PROVINCE OF NOVA SCOTIA INSURED PRESCRIPTION DRUG PROGRAM FOR THE TWELVE MONTHS ENDING MARCH 31, 2008

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1 INSURED PRESCRIPTION DRUG PROGRAM FOR THE TWELVE MONTHS ENDING MARCH 31, 2008

2 Deloitte & Touche LLP 1969 Upper Water Street Suite 1500 Purdy's Wharf Tower II Halifax NS B3J 3R7 Canada Tel: (902) Fax: (902) Independent Auditors Report To the Minister of Health We have audited the balance sheet of the Province of Nova Scotia Insured Prescription Drug Plan Trust Fund as at March 31, 2008 and the statement revenues, expenses and fund balance and the statement of cash flows for the year then ended. These financial statements are the responsibility of the Department of Health s management. Our responsibility is to express an opinion on these 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 financial statements present fairly, in all material respects, the financial position of the Province of Nova Scotia Insured Prescription Drug Plan Trust Fund as at March 31, 2008 and the results of its operations and its cash flows for the year then ended in accordance with Canadian generally accepted accounting principles. The comparative figures were audited by another firm of chartered accountants. Chartered Accountants Halifax, Nova Scotia June 11, 2008

3 INSURED PRESCRIPTION DRUG PLAN BALANCE SHEET March 31/08 March 31/07 ASSETS Cash (2,936,764) 3,936,363 Receivables Seniors 613,084 1,822,689 Receivable from Department of Health (Note 3) 17,906,055 (7,699,186) Receivable from Department of Health -PFNH 819,199 1,146,851 Total Receivables 19,338,338 (4,729,646) Investments 0 10,066,830 TOTAL ASSETS 16,401,574 9,273,547 LIABILITIES AND FUND BALANCE Payables and Accruals 4,812,874 3,554,741 Unearned Premiums 11,588,700 5,718,806 TOTAL LIABILITIES 16,401,574 9,273,547 Fund Balance 0 0 TOTAL LIABILITIES & FUND BALANCE 16,401,574 9,273,547 Page 1 of 5

4 INSURED PRESCRIPTION DRUG PLAN STATEMENT OF REVENUES, EXPENSES AND FUND BALANCE March 31/08 March 31/07 REVENUES Premiums Paid by Seniors 16,892,728 17,403,783 Copayment Contributions 26,863,511 25,582,356 43,756,239 42,986,139 Department of Health 127,270, ,875,523 Investment Income 69, ,829 TOTAL REVENUE 171,095, ,681,491 EXPENSES Provider Claims 170,818, ,486,734 GIS Rebate Program 277, , ,095, ,681,491 EXCESS OF REVENUES OVER EXPENSES 0 0 Funding From/(To) Province of Nova Scotia 0 0 FUND BALANCE 0 0 Page 2 of 5

5 INSURED PRESCRIPTION DRUG PLAN STATEMENT OF CASH FLOW Year Ending March 31, 2008 Increase (decrease) in cash and cash equivalents March 31/08 March 31/07 Operating Excess of revenue over expenses $ - $ - Changes in non-cash operating working capital Receivables 1,537,257 (452,967) Payables and accruals 1,258,133 (163,771) Unearned premiums 5,869,894 2,677,264 8,665,284 2,060,526 Financing Surplus (deficit) re advances from Dept of Health (25,605,241) 2,957,287 Investing Purchases of investments, net 10,066,830 (6,175,239) Net (decrease) increase in cash and cash equivalents (6,873,127) (1,157,426) Cash and cash equivalents Beginning of year 3,936,363 5,093,789 End of year (2,936,764) 3,936,363 Page 3 of 5

6 Province of Nova Scotia Insured Prescription Drug Plan Trust Fund Notes to the Financial Statements March 31, Purpose of Organization Senior's Pharmacare is a voluntary prescription drug insurance plan, regulations established by Order-in-Council and amended several times, the most recent being Order in Council effective April 1, Contributions made by seniors and government of Nova Scotia are placed in the Province of Nova Scotia Insured Prescription Drug Plan Trust Fund (the Fund) and are used to pay Senior's Pharmacare program costs. The fund was established by Order in Council Principle features of the Pharmacare program are: - Participation in the Pharmacare program is optional. Eligible seniors must be 65 years of age and not already have coverage under the government programs or primary drug coverage through a contract of insurance. - Eligible seniors are required to pay a maximum annual premium of $424 plus a co-payment fee of 33% of prescription costs to a maximum of $30 for each drug or supply (effective April 1, 2008) to maximum of $382 per year. Annual premiums are waived for low-income seniors. - The Department of Health is responsible for funding program costs net of recoveries from seniors and other income. On February 19, 2008 the Executive Council by Order-in-Council approved the repeal of this Fund effective on or after March 31, 2008 as it is no longer required for the management and investment functions of the program. The Department of Health will work cooperatively with the Department of Finance to perform these functions with the Consolidated Fund of the Province of Nova Scotia and track the transactions of the program for annual reporting purposes. This program is still in existence and participants will not be impacted, other than by regulation changes to the program. 2 Summary of significant accounting policies Premium revenues Premium revenues are recorded on the accrual basis Claim expenses Claim expenses are recorded on the accrual basis. Claims, submitted by providers, are subject to audit by program administrators. Any adjustments to claims as a result of these audits are recorded in the year of settlement. Administration of program Medavie Blue Cross administers Seniors' Pharmacare on behalf of the Department of Health, on a cost recovery basis. Administration costs for the year are paid by the Province of Novas Scotia and are not reported in these financial statements. Cash and cash equivalents Cash and cash equivalents include cash on hand, balances with banks, net of indebtedness and short term deposits with original maturities of three months or less. Investments Investments consisted of government and corporate bonds, and short term investments. All investments are carried at cost which approximates market value. Page 4 of 5

7 Province of Nova Scotia Insured Prescription Drug Plan Trust Fund Notes to the Financial Statements March 31, Summary of significant accounting policies (continued) Use of estimates The presentation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those reported. Financial Instruments The Fund's financial instruments consist of cash and cash equivalents, receivables, investments, and payables and accruals. Unless otherwise noted, it is management's opinion that the Fund is not exposed to significant interest, currency or credit risks arising from these financial instruments. The fair value of these financial instruments approximate their carrying values, unless otherwise noted. 3 Receivable (Payable) to the Department of Health Payable to the Department of Health, beginning of year (7,699,186) (4,741,899) Adjustment due to correction of an error * 1,834,412 Payments from the Department of Health (101,665,302) (125,832,810) Net program expenses 125,436, ,875,523 Receivable from (payable to) Department of Health, end of year $ 17,906,055 $ (7,699,186) * A reallocation between the receivables from the Dept of Health and the Seniors was necessary due to a computer related issue of a Dept of Health IT system that was operated, managed and supported by Medavie. Certain transactions occurring in the accounts receivable subledger were not appropriately updated in the accounts receivable control account. As a result, the accounts receivable from the seniors were overstated and the accounts receivable from the Department of Health were understated by the same amount. The reallocation relates to several years, however, the impact on each period cannot be reasonably determined and thus has been accounted for in the current period on a prospective basis. In addition, on the Statement of Operations, revenues from the Department of Health have been increased and revenues from the seniors have been decreased by the same amount. Page 5 of 5