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ANNUAL REPORT FOR THE YEAR ENDED MARCH 31, 2010

ANNUAL REPORT 2009-2010  l  A


This report may be reproduced in its present format without permission. Any alteration of its contents must be approved by the University of Calgary. Š 2010 by the University of Calgary


TABLE OF CONTENTS BOARD OF GOVERNORS

2

MESSAGE FROM THE CHAIR

3

MESSAGE FROM THE PRESIDENTS

4

GENERATING STRONG IDEAS

5

QUICK FACTS

6

GROWING IDEAS INTO ACTION

7

STUDENT SUCCESS

9

EXCELLENCE IN RESEARCH, SCHOLARSHIP AND CREATIVE ACTIVITY

11

INTERDISCIPLINARY EDUCATION AND RESEARCH

13

RETURN TO COMMUNITY

15

ENERGIZING EXCELLENCE

16

MANAGEMENT DISCUSSION AND ANALYSIS

17

FINANCIAL STATEMENTS

27

STATEMENT OF MANAGEMENT RESPONSIBILITY

28

UNIVERSITY OF CALGARY AUDITOR’S REPORT

29

STATEMENT OF FINANCIAL POSITION FOR THE YEAR ENDED MARCH 31, 2010

30

STATEMENT OF REVENUE AND EXPENSE FOR THE YEAR ENDED MARCH 31, 2010

31

STATEMENT OF CHANGES IN NET ASSETS FOR THE YEAR ENDED MARCH 31, 2010

32

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED MARCH 31, 2010

33

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2010

34

ANNUAL REPORT 2009-2010  l  1


BOARD MEMBERSHIP – VOTING JACK PERRATON

Chair

CHARLES FISCHER

Vice-Chair

DOUGLAS BLACK

Public

JOANNE CUTHBERTSON

Chancellor

KEITH DOBSON

General Faculties Council

JOE DOOLAN

Public

VERONIQUE DORAIS

Graduate Students’ Association

BONNIE DUPONT

Public

PAUL FARION

Alumni

KABIR JIVRAJ

Public

CHARLOTTE KINGSTON

Students’ Union

NICK KIRTON

Public

JEFF LAFRENZ

Senate

GRANT MACEACHERN

Alumni

KEN MCKINNON

Public

LESLIE POTTER

Alberta Union of Public Employees

WILLIAM SMITH

Public

DAVID TARAS

Faculty Association

WARREN VEALE

Interim President

PAMELA WEATHERBEE

Students’ Union

BOARD OFFICIALS – NON-VOTING CHARLENE ANDERSON

General Counsel

GARY DURBENIUK

VP (Development)

BOB ELLARD

VP (Facilities Management and Development)

JONATHAN GEBERT

VP (Finance and Services)

ROSE GOLDSTEIN

VP (Research)

ALAN HARRISON

Provost and VP (Academic)

ELIZABETH OSLER

University Secretary and Associate General Counsel

ANN TIERNEY

Vice-Provost (Students)

ANNUAL REPORT 2009-2010  l  2


MESSAGE FROM THE CHAIR The University of Calgary is committed to accountability and, therefore, we take seriously our responsibility to report our progress toward the stated goals and objectives of the university. We are committed to communicating our progress to our many stakeholders; the provincial government, the community, our students, faculty, staff and our valued alumni. One of the ways we communicate with our stakeholders is with this document, the University of Calgary’s annual report. In spring of 2009, the University of Calgar y began a strategic initiative to increase efficiencies across our university Innovative Support Ser vices or iS2. We will improve financial controls and administrative ser vices, while reducing administrative costs. The core goals of the iS2 project are to increase financial controls, improve customer ser vices, reduce costs and increase efficiencies, and provide assurance to the Auditor General and Tri-Council in accordance with their recommendations All of the university’s support services are engaged in this project—Information Technologies, Human Resources, Supply Chain Management, Facilities Management and Development, and Financial Services. These business units have undergone extensive examinations of their business processes and are developing new policies and stringent procedures in order to meet the goals of the project.

The long-term vision of the iS2 project is to build a customer-oriented organization that delivers high quality, efficient and effective administrative ser vices that enable the University of Calgar y to be a recognized leader among academic institutions. The 2009-2010 year marks the end of the successful leadership of President Harvey Weingarten and Chancellor Joanne Cuthbertson. They provided important and effective leadership during their years at the university, and I thank them sincerely for their contributions and legacies. The University of Calgary’s annual report for the year ended March 31, 2010 was prepared under the direction of the board in accordance with the Government Accountability Act and ministerial guidelines established pursuant to the Accountability Act. All material economic, environmental or fiscal implications of which we are aware have been considered in the preparation of this report.

John (Jack) R. Perraton, C.M., Q.C. CHAIR, BOARD OF GOVERNORS

ANNUAL REPORT 2009-2010  l  3


MESSAGE FROM THE PRESIDENTS We are privileged to have contributed to the leadership of this remarkable university over the last year. Harvey Weingarten’s eight-year tenure as president of the university has ended. We thank him for his vision, his strength and his unwavering belief in our students. His leadership was guided by respect for students. Our leadership, as well, is guided by respect for this university’s students; men and women who come to us from all over the country and the world. We hold a firm commitment to continually improve the student experience for them. Our roles as leaders are to facilitate opportunities for students to achieve and enjoy success with outstanding learning, exceptional teaching and innovative research. By focusing on these goals, the university is able to attract the highest caliber people who create a strong academic community and extraordinary research environment that benefits the city, the region and the country.

Warren Veale INTERIM PRESIDENT, U OF C

The University of Calgary is an excellent university by any standard and we have accomplished much in 2009-2010. While we reflect back upon the last year, we look forward to supporting new leaders at the university as they further the work toward student success, excellence in research, scholarship and creative activity, interdisciplinary education and research, and return to community. The University of Calgary is one of the best in the country and it will continue to build and expand on our tradition of excellence and launching engaged graduates, innovative ideas and important research. But we couldn’t do any of this without the support of our community; people who share the university’s belief in our students, faculty, staff and alumni, and the positive impact they have in their communities.

Charlotte Kingston PRESIDENT, STUDENTS’ UNION

Daniel Bidulock INTERIM PRESIDENT, GRADUATE STUDENTS’ ASSOCIATION

ANNUAL REPORT 2009-2010  l  4


GENERATING STRONG IDEAS At the U of C, our students, faculty and staff are the source of our strong ideas, our creativity, our discovery and our innovation.

ENROLMENT

29,663

28,196 27,915

Meet Mahrukh, one of the class of 2013. In 2009-2010, they entered the U of C as first-year students and became part of a dynamic university community made up of over 23,800 undergraduate students, 5,800 graduate students and 4,700 faculty and staff. During their first year, Mahrukh and her classmates were taught by top educators and researchers. Their instructors brought their knowledge and hands-on experience into the classroom with a focus on experiential learning and interdisciplinary education.

27,603

2006

2008

2009

SPONSORED RESEARCH INCOME

In 2009-2010, U of C faculty brought in $272 million in sponsored research. Their creativity, discovery and innovation is inspiring the class of 2013 and benefiting society.

$272 $242

$252

$245

$ Million

When Mahruhk and the class of 2013 graduates, they will join more than 135,000 alumni worldwide whose strong ideas are making remarkable contributions to the business, health, social, political and cultural life of Calgary and other communities.

2007

2007

2008

2009

2010

FACULTY AND STAFF 4,921 4,782 4,721 4,456

2006

2007

2008

2009

ANNUAL REPORT 2009-2010  l  5


QUICK FACTS

2009-2010

2008-2009

Undergraduate Students

23,824

22,539

Graduate Students

5,839

5,376

Degrees and Diplomas Granted

5,888

6001

Faculty and Staff

4,782

4,921

$272 million

$245 million

$1.032 billion

$0.971 billion

Sponsored Research Income Budget

ANNUAL REPORT 2009-2010  l  6


GROWING IDEAS INTO ACTION A powerful idea can change a day and a life. It can change the entire world. At the U of C, we have the great privilege of fostering ideas and facilitating the growth of ideas every single day. Ideas are our endlessly renewable resource. One of our roles as a university is to pair those ideas with needs, to pair innovation with ambition. Ideas that begin at the U of C go on to discover new knowledge, enhance understanding and solve complex problems. In every case, with each idea, in all that the university does, we are guided by four academic principles: • Student success • Excellence in research, scholarship and creative activity • Interdisciplinary education and research • Return to community As one of the country’s leading research universities, we use these principles to help align the U of C’s activities with community needs and society’s ambition. On the following pages, there are only a few examples of how these principles have helped bring strong ideas to life. There are many more examples highlighted throughout the year in the U of C’s other publications, both hard copy and online.

ANNUAL REPORT 2009-2010  l  7


As an instructor, I want to do everything I can to facilitate student learning and enjoyment in my classes. - Melissa Boyce, instructor, Psychology of Everyday Life

ANNUAL REPORT 2009-2010  l  8


student

SUCCESS PROJECT ENGAGE

When students in Melissa Boyce’s first year psych class answer questions with a click of a hand-held remote, within seconds their answers are projected on a bar graph for the class to discuss. Boyce uses the clickers to keep students engaged in her lecture and soon, she’ll have hard evidence about how to increase that engagement. Boyce is one of eleven instructors participating in Project Engage, a two-year pilot project to assess and improve firstyear classes. The project was born from the desire to boost student learning and increase the retention of students from first year into second year. Every year, thousands of students are accepted into undergraduate programs at the U of C. The majority of these students take introductory courses in the arts and sciences. Project Engage was launched in December 2009 as an innovative initiative to promote and enhance student engagement in these large-enrolment courses.

Currently, Project Engage researchers are observing and collecting data from first-year classes, and students in the classes—more than 1,700 of them— are completing surveys about their experiences. The Project Engage team works closely with faculty members to understand the data collected and fold it into new and better strategies for engaging students. Participating instructors will complete an intensive three-day workshop and monthly meetings focusing on professional development and course re-design. They will be assured more rewarding and beneficial experiences in the classroom next year. And, so will U of C students.

(L to R) Leslie Reid (project lead), Alan Harrison (provost) and Clem Martini (chair, Teaching and Learning, Funding Committee) are excited about the potential for Project Engage.

ANNUAL REPORT 2009-2010  l  9


In theatre, our laboratory is the stage and our research must be tested, retested and analyzed through live performance. - Patrick Finn, director, The Humorous Magistrate ANNUAL REPORT 2009-2010  l  10


excellence in research, scholarship and

CREATIVE ACTIVITY THE HUMOROUS MAGISTRATE It started with an old anonymous, undated manuscript, The Humorous Magistrate, the university bought from a British book collector in 1972. It ended with a better understanding of anxiety among the gentr y in seventeenth-centur y England, a series of important essays challenging the thinking about per formance in that era, and an international collaboration with leading scholars in per formance studies and cultural/critical geography. In 2006, an international team of faculty, librarians and graduate students started investigating the mysterious manuscript in the U of C special collections. It was an interdisciplinary effort with involvement of the U of C departments of communications and culture, English and drama.

Brittany Reid, drama major, appreciates the opportunity for interdisciplinary work to flourish.

Supported by funding from Social Sciences and Humanities Research Council, the researchers determined where, when and by whom the play was written. They made exciting discoveries about the drama, people and the politics of the time in the process. The Humorous Magistrate examines wealth, greed, manipulation and the role of women in the discovery of true love.

(L to R) Sasha Barry, Kyle Rakoz, Jason Mansini and Jared Knapp

After five years of intense research, seminars and full-term classes based on the manuscript, the play was ready to take to the stage. The research team worked with student actors on the stage production and took their investigative work to the international stage with a two-day colloquium that introduced new ideas to researching medieval and early modern performance. And, the U of C received a standing ovation for the production of knowledge.

ANNUAL REPORT 2009-2010  l  11


Working together, we are able to apply engineering principles to solve medical problems. - Janet Ronsky, director, Biovantage-Alberta Ingenuity Centre L to R; Janet Ronsky, Craig Mathison (research engineer), Emily Bishop (graduate student), Stephen Andrews (graduate student) ANNUAL REPORT 2009-2010  l  12


interdisciplinary education and

RESEARCH

BIOVANTAGE-ALBERTA INGENUITY CENTRE When doctors needed better tools to understand the motion of the knee and the progression of osteoarthritis, Janet Ronsky’s interdisciplinary team delivered. They developed a device that can be used to study the knee in a MRI and they set up a sophisticated laboratory to research human motion. Now, Ronsky will oversee many more biomedical innovations as inaugural director of the new Biovantage-Alberta Ingenuity Centre at the U of C. Researchers and students from a variety of disciplines engineering, medicine, kinesiology, science and nursing are working and learning together to find better ways to deal with stroke, Alzheimer’s, arthritis, osteoporosis, heart disease and other health problems.

Darren Steiner, research assistant, discusses results with Janet Ronsky.

Adjustment of knee laxity device.

With support from the provincial and federal governments, various funding agencies and industry, the centre works with industry to develop innovative medical technologies and translate them into commercial products, contributing much to Alberta and Canada’s growing biomedical industry. Doctors look for patterns that fit a diagnosis. Engineers look for potential solutions to a problem. Together, along with other researchers, this interdisciplinary research is creating revolutionary imaging techniques, intricate devices and other innovations that are improving health care all over the world. And, the U of C is proving that the whole is greater than the sum of its parts.

ANNUAL REPORT 2009-2010  l  13


Our partnership with the City of Calgary gives us a unique opportunity to move beyond laboratory bench-scale studies to the full-scale realities of an operating wastewater treatment plant. - Leland Jackson, executive director, Advancing Canadian Wastewater Assets

ANNUAL REPORT 2009-2010  l  14


return to

COMMUNITY

ADVANCING CANADIAN WASTEWATER ASSETS Every day, in just the city of Calgary alone, more than four million litres of water go down the drain with traces of the pharmaceuticals and hormones we take and residues from our personal care, plastic and other products. The U of C is working with our community to improve public health and reduce environmental impacts. Current waste water techniques are not equipped to treat these and other compounds that are emerging in the planet’s water supplies. But that’s about to change. The U of C is collaborating with the City of Calgary to build a unique research facility, Advancing Canadian Wastewater Assets, at the city’s Pine Creek Wastewater Treatment Plant.

Assessment of oxygen levels in the Bow River. With funding from a number of partners, including the Canada Foundation for Innovation and the Alberta Science and Research Investments Program, U of C scientists will be the first anywhere to integrate research on natural stream systems with treatment technology in a controlled environment. And, the U of C is helping to keep the taps running with safe water.

Researchers will have a huge and far more effective lab to explore new approaches and more innovative technologies for treating waste water. They will embed an engineering research component into a full-scale water treatment plant,

ANNUAL REPORT 2009-2010  l  15


ENERGIZING EXCELLENCE A strong idea cannot be contained. It energizes other ideas, innovations and improvements. Back in 1966, the University of Calgary was founded on the idea of bringing post-secondary education to the growing communities of southern Alberta. In the decades since, we have brought together thousands of ideas and diverse perspectives to explore a myriad of topics. We address local and global problems, immediate issues and those decades away. Working with our community and partners in industry and governments, we pull together experts from different disciplines to address complex and important issues. We have built a place of research and teaching excellence, a place that creates knowledge and passes that knowledge on. Our ideas will help us to continue to energize excellence. And, the U of C started it with one strong idea.

ANNUAL REPORT 2009-2010  l  16


MANAGEMENT DISCUSSION AND ANALYSIS This Management Discussion and Analysis (MD&A) should be read in conjunction with the University of Calgary annual audited financial statements and accompanying notes. The MD&A and audited financial statements are reviewed and approved by the University of Calgary Board of Governors on the recommendation of the University of Calgary Audit Committee. The University financial statements have been prepared in accordance with Canadian generally accepted accounting principles and are expressed in Canadian dollars. The University has reported a $48.0 million excess of revenue over expense for the year ended March 31, 2010. This compares to an $8.7 million excess of revenue over expense for the year ended March 31, 2009. The year-end net asset position is $710.0 million as compared to last year’s $561.3 million. Total revenue increased by $79.9 million (8.4%) to $1,034.1 million while total expenditures increased by $40.6 million (4.3%) to $986.1 million. The predominant changes in revenue include increases of $38.6 million in grants and donations, $12.5 million in tuition and $24.5 million in investment income. The main increases in expense categories include increases in salaries and benefits of $37.9 million and $5.5 million in scholarships and awards, offset by a decrease in utility expense of $3.8 million. This MD&A provides an overview of the results the University of Calgary achieved in 2010 with a detailed discussion and analysis of the institution’s: 1.

Operating Environment

2.

Business Planning and Management

3.

Financial / Budget Information

4.

Areas of Significant Financial Risk

5.

Progress in Capital Projects

1. OPERATING ENVIRONMENT Over the past several years, the University of Calgary has taken its place among Canada’s major research institutions as evident from its ranking on a number of national and international measures related to program quality, size and research productivity. The university continues to derive much of its strength from its role within the Campus Alberta post-secondary system, its location within the City of Calgary and Province of Alberta, and from the over 100 academic programs it offers through its 14 faculties and 53 teaching departments. The University of Calgary operates in an environment characterized by considerable political, economic, social, technological, and environmental change. The recession is just one of a number of factors contributing to increased student demand in 2009-10 as more people move from the workforce to post-secondary education. Meeting this demand over the next few years, particularly in areas of strategic priority, will be challenging since much of the funding for planned program expansions across the Campus Alberta system is no longer available. The acute staffing challenges of recent years eased in 2009. However, longer term demographics suggest that these pressures will re-emerge and the University will need to take strategic actions now to ensure that it is prepared. As the public sector typically lags behind the private sector, the University will remain in this period of wage restraint as the private sector is emerging from it.

ANNUAL REPORT 2009-2010  l  17


Revenue through fundraising declined; investment returns were lower than normal; and government grant and tuition revenue grew at rates less than the inflationary cost of program delivery. Recent changes to post-secondary roles and mandates, new legislation governing university research, and the resulting desire of government to target funds and regulate student fees provide evidence that the University must continue to work to achieve the appropriate balance between institutional autonomy and public accountability.

2. BUSINESS PLANNING AND MANAGEMENT The University of Calgary’s four-year business plan lays out the framework and provides the resources for the institution to achieve its teaching, research, interdisciplinary, and service goals and objectives. Within this plan, the University describes its operating environment as well as the strategies it will engage in to further enhance its quality, reputation, profile and distinctive character. Performance measures monitor plan progress. As the University refines its plans, these measures are updated to ensure they continue to assess performance against desirable outcomes. Together, this plan and the annual report form part of an accountability relationship with many stakeholders: students, faculty and staff, the Board of Governors, the business community, various public communities, other post-secondary institutions, and the provincial and federal governments.

3. FINANCIAL / BUDGET INFORMATION REVENUES Total revenues have increased by $79.9 million (8.4%) to $1,034.1 million from the $954.2 million recorded in 2009. The following table shows the composition of the University’s total revenues for the 2010 fiscal year with comparative information for 2009 and 2008:

REVENUE BY SOURCE

2010

2009

2008

$614,404

$564,370

$492,105

94,967

90,949

79,536

169,720

157,166

138,968

Donations and other grants

71,456

82,929

75,744

Investment income (loss)

31,510

7,036

(129)

Amortization of deferred capital contributions

52,073

51,751

48,944

1,034,130

954,201

$835,168

Government grants Sales of services and products Student tuition and fees

Total Revenue

ANNUAL REPORT 2009-2010  l  18


GOVERNMENT GRANTS The University’s single largest source of revenue is government grants which increased by $50.0 million (8.9%) from $564.4 million in 2009 to $614.4 million in 2010. Grants received during the year from Alberta Advanced Education and Technology increased by $44.2 million (6.8%) from $649.2 million in 2009 to $693.4 million in 2010. Of this amount, $193.7 million (2009 $199.4 million) relates to capital grants. These capital grant amounts are deferred and recognized into revenue as “amortization of deferred capital contributions” over the life of the associated capital assets. The base operations grant increased by $27.2 million; this increase includes a 6% increase over the 2009 base operations grant ($20.1 million), and additional veterinary medicine funding amounting to $6.4 million. Enrolment Planning Envelope (EPE) funding increased by $8.5 million from $57.2 million in 2009 to $65.7 million in 2010. Other miscellaneous grants increased by $14.2 million. Grants from the Government of Alberta represent 81.3% of the total government grant revenue received by the University (80.8% in 2009) and 48.3% of total revenues for the University in 2010 (47.8% in 2009).

TUITION FEES Total credit tuition revenue increased by $14.2 million (10.2%) from $139.8 million in 2009 to $154.0 million in 2010. Of this increase, the Government of Alberta Tuition Policy which allowed for a 4.1% increase (2009- 4.6%) in regulated tuition provided $5.3 million in revenue growth for 2010. Further, increased student enrolment resulted in additional general tuition and visa differential revenue amounting to $8.0 million. The enrolment increase is in line with expectations. The 2010 credit tuition budget allowed for an enrolment increase of 1,500 full load equivalent students in support of the University objective to expand access in response to population growth and market demand. Non credit tuition decreased by $1.7 million from $17.4 million in 2009 to $15.7 million in 2010 as the result of decreased enrolments in 2010. The weakened economic environment led to a reduction in registrations, particularly in leisure programs such as travel study and general interest offerings. In addition, the threat of a flu epidemic led to cancellations of English as a Second Language and other international group program registrations.

RESEARCH Cash research contributions during the year increased by $28.4 million from $243.7 million in 2009 to $272.1 million in 2010. The significant contributors to this increased funding are as follows: Alberta Advanced Education and Technology ($2.1 million), Canadian Foundation for Innovation ($13.3 million), Informatics Circle of Research Excellence ($1.6 million), Natural Sciences & Engineering Research Council ($2.2 million), Social Science & Humanities Research Council ($2.5 million) and corporate business funding ($5.0 million). Research grants and revenues are matched to the period in which related expenditures are incurred; there is significant deferral of revenues at the balance sheet date. The financial statements reflect recognized research revenue of $260.6 million in 2010 compared to $228.7 million in 2009. Research revenue is derived from a number of sources and as such is reported within multiple lines of the statement of operations.

ANNUAL REPORT 2009-2010  l  19


INVESTMENT INCOME The University’s investment income increased by $24.5 million (350.0%) to $31.5 million from the $7.0 million reported in 2009. The $31.5 million in investment income is comprised of the following:

INVESTMENT INCOME ($000) Gain on investments held for endowments

76,019

Gain on other investments

13,258

Recovery on Floating Rate Notes (ABCP)

2,986

Loss from subsidiaries & joint venture

(424) 91,839

Less: Income capitalized to endowment net assets

(57,944)

Amounts deferred

(2,385)

Net investment income

31,510

The increase in total investment income earned is primarily the result of an increase in valuations for world equity markets. Equity investments represent a substantial component of the University’s long-term investment portfolio. These increases are partially offset by decreased returns in the University’s fixed income and money market investments. The investment gain relating to externally restricted endowments, net of endowment spending and fees, was transferred to cumulative capitalized endowment earnings. In addition, the value of the University’s investment in Floating Rate Notes (formerly Asset Backed Commercial Paper) stabilized during the fiscal year, resulting in a recovery of $3.0 million. For the year ended March 31, 2010 the return on the University’s endowment funds was 23.8% (2009 -19.11%) and on non-endowed funds was 2.4% (2009 2.1%)

ANNUAL REPORT 2009-2010  l  20


EXPENSES Total expenditures increased by $40.6 million (4.3%) from $945.5 million in 2009 to $986.1 million in 2010. The following table shows the composition of the University’s total expenses for the 2010 fiscal year with comparative information for 2009 and 2008:

EXPENSE BY CATEGORY

2010

2009

2008

Salaries

$502,482

$479,030

$446,703

Benefits

101,957

87,596

72,645

Materials, supplies and services

182,095

180,727

165,184

Utilities

28,214

32,039

27,707

Maintenance and repairs

14,160

14,054

13,556

Scholarships, bursaries and awards

61,061

55,572

45,049

Cost of goods sold

15,471

15,833

15,541

Amortization of capital assets

80,681

80,668

79,780

$986,121

$945,519

$866,165

Total Expenses

SALARIES AND BENEFITS At 61.3% of total expenditures (2009 59.9%) salaries and benefits represent the single largest operating expenditure. Salaries increased in 2010 by $23.5 million or 4.9% over 2009 (compared to a 2009 increase of $32.3 million over 2008 or 7.2%) as a result of salary rate increases coupled with an average overall head count increase of 50 (2009 163). This average headcount increase includes 107 additional individuals within the following categories: fixed term employees (formerly trust employees), temporary and term appointments and hourly employees. These increases were offset by a decrease in headcount of 57 in senior administrative, regular continuing academic, support staff and management and professional categories. Final full time equivalent (FTE) staffing numbers for specific employee groups as at March 31, 2010 with comparative numbers for March 31, 2009 are provided in the table below:

Full Time Equivalent

March 31, 2009

March 31, 2010

Net Change

Regular Continuing Academic

1,788

1,798

10

Support Staff

2,349

2,165

(184)

693

698

5

47

51

4

4,877

4,712

(165)

Management & Professional Senior Administration Total Workforce A portion of salary costs was recovered from external sources.

Expenditures on benefits increased by $14.4 million (16.4%) over the prior year. The cost of benefits as a percentage of salary is 20.3% in 2010 compared to 18.3% in 2009. Of this increase, $12.0 million (2009 $7.6 million) is due to the increase in the actuarially determined UAPP pension expense net of employer cash contributions. The remainder of the increase in benefits expense is primarily due to the $23.5 million increase in total salaries paid as described above. ANNUAL REPORT 2009-2010  l  21


UTILITIES Utilities expense decreased by $3.8 million (-11.9%) primarily as a result of lower natural gas costs.

SCHOLARSHIPS, BURSARIES AND AWARDS Scholarship expense increased by $5.5 million (9.9%) over 2009. Higher enrolment numbers in 2010 contributed to the increase in scholarship spending as more students became eligible for support. Increased funding came from a number of sources including: the Alberta Ingenuity Fund, Natural Sciences and Engineering Research Council and Social Science and Humanities Research Council funds in addition to private corporate contracts.

BUDGET TO ACTUAL The 2010 surplus of $48.0 million is a reflection of cumulative favourable overall variances for both revenue and expenditures. Actual revenue is $2.1 million over budget due to higher than anticipated investment returns of $14.1 million and increased sales and services across all portfolios of $10.7 million. These factors are offset by lower than anticipated government research grant revenue of $11.1 million and lower than anticipated operating revenue from University of Calgary - Qatar of $8.6 million. In addition, there is a further cumulative $3.0 million reduction in revenue recognition in all other categories. Actual expenses are $45.9 million below budget due to lower than expected materials and supplies expenses of $48.0 million combined with below budget utilities costs of $7.9 million. These positive variances are offset by higher than expected scholarships, bursaries and awards costs of $6.5 million and smaller unfavorable variances in amortization and repairs and maintenance. The lower than expected materials and supplies costs are the result of expenditure restraint at the University combined with lower than anticipated use of contingency funds.

FINANCIAL POSITION NET ASSETS The University’s net asset balance totalled $710.0 million at March 31, 2010. This is an increase of $148.7 million over 2009. The net asset balance is reported in the following four major categories:

NET ASSETS - ENDOWMENTS Net assets restricted for endowment purposes increased by $101.6 million or 29.9% to $441.7 million from $340.1 million in 2009. The increase is the result of net investment gain of $76.1 million and $43.6 million in new contributions less $18.1 million in endowment expenditures.

NET ASSETS - INVESTMENT IN CAPITAL ASSETS AND COLLECTIONS The portion of net assets invested in capital assets decreased from $200.1 million in 2009 to $194.5 million in 2010. The $5.6 million decrease is the result of internally funded net capital purchases of $23.0 million less amortization expense relating to internally funded capital assets of $28.6 million. Growth in the capital asset and collections balance is discussed in Section 5. Progress in Capital Projects. ANNUAL REPORT 2009-2010  l  22


NET ASSETS - INTERNALLY RESTRICTED Internally restricted net assets represent amounts set aside by the University for specific purposes. The balance increased by $5.9 million from $78.6 million in 2009 to $84.5 million in 2010. The increase in this balance is due primarily to an internal restriction established in 2010 to allow for management of departmental budget surpluses carried over into 2011 with partially offsetting reductions in the balance due to spending of internally restricted amounts for future commitments. The composition of internally restricted net assets is as follows:

$ Million Funding reserved for subsidiaries (University Technologies Group and Arctic Institute of North America)

5,643

Future Commitments and Strategic Reinvestments

53,598

Funding for faculty and departmental priorities

25,227

Total

84,468

NET ASSETS - UNRESTRICTED The University’s unrestricted net assets balance (or “equity”) at year-end is in a deficit position of $(10.6) million (2009 $57.6 million deficit as re-stated). This improvement of $47.0 million is primarily due to $48.0 million in net income.

INVESTMENTS The cash and cash equivalents balance at March 31, 2010 is $576.1 million compared to $456.6 million at March 31, 2009. This $119.5 million net increase is primarily due to the excess of revenue over expense for the year, adjusted for non-cash items plus amounts held to support payment of March 31, 2010 payroll and other accounts payable and accrued liabilities. Pay dates for employees were changed during the fiscal year resulting in payments 10 days in arrears, rather than at mid-month and end of month as in previous fiscal years. Total investments increased by $165.7 million (35.0%) from the $473.9 million recorded in 2009 to $639.6 million in 2010. Long-term investments increased by $94.7 million and current investments increased by $70.8 million. The increase in long-term investments is primarily due to an increase in the value of equities and bonds held, as well as endowment contributions net of expenditures of $25.5 million. The increase in short-term investments is primarily due to increases in unspent research and other restricted balances.

4. AREAS OF SIGNIFICANT FINANCIAL RISK UNFUNDED PENSION LIABILITY The University participates with other employers in the Universities Academic Pension Plan (“UAPP”) to provide pensions for certain staff members. The actuarial deficiency reported by the UAPP as at December 31, 2009 related to all participants is $971.0 million (2008 - $1,055.5 million) consisting of a pre-1992 deficiency ($666.0 million) and a post 1991-deficiency ($305.0

ANNUAL REPORT 2009-2010  l  23


million). Based on an extrapolation of the UAPP’s financial position to March 31, 2010, the University’s portion of this deficiency, which has been allocated based on its plan members’ percentage of pensionable earnings, is estimated to be $116.4 million (2009 - $187.0 million). The University has recorded an accrued benefit liability of $58.3 million (2009 - $38.7 million) and deferred $58.1 million (2009 - $148.3 million) of unamortized experience losses as prescribed by GAAP for employee future benefits. Current contributions have been set such that the pre-1992 liability would be eliminated by December 31, 2043. Rates are currently being re-evaluated by UAPP and increases are anticipated effective July, 2010. This represents a significant financial risk to the University, including a potential risk in recruitment and retention. The University is also a participant in the Public Sector Pension Plan (PSPP) for certain other employees. Participants, including the University, are unable to isolate their share of the PSPP pension due to the number of participating employers in the PSPP and the resultant complexities in calculating accurate information related to the participants’ share of any unfunded liability. There is a strong likelihood that both employer and employee contribution rates will increase in the near future for PSPP plans. For multi-employer defined-benefit plans where there is measurement uncertainty with respect to each plan participant, the CICA Handbook guidance allows for following the standards on defined-contribution plans. Therefore, the University has chosen to continue to account for the PSPP on a defined-contribution basis.

DEFERRED MAINTENANCE The magnitude of deferred maintenance and an aging infrastructure means emergency repairs may be unavoidable. The current 5-year deferred maintenance liability for buildings totals $298.7 million (2009 $361.7 million). A significant part of the reduction from 2009 can be attributed to the reduction in construction costs, which impacts the cost of addressing deferred maintenance projects. Wherever possible, the University will try to address deferred maintenance as part of other capital projects within the existing building inventory. Even with this strategy, deferred maintenance continues to be a major issue for the University. During the past year, the University expended $14.2 million (2009 $14.1 million) on maintenance projects. Another $6.9 million (2009 $5.2 million) was spent on capital projects within the Infrastructure Maintenance Program funded by the Province of Alberta. Based on current Facilities Condition Index data compiled for the University, the University estimates it needs to spend approximately $41.9 million (1.5% of current replacement value) per year in order to properly address the capital renewal requirements of its existing buildings. The University is limited in its ability to make adequate progress on its deferred maintenance issues.

BUDGETARY PRESSURE The University’s future finances are under pressure as a result of a number of factors including: • the expectation that there will be no increases in operating grant funding in the foreseeable future; • potential for operating grant funding reductions in the foreseeable future; • loss of incremental Enrolment Planning Envelope funding impacting new programming and tuition revenues; • potential for negotiated salaries in excess of funding; • a tuition policy that limits tuition to rates below inflation rates; • potential for volatility with regards to Investment returns; and, • maintaining a positive unrestricted net asset position The University continues to be committed to address these budgetary pressures and will work closely with the Board of Governors and the government to develop long-term strategies to ensure that it can continue to deliver on its mandate.

ANNUAL REPORT 2009-2010  l  24


5. PROGRESS IN CAPITAL PROJECTS In 2010 the University expended $274.1 million (2009 $181.1 million) on buildings and plant, and a total of $47.0 million (2009 $38.3 million) in equipment & furnishings, books, software and artwork. These additions were funded as follows: $23.2 million from internal University funds, $50.8 million from debt financing and $247.1 million from other external sources. Significant investment in buildings from external funds includes: Energy, Environment & Experiential Learning ($60.8 million), Taylor Family Digital Library and High Density Library ($87.6 million), Phase VI New Residence ($29.1 million – debt funded), Foothills Campus including Health Research Innovation Centre fit out costs, Health Science Centre Critical Renovations, and Undergraduate Medical Expansion ($26.6 million), the International House residence ($18.4 million – debt funded), Central Heating and Cooling Plant / Energy Centre ($15.2 million), and the Clinical Skills Building ($9.1 million).

ANNUAL REPORT 2009-2010  l  25


FINANCIAL STATEMENTS

FOR THE YEAR ENDED MARCH 31, 2010

ANNUAL REPORT 2009-2010  l  27


STATEMENT OF MANAGEMENT RESPONSIBILITY

The University is responsible for the preparation of the financial statements and has prepared them in accordance with Canadian generally accepted accounting principles as described in note 2 to the financial statements. The financial statements present fairly the financial position of the University as at March 31, 2010 and the results of its operations and cash flows for the year then ended. In fulfilling its responsibilities and recognizing the limits inherent in all systems, the University has developed and maintains a system of internal control designed to provide reasonable assurance that University assets are safeguarded from loss and that the accounting records are a reliable basis for the preparation of the financial statements. The Board of Governors carries out its responsibility for review of the financial statements principally through its Audit Committee. The Audit Committee meets with Management and the External Auditor to discuss the results of audit examinations and financial reporting matters. The External Auditor has full access to the Audit Committee, with and without the presence of Management. The financial statements for the year ended March 31, 2010 have been reported on by the Auditor General of the Province of Alberta, the auditor appointed under The Post-secondary Learning Act. The Auditor's Report outlines the scope of his examination and provides his opinion on the fairness of presentation of the information in the financial statements.

Original signed by Warren Veale Interim President

Original signed by Jonathan Gebert Vice-President (Finance and Services)

ANNUAL REPORT 2009-2010  l  28


STATEMENTREPORT OF MANAGEMENT RESPONSIBILITY AUDITOR’S To the Board of Governors of the University of Calgary I have theisstatements positionofofthe thefinancial statements and has prepared them in accordance with Canadian The audited University responsibleof forfinancial the preparation generallyofaccepted accounting described in note 2 to the financial statements. The financial statements present fairly University Calgary as at Marchprinciples 31, 2010asand 2009 and the financial position of the University as at March 31, 2010 and the results of its operations and cash flows for the year then the statements of revenue and expenses, changes in net ended. assets and cash flows for the years then ended. These In fulfilling its responsibilities and recognizing theUniversity’s limits inherent in all systems, the University has developed and maintains a financial statements are the responsibility of the system of internal control designed provideanreasonable management. My responsibility is to to express opinion onassurance that University assets are safeguarded from loss and that the accounting records are a reliable basis for the preparation of the financial statements. these financial statements based upon my audits. The Board of Governors carries out its responsibility for review of the financial statements principally through its Audit Committee. The Audit Committee with Management andgenerally the External Auditor to discuss the results of audit examinations and financial I conducted my audits inmeets accordance with Canadian reporting matters.standards. The External Auditor has fullrequire accessthat to the Audit Committee, with and without the presence of Management. accepted auditing Those standards I plan perform an auditfor to the obtain assurance Theand financial statements yearreasonable ended March 31, 2010 have been reported on by the Auditor General of the Province of whether the statementsunder are free material Alberta, thefinancial auditor appointed Theof Post-secondary Learning Act. The Auditor's Report outlines the scope of his examination and provides his opinion on the fairness of presentation of the information in the financial statements. 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. In my opinion, these financial statements present fairly, in all material respects, the financial position of the Original signed by Warren Veale University as at March 31, 2010 and 2009 and the results Interim President of its operations and its cash flows for the years then ended in accordance with Canadian generally accepted accounting principles.

Edmonton, Alberta June 03, 2010

Original signed by Jonathan Gebert Vice-President (Finance and Services)

Original signed by Merwan N. Saher, CA Auditor General

ANNUAL REPORT 2009-2010  l  29


STATEMENT OF FINANCIAL POSITION FOR THE YEAR ENDED MARCH 31, 2010 (thousands of dollars) 2010

2009 restated, note 3

ASSETS Current Assets Cash and cash equivalents (note 4) Short-term investments (note 5) Accounts receivable Inventories and prepaid expenses

$

Long-term investments (note 5) Other long-term assets (note 6) Capital assets and collections (note 7)

576,062 190,331 63,379 19,916 849,688

$

456,643 119,467 60,899 17,557 654,566

449,242 22,604 1,209,195

354,454 25,763 969,846

2,530,729

2,004,629

166,550 3,951 391,665 20,238 582,404

89,691 22,124 327,125 18,518 457,458

63,691 110,186 162,059 902,374 1,820,714

43,720 48,550 185,458 708,170 1,443,356

441,658

340,103

194,471

200,144

LIABILITIES AND NET ASSETS Current Liabilities Accounts payable and accrued liabilities Current portion of long-term liabilities (note 9) Deferred contributions, research and other (note 10) Deferred revenue

Employee future benefit liabilities (note 8) Long-term liabilities (note 9) Deferred capital contributions (note 10) Unamortized deferred capital contributions (note 11) Net Assets Endowments (note 12) Investment in capital assets and collections (note 13)

84,468

78,624

(10,582) 710,015

(57,598) 561,273

Internally restricted (note 14) Unrestricted (deficit) $

2,530,729

$

2,004,629

Contingent liabilities and contractual obligations (note 15 and note 16) Signed on behalf of the Board of Governors:

Original signed by

Original signed by

Chair, Board of Governors

Vice-President (Finance and Services)

The accompanying notes are part of these financial statements. ANNUAL REPORT 2009-2010  l  30


STATEMENT OF REVENUE AND EXPENSE FOR THE YEAR ENDED MARCH 31, 2010 (thousands of dollars) 2010

2009 restated, note 3

REVENUE $

Government of Alberta grants

499,583

Federal and other government grants Sales of services and products

$

455,989

114,821

108,381

94,967

90,949

169,720

157,166

Donations and other grants

71,456

82,929

Investment income (note 18)

31,510

7,036

Student tuition and fees

52,073

51,751

1,034,130

954,201

Salaries

502,482

479,030

Employee benefits

101,957

87,596

Materials, supplies and services

Amortization of deferred capital contributions (note 11)

EXPENSE

182,095

180,727

Utilities

28,214

32,039

Maintenance and repairs

14,160

14,054

Scholarships, bursaries and awards

61,061

55,572

Cost of goods sold

15,471

15,833

80,681 986,121

80,668 945,519

EXCESS OF REVENUE OVER EXPENSE

48,009

8,682

NET TRANSFER (TO) FROM ENDOWMENTS (note 12)

(1,208)

19,221

6,059

9,333

NET CHANGE IN INTERNALLY RESTRICTED NET ASSETS

(5,844)

(51,420)

CHANGE IN UNRESTRICTED NET ASSETS FOR THE YEAR

47,016

(14,184)

(57,598)

(43,414)

Amortization of capital assets

NET CHANGE IN INVESTMENT IN CAPITAL ASSETS (note 13)

UNRESTRICTED NET ASSETS (DEFICIT), Beginning of year UNRESTRICTED NET ASSETS (DEFICIT), End of year

$

(10,582)

$

(57,598)

The accompanying notes are part of these financial statements. ANNUAL REPORT 2009-2010  l  31


STATEMENT OF CHANGES IN NET ASSETS FOR THE YEAR ENDED MARCH 31, 2010 (thousands of dollars) Investment in Capital

Internally

Assets

Restricted

Unrestricted

$

$

Endowments NET ASSETS (DEFICIENCY), March 31, 2008

$

Excess of revenue over expense Investment loss (note 18) Endowment contributions (note 12) Transfers

425,578

$

209,373

27,204

(43,414)

-

-

-

8,682

(87,110)

-

-

-

20,856

-

-

-

(19,221)

-

-

19,221

Net change in investment in capital assets (note 13)

-

(9,333)

-

9,333

Contributions of assets not subject to amortization (note 13)

-

104

-

-

Net expenditures and transfers of internally restricted net assets

-

-

51,420

(51,420)

NET ASSETS (DEFICIENCY), March 31, 2009 - restated note 3

$

Excess of revenue over expense

340,103

$

200,144

$

78,624

$

(57,598)

-

-

-

48,009

Investment income (note 18)

57,944

-

-

-

Endowment contributions (note 12)

42,403

-

-

-

Transfers

1,208

-

-

(1,208)

Net change in investment in capital assets (note 13)

-

(6,059)

-

6,059

Contributions of assets not subject to amortization (note 13)

-

386

-

-

Net expenditures and transfers of internally restricted net assets

-

-

5,844

(5,844)

NET ASSETS (DEFICIENCY), March 31, 2010

$

441,658

$

194,471

$

84,468

$

(10,582)

The accompanying notes are part of these financial statements. ANNUAL REPORT 2009-2010  l  32


STATEMENT OF CASH FLOWS FOR THE YEAR ENDED MARCH 31, 2010 (thousands of dollars) 2010 CASH PROVIDED FROM (USED IN) OPERATING ACTIVITIES Excess of revenue over expense

$

Add (deduct) non-cash items: Amortization of capital assets Amortization of deferred capital contributions Change in employee future benefit liabilities Change in unrealized (gain) loss on investments

48,009

2009 restated, note 3 $

8,682

80,681 (52,073) 19,971 (21,060)

80,668 (51,751) 9,744 11,934

Total non-cash items

27,519

50,595

Net change in non-cash working capital (*)

67,416

62,712

142,944

121,989

(319,644) (23,895) 3,159 8,112

(217,342) (5,803) 430 8,115

(332,268)

(214,600)

42,403 222,877 43,463 308,743

20,856 237,448 30,592 288,896

INCREASE IN CASH AND CASH EQUIVALENTS

119,419

196,285

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

456,643

260,358

CASH PROVIDED FROM (USED IN) INVESTING ACTIVITIES Purchase of capital assets and collections, net of disposals Purchases of long-term investments, net of sales Proceeds from other long-term assets Endowment investment earnings realized

CASH PROVIDED FROM FINANCING ACTIVITIES Endowment contributions Capital contributions Long-term liabilities - new financing, net of repayments

CASH AND CASH EQUIVALENTS, END OF YEAR (note 4)

(*)

$

2010

Net change in non-cash working capital: (Increase) in short-term investments

576,062

$

(70,864)

$

456,643

2009 restated, note 3 $

(23,993)

(Increase) decrease in accounts receivable

(2,480)

37,266

(Increase) in inventories and prepaid expenses

(2,359)

(5,372)

Increase in accounts payable and accrued liabilities

76,859

18,207

Increase in deferred contributions, research and other

64,540

38,483

1,720

Increase (decrease) in deferred revenue $

67,416

(1,879) $

62,712

The accompanying notes are part of these financial statements. ANNUAL REPORT 2009-2010  l  33


NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2010 (thousands of dollars) 1.

Authority and Purpose The Governors of The University of Calgary (“the University”) is a corporation which manages and operates the University of Calgary (“the University”) under the Post-secondary Learning Act (Alberta). All members of the Board of Governors are appointed by either the Lieutenant Governor in Council or the Minister of Advanced Education and Technology, with the exception of the Chancellor and President, who are ex officio members. Under the Post-secondary Learning Act, Campus Alberta Sector Regulation, the University is a comprehensive academic and research institution offering undergraduate and graduate degree programs as well as a full range of continuing education programs and activities. The University is a registered charity, and under section 149 of the Income Tax Act (Canada), is exempt from the payment of income tax. This tax exemption does not extend to its wholly-owned subsidiary, University Technologies International Inc.

2.

Summary of Significant Accounting Policies and Reporting Practices a)

General - GAAP and Use of Estimates

These financial statements have been prepared in accordance with Canadian generally accepted accounting principles, known as GAAP. The measurement of certain assets and liabilities is contingent upon future events; therefore, the preparation of these financial statements requires the use of estimates, which may vary from actual results. University administration uses judgment to determine such estimates. Employee future benefit liabilities, amortization of capital assets and floating rate notes investments are the most significant items based on estimates. In administration’s opinion, the resulting estimates are within reasonable limits of materiality and are in accordance with the significant accounting policies summarized below. These significant accounting policies are presented to assist the reader in evaluating these financial statements and, together with the following notes, should be considered an integral part of the financial statements. b)

Investment in Subsidiaries and Joint Venture

The financial statements include the accounts of the following entities using the equity method of accounting: • the combined results of University Technologies Group o University Technologies International Inc. (UTI), o University Technologies International Limited Partnership (UTI LP), a limited partnership held in trust by the University, and o UTI LP’s wholly owned subsidiaries, • the accounts of The Arctic Institute of North America (AINA), a non-profit organization controlled by the University. UTI LP operates to facilitate the transfer of intellectual property from the University to private business. AINA operates under the authority of the Act of the Federal Parliament (9-10 George VI, Chapter 45) to initiate, encourage and support northern research and to advance the study of arctic conditions and problems. The financial statements use the equity method to record the University’s proportionate share of the following joint venture: Canada School of Energy and Environment (46.2% interest) – a joint venture with two other universities to promote coordination and collaboration in research and education related to the implementation of Alberta’s energy and environment strategies. These investments are recorded as other long-term assets (Note 6).

ANNUAL REPORT 2009-2010  l  34


NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2010 (thousands of dollars) Summary of Significant Accounting Policies and Reporting Practices (Continued) c)

Financial Instruments

The University’s financial assets and liabilities are generally classified and measured as follows: Financial Statement Components Cash and cash equivalents Investments Accounts receivable Other Long-term assets Accounts payable Long-term liabilities

Classification Held for Trading Held for Trading Loans and Receivables Loans and Receivables Other liabilities Other liabilities

Measurement Fair Value Fair Value Cost Amortized cost Cost Amortized cost

The University’s financial instruments are recognized on their trade date and transaction costs related to all financial instruments are expensed as incurred. Valuations of publicly traded securities are based on quoted market bid prices at the close of business on the statement of financial position date. For securities where market quotes are not available, estimation techniques are used to determine fair value. Estimation techniques used include discounted cash flows, internal models that utilize observable market data or comparisons with other securities that are substantially the same. All derivative financial instruments of the University are classified as held for trading. The University does not use foreign currency forward contracts or any other type of derivative financial instruments for trading or speculative purposes. As permitted for Not-for-Profit Organizations, the University has elected to not apply the standards on derivatives embedded in non-financial contracts, and the University has elected to continue to follow CICA 3861: Disclosure and Presentation. Financial statements are exposed to credit risk, interest rate risk, foreign exchange risk, market risk, commodity price risk and liquidity risk. Each of these risks is managed through the University’s collection procedures, investment guidelines, banking arrangements and other internal policies, guidelines and procedures. d)

Inventories

Inventories held for resale are valued at the lower of cost and net realizable value. Inventories held for consumption are valued at cost or net replacement cost. e)

Capital Assets and Collections

Capital assets purchased are recorded at cost. In-kind contributions are recorded at fair value when a fair value can be reasonably determined. Permanent collections are not amortized and include library assets with permanent value, museum specimens, archival materials, maps and works of art held for education, research and public exhibition purposes. Construction in progress includes the costs directly attributable to the construction including engineering, legal fees and interest on specific debt attributed to the construction of capital assets. Capital assets, once placed into service, are amortized on a straight-line basis over the assets’ estimated useful lives. The estimated useful lives are as follows: Buildings, utilities and site improvements Furniture, equipment and systems Learning resources

20 - 40 years 3 – 10 years 10 years

ANNUAL REPORT 2009-2010  l  35


NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2010 (thousands of dollars) Summary of Significant Accounting Policies and Reporting Practices (Continued) f)

Revenue Recognition

The financial statements record the following items as revenue - at the following times: • • • • • • • •

Unrestricted contributions - when received or receivable, if the amount can be reasonably estimated and collection is reasonably assured. Operating grants - when received or receivable, or where a portion of the grant relates to a future period, it is deferred and recognized in the subsequent period. Unrestricted investment income - when earned; this includes interest, dividends, realized and unrealized gains and losses. Pledges - when collected. Revenues received for services and products - when the services or products are substantially provided. Tuition fees - when the instruction is delivered. Donation of materials and services – are recorded at fair value when a fair value can be reasonably determined and when materials and services would otherwise have been purchased. Restricted contributions - based on the deferral method.

Deferral method Contributions, including investment income on the contributions, which are restricted for purposes other than endowment or capital asset acquisitions, are deferred and recognized as revenue when the conditions of the contributions are met. Contributions to acquire capital assets with limited life are first recorded as deferred capital contributions, when received, and when expended, they are transferred to unamortized deferred capital contributions and amortized to revenue over the useful lives of the related assets. Endowment contributions are recognized as direct increases in endowment net assets. Investment earnings, under agreements with benefactors or the Post-secondary Learning Act allocated to endowment principal, are also recognized as direct increases in endowment net assets. Endowment investment earnings that are allocated for spending are deferred and recognized as revenue when the conditions of the endowment are met. Contributions restricted for the acquisition of land and permanent collections are first recorded as deferred contributions when received, and when expended, they are recognized as direct increases in investment in capital assets and collections. g)

Foreign Currency Translation

Financial assets and liabilities recorded in foreign currencies are translated to Canadian dollars at the year-end exchange rate. Revenues and expenses are translated at average daily exchange rates. Gains or losses from these translations are included in investment income. h)

Employee Future Benefits

Pension The University participates with other employers in the Public Service Pension Plan (PSPP) and the Universities Academic Pension Plan (UAPP). These pension plans are multi-employer defined benefit pension plans that provide pensions for the University’s participating employees based on years of service and earnings. Pension expense for the UAPP is actuarially determined using the projected benefit method prorated on service and is allocated to each participant based on their respective percentage of pensionable earnings. Actuarial gains or losses on the accrued benefit obligation are amortized over the expected average remaining service life.

ANNUAL REPORT 2009-2010  l  36


NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2010 (thousands of dollars) Summary of Significant Accounting Policies and Reporting Practices (Continued) The University does not have sufficient plan information on the PSPP to follow the standards for defined benefit accounting, and therefore follows the standards for defined contribution accounting. Accordingly, pension expense recorded for the PSPP is comprised of employer contributions to the plan that are required for its employees during the year. These contributions are calculated based on actuarially pre-determined amounts that are expected to provide the plan’s future benefits.

Supplementary retirement plans The pension expense for defined benefit supplementary retirement plans is actuarially determined using the projected benefit method prorated on service. Actuarial gains or losses in excess of 10% of the accrued benefit obligation are amortized over the expected service lifetime for each plan participant. i)

Capital Disclosures

The University defines its capital as the amounts included in deferred contributions (note 10), endowment net assets (note 12) and unrestricted net assets. A significant portion of the University’s capital is externally restricted and the University’s unrestricted capital is funded primarily by The Ministry of Advanced Education and Technology. The University has investment policies (note 5), spending policies and cash management procedures to ensure the University can meet its capital obligations. Under the Post-secondary Learning Act, the University must receive ministerial approval for a deficit budget, borrowing and the sale of any land or buildings. j)

Contributed Services

Volunteers as well as members of the staff of the University contribute an indeterminable number of hours per year to assist the institution in carrying out its mission. Such contributed services are not recognized in the financial statements.

3.

Changes in Accounting Policies During the year, the University of Calgary changed its accounting policy with respect to consolidation of its controlled subsidiaries. As permitted by Not For Profit accounting standards under CICA 4450, the University now records the interest in its controlled subsidiaries on an equity basis without a line by line consolidation of the subsidiaries’ accounts. The University also changed its accounting policy with respect to accounting for its internal endowments. As a result of the change, internal and external endowments share the same accounting treatment, where endowment investment income (loss) is a direct increase (decrease) to endowment net assets. This change removes endowment investment earnings from the statement of revenue and expense, providing more relevant information about the University’s financial performance. These changes have been applied retroactively with restatement of comparative numbers. The impact of the change in policies on the prior year financial statements is as follows:

ANNUAL REPORT 2009-2010  l  37


NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2010 (thousands of dollars) Changes in Accounting Policies (Continued) 2009

As previously recorded

Adjustment recorded - Change in policy from Consolidated to Unconsolidated Financial Statements

Adjustment recorded - Change in policy for internal endowments

As restated

Increase (decrease) in: Statement of Financial Position Assets

$ 2,006,703

Liabilities

$

(2,074)

$

-

$

2,004,629

2,006,703

(2,074)

-

2,004,629

1,445,430

(2,074)

-

1,443,356

Net Assets Endowments

340,552

(449)

-

340,103

Investment in capital assets and collections

202,435

(2,291)

-

200,144

Internally restricted (note 14) Unrestricted Net Assets (Deficit)

77,654

970

-

78,624

(59,368)

1,770

-

(57,598)

$ 2,006,703

$

(2,074)

$

-

$

2,004,629

$

$

(4,444)

$

12,873

$

954,201

Statement of Revenue and Expense Revenues*

Excess (Deficiency) of Revenue over Expense

945,772 949,963

Expenses $

(4,191)

(4,444) $

-

-

$

945,519

12,873

$

8,682

*As a result of the change in accounting policy for internal endowments, investment income has increased by $12,873 since endowment losses have been removed from net income and recorded as direct decreases to endowment net assets. This is included in the change in revenues noted above.

4.

Cash and Cash Equivalents Cash and cash equivalents, with a maximum maturity of 90 days at date of purchase are as follows: 2010

Cash

$

5,948

$

576,062

2009 $

(10,816)

$

456,643

570,114

Money market funds, short-term notes and treasury bills

467,459

ANNUAL REPORT 2009-2010  l  38


NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2010 (thousands of dollars) 5.

Investments As at March 31, 2010, the composition, fair value, and annual market yields on investments are as follows: 2010

2009

Annual Market Yield Money market funds, short-term notes, and treasury bills

-

$

Market Value

Annual Market Yield

1,028

-

Market Value $

737

Canadian bonds

5.76%

255,117

5.74%

173,902

Canadian equity

41.13%

150,104

(29.20%)

112,522

Foreign equity

20.91%

150,486

(29.49%)

117,114

Floating Rate Notes (ABCP)

15.39%

31,844

(22.01%)

38,767

Other fixed income

6.84%

50,994

4.38%

30,879

Short-term investments

5.98%

190,331

5.61%

119,467

Long-term investments

23.23%

449,242

(19.98%)

354,454

$

$

639,573

$

639,573

$

473,921

473,921

Terms to maturity of fixed income investments are as follows: • Money market funds, short-term notes, and treasury bills – less than one year. • Canadian government and corporate bonds – range from less than one year to more than 10 years. The University’s investments are managed using two pools, the Working Capital Pool “WCP” with investment holdings of $225,647 (2009 - $152,004) and the Unitized Endowment Pool “UEP” with investment holdings of $413,926 (2009 $321,917). The primary objective of the University’s investment policy for the WCP is the preservation of capital, liquidity and to earn a rate of return that exceeds the DEX Short Term Bond Index. The primary objective for the UEP is to earn a long-term rate of return that, in real terms, exceeds total endowment spending at an acceptable level of risk. The University has policies and procedures in place governing asset mix, diversification, exposure limits, credit quality and performance measurement. The University’s Investment Committee, a subcommittee of the Board of Governors, has delegated authority for oversight of the University’s investments. The Investment Committee meets regularly to monitor investments, to review investment manager performance, to ensure compliance with the University’s investment policies and to evaluate the continued appropriateness of the University’s investment policies.

Floating Rate Notes (formerly Asset Backed Commercial Paper - ABCP) At March 31, 2010, the University holds $57,608 (2009 - $67,646) in floating rate notes which comprise the following:

ANNUAL REPORT 2009-2010  l  39


NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2010 (thousands of dollars) Investments (Continued)

Note Type

Face Value

Estimated fair value

Scheduled repayment

Maturity

Synthetic Assets

$ 46,549

$ 31,126

7 years

July 15, 2056

11,059

718

3 - 30 years

3 - 30 years

$ 57,608

$ 31,844

IA Tracking Notes Total

Synthetic Assets are considered investment grade, rated BBB or higher, with the exception of C notes that are rated BB for which the University holds $1.4 million in face value. In the absence of a well-functioning market for floating rate notes, the University has estimated the fair value of these investments using a discounted cash flow valuation model. The model involves assumptions regarding the difference between the expected yield, based on similarly rated securities adjusted for illiquidity and market complexity, and the appropriate market-discount attributable to such investments. The spread between the expected yield and the estimated discount rate ranges from 422 basis points for the Class A-1 notes and 682 basis points for the Class C notes. An increase in spread of 100 basis points would result in a reduction to the fair value of $3,113. IA Tracking Notes are generally unrated and therefore have been valued at the current market value provided by an independent, publicly available source. Administration believes this is a fair approximation of their current market value. The eventual timing and amount of future cash flows attributable to these assets may vary significantly from administration’s current best estimates. It is possible that the ultimate fair value of these assets may vary significantly from current estimates and that the magnitude of any such difference could be material to the financial results.

6.

Other Long-term Assets 2010

Receivable from Alberta Innovates Health Solutions

$

Capital lease receivable (1) Other long-term assets Investment in subsidiaries and joint venture

(2)

Current portion in Accounts Receivable Balance, end of year

$

-

2009 $

5,725

14,737

15,014

2,522

2,955

5,643

5,528

(298)

(3,459)

22,604

$

25,763

1)

The University and Alberta Health Services (AHS) entered into a 25-year agreement for AHS to lease space in the University Research Centre Building. This lease has been accounted for as a capital lease. The future minimum lease payments receivable for the next five fiscal years are as follows: 2011 to 2013 - $1,384 per year; 2014 - $1,424; 2015 $1,453.

2)

Financial Information with respect to the University’s share of its subsidiaries and joint venture is disclosed below:

ANNUAL REPORT 2009-2010  l  40


NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2010 (thousands of dollars) Other Long-term Assets (Continued) University Technologies Group 2010 Assets

$

4,933

Arctic Institute of North America 2010

2009 $

5,101

$

2,238

Canada School of Energy and Environment 2010

2009 $

$

2,542

2009

4,557

$

6,318

Liabilities

1,163

11,949

365

380

4,557

6,318

Equity (Accumulated Deficit)

3,770

(6,848)

1,873

2,162

-

-

Revenues

8,186

2,415

895

932

1,651

969

Expenses

2,800

4,070

1,172

1,173

1,651

969

Net Income (loss) Cash provided (used in) operating activities Cash provided (used in) financing activities Cash provided (used in) investing activities

5,386

(1,655)

(277)

(241)

-

-

5,098

(359)

(121)

(118)

(2,221)

6,404

(3,824)

22

15

43

-

(715)

(474)

(116)

34

-

Increase (decrease) in cash

$

559

$

(811)

$

(222)

$

(41)

$

- -

(2,221)

$

6,404

The difference between the combined net income of the subsidiaries and the subsidiaries income recorded in investment income in note 18 is due to offsetting inter-company revenues and expenses. 7.

Capital Assets and Collections 2010 Net book

amortization

value

Cost

528,549

$ 1,031,444

$ 1,287,020

565,464

458,279

107,185

171,853

128,103

43,750

14,058

-

4,370

-

Cost Buildings, utilities and site improvements Furnishings, equipment and systems Learning resources Land Library permanent collections Other permanent collections Balance, end of year

2009

Accumulated

$ 1,559,993

$

Accumulated

Net book

amortization

value

$

497,122

$

789,898

536,638

425,377

$

111,261

165,347

122,599

$

42,748

14,058

14,058

-

$

14,058

4,370

3,981

-

$

3,981

8,388

-

8,388

7,900

-

7,900

$ 2,324,126

$ 1,114,931

$ 1,209,195

$ 2,014,944

1,045,098

969,846

Construction in progress, which is not amortized as the assets are not yet available for use is comprised of $468,942 (2009 - $313,231) from buildings, utilities and site improvements and $4,674 (2009 - $2,981) from furnishings, equipment and systems. Acquisitions during the year included in-kind contributions (such as learning resources, equipment, software, buildings and land) in the amount of $7,110 (2009 - $840).

ANNUAL REPORT 2009-2010  l  41


NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2010 (thousands of dollars) 8.

Employee Future Benefit Liabilities Employee future benefit liabilities are comprised of the following:

2010 $

Universities Academic Pension Plan (UAPP)

58,321

Long-term Disability Supplemental Retirement Pension Plan $

Balance, end of the year

a)

2009 $

38,720

403

365

4,967

4,635

63,691

$

43,720

Defined Benefit

Multi-Employer Pension Plans The UAPP is a multi-employer contributory joint defined benefit pension plan for academic staff members. An actuarial valuation of the UAPP was carried out as at December 31, 2008. This was then extrapolated to the University’s year end of March 31, 2010. The PSPP is a multi-employer contributory defined benefit pension plan for support staff members and is accounted for on a defined contribution basis. An actuarial valuation of the PSPP was carried out as at December 31, 2008 and was then extrapolated to December 31, 2009. The pension expense recorded in these financial statements is $11,578 (2009 $8,993). The deficits reported below represent the unfunded position of the plans as a whole and not the University’s share: 2010

2009

31-Mar-10

31-Dec-09

31-Mar-09

31-Dec-08

UAPP Post 1991 Pre 1992

$ 277,859

$

646,208

Total

$ 924,067

PSPP

n/a

305,020

$

442,750

$

303,034

665,980

857,110

752,437

971,000

$ 1,299,860

$ 1,055,471

$ 1,729,196

n/a

$ 1,187,538

$

The University’s portion of the UAPP deficiency disclosed below has been allocated based on its percentage of the plan’s total employer contributions for the year. b)

Supplementary retirement (defined benefit)

The University provides non-contributory defined supplementary retirement benefits to current and past executives. An actuarial valuation of these benefits was carried out at March 31, 2010. The valuation showed an aggregate liability of $4,967 (2009 - $4,635).

ANNUAL REPORT 2009-2010  l  42


NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2010 (thousands of dollars) Employee Future Benefit Liabilities (Continued) 2009

2010 Long-term UAPP

(1)

disability

Supplementary

(2)

retirement

(2)

UAPP

(1)

Long-term

Supplementary

(2)

retirement

disability

Expenses Current service cost

$

Interest cost Amortization of net actuarial losses (gains) Amortization of past service cost Curtailment Settlement loss (gain) Total expense

23,189

$

-

$

462

$

20,470

$

-

$

451

13,087

37

215

6,180

40

217

13,126

(105)

11

4,710

(105)

763

-

207

37

-

-

-

-

-

206 -

848

-

(236)

-

$

49,402

$

139

$

489

$ 31,360

$

141

$

2,279

-

$

499,240

$

989

$

$

1,050

$

5,151

Financial Position Accrued benefit obligation: Balance, beginning of year

6,281

$ 441,220

Current service cost

23,189

-

462

20,470

-

451

Interest cost

34,242

37

215

30,250

40

217

(22,729)

(101)

(156)

(20,280)

(101)

(196)

-

787

121

-

-

-

(59,608)

(585)

(1,300)

27,580

-

191

-

-

(270)

-

-

-

Benefits paid Past service costs Actuarial (gain) loss Settlement loss (gain) Curtailment loss Balance, end of year Plan assets Funded status - plan deficit Unamortized past service costs Unamortized net actuarial (gain) loss Accrued benefit liability

-

-

-

-

-

467

474,334

1,127

5,353

499,240

989

6,281

312,210

-

-

(5,353) 84

(187,030) -

(989) 1,408

(6,281) -

357,893

-

(116,441) -

(1,127) 1,988

58,120 $

(58,321)

(1,264) $

(403)

$

302

148,310

(4,967)

$ (38,720)

(784) $

(365)

1,646 $

(4,635)

(1)

Plan assets: UAPP - the unfunded deficiency for service prior to January 1, 1992 is financed by additional contributions of 1.25% (2009 1.25%) of total earnings by the Province of Alberta. Employees and employers equally share the balance of the contributions of 2.03% (2009 – 1.74%) of total earnings required to eliminate the unfunded deficiency by December 31, 2043. The actuarial valuation shows that the present value of the Province of Alberta’s obligation for the future additional contributions at December 31, 2008 was $270,200. The unfunded deficiency for service after December 31, 1991 is financed by special payments of 4.64% (2009 – 1.08%) of pensionable earnings shared equally between employees and employers until December 31, 2021. (2) Supplementary retirement and Long-term disability - the University plans to use its working capital to finance these future obligations. ANNUAL REPORT 2009-2010  l  43


NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2010 (thousands of dollars) Employee Future Benefit Liabilities (Continued) The significant actuarial assumptions used to measure the accrued benefit obligation are as follows:

2010

UAPP

2009

Long-term

Supplementary

disability

retirement

UAPP

Long-term

Supplementary

disability

retirement

Accrued benefit obligation:

Discount rate Long-term average compensation increase

6.90%

4.50%

5.00%

6.70%

4.00%

3.2% first ten years, 5.3% thereafter

3.50%

n/a

4.00%

3.00%

n/a

4.00%

3.2% first ten years, 5.3% thereafter

6.70%

4.00%

4% first ten years, 5% thereafter

4.00% 0.93% first ten years, 1.75% thereafter

3.00%

n/a

4.00%

2.70%

n/a

2.50%

(1)

10.5 yrs

10 yrs

(1)

Benefit cost:

Discount rate Long-term average compensation increase

6.70%

4.00%

3.00%

n/a

Long-term inflation

2.25%

n/a

11.3 yrs

9 yrs

Estimated average Estimated average remaining service life

(1) Excess actuarial gains or losses are amortized over the remaining service of each plan participant, not an average.

ANNUAL REPORT 2009-2010  l  44


NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2010 (thousands of dollars) 9.

Long-term Liabilities

Collateral

Maturity

Interest

date

rate %

Amount outstanding 2010

2009

Debentures payable to Alberta Capital Finance Authority*: $

13,129

Debenture for Cascade Hall

1

May 2025

6.250%

Debenture for Human Performance Lab Debenture for Health Renovation Innovation Centre/Parkade Debenture for Child Development Centre/Parkade

1

March 2011

4.349%

892

$

13,600 1,745

1

April 2031

4.935%

5,485

5,625

1

June 2032

5.249%

1,848

1,890

Debenture for International Residence House

1

September 2032

4.689%

24,984

25,600

Debenture for International Residence House

1

June 2039

5.100%

29,400

-

Debenture for Residence Renewal Program

1

September 2026

4.429%

5,700

-

1

March 2040

4.734%

30,000

-

1

March 2016

5.125%

616

700

Mortgage for University Research Centre

1

April 2012

0.00%

1,192

1,740

Capital finance bridging facility

2

June 2009

Prime

Debenture for Phase VI Residence Mortgages payable to Canada Mortgage and Housing Corporation: Mortgage for Dining Centre, Kananaskis and Rundle Halls Bank loans payable:

Obligations under capital leases Other long-term obligations (includes asset retirements and liabilities for site restoration)

-

16,000

113,246

66,900

891

714

-

3,060

114,137

70,674

Less current portion

(3,951)

(22,124)

Balance, end of year

$ 110,186

$

48,550

(1) title to land, building; (2) none

* Alberta Capital Finance Authority is a related party The principal portion of long-term debt repayments required over the next five years is as follows: 2011 - $ 3,315; 2012 - $ 3,876; 2013 - $ 3,952; 2014 - $4,053; 2015 - $ 4,257. Interest expense on long-term obligations is $ 2,656 (2009 - $1,374). The weighted average interest rate is 4.95% (2009 – 4.37%).

ANNUAL REPORT 2009-2010  l  45


NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2010 (thousands of dollars) 10. Deferred Contributions Deferred contributions represent unspent externally restricted grants and donations. Changes in the deferred contributions balances are as follows: 2010 Research and Capital other Balance, beginning of year Grants, contributions, donations, and investment income Recognized as revenue Transferred to unamortized deferred capital contributions Transferred to investment in capital assets, not subject to amortization Balance, end of year

$ 185,458

2009 Research and Capital other

$327,125

$ 120,656

186,521

355,308

201,168

312,095

(188)

(253,411)

(234)

(236,271)

(209,346)

(37,357)

(136,035)

(37,334)

(386)

-

(97)

(7)

$ 162,059

$391,665

$ 185,458

$ 327,125

$ 288,642

11. Unamortized Deferred Capital Contributions Unamortized deferred capital contributions represent the unamortized grants and donations received to fund capital acquisitions. The amortization of unamortized deferred capital contributions is recorded as revenue in the statement of operations. The changes in the unamortized deferred capital contributions balance are as follows: 2010 Balance, beginning of year

$

2009 $

246,277

Additions from deferred contributions, net of disposals $

902,374

587,277 172,644

(52,073)

Amortization to revenue Balance, end of year

708,170

(51,751) $

708,170

12. Endowments Endowments consist of externally restricted donations received by the University and internal allocations by the University’s Board of Governors, the principal of which is required to be maintained intact in perpetuity. Investment income earned on endowments must be used in accordance with the various purposes established by the donors or the Board of Governors. Benefactors 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. Under the Post-secondary Learning Act, the University has the authority to alter the terms and conditions of endowments to enable: • income earned by the endowment to be withheld from distribution to avoid fluctuations in the amounts distributed and generally to regulate the distribution of income earned by the endowment. • encroachment on the capital of the endowment to avoid fluctuations in the amounts distributed and generally to regulate the distribution of income earned by the endowment if, in the opinion of the Board of Governors, the encroachment benefits the University and does not impair the long-term value of the fund.

ANNUAL REPORT 2009-2010  l  46


NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2010 (thousands of dollars) Endowments (Continued) In any year, if the investment income earned on endowments is insufficient to fund the spending allocation, the spending allocation is funded from the cumulative capitalized income. However, for individual endowment funds without sufficient cumulative capitalized income, endowment principal is used in that year. This amount is expected to be recovered by future investment income. The composition of endowments is as follows: 2010 Balance, beginning of year

$

Gifts of endowment principal Transfer to endowments Endowment spending allocation including fees

340,103

2009 $

42,403

20,856

1,208

190

(18,075)

(19,411)

76,019

Investment gain (loss)

425,578

(87,110)

Balance, end of year

$

441,658

$

340,103

Cumulative contributions

$

340,515

$

296,905

$

441,658

$

340,103

101,143

Cumulative capitalized income

43,198

In 2009, cumulative capitalized income of $106,521 was required to cover the investment income loss on endowments of $87,110 and the approved endowment spending allocation of $19,411.

ANNUAL REPORT 2009-2010  l  47


NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2010 (thousands of dollars) 13. Investment in Capital Assets and Collections Net assets invested in capital assets and collections represent the carrying amount (net book value) of capital assets and collections less unamortized deferred capital contributions and any related debt. 2010 Capital assets and collections at net book value (note 7)

$ 1,209,195

2009 $

969,846

Less amounts financed by: Unamortized deferred capital contributions (note 11)

(902,374)

(708,170)

Long-term liabilities related to capital expenditures

(112,350)

(61,532)

Investment in capital assets and collections, end of year

$

194,471

$

2010

200,144 2009

The changes during the year are as follows: Investment in capital assets and collections, beginning of year

$

200,144

$

209,373

73,367

44,696

4,830

1,577

Long-term liabilities - new financing

(55,648)

(26,689)

Amortization of investment in capital assets

(28,608)

(28,917)

(6,059)

(9,333)

Acquisition of capital assets and collections Long-term liabilities - repayment

Net change in investment in capital assets Contributions of assets not subject to amortization (Decrease) for the year Investment in capital assets and collections, end of year

$

386

104

(5,673)

(9,229)

194,471

$

200,144

14. Internally Restricted Net Assets Internally restricted net assets represent amounts set aside by the University’s Board of Governors for specific purposes. Internally restricted net assets are summarized as follows: 2010 Subsidiaries

$

5,643

2009 $

2,128

Internally Restricted for Future Commitments and Strategic Reinvestments

53,598

71,048

Faculty and Departmental

25,227

5,448

Balance, end of the year

$

84,468

$

78,624

ANNUAL REPORT 2009-2010  l  48


NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2010 (thousands of dollars) 15. Contingent Liabilities (a) The University is a defendant in a number of legal proceedings. While the ultimate outcome and liability of these proceedings cannot be reasonably estimated at this time, the University believes that any settlement will not have a material adverse effect on the financial position or the results of operations of the University. Administration has concluded that none of the claims meet the criteria for being recorded under GAAP. (b) At March 31, 2010 the University had entered into agreements that provide guarantees on employee housing loans in the amount of $1,589 (2009 - $2,078).

16. Contractual Obligations The University has contractual obligations which are commitments that will become liabilities in the future when the terms of the contracts or agreements are met. 2010 Service contracts

$

52,600

$

208,116

2009 $

59,800

$

228,980

155,516

Capital projects

169,180

Included in service contracts are contracts to purchase electricity and natural gas. The University has entered into a fiveyear contract expiring December 31, 2011, to purchase blocks of electricity in order to manage its exposure to volatility in electrical prices. As a subset of this contract, the University entered a three-year fixed-price contract which expires March 31, 2011. The approximate contractual obligation for electricity is $17,200 (2009 - $20,850). To manage its risk exposure to natural gas, the University has entered into an Energy Purchase Agreement, expiring September 30, 2013, based on an index (floating on the spot market) price with an option to hedge any portion of the requirement at any time. At March 31, 2010, the University had hedged a portion of this contract by fixing the price on a portion of its estimated consumption. Using best estimates of future consumption and forward market prices on March 31, 2010, the approximate contractual obligation for natural gas including executed hedge contracts is $35,400 (2009 - $38,950). The University’s commitments for operating leases for the next five year are as follows: 2011- $2,720; 2012 - $3,709; 2013 - $3,460; 2014 - $3,425; 2015 - $3,216. The University is one of 58 members of CURIE, the Canadian Universities Reciprocal Insurance Exchange, a self-insurance reciprocal established to share the insurable property, liability, and errors and omissions risks of member universities. The projected cost of claims against the exchange is based on actuarial projections and is funded through members’ premiums. As at December 31, 2009 CURIE had a surplus of $32,032 (2008 - $17,748). This surplus is an accumulation of five different underwriting periods, of which the University’s pro rata share is approximately 5.84% (2008 – 5.88%). This surplus is not recorded in the financial statements.

ANNUAL REPORT 2009-2010  l  49


NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2010 (thousands of dollars) 17. Budget Comparison The University’s 2009-10 budget was approved by the Board of Governors and was presented to the Minister of Advanced Education and Technology as part of the University’s submission of its 2009-13 Business Plan. Certain budget figures from the University’s 2009-13 Business Plan have been reclassified to conform to the presentation adopted in the 2010 financial statements. Budget - Unaudited

2010 Actual

$508,533

$499,583

126,360

114,821

84,278

94,967

REVENUE Government of Alberta grants Federal and other government grants Sales of services and products

168,180

169,720

Donations and other grants

76,840

71,456

Investment income (note 18)

17,382

31,510

Amortization of deferred capital contributions (note 11)

50,443

52,073

1,032,016

1,034,130

Salaries

501,455

502,482

Employee benefits

101,420

101,957

Materials, supplies and services

230,107

182,095

Utilities

36,125

28,214

Maintenance and repairs

11,314

14,160

Scholarships, bursaries and awards

54,603

61,061

Cost of goods sold

18,899

15,471

Amortization of capital assets

78,093

80,681

1,032,016

986,121

-

$48,009

Student tuition and fees

EXPENSE

EXCESS OF REVENUE OVER EXPENSE

$

ANNUAL REPORT 2009-2010  l  50


NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2010 (thousands of dollars) 18. Investment Income 2009 restated

2010 Gain (Loss) on investments held for endowments

$

76,019

$

(87,110)

13,258

20,932

Recovery (write-down) on Floating Rate Notes (ABCP)

2,986

(11,934)

Loss from subsidiaries and joint venture

(424)

(1,927)

91,839

(80,039)

(57,944)

-

-

87,110

(2,385)

(35)

Gain on other investments

Investment income capitalized to endowments Investment loss charged to cumulative capitalized endowment earnings Amounts deferred Investment income

$

31,510

$

7,036

ANNUAL REPORT 2009-2010  l  51


NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2010 (thousands of dollars) 19. Related Party Transactions a)

The University operates under the authority and statutes of the Province of Alberta. Transactions between the University and the Government of Alberta (GOA) are measured at the exchange amount and summarized below. 2010

2009

Revenue from GOA Advanced Education and Technology: Operating grants

$

360,724

$

333,541

65,708

57,235

193,656

199,407

16,006

12,410

1,319

1,479

241

35

1,187

-

Alberta Innovates Health Solutions

27,685

25,970

Alberta Innovates Technology Futures

14,246

15,013

Other

12,619

4,063

693,391

649,153

Alberta Health and Wellness

15,808

13,847

Alberta Health Services

11,474

16,368

EPE grants Capital grants Research grants Access to the Future Fund (matching grants) Alberta Innovates Bio Solutions Alberta Innovates Energy and Environment

Total Advanced Education and Technology Other GOA departments and agencies grants:

Other Total other GOA departments and agencies

2,398

2,547

29,680

32,762

Total contributions received

723,071

681,915

Less: deferred contributions

(223,488)

(225,926)

$

499,583

$

455,989

$

22,917

$

3,168

$

31,355

$

17,390

$

153

$

Accounts receivable Advanced Education and Technology

8,438

Other GOA departments and agencies

14,222

Accounts payable Advanced Education and Technology

35

Other GOA departments and agencies $

188

80 3,643

$

3,723

The University has long-term liabilities with Alberta Capital Finance Authority as described in note 9.

ANNUAL REPORT 2009-2010  l  52


NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2010 (thousands of dollars) Related Party Transactions (Continued) b)

Alberta Health Services (AHS) is related to the Province of Alberta since its board is appointed by the Minister of Health and Wellness. As the University and the Province of Alberta are related parties, AHS is a related party to the University. Transactions between the University and the AHS are summarized as follows: 2010

2009

The University of Calgary pays to AHS in the normal course of operations amounts related to utilities; salaries and benefits; and materials, supplies and overheads. Expenditures incurred:

$

18,678

$

23,215

The University of Calgary receives from AHS in the normal course of operations amounts related to physicians; research projects, studies and grants, programs; and support services. Revenues included in income:

$

55,639

$

40,496

Net receivable to the University of Calgary by AHS:

$

8,344

$

5,211

The University leases land to AHS for a parkade at the Foothills Medical Centre and the Alberta Children’s Hospital. Effective September 2003 the University and AHS entered into a 25-year agreement for AHS to lease space in the University Research Centre Building. This lease has been accounted for as a capital lease. At March 31, 2010, the carrying value of the lease receivable is $14,737 (2009 - $15,014). During the year the University received $1,384 in lease payments (2009 - $1,356), $1,107 of which was recognized as interest income (2009 - $1,126). 20. Salary and Employee Benefits Treasury Board Directive 12-98 under the Financial Administration Act of the Province of Alberta requires the disclosure of certain salary and employee benefits information. 2010

2009

Other Base salary (1) Governance

Other

cash

non-cash

(2)

benefits (3) (6)

benefits

Total

Total

$

$

(4)

$

Chair of the Board of Governors Members of the Board of Governors

-

$

-

$

-

-

-

-

-

-

-

-

126

-

1

127

-

316

-

408

724

2,463

326

-

162

488

459 430

Executive President - Incumbent

(5) (10)

President - Past Incumbent

(5) (7)

Vice-Presidents: Provost and Vice-President Academic Vice-President Research

(7)

(8)

367

-

83

450

203

10

74

287

-

(5) (10)

75

-

18

93

378

193

-

41

234

362

(10)

341

34

85

460

352

281

55

88

424

422

Vice-President Finance and Services – Incumbent (5) (10) Vice-President Finance and Services - Past Incumbent Vice-President External Relations

(10)

Vice-President Facilities Management and Development Vice President Development

(9)

ANNUAL REPORT 2009-2010  l  53


NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2010 (thousands of dollars) Salary and Employee Benefits (continued) 1. 2. 3.

Base salary includes pensionable base pay. Other cash benefits include bonuses. Other non-cash benefits include the University’s share of all employee benefits and contributions or payments made on behalf of employees including pension, group life insurance, employee family assistance program, critical illness, supplementary health care, short and long-term disability plans, dental plan, (6) supplemental retirement plan (per footnote ), accidental disability and dismemberment. Benefits for some of the executive also include professional leave, car allowance/taxable benefit for the use of University leased vehicles, and memberships. Benefits reported for the President include a housing allowance. 4. The Chair and Members of the Board of Governors receive no remuneration for participation on the Board. 5. During the fiscal year, the President - Incumbent and President - Past Incumbent positions were occupied for three and nine months respectively. During the fiscal year, the VP Finance and Services - Incumbent and the VP Finance and Services - Past Incumbent positions were occupied for nine and three months respectively. 6. Under the terms of the supplementary retirement plan (SRP), the executive may receive supplemental retirement payments. Retirement arrangement costs as detailed below are not cash payments in the period but are period expenses for rights to future compensation. Costs shown reflect the total estimated cost to provide annual pension income over an actuarially determined post employment period. The SRP provides future pension benefits to participants based on years of service and earnings. The cost of these benefits is actuarially determined using the projected benefit method pro-rated on services, a market interest rate, and management’s best estimate of expected costs and the period of benefit coverage. Net actuarial gains and losses in excess of 10% of the benefit obligations are amortized over the average remaining service life with respect to each plan participant. Current service cost is the actuarial present value of the benefits earned in the current year. Prior service and other costs include amortization of past service costs on plan initiation, amortization of actuarial gains and losses, and interest accruing on the actuarial liability. 7. Individuals in these roles earned administrative leave benefits during the year that have been included in other non-cash benefits. 8. Upon completion of their employment contract, the individual in this role will be eligible for six months of administrative leave. Given this individual is not at the completion of their contract, they are currently not eligible for the administrative leave benefits. As the individual becomes eligible, the costs associated with the leave benefits will be recorded. 9. During the term of their employment contract, the individual in this role may take up to six months of administrative leave subject to the President’s approval of the individual’s administrative leave proposal. The costs associated with the leave benefits are recorded when incurred. 10. The employment contracts for these individuals do not provide for administrative leave benefits.

ANNUAL REPORT 2009-2010  l  54


NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2010 (thousands of dollars) Salary and Employee Benefits (continued)

The current service cost and accrued obligation for each executive under the SRP is outlined in the following table: 2010 Current service cost President - Incumbent President - Past Incumbent

$

-

2009

Prior service and other costs $

-

132

142

Accrued Net Cost $

274

Obligation(1) $

-

Accrued Net Cost $

-

Obligation $

-

3,369

1,882

4,300

Vice-Presidents: Provost and Vice-President Academic

56

13

69

202

51

155

Vice-President Research Vice-President Finance and Services Incumbent Vice-President Finance and Services Past Incumbent

50

4

54

129

49

87

23

30

53

28

-

-

-

-

-

-

-

-

Vice-President External Relations (2) Vice-President Facilities Management and Development

-

9

9

9

55

180

54

3

57

105

41

41

Vice-President Development

45

11

56

325

51

211

(1) The significant actuarial assumptions used to measure the accrued benefit obligation (ABO) are disclosed in Note 8. (2) At March 31, 2010 the VP External Relation position was vacant. As such, at March 31, 2010 the ABO for this position was nil. Rather than reporting a zero balance to reflect the position as at March 31, 2010, the ABO figure disclosed relates to the person last holding the position during the year. 21. Comparative Figures Certain 2009 figures have been reclassified to conform to the presentation adopted in the 2010 financial statements.

ANNUAL REPORT 2009-2010  l  55


For more information about the content of this report, or to share your comments about it, please contact: University of Calgary Office of the Provost provost@ucalgary.ca ucalgary.ca


A Strong Idea  

Annual Report 2009-2010 for the University of Calgary

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