c/ovei<it S&drding to the provisions of the Bermuda Hospitals Board Act, 1970 and its subsequent amendments. 2. SIOdFTCANT ACCTXJNTING POLICIES (a) Inventories Inventories are stated at the lower of average cost and net realizable value. (b) Fixed Assets The Peard has adopted the following eqidpment classification, capitalization and depreciation policies: St. Brendan's Hospital Capital experditures made on behalf of St. Brendan's capitalized as they are reimbursed by Government. Hospital are not King Edward VTI Memorial Hospital Minor Operating Fquipment - new and replacement items valued at $2,500 or less are charged to expense; Minor Capital Equipment - new and replacement items valued between $2,500 and $10,000 are purchased using the Designated Cash Depreciation Fund and capitalized; The Beard has established a Depreciation Fund for the purpose of providing funds to assist in meeting the cost of acquiring minor capital equipment not identified with other Capital Fund projects. Funds are provided by placing on deposit an amount equivalent to the current year's depreciation charge. Major Capital Ermlpment - new and replacement items valued at more than $10,000 are purchased from the Capital Fund - Major Equipment and capitalized. 34 THE BERMUDA HOSPITTALS BOARD NOTES TO THE FllffANCrLAL STATEMENTS MARCH 31, 1993 Continued (g) Interest on Designated Cash Interest earned on designated cash is credited appropriated to the respective Capital Fund balance. to income and then (h) Surcharge to Non-Residents The surcharge to non-residents for inpatient care is credited to income and then appropriated to the Capital Fund - Special Projects (i) Deferred Revenue Capital grants are deferred and recongized as income over the same period as the related asset is being depreciated. DUE FROM CWVliENMENT The Bermuda Hospitals Foard and Covernment have entered into an agreement whereby Government has provided a capital grant in the amount of $2,750,000 to be paid in eleven annual irstaJlments starting from 1991. The remaining non-cirrrent balance is $2,000,000. This grant is intended to reimburse the Foard for capital expenditures incurred in the renovation of the Hospice, along with all principal, interest, and administrative fees payable by the Eoard on the mortgage and loans assumed by the Foard on the acquisition and renovation of the Archlyn Villa property (see Note 8). It is conditional that Covernment would have the use of either the Hospice or Archlyn Villa properties in perpetuity and free of charge should the Hospice close. The Due from Covernment amount of $918,547 (1992 - $1,474,007) in cmirrent assets includes the following: - $250,000 (1992 - $250,000) for Hospice capital grant. - $43,100 (1992 - $649,814) for St. Ererdan's Hospital capital ecnripment. - $625,447 (1992 - $574,193) for St. Brendan's Hospital acxrrued vacation pay. This vacation pay for employees will be reimbursed in the period in which payments are made. 35 THE PEPMuTJA HOSPITALS BOARD NOTES TO THE FTNANCTTaL STATEMENTS MARCH 31, 1993 Continued Software - the information system software licence fee is purchased from the Capital Fund - Special Projects, and capitalized. Other Capital Expenditures - new and replacement items for special projects and the building are purchased from the Capital Fund - Special Projects and Capital Fund - Building Project and capitalized. Fixed assets donated to King Frhrard VII Memorial Hospital by the Frdowment and Donations Fund are capitalized. All items capitalized estimated to amortize follows: are the depreciated on a straight line basis, at rates cost of each asset over its economic life as Building 2.5% per annum. Software 10% per annum; Fdulpment 10% per annum; A full year's depreciation is recorded in the year of purchase and no depreciation is recorded in the year of disposal or retirement. (c) Pensions There is a Defined Contribution Plan whereby the Board contributes 6% of gross salary and the employee contributes 4% of gross salary. Vesting rights begin to accrue after four years in the plan. When an employee leaves the Poard's employ, other than through retirement, the Board's contributions which were not vested are refunded to the Eoard. These are reflecrted as a reduction in employee benefits expense. (d) Coverriment Opcerating Grant The St. Brendan's Hospital operating grant from the Eermudu Government is included in the determination of total operating revenue for the year. (e) Donations Donations received by the Board are reported in the financial statements of the Frdcwment and Donations and Education Furxls. (f) Patient Ccmrcort Funds In recognition of its liability to those patients whose funds it holds in trust, the Board places on deposit designated funds egual to the amount owed to these patients. 36 THE BFRMUTJA HOSPIT'ALS BOARD NOTES TO THE FiTfANCnAL STATEMENTS MARCH 3 1 , 1993 Continued FIXED ASSETS Cost $ $ 25,185 19,616,228 7,233,288 1,060,286 1,399,700 1,934,434 106,028 25,185 18 ,216,528 5 ,298,854 954,258 25,185 18 ,585,610 3 ,714,574 27,934,987 Land Buildings Fvguipment Software Acxaimulated Depreciation 1993 Net 3,440,162 24 ,494.825 22 ,325,369 1992 Net $ $ The insured value of all fixed assets under the Board's control was approximately $137,750,000 (1992 - $137,000,000). 5. DIEIG11ATED CASH $ Capital Fund - Special Projects Capital Fund - Builiding Project Capital Fund - Major Equipment Capital Fund - Pensions Depreciation Fund - Minor Eguipment Patient Comfort Fund 1 ,759 167 1 ,074 458 $ 860 227 730 344 537 880 3,998,041 (433 257) 351 660 1,382 031 458 344 (91,942) 646 871 2,313,707 The designated cash is invested in demand and time deposits. 6. CAPITAL FUNDS Capital Fund - Special Projects: this fund was established in 1986/87 for the purpose of providing f irances to meet the cost of anticipated building and eguipment reguirements for major projects. The funding and expenlitxire reflects the activity of the New BVulding Fdgpansion, Extended Care Unit Projects and Automation Projects. Capital Fund - Building Project: this fund was established in 1975/76 for the purpose of providing funds to meet the cost of anticipated builciing expenditures. 37 THE BERMUDA HCSPITAIS BOARD NOTES TO THE FTHANCTLAL STATFIMETTIS MARCH 31, 1993 Continued Capital Fund - Major Equipment: this fund was established in 1975/76 for the purpose of presiding funds to meet the cost of anticipated expenditure on major equipment. Capital Fund - Pensions: this fund was established in 1987/88 for the purpose of providing funds to supplement pensions at the discretion of the Evaard. CTJVFIvlMTTJr SUBSIDY FR0C17AMMES During the year, the Hospital Insurance Commission approved claims totalling $24,894,439 in respect of services rendered by the Hospital to patients covered under the Government's subsidy prcxjrammes as follows: 1993 5,015,639 11,991,212 7,875,218 1.258.366 Less: Shortfall in Covernment subsidy programmes 4,740,520 10,643,054 7,077,068 1.058.629 26,140,435 Youth subsidy Aged subsidy Iixligent subsidy Other subsidies 1992 23,519,271 1,245,996 24.894,439 23,519,271 For the year ended March 31, 1993 a shortfall in subsidies arose due to the Covernment freeze on subsidy payments. As a result, claims approved by the Hospitals Irisurance Ccmnussion for the services rendered to subsidy patients in excess of the approved subsidy payments will not be recovered from Crvernment. This write-off of revenue has been reflected in the statement of revenue and expenses. Included in the IrKiigent subsidy is an amount of $5,297,729 (1992 - $4,244,257) which represents claims made for patients in the Extended Care Unit. Other subsidies include Renal Dialysis, Diabetic and Hospice programmes. During the year the Bermuda Hospitals Beard received $238,140 from Crvernment for claims approved by the Hcispital Insurance Commission relating to the Diabetic and Hospice subsidy programmes in excess of approved subsidy payments. The $238,140 is reflected in the balance sheet as due to Cxvernment. 38 THE BERMUDA HCSPlXALS BOARD NOTES TO THE FTNANCTAL STATEMENTS MARCH 31, 1993 Continued 8. LONG TERM DEBT 1993 1992 $ Bank loans of $850,000 interest at 6% plus 2% fee per annum, payable instalments of $17,076 bearing administration in monthly to June 1995 $ 413,105 585,024 Bank loan of $3,000,000 bearing interest at 6% plus 1% a