OCCUPATIONAL HEALTH CLINICS

FOR ONTARIO WORKERS INC.

Notes to Financial Statements
December 31, 2004

1.       DESCRIPTION OF OPERATIONS

The Occupational Health Clinics for Ontario Workers Inc. (“the Clinics”) operates health clinics for the benefit of workers in Ontario.  The Clinics provide medical services for the diagnosis of occupational illnesses and injuries and information services in the nature, prevention and treatment of occupational illness.  Research in occupational illness is also conducted by the Clinics.  The funding for the Clinics is provided by the Workplace Safety and Insurance Board.

2.       SIGNIFICANT ACCOUNTING POLICIES

These financial statements have been prepared in accordance with Canadian generally accepted accounting principles (GAAP) for not-for-profit organizations.  The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes.  Due to the inherent uncertainty involved in making estimates, actual results could differ from those estimates.

Revenue recognition

The Clinics follow the deferral method of accounting for contributions. Restricted contributions, if any, 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.

Capital assets

Capital assets are stated at cost less accumulated amortization.  Amortization is provided in the accounts at the following annual rates:

Computer equipment                              30% declining-balance

Leasehold improvements                        20% straight-line

Medical equipment                                 30% declining-balance

Office furniture and equipment                 20% declining-balance

Equipment under capital lease                Term of lease

Employee future benefits

The Clinics accrue obligations under employee benefit plans as the benefits are earned through employee service.  Under the accounting policy:

·       The post retirement benefits earned by employees are actuarially determined using the projected unit credit actuarial         cost method, pro rated on service and management's best estimate of salary escalation, retirement ages of employees  and expected health care costs.

·       Past service costs from plan amendments are amortized on a straight-line basis over the average remaining service         period of employees active at the date of amendment.

·       The expected average remaining service lifetime (EARSL) is estimated by actuaries to be 15.5 years.

The Clinics provide health care, hospitalization, vision care, dental and life insurance benefits to substantially all employees.

In 2003, the employee agreements of certain plan members had changed to reflect a decrease in eligible retirement age from 65 to 55.  The past service costs relating to this plan amendment are $369,800 and are being amortized on a straight-line basis over the average remaining service period of employees active at the date of amendment.

The Clinics measures its accrued benefit obligation for accounting purposes as at January 1 of each year.

A reconciliation of the Clinics post-retirement benefit plan to the amount recorded in the financial statements is as follows:

Details of the accrued benefit obligation are as follows:

The benefit expense for the year is determined as follows:

The significant actuarial assumptions adopted in estimating the Clinics’ accrued benefit obligation were as follows:

In 2002, the Board of Directors resolved to provide a fund in respect of the expected cost of employee future benefits.  The balance of the fund is $728,800 (2003 - $404,500).

4.       SEVERANCE FUND

By resolution of the Board of Directors, the Clinics have provided a reserve in respect of the expected cost of employee severance.  Annual estimated severance entitlements are charged to expenses, and credited to the reserve, as they are earned by employees through service.  Concurrently, funds in respect of this reserve have been accounted for as an internally restricted fund.  During the year, severance payments paid amounted to $28,000 (2003 - $Nil).

5.       CAPITAL ASSETS

6.       OBLIGATION UNDER CAPITAL LEASES

The future minimum payments under capital leases are as follows:

7.       DEFERRED CAPITAL FUNDING

Deferred capital funding represents the amount of grants received from Workplace Safety & Insurance Board for the purchase of capital assets.  The amortization of this funding is at the same rate as the related capital assets purchased and is recorded in the statement of operations.

8.       EXTERNALLY RESTRICTED NET ASSETS

During the year, the Ministry of Labour announced that the Sarnia clinic will become a regular clinic of Occupational Health Clinics for Ontario Workers, and thus will fall under common management and will be accountable to the Board of Directors of the Clinics.  As such, the Sarnia clinic’s previously externally restricted net capital assets of $48,325 and fund deficiency of $37,288 as of January 1, 2004 were transferred by way of an inter-fund transfer to the Clinics.

RAC 980049 net assets are externally restricted for investigative research into the incidence of cancer among workers in an auto parts plant.  The statistical analysis is nearing completion and a meeting is being arranged with worker researchers in London, Ontario to engage them in the final analysis of the data.  During the year, an amount of $3,156 was spent in the performance of the analysis.  Net assets of RAC 980049 as at December 31, 2004 were $Nil (2003 - $Nil).

9.       LEASE COMMITMENTS

At December 31, 2004, minimum payments under operating leases for rental of premises and equipment over the next five fiscal years and thereafter approximate the following:

10.     INCOME TAX STATUS

As a not-for-profit organization, the Clinics are not taxable under the Income Tax Act.

11.     ECONOMIC DEPENDENCE

The Clinics receive a significant amount of revenue from the Workplace Safety & Insurance Board based on annual budget submissions to the Board.

12.     ACCRUED LIABILITY

The Clinics have made a voluntarily disclosure to Canada Revenue Agency (“CRA”) regarding Canada pension plan contributions for the years 2000 to 2003 and employment insurance premiums for the years 2001 to 2003 with respect to payments made to doctors during that period.  There is a possibility that CRA will assess the Clinics as a result of this disclosure, but to December 31, 2004, it has not done so.  An amount based on management’s best estimates of this potential cost is included in accrued liabilities.

13.     COMPARATIVE FIGURES

Annual Report 2004   Financial Statements    Auditor's Report   Table of Contents    Financial Position    Operations    Changes in Net Assets    Cash Flow   Notes to the Financial Statements