These FAQs are provided to answer questions regularly asked about the University’s financial statements.

If your questions are not answered here, please contact Barb MacIntosh, the University’s controller, at bmacintosh@mta.ca 
  

Financial statements are complicated. How is someone reading the financial statements able to gauge the overall financial health of the University?

To best gauge the financial health of the University and, indeed any not-for-profit organization, the financial statements should be analyzed in their entirety, along with supporting documents. At Mount Allison this includes the Review of Operations.

In addition, it is useful to pose questions to those tasked with the financial stewardship of the University such as, Robert Inglis, vice-president finance and administration (ringlis@mta.ca) and Barb MacIntosh, controller (bmacintosh@mta.ca).
  

Why does the University have cash in the bank — $12.7 million as of April 30, 2016?

The cash amount on the financial statements represents money from different sources which is committed for specific purposes. Cash is often received in advance of the actual expenditures so the amount of cash in the bank fluctuates during the course of the year.

The $12.7 million in the bank as of April 30, 2016 included:

  • $5.3 million in donations and endowment spending
  • $3.6 million in research funds
  • $2.3 million in other grants and contracts

All of this money was committed or externally restricted for specific purposes. The remainder included money to pay bills, revenue received before a service had been provided, and some funds designated for capital projects.
  

Reference is often made to different "funds". Why do the financial statements have different funds and what are they?

Under Canadian accounting rules, not-for-profit organizations, like the University, are required to show the observance of restrictions on different funds. Contributions that have limitations put on them by external parities are classified as externally restricted funds.

Even though the annual financial statements consolidate all these funds, the University still must maintain them and show the details for each fund in the schedules attached to the financial statements.

The University’s financial statements have eight funds:

  • General Operating Fund
  • Special Program Operating Fund
  • Ancillary Operating Fund
  • Capital Asset Fund
  • Endowment Principal Fund
  • Endowment Expendable Fund
  • Research Fund
  • Special Purpose Fund

Externally restricted funds can only be used for the purpose for which they were given to the University. An explanation of each fund is available in the guide to the financial statements.

 

The audited Statement of Operations often shows “revenues over expenses” (or “expenses over revenues”). How does this arise and does it mean there is a surplus or deficit?

Revenues over expenses or expenses over revenue generally arises for two reasons:

1. How capital projects are accounted for
Money spent on small capital projects (minor repairs and upgrades) counts as expenses and is reflected in the financial statements. However, large capital projects (new buildings, major upgrades or repairs) must be accounted as “assets” and expensed over the lifetime of the building or renovation.

For example, if $1 million was spent on new windows for a building and those new windows were expected to last for 40 years, then 1/40th of the cost, or $25,000, would be counted as expenses each year. Although the $1 million was actually spent in the year the work was completed, the financial statements would show $975,000 of revenue over expenses in that year.

The Budget Document, on the other hand, does show the cost of all capital projects as expenses in the year the revenue was actually used.

2. The Endowment Fund earned more or less than was spent.
The Endowment Fund, like endowment funds at other universities, is designed to adjust for inflation. Actuaries have determined that if we spend 5 per cent each year, current and future members of our community will benefit equally from the Endowment Fund.

In years when the endowment earns more than 5 per cent, the excess is re-invested in the endowment principal and in years when less than 5 per cent is earned, that extra is taken out.  

Even though amounts earned over 5 per cent are re-invested they are still accounted for as revenue in our financial statements. This can make the balance of revenue over expenses or expenses over revenue change significantly from year to year:

Investment income

  • 2016 — $3,197,841
  • 2015 — $11,277,686
  • 2014 — $9,988,796


The change in investment income and the types of capital projects completed are two of the main reasons the amount of revenue and expenses can fluctuate significantly from year to year:

  2016 2015 2014
Revenues $68,094,751 $74,583,808 $72,217,959
Expenses $68,791,368 $66,448,717 $64,101,782
Revenues over expenses or (Expenses over revenues) $(696,617) $8,135,091 $8,116,177

                                                

Is there a surplus (or are there excess funds) in the General Operating Fund?

The General Operating Fund pays for all the academic, administrative, and other operating activities supported by tuition fees, government operating grants, and other revenue (see page 21 of the 2016 audited financial statements).

An excess of revenue over expenses in this fund is not a surplus. Revenue in the General Operating Fund also supports activities recorded in other funds. For example, if the General Operating Fund provides a research grant to a faculty member, the amount is transferred to the Research Fund so the faculty member can spend it in support of his or her research.  

After all items, including transfers in and out of the General Operating Fund, were recorded in 2014, 2015, and 2016 there was a shortage of funds in 2014 and 2015 and leftover funds in 2016.

  • 2014 — shortage of $93,936 (covered by the Contingency Fund)*
  • 2015 — shortage of $712,404 (covered by the Contingency Fund)*
  • 2016 — leftover amount of $374,560 (will be used to support teaching and research space in the Centre for Environmental Innovation project)

*The Contingency Fund is within the Special Purpose Fund and is supported by the annual spending allocations on unrestricted endowments and unrestricted trusts and unrestricted donations and is used in times of revenue shortfalls or emergency expenditures. See Policy 7202 and the Budget Document for more details.
  

What are the various schedules in the financial statements?

The financial statements are comprised of four main statements or schedules:

  • the Statement of Financial Position or balance sheet
  • the Statement of Operations or income statement
  • the Statement of Changes in Net Assets
  • the Statement of Cash Flows

The Statement of Financial Position is a snapshot of the University’s financial position on the last day of the fiscal year.

The Statement of Operations presents the University’s revenue and expenses over a one year period and, along with the Statement of Changes in Net Assets, provides the financial statement user with information about the University’s net assets.

The University’s net assets are in five main categories, those that are: 

  • invested in capital assets
  • endowed
  • restricted for future pension benefits
  • internally restricted
  • unrestricted

The Statement of Cash Flows provides information about how the University’s cash balances changed due to operating, financing, or investing activities.

These statements consolidate all the funds of the University. The three schedules after the notes to the financial statements provide details for each fund.
  

What are employee future benefit assets and employee future benefit obligations?
These represent amounts determined by our actuary relating to pension and other future commitments to university employees.
  

What are deferred contributions?
Deferred contributions represent amounts donated or contributed to the University for a specific purpose. Donations or grants received and spent for building projects are called deferred contributions for capital assets and will be recorded as revenues and expenses over time as the building is amortized or depreciated. Donations and grants received for other purposes are called deferred contributions related to restricted and endowed funds. They represent amounts not yet spent and will be recorded as revenues and expenses as they are spent.