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Meow, 19,

FOR INFORMATION

SIMON FRASER UNIVERSITY

MEMORANDUM

Director, Secretariat Services

DATE:

August 20, 1998

SUBJECT:

Annual Financial Statement

Section 32 of the University Act states: "The board shall make an annual report of

its transactions to the Minister, in which shall be set out a balance sheet and a

statement of revenue and expenditure for the year ending on the preceding March

31, and other particulars the Minister may require. A copy of the annual report shall

be transmitted promptly to the senate."

A copy of the report is attached.

NOTE:

IF YOU DO NOT WISH TO KEEP THE ANNUAL FINANCIAL STATEMENT,

PLEASE RETURN IT TO BOBBIE GRANT, OFFICE OF THE REGISTRAR.

•H•

...

SIMON FRASER UNIVERSITY

FINANCIAL STATEMENTS ?

FOR THE YEAR ENDED MARCH 31, 1998

. .

SIMON FRASER UNIVERSITY

FINANCIAL STATEMENTS

MARCH 31, 1998

TABLE OF CONTENTS

Page

Statement of Management Responsibility

Report of the Vice-President Finance & Administration

Report of the Auditor General

Audited Statements

Statement of Financial Position

Statement of Operations and Changes in Operating Net Assets

Statement of Changes in Financial Position

Notes to the Financial Statements

STATEMENT OF MANAGEMENT RESPONSIBILITY

13. ?

Pledges

S ?

Pledges made by donors to the University for donations to be received in future years are

estimated at $2,215,000 (1997 - $2,483,000) plus a remaining $2,000,000 from the Federal

Government for the new Centre for Dialogue. Pledges are not recorded in the financial

statements.

The University is responsible for the preparation of the financial statements and has

14 ?

Contingencies

University as at March 31, 1998 and the results of its operations for the year then

ended

Simon Fraser University is the defendant to several unresolved statements of claims. It is

not expected that the ultimate outcome of these claims will have a material effect on the

In fulfilling its responsibilities and recognizing the limits inherent in all systems, the

financial position of the University.

University has developed and maintains a system of internal control designed to

provide reasonable assurance that University assets are safeguarded from loss and

15. ?

Subsequent Events

that the accounting records are a reliable basis for the preparation of financial

statements.

Pursuant to the Capital Financing Authority Repeal and Debt Restructuring Act, (S.B.C.

1998,c.6) the debt obligations to the British Columbia Educational Institutions Capital

The Board of Governors carries out its responsibility for review of the financial

Financing Authority, together with the associated sinking funds, have been assumed by the

statements principally through its Audit Committee. The majority of the members of the

government of British Columbia, effective April 1, 1998.

Audit Committee are not officers or employees of the University. The Audit Committee

meets with Management and the external auditors to discuss the results of audit

The University is therefore deemed to have received contributions of $154,165,000. These

examinations and financial reporting matters. The external auditors have full access to

contributions will be shown as deferred capital contributions and amortized at the same

the Audit Committee, with and without the presence of Management.

rate as the associated capital assets.

The financial statements for the year ended March 31, 1998 have been reported on by

16. ?

Comparatives

the Auditor General of the Province of British Columbia, the auditor appointed under the

University Act. The Auditor's Report outlines the scope of his examination and provides

Certain comparative figures have been restated to conform with the current year's

his opinion on the fairness of presentation of the information in the financial statements.

Finance & Administration

Page 1

Page 18

This statement reflects the format of the 1997-98 operating budget, approved by the Board

of Governors in June 1997. It groups expenses in a different format than the audited statements.

The summary of the appropriations of $18,729 at March 31, 1998 has been extracted

from note 9 to the financial statements.

Carryovers: Departmental

AuxilIaries and Special projects

Research and other contracts

Specific Provisions

Non-recurring expenditures

Administrative/Union Pension Plan

REPORT OF THE VICE-PRESIDENT FINANCE AND ADMINISTRATION

The University Pension Plan for the Administrative/Union staff provides benefits based on

General comment

years of service and the average of the highest sixty (60) consecutive months' salary. A

revised plan dated January 1, 1993 is still under review by Revenue Canada. Under the

The University prepares its annual financial statement according

to generally accepted accounting

revised plan:

principles for non-profit organizations. The operations for the entire entity have been combined

for reporting purposes. However, we continue

to manage internally

on a fund basis

and I am pleased to provide this additional information for the different

funds

a. ?

The University's contribution is based on the amounts estimated by the Actuary and

Governors of the University. The University shall contribute to the fund such

Operating fund (000

Budget

Actual

amounts as the Board of Governors determines are required to fund the retirement

199798

199697

benefits and other plan benefits.

Revenue

The University shall not suspend or reduce its contribution to the pension fund

without the prior approval of the employee organizations.

The latest actuarial valuation as at December 31, 1996 showed an actuarial liability

of $76,491,000 against adjusted actuarial assets of $87,911,000, resulting in a

surplus of $11,419,000. Pursuant to an agreement between the University and the

Employee Organizations, the portion of the surplus in excess of a contingency

Expenses

reserve equal to 8% of the defined-benefit portion of the above liabilities was

distributed to members. As a result, $5,457,000 of the above surplus, plus

investment earnings thereon, was distributed to the members in December 1997;

Student financial assistance

4,827

5,277

5,106

the amounts distributed were, to the extent permitted under the Income Tax rules,

Utilities and janitorials

4,582

4,208

4,029

allocated to individual money-purchase accounts for the members, within the Plan,

and the balance was paid out in cash.

The rate of employer contribution was also increased from 9.56% to 9.89%, effective

Net change in fund balance

2,401

565

January 1, 1997, as indicated by the 1996 actuarial valuation.

Appropriations opening balance

16,328

15,763

The assets and liabilities of both Plans are not reflected in the University's financial

Total Appropriations

18,729

16,328

statements.

Summary of Appropriations

1 2. ?

Financial Instruments

The estimated fair value of cash, cash equivalents, accounts receivable and accounts

payable approximate carrying value due to the relatively short-term nature of the

instruments.

At the date of these financial statements, it is not practicable within constraints of

timeliness and cost to determine the fair value of sinking funds and debt. The majority of

sinking funds and debt is held by British Columbia Educational Institutions Capital

Financing Authority (a crown corporation). The Province of British Columbia guarantees

the debt and provides annual appropriations to pay interest and sinking fund provisions on

Operating revenues surpassed the budgeted revenue by $1,163,000 or .70%. In

1996/97 we had a one time reduction of $548,000 in our operating grant. This

amount was reinstated to our operating grant and our base operating grant was

permanently reduced by $571,000 in 1997/98 resulting in a $23,000 net de-

crease in operating grant. Although tuition fees were frozen for a second year in

a row, student fees increased due to increased undergraduate and graduate en-

rollment. The increase in Non-Credit Course fees is due primarily to the addi-

tional revenues generated by the Publishing and Writing programs and the Fel-

lows programs. Investment income is $385,000 lower due to lower interest rates

and less capital gains. The University continues to provide additional support

from the operating budget for library acquisitions and student financial assis-

tance, and this is reflected in the increase in expenditures over that of 1996/97.

For a more complete analysis and commentary on revenues and for detail on

expenditure line items, the 1997/98 Year-end Results and the 1998/99 Operating

Budget are available at www.sfu.calfinance under 1998/99 Approved Operating

Budget.

Endowment Principal

1998 ?

1997

(000)1 ?

(000)

Balance, beginning of year

$71,851

$51,112

Donations ?

1,643 ?

18,390

Capitalized income and other transfers

1.390 ?

2.349

Balance, end of year as per financial statements

$74.884 ?

$71.851

Endowment consists of restricted donations to the University. The investment income

generated from endowments must be used in accordance with the various purposes

established by the donors or the Board of Governors. Donors as well as University policy

stipulate that the economic value of the endowments must be protected by limiting the

amount of income that may be expended, and reinvesting unexpended income. Included

in the $74,884,000 are the following receivables:

10.

. .

Ancillary Enterprises

Included in Ancillary Enterprises are the Bookstore, Food Services, Residences,

Parking Operations and the Microcomputer Store. The increase of $159,000 in

the Ancillary Fund will be used by individual ancillaries for future upgrades to fa-

cilities, equipment replacement and for new service initiatives.

Research

There was $24,000,000 of externally funded research activity during fiscal year

1997/98, an increase of $400,000 over 1996/97. Grants for the National Centre

of Excellence for TeleLearning remained at $3,600,000.

Endowment

This fund received $1,643,000 in new donations during the year and $1,390,000

of interest income was capitalized in order to protect the economic value of the

endowments. The fund stands at $74,884,000 at the end of the fiscal year.

SFU Foundation ?

$7,915,000

Future proceeds from sale of 21 lots

City of Burnaby

3,000,000

$1 million a year over the next 3 years

Government of B.C.

250,000

Matching Fund Program

Pension Plans

Academic Pension Plan

The University Pension Plan for Academic Staff generally provides benefits on a money

purchase basis, but includes an option to members who were in the plan on March 20,

1973 to choose benefits based on years of service, and the average of the highest sixty

(60) consecutive months' salary.

An amendment to the plan in 1981 and a letter of agreement between the University and

the Faculty Association in 1990 addressed the funding and the distribution of the formula

retirement benefit account. The latest actuarial valuation of this account as at January 1,

1995 estimates an unfunded liability of $1,112,000 to be funded over the next 7½ years.

The University is making annual contributions of $195,000 per year as of 1995 until the

liability for past service is fully funded. The new current service contribution, estimated to

be $142,000 for 1995, is 1.2% of members' earnings. As of January 1996 the 1.2% is paid

bi-weekly to the pension fund.

. .

11.

Page 3

. .

Page 16

Restricted for Specific Commitments ?

1998 ?

1997

Carryovers - faculties & departments

$ 4,321

$ 4,489

Consisting of specific projects such as those funded by the Canadian Intema-

Auxiliaries and special projects

2,835 ?

2,441

tional Development Agency, the sources of specific purpose funds include gov-

Research and other grants ?

5,096 ?

4,442

ernment grants, conference fees and interest income from endowments. ?

This

Specific provisions ?

1,846

1,377

fund also includes scholarships funded through endowment income. ?

Activity in

Non-recurring expenditures

4.631 ?

3.579

the fund this year was $21 million, similar to that of 1996/97.

Total General Operating

18.729 ?

16.328

Capital

Ancillary enterprises ?

The initial construction phase of the International Centre for Dialogue continued

Funds committed for specific purposes - long term

throughout the year, accounting for $1.6 million in expenditures.

funded by donations, internal funding, and a contribution of $4 million from the

-Lease commitment ?

16,512 ?

16,323

federal government in connection with the APEC summit.

Minor capital project

-Self insurance ?

484 ?

483

funding released from the prior year freeze included $1.1 million expenditures on

the AQ, Strand Hall and the Traffic Centre

Current year minor capital funding

TOTAL RESERVES

$48,429

$45.190

for cyclical maintenance amounted to $1.6 million. Minor capital renovations and

upgrades amounted to an additional $2.4 million in expenditures

The General Operating is composed of carryover funds for faculties and departments

under a policy that allows faculties to carry over unspent instructional salaries and also

allows departments to carry over up to $25,000 of unspent non-salary budget. It also

includes unspent balances on specific projects and internally funded research already in

progress and funds set aside for specific provisions and one-time non-recurring

expenditures as approved by the Board of Governors.

The Ancillary Enterprise represents accumulated funds held for the ongoing operations of

ancillaries such as the Bookstore, Food Services, Microcomputer Store, Residences and

Parking.

Capital represents funds that are committed to capital projects.

The funds committed for specific purposes are set aside to meet the cost of future

obligations.

a. Group insurance funds are designated for potential requirements related to self-insured

group life and long-term disability plans. Annual premiums are funded from the general

operating funds on a cost of claim plus fee for services basis.

b. Lease commitment funds provide for commitments entered into for the occupancy of

the University's Harbour Centre facility which include lease payments, tenant loan

payments and a contribution towards operating costs. Lease and tenant loan

obligations include annual payments of $1,140,000, which started in September 1988

increasing to $1,648,000 over the term of the lease, and a termination payment of

$8,000,000 upon the expiry of the lease in December 2017 or a discounted equivalent

of that amount at an earlier date.

Self-insurance funds are held to pay self-insured property and liability losses.

Page 4

Page 15

.

dk%

4W

Report of the Auditor General ?

of British Columbia

I have audited the statement of financial position of

Simon Fraser University

as at

March 31, 1998 and the statements of operations and changes in operating net assets and of

changes in financial position. These financial statements are the responsibility of the

University's management. My responsibility is to express an opinion on these financial

statements based on my audit.

I conducted my audit in accordance with generally accepted auditing standards. Those

standards require that I plan and perform an audit to obtain reasonable assurance whether the

financial statements are free of material misstatement. An audit includes examining, on a test

basis, evidence supporting the amounts and disclosures in the financial statements. An audit also

includes assessing the accounting principles used and significant estimates made by

management, as well as evaluating the overall financial statement presentation.

.

To the Members of the Board of Governors

of Simon Fraser University:

7. ?

Deferred Contributions

Deferred contributions represent unspent resources externally restricted for a particular use

relating to a subsequent period. Changes

in the deferred contributions are as follows:

Sponsored

Specific

Research

Purpose

Capital

1998

1997

received during the year

Under the deferred method of accounting for contributions, restricted contributions related

to expenses of future periods are deferred and recognized as revenue in the period in

represents the "unamortized" portion of restricted capital grants and repayment of debt

relating to assets which were purchased with restricted contributions, but which still have

an undepreciated book value.

Changes in Net Assets

1^1

In my opinion, these financial statements present fairly, in all material respects, the financial

position of

Simon Fraser University

as at March 31, 1998 and the results of its operations and

changes in its financial position for the year then ended in accordance with generally accepted

accounting principles.

Victoria, British Columbia

June 19, 1998 

Restricted

Invested

Restricted

for Specific

for

Commit-

Capital Endowment

1998

1997

ments

Assets

Principal

Total

3,239 ?

697

$(2,750) $48.429$78,475 $74.884 $199,038 $190,594

Balance, beginning of year

Net change in operating

equity

Endowment contributions

Capital Preservation of

Endowment

Change in Investment in

Capital Assets

Internally imposed restrictions

Operating ?

SIMON FRASER UNIVERSITY ?

Externally restricted capital contributions are recorded as deferred contributions until the

NOTES TO THE FINANCIAL STATEMENTS

amount is invested to acquire capital assets. Amounts invested representing externally

funded capital assets are then transferred to unamortized deferred capital contributions.

FOR THE YEAR ENDED MARCH 31, 1998 ?

Unamortized deferred capital contributions are recognized as revenue in the periods in

Authority and Purpose

Endowment donations are recognized as a direct increase in endowment principal. The

university has a policy to protect the economic value of the endowments whereby a portion

Simon Fraser University is an agent of the Crown and operates under the authority of the

of the income earned on endowments is recorded as a direct increase in endowment

University Act, R.S. Chapter 419. The purpose of the organization is to conduct research

principal.

and deliver a full range of undergraduate, graduate and continuing studies programs.

Simon Fraser University is a not-for-profit entity governed by a Board of Governors, the

Gifts-in-kind are recorded at fair market value on the date of their donation or at nominal

majority of which are appointed by the provincial government of British Columbia. The

value when the fair market value cannot be reasonably determined.

academic governance of the University is vested in the Senate. The organization is a

Capital

assets

Province of British Columbia.

Capital asset acquisitions are recorded on the balance sheet at cost, except donated

Summary of Significant Accounting Policies and Reporting Practices

assets which are recorded at fair market value at the date of acquisition. Depreciation is

recorded on a straight line basis over the estimated life of the asset as per the schedule

General

below.

These financial statements have been prepared in accordance with generally accepted

Buildings ?

- Concrete ?

50 years

accounting principles for non-profit organizations.

Accounting Method

The financial statements are prepared on a non-fund basis as the operations for the entire

Equipment - Computing

3 years

entity have been combined for reporting purposes. The university follows the accrual basis

- Other

8 years

of accounting. Unrestricted revenue is recorded when receivable and expenditures are

Leasehold improvements ?

Term of Lease

recorded when goods or services are received.

Works of art and collections are not amortized and include that portion of library assets

Revenue Recognition

considered to have permanent value.

Operating grants are recognized in the period when receivable. Operating grants received

Investments

for

contributions,a

future period are deferred until that future period and are reflected as deferred

Amounts received for tuition fees and sales of goods and services are recognized as

revenue at the time the goods are delivered or the services are provided. Otherwise, these

Inventories

amounts are classified as unearned revenue in accounts payable.

Inventories of supplies kept at Central Stores are recorded at cost. Inventories of

merchandise held for resale in the Bookstore and the Microcomputer Store are recorded at

Externally restricted contributions for purposes other than endowment or the acquisition of

the lower of cost and net realizable value.

capital assets are deferred and recognized as revenue in the year in which the related

expenses are incurred. Externally restricted amounts can only be used for purposes

designated by the contributors.

.•

Page 9

Page 10

g. ?

University Interests in WCUMBS, TRIUMF, SFUV and SFU Foundation

• •

i. ?

The University is one of five university members of the Western Canadian

Universities Marine Biological Society (WCUMBS) which operates a research

station at Bamfield, British Columbia. The University's annual operating grant to

the Society remains the same as last year at $158,000 and is recorded as an

expenditure by the university. The accounts of WCUMBS are not included in

these statements other than that initial contributions in the amount of $347,000

S I M 0 N F A A S E A UNIVERSITY

Statement 3

for capital acquisitions, are recorded as capital assets on the Balance Sheet.

STATEMENT OF CHANGES IN FINANCIAL POSITION

There is no expectation of monetary gain to the University from this venture.

FOR THE YEAR ENDED MARCH 31, 1998

, ?

(thousands of dollars)

: ?

The University is one of four parties to a joint venture agreement under which

research is conducted by University faculty members at the Tr-Universities

1997

Meson Facility (TRIUMF) on the University of British Columbia campus and

CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

elsewhere. The facility and its operations are funded by federal government

Excess of revenue over expense

grants and the University makes no direct financial contribution. The accounts of

Depreciation

21,963 ?

21,310

TRIUMF are not included in these statements. There is no expectation of

Net decrease (increase) in non-cash current assets ?

5,979 ?

(13,223)

monetary gain to the University from this venture.

Net (decrease) increase in current liabilities

(3,527)

1,474

Amortization of deferred capital contributions

(8,343) ?

(8,279)

iii. ?

The University owns 100% of the shares of SF Univentures Corporation (SFUV),

21,483 ?

6,521

which was established to promote technology transfer to the private sector. The

consolidated assets of SFUV are not considered to be material and are not

included in these financial statements.

CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

Net decrease (increase) in long term investments

(29,238) ?

19,812

Capital asset acquisitions

(17,383) ?

(22,318)

iv.

The Simon Fraser University Foundation was established in 1987 under the

provisions of the University Foundations Act. Its main purpose is to receive,

(46,621) ?

(2,506)

manage and invest funds to further the purposes of the University. The Province

of British Columbia through the Minister of Finance and Corporate Relations is

CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

the single shareholder. At March 31, 1998 the Foundation is holding residential

Net increase (decrease) in long term debt

(6,781)

(4,773)

lots valued at $7,915,000 and the proceeds from the sale of those lots will be

Increase in deferred contributions

13,078 ?

13,826

transferred to the University. Assets and liabilities of the Simon Fraser University

Endowment contributions

3,033 ?

20,739

Foundation amounting to $8,485,000 and $8,172,000 respectively are not

9,330

29,792

included in the financial statements of the University.

Cash and Short Term Investments

(DECREASE) INCREASE IN CASH AND SHORT TERM INVESTMENTS

(15 808) ?

33,807

1998 ?

1997

• ?

CASH AND SHORT TERM INVESTMENTS beginning of year

CASH AND SHORT TERM INVESTMENTS, end of year ?

Bonds Maturing under one year

8.180 ?

SIMON FRASER UNIVERSITY

Statement

STATEMENT OF OPERATIONS and

CHANGES IN OPERATING NET ASSETS

•

Long-Term Investments

Long-term investments at fiscal year

1998

1997

Government grants and contracts

Bonds and Debentures ?

Province of British Columbia

Sun Life Term Certain Annuity

11,404 ?

11,207 11,207

Student fees - credit courses

40,222

39,849

•

Other Miscellaneous ?

Vancouver Foundation Held

Gifts, grants and contracts

Sale of goods and services

The Vancouver Foundation holds a number of endowment funds for the benefit of the

Amortization of deferred capital contributions

8,343

8,279

University. These funds total $7,338,000 at March 31, 1998 and the portion of $5,305,000

274,834

270,827

belonging to the University is included in the University's financial statements

EXPENSE

1998

1997

Salaries - academic

-other instruction and research

Centre for North American Studies

Gordon M Shrum Chair in Science Fund

SFU Scholarship and Bursary Endowment Fund

1,235

Simon Fraser University Bridge Endowment Fund

Women's Studies Endowment Trust Fund

735

Travel and personnel costs

8,596

8,453

Tr-University's Paul and Helen Trussell

Supplies and expenses

18,599

18,276

Science Student Endowment Fund

Grants to other:cl':ntals

In the fiscal year 1997/98 these funds generated $405,820 of income for Simon Fraser

3:258

University (1997 - $517,000) to be used for specific purposes.

servicesfeesfellowships

Capital

Assets

1998 ?

Accumulated

1998

1997

Renovations and alterations

4,180

2,581

Cost

Depreciation

Net

Debt servicing - interest

EXCESS OF REVENUE OVER EXPENSE

Leasehold Improvements ?

CHANGES IN NET ASSETS

Equipment & Furnishings

Investment in capital assets

(2,322)

(4,742)

Library Acquisitions ?

Special Collections ?

825 ?

825

470

NET CHANGE IN OPERATING EQUITY

OPERATING NET ASSETS, beginning of year

(2,600)

(2,400)

The 429 acres of land is recorded in the financial statements at its 1965 assessed value of

$572,000.

OPERATING NET ASSETS, end of year

$ ?

$ ?

,

851 ?

,

378

168

,

,

429 ?

,

$ __

Finance and Administration

SIMON FRASER UNIVERSITY

Statement

STATEMENT OF FINANCIAL POSITION

6. ?

Long-Term Debt

AS AT MARCH 31, 1998

Funded

Funded 

?

1998 ? 

1997 ? 

W ?

University ?

Ministry

rTötãI ?

Total

(thousands of dollars)

(000) ? 

(000) ? 

(000) ? 

= ?

(000) ?

ASSETS ?

1998 ? 

1997

$ ?

investments (Note 3) ?

$ ?

18,018 ?

$ ?

33,826

Less: Sinking Funds ?

Investments (Note 4) ?

124,755 ?

95517

University Funded long-term debt annual principal and interest payments are funded

Capital assets (Note 5)

293,423

298,003

through a charge to Ancillary Enterprises operations and from contributions from the Simon

Fraser Students Society for a portion of the Maggie Benston Student Services Building. ?

Unamortized debt discount

2,009 ?

2,144

Ministry Funded long-term debt annual principal and interest payments are funded directly ?

467,389

$464,653

by the Province of British Columbia.

LIABILITIES AND NET ASSETS

Demand Loans are used to provide interim financing for capital projects before being

converted into debentures. ?

CURRENT LIABILITIES

Accounts payable and accrued liabilities

CMHC 

by certain

Mortgages 

student

issued 

residence

by

Current portion of long term debt (Note 6)

6.875% and mature between January 1, 2017 and July 1, 2019. Annual payments

including principal and interest until maturity amount to $248,000.

Long-term debt (Note 6)

Deferred contributions (Note 7)

Deferred contributions related to capital assets (Note 7)

payments including principal and interest due within the next five years are as follows:

NET ASSETS (Note 8)

University

Ministry ?

Operating

Funded ?

Total

Restricted for specific purposes (Note 9)

(000) ?

invested in capital assets

2001 ? 

$3,294 ? 

$24,622 ? 

$27,916 

2003

?

^;;^Owarsky, LL.B., LL.D. 

Chair

Page 13 

?

Board of Governors

The accompanying notes are an integral part of these finan

Page 6