Skip navigation

You are here: Homepage > Press Room > Previous Years > Report to Board of Directors

Report to the Board of Directors of CINICO on the proposed contract with CareGuide Inc.

Published 12th June 2008, 2:10pm

Background

In early March 2008, the Chair of the CINICO Board of Directors wrote to my Office requesting a review of certain aspects of the tender process and proposed awarding of a contract to CareGuide Inc. Through various correspondences between the Office and the Chair, a term of reference was established. The Chair asked that we report by May 1, 2008. This report is the total report relating to that request.

Terms of Reference

As determined in our letters, the terms of reference as agreed were:

  • Provide information on the viability, including current information, on CareGuide; and
  • Whether CareGuide is affiliated with CBCA.

Work Performed

My preliminary task was to contact Mr. Chris Paterson who is the President of CareGuide. After my original contact, we arranged a telephone call between me and the following people:

  • Chris Paterson
  • J. Pegus
  • Annette Sparkman

As a result of that telephone conversation, Chris Paterson sent me information relating to the issues discussed. I enclose this information as Appendix A of this Report.

Co-operation by CareGuide

It appeared to me that CareGuide was very helpful in assisting the Office in getting the information required. Mr. Paterson responded to my original request immediately and set up our initial conversation in very short order. They followed up with the material in Appendix A the next day and have said that they were willing to provide any additional information as required.

One point I would like to make is that CareGuide made the point in their correspondence with me that they had

"...provided detailed financial information several times concerning the company’s size and going concern viability"

I am not in a position to determine the validity of this statement but I do include it as it may well relate to the concerns of the Board.

Financial Viability

CareGuide provided my Office with three main pieces of information relating to their financial viability:

  • Press release that detailed the 3rd quarter 2007 financial results. This press release gives the unaudited financial statements for CareGuide
  • Press release in January 2008 announcing $3.75 Million financing for working capital purposes
  • Non-public information relating to Revenue and EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization)

The information above forms the bulk of Appendix A. The following are comments relating to the above:

  1. CareGuide has had significant financial losses recently. The loss from continuing operations for the 9 months ending September 2007 was just over $7 Million. This compares to a profit of $716,000 in the corresponding period in 2006.
  2. This loss had significant effects on the cash position of CareGuide. In September, 2007 the cash position was $1.1 Million compared to a cash position of almost $6.9 Million for the same time in 2006.
  3. In reviewing the cash position, it should also be kept in mind that the working capital injection announced in January press release will increase the cash position by $3.75 Million
  4. The asset position of the Company deteriorated in 2007 but still remains positive. Total assets are $47 Million with approximately $8.8 million in tangible assets. However, a note of concern is that 82% of total assets are Intangible Assets.
  5. Liabilities exceed total tangible assets. Current liabilities total $9.7 Million compared to current assets of $6.1 Million. This means that CareGuide has a current ratio of .63 which is low. Traditionally ratios for financially stable companies usually have a current ratio of 1 or higher. When the current ratio is less than 1, the company may have problems meeting its short term obligations.
  6. There is a large accumulated deficit ($ 42.6 Million). This indicated a large amount of losses over several years.
  7. The Company has an $8 Million line of credit facility which is currently fully used. This credit line has a current maturity date of January 1, 2009.

Caution to Readers

Readers of this report are cautioned that the Office of the Auditor General has NOT done any auditing relating to the information provided by CareGuide. Our sole responsibility was to compile the information noted and to provide comments as above. The Company’s information is unaudited and therefore provides no independent verification relating to the accuracy of the figures.

Summary on Financial Viability

From my review, it is clear that recent financial results at CareGuide have weakened the company significantly. Currently, it appears to be in a weak financial position.

However, it announced that it would receive a significant amount of working capital ($3.75 Million) from its investors. This will certainly help its financial viability.

I believe that the state of financial viability is an important factor in considering whether to enter into a contractual relationship with CareGuide. However, there are many other factors such as the Board’s opinion as to the level of care that can be provided, potential cost savings etc. that must also be considered. In the final analysis, it is the Board of Directors of CINICO who must make the decision on whether to proceed in entering into an agreement.

Relationship between CareGuide and CBCA

It is clear from our review of recent Board of Directors Minutes indicated that there was some confusion as to the relationship, if any, between CareGuide and CBCA. CBCA was a provider of services to CINICO from a previous contract.

During my interview, I discussed this issue with senior officials of CareGuide. They provided details to me and provided significant detail in Page 2 of Appendix A. I encourage readers to read through this section. However, the main points are as follows:

  • CareGuide used to do business as CBCA Care Management.
  • CBCA Management provided Overseas Case Coordination services to CINICO from February 2004 to July 2005.
  • The people who provided services to CINICO in 2004 and 2005 remain with CareGuide. This included Annette Sparksman.
  • There is another company, CBCA Inc., which is currently providing claims administration services to CINICO. CareGuide has stated that CBCA Inc. is a company distinct from and unrelated to them.

Conclusion re Relationship between CareGuide and CBCA Care Management

Based upon the information provided and my discussion with CareGuide officials, I believe it would be fair to state that, for contract purposes, CareGuide and CBCA Care Management should be considered as one corporate body. The people, including Annette Sparksman, would be the same as the previous relationship. This should be taken into consideration when CINICO is deciding whether to award a contract to CareGuide.

Report to the Board of Directors Printable Document