Financial Statement Analysis

Financial statements of two non-profit organizations are attached (Below). Please use spreadsheet program to perform two financial statement analyses as specified below:

1. Use common size financial statements to compare the two organizations’ Statement of Operations and Statement of Financial Position.

2. Perform the following ratio analyses with the two organizations:

1
.Debt equity ratio

Total Liabilities / Total Fund Balance (or Net Assets)

2.Current ratio

Current Assets / Current Liabilities

3.The asset turnover ratio

Donations / average total assets

4.Viability ratio

Net assets / long-term debt

5. Savings ratio

(Total Revenue – Total Expenses) ÷ Total Expenses

6.Program ratio

Program expenses / Total expenses

3. 
   Comment on the performance and efficiency of these two organizations based on your above two analyses. Use all your spreadsheet skills by providing charts, graphs, and any visualization tools to show your analyses and support your comments. (State your assumption if you make certain assumptions in your analyses and/or comment.)
   

Marking rubric: 50% on the two analyses (including visualization), 30% on comments, 20% on report presentation

Financial Statements of

Canadian Cancer Society - Société Canadienne du Cancer

Year ended January 31, 2020

Canadian Cancer Society – Société Canadienne du Cancer

Contents

Page

Independent Auditor’s Report 1 - 2

Statement of Financial Position 3

Statement of Financial Activities – Operations and Externally Restricted Funds 4

Statement of Changes in Fund Balances 5

Statement of Cash Flows 6

Notes to Financial Statements 7 - 22

Independent Auditor’s Report

Grant Thornton LLP 11th Floor 200 King Street West, Box 11 Toronto, ON M5H 3T4

T +1 416 366 0100

F +1 416 360 4949

To the Members of Canadian Cancer Society - Société Canadienne du Cancer

Qualified Opinion

We have audited the financial statements of Canadian Cancer Society – Société Canadienne du Cancer (the “CCS”), which comprise the statement of financial position as at January 31, 2020, and the statements of financial activities – operations and externally restricted funds, statement of changes in fund balances and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, except for the possible effects of the matter described in the
Basis for Qualified Opinion
section of our report, the accompanying financial statements present fairly, in all material respects, the financial position of the CCS as at January 31, 2020, and its results of operations and its cash flows for the year then ended in accordance with Canadian accounting standards for not-for-profit organizations.

Basis for Qualified Opinion

In common with many not-for-profit organizations, the CCS derives revenue from fundraising activities, which includes individual donations, corporate and planning giving, the completeness of which is not susceptible to satisfactory audit verification. Accordingly, verification of these revenues was limited to the amounts recorded in the records of the CCS. Therefore, we were not able to determine whether any adjustments might be necessary to revenue from fundraising activities, excess of revenue over expenses, and cash flows from operations for the years ended January 31, 2020 and

January 31, 2019, current assets as at January 31, 2020 and January 31, 2019, and net assets as at February 1, 2019 and February 1, 2018 and January 31, 2020 and January 31, 2019. Our audit opinion on the financial statements for the year ended January 31, 2019 was modified accordingly because of the possible effects of this limitation in scope.

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the
Auditor's Responsibilities for the Audit of the Financial Statements
section of our report. We are independent of the CCS in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian accounting standards for not-for-profit organizations, and for such internal

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© Grant Thornton LLP. A Canadian Member of Grant Thornton International Ltd

1

control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the CCS’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the CCS or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the CCS’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the CCS's internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the CCS's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the CCS to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements
represent the
underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

Toronto, Canada Chartered Professional Accountants

June 19, 2020 Licensed Public Accountants

Audit | Tax | Advisory

© Grant Thornton LLP. A Canadian Member of Grant Thornton International Ltd

2

Canadian Cancer Society - Société Canadienne du Cancer

Statement of Financial Position

(in thousands of dollars)

As at January 31

		2020		2019
Assets Current assets: Cash	$	56,776	$	53,495
Short-term investments (note 2)		18,115		17,477
Accounts receivable		4,391		2,400
Prepaid expenses		2,504		2,264
		81,786		75,636
Long-term investments (note 3)		82,733		73,961
Intangible assets (note 4)		1,162		1,190
Capital assets (note 5)		40,494		38,434
	$	206,175	$	189,221
Liabilities and Fund Balances Current liabilities: Accounts payable and accrued liabilities (note 6)	$	9,377	$	6,045
Research grants payable		8,968		3,863
Deferred revenue (note 7)		18,364		19,178
		36,709		29,086
Defined benefit pension liability (note 9(a))		15,433		11,778
Defined benefit liability for post-retirement benefits other than pensions (note 9(b))		30,888		27,244
Other long-term liabilities		771		632
		83,801		68,740
Fund Balances: Externally restricted fund (note 10)		5,398		13,314
Operations fund Invested in intangible and capital assets (note 11 (a))		41,656		39,624
Employee future benefits (note 11(b))		(46,321)		(39,022)
Internally restricted (note 11 (c))		75,320		53,539
Unrestricted		46,321		53,026
		122,374		120,481
	$	206,175	$	189,221

Commitments (note 13)

Guarantees and contingencies (note 16)

On behalf of the Board:

Director Director

3

See accompanying notes to the financial statements.

Canadian Cancer Society - Société Canadienne du Cancer

Statement of Financial Activities – Operations and Externally Restricted Funds

(in thousands of dollars)

Year ended January 31

					Operations fund				Externally restricted fund				Total		Total
Revenue:					2020		2019		2020		2019		2020		2019
Individual donations				$	103,483	$	101,527	$	453	$	103	$	103,936	$	101,630
Corporate					13,447		14,941		1		-		13, [1] 48		14,941
Planned giving					31,452		29,283		250		1,566		31,702		30,849
Lotteries (note 14)					9,841		9,598		-		-		9,841		9,598
Government sponsored projects and grants					12,404		11,818		-		-		12,404		11,818
Investment income (note 15)					9,334		3,117		1,108		275		10,442		3,392
Other					5,875		5,941		-		-		5,875		5,941
Expenses: Mission expenses:					185,836		176,225		1,812		1,944		187,648		178,169
Programs					56,338		52,593		143		-		56,481		52,593
Research					42,128		40,403		5		5		42,133		40,408
Advocacy					3,657		3,046		-		-		3,657		3,046
					102,123		96,042		148		5		102,271		96,047
Fundraising					57,214		53,480		856		1		58,070		53,481
Lotteries (note 14)					6,966		7,042		-		-		6,966		7,042
Administration					7,611		6,556		1,537		31		9,148		6,587
					173,914		163,120		2,541		37		176,455		163,157
Excess (deficiency) of revenue over expenses				$	11,922	$	13,105	$	(729)	$	1,907	$	11,193	$	15,012

Canadian Cancer Society - Société Canadienne du Cancer

Statement of Changes in Fund Balances

(in thousands of dollars)

Year ended January 31

Externally

Restricted

Centre for

Invested in Employee Cancer

intangible and future Internally
Externally
Prevention and
Total
Total capital assets benefits restricted Unrestricted Restricted Survivorship
2020
2019

Fund balances, beginning

of year $ 39,624 $ (39,022) $ 53,539 $ 53,026 $ 10,757 $ 2,557
$ 120,481
$ 106,028

Excess (deficiency) of

revenue over expenses (1,722) (1,725) - 15,369 1,357 (2,086)

11,193

15,012

Employee future benefits

contributions - 3,726 - (3,726) - -

-

-

Transfer of funds (Notes 10

and 11) 3,754 - 21,781 (18,348) (673) (6,514)

-

-

Remeasurements and other

items - (9,300) - - - -

(9,300)

(559)

Fund balances, end of

year $ 41,656 $ (46,321) $ 75,320 $ 46,321 $ 11,441 $ (6,043) $ 122,374 $ 120,481

5

See accompanying notes to the financial statements.

Canadian Cancer Society - Société Canadienne du Cancer

Statement of Cash Flows

(in thousands of dollars)

Year ended January 31

Operating activities

Excess of revenue over expenses Non-cash items:				$	11,193	$	15,012
Amortization of intangible assets					28		29
Amortization of capital assets					1,694		2,382
(Gain)/loss on capital asset disposition					(1,343)		36
Defined benefit pension expense					741		738
Post-retirement benefits expense					984		926
(Gain)/loss on short-term investments					(5)		71
Gain on long-term investments					(6,178)		(99)
Other income					-		(50)
Employer defined benefit pension contributions					(2,430)		(4,165)
Employer post-retirement benefits contributions					(1,296)		(1,246)
Change in non-cash operating working capital (note 19)					5,531		(906)
Investing activities					8,919		12,728
Capital asset additions (net)					(2,411)		(2,705)
Net purchase of short-term investments					(633)		(2,923)
Purchase of long-term investments					(2,832)		(3,645)
Proceeds on sale of long-term investments					238		3,089
					(5,638)		(6,184)
Increase in cash					3,281		6,544
Cash - beginning of year					53,495		46,951
Cash - end of year				$	56,776	$	53,495

6

See accompanying notes to the financial statements.

The Canadian Cancer Society - Société Canadienne du Cancer ("CCS") is a registered charity incorporated under the Canada Not-for-profit Corporations Act (CNCA) as an organization without share capital. The CCS is a national, community-based organization of volunteers, whose mission is the eradication of cancer and the enhancement of the quality of life of people living with cancer. The CCS achieves its mission through research, programs (prevention, information and support) and advocacy for healthy public policy and access to quality cancer care everywhere in Canada. These efforts are supported by volunteers and staff and funds raised in communities across Canada.

The CCS is a registered charity under the Income Tax Act (Canada) and, accordingly, is exempt from income taxes provided certain requirements under the Income Tax Act (Canada) are met.

1. Significant accounting policies

(a) Basis of presentation:

The financial statements have been prepared in accordance with Canadian accounting standards for not-for-profit organizations.

(b) Fund accounting:

The CCS follows the restricted fund method of accounting for contributions.

The externally restricted fund reports contributions utilized for capital campaigns and endowments. Other externally restricted contributions that relate to the CCS's regular operations are reported as deferred revenue.

The operations fund reports all other activity and includes the following balances:

i. The invested in intangible and capital assets balance represents the net book value of all intangible and capital assets, less any related debt.

ii. The employee future benefits balance represents the defined benefit pension liability and the defined benefit liability for post-retirement benefits other than pensions.

iii. The internally restricted balance reports amounts that have been allocated for specific purposes by the Board of Directors of the CCS.

iv. The unrestricted balance represents the CCS's research, programs, advocacy, fundraising and administration activities
not accounted for in other balances.

Significant accounting policies

(c) Financial instruments:

Financial instruments are recorded at fair value on initial recognition. Equity instruments that are quoted in an active market are subsequently measured at fair value. All other financial instruments are subsequently recorded at cost or amortized cost, unless management has elected to carry the instruments at fair value. The CCS has elected to carry its investments at fair value. Transaction costs incurred on the acquisition of financial instruments measured subsequently at fair value are expensed as incurred.

Financial assets measured at cost or amortized cost are regularly assessed for indicators of impairment. If there is an indication of impairment the CCS determines if there is a significant adverse change in the expected amount or timing of future cash flows from the financial asset, and recognizes an impairment loss if the carrying value of the financial asset is greater than the higher of the present value of the expected future cash flows, the amount that could be realized from selling the financial asset or the amount the CCS expects to realize by exercising its right to any collateral.

If events and circumstances reverse in a future period, an impairment loss will be reversed to the extent of the improvement not exceeding the initial carrying value.

The investment policy of the CCS prohibits investment in any derivative financial instrument arrangements for leveraging or speculative purposes. The CCS may invest in derivatives to specifically hedge investment assets against currency or interest rate risk.

(d) Intangible assets:

Intangible assets consist of lump-sum payments pertaining to an agreement that began in January of 2004 which were capitalized and are being amortized over the term of the agreement, subject to early termination rights by both parties.

(e) Capital assets:

Purchased capital assets are recorded at cost. Contributed capital assets are recorded at fair value at the date of contribution. When conditions indicate a capital asset no longer contributes to the CCS's ability to provide services or that the value of future economic benefits or service potential associated with the capital asset is less than its net carrying amount, its net carrying amount is written down to its fair value or replacement cost.

Capital assets are amortized on a straight-line basis over the following periods:

Buildings	Maximum of 40 years based on useful life
Furniture and fixtures	4 years
Office equipment	3 years
Vehicles	3 years
Leasehold improvements	Lesser of lease term and useful life

(f) Commitments:

Grants for research may be awarded for a period covering more than one fiscal year, subject to available funding and grantees meeting certain performance criteria. The statement of financial activities reflects only that portion of grants payable during the current fiscal year.

Research grants payable represents amounts payable upon receipt of financial reports, various certificates and actual invoices for equipment purchased from the various grantee institutions.

(g) Deferred revenue:

Deferred revenue includes donations and sponsorships received for events to be held in the next fiscal year.

Deferred revenue also represents the deferred portion of government-sponsored projects, designated bequests and funds received for specific projects for which no corresponding restricted fund exists.

Deferred revenues are recognized as revenue when the event takes place or when the related expenses are incurred.

(h) Employee future benefits:

(i) Pension plan:

The CCS maintains a registered pension plan with a defined benefit component and a defined contribution component, which covers substantially all employees of the CCS. The defined benefit component provides pensions based on length of service and final average earnings. The defined contribution component provides benefits based on the amount of employee and employer contributions and the rate of return on such contributions. As of January 1, 2016, all pension plan members participate under the defined contribution component for all future service.

The CCS also maintains a supplemental defined benefit pension plan (non-registered plan) providing benefits above the maximums prescribed under the Income Tax Act (Canada). The non-registered pension plan is unfunded.

The CCS measures the defined benefit obligations using an actuarial valuation prepared for accounting purposes, based on the projected benefit method prorated on services (which incorporates management's best estimate of future salary levels, other cost escalation, retirement ages of employees and other actuarial assumptions). The measurement date of the plan assets and defined benefit obligations is January 31. The financial statements were prepared using a projection of the December 31, 2017 valuation. The cost of the defined contribution component of the pension plan is based on a percentage of the employee's pensionable earnings.

(h) Employee future benefits (continued):

(ii) Post-retirement benefits other than pensions:

The CCS maintains a post-retirement benefit plan for retired employees and their spouses which includes life insurance, extended health care and dental care benefits.

Employees joining the CCS after January 1, 2007 are not eligible for this benefit plan. The post-retirement benefit plan is unfunded.

The CCS accrues its obligations under the post-retirement benefit plan as the employees render the services necessary to earn the post-retirement benefits. The CCS measures the post-retirement benefit obligation using an actuarial valuation prepared for accounting purposes, based on the projected benefit method prorated on services (which incorporates management's best estimate of future salary levels, other cost escalation, retirement ages of employees and other actuarial assumptions). The measurement date of the post-retirement benefit obligation is January 31. The financial statements were prepared using a projection of the January 31, 2019 valuation.

The CCS accounts for current service costs and finance costs under the pension and post-retirement benefits other than pension plans through the statement of financial activities. Remeasurements and other items are accounted for through the statement of changes in fund balances and include actuarial gains and losses; past service costs; and gains and losses arising from settlements and curtailments.

Actuarial gains and losses are changes in the defined benefit obligations arising from differences between actual and expected experiences and from changes in the actuarial assumptions used to determine the defined benefit obligations.

(i) Revenue and expenses:

(i) Revenue

Revenue from donations is recognized on a cash basis, with no accrual being made for amounts pledged but not received.

Special events revenue is recognized on completion of the event.

Investment income is recognized on an accrual basis. Changes in fair value, of investments subsequently measured at fair value, are included in investment income in the statement of financial activities.

The CCS is the beneficiary under various wills and trust agreements. The total realizable amounts are not readily determinable. The CCS recognizes such bequests when the proceeds are received or when collection of the amount is reasonably assured and reliably measurable.

(i) Revenue and expenses (continued):

(i) Revenue (continued)

Endowment contributions are recognized as revenue in the year in which they are received. Endowments consist of restricted contributions received by the CCS where the principal gift is required to be maintained intact and investment income generated is used in accordance with the purposes established by the donors.

Revenue from lotteries is recognized upon completion of the lottery.

(ii) Expenses:

Expenses are charged to mission priorities, which include programs, research, advocacy, as well as fundraising and administration according to the activity that they benefit. Certain expenses benefit more than one category and, accordingly, are attributed to the relevant categories. In addition, certain administrative expenses are allocated to mission and fundraising activities based on an estimate of staff time related to each area of activity (note 12). A policy exists that enforces annual review and approval of the basis of attribution and allocation for all expenses. The basis of allocation may be revised according to circumstances prevailing at any given time.

• Programs expenses consists of health promotion for Canadians (tobacco cessation, healthy eating, physical activity, reduced exposure to carcinogens, screening) and of support to cancer patients and caregivers during and beyond the cancer journey. Information, emotional and practical support programs are delivered in the community, by telephone, print or through the website and social media. Examples of programs include community outreach, workplace wellness, smoking cessation, information and support services, lodges, transportation, financial assistance, wigs/prosthesis and related activities.

• Research expenses includes research funding and the costs of supporting research programs. Research funding (projects, personnel and research centres) focuses on the advancement of knowledge in cancer risk reduction and prevention, screening, diagnosis, treatment, cure, supportive care, survivorship and end-of-life care through basic-biomedical, translational, clinical, behavioural and population-based research. Supporting research programs includes activities related to the peer-review process, program administration, research forums, advisory committees and linkage with researchers.

• Fellowships and grants may be awarded, and contracts entered into, for a period covering more than one fiscal year. The statement of financial activities reflects only that portion of fellowships, grants or contracts payable during the current fiscal year.

(i) Revenue and expenses (continued):

(ii) Expenses (continued):

• Advocacy expenses includes activities related to influencing policy makers to implement public policies and programs that enable the adoption of healthy behaviours, reduction of occupational and environmental carcinogens, access to organized cancer screening programs and quality cancer care (from diagnosis to palliative care), financial support for cancer patients and caregivers and investment in cancer research. Activities include developing positions, raising public awareness, mobilizing communities, building coalitions and lobbying.

• Fundraising expenses include all costs supporting the generation of fundraising revenue to provide the means to further the CCS’s mission. Fundraising expenses include costs related to the lotteries, which are costs related to prizes awarded, marketing and other expenses.

• Administration expenses are incurred to operate the CCS and its programs in a cost-effective manner while maximizing all opportunities to further the CCS's mission. These include expenses related to human resources, information technology, facilities and finance department in addition to corporate governance activities, such as strategic planning, compliance and regulatory reporting, and financial planning. As discussed above, amounts related to fundraising and mission are allocated to those activities.

(j) Donated goods and services:

The value of donated goods and services is recorded as revenue and an expense in the financial statements when the fair value can be reasonably estimated and when the goods and services are normally purchased and would be paid for if not donated.

The CCS's programs benefit substantially from services in the form of volunteer time. The value of volunteer services is not recorded in these financial statements.

(k) Use of estimates:

The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the year. Significant items subject to such estimates and assumptions include obligations related to employee future benefits, carrying amount of intangible and capital assets, and allocation of expenses. Actual results could differ from those estimates.

2. Short-term investments

Short-term investments in the amount of $5,651 (2019 - $5,347) mature or are redeemable at various dates not exceeding 12 months, and with interest rates varying from 1.15% to 1.70% (2019 - 1.10% to 2.30%).

In addition, there are short-term investments in the amount of $12,464 (2019 - $12,130) managed by an independent investment manager, with interest rates varying from 1.57% to 6.5% (2019 – 1.42% to 4.50%) and with maturity dates from March 2020 to November 2027 (2019 – May 2019 to January 2029).

3. Long-term investments

							2020		2019
Pooled funds						$	82,578	$	73,884
Other investments							155		77
						$	82,733	$	73,961

Long-term investments have been placed in an independently managed portfolio of pooled funds, which can be promptly liquidated if required. These investments have been classified as longterm investments as the CCS does not intend to use these investments in the next 12 months. Long-term investments are recorded at fair value. The fair value of the pooled funds is determined based on year-end quoted market prices of the underlying assets in the pooled funds.

Other investments consist primarily of GIC’s and other fixed income securities with maturities greater than 12 months. The stated interest rates for the other investments are 1.40% to 1.55% (2019 - 1.20% to 1.55%) and maturity dates to February 2023 (2019 - to October 2020).

The pooled funds comprise the following asset classes:

	2020	2019
Fixed income	55.72 %	59.59 %
Canadian equity	21.46 %	21.14 %
Global equity	15.08 %	13.39 %
Money market	7.74 %	5.88 %

4. Intangible assets
		2020		2019
Cost	$	1,619	$	1,619
Accumulated amortization		(457)		(429)
	$	1,162	$	1,190

Camp Goodtimes:

The CCS has an agreement with the University of British Columbia (“UBC”) to provide the CCS with access to the UBC Loon Lake Camp. The camp facilities house the camp programs for children and teens who are undergoing or who have undergone cancer treatment, along with their siblings and families. This agreement began in January 2004 and ends on December 31, 2055, with lump-sum payments by the CCS totalling $1,619 and annual operating payments of $139 (2019 - $133) indexed for inflation in the future. Total lump-sum payments were capitalized and are amortized over the term of the agreement, subject to early termination rights by both parties. If this occurs, any unamortized amounts would be repaid to the CCS.

5. Capital assets

						2020		2019
				Accumulated		Net book		Net book
			Cost	amortization		value		value
Land		$	4,012	$ -	$	4,012	$	4,310
Buildings			48,788	24,346		24,442		30,881
Furniture and fixtures			6,362	5,856		506		192
Office equipment			16,397	15,749		648		294
Art collection			20	-		20		20
Vehicles			653	632		21		48
Leasehold improvements			2,251	2,193		58		33
Construction in progress			7,954	-		7,954		1,312
Work in progress			2,833	-		2,833		1,344
		$	89,270	$ 48,776	$	40,494	$	38,434

In 2018, the Board of Directors of the CCS approved a project to develop the Centre for Cancer Prevention and Survivorship (“CCPS”), which will be a nationwide centre of excellence conducting research and developing programming in the areas of cancer prevention and survivorship. CCPS, which is currently under construction, will be based in Vancouver and its construction is being funded in part by the Government of British Columbia, which has committed $10,000, contingent upon the achievement of certain building milestones.

5. Capital assets (continued)

Construction in progress of $7,954 (2019 - $1,309) relates to costs incurred on the construction of the Centre. Work in progress of $2,833 (2019 - $1,344) relates to costs incurred on the development of a constituent relationship management system. These assets are not available for use and therefore no amortization is being recorded.

6. Accounts payable and accrued liabilities

Included in accounts payable and accrued liabilities are government remittances payable of $129 (2019 - $124) relating to federal and provincial sales taxes, payroll taxes, health taxes and workers’ safety insurance.

7. Deferred revenue

					2020		2019
Balance, beginning of the year				$	19,178	$	16,755
Amounts received or receivable					12,570		12,860
Revenue recognised in the year					(13,384)		(10,437)
Balance, end of the year				$	18,364	$	19,178

8. Credit facilities

The CCS has entered into a credit facility agreement (the “Facility”) with a Canadian chartered bank, used by the CCS to issue letters of credit in support of its Ontario lotteries. The Facility has a maximum credit limit equal to $10,000 and drawings are secured by either cash or a guaranteed investment certificate held at the chartered bank. The Facility carries a fee of 0.45% per annum on any drawn amounts. As at January 31, 2020, the CCS had no letters of credit outstanding.

9. Employee future benefit plans

(a) Defined benefit pension liability is as follows:

		Registered Non-registered
		plan		plan		2020		2019
Defined benefit obligation	$	145,134	$	3,413	$	148,547	$	129,340
Fair value of plan assets Defined benefit pension		133,114		-		133,114		117,562
liability	$	12,020	$	3,413	$	15,433	$	11,778

The employee future benefit plan liabilities are estimates, based on actuarial assumptions, of liabilities that will be settled over a long-term time horizon.

The CCS is committed to providing full funding of the benefit plans and has put multiple strategies in place to reduce or limit the future costs and risks associated with the plans.

Plan assets include annuities which are accounted for on a non-settlement basis.

The most recent actuarial valuation of the defined benefit components of the pension plan and the non-registered supplemental pension plan was as of December 31, 2017, and the next required valuation will be as of December 31, 2020.

(b) Defined benefit liability for post-retirement benefits other than pensions

The plan for post-retirement benefits other than pensions is unfunded and therefore has no plan assets to report.

The most recent actuarial valuation of the post-retirement benefit plan was as of January 31, 2019, and the next required valuation will be as of January 31, 2022.

10. Externally restricted fund

Centre for Cancer Prevention and Other Capital
Survivorship Campaigns	Endowments	2020	2019
Balance, beginning of the year $ 2,557 $ 2,167	$ 8,590 $	13,314 $	11,006
Increase (decrease) in balance (2,086) 58	1,299	(729)	1,907
Appropriations / transfers (6,514) -	(673)	(7,187)	401
Balance, end of the year $ (6,043) $ 2,225	$ 9,216 $	5,398 $	13,314

11. Operations fund

a) Invested in capital assets

			2020			2019
Intangible assets (note 4)			$ 1,162		$	1,190
Capital assets (note 5)			40,494			38,434
			$ 41,656		$	39,624
Employee future benefits The employee future benefits balance comprises the followin			g amounts:
			2020			2019
Defined pension benefit liability (note 9(a))			$ (15,433)		$	(11,778)
Defined benefit liability for post-retirement benefits other than pensions (note 9 (b))			(30,888)			(27,244)
			$ (46,321)		$	(39,022)
Internally restricted The internally restricted balance comprises the following rese			rves:
		Balance,	Increase			Balance,
		beginning	(decrease)			end of
		of year		in fund		year
Research	$	2,539	$	(1,271)	$	1,268
Operating		17,000		23,787		40,787
Capital projects		34,000		(735)		33,265
	$	53,539	$	21,781	$	75,320

The amount invested in capital assets is computed as follows: b)

c)

During the year, $23,787 was transferred from the unrestricted balance to the internally restricted balance to fund ongoing operations.

12. Allocation of expenses

Certain administrative expenses are allocated to fundraising and mission activities based on an estimate of staff time related to each area of activity.

The administrative expense which have been allocated have impacted the following expense categories:

									2020		2019
Programs								$	29,814	$	25,371
Research									684		1,136
Advocacy									1,812		1,667
Fundraising									16,658		11,855
								$	48,968	$	40,029

13. Commitments

The CCS has entered into various agreements with approximate minimum aggregate annual commitments as follows:

									Equipment
							Premises		and other		Total
2021						$	7,056	$	61	$	7,117
2022							5,409		48		5,457
2023							5,087		29		5,116
2024							3,406		21		3,427
2025							871		6		877
Thereafter							617		-		617
						$	22,446	$	165	$	22,611

As at January 31, 2020, the Board of Directors has awarded research grants and program funding totalling $58,262 (2019 - $61,515), payment of which is expected to be made over the next four years, subject to future revenue and to certain performance conditions being met, as follows:

2021 $ 27,620

2022 18,478

2023 7,715

2024 4,449

Thereafter -

$ 58,262

14. Lotteries

The CCS conducts charitable lotteries in accordance with provincial regulations. The net proceeds are used by the CCS for mission-related expenses. During the fiscal year ended January 31, 2020, 1 lottery program (2019 – 1) was held in Ontario. The financial results were as follows:

							2020		2019
Revenue Expenses						$	9,841	$	9,598
Prizes							4,423		4,253
Marketing and other							2,543		2,789
							6,966		7,042
						$	2,875	$	2,556

15. Income from investments measured at fair value

Income earned is reported as follows:

					2020		2019
Net increase/(decrease) in fair value of investments				$	3,668	$	(3,633)
Interest and dividends income					4,249		3,364
Realized gains					2,525		3,661
Total investment income				$	10,442	$	3,392

Income earned on unrestricted funds				2020		2019
- recognized in the operations fund Income earned on restricted funds			$	9,334	$	3,117
- recognized in the externally restricted fund				1,108		275
Total investment income			$	10,442	$	3,392

16. Guarantees and contingencies

In the normal course of operations, the CCS enters into agreements that meet the definition of a guarantee. The CCS's primary guarantees are as follows:

The CCS purchases directors' and officers' insurance. The CCS has indemnified its past, present and future directors, officers, trustees, employees, volunteers and members, who sit on any duly constituted committee of the CCS, against expenses (including legal), judgements and any amount actually or reasonably incurred by them in connection with any wrongful act in which they are sued as a result of their service to the CCS, if they acted honestly and in good faith with a view of the best interests of the CCS.

The nature of these indemnification agreements prevents the CCS from making a reasonable estimate of the maximum exposure due to the difficulties in assessing the amount of the liability, which stems from the unpredictability of future events and the unlimited coverage offered to third parties. Historically, the CCS has not made any significant payments under such or similar indemnification agreements. At this time, the CCS is not aware of any claims under these guarantees and, therefore, no amount has been accrued in the financial statements with respect to these guarantees.

The CCS is party to legal actions arising in the ordinary course of operations. While it is not feasible to predict the outcome of these actions, it is the opinion of management that the resolution of these matters will not materially affect the CCS's financial position.

17. Related party transactions

During the fiscal year ended January 31, 2020, 1 member (2019 – 1) of the Board of Directors was a recipient of research funding through the CCS's normal competitive research grant process. This included $250 (2019 - $250) for programs for which they are directly responsible and $500 (2019 - $500) for programs in which they participate.

18. Financial risks

Risk management relates to the understanding and active management of risks associated with all areas of the CCS's activities and the associated operating environment. The CCS is primarily exposed to interest rate, market, foreign currency, credit and liquidity risks.

(a) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flow of a financial instrument will fluctuate because of changes in the market interest rate. The CCS’s credit facility agreement bears interest at a fixed rate. Consequently, the CCS is not subject to cash flow interest rate risk. The CCS’s short-term deposits and a portion of the long-term investments bear interest at various fixed rates and therefore are subject to fair value interest rate risk. The CCS’s other financial instruments are non-interest bearing and as such interest rate risk is minimal. There has been no change to the risk exposure from 2019.

18. Financial risks (continued)

(b) Market risk

The risks associated with the pooled funds are the risks associated with the securities in which the pooled funds are invested. The value of equity securities changes with stock market conditions, which are affected by general economic and market conditions. The fair value of securities will vary with developments within the specific companies or governments which issue the securities. The CCS manages this risk through controls to monitor and limit concentration levels. There has been no change to the risk exposure from 2019.

(c) Foreign currency risk

The fair value of securities denominated in a currency other than the Canadian dollar will be affected by changes in the value of the Canadian dollar in relation to the value of the currency in which the security is denominated. The CCS's investment policies mitigate this risk by limiting concentration levels. There has been no change to the risk exposures from 2019.

(d) Credit risk

The CCS is exposed to credit risk on its fixed income investments as a default by the bond issuer would cause a financial loss for the CCS. The CCS mitigates this risk by restricting fixed income investments to instruments with high quality credit ratings assigned by a wellrecognized credit agency, and by limiting exposure to individual investments. There has been no change to the risk exposures since 2019. The CCS does not consider credit risk on its accounts receivable to be significant given the nature of the CCS’s sources of revenue.

(e) Liquidity risk

Liquidity risk is the risk that the CCS will not be able to meet a demand for cash or fund its obligations as they come due. The CCS meets its liquidity requirements by preparing and monitoring forecasts of cash flows from operations, anticipating investing and financing activities and holding assets that can be readily converted into cash. There has been no change to the risk exposures since 2019.

19. Change in non-cash operating working capital

					2020		2019
Accounts receivable				$	(1,991)	$	4,500
Prepaid expenses					(240)		(1,205)
Accounts payable and accrued liabilities					3,332		(4,399)
Research grants payable					5,105		(1,855)
Deferred revenue					(814)		2,287
Other long-term liabilities					139		(234)
				$	5,531	$	(906)

20. Subsequent events

Amalgamation of the CCS and Prostate Cancer Canada

On February 1, 2020, the CCS amalgamated with the Prostate Cancer Canada to increase operational efficiencies and further strengthen and support cancer research, education and the needs of Canadians and their families dealing with the disease.

Prostate Cancer Canada’s audited financial statements for the period from April 1, 2019 to January 31, 2020 reported total revenue of $7,281, total assets of $21,610, and net resources of $1,827. As the amalgamation is effective February 1, 2020, these numbers are not reflected in the CCS’s audited financial statements as at January 31,2020.

COVID-19

Since January 1, 2020, the spread of COVID-19 has severely impacted many local economies around the globe. In many countries, including Canada, organizations and businesses are being forced to cease or limit operations for long or indefinite periods of time. Measures taken to contain the spread of the virus, including travel bans, quarantines, social distancing, and closures of non-essential services have triggered significant disruptions to organizations worldwide, resulting in an economic slowdown. Global stock markets have also experienced great volatility and a significant weakening.

Because of the pandemic, the CCS has cancelled many fundraising events and donation and investment revenue is expected to be significantly impacted. Offices have been closed and many service programs have been suspended due to the requirements of social distancing. As a response to the expected fall in revenues, steps have been taken to immediately decrease costs across the CCS.

The CCS has determined that these events are a non-adjusting subsequent event. Accordingly, the financial position and results of operations as of and for the year ended January 31, 2020 have not been adjusted to reflect their impact. The duration and impact of the COVID-19 pandemic, as well as the effectiveness of government and central bank responses, remains unclear at this time. It is not possible to reliably estimate the duration and severity of these consequences, as well as their impact on the financial position and results of the CCS for future periods.

Consolidated Financial Statements of

HEART AND STROKE FOUNDATION OF CANADA

And Independent Auditors' Report thereon Year ended August 31, 2020

KPMG LLP

Vaughan Metropolitan Centre 100 New Park Place, Suite 1400 Vaughan ON L4K 0J3

Canada

Tel 905-265-5900

Fax 905-265-6390

INDEPENDENT AUDITORS' REPORT

To the Board of Directors of Heart and Stroke Foundation of Canada

Qualified Opinion

We have audited the consolidated financial statements of Heart and Stroke Foundation of Canada (the Entity), which comprise:

· the consolidated statement of financial position as at August 31, 2020

· the consolidated statement of operations for the year then ended

· the consolidated statement of changes in net assets for the year then ended

· the consolidated statement of cash flows for the year then ended

· and notes to the consolidated financial statements, including a summary of significant accounting policies

(Hereinafter referred to as the "financial statements").

In our opinion, except for the possible effects of the matter described in the

"Basis for Qualified Opinion"

section of our auditors' report, the accompanying financial statements present fairly, in all material respects, the consolidated financial position of the Entity as at August 31, 2020, and its consolidated results of operations and its consolidated cash flows for the year then ended in accordance with Canadian accounting standards for not-for-profit organizations.

Basis for Qualified Opinion

In common with many charitable organizations, the Entity derives revenue from fundraising activities, the completeness of which is not susceptible to satisfactory audit verification. Accordingly, verification of revenues from non-online community-based programs was limited to the amounts recorded in the records of the Entity.

Therefore, we were not able to determine whether any adjustments might be necessary to:

· the current assets reported in the statements of financial position as at August 31, 2020 and August 31, 2019

· non-online community-based programs fundraising receipts and excess of revenue over expenses reported in the consolidated statements of operations for the years ended August 31, 2020 and August 31, 2019

© 2020 KPMG LLP, an Ontario limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

· the unrestricted net assets, at the beginning and end of the year, reported in the consolidated statements of changes in net assets for the years ended August 31, 2020 and August 31, 2019

· the excess of revenue over expenses reported in the consolidated statements of cash flows for the years ended August 31, 2020 and August 31, 2019.

Our opinion on the financial statements for the year ended August 31, 2019 was qualified accordingly because of the possible effects of this limitation in scope.

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the

"Auditors' Responsibilities for the Audit of the Financial Statements"

section of our auditors' report.

We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada and we have fulfilled our other ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with Canadian accounting standards for not-for-profit organizations, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Entity's ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Entity's financial reporting process.

Auditors' Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit.

We also:

· Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.

The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

· Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity's internal control.

· Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

· Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Entity's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Entity to cease to continue as a going concern.

· Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

· Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

· Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group Entity to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

Chartered Professional Accountants, Licensed Public Accountants Vaughan, Canada

November 20, 2020

Consolidated Statement of Financial Position (In thousands of dollars) August 31, 2020, with comparative information for 2019
	2020	2019
Assets
Current assets: Cash	$ 18,056	$ 9,599
Accounts receivable (note 2)	9,032	3,619
Inventory	263	1,546
Prepaid expenses	183	960
	27,534	15,724
Investments (note 3)	58,792	67,770
Investments - Impact fund (note 3)	36,299	36,837
Capital assets (note 4)	4,108	6,299
	$ 126,733	$ 126,630
Liabilities and Net Assets
Current liabilities: Accounts payable and accrued liabilities (note 9)	$ 11,329	$ 6,639
Research awards payable	25,946	35,049
Deferred revenue (note 5)	6,691	6,321
	43,966	48,009
Deferred contribution	506	–
Lease inducements	1,059	1,577
Employee future benefits (note 6)	10,973	5,323
	56,504	54,909
Net assets: Unrestricted	12,302	5,237
Internally restricted - Impact fund (note 7(a))	37,787	37,193
Internally restricted - others (note 7(b))	13,227	22,378
Endowments	6,913	6,913
	70,229	71,721

Commitments (note 11) Subsequent events (note 14)

$ 126,733 $ 126,630

See accompanying notes to consolidated financial statements.

On behalf of the Board:

Dr. Andrew Pipe Glenn Sauntry

Chair Chair, Finance and Audit Committee

Consolidated Statement of Operations (In thousands of dollars)

Year ended August 31, 2020, with comparative information for 2019

2020 2019

Revenue:

Fundraising receipts:

Online community-based programs	$ 4,020	$ 15,140
Non-online community-based programs	6,206	16,734
Direct marketing	31,961	28,373
Corporate sponsorship	4,785	5,589
Mission	5,679	6,488
Major gifts	30,737	32,407
	83,388	104,731
Less: net change in deferrals (note 5)	(1,244)	(1,251)
	82,144	103,480
Lottery	17,629	17,379
	99,773	120,859
Government sponsored projects and grants (note 5)	3,707	4,244
Government wage subsidy (note 2)	8,488	–
Interest, dividends and other financial income	4,524	8,885
	16,719	13,129
Total revenue	116,492	133,988
Direct costs: Fundraising (note 8)	13,049	17,738
Lottery (note 8)	10,594	11,611
	23,643	29,349
Net revenue before operating and mission expenses: Fundraising	69,095	85,742
Lottery	7,035	5,768
Government, investment, and other	16,719	13,129
	92,849	104,639
Operating expenses: General fundraising (note 8)	28,273	26,088
Administration (note 8)	4,312	4,229
	32,585	30,317
Funds available for mission	60,264	74,322
Mission programs: Research (note 8)	21,776	32,093
Health promotion and community programs (note 8)	34,636	36,129
	56,412	68,222
Excess of revenue over expenses before the undernoted	3,852	6,100
Changes in fair value of investments	1,301	(1,731)
Excess of revenue over expenses	$ 5,153	$ 4,369
See accompanying notes to consolidated financial statements.

Consolidated Statement of Changes in Net Assets (In thousands of dollars)

Year ended August 31, 2020, with comparative information for 2019

					2020	2019
		Internally restricted -	Internally
Unrestricted		Impact fund	restricted - others	Endowments	Total	Total
		(note 7(a))	(note 7(b))
Net assets, beginning of year $ 5,237		$ 37,193	$ 22,378	$ 6,913	$ 71,721	$ 67,169
Excess of revenue over expenses 5,153		–	–	–	5,153	4,369
Remeasurement and other items relating to employee future benefits	(6,645)	–	–	–	(6,645)	44
Endowment contributions	–	–	–	–	–	139
Interfund transfers	8,557	594	(9,151)	–	–	–
Net assets, end of year	$ 12,302	$ 37,787	$ 13,227	$ 6,913	$ 70,229	$ 71,721

See accompanying notes to consolidated financial statements.

Consolidated Statement of Cash Flows (In thousands of dollars) Year ended August 31, 2020, with comparative information for 2019
	2020	2019
Cash provided by (used in):
Operating activities: Excess of revenue over expenses	$ 5,153	$ 4,369
Items not affecting cash: Amortization of capital assets	1,994	1,947
Changes in fair value of investments	(1,301)	1,731
Reinvested realized investment income and gain on disposal of investments	(2,980)	(7,226)
Pension plan expense	269	307
Amortization of lease inducements	(518)	(422)
Write off of capital assets	334	–
Contributions to pension plan	(1,264)	(444)
Change in non-cash operating working capital: Accounts receivable	(5,413)	(734)
Inventory	1,283	(34)
Prepaid expenses	777	(141)
Accounts payable and accrued liabilities	4,690	(4,952)
Research awards payable	(9,103)	(3,350)
Deferred revenue	361	1,019
	(5,718)	(7,930)
Financing activities: Endowment contributions	–	139
Receipt of deferred contribution	506	–
	506	139
Investing activities: Additions to lease inducements	–	539
Purchases of investments	(85)	(39,922)
Proceeds on disposal of investments	13,381	10,861
Return of capital on annuity	510	–
Purchases of capital assets	(137)	(2,344)
	13,669	(30,866)
Increase (decrease) in cash	8,457	(38,657)
Cash, beginning of year	9,599	48,256
Cash, end of year	$ 18,056	$ 9,599
Consisting of: Cash	$ 17,033	$ 9,599
Cash - Impact fund	1,023	–
	$ 18,056	$ 9,599
See accompanying notes to consolidated financial statements.

Notes to Consolidated Financial Statements (In thousands of dollars)

Year ended August 31, 2020

The Heart and Stroke Foundation of Canada (the "Foundation") is a registered charity exempt from income taxes, incorporated under the provisions of the Canada Not-for-profit Corporations Act. The Foundation's mission is to "Promote health. Save lives. Enhance recovery." The Foundation's vision is "Life. Uninterrupted by heart disease and stroke."

1.

Significant accounting policies:

(a) Basis of presentation and consolidation:

These consolidated financial statements include the assets, liabilities, revenue and expenses of the Foundation and all of its subsidiaries in which the Foundation has effective control, including the Heart and Stroke Foundation of British Columbia and Yukon, Heart and Stroke Foundation of Nova Scotia, Heart and Stroke Foundation of Ontario, Heart and Stroke Foundation of Prince Edward Island Inc., and Heart and Stroke Foundation of Quebec.

These consolidated financial statements have been prepared in accordance with Canadian accounting standards for not-for-profit organizations applied in Part III of the Chartered Professional Accountants of Canada Handbook.

(b) Revenue recognition:

The Foundation follows the deferral method of accounting for contributions. 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. Restricted contributions and restricted investment income are recognized as revenue in the year in which the related expenses are incurred. Endowment contributions, where donors have restricted the original contribution to be maintained in perpetuity, are recognized as direct increases in endowments net assets.

Sales of educational materials are recorded when shipment has occurred, title has passed and when collection is reasonably assured.

Notes to Consolidated Financial Statements (continued) (In thousands of dollars)

Year ended August 31, 2020

1. Significant accounting policies (continued):

(c) Financial instruments:

Financial instruments are recorded at fair value on initial recognition. Equity instruments that are quoted in an active market are subsequently measured at fair value. All other financial instruments are subsequently recorded at cost or amortized cost, unless management has elected to carry the instruments at fair value. The Foundation has elected to carry all investments at fair value except for the annuity and social impact bond, which are recorded at cost.

Transaction costs incurred on the acquisition of financial instruments measured subsequently at fair value are expensed as incurred. All other financial instruments are adjusted by transaction costs incurred on acquisition and financing costs, which are amortized using the straight-line method.

Financial assets are assessed for impairment on an annual basis at the end of the fiscal year if there are indicators of impairment. If there is an indicator of impairment, the Foundation determines if there is a significant adverse change in the expected amount or timing of future cash flows from the financial asset. If there is a significant adverse change in the expected cash flows, the carrying value of the financial asset is reduced to the highest of the present value of the expected cash flows, the amount that could be realized from selling the financial asset or the amount the Foundation expects to realize by exercising its right to any collateral. If events and circumstances reverse in a future year, an impairment loss will be reversed to the extent of the improvement, not exceeding the initial carrying value.

(d) Inventory:

Inventory is carried at the lower of average cost and net realizable value. Cost is determined on a weighted average basis and includes direct and indirect expenses incurred in bringing an item to its existing location and condition.

Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs necessary to sell an item.

Notes to Consolidated Financial Statements (continued) (In thousands of dollars)

Year ended August 31, 2020

1. Significant accounting policies (continued):

(e) Capital assets:

Capital assets, which are initially recorded at cost, are amortized on a straight-line basis over their estimated useful service lives as follows:

Furniture and fixtures 8 years

Equipment 5 years

Computer hardware and software 3 - 5 years

Leasehold improvements Term of lease

Long-lived assets, including capital assets, are written down to fair value or replacement cost to reflect partial impairments when conditions indicate that the assets no longer contribute to the Foundation's ability to provide goods and services, or that the value of future economic benefits or service potential associated with the long lived assets are less than their net carrying amounts.

(f) Research awards payable:

Research awards are recorded annually as payable when signed letters of acceptance are received from the awardees.

Certain research projects funded by the Foundation extend over a number of years. Such projects are reviewed annually and further funding is provided conditional upon accomplishment of specified performance criteria and availability of research funds. Accordingly, research awards payable, as shown on the consolidated statement of financial position, do not include a provision for funding on multi-year research projects that extend beyond the subsequent year.

Unexpended balances of terminated grants are offset against the current year's expenses.

(g) Lease inducements:

The Foundation enters into long-term leases and receives certain lease inducements and rent allowances, which are amortized on a straight-line basis over the expected lease term.

Notes to Consolidated Financial Statements (continued) (In thousands of dollars)

Year ended August 31, 2020

1. Significant accounting policies (continued):

(h) Employee future benefits:

The Foundation's pension plans consist of a defined benefit plan and a defined contribution plan. The defined benefit plan provides benefits for employees who joined prior to November 1, 2014. Employees who joined after November 1, 2014 were enrolled in the defined contribution plan. Active members in the defined benefit plan stopped accruing credited service in the plan as of October 31, 2015 and transitioned to the defined contribution plan as of November 1, 2015. The pension contribution is based on length of service and rate of pay.

(i) Defined benefit plan:

The Foundation records its obligations as being its total liabilities and related costs less the plan assets.

The Foundation has adopted the following policies:

· The cost of pensions and other retirement benefits earned by employees is actuarially determined using the projected benefit method pro-rated on service and management's best estimate of expected plan investment performance for funded plans, salary escalation, retirement ages of employees and expected health-care costs.

· Plan assets are measured at fair value.

· Actuarial gains (losses) on plan assets arising from the difference between the actual return on plan assets for a period and the expected return on plan assets for that period are immediately recognized in the consolidated statement of changes in net assets. For the purpose of calculating the expected return on plan assets, the assets are valued at fair value. Actuarial gains (losses) on the accrued benefit obligation, arising from differences between actual and expected experience and from the changes in the actuarial assumptions used to determine the accrued benefit obligation, are immediately recognized in the consolidated statement of changes in net assets.

Notes to Consolidated Financial Statements (continued) (In thousands of dollars)

Year ended August 31, 2020

1.

Significant accounting policies (continued):

(ii) Defined contribution plan:

The Foundation recognizes the current service cost of employee future benefits for the year equal to the Foundation's contributions required to be made in the year, in exchange for employee services rendered during the year; and estimated present value of any contributions required to be made by the Foundation in future years related to employee services rendered during the year.

(i) Expenses:

Direct costs are those directly attributable to various fundraising, lottery or other programs.

General fundraising expenses include operating and salary costs related to fundraising, but not specifically attributable to a fundraising program.

Research expenses include grants for research projects, fellowships, new and career investigator awards, graduate student awards and other research-related activities, including administration of research programs and awards, strategic planning of research funds and public messaging of knowledge from research findings.

Health promotion and community programs expenses include all spending related to the promotion of healthy living and advocacy. This spending focuses on activities related to healthy communities, prevention and awareness and heart healthy children and youth.

The expenses of the Foundation are recorded on an accrual basis in the year they are incurred.

(j) Allocation of expenses:

The Foundation allocates certain costs by identifying the appropriate basis of allocating and applying that basis consistently each year. The cost of fundraising activities and general support include both costs which can be directly attributed and costs which are allocated to each function.

The basis of allocation varies depending on the nature of the expense and includes estimates of time spent, material costs, delivery costs and head count.

Notes to Consolidated Financial Statements (continued) (In thousands of dollars)

Year ended August 31, 2020

1.

Significant accounting policies (continued):

(k) Foreign currency translation:

Monetary assets and liabilities denominated in foreign currencies are translated at the exchange rate in effect at the consolidated statement of financial position date, whereas other assets and liabilities are translated at the exchange rate in effect at the transaction date. Revenue and expenses denominated in foreign currency are translated at the rate in effect on the transaction date. Gains and losses are included in the consolidated statement of operations.

(l) Contributed material and services:

Contributed materials and services are recognized only if the fair value can be reasonably estimated at the date of contribution and when the materials and services are used in the normal course of the Foundation's operations and would otherwise have been purchased. There were no significant amounts of contributed material and services in 2020 or 2019.

A substantial number of volunteers contribute a significant amount of their time each year. Because of the difficulty of determining the fair value, these contributed services are not recognized or disclosed in the consolidated financial statements.

(m) Government assistance:

The Foundation has applied for financial assistance under available government incentive programs. Government assistance related to current expenses is recognized as revenue during the year.

(n) Use of estimates:

The preparation of consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the year. Significant items subject to such estimates and assumptions include certain receivables, allocation of expenses and assets and obligations related to employee future benefits. Actual results could differ from those estimates.

Notes to Consolidated Financial Statements (continued) (In thousands of dollars)

Year ended August 31, 2020

2.

Government wage subsidy:

The Foundation applied for and received government assistance in the form of the Canada Emergency Wage Subsidy ("CEWS"). Total CEWS recorded as government wage subsidy in the consolidated statement of operations amounts to $8,488, of which $6,281 is included in accounts receivable as at year-end. Management believes that it is in compliance with all eligibility criteria under the CEWS program.

3.

Investments:

	2020	2019
Measured at fair value: Pooled funds: Canadian equity	$ 20,182	$ 22,020
Foreign equity	20,796	21,296
Canadian fixed income	17,264	18,593
Alternative strategies	–	5,405
	58,242	67,314
Measured at cost Social impact bond (note 12)	550	456
Investments	58,792	67,770

Measured at fair value:

Pooled funds:

Canadian equity	5,276		4,529
Foreign equity	9,420		10,340
Canadian fixed income	4,613		4,468
	19,309		19,337
Measured at cost Annuity		16,990		17,500
Investments - Impact fund		36,299		36,837
Total investments	$	95,091	$	104,607

Notes to Consolidated Financial Statements (continued) (In thousands of dollars)

Year ended August 31, 2020

4. Capital assets:
			2020	2019
	Cost	Accumulated amortization	Net book value	Net book value
Furniture and fixtures	$ 562	$ 209	$ 353	$ 515
Equipment	84	34	50	295
Computer hardware and software	6,063	3,759	2,304	3,525
Leasehold improvements	3,886	2,485	1,401	1,964
	$ 10,595	$ 6,487	$ 4,108	$ 6,299
5. Deferred revenue:

Deferred revenue related to expenses of future periods represent unspent externally restricted grants and donations for specific programs. Net change in deferrals on the consolidated statement of operations represent the net of total funds received during the year and total funds recognized as revenue in respect of fundraising receipts. During the year, $1,244 (2019 -

$1,251) of designated fundraising receipts were deferred.

				2020	2019
	Government
	sponsored
	projects and
	grants	Fundraising	Other	Total	Total
Balance, beginning of year	$ 1,713	$ 1,867	$ 2,741	$ 6,321	$ 4,834
Funds received	3,493	3,066	637	7,196	7,328
Funds recognized
as revenue	(3,707)	(1,822)	(1,183)	(6,712)	(5,841)
Excess funds owing to
government funders	(114)	–	–	(114)	–
Balance, end of year	$ 1,385	$ 3,111	$ 2,195	$ 6,691	$ 6,321
Change in deferred
revenue	$ (214)	$ 1,244	$ (546)	$ 484	$ 1,487

Notes to Consolidated Financial Statements (continued) (In thousands of dollars)

Year ended August 31, 2020

5.

Deferred revenue (continued):

Government sponsored projects and grants deferred revenue includes amounts that have been advanced by the federal and provincial governments for various projects. These projects are managed and executed by the Foundation in partnership with other health organizations and stakeholders in Canada, including the respective governments. Any part of these funds that have not been used belongs to the respective governments and are reclassified to accounts payable and accrued liabilities as excess funds owing to government funders in the table above.

6.

Employee future benefits:

The Foundation maintains a defined benefit pension plan and a defined contribution plan.

(a)	Defined benefit pension plan: The defined benefit plan is registered under the Information about the Foundation's plan is as follows:	Pension Benefits	Act (Ontario).
		2020	2019
	Fair value of plan assets	$ 43,361	$ 47,052
	Accrued benefit obligation	(54,334)	(52,375)
	Employee future benefits liability	$ (10,973)	$ (5,323)

The Foundation measures its defined benefit obligations and the fair value of the defined benefit plan assets for accounting purposes as at August 31 of each year. The most recent actuarial valuation of the plan for funding purposes was prepared as at January 1, 2020 and the next required actuarial valuation will be as at January 1, 2021.

(b) Defined contribution pension plan:

Under the terms of the defined contribution pension plan, eligible employees contribute a range of 2% - 4% of their earnings, which the Foundation is required to match. In addition, existing employees who migrated from the defined benefit pension plan are eligible to receive an additional contribution from the employer, the transition top up, ranging from 0.5% - 5.5%. Employer contributions for the year were $1,533 (2019 - $1,829).

Notes to Consolidated Financial Statements (continued) (In thousands of dollars)

Year ended August 31, 2020

7.

Internally restricted net assets:

Internally restricted net assets represent amounts that have been designated by the Board of Directors to fund grants awarded in the current year and other approved Board of Director initiatives.

The Foundation sets the amount of internally restricted net asset balances in proportion to risk and economic conditions, and manages fund restrictions to ensure the Foundation's mission and strategic plans are accomplished.

Internally restricted net assets are not available for use by the Foundation for any purpose other than those outlined below, without prior approval by the Board of Directors. Internally restricted net assets consist of the following:

(a) Impact fund:

The Board of Directors approved the establishment of an internally restricted fund to restrict the net gains of both the Vancouver and Winnipeg fiscal 2018 building sales including all resulting investment income. These funds are Board designated to fund transformational strategic initiatives over approximately a 10-year period.

(b) Others:

2020 2019

Future grant awards (i) $ 5,118 $ 13,815 Reserve (ii) 8,109 8,563

$ 13,227 $ 22,378

(i) Future grant awards:

The Board of Directors has determined that an amount equal to at least 50% of the future grant awards and commitments should be internally restricted.

(ii) Reserve:

The Board of Directors determines at the end of each year an amount that should be held in reserve against unforeseen events. The reserve is based on a formula approved by the Board of Directors.

Notes to Consolidated Financial Statements (continued) (In thousands of dollars)

Year ended August 31, 2020

8.

Allocation of expenses:

Fundraising, administration and mission activities include both costs, which can be directly attributed, and general support expenses, which have been allocated. This is summarized as follows:

2020 2019

Indirect fundraising

and

Fundraising administration Mission

direct costs costs activities Total Total

Fundraising direct costs	$ 13,049	$ –	$ –	$ 13,049	$ 17,738
Lottery direct costs	10,594	–	–	10,594	11,611
General fundraising	–	28,239	34	28,273	26,088
Administration	–	4,289	23	4,312	4,229
Research	–	2,641	19,135	21,776	32,093
Health promotion and
community programs 5,666		15,357	13,613	34,636	36,129
$ 29,309		$ 50,526	$ 32,805	$ 112,640	$ 127,888

9.

Severance:

Pursuant to its strategic plan, the Foundation took restructuring measures in the year to improve its ability to deal with continued economic uncertainty and enhance sustainability due to the continued impacts of the COVID-19 pandemic, which is described in note 14. Total severance expense related to the restructuring included in various expenses on the consolidated statement of operations amounted to $4,077. Included in accounts payable and accrued liabilities are $3,572 in severance accruals relating to individuals who will be paid out agreed amounts that will end on dates ranging from October 2020 to August 2022.

10.

Banking facilities:

On June 29, 2015, the Foundation entered into a credit facility agreement for a total line of credit comprising a $6,000 revolving line of credit for general business purposes and a $37,000 revolving line of credit for letters of guarantee in support of lottery licenses, available to a maximum of $37,000. The first facility bears interest at the prime rate and is due on demand. There is no amount drawn on this facility as at August 31, 2020 and 2019. The second facility has specific fees payable of 0.3% on the issue of the respective letters of guarantee. As at year end, there were letters of guarantee outstanding of $6,653 (2019 - $6,565).

Notes to Consolidated Financial Statements (continued) (In thousands of dollars)

Year ended August 31, 2020

10.

Banking facilities (continued):

The Foundation has pledged a specific portion of its investments in the amount of $40,978 (2019 - $43,316) as security for the second facility and must maintain an aggregate market value for cash and investments of at least $47,000.

11.

Commitments:

Heart and

Stroke Foundation Canadian Partnership

Research for Stroke Operating

awards (a) Recovery (b) leases (c) Total

2021 $ – $ 1,180 $ 2,886 $ 4,066

2022 7,691 1,400 2,864 11,955

2023 1,483 1,380 2,489 5,352

2024 581 – 2,210 2,791

2025 381 – 2,234 2,615

Thereafter 100 – 10,175 10,275

$ 10,236 $ 3,960 $ 22,858 $ 37,054

(a) Research awards:

Applications for research grants are generally multi-year in nature. However, the Foundation only commits to and expenses one year at a time, with the subsequent years of research awards subject to annual review and approval. If specified performance criteria are met, and funds are available, further funding of existing multi-year research awards would be forthcoming.

Notes to Consolidated Financial Statements (continued) (In thousands of dollars)

Year ended August 31, 2020

11.

Commitments (continued):

(b) Heart and Stroke Foundation Canadian Partnership for Stroke Recovery:

The Heart and Stroke Foundation Canadian Partnership for Stroke Recovery ("HSFCPSR") is an independently incorporated registered charity created to facilitate its long-term scientific success in promoting research on recovery after stroke. HSFCPSR was established by the Foundation in conjunction with the Ottawa Hospital Research Institute, the University of Ottawa, the Sunnybrook Health Sciences Centre, the Baycrest Centre for Geriatric Care, University Health Network, Memorial University of Newfoundland, the University of British Columbia and the University of Calgary. The Foundation has the right to select four of the 13 members of HSFCPSR's board and is, therefore, able to contribute to HSFCPSR's activities, operations and strategic direction.

In the current year, the Foundation transferred $1,500 (2019 - $2,030) in funding to HSFCPSR. Future funding commitments to HSFCPSR by the Foundation are noted in the table above.

The funding commitment is subject to total matching funding commitments by other HSFCPSR stakeholders.

(c) Operating leases:

The Foundation has lease commitments for premises used in its operations. These leases expire on or before May 31, 2031.

12.

Social impact bond:

In 2017, the Foundation launched a Community Hypertension Prevention Initiative, a program aimed at preventing the onset of hypertension among Canadians. The Foundation has raised funds from a group of investors. Connected to this arrangement is a parallel agreement between the Foundation and the Public Health Agency of Canada ("PHAC") that describes performance-based outcome payments from PHAC to the Foundation and back to the investors. This arrangement is a form of financing known as Social Impact Bond.

Notes to Consolidated Financial Statements (continued) (In thousands of dollars)

Year ended August 31, 2020

12.

Social impact bond (continued):

The $3,400 cost of the program is funded from money raised from investors, consisting of three capital calls. The first investor capital call of $1,200, second capital call of $1,700 and final capital call of $500 were received in 2017, 2019 and 2020, respectively, and were recorded as deferred revenue. Revenue is recognized as expenses of the program occur. During the year, the Foundation recognized a total of $1,137 (2019 - $1,113) in revenue and related program expenditures. Additional funds of $85 (2019 - $59) were invested in the program during the year. In addition, the Foundation received a donation of units in the social impact bond valued at $9 (2019 - $468).

PHAC has agreed to provide an aggregate outcome payment of up to a maximum of $4,000 as an aggregate return to investors if the program is successful and has guaranteed a minimum aggregate outcome payment of $1,000. Outcome payments from PHAC are triggered by two outcomes, first, the number of participants enrolled in the program and the second is based on changes in blood pressure that occur in the target population over the course of the initiative. Aggregate PHAC outcome payments received to date total $729 with a final payment scheduled for December 2020. In addition to the final outcome payment, investors will also receive back an amount representing unspent capital due to modifications to the initiative as a result of COVID-19.

13.

Financial risk management:

The main risks to which the Foundation's financial instruments are exposed are liquidity risk, market price risk, interest rate risk, and credit risk. It is management's opinion that the Foundation is not exposed to significant foreign currency risk.

(a) Liquidity risk:

Liquidity risk is the risk that the Foundation will be unable to fulfill its obligations on a timely basis or at a reasonable cost. The Foundation manages its liquidity risk by monitoring its operating requirements. The Foundation prepares budget and cash forecasts to ensure it has sufficient funds to fulfill its obligations.

Notes to Consolidated Financial Statements (continued) (In thousands of dollars)

Year ended August 31, 2020

13.

Financial risk management (continued):

(b) Market price risk:

Market risk arises as a result of investing in equity securities and fixed income securities. Fluctuations in market prices expose the Foundation to a risk of loss. The Foundation manages market risk by substantially investing in equities and fixed income pooled mutual funds that meet specific investment criteria established and approved by the Board of Directors and are designed to adequately diversify the Foundation's investments to reduce exposure to market risk. Professional investment managers invest and manage the investment portfolio in accordance with the Foundation's investment policy statement. These equity and fixed income investments are recorded at fair value. Fair value estimates are made at a specific point in time and may not be reflective of future value. The Foundation does not hold or issue financial instruments for trading purposes and does not hold or invest in derivative financial instruments.

(c) Interest rate risk:

The Foundation is exposed to interest rate risk as the value of its investments fluctuates in accordance with fluctuations in interest rates. The Foundation manages its interest rate risk by monitoring the performance of the individual investments and by ensuring compliance by the investment managers with the Foundation's investment policy statement.

(d) Credit risk:

Financial instruments that potentially subject the Foundation to concentrations of credit risk are cash, investments and accounts receivable. The Foundation places its cash in interest- bearing accounts or instruments insured by Canadian Deposit Insurance Corporation. As at August 31, 2020, the Foundation has a provision for doubtful accounts of $27 (2019 -

$25). The Foundation believes that an adequate provision has been made for accounts receivable to the extent that collection is doubtful.

Notes to Consolidated Financial Statements (continued) (In thousands of dollars)

Year ended August 31, 2020

14.

Subsequent events:

During the year, the COVID-19 outbreak was declared a pandemic by the World Health Organization and has had a significant financial, market and social dislocating impact. This has resulted in governments worldwide, including the Canadian and provincial governments, enacting emergency measures to combat the spread of the virus. These measures, which include the implementation of travel bans, self-imposed quarantine periods and social distancing, have caused material disruption in Canada to our fundraising efforts. In addition, the Foundation has also experienced temporary declines in the fair value of investments and investment income, termination of employees and temporary reduction of granting activities. During the year, the Foundation was eligible and applied for CEWS government funding, as described in note 2. In addition, the Foundation undertook restructuring activities and incurred related expenses, as described in note 9.

The situation is dynamic and the ultimate duration and magnitude of the impact on the economy and the financial effect on operations is not known at this time. These emergency measures and economic impacts could include potential future decreases in donations and income.

15.

Comparative information:

Certain comparative information has been reclassified to conform with the consolidated financial statement presentation adopted in the current year.

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[1] See accompanying notes to the financial statements.