Act and accordingly is exempt from income taxes. 1. Significant accounting policies: The non-consolidated financial statements have been prepared by management in accordance with Canadian generally accepted accounting principles. (a) Basis of presentation: These financial statements do not include the assets, liabilities or operations of the University of Ottawa Heart Institute, a controlled entity, and The Ottawa Hospital Residence Corporation, a controlled entity, nor the following entities where the Hospital has an economic interest including; The Ottawa Hospital Foundation, Ottawa Hospital Research Institute, its auxiliaries, Hospital Food Services – Ontario Inc., Ottawa Regional Hospital Linen Services Incorporated and Eastern Ontario Regional Laboratory Association Inc. (b) Revenue recognition: The Hospital follows the deferral method of accounting for contributions. 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. Operating grants are recorded as revenue in the period to which they relate. 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. The Hospital receives funding for operations for certain programs from the Ministry of Health and Long-Term Care of Ontario. The final amount of operating revenue recorded cannot be determined until the Ministry of Health and Long-Term Care of Ontario has reviewed the Hospital’s financial and statistical returns for the year. Any adjustments arising from the Ministry of Health and Long-Term Care of Ontario review is recorded in the period in which the adjustment is made. 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. THE OTTAWA HOSPITAL Notes to Non-Consolidated Financial Statements, page 2 Year ended March 31, 2010 (In thousands of dollars) 1. Significant accounting policies (continued): (b) Revenue recognition (continued): Externally restricted contributions are recognized as revenue in the year when the conditions for the restriction have been met. Contributions restricted for the purchase of capital assets are deferred and amortized into revenue on a straight-line basis, at a rate corresponding with the amortization rate for the related capital assets. Revenue from the Provincial Insurance Plan and marketed services is recognized when the goods are sold or the service is provided. (c) Contributed services: A substantial number of volunteers contribute a significant amount of their time each year.