Office of the Auditor General Victoria Hall 11 Victoria Street Hamilton HM 11, Bermuda Tel: (441)296-3148 Fax: (441)295-3849 Email: auditbda@gov.bm Website: www.oagbermuda.gov.bm AUDITOR'S REPORT To the Minister of Finance I have audited the balance sheet of the Government Employees Health Insurance Fund as at March 31, 2003 and the statement of revenues and expenses and fund equity for the year then ended. These financial statements are the responsibility of the Fund's management. My responsibility is to express an opinion on these financial statements based on my audit. Except as explained in the following paragraph, I conducted my audit in accordance with auditing standards generally accepted in Bermuda and Canada. Those standards require that I 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. I was unable to obtain sufficient appropriate audit evidence to support the accuracy and completeness of claims expense of $25,666,917 and claims payable of $6,557,157. As a result, I was unable to determine whether adjustments might be necessary to claims expense, deficiency of revenues over expenses, liabilities and fund equity. In my opinion, except for the effect of adjustments, if any, which I might have determined to be necessary had I been able to verify claims expense and claims payable as described in the preceding paragraph, these financial statements present fairly, in all material respects, the financial position of the Government Employees Health Insurance Fund as at March 31, 2003 and the results of its operations for the year then ended in accordance with accounting principles generally accepted in Bermuda and Canada. Hamilton, Bermuda February 15,2007 Larry T. Dennis, C.A. Auditor General 331 GOVERNMENT EMPLOYEES HEALTH INSURANCE FUND BALANCE SHEET MARCH 31, 2003 2003 2002 $ $ 8,351,860 979,918 13,553,246 621,642 9,331,778 14,174,888 180,525 1,547,052 5,010,105 24,541 1,399,347 110,825 2,289,152 3,878,759 84,017 1,451,241 8,161,570 7,813,994 1,170,208 6,360,894 9,331,778 14,174,888 ASSETS CURRENT ASSETS Due from the Consolidated Fund of the Government of Bermuda (note 3) Premiums receivable (note 7) LIABILITIES AND FUND EQUITY CURRENT LIABILITIES Accounts payable and accrued liabilities Claims payable to Bermuda Hospitals Board Other claims payable Portability received in advance Contributions received in advance FUND EQUITY (note 7) The accompanying notes are an integral part of these financial statements. 332 GOVERNMENT EMPLOYEES HEALTH INSURANCE FUND STATEMENT OF REVENUES AND EXPENSES AND FUND EQUITY FOR THE YEAR ENDED MARCH 31, 2003 2002 2003 $ REVENUES Contributions (note 7) Interest 22,019,268 854,880 21,523,347 917,670 22,874,148 22,441,017 25,666,917 1,405,621 564,104 121,212 117,475 73,000 40,374 24,000 20,000 12,682 11,426 6,496 1,527 20,288,306 1,094,671 488,893 28,064,834 21,954,507 EXPENSES Claims Premiums - Mutual Re-insurance Fund (note 4) Salaries Provision for bad debts Loss due to theft (note 8) Administration Consulting Actuarial fees Audit fees Furniture, computer hardware and software Postage Supplies Miscellaneous (DEFICIENCY) EXCESS OF REVENUES OVER EXPENSES 17,800 25,698 3,500 16,500 7,562 8,373 1,529 1,675 (5,190,686) 486,510 FUND EQUITY, BEGINNING OF YEAR 6,360,894 5,874,384 FUND EQUITY, END OF YEAR 1,170,208 6,360,894 The accompanying notes are an integral part of these financial statements. 333 GOVERNMENT EMPLOYEES HEALTH INSURANCE FUND NOTES TO THE FINANCIAL STATEMENTS MARCH 31,2003 1. AUTHORITY The Government Employees Health Insurance Fund ("the Fund") was established under the Government Employee (Health Insurance) Act 1986 and its subsequent amendments. The Fund provides health insurance benefits for government employees, Ministers and Members of the Legislature, and their enrolled dependants and covers medical expenses, such as hospital stays, doctor's visits and prescription drugs. The Fund derives its revenue from contributions received from its members and the Consolidated Fund of the Government of Bermuda. Enrolment in the Scheme is compulsory for all government employees and voluntary for Ministers and Members of the Legislature. Contributions are matched by an equivalent amount from the Consolidated Fund. 2. SIGNIFICANT ACCOUNTING POLICIES The financial statements have been prepared in accordance with accounting principles generally accepted in Bermuda and Canada and include the following significant accounting policies: (a) Basis of presentation These financial statements are prepared on the going concern basis, meaning the Fund will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the normal course of operations. They present the aggregate financial position of the Fund as a separate financial reporting entity independent of the Government of Bermuda and its employees. The financial statements show only the net assets available for benefits of the Fund and do not purport to show the adequacy of the Fund to meet future obligations. (b) Revenue recognition Contributions and interest revenues are recognized when earned. Amounts earned but not received at year end are recorded as receivables. (c) Translation of foreign currencies The financial statements are reported in Bermuda dollars. The Bermuda dollar is at par with the United States dollar. Assets and liabilities are translated at the exchange rate prevailing at the balance sheet date. Revenues and expenses are translated at the exchange rate in effect of the transaction date. Translation gains and losses are included in the statement of revenues and expenses and fund equity. (d) Use of estimates The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues earned and expenses incurred during the year. Actual results could differ from these estimates. 334 GOVERNMENT EMPLOYEES HEALTH INSURANCE FUND NOTES TO THE FINANCIAL STATEMENTS MARCH 31, 2003 3 DUE FROM THE CONSOLIDATED FUND OF THE GOVERNMENT OF BERMUDA . The amount of $8,351,860 (2002 - $13,553,246) due from the Consolidated Fund of the Government of Bermuda represents the net position of certain revenues received and expenses paid by the Consolidated Fund on behalf of the Fund, which has not yet been reimbursed. The rate of interest accruing on the balance is 7% per annum. 4. PREMIUMS - MUTUAL RE-INSURANCE FUND The Fund pays premiums to the Mutual Re-insurance Fund which provides reinsurance for the costs of haemodialysis treatment, long-stay hospital care, home health care, kidney transplants and the required anti-rejection drugs. 5. RELATED PARTY TRANSACTIONS The Bermuda Hospitals Board, the Mutual Re-insurance Fund, the Consolidated Fund and the Government Employees Health Insurance Fund are under the common control of the Government of Bermuda. All transactions between the Government Employee Health Insurance Fund and the related parties are in the normal course of operations. 6. STATEMENT OF CASH FLOWS A statement of cash flows has not been prepared as it would not provide additional useful information. 7. CORRECTION OF PRIOR PERIOD ERRORS As a result of an error in not reporting certain premiums receivable and the related revenue amount in the prior period, the balance of net assets as at April 1, 2002 has been adjusted by $276,768 representing the amount by which premiums receivable had been understated: Fund Equity As previously stated (March 31, 2002): As restated: $ 5,795,501 $ 6,360,894 Premiums Receivable As previously stated (March 31, 2002): As restated: $ $ Contributions Revenue As previously stated (March 31, 2002): As restated: $21,234,722 $21,523,347 335 56,249 621,642 GOVERNMENT EMPLOYEES HEALTH INSURANCE FUND NOTES TO THE FINANCIAL STATEMENTS MARCH 31, 2003 8. SUBSEQUENT EVENT An employee of the Fund was convicted of submitting fictitious claims approximating $160,000 for fiscal years 2003 and 2004. Thus, his employment was terminated. As of February 2007, approximately $17,800 has been recovered. 9. COMPARATIVE FIGURES Certain comparative figures have been restated to conform to the current year's presentation. 336