Contents PAGE 2-3. Campus Bursar s Report Selected Financial and Statistical Highlights Auditors Report.

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1 CC(M)P.3 /2013

2 Contents Campus Bursar s Report Selected Financial and Statistical Highlights Auditors Report Balance Sheet Statement of Comprehensive Income Detailed Statement of Comprehensive Income Statement of Changes in Equity Statement of Cash Flows Notes to the Financial Statements Identification and Principal Activities Basis of Presentation Significant Accounting Policies Cash and Cash Equivalents Shortterm Investments Related Parties Accounts Receivables Inventories Accounts Payable and Accruals Shortterm loan Longterm Receivables Investments in Subsidiaries Property, Plant & Equipment Unexpended donations for special projects Endowments Longterm Liabilities Capital Grants Employee benefits obligations Miscellaneous Income Central Expenditures Finance costs Taxation Financial Risk Management Fair Value of Financial Instruments Capital Commitments PAGE

3 Campus Bursar s Report for the Year Ended July 31, OVERVIEW Managing the finances of the Mona Campus became increasingly difficult during the 12 financial year. Faced with the harsh economic realities that continue to affect Jamaica, the government and many households struggled to find solutions to the adverse financial consequences. Obvious financial difficulties being experienced by an increased number of students added to the cumulative effect of the reduced level of government funding support in recent years. Cost containment and the achievement of sustainable cost reductions remained high priorities for the Campus towards reducing the inevitable cash management difficulties that emerge in such an environment. The need to position the Campus for long term viability could not be ignored despite the financial challenges. Implementation of key projects to take advantage of the opportunities identified to advance the strategic agenda was kept in focus. In the absence of direct funding from governments and the lack of fiscal space for Government of Jamaica to provide loan guarantees to finance strategic initiatives requiring substantial capital outlay, the Campus has had to go it alone to bring these projects to fruition. Operating Results Total Campus income increased by $975.8m (8.5%) compared with the previous year. The most significant contribution to this growth came from other projects which comprise the nongovernment sponsored components of the medical sciences and law programmes, which have all realized good, consistent increase in enrolment and all other academic programmes that are operated on a commercial basis. This segment of the Campus operations reported income growth of $546.9m (24.3%) over the prior year accounting for 56% of the increase in total income. The other notable areas of growth were student fees from government sponsored programmes which increased by $243.8m (13.6%) due mainly to tuition fee increases and Campus nonacademic commercial activities that recorded increased revenues of $149.0m (11.2%). Total operating expenses increased by $613.1m (5.7%) over the previous year reflecting the results of efforts to manage costs. This resulted in an operating surplus of $756.8m before taking account of postemployment benefits and depreciation which is an increase of $359.6 or 90.5% higher than the previous year. The actuarial estimate of future pension obligations was reduced by $886.7m arising from an approved change in one of the variables used to compute the liability. The entire amount of the reduction was applied to government funded segment of Campus operations. The write back reduced the loss recorded on this segment of the operations to $463.2m. The loss realized on the government sponsored activities was more than offset by surpluses realized on other Campus income generating activities which gave rise to the substantial $916.1m reported surplus for the Campus which compares with a deficit of $882.3m reported in the previous year. Financial Position Managing the working capital needs of the Campus required that the collection of receivables be given the primary focus. Though the Government of Jamaica s committed contribution remained lower than expected based on the Campus approved budget, payments by the Government were consistent and timely throughout the year which facilitated financial planning. Collection of student fees which accounted for roughly a third of total income was the main challenge. Payments from many students were slow and unpredictable leading to fees outstanding at year end being 38.6% higher than the previous year. Cash inflows were also affected by the financing issues facing the Students Loan Bureau as well as delayed payments from other third parties responsible for student fee payments. 2 Accounts

4 Campus Bursar s Report for the Year Ended July 31, Encashment of short term investments and short term borrowings were used to support the funding of operating expenses and priority capital projects. The additions to fixed assets totaling $4.2 billion relate mainly to the following projects: Expansion to students housing (1000 additional rooms) The Basic Medical Sciences Complex to facilitate expansion of the Faculty of Medical Sciences The Call Centre building which is intended to create employment for thousands of students Air Conditioning Service Park, an energy efficiency project which will initially provide air conditioning to four major campus facilities. $1.9 billion of the cost of additions was financed from loans. Work on the Call Centre building was advanced pending approval of a US$3m loan application due to the urgency of the project. The loan was approved subsequent to year end. Similarly, the Air Conditioning Service Park project had to be accelerated to ready the Medical Sciences Complex for the 13 academic year. Expenditures incurred to date on this project have been funded from Campus internal resources. Long term financing is currently being sought. In addition, the Campus had to finance the acquisition of furniture and equipment to prepare the Basic Medical Sciences Complex and parts of the new student accommodation for occupancy in the current academic year. Indications are that the financial challenges of 12 will persist in financial year 13. With this prospect, finding ways to mitigate the anticipated consequences remains high priority for the Campus. The ongoing cooperation and understanding of staff will be essential as we work through this difficult period. Elaine Robinson Campus Bursar Accounts 3

5 Selected Financial and Statistical Highlights for the Year Ended July 31, 1. SOURCE OF INCOME The primary source of income of the University of the West Indies, Mona Campus has been contributions from the Governments of the West Indies. The other sources (including the primary source) of income and the proportional representation are as follows: (i) (ii) (iii) (iv) Contributions from the Governments of the West Indies (43%). Tuition fees (16%). Donor funds which are funded by governments, International Agencies and private donors (27%). Other projects ( Administration & Common service Fees, Investment income, Contributions from Centre, Commercial Operations) (14%). The total campus income from all sources for the year ending July was $12,419 million. Information on the income categories, for the current year and the last four years is presented in pictorial form by figures 2 and 3. Figure 1 shows sources of income by categories for the last four financial years. Figure 1. Income () Five Year Summary SOURCES 11/12 10/11 09/10 08/09 07/08 West Indian Government Contributions 5,290,249 5,431,337 5,441,544 5,126,623 5,081,372 Tuition Fees 2,039,285 1,795,466 1,667,671 1,359,693 1,167,996 Donor Income 3,331,870 2,716,523 2,300, , ,660 Other Projects 1,758,034 1,500,314 1,560,185 2,620,590 2,079,316 TOTAL INCOME 12,419,438 11,443,640 10,970,239 9,727,640 9,240,344 4 Accounts

6 Selected Financial and Statistical Highlights for the Year Ended July 31, Figure 2. Income (%) West Indian Government Contributions Tuition Fees Donor Income Other Projects Figure 3. Income () Five Year Analysis West Indian Government Contributions Tuition Fees Donor Income Other Projects Accounts 5

7 Selected Financial and Statistical Highlights for the Year Ended July 31, 2. EXPENDITURE The expenditure of the Campus is incurred in four (4) broad categories as follows: (i) (ii) (iii) (iv) Administration (9%) Departments Teaching & Research, Other (44%) Central Expenditure (18%) Other projects (29%) Total campus expenditure excluding finance charge and depreciation for the reporting period was J$11,494 million. Figure 5 shows the expenditure incurred in each of the above categories. Figure 6 is a pictorial representation of the five year summary of expenditure as presented in Figure 4. Figure 7 shows the total departmental ( academic and other teaching and research) expenditure for the last five financial years. Figure 8 and 9 are pictorial representation of the departmental expenditure for the last five financial years. Figure 4. Expenditure () Five Year Summary CATEGORIES 11/12 10/11 09/10 08/09 07/08 Administration 1,013, , , , ,128 Departments 5,082,807 4,953,101 4,587,128 4,822,132 4,155,931 Central Expenditure 2,054,952 1,968,291 2,046,140 1,974,401 2,216,413 Other Projects 3,259,948 2,922,356 2,462,955 2,293,588 2,112,634 11,411,459 10,798,424 9,912,247 9,876,399 9,118,106 Pension, Finance Charge & Depreciation 82,793 1,421, ,516 1,109, ,216 TOTAL 11,494,251 12,220,061 10,857,763 10,985,786 9,537,322 6 Accounts

8 Selected Financial and Statistical Highlights for the Year Ended July 31, Figure 5. Areas of Expenditure () : 6,000,000 5,000,000 5,082,807 Administration Departments Central Expenditure 4,000,000 Other Projects Pension, Finance Charge & Depreciation 3,259,948 3,000,000 2,000,000 2,054,952 1,000,000 1,013, ,793 Accounts 7

9 The University of the West Indies, Mona Campus Selected Financial and Statistical Highlights for the Year Ended July 31, Figure 6. 8 Accounts Areas of Expenditure () Five Year Analysis

10 Selected Financial and Statistical Highlights for the Year Ended July 31, Figure 7. Departmental Expenditure () Five Year Summary CATEGORIES 11/12 10/11 09/10 08/09 07/08 Pure and Applied Science 938, , , , ,139 Arts and Education 698, , , , ,334 Social Science 758, , , , ,431 Medical Science 1,748,741 1,748,741 1,545,341 1,666,422 1,378,481 Library 364, , , , ,329 Others 443, , , , ,217 TOTAL 4,953,101 4,587,128 4,822,133 4,155,931 4,155,931 Figure 8. Departmental Expenditure Pure and Applied Science Arts and Education Social Science Medical Science Library Others Accounts 9

11 The University of the West Indies, Mona Campus Selected Financial and Statistical Highlights for the Year Ended July 31, Figure Accounts Departmental Expenditure () Five Year Analysis

12 Auditors Report for the Year Ended July 31, KPMG Chartered Accountants The Victoria Mutual Building 6 Duke Street Kingston Jamaica, W.I. P.O. Box 76 Kingston Jamaica, W.I. Telephone +1 (876) Fax +1 (876) (876) firmmail@kpmg.com.jm INDEPENDENT AUDITORS REPORT To the Members of The Council of the University of the West Indies Mona Campus Report on the Financial Statements We have audited the financial statements of University of the West Indies Mona Campus, set out on pages 13 to 52, which comprise the balance sheet as at July 31,, the statements of comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information. Management s Responsibility for the Financial Statements Management is responsible for the preparation of financial statements that give a true and fair view in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on the financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether or not the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence relating to the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including our assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal controls relevant to the entity s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. KPMG, a Jamaican partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International cooperative ( KPMG international ), a Swiss entity. Elizabeth A. Jones R. Taron Handa Patrick A. Chin Patricia O. DaileySmith Linroy J. Marshall Cynthia L. Lawrence Rajan Trehan Norman O. Rainford Nigel R. Chambers Accounts 11

13 Auditors Report (cont d) for the Year Ended July 31, INDEPENDENT AUDITORS REPORT To the Members of The Council of the University of the West Indies Mona Campus Report on the Financial Statements, cont d We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements give a true and fair view of the financial position of University of the West Indies Mona Campus as at July 31,, and of its financial performance, changes in equity and cash flows for the year then ended, in accordance with International Financial Reporting Standards. Chartered Accountants Kingston, Jamaica October 29, 12 Accounts

14 Balance Sheet for the Year Ended July 31, CURRENT ASSETS Cash and cash equivalents Shortterm investments Due from related parties Accounts receivable Inventories CURRENT LIABILITIES Accounts payable and accruals Due to related parties Current portion of longterm loans Current portion of other longterm liabilities Shortterm loan NET CURRENT (LIABILITIES)/ASSETS NONCURRENT ASSETS Longterm receivables Interest in subsidiaries Property, plant and equipment RESERVES Capital reserves Other reserves: General reserves Accumulated fund NONCURRENT LIABILITIES Unexpended funds for special projects, scholarships and prizes Endowment funds Longterm liabilities Capital grants Employee benefits obligation Notes 4 5 6(a) (b) 16(i) 16(ii) , , ,253 1,531,545 71,475 2,471,725 1,975, , , , ,500 3,384,562 ( 912,837) 413, ,115 14,101,765 14,684,196 13,771,359 1,763, ,685 1,496,517 4,120, , ,540 5,929,951 1,391,805 1,568,540 9,651,179 13,771, ,560 1,285, ,597 1,782,447 72,358 3,692, , ,520 10,498,045 11,312,078 12,445,867 1,763, , ,769 3,204, , ,712 4,767,384 1,018,221 2,501,346 9,241,756 12,445,867 * * 1,937,170 * 77,342 * 396, ,195 * 2,558,319 1,133,789 * The financial statements on pages 13 to 52 were approved for issue by the University Finance & General Purpose Committee on October 29, and signed on its behalf by: Principal Professor Gordon Shirley Campus Bursar Elaine Robinson The accompanying notes form an integral part of the financial statements. * After reclassifications to conform to current year s presentation Accounts 13

15 Statement of Comprehensive Income for the Year Ended July 31, INCOME Notes West Indian government contributions University Centre contributions for library & administration Tuition & other student fees Donor income for special projects Other projects Investment Commercial operations Miscellaneous 19 5,290,249 25,200 2,039, ,259 2,794,611 48,110 1,476, ,735 5,431,338 32,502 1,795, ,810 2,247,713 40,968 1,327, ,308 Less: Transfer to capital grants 17 12,560,528 ( 141,090) 11,583,209 ( 139,568) Income after transfer to capital grants 12,419,438 11,443,641 EXPENDITURE Administrative Departmental Central Donor funded expenditure for special projects Other projects Commercial operations 20 1,013,752 5,082,807 2,054, ,259 1,379,882 1,342, ,675 4,953,100 1,968, ,810 1,212,804 1,240,745 EXCESS OF INCOME OVER EXPENDITURE FOR THE YEAR BEFORE LOSS ON EXCHANGE, FINANCE COSTS, DEPRECIATION, PENSION PLANS AND POSTEMPLOYMENT MEDICAL BENEFITS 11,411,461 1,007,977 10,798, ,215 LOSS ON FOREIGN EXCHANGE ( 4,558) ( 52,961) FINANCE COSTS 21 ( 246,665) ( 195,072) EXCESS OF INCOME OVER EXPENSES FOR THE YEAR BEFORE DEPRECIATION, PENSION PLANS AND POSTEMPLOYMENT MEDICAL BENEFITS 756, ,182 PENSION PLANS AND POSTEMPLOYMENT MEDICAL BENEFITS 18(c)(iv) 739,550 ( 821,199) DEPRECIATION Surplus/(deficit), being total comprehensive income/(loss) for the year 13 ( 580,235) ( 458,325) 916,069 ( 882,342) The accompanying notes form an integral part of the financial statements. 14 Accounts

16 Detailed Statement of Comprehensive Income for the Year Ended July 31, Halls of Residence July 468, , , , ,238 3,956 ( 45,199 ) ( 41,243 ) ( 41,243 ) Commercial Operations July 1,004,796 1,004,796 1,004, , , , , ,227 Departmental Funds Consultation July 129, , ,380 96,844 96,844 32,536 32,536 32,536 Departmental Funds Other July 1,925,862 1,925,862 1,925, , ,475 1,375,387 1,375,387 ( 53,311 ) 1,322,076 TOTAL FUNDS July 5,290,249 25,200 2,039, ,259 2,794,611 48,110 1,476, ,735 12,560,528 ( 141,090 ) 12,419,438 1,013,752 5,082,807 2,054, ,259 1,379,882 1,342,807 11,411,461 1,007,977 ( 4,558 ) ( 246,665 ) 756, ,550 ( 580,235 ) 916,069 TOTAL FUNDS July Special and Other Projects July 5,431,338 32,502 1,795, ,810 40, ,308 2,247,713 1,327,104 11,583, ,568 11,443, ,675 4,953,100 1,968, ,810 1,212,804 1,240,745 10,798, ,217 ( 52,961 ) ( 195,072 ) 397,184 ( 821,201 ) ( 458,325 ) ( 882,342 ) UGC Notes July INCOME 5,290,249 25,200 2,039, , ,233 67,136 48,110 3, ,735 7,822,804 ( 141,090 ) 7,681, West Indian government contributions University Centre contributions for library and administration Tuition and other student fees Donor income from special projects Other projects Investments Commercial operations Miscellaneous 1,209, Less: Transfer to capital grants 1,209,492 Expenditure 1,013,752 5,082,807 2,054, , ,563 Administrative Departmental Central Donor funded expenditure for special projects Other projects Commercial operations 1,269,822 8,151,513 (Deficit)/Excess OF INCOME OVER EXPENDITURE ( 60,330 ) ( 469,799 ) FOR THE YEAR BEFORE FINANCE COSTS, DEPRECIATION, PENSION PLANS AND POSTEMPLOYMENT MEDICAL BENEFITS Loss on foreign exchange ( 4,558 ) ( 201,466 ) Finance costs 21 (Deficit)/Excess OF INCOME OVER EXPENDITURE ( 60,330 ) ( 675,823 ) FOR THE YEAR BEFORE DEPRECIATION, PENSION PLANS AND PostEMPLOYMENT MEDICAL BENEFITS 739,550 18(c)(iv) PENSION PLANS AND POSTEMPLOYMENT MEDICAL BENEFITS ( 526,924 ) 13 DEPRECIATION ( 463,197 ) ( 60,330 ) Surplus/(deficit), being total comprehensive income/(loss) for the year The accompanying notes form an integral part of the financial statements. Accounts 15

17 Statement of Changes in Equity for the Year Ended July 31, Capital Reserves General Reserves Balances as at July 31, 2010 Deficit, being total comprehensive loss for the year 1,763, ,655 Adjustments for net changes on staff revolving loan fund 7,709 Balances as at July 31, 1,763, ,364 Surplus, being total comprehensive income for the year Transfer other Adjustments for net changes on staff revolving loan fund 10,321 Balances as at July 31, 1,763, ,685 The accompanying notes form an integral part of the financial statements. * After reclassifications to conform to current year s presentation. Accumulated Funds Departmental Funds UGC Funds * 1,238,130 * 242,690 * 1,054,192 * ( 1,936,534 ) ( 7,709 ) 2,292,322 ( 1,701,553 ) 1,379,266 ( 463,197 ) ( 314,686 ) 314,686 ( 10,321 ) 3,356,902 ( 1,860,385 ) Total Funds 4,086,453 ( 882,342 ) 3,204, ,069 4,120, Accounts

18 Statement of Cash Flows for the Year Ended July 31, Notes CASH FLOWS FROM OPERATING ACTIVITIES Surplus/(deficit) for the year Adjustments: 916,069 ( 882,342) Interest expense Depreciation Employee benefits obligation Unrealized (gain)/loss on foreign exchange Amortization of capital grants Transfers to capital grants Gain on sale of property, plant and equipment Interest Income (Increase)/decrease in current assets Accounts receivable Due from related parties Inventories ( ( ( ( ( 246, , ,806) 62,038) 27,261) 259, ) 48,110) 932,257 ( ( ( 195, , ,502 36,101 24,440) 2,860) 40,968) 445, , , ( 334,546) * ( 103,246) * 2,712 Increase/(decrease) in current liabilities Due to related parties Accounts payable and accruals 438,453 33,413 55,804 * ( 999,534) * Net cash provided by operating activities 1,814,767 ( 933,420) CASH FLOWS FROM INVESTING ACTIVITIES Interest received Additions to property, plant & equipment Proceeds of sale of property, plant & equipment Investments, net Longterm receivables, net Interest in subsidiaries 13 53,274 ( 4,183,955) , ,197 ( 13,595) 51,437 ( 3,030,881) 2, ,036 ( 614,006) ( 103,062) Net cash used by investing activities ( 3,078,400) ( 3,568,594) Accounts 17

19 Statement of Cash Flows cont d for the Year Ended July 31, Notes CASH FLOWS FROM FINANCING ACTIVITIES Capital grants Endowment funds Special projects advances, net Longterm liabilities, net Proceeds of longterm loans Proceeds of shortterm loans Interest paid ( ( ( 141,090 1,172) 153,580) 390,477) 139,567 7,118 76,891 1,670,492 * 1,742, ,500 1,789,390 ( 177,617) ( 168,409) Net cash provided by financing activities 1,303,605 3,515,049 NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS EFFECT OF EXCHANGE RATE MOVEMENT ON CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 39,972 ( 2,113) 172,560 ( 986,965) ( 7,256) 1,166,781 CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 4 210, ,560 The accompanying notes form an integral part of the financial statements. * After reclassifications to conform to current year s presentation. 18 Accounts

20 Notes to the Financial Statements for the Year Ended July 31, 1. IDENTIFICATION AND PRINCIPAL ACTIVITIES The University of the West Indies Mona Campus ( UWI Mona ) is located at Mona, Kingston, Jamaica. UWI Mona is one of the four main Campuses of the University, the other three being Cave Hill in Barbados, St. Augustine in Trinidad and Tobago and the Open Campus with operations in all sixteen Caribbean territories. Its principal activities are the provision of a place of education, learning and research, in order to secure the advancement of knowledge and the diffusion and extension of arts, sciences and learning throughout the Caribbean. 2. Basis of presentation (a) Statement of compliance: The financial statements have been prepared in accordance with International Financial Reporting Standards ( IFRS ), and their interpretations as issued by the International Accounting Standards Board. New, revised and amended standards and interpretations that became effective during the year Certain new, revised and amended standards and interpretations which were in issue came into effect for the current financial year. The only standard management considered relevant is as follows: IAS 24 Related Party Disclosures which is effective for annual reporting periods beginning on or after January 1, has been amended to introduce changes to related party disclosure requirements for governmentrelated entities and amends the definition of a related party. Aside from the change to the definition of a related party in note 3(p), this revision did not have any other impact on these financial statements. New, revised and amended standards and interpretations that are not yet effective At the date of authorization of the financial statements the following new, revised and amended standards and interpretations which were in issue were not yet effective and had not been adopted early by UWI Mona. Those standards and interpretations that management considers relevant to UWI Mona are as follows: IAS 1, Presentation of Financial Statements, has been amended (effective for annual periods beginning on or after July 1, ) to require a reporting entity to present separately the items of other comprehensive income (OCI) that may be reclassified to profit or loss in the future from those that would never be reclassified to profit or loss. Consequently, an entity that presents items of OCI before related tax effects will also have to allocate the aggregated tax amount between these sections. The existing option to present the profit or loss and other comprehensive income in two statements has not changed. The title of the statement has changed from Statement of Comprehensive Income to Statement of Profit or Loss and Other Comprehensive Income. However, an entity is still allowed to use other titles. Accounts 19

21 Notes to the Financial Statements for the Year Ended July 31, 2. Basis of presentation (cont d) (a) Statement of compliance (cont d): New, revised and amended standards and interpretations that are not yet effective (cont d) IFRS 9, Financial Instruments, is effective for annual reporting periods beginning on or after January 1, The standard retains but simplifies the mixed measurement model and establishes two primary measurement categories for financial assets: amortised cost and fair value. It eliminates the existing IAS 39 categories of held to maturity, availableforsale and loans and receivables. For an investment in an equity instrument which is not held for trading, the standard permits an irrevocable election, on initial recognition, to present all fair value changes from the investment in other comprehensive income. The standard includes guidance on classification and measurement of financial liabilities designated as fair value through profit or loss and incorporates certain existing requirements of IAS 39 Financial Instruments: Recognition and Measurement on the recognition and derecognition of financial assets and financial liabilities. IFRS 10, Consolidated Financial Statements (effective for annual reporting periods beginning on or after January 1, 2013) supersedes IAS 27 Consolidated and Separate Financial Statements and provides a single model to be applied in the control analysis for all investees, including entities that currently are Special Purpose Entities. The consolidation procedures are carried forward from IAS 27 (2008). IFRS 12, Disclosure of Interest in Other Entities (effective for annual reporting periods beginning on or after January 1, 2013) contains disclosure requirements for entities that have interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. These required disclosures aim to provide information to enable users to evaluate the nature of, and risks associated with, an entity s interests in other entities and the effects of those interests on the entity s financial position, financial performance and cash flows. IFRS 13, Fair Value Measurement, (effective for annual reporting periods beginning on or after January 1, 2013) replaces the fair value measurement guidance contained in individual IFRSs with a single source of fair value measurement guidance. It defines fair value, establishes a framework for measuring fair value and sets out disclosure requirements for fair value measurements. IFRS 13 explains how to measure fair value when it is required or permitted by other IFRSs. IFRS 13 does not introduce new requirements to measure assets or liabilities at fair value, nor does it eliminate the practicability exceptions to fair value measurements that currently exist in certain standards. It defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, i.e. an exit price. Improvements to IFRS cycle contain amendments to certain standards and interpretations and are effective for accounting periods beginning on or after January 1, The main amendments applicable to UWI Mona are as follows: 20 Accounts IAS 19, Employee Benefits, has been amended, effective for annual reporting periods beginning on or after January 1, 2013, to require all actuarial gains and losses to be recognised immediately in other comprehensive income. This change will remove the corridor method and eliminate the ability of entities to recognise all changes in the definedbenefit obligation and in plan assets in profit or loss. The expected return on plan assets recognised in profit or loss is to be calculated based on the rate used to discount the definedbenefit obligation. The amendment also includes changes to the definitions and disclosure requirements in the current standard.

22 Notes to the Financial Statements for the Year Ended July 31, 2. Basis of presentation (cont d) (a) Statement of compliance (cont d): New, revised and amended standards and interpretations that are not yet effective (cont d) IAS 16 Property, Plant and Equipment is amended to clarify that the definition of property, plant and equipment in IAS 16 is now considered in determining whether spare parts, standby equipment and servicing equipment should be accounted for under the standard. If these items do not meet the definition, then they are accounted for using IAS 2 Inventories. UWI Mona is assessing the impact these new, revised and amended standards and interpretations will have on the financial statements when they become effective. (b) Basis of measurement: The financial statements are prepared under the historical cost basis. (c) Functional and presentation currency: These financial statements are presented in Jamaica dollars, except where otherwise indicated, which is the functional currency of UWI Mona. (d) Use of estimates, assumptions and judgments: The preparation of the financial statements in conformity with IFRS requires management to make estimates, assumptions and judgements that affect the reported amounts of, and/or disclosures relating to, assets, liabilities, contingent assets and contingent liabilities at the reporting date and the income and expenses for the year ended. Actual amounts could differ from those estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and future periods, if the revision affects both periods. Judgements made by management in the application of IFRS that have a significant effect on the financial statements and estimates with a significant risk of material adjustment in the next financial year are discussed below: (i) Allowance for impairment losses on receivables: In determining amounts recorded for impairment losses on receivables in the financial statements, management makes judgements regarding indicators of impairment, that is, whether there are indicators that suggest there may be a measurable decrease in the estimated future cash flows from receivables, for example, default and adverse economic conditions. Management also makes estimates of the likely estimated future cash flows of impaired receivables as well as the timing of such cash flows. Historical loss experience is applied where indicators of impairment are not observable on individual significant receivables with similar characteristics, such as credit risks. Accounts 21

23 Notes to the Financial Statements for the Year Ended July 31, 2. Basis of presentation (cont d) (d) Use of estimates, assumptions and judgments (cont d): (ii) Residual value and expected useful life of property, plant and equipment: The residual value and the expected useful life of an asset are reviewed at least at each financial yearend, and, if expectations differ from previous estimates, the change is accounted for. The useful life of an asset is defined in terms of the asset s expected utility to UWI Mona. (iii) Pension and other postretirement benefits: The amounts recognised in UWI Mona s balance sheet and statement of comprehensive income for pension and other postemployment benefits are determined actuarially using several assumptions. The primary assumptions used in determining the amounts recognised include expected longterm return on plan assets, the discount rate used to determine the present value of estimated future cash flows required to settle the pension and other postretirement obligations and the expected rate of increase in medical costs for postemployment medical benefits. The expected return on plan assets considers the longterm returns, asset allocation and future estimates of longterm investment returns. The discount rate is determined based on the estimate of yield on longterm government securities that have maturity dates approximating the terms of UWI Mona s obligation; in the absence of such instruments in Jamaica, it has been necessary to estimate the rate by extrapolating from the longesttenor security on the market. The estimate of expected rate of increase in medical costs is determined based on inflationary factors. Any changes in the foregoing assumptions will affect the amounts recorded in the financial statements for these obligations. (e) Going concern basis: The preparation of the financial statements in accordance with IFRS assumes that UWI Mona will continue in operational existence for the foreseeable future. This means, inter alia, that the balance sheet and the statement of comprehensive income assume no intention or necessity to liquidate UWI Mona or curtail the scale of its operations. This is commonly referred to as the going concern basis. The Council and management are of the view that the going concern basis continues to be appropriate in the preparation of the financial statements. 3. Significant accounting policies (a) Cash and cash equivalents Cash and cash equivalents comprise cash and bank balances and include shortterm deposits and other monetary investments with maturities of three months or less from the acquisition date. Bank overdrafts that are repayable on demand and form an integral part of UWI Mona s cash management activities are included as a component of cash and cash equivalents. 22 Accounts

24 Notes to the Financial Statements for the Year Ended July 31, 3. Significant accounting policies (cont d) (b) Investments (i) Loans and receivables Loans and receivables are nonderivative financial instruments with fixed or determinable payments that are not quoted in an active market and are measured at amortized cost using the effective interest method, less any impairment losses. (ii) Resale agreements Resale agreements are shortterm transactions whereby an entity buys securities and simultaneously agrees to resell them on a specified date and at a specified price. Although the security is delivered to the buyer at the time of the transaction, title is not actually transferred unless the counterparty fails to repurchase the securities on the date specified. Resale agreements are accounted for as shortterm collateralised lending. The difference between the purchase and sale considerations is recognised on an accrual basis over the period of the transaction, using the effective interest method, and is included in interest income. (c) Accounts receivable Trade and other receivables are stated at their cost less impairment losses. (d) Provisions A provision is recognized in the balance sheet when UWI Mona has a legal or constructive obligation as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and the amount can be reliably determined. If the effect is material, provisions are determined by discounting the expected future cash flows at a rate that reflects current market assessments of the time value of money and, where appropriate, the risk specific to the liability. (e) Interest in subsidiaries UWI Mona s interest in subsidiaries is carried at cost less impairment losses. (f) Inventories Inventories are stated at the lower of cost and net realizable value. Cost is determined on the weighted average basis. (g) Accounts payable Trade and other payables are stated at amortized cost. Accounts 23

25 Notes to the Financial Statements for the Year Ended July 31, 3. SIGNIFICANT ACCOUNTING POLICIES (cont d) (h) Property, plant & equipment & depreciation (i) (ii) Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Costs include expenditure that is directly attributable to the acquisition of the assets. The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to UWI Mona and its cost can be reliably measured. The cost of daytoday servicing of property, plant and equipment is recognised in profit or loss as incurred. Property, plant and equipment, with the exception of freehold land and workinprogress on which no depreciation is provided, are depreciated on the straightline basis at annual rates estimated to write down the assets to their residual values over their expected useful lives. The depreciation rates are as follows: Buildings Furniture and office equipment Motor vehicles Computers and other electronic equipment Library books 2.50% 10% 20% % 20% Depreciation methods, useful lives and residual values are reassessed annually. (iii) Property, plant and equipment donated are capitalised at estimated fair values, usually the cost of the item if it was purchased, and credited to capital grant. (i) Employee benefits Pensions and other postemployment assets and obligations included in these financial statements have been actuarially determined by a qualified independent actuary, appointed by management. The appointed actuary s report outlines the scope of the valuation and the actuary s opinion. The actuarial valuations were conducted in accordance with IAS 19, and the financial statements reflect the postemployment benefit assets and obligations as computed by the actuary. In carrying out their activity, the auditors rely on the work of the actuary and the actuary s report. Employee benefits include current or shortterm benefits such as salaries, NIS contributions paid, annual vacation, and nonmonetary benefits such as sick leave medical care and housing; postemployment benefits such as pensions and medical care; other longterm employee benefits such as sabbatical leave, long service benefits and termination benefits. 24 Accounts

26 Notes to the Financial Statements for the Year Ended July 31, 3. SIGNIFICANT ACCOUNTING POLICIES (cont d) (i) Employee benefits (cont d) (i) General benefits Employee benefits that are earned as a result of past or current service are recognized in the following manner: Shortterm employee benefits are recognized as a liability, net of payments made, and charged as expense. The expected cost of vacation leave that accumulates is recognized when the employee becomes entitled to the leave. Post employment benefits are accounted for as described in (ii) and (iii) below. Other longterm benefits and termination benefits are not considered material and are expensed as incurred. (ii) Pension benefits (1) (2) Definedcontribution plans UWI Mona provides for pension benefits for retired employees by the operation of two defined contribution plans. Its obligation to contribute to the defined contribution pension plans in accordance with the rules of the plans is recognized as an expense in profit or loss as the contributions fall due. In the case of one of the two plans, that for academic and senior administrative Federated Superannuation Scheme for Universities [see note 18 (a)] UWI Mona, on the basis of commitments made, has an obligation to supplement the pensions. Definedbenefit effect of supplementation arrangements The effect of UWI Mona undertaking to supplement basic pensions to twothirds final salary under certain conditions (note 18) is to create an obligation consistent with that for a defined benefit plan. Therefore, this obligation for the supplementation arrangements is determined and accounted for in the same way as the obligation arising under a definedbenefit plan. UWI Mona s net obligation in respect of its undertaking to supplement pensions is calculated by estimating the amount of future supplementation benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine the present value, and the fair value of any plan assets, (in the case of UWI Mona, is $nil), is deducted from it. The discount rate used is the yield at reporting date on longterm government instruments that have maturity dates approximating the terms of UWI Mona s pension obligations. The calculation is performed by a qualified actuary using the projected unit credit method. If and when benefits payable under the supplementation arrangements are improved, the portion of the increased benefit that relates to past service by employees is recognized as an expense in profit or loss on a straightline basis over the average service period remaining until the benefits become vested. To the extent that the benefits vest immediately, the expense is recognized immediately. To the extent that any cumulative unrecognized actuarial gain or loss exceeds ten percent (10%) of the greater of the fair value of plan assets and the present value of the defined benefit obligation, that portion is recognized in profit or loss over the expected average remaining working lives of the employees participating in the plan. Otherwise, the actuarial gain or loss is not recognized. Accounts 25

27 Notes to the Financial Statements for the Year Ended July 31, 3. SIGNIFICANT ACCOUNTING POLICIES (cont d) (i) Employee benefits (cont d) (ii) Pension benefits (cont d) (2) Definedbenefit effect of supplementation arrangements (cont d) Where the calculation results in a benefit to UWI Mona, an asset is recognized only to the extent of the net total of (1) any unrecognized actuarial losses and past service costs, and (2) the present value of any future refunds from the plan or reductions in future contributions to the plan. However, the supplementation plan is unfunded, i.e., a payasyougo plan, and, accordingly, there are no contributions and therefore no plan assets at this time. (iii) Postemployment medical care UWI Mona also has an obligation to provide certain postemployment medical benefits. The obligation to fund these future benefits is actuarially determined and accounted for in the same way as the obligation to supplement basic pensions. (j) Donations for designated projects UWI Mona receives funding from donors for special projects and other projects. (i) Donations that are governed by donorimposed stipulations, which stipulations must be complied with to the satisfaction of the donor for the project expenditure to be approved, are generally for projects undertaken by the various departments and are referred to as unexpected fund for (note 14). Such donations are accounted for as follows: (a) Donations received in advance of project expenditure Donations received in advance of expenditure are deferred, and are shown in the balance sheet as Unexpended donations for special projects. When funds are spent in accordance with the donor s stipulations, the amount is charged off as Special projects expenses or, if applicable, as property, plant and equipment. An equivalent amount is then transferred from Unexpended donations for special projects to Special projects income or, if applicable, capital grants. (b) Project expenditure made in advance of receipt of donations pledged Project expenditure made in accordance with the donor s stipulations in advance of receipt of donations pledged is accounted for as Special projects receivables in anticipation of reimbursements. The amount is reflected in the statement of comprehensive income as Special project expenses or, if applicable, as property, plant and equipment, with an equivalent sum reflected as Special projects income or, if applicable, capital grants. (ii) Donations that are not subject to donorimposed stipulations such as those at (a) above, are accounted for as other projects income. 26 Accounts

28 Notes to the Financial Statements for the Year Ended July 31, 3. SIGNIFICANT ACCOUNTING POLICIES (cont d) (j) Donations for designated projects (cont d) (iii) UWI Mona charges administration and common service fees for receiving and disbursing these funds; these fees are credited to income. (k) Capital grants Capital grants comprise the following: (i) (ii) estimated fair value of property, plant and equipment donated to UWI Mona [note 3 (h) (iii)]; and amounts granted to UWI Mona subject to conditions that must be met, the primary condition being that they must be used for the acquisition or construction of property, plant and equipment. The amounts meeting the condition include: (i) (ii) sums included in the biennial budgets for the repayment of the principal of loans taken out to purchase or construct or otherwise acquire property, plant and equipment and funded by contributions from the contributing governments; and sums from donors other than the contributing governments referred to above, where the donors impose such a condition. For each reporting period, an amount equivalent to the depreciation charge on the relevant property, plant and equipment for the period is transferred from capital grants as a credit to income. (l) Revenue recognition (i) (ii) (iii) Government contributions are recognized as income when invoiced. Tuition fees are recognized over the period of instruction for which the fees are paid. Interest income is recorded on the accrual basis, using the effective interest method. Accounts 27

29 Notes to the Financial Statements for the Year Ended July 31, 3. SIGNIFICANT ACCOUNTING POLICIES (cont d) (m) Consolidation UWI Mona has not consolidated its financial position, results of operations and cash flows with those of its whollyowned subsidiaries, Mona Informatix Limited (MIL), Mona School of Business Limited (MSB) and Universal Media Company (UMC), as the amounts for the subsidiaries were considered immaterial to the financial statements. Information on the subsidiaries is listed below. Name of subsidiary Mona Informatix Limited Mona School of Business Principal activity Provision of data processing Provision of management education to private and public sectors; researching of managementrelated topics and the provision of consultancy services to the private and public sectors and international bodies Percentage ownership (%) Universal Media Company Provision of radio broadcast and communication services Summary information applicable to these subsidiaries, based on draft financial statements as at July 31, and are as follows: MGL MSB UMC Net assets/(liabilities) Net income 64,313 12,222 ( 7,473) 120, ,877 ( 15,157) ( 178,636) ( 154,341) ( 8,570) 5,865 ( 7,242) ( 31,200) ( 1,933) ( 15,502) ( 7,607) ( 25,042) (n) Impairment The carrying amounts of UWI Mona s assets are reviewed at each reporting date to determine whether there is objective evidence of impairment. If any such indication exists, an impairment loss is recognized based on the asset s estimated recoverable amount. The recoverable amount of UWI Mona s receivables is calculated as the present value of expected future cash flows, discounted at the original effective interest rate inherent in the asset. Receivables with a short duration are not discounted. If, in a subsequent period, the amount of an impairment loss decreases and the decrease can be linked objectively to an event occurring after the writedown, the writedown is reversed through profit or loss. 28 Accounts

30 Notes to the Financial Statements for the Year Ended July 31, 3. SIGNIFICANT ACCOUNTING POLICIES (cont d) (o) Foreign currency translations (i) (ii) (iii) (iv) Transactions in foreign currencies during the year are translated at the approximate rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the exchange rates ruling at the reporting date. Nonmonetary assets and liabilities denominated in foreign currencies and are carried at historical cost are translated at the foreign exchange rate ruling at the date of the transaction. Nonmonetary assets and liabilities that are denominated in foreign currencies and are carried at fair value are translated to the functional currency at the exchange rates ruling at the dates that the fair values were determined. Foreign currency translation gains and losses are reported in profit or loss. Gains and losses arising from conversion of intercampus balances and government accounts are included in profit or loss. (p) Related parties A related party is a person or entity that is related to the entity that is preparing its financial statements (referred to in IAS 24, Related Party Disclosures as the reporting entity, in this case UWI Mona). (i) (ii) A person or a close member of that person s family is related to a reporting entity if that person: (a) has control or joint control over the reporting entity; (b) has significant influence over the reporting entity; or (c) is a member of the key management personnel of the reporting entity or of a parent of the reporting entity. An entity is related to a reporting entity if any of the following conditions applies: (a) (b) (c) (d) (e) (f) (g) The entity and the reporting entity are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others); One entity is an associate or joint venture of the reporting entity (or an associate or joint venture of a member of a group of which the reporting entity is a member). Both entities are joint ventures of the same third party; One entity is a joint venture of a third entity and the reporting entity is an associate of the third entity; The entity is a postemployment benefit plan for the benefit of employees of either the reporting entity or an entity related to the reporting entity. If the reporting entity is itself such a plan, the sponsoring employers are also related to the reporting entity. The entity is controlled, or jointly controlled, by a person identified in (i); and A person identified in (i)(a) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity). A related party transaction is a transfer of resources, services or obligations between related parties, regardless of whether a price is charged. Accounts 29

31 Notes to the Financial Statements for the Year Ended July 31, 3. SIGNIFICANT ACCOUNTING POLICIES (cont d) (q) Interestbearing borrowings: Interestbearing borrowings are recognized initially at cost. Subsequent to initial recognition, interestbearing borrowings are stated at amortized cost, with any difference between cost and redemption value being recognized in profit or loss over the period of the borrowing to determine the effective interest rate. 4. Cash and cash equivalents Cash on hand and imprest accounts Bank current accounts Savings and overnight deposit accounts Fixedterm deposits Bank overdraft Interest Rate % , ,696 14,871 58, ,871 7, ,419 2, ,698 30,107 90, , , ,560 ( ) ( ) 5. SHORTTERM INVESTMENTS Mortgages Resale agreements [see (i) and (ii) below] GOJ Local Registered Stocks ,772 9, , ,276,188 8,896 1,285,146 Held as follows: Restricted funds: Endowment funds (note 15) Net unexpended donations for special projects, scholarships and prizes Unrestricted funds 296, , , , , ,960 1,285,146 (i) (ii) The fair value of the securities collateralising resale agreements is $478,472,000 (: $1,421,641,000). Of the amount held under resale agreements, $150 million is hypothecated as security for a loan from Bank of Nova Scotia Jamaica Limited [note 10]. 30 Accounts

32 Notes to the Financial Statements for the Year Ended July 31, 6. RELATED PARTIES (a) (b) Due from related parties: University Centre Cave Hill Campus Open Campus St. Augustine Campus Due to related parties: University Centre Open Campus Cave Hill Campus St Augustine Campus 5,182 43, ,918 8, , ,405 5,869 55, ,795 52,435 28, , ,597 33, ,014 6,299 77,342 The above balances are unsecured, interest free and payable within twelve months of the reporting date. (c) Key management personnel compensation paid during the year was as follows: Salaries and shortterm employee benefits 45,261 43, ACCOUNTS RECEIVABLE Due from Governments [see (a) below] Student accounts [note 24(i)] Staff loans and advances Withholding tax on investments Third party receivables Prepayments Credit Union revolving loans Other accounts receivable and deposits [see (b) and (c) below] Less: impairment losses 258, ,830 40,690 69,131 96,431 9, , ,776 1,650, ,719 1,531, , ,753 31, ,192 3,683 12, , ,672 1,875,732 93,285 1,782,447 ( ) ( ) (a) (b) (c) This represents amounts due from contributing governments to UWI Mona. This includes $245,222,000 (: $117,073,000) which represents the current portion of salary arrears due from the Government of Jamaica arising from wage agreements for the contract period 2008/2009 to 2010/ [see note 11(b)]. Included in other accounts receivable is $25,030,000 (: $64,200,000) representing project expenditure to be reimbursed by donors. Accounts 31

33 Notes to the Financial Statements for the Year Ended July 31, 8. Inventories General stores Bookshop inventory 21,799 49,676 71,475 21,919 50,439 72, Accounts payable and accruals Trade payables Other payables and accruals Accrued staff benefits: Sabbatical leave Current portion of vacation leave pay Study and travel grant Book grant 1,123, ,349 9,438 13, ,178 42,793 1,975, , , ,202 12, ,285 44,886 1,937, Shortterm loan This is a secured loan from The Bank of Nova Scotia Jamaica Limited ( BNS ), under a revolving demand operating credit line. The applicable interest rate is 9% per annum, fixed for six months and is secured up to $150 million by hypothecation of a term deposit with BNS [note 5(ii)]. 11. Longterm receivables Tuition fees Medical Sciences students (a) Retroactive salaries receivable (b) Less: current portion [see note 7(b)] 45, , , , ,316 45, , , , ,513 ( ) ( ) (a) (b) This relates to a special arrangement to facilitate a number of students in the Faculty of Medical Sciences who have been granted extended payment terms for settlement of tuition fees. This relates to salary arrears due from the Government of Jamaica arising from wage agreements for the contract period 2008/2009 to 2010/. The amount is to be settled over a period of 36 months [see note 16(j)]. 32 Accounts

34 Notes to the Financial Statements for the Year Ended July 31, 12. INTEREST IN SUBSIDIARIES MSB (a) UMC (b) MIL (c) Total Shares at cost Loan receivables (see note below) Investment in UMC Current account Net interest subsidy ,752 51,235 79, , ,181 79,697 3,465 ( 18,532) 26,808 ( 47,518) ,071 ( 66,050) 18, ,222 40, ,115 MSB (a) UMC (b) MIL (c) Total Shares at cost Loan receivables (see note below) Investment in UMC Current account Net interest subsidy ,752 51,235 79, , ,647 79,697 9,645 ( 16,845) ( 36,518) ,323 ( 53,363) 26,668 94,414 34, ,520 Note: (a) In accordance with an agreement dated June 14, 2002, between UWI Mona and Mona School of Business (MSB), the loan receivable is due in installments over 20 years at an interest rate of five percent per annum with a moratorium of three years on the principal. The payment of interest commenced on August 1, If MSB s finances at any point can allow for earlier settlement or larger instalments, this will be permitted without penalty. The balance is stated net of an imputed interest subsidy. The imputed interest is calculated using the discounted cash flow technique at an estimated market rate of interest of 22%, which was the rate at the date of receipt of loan funds. (b) In accordance with an agreement between UWI Mona and Universal Media Company Limited (UMC), the loan receivable is due in quarterly installments over 10 years at five percent per annum with a moratorium of two years, from April 30, 2006 through April 30, 2008, on the principal and interest. Repayment of principal and payment of interest did not commence on May 1, 2008 as scheduled. By way of agreement dated May 14, 2010, UWI Mona took control of Universal Media Company (UMC) Limited resulting in UMC reverting to the status of a wholly owned subsidiary. A decision is still to be made on the loan receivable from this subsidiary. (c) Mona Informatix Limited (MIL) Limited is a wholly owned subsidiary of UWI Mona. The loan receivable from this subsidiary relates to contributions made by UWI Mona towards operations. Accounts 33

35 Notes to the Financial Statements for the Year Ended July 31, 13. PROPERTY, PLANT & EQUIPMENT Land, plant and buildings Cost: July 31, 2010 Acquisitions Disposals July 31, 6,339, ,440 6,683,628 Acquisitions Transfer from WIP Disposals July 31, 480,591 1,006,696 8,170,915 Depreciation: July 31, 2010 Charge for year Eliminated on disposals July 31, 1,223, ,799 1,376,547 Charge for year Eliminated on disposals July 31, 189,971 1,566,518 Net book values: July 31, July 31, 6,604,397 5,307,081 Furniture & office equipment Motor vehicles Computer equipment Library books Work in progress Total 1,218, ,749 18,276 1,489, ,790 20,227 5, ,764 1,714, ,652 10,296 1,820, ,577 20,494 ( ) ( ) ( ) ( ) 507,071 4,102,204 1,861,885 2,240,319 11,840,581 3,030,881 33,825 14,837, ,904 ( ) ( ) ( ) ( ) 20,395 1,908,977 23, , ,374 8,599 4,958 2,037,517 32, ,283 2,994,219 1,015,295 6,081,128 4,183,955 25,353 18,996, , ,836 18, , ,216 33,016 5, ,979 1,520, ,778 10,296 1,613, ,704 16,896 ( ) ( ) ( ) ( ) 393,600 3,915, ,325 33,803 4,339, ,472 34, ,452 21, ,235 ( 20,395 ) ( 4,958 ) ( 25,353 ) 945, ,083 1,756, ,836 4,894, , ,977 47,336 57, , , , ,471 6,081,128 4,102,204 14,101,765 10,498, Accounts

36 Notes to the Financial Statements for the Year Ended July 31, 14. Unexpended donations for special projects July 31, New advances and Interest received Expenditure July 31, Projects (a) Scholarships Prizes 423, ,788 10, , , , ,729 ( 539,192) ( 356,272) ( 1,015) ( 896,479) 243, ,765 9, ,343 July 31, 2010 New advances and Interest received Expenditure July 31, Projects (a) Scholarships Prizes 388, ,943 11, , ,853 1,835,825 2,558 2,372,236 ( 498,537) ( 1,785,980) ( 2,968) ( 2,287,485) 423, ,788 10, ,093 (a) This amount represents funds donated for projects being implemented by various departments of UWI Mona. 15. Endowment funds Balance as at August 1 (Disbursements)/new grants Balance as at July ,712 ( 1,172) 296, ,594 7, ,712 Accounts 35

37 Notes to the Financial Statements for the Year Ended July 31, 16. Longterm liabilities (i) Longterm loans: Note Interest Rates % United States Agency for International Development (USAID) European Union InterAmerican Development Bank Bank (IDB) National Housing Trust Loan # 1 National Housing Trust Loan # 2 NCB Capital Markets Limited Current portion of longterm loans (a) (b) (c) (d) (e) (f) , , , ,740 1,231,656 1,945,000 4,564,391 ( 442,305) 4,122,086 78, , , , ,282 1,500,000 3,190,858 ( 396,612) 2,794,246 (ii) Other longterm liabilities: Trade Creditors Due to Cave Hill Campus Due to UHWI Retroactive salaries Accrued vacation leave Current portion of other longterm liabilities Total longterm liabilities (g) (h) (i) (j) Nil Nil Nil Nil 175, , , , ,096 2,116,548 ( 308,683) 1,807,865 5,929, , , , , ,561 2,120,333 ( 147,195) 1,973,138 4,767,384 (a) (b) In February 1977, a loan of US$8.5 million was granted to the University by USAID. The purpose of this loan was the construction of certain buildings and the provision of scholarships and training on three of its Campuses. This loan is repayable in sixtyone (61) halfyearly installments, which commenced in May 1987, and bears interest at the rate of 2% per annum for the first ten years, thereafter at 3% per annum. The principal outstanding at July 31, was US$777,000 (: US$919,000). In March 1993, the European Union (formerly Economic Community) granted a loan to the University of 4,692,232, the allocation of which was as follows: 1,764,796 to the Mona Campus; 1,640,246 to the St. Augustine/Mount Hope Campus; and 1,287,190 to the Cave Hill Campus. The loan is repayable in 60 halfyearly installments, which commenced June 1, 2003, and bears interest at the rate of 1% per annum. The principal outstanding at July 31,, was 1,261,000 (: 1,371,000). 36 Accounts

38 Notes to the Financial Statements for the Year Ended July 31, 16. Longterm liabilities (cont d) (b) (cont d) The University also received a grant of 7,820,386 for the purpose of constructing student accommodations on three of its campuses and Mount Hope Medical Complex. (c) In April 1992, the University of the West Indies entered into a loan agreement with InterAmerican Development Bank (IDB) and the Caribbean Development Bank (CDB) to enhance the capacity of the University to respond to higher education needs in the fields of science and technology. The estimated total project cost was US$82.1 million. The loan is guaranteed by the Governments of Trinidad and Tobago, Jamaica and Barbados. This loan is repayable in thirtytwo (32) semiannual, consecutive and, in so far as possible, equal installments. Repayment commenced in May 2001, and the last installment is scheduled to be paid no later than April 7, Interest accrues on the daily outstanding balance of the loan at a rate per annum for each semester determined by the cost of qualified borrowing for the preceding semester, plus a spread established by IDB. The balance outstanding at July 31, was US$7,054,000 (: US$8,465,000). (d) (e) (f) (g) In April 2001, the National Housing Trust (NHT) granted a loan of $584,800,458 to UWI Mona towards the construction of a new student residence, The Rex Nettleford Hall. The loan shall be repaid from income earned from the operations of the Hall in semiannual periods, over twenty five (25) years, at five percent (5%) per annum on a graduated basis for nine (9) years, and then a fixed sum for the remaining years. The graduated loan repayments will increase by five percent (5%) for each of the first five (5) years of the repayment period. The agreement provides that the repayment of the principal commences after the expiration of the five (5) years. Interest is payable on a quarterly basis. In June, the National Housing Trust (NHT) granted a loan of $1,440,335,000 to UWI Mona towards the construction of new student accommodation at two sites on the Campus. The loan shall be repaid from income earned from the operations of the Halls in quarterly installments, over twenty five (25) years, at five percent (5%) per annum in accordance with a graduated payment mortgage basis. The agreement provides that the first installment of principal together with interest shall be due within three (3) months following the date of final disbursement. In February, UWI Mona entered into an agreement with NCB Capital Markets Limited and National Commercial Bank Jamaica Limited for a J$2,100,000,000 loan facility towards the partial financing of the construction of a complex at the Mona Campus to house the Basic Medical Sciences Departments of the Faculty of Medical Sciences. The additional draw down during the year was J$600,000,000. The facility involves UWI Mona issuing promissory notes under the commercial paper transactions arranged by NCB Capital Markets Limited. There will be a moratorium on the principal of 12 months following the issue date. The facility will attract a Financing Cost of 13.75% p.a. and will be payable quarterly on a calendar quarter basis. The finance cost is inclusive of the coupon payable on the notes, with the coupon fixed at 13.25%. The facility has a final maturity of 5 years inclusive of a 12 month moratorium and is based on a 5year amortization schedule. With effect from August 1, the facility was restructured by reducing the interest rate on both tranches from 13.75% and 13.25%, respectively, to a single rate of 9.85% and also extend the maturity of the notes from 2016 to This represents longterm credit arrangements extended to UWI Mona by trade creditors. Accounts 37

39 Notes to the Financial Statements for the Year Ended July 31, 16. Longterm liabilities (cont d) (h) (i) (j) As at July 31, 2008, an amount of $185,068,000 was recorded as due to UWI Cave Hill based on an agreement dated July 3, This relates to pension payments advanced by UWI Cave Hill up to December Based on the agreement, the amount was equally divided amongst UWI Mona, the University Centre and UWI Cave Hill and the amount herein is UWI Mona s share. This represents funds held on behalf of the University Hospital of the West Indies (UHWI) by UWI Mona for the purpose of upgrading the facilities at the hospital. In accordance with agreement arrived at between the Government of Jamaica in, salary arrears for the public sector which will be paid over five (5) tranches amounted to $729,901,628. The balance remaining at July 31, amounted to $612,854,000 (: $729,902,000). 17. Capital grants At beginning of year Receipts Transfers Amortisation (note 19) 1,018, , , , ,568 ( 27,261) ( 24,440) At end of year 1,391,805 1,018, Employee benefits obligation The University operates two pension plan for its employees one for academic and senior administrative staff and the other for administrative and technical staff. In addition to pensions, UWI Mona provides for postemployment health benefits. (a) Plan for academic and senior administrative staff The plan for the academic and senior administrative staff is the Federated Superannuation Scheme for Universities (FSSU), which is a UKbased definedcontribution plan and the assets are invested primarily through a UKbased investment management company and a small portion with two life insurance companies. Membership is compulsory for eligible staff members who are not engaged in shortterm, parttime or special contracts. The plan requires compulsory, joint contributions of 15% of pensionable salaries (10% by UWI Mona as employer and 5% by members). Members also have the option of voluntarily contributing up to an additional 5% of pensionable salaries. 38 Accounts

40 Notes to the Financial Statements for the Year Ended July 31, 18. Employee benefits obligation (cont d) (a) (b) (c) Plan for academic and senior administrative staff (cont d) UWI Mona has committed itself to supplementing pensions under certain circumstances. Under the Supplementation Plan, UWI Mona is obligated to top up the pension of each retiring FSSU member to 2/3 final salary, provided the member had at least 35 years service (but fractionally less for shorter service in excess of ten years). If the pension derived from all his FSSU investments is less than the level up to which supplementation is triggered, that is, 2/3 of final salary, UWI Mona must meet the pension shortfall. Any person who becomes a member of the FSSU plan on or after August 1, 2005, will not be eligible for supplementation. UWI Mona has honoured all cases of supplementation that have arisen. Plan for administrative and technical staff This is also a definedcontribution plan funded by joint compulsory contributions of 15% of pensionable salaries (10% by the University as employer and 5% payable by the employees). Sagicor Life of Jamaica Limited is the administrator and investment manager of the plan. Postemployment benefit computation UWI Mona s obligation for postemployment pensions and medical care is determined and accounted for as described in note 3(i), and comprises the following amounts: Defined contribution supplementation plan Post employment medical benefits Amount recognized in balance sheet 777, ,393 1,568,540 1,838, ,026 2,501,346 (i) Defined contribution supplementation plan: Present value of unfunded obligation Unrecognized actuarial loss Recognised obligation 1,838,320 ( 1,061,173) 777,147 3,557,327 ( 1,719,007) 1,838,320 The movement in the liability recognized in the balance sheet is as follows: Liability at beginning of year Contributions paid (Income)/expense recognized in profit or loss Liability at end of year 1,838,320 ( 174,479) ( 886,694) 777,147 1,245,171 ( 101,099) 694,248 1,838,320 Accounts 39

41 Notes to the Financial Statements for the Year Ended July 31, 18. Employee benefits obligation (cont d) (c) Postemployment benefit computation (cont d) (i) (cont d) The (income)/expense recognized in profit or loss is made up as follows: Current service cost Interest on obligation Past service cost vested benefits Past service cost nonvested benefits Net actuarial loss recognized in year 119, ,194 ( 1,466,234) ( 33,166) 116,500 ( 886,694) 125, , , ,248 (ii) Postemployment medical benefits: Present value of unfunded obligations Unrecognized actuarial loss Amount recognized in balance sheet 1,289,084 ( 497,691) 791, ,783 ( 192,757) 663,026 The movements in the obligation recognized in the balance sheet are as follows: Liability at beginning of year Contributions paid Expense recognized in the profit or loss Liability at end of year 663,026 ( 18,777) 147, , ,673 ( 13,598) 126, ,026 The expense recognized in profit or loss is made up as follows: Current service cost Interest cost Net actuarial loss recognized in year 47,052 93,812 6, ,144 39,515 83,052 4, , Accounts

42 Notes to the Financial Statements for the Year Ended July 31, 18. Employee benefits obligation (cont d) (c) Postemployment benefit computation (cont d) (iii) Principal actuarial assumptions at reporting date: Discount rate Expected return on plan assets Future salary increases Medical claims growth 10.0% 9.5% 7.0% 10.0% 10.5% 9.5% 7.0% 10.5% Assumed medical claims growth trend can have a significant effect on the amounts recognized in profit or loss. A one percentage point change in the assumed healthcare costs trend rates would have the following effects: One percentage point increase One percentage point decrease Effect on the aggregate service and interest cost Effect on the defined benefit obligation 79, ,890 ( 59,249) ( 146,433) (iv) Included in central expenditure are amounts (credited)/charged for the foregoing benefits, as follows: Pension supplementation scheme [note 18(c)(i)] Postemployment medical care [note 18(c)(ii)] Amount recognised in profit or loss ( 886,694) 147,144 ( 739,550) 694, , ,199 (v) Historical information: (a) Defined benefit pension plan Present value of the defined benefit obligation Experience adjustment arising on plan liabilities 1,838, ,425 3,557,327 ( 464,830) 3,647,203 ( 77,267) 1,654,875 ( 613,590) 1,311,000 ( 1,971) Accounts 41

43 Notes to the Financial Statements for the Year Ended July 31, 18. Employee benefits obligation (cont d) (c) Postemployment benefit computation (cont d) (v) Historical information (cont d): (b) Postemployment medical benefits Present value of the defined benefit obligation Experience adjustment arising on plan liabilities 1,289,084 90, ,783 78, ,472 ( 67,753) 364,026 ( 52,173) 376,496 ( 12,060) 19. Miscellaneous income Amortization of capital grant (note 17) Student services/caution money/parking stickers/id Recoveries Admin and library share from centre Other 27,261 27, ,000 25, , ,735 24,440 35,401 32, , , Central expenditure Computer and software license fees Insurance Light and power Modernization and infrastructure Miscellaneous Office and general Professional, consulting, graduation and other exp. Repairs and maintenance Estate Mgmt. Dept. Security and fire protection Student facilities and amenities Travelling and motor transport Tuition fee exemption staff and dependents Water rates Less: Centre s share of central expenditure 14,933 90, ,007 96, , , , , ,617 71, , , ,553 2,054,954 56, , ,644 72, , , , , , ,699 54, , , ,333 1,968,292 ( ) ( ) 42 Accounts

44 Notes to the Financial Statements for the Year Ended July 31, 21. Finance costs Interest and other expenses: Fixed loans Bank charges and other 213,782 32, , ,032 27, , Staff costs Salaries and incentive pay Statutory payroll contributions Pension plan contributions Post employment benefit costs: Supplementation arrangements Medical care Other 6,727, ,617 1,051,974 ( 886,694 ) 147, ,000 7,949,141 4,539, , , , , ,264 6,878, Taxation UWI Mona is an approved educational institution for the purpose of Section 13 (1)(q) and Section 25c of the Income Tax Act (the Act) and has been granted exemption from income tax under Section 12(h) of the Act. Under the General Consumption Tax (GCT) Act, the University is entitled to acquire goods and services at a zero rate of tax; in addition, its own services are generally exempt from GCT under the provisions of item 12 Part II of the Third Schedule to the GCT Act, viz: Services pertaining to the provision of education and training, except where a fee is charged for admission to a conference, seminar or such other type of meeting (excluding any conference, seminar or such other type of meeting conducted by the University of the West Indies for its members). 24. Financial risk management Overview A financial instrument is any contract that gives rise to a financial asset of one enterprise and a financial liability or equity instrument of another enterprise. For the purpose of the financial statements, financial assets have been determined to include cash and cash equivalents, shortterm investments, due from related parties, accounts receivable and longterm receivables. Financial liabilities have been determined to include accounts payable, due to related parties, shortterm loan and longterm liabilities. UWI Mona has exposure to operational risk and the following risks from its use of financial instruments: (i) Credit risk (ii) Liquidity risk (iii) Market risk Accounts 43

45 Notes to the Financial Statements for the Year Ended July 31, 24. Financial risk management (cont d) Overview (cont d) This note presents information about UWI Mona s exposure to each of the above risks and its objectives, policies and processes for measuring and managing risk. The UWI Mona Campus Council has the overall responsibility for the establishment and oversight of UWI Mona s risk management framework. UWI Mona s risk management policies are established to identify and analyze the risks it faces, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and UWI Mona s activities. The Audit Committee oversees how management monitors, and is in compliance with, UWI Mona s policies and procedures and reviews the adequacy of the risk management framework, in relation to the risks faced by UWI Mona. The Audit Committee is assisted in its functions by UWI Mona s Management Audit Department, which undertakes periodic reviews of risk management controls and procedures, the results of which are reported to the Audit Committee. (i) Credit risk: Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. Credit risk arises principally from receivables from students, government receivables, cash and cash equivalents, investment securities and resale agreements. Exposure to credit risk The following table sets out the financial assets that are exposed to credit risk and the maximum amount of the exposure: Maximum exposure Cash and cash equivalents (note 4) Shortterm investments (note 5) Accounts receivable excluding withholding tax and deposits (note 7) Due from related parties (note 6) Longterm receivables (note 11) Interest in subsidiaries (note 12) Management of credit risk relating to different types of financial assets 210, ,033 1,462, , , ,115 2,913, ,560 1,285,146 1,622, , , ,520 4,273,591 Management establishes an allowance for impairment that represents its best estimate of losses in respect of receivables. Management s policy is to provide for balances based on past default experience, current economic conditions and expected recovery. 44 Accounts

46 Notes to the Financial Statements for the Year Ended July 31, 24. Financial risk management (cont d) Overview (cont d) (i) Credit risk (cont d): Management of credit risk relating to different types of financial assets (cont d) Due from West Indian Governments UWI Mona s exposure to credit risks relating to these receivables is influenced by the ability of the Governments in each territory to pay. These amounts are all current and not impaired and are the subject of regular and vigorous followup. Due from related parties and other receivables UWI Mona s exposure to credit risk relating to these receivables is influenced by each person s ability to pay. These amounts are all current and not impaired. Cash and cash equivalents, investments, securities and resale agreements: Cash and cash equivalents, investments securities and resale agreements are placed with reputable financial institutions, who are appropriately licensed and regulated, for shortterm periods, and management believes these institutions have minimal risk of default. Student receivables UWI Mona s exposure to credit risk on student receivables is influenced mainly by the individual characteristics of each student and their ability to pay. Student receivables are the only financial assets with significant amounts past due. Student receivables are deemed past due when the payments are not received on the contractual payment dates. The majority of the past due accounts receivable are not considered impaired. According to UWI Mona policy, a provision of 50% of balances over 365 days is made at the end of each year. The ageing of the student receivables (note 7) at the reporting date is summarized as follows: Past due 0120 days Past due days More than one year Gross 126, , , ,830 Impairment 118, ,719 Gross 17, , , ,753 Impairment 93,285 93,285 Accounts 45

47 Notes to the Financial Statements for the Year Ended July 31, 24. Financial risk management (cont d) Overview (cont d) (i) Credit risk (cont d): Management of credit risk relating to different types of financial assets (cont d) Student receivables (cont d) The movement in the allowance for impairment in respect of student receivables during the year was as follows: Balance at beginning of year Amount recognized, net Balance at end of year 93,285 25, ,719 46,017 47,268 93,285 Based on past experience, management believes that no impairment allowance is necessary in respect of staff receivables not past due, due from related parties and other receivables. (ii) Liquidity risk: Liquidity risk, also referred to as funding risk, is the risk that UWI Mona will encounter difficulty in raising funds to meet commitments associated with financial instruments. Liquidity risk may result from an inability to sell a financial asset quickly at, or close to, its fair value. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and ensuring the availability of funding through an adequate amount of committed facilities. The management of UWI Mona manages this risk by keeping a substantial portion of its financial assets in liquid form, and having overdraft facility in place. The following tables present the contractual maturities of the nonderivative financial liabilities, including interest payments and excluding the impact of netting agreements. Carrying Amount Contractual Cashflow Less than 1 year 12 years Over 2 years Accounts payable and accruals Due to related parties Shortterm loan Longterm liabilities 1,975, , ,500 6,680,939 9,314,513 1,975, , ,924 8,407,935 11,046,933 1,975, , ,924 1,325,507 3,964,505 1,101,991 1,101,991 5,889,437 5,889, Accounts

48 Notes to the Financial Statements for the Year Ended July 31, 24. Financial risk management (cont d) Overview (cont d) (ii) Liquidity risk: Carrying Amount Contractual Cashflow Less than 1 year 12 years Over 2 years Accounts payable and accruals Due to related parties Longterm liabilities 1,937,170 77,342 5,311,191 7,325,703 1,937,170 77,342 6,146,579 8,161,091 1,937,170 77,342 1,355,408 3,369,920 1,198,933 1,198,933 3,592,238 3,592,238 (iii) Market risk: Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect UWI Mona s income or the value of its holding of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. UWI Mona has no formal risk management mechanism to address market risk; however, the exposure comes under the purview of the Investment Committee. (a) Interest rate risk: Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. Interest rate risk is affected where there is a mismatch between interestearning assets and interestbearing liabilities which are subject to interest rate adjustments within a specified period. The University manages this risk by consistently analysing and adjusting its portfolio of interestearning assets, depending on the direction in which interest rates are going in the opinion of management. UWI Mona contracts other financial liabilities, primarily shortterm loans and supplier credit at floating interest rates, which are fixed in advance but which may be varied by appropriate notice by the lenders. Interest bearing financial assets is primarily represented by cash and cash equivalents, both shortterm and longterm investments, and staff loans, which are contracted at fixed and floating interest rates for the duration of the term. Accounts 47

49 Notes to the Financial Statements for the Year Ended July 31, 24. Financial risk management (cont d) Overview (cont d) (ii) Market risk (cont d): (a) Interest rate risk (cont d): At the reporting date, the interest profile of UWI Mona s interestbearing financial instruments as represented by their carrying amount was as follows: Fixed rate instruments: Financial assets Financial liabilities Variable rate instruments: Financial liabilities Interest Rate % ,006 1,737,823 ( 4,706,891) ( 3,190,858) ( 3,859,885) ( 1,453,035) ( 7,452) ( 123,208) Fair value sensitivity analysis for fixed rate instruments UWI Mona does not carry any fixed rate financial asset at fair value through profit or loss or availableforsale. Therefore, a change in interest rates at the reporting date would not affect surplus for the year. Cash flow sensitivity analysis for variable rate instruments An increase of 100 (:100) basis points in interest rates would have increased surplus for the year by J$75,000 (: J$1,232,000). This analysis assumes that all other variables, in particular, foreign currency rates, remain constant. The analysis is performed on the same basis as for. A decrease of 100 basis points would have an equal but opposite effect. 48 Accounts

50 Notes to the Financial Statements for the Year Ended July 31, 24. Financial risk management (cont d) Overview (cont d) (ii) Market risk (cont d): (b) Foreign currency risk: Foreign currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. UWI Mona is exposed to foreign currency risk primarily on purchases and borrowings that are denominated in a currency other than its functional currency. UWI Mona ensures that the net exposure is kept within reasonable limits by monitoring and, where necessary, adjusting its exposure. UWI Mona manages foreign exchange exposure by maintaining adequate liquid resources in intervening currencies and by managing the timing of payments of foreign currency liabilities. At the reporting date UWI Mona s exposure to foreign currency risk was as follows: Cash and cash equivalents Shortterm investments Accounts receivable Due from related parties Accounts payable Longterm loans Due to related parties Net exposure US Stg 000 Euro 000 Bds 702 1, ( 2,387) ( 8) 969 ( 9,342) ( 1,261) ( 9,685) 112 ( 1,261) ( 4,140) ( 2,935) TT US Stg 000 Euro 000 Bds TT Cash and cash equivalents Shortterm investments Accounts receivable Accounts payable Longterm loans Due from related parties Net exposure ,488 1,600 ( 5,411) ( 11,245) ( 1,317) 4,114 ( 3,044) 89 ( 1,317) ( 52) 177 Accounts 49

51 Notes to the Financial Statements for the Year Ended July 31, 24. Financial risk management (cont d) Overview (cont d) (ii) Market risk (cont d): (b) Foreign currency risk (cont d): The rates of exchange for the Jamaica dollar against the main currencies for which it is exchanged were as follows: July 31, July 31, TT$1.00 BD$1.00 US$1.00 EURO = = = = = J$ J$ J$ J$ J$ TT$1.00 BD$1.00 US$1.00 EURO = = = = = J$ J$ J$ J$ J$ (c) Sensitivity analysis: A 5% (: 5%) strengthening of the foreign currencies against the Jamaica dollar would have decreased surplus for the year by $55,483,000 (: $13,351,000). This analysis assumes that all other variables, in particular interest rates, remain constant. A 5% (: 5%) weakening of the currencies against the Jamaica dollar would have an equal but opposite result on surplus. (iv) Operational risk: Operational risk is the risk of the direct or indirect loss arising from a wide variety of causes associated with UWI Mona s processes, personnel, technology and infrastructure, and from external factors other than credit, market and liquidity risks, such as those arising from legal and regulatory requirements, generally accepted standards of corporate behaviour and natural disasters. UWI Mona s objective is to manage operational risk so as to balance the avoidance of financial losses and damage to its reputation with overall cost effectiveness and to avoid control procedures that restrict initiative and creativity. The primary responsibility for the development and implementation of controls to address operational risk is assigned to senior management. This responsibility is supported by the development of overall standards for the management of operational risk in the following areas: Requirements for appropriate segregation of duties, including the independent authorization of transactions; Requirements for the reconciliation and monitoring of transactions; Compliance with regulatory and other legal requirements; Documentation of procedures, including controls; Requirements for the periodic assessment of operational risks faced and the adequacy of controls and procedures to address the risks identified; 50 Accounts

52 Notes to the Financial Statements for the Year Ended July 31, 24. Financial risk management (cont d) Overview (cont d) (iv) Operational risk (cont d): Development of contingency plans; Training and professional development; Ethical and business standards; Risk mitigation, including insurance, where this is effective; and Safety policies and procedures. 25. Fair values of financial instruments: Fair value amounts represent estimates of the arms length consideration that would currently be agreed between knowledgeable, willing parties who are under no compulsion to act and is best evidenced by a quoted market price, if one exists. Where quoted market prices are not available, the fair values of these instruments have been determined using a generally accepted alternative method. Determination of fair value and fair value hierarchy: IFRS 7 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. These two types of inputs have created the following fair value hierarchy: Level 1 Level 2 Level 3 Quoted prices in active markets for identical assets or liabilities. This level includes listed equity securities and debt instruments on exchanges. Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. (Unobservable inputs). This level includes equity investments and debt instruments with significant unobservable components. This hierarchy requires the use of observable market data when available. UWI Mona does not carry any of its financial instruments at fair value. Accounts 51

53 Notes to the Financial Statements for the Year Ended July 31, 25. Fair values of financial instruments (cont d): The following methods and assumptions were used to estimate the fair value of each class of financial instrument which was material to the financial statements: Financial asset/liability Cash and cash equivalents, due from/to related parties, accounts receivable and current liabilities Method Fair values assumed to be carrying value because of the relatively shortterm nature of the instruments. Investments: Fixed deposits Government securities Resale agreements Mortgages Longterm loans Assumed to be carrying value because of their shortterm nature. Discounting of future cash flows using balance sheet date yield on similar securities. Discounting of future cash flows using reporting date yield of securities with similar risk; for short duration instruments the market yield would likely be equal to the contracted rate. Discounting of future cash flows using current yield of securities with similar risk. Discounting of future cash flows using current yield of securities with similar risk. 26. Capital commitments As at the reporting date, UWI Mona was committed to incur capital expenditure of $1,696,250,000 (: $1,623,331,000). Subsequent to the year end, UWI Mona got approval for a loan of US$3 million from Development Bank of Jamaica Limited to assist with the financing of capital expenditure. The loan will bear interest at the rate of 4.5% per annum, is secured by a debenture over fixed and floating assets, a mortgage and an established account and is repayable over ten years with twelve months moratorium on the principal repayment. 52 Accounts

54 Cover Photos: Top right: The first medical class before the first lecture outside Gibraltar Hall (1948). Bottom left: The New Basic Medical Sciences Teaching and Research Complex ().