MANAGEMENT DISCUSSION AND ANALYSIS INTRODUCTION
INTRODUCTION
The following discussion and analysis should be read in conjunction with our audited consolidated financial statements and the accompanying notes. The consolidated financial statements have been prepared in accordance with the Canadian accounting standards for not-for-profit organizations. All amounts are expressed in Canadian dollars unless otherwise noted. Any reference to “we” “us” or “our” refers to March of Dimes Canada and Ontario March of Dimes, which have consolidated. Any grading or rating performance is explained in the subsequent narrative and the colours are explained on page six.
2012-2013 FINANCIAL MANAGEMENT AND PERFORMANCE
The Finance and Corporate Services department is responsible for financial planning and analysis, management and reporting for Ontario March of Dimes and its subsidiaries. Financial services are organized by program divisions having responsibility for treasury, budget development, financial transactions, contract management, audit and all financial policies and procedures. The department ensures compliance with both Canada Revenue Agency and the Canadian accounting standards for not-for-profit organizations.
Centralized corporate services provides coordination and a policy framework on facilities and lease management, management of telecommunications and capital expenditure policies and controls, purchasing standards and procedures, forms management and control, and manuals and administrative policies. One project completed this year was a review checklist for 93 leases to ensure renewals and new leases meet standards. This checklist helped ensure quality control when lease management was transferred to Financial Services Managers in regional offices.
2012-2013 was an excellent financial year for OMOD and MODC. Gross revenue increased by 8% over 2011-2012 and generated a net operating surplus of $1.47 million, a 437% improvement over the prior year. All departments contributed to this successful result. Independent Living Services revenues grew by over $2.5 million and proprietary services exceeded the net target goal. Employment Services generated a surplus of $895,000, a $1.34 million improvement from the prior year, when the program incurred a $449,000 loss. The Passport Program grew from $2.2 million to $8 million. Fund Development produced $3.36 million net revenue, 15.7% higher than forecast. Businesses generated a net of $98,000 and non-funded programs were $89,000 better in fees than planned. Administration costs were also $600,000 less than budgeted.
Program recoveries grew by $4.5 million as a result of the expansion of the Passport Program. Government grant revenue increased by $1.14 million, fees by $484,000 and fundraising revenue by $453,000. Business revenue declined slightly, $17,000 lower than the prior year.
In 2012-2013, 88.5% of expenditures were on service delivery, 2.9% on fundraising, and 8.6% on administration and amortization. However, $25.5 million or 27.9% of expenditures were not charged any administration, either because there are administration cost centres or it was disallowed by government contract. The latter includes all funding to individuals for home and vehicle modifications, assistive devices acquisition and maintenance, training grants, or personal expenses through the Passport Program. Excluding these, the true cost of administration on the balance of program activity is 10.96%.
March of Dimes had an operating surplus for 2012-2013 of $1,471,712 or 1.58% of total revenues. 98.42% of funds received in 2012-2013 were spent in the year raised on service delivery and operations. Generally, surplus is transferred each year to support our stabilization reserve and capital reserve, providing working capital and funds to maintain our owned headquarters and other properties. This year, in addition to these allocations, the Board allocated $400,000 to the Paul Martin Sr. Biomedical and Rehabilitation Research Fund, created a new $300,000 program development and evaluation fund, and $365,000 was received in donor designated funds and is carried on the balance sheet.
Total assets as of March 31, 2013 were $20.6 million, up from $18 million the previous year. Cash and cash equivalents are $9.3 million, $1.84 million higher than last year. Working capital is at $4.52 million, up from $3.64 million at the same time last year. One addition to the asset report is the fair market valuation option taken this year on the land owned at 10 Overlea Boulevard, headquarters of MODC.
Total capital purchases were $629,651, $338,472 from funded programs and $291,179 from the donor funded capital budget. Amortization for the latter was $320,724. Government funding policies do not follow GAAP and capital purchases are therefore not amortized.
PROGRAM PERFORMANCE
March of Dimes tracks both the number of consumer services delivered and the number of service hours this represents. Both statistics are tracked and reported as the form and intensity of each service varies significantly, and either statistic alone does not give a true picture of the service. For example, some services are delivered to groups and individuals and some are delivered by volunteers and front-line employees. Some are short and infrequent, such as the provision of information, while others such as personal care, take more time and are delivered with greater frequency.
| 12/13 Actual |
12/13 Forecast |
11/12 Actual |
12/13 Actual |
12/13 Forecast |
11/12 Actual |
| Independent Living |
3,550 |
3,800 |
3,530 |
2,004,000 |
1,850,000 |
1,829,495 |
|---|
| Employment Services |
7,250 |
8,000 |
12,721 |
211,560 |
201,400 |
295,550 |
|---|
| Passport Program |
1,584 |
1,700 |
400 |
9,200 |
17,000 |
4,000 |
|---|
| AccessAbility Services |
8,217 |
8,000 |
7,220 |
78,800 |
76,000 |
76,287 |
|---|
| Recreation/Integration |
7,913 |
6,160 |
2,760 |
109,200 |
85,000 |
96,722 |
|---|
| Peer Support Services |
26,400 |
26,500 |
26,000 |
120,000 |
120,000 |
115,000 |
|---|
| Conductive Education |
370 |
500 |
410 |
14,580 |
19,000 |
14,802 |
|---|
| TOTAL |
55,284 |
54,660 |
53,041 |
2,547,340 |
2,368,400 |
2,431,856 |
|---|
55,284 consumer services were delivered in 2012-2013 representing 2.55 million hours of service. This is a 4.2% increase in service from the prior year and a 4.7% increase in hours of service delivered. The largest contributors to the service increases were Independent Living Services, the new ModMobility® transportation service, the growth of the Passport Program and increased demand for the Assistive Devices Program. Employment Services experienced some reduction in the numbers of consumers served with the closure of the Workers Safety and Insurance Board (WSIB) Labour Market Re-entry contract in 2012. The Conductive Education program also experienced a drop in numbers of consumers served due to staff vacancies, hence lower capacity.
Consumers in each program are surveyed at regular intervals to track satisfaction with the program. Outcomes are compared to goals and the impact of particular interventions against program objectives. Results are also compared to prior surveys to assess positive or negative trends. Consumer satisfaction in all programs surveyed in 2012-2013 remained high with improvements or retention of rating levels from prior surveys.
KEY PERFORMANCE INDICATORS (KPI)
All programs establish key performance indicators that include measures related to program efficiency and effectiveness, service volumes, and participant satisfaction. With the exceptions of the variances noted under the program performance section, service goals were met and program participant satisfaction remained stable in 2012-2013.
UNDERSTANDING AND MANAGING RISK
Ontario March of Dimes established an enterprise risk management framework in 2002, with management implementing an organization-wide program for training and monitoring risk. The Board’s Risk and Audit Committee oversees the auditing of management, Finance Committee performance, approves the annual audit plan and internal audit project reports, and reports results to the Board of Directors. The Internal Audit Consultant completed audits of payroll, HR policy compliance, information technology project management, back-up, recovery and access, the ISO regional audit program, preferred supplier program, purchasing, leases and fixed assets, and contract management. On an annual basis, the Internal Audit Consultant reviews the travel and expenses of the CEO and President to ensure compliance with MOD policies.
Ontario March of Dimes recognizes the following key risks to its operations:
- The majority of the organization’s funds come from government and crown corporations in the form of grants or fees to purchase specific services. The organization is therefore vulnerable to changes in legislation, government funding priorities or policies affecting its approach to service delivery, contract changes, re-tendering, or termination of contracts.
- Most revenue received is designated for specific uses and cannot be retained or used for other purposes.
- Ontario March of Dimes is vulnerable to changes in the political, economic or social environment which affect funding through purchased services or donor support.
- A number of key services are dependent on discretionary dollars raised through fund development, business operations and proprietary services. These programs are at risk when budget targets are not achieved.
- Strategic goals, such as building the brand and expanding services across Canada require an investment of funds and community building with little guarantee of immediate return on investment. Our Government Relations and Advocacy department, in conjunction with senior management, monitor government policy and identify opportunities and risks while cultivating proactive relationships with government at senior levels to promote the issues impacting people with disabilities as well as to mitigate risk to the organization.
All employees are individually evaluated annually based on a comprehensive set of performance measures and core competencies for their particular job. Managers are also evaluated based on achievement of program goals and key performance indicators from their annual program plans. Pay is based on merit and a comprehensive salary structure. The policy of March of Dimes is to provide fair compensation, and be in the mid-range of the marketplace regarding pay levels for most staff and the 75% range for senior management. All employees are eligible for a pay bonus for exceptional performance. For senior management, compensation includes a bonus based in part on goals submitted to the Executive Compensation Committee of the Board and evaluated at year end by the committee, which reports directly to the Board, and in part, on meeting or exceeding personal goals.
Annual program plans are developed by each manager and submitted to management who create one plan to present to the Board in March for implementation effective April 1st each year. Plans relate to strategic goals from our five-year strategic plan, and goals and objectives focus on three areas: on-going activities, new or expansion initiatives, and quality improvements. Each objective has measurable performance indicators and each plan must identify related risks and integration strategies.
Plans are evaluated twice each year: at forecast in November and at fiscal year-end. The Program Research department coordinates confidential satisfaction surveys, completed by both program participants and employees, providing critical feedback to management in regards to service delivery and the quality of working conditions from the employees’ perspectives. External researchers and interviewers are used to maintain confidentiality. This department also works with each program to establish program logic models to evaluate processes and pilot projects. The manager works with external research bodies to co-fund research and evaluate projects as required.
ISO certification is managed and monitored centrally for all Independent Living Services. The Home and Vehicle Modification Program is undergoing the process to achieve certification over the next 12-18 months. Oversight for this program will move from the Associate Director of Independent Living Services to the newly created office of the Chief Administrative Officer in 2013-2014.
INTERNAL CONTROLS
A number of internal controls are in place which are annually reviewed and signed off by management and comprise part of the annual external audit. Employees and volunteers annually sign off on a code of business conduct, and provide proof of professional designations, insurance and other requirements to perform their duties. An extensive in-house training program is managed to ensure staff achieve and retain certification requirements, receive and complete required job skills and training in a timely fashion, and are able to achieve the goals of the organization.
Comprehensive operational and policy manuals are in place and regularly updated for all programs and corporate resource departments such as Finance, Human Resources and IT.
Reliability of financial reporting, including budgeting, monthly statements, financial analysis and transactional procedures are monitored by both management and the Finance Committee.
Governance and management functions are clearly delineated. The Internal Audit (IA) Consultant reports independently to the Board, through the Risk and Audit Committee. Assignments may be defined by the Committee, IA or management, but all are reported to the Committee.
Emergency preparedness and business continuity planning are part of management’s annual planning responsibility.
GOVERNANCE
This is the last annual report that consolidates information from two separate corporations: March of Dimes Canada, which is federally chartered and Ontario March of Dimes which is provincially chartered. Industry Canada granted Ontario March of Dimes a continuance as March of Dimes Canada and the former provincial charter was surrendered. The combined operations of OMOD and MODC will now operate as one federally chartered charity, under the OMOD charitable number and MODC name. The previous March of Dimes Canada charitable corporation was granted continuance as March of Dimes Foundation. The Ontario March of Dimes Non-Profit Housing Corporation is now federally chartered as March of Dimes Canada Non-Profit Housing Corporation and will also pursue opportunities outside of Ontario.
The current OMOD board will continue as the MODC board. It includes 24 members plus one lifetime member. Meetings are held six times per year. The Federal charter does not recognize the category of lifetime member which was established for Dr. David Logan and with the adoption of a separate bylaw clause, he continues as a regular board member until such time as a policy is approved confirming his lifetime status. Committees of the Board include the Executive, Finance, Risk and Audit, Nominating and Governance, Executive Compensation and the CEO Performance Evaluation Committee. The Pension and Investment sub-committees each meet at least twice annually and report to the Finance Committee. Program specific committees provide advice to programs and may hear appeals from consumers when these come forward. These committees and structure will continue under the MODC corporation.
The Nominating and Governance Committee is responsible for evaluation of existing Board members, recruitment of new members, as well as Board training and orientation. This Committee considers skill requirements within the Board annually and targets recruitment to fill any gaps. Board member evaluation includes participation and attendance, as well as the quality of the contribution of each member. Board terms are typically three-year renewable terms, with one-third of the Board elected each year.
The Rehabilitation Foundation for Disabled Persons Inc., U.S., a U.S. federally incorporated charity operates under U.S. regulations and has a four-person Board of Directors, including two members who are U.S. residents.
OUTLOOK
Last year, we projected that 2012-2013 would have a stronger financial performance than the prior two years. The improvement exceeded our expectations and resulted in our most successful year. The amalgamation of OMOD and MODC under a single national entity will enhance the brand, and simplify governance. More importantly, it highlights an important step in our evolution into a national organization. Expanding into new communities and provinces will require both risk and investment. We hope it also results in a heightened ability to bring the services of MODC to Canadian residents with disabilities, wherever they reside.