2002 Annual Report

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Schedule N - PRICEWATERHOUSECOOPERS PCW

April 2, 2002

Dear Ms. Matthews:

Compensation for Hepatitis C Infected Persons

Your Ref: 20014/001

Our File Number: 20-73-26335-05-001

Thank you for your e-mail of April 1, 2002. Hopefully, the information below will be of assistance in obtaining the necessary approvals in BC.

With reference to the time spent last year developing 2001 income tax calculations, the majority of the time incurred was spent dealing with the different provincial calculations. During 2000 and 2001, most provinces have switched from calculating tax as a percentage of Federal tax to calculating tax based on bands and tax rates which are set at the provincial level. (For example, British Columbia made this change in 2001, and the BC income tax calculation for 2001 is completely different from the calculation for 2000.) In addition, the software must be able to handle all income tax calculations from 1986 forwards, therefore we could not simply replace the old approaches with the new ones. This explains the time (of 97.1 hours) required to develop the 2001 income tax calculations.

Based on the above, and our expectation that there will be fewer changes to the income tax calculations during 2002, we expect the time required for dealing with 2002 income tax calculations will be less than the 97.1 hours of time spent in 2001.

We were originally retained to provide two software suites to the Hepatitis C Centre, namely a loss of Income (and loss of Financial Support) suite, and also a suite for capturing Payments and Holdbacks at various income cap levels, and for calculating the accrued Interest on any future holdback releases. For ease of reference, the discussion below uses the acronyms IPS for the first suite and PHI for the second suite.

During 2001, all of the time spent on software maintenance/ upgrades and provision of staff training applied to the IFS suite, which was first used by the Hepatitis C Centre during 2001. This was mostly "non-recurring" time, and beyond 2001, there will be a substantial reduction in the "software maintenance / upgrades" and "provision of staff training / assistance" categories as far as the IFS suite is concerned. However, time will be spent (and, in fact, has been spent in 2002 to date) providing assistance to Hepatitis C staff with the PHI suite. (The Hepatitis C Centre did not use the PHI suite during 2001.)

During January to March 2002, we have incurred 41.7 hours of time, partly dealing with some interpretation issues, and forms upgrade (new inflation factors for 2002), but mostly assisting the Hepatitis C Centre staff with inputting all of the loss of income compensation payments in the PHI suite, and training them in its use. Again, this is mostly "non-recurring" time which will not be incurred again in 2003.

Based on the above, we expect a decline in the number of hours required to develop 2002 income tax calculations, with some declines in other areas. However, some further decline could be expected in 2003, because the Hepatitis C centre staff will be familiar with both the IFS suite and the PHI suite.

We respectfully suggest the following budget for January to December 2002:

We trust that the information provided above will assist you in obtaining approval for our final account for 2001, and for interim billings for 2002, as previously requested in our letter to you dated December 20,2001.

We hope to hear from you in the near future, and we thank you for your assistance and cooperation.

Yours very truly,

Daniel M. Edwards
Financial Advisory Services

cc: Ms. Laura Bruneau The 86-90 Hepatitis C Claims Center

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