Annual Financial Report

Transcription

1 Annual Financial Report March 31, 2017 Published June 2017 Published June 2017

2 Table of Contents Message from the Vice President, Finance & Administration Financial Overview Operating Budget Results Introduction Commentary on Major Revenue & Expenditure Variances Audited Consolidated Financial Statements Independent Auditors Report Consolidated Statement of Financial Position Consolidated Revenue, Expense and Changes in the Operating Surplus Consolidated Statement of Changes in Net Assets Consolidated Statement of Cash Flows Notes to Consolidated Financial Statements Supplementary Schedules... 40

3 Plans are well underway to mark the 200 th anniversary of the founding of Dalhousie and recognize our many contributions to our country and the world around us. The bicentennial is an important and rare milestone for our community. It provides an opportunity to pause and reflect on our successes and challenges while looking forward with optimism to our third century has been an exciting year with progress across key strategic areas. I have highlighted a few of particular note below. Message from Vice President, Finance & Administration, Dalhousie University In our recent spring convocations, we celebrated the achievements of 3,575 graduates. Their stories and accomplishments are inspiring. Student financial assistance is an important success factor for many of our students. In , $67.4 million in direct support (including student employment) was provided to students. Over the last five years total student support has grown by $8.9 million. The growth has been possible through new endowment gifts, success in attracting provincial support through the Nova Scotia Graduate Scholarship program and increased operating budget allocations. The University s most important assets continue to be our faculty, staff and students. Recognizing this, Dalhousie has adopted a people first human resources strategy and a pivotal diversity and inclusiveness strategy. These strategies are built to ensure that our workforce is representative, our student s access to educational opportunities is on an equitable footing, our curriculum is diverse and our community is welcoming. Respect must be a critical aspect of Dalhousie s way forward. In addition to the excellent teaching and learning environment faculty provide for our students, has been a remarkable year for faculty research. Dalhousie s research excellence in the ocean sector was recognized through the award of $94 million from the federal government through the Canada First Research Excellence Fund program. This award along with a significant donor contribution and partner contributions will provide $220 million to support the collaborative research and teaching opportunities for the safe and sustainable development of the Ocean Frontier. During the year, the Ocean Tracking Network and MEOPAR received commitments for renewed funding and several other multimillion dollar research projects were confirmed totaling $107.3 million in funding. It has also been a productive year for renewal of campus infrastructure. Continued annual commitment to investment in campus maintenance and renewal of facilities and technology through the operating budget and external sources continues to be imperative to address the challenge of providing quality space and IT resources to support learning and research. A multi year program to renew and upgrade our IT infrastructure was initiated in and will gain momentum in the next year ahead. In , through the significant contribution from the Federal Government (Post Secondary Institutions Strategic Investment Fund (SIF)) and other contributors, a transformational $64 million investment to Dalhousie s Engineering and Architecture and Planning campus is now underway. This project will provide new space and address a significant backlog of deferred maintenance on the Sexton Campus. We have made i

4 tremendous progress on the new Fitness Centre, scheduled to open during our bicentennial. This centre is the first major addition to fitness and recreation facilities for students in more than three decades. Planning for expanded and enhanced facilities to support a home for the Fountain School of Performing Arts is also underway and supported by a significant gift for the Joseph Strug Concert Hall. This gift along with others are the catalyst for an exciting capital campaign chaired by high profile performing artist, Sarah McLachlan. It is through the work of the entire Dalhousie community that achievements are possible and I appreciate these significant contributions that make Dalhousie a leader in our community. It is our responsibility to advance the University s mission and shared strategic priorities, guided by Strategic Direction , particularly as we prepare for Dalhousie s 200 th Anniversary. There will be an opportunity for everyone to find a way to participate in the celebration. Ian Nason, Vice President, Finance & Administration ii

5 Financial Overview

6 Financial Overview FINANCIAL PERFORMANCE The financial performance of the University is organized using separate Fund categories. This approach groups activities that have similar characteristics to enhance budgetary controls and allow for appropriate accountability and reporting for internal and external stakeholders. The University maintains six Fund categories: Operating, Ancillary, Endowment, Capital, Research and Special Purpose. Operating Fund The Operating Fund encompasses the day to day revenue and expenditures required to operate the University and to carry out the Academic mission. Government grants, tuition revenue and other general revenues support operating expenditures. Budget allocations to Faculties and major service and support units are based on Budget Advisory Committee recommendations and are presented in the Operating Budget Report. Ancillary Fund Ancillary units provide important services to the University community and are segregated from the core functions of teaching and research. The ancillary operations include Student Community Services (Residence Life and Housing), the Bookstore, Food Services, the Dalhousie Arts Centre and Dalplex. Overall, ancillary units are expected to cover their expenditures as a group. Results for these units compared to budget are presented in the Operating Budget Report. Endowment Fund University operations are supplemented by the University s 1400 endowment funds. Endowments support student bursaries and scholarships, research, library materials and services, academic chairs and salaries. The funds must be spent according to the terms of the individual endowments as established by donors. Endowment funds are an important supplement to the operations of the University and are incorporated into the Operating Budget Report. Capital Fund The Capital Fund accounts for funds received and expended on property, plant and equipment, which have a use into the future. Capital reserves are funds set aside by the University to support future costs of large scale capital upgrades or replacements and are included in the Capital Fund. Capital projects are initiated once funding plans are approved, and as recommended by the Capital Projects and Facilities Committee. Research Funds Research Fund expenditures are supported by revenues which are restricted for the purposes designated by the funders and sponsors. These funds cannot be used to support operations. Researchers are accountable to manage and report to funders and sponsors on 3267 segregated research grant and contract accounts. Special Purpose Funds Special Purpose Fund expenditures are supported by revenues which are restricted for the purposes established by contributors. Special Purpose Account Holders are identified and accountable to manage 985 special purpose accounts utilized for a variety of purposes including annual giving, conferences, service and lab accounts, and joint projects with contributions from external parties Annual Financial Report - Financial Overview 1

7 Financial Overview REVENUE ALL FUNDS Total revenue from all funds is $674.7 million; an increase of 2.7% over the prior year. The following graph shows the growth in total revenue across all funds since : $700 Total Revenue All Funds (in millions of dollars) $650 $600 $ A breakdown of revenue by fund is below: Total Revenues by Fund Research 15% Special Purpose 3% Capital 1% Ancillary 7% Endowment 4% Operating 70% Annual Financial Report - Financial Overview 2

8 Financial Overview Operating & Endowment Revenue The Operating Budget Report reflects revenues of $405.8 million. These revenues consist mainly of government operating grants, tuition and endowment revenues. In addition to these centrally managed revenue streams certain revenues are managed directly through Faculty and service unit budgets. In Faculties, examples include revenue from auxiliary fees, full cost recovery programs, extended learning and farm revenues. Other revenues included in this category are the student services fee, application fees, King s transfer for teaching services and revenue from services provided to external parties. The University s total operating and endowment revenue reported in fiscal was $496.1 million; a net increase of $13.2 million (2.7%) from the previous year. The graph below provides a breakdown of total Operating & Endowment Revenues for compared to $250 Operating & Endowment Revenue (in millions of dollars) $200 $150 $100 $50 $0 Provincial Operating Grant Tuition fees Non Credit Fees Investment Income Other External cost recoveries Provincial operating grants are the largest source of revenue for the University (42.9%) and increased by $1.6 million in The overall increase relates to the 1% increase in the Provincial Operating Grant from the Department of Labour and Advanced Education, and minor adjustments to other grants. Tuition revenue of $167.5 million represents 33.8% of Dalhousie s operating and endowment revenue. Tuition fee revenue increased by $7.6 million, a result of a 3% tuition increase across all programs, market adjustments in Engineering, Pharmacy and Agriculture programs, and enrolment related growth. Endowment funds are an important supplement to the operations of the University. Investment income from endowment funds support scholarships for students, academic chairs and other Faculty program costs. In the endowment income totaled $26.7 million Annual Financial Report - Financial Overview 3

9 Financial Overview Endowment funds are gifts received for which the purpose is restricted by the donor. Over time the earnings provide support for donor specified activities at the University. The market value of the University s endowment assets reached $582.9 million as of March 31, $600 $550 $500 $450 $400 $350 $300 $250 $200 $150 $100 $50 $0 Market Value of Endowment Assets to (in millions of dollars) Ancillary Revenues The University s ancillary operations provide essential support and business services to the Dalhousie community with a view to enhancing the student experience. Ancillary operations provide high quality and competitively priced services while covering the associated operating and capital cost. In the composition of Ancillary revenue was consistent with the prior year. The following graph shows the breakdown of Ancillary revenue. Arts Centre 8% Ancillary Revenues Food Services 26% University Housing & Conference Services 47% Bookstore 15% Dalplex 4% Annual Financial Report - Financial Overview 4

10 Financial Overview Research Revenues Revenues received in the Research Fund must be used for the purposes specified by the approximately 300 contributors and sponsors. Research funding is received from a variety of sources with the largest contributions coming from the federal government through the Tri Council granting agencies (CIHR, NSERC, and SSHRC) and the Canada Foundation for Innovation (CFI). Research Revenue Received by Funder Corporations & Foundations 19% Other 6% Tri Council 53% CFI 9% Other Federal Government 10% Province of NS Various 3% The chart above reflects actual revenue received during the year while for financial statement purposes revenue is recognized when the expenditure occurs. Special Purpose Revenues Revenue received in the Special Purpose Fund must be used for the purposes specified by contributors and/or donors. The University manages 985 Special Purpose accounts for a variety of purposes such as Annual Giving accounts, conferences, and service and lab accounts that provide services to other areas of the University and some external clients. In addition, Special Purpose accounts host joint initiatives between Dalhousie and contributors Annual Financial Report - Financial Overview 5

11 Financial Overview EXPENDITURES ALL FUNDS The University s total expenditures from all funds in was $651.2 million; an increase of 2.3% over the previous year. There has been consistent growth over the last five years totalling $51.1 million. Operating & Endowment Expenditures Operating and endowment expenditures increased to $493.6 million from $487.9 million in the previous fiscal year, an increase of $5.7 million (1.2%). Compensation The largest expenditure of the Operating & Endowment Fund is salary and benefits costs (including pension). Compensation costs have increased $7.5 million over (2.3%). The majority of this increase relates to annual compensation adjustments. The following graph shows the distribution of compensation costs between Academic and Major Service and Support Units: Distribution of Compensation Costs by Function Academic Support & University Services 24% Faculties and Academic Areas 76% Includes: IT, Registrar's Office, Facilities Management, Student Affairs, etc. Student Assistance Student assistance includes student employment, undergraduate and graduate scholarships and bursaries, and fellowships. In support for students from Operating and Endowment Funds totaled $45.1 million. Research grants also provide significant financial support, particularly for graduate students. Total student support from all funds was $67.4 million ( $66.1 million) Annual Financial Report - Financial Overview 6

12 Financial Overview The following graph outlines Student Assistance across all funds for the last five years. $80 $70 $60 $50 $40 $30 $20 $10 Student Assistance: All Funds to (in millions of dollars) $ Operating & Ancillary Endowment Research & Special Purpose Endowment Supported Expenditures The University s Endowment Management Policy includes three key objectives: 1. To balance present spending needs with expected future requirements; 2. To protect the purchasing power of the capital base while achieving stability in year to year spending; and 3. To attain real increases in spending through capital appreciation from new gifts, capital investment gains, and the capitalization of income. The University s Endowment Spending Policy allows for annual spending increases at the rate of CPI as long as the resulting spending rate remains within a band of 3.75% to 5.0% of the endowment s market value. The objectives of this approach are to provide stable year to year spending allocations that maintain purchasing power over time. The following graph provides a history of total expenditures supported by the University s 1400 endowments. Annual endowment expenditures have continued to trend higher over the prior year, providing an important source of funding for student bursaries and scholarships, academic chairs and salaries, research, library materials and services Annual Financial Report - Financial Overview 7

13 Financial Overview Endowment Spending to (in millions of dollars) $25 $23 $21 $19 $17 $ The following graph shows the breakdown of endowment spending and growth over the last three years. Student assistance spending is the largest component of spending and has increased over time Endowment Spending by Category to (in millions of dollars) Endowment Management Expense Academic Chairs & Salaries Library, Research, Equipment, Facilities, etc. Student Assistance Annual Financial Report - Financial Overview 8

14 Financial Overview Research Expenditures As the purpose of research revenue is restricted by the funder, revenue is only recorded when the related expenditures occur. In there was research expenditures of $101.6 million. As reflected in the following chart, 25% of grants and contracts have expenditures greater than $500,000 in % of Research Accounts Categorized by Spending [Grab your reader s attention with a great quote from the document or use Research Grants and Contracts this space to emphasize a key point. To with Spending Between $100,000 and $499,999 place this text box anywhere on the 7% (7% of Accounts) page, just drag it.] 37% of spending 25% of spending Research Grants and Contracts with Spending 18% Greater than $500,000 (1% of Accounts) Research Grants and Contracts 38% with Spending up to $100,000 (92% of Accounts) 38% of spending CAPITAL The University accounts for all capital assets in the Capital Fund. Examples include construction of new buildings, building improvements (Facilities Renewal), and smaller items such as library books and research and lab equipment. The University invested $74.8 million in capital assets in Large capital projects are undertaken based on funding plans as recommended by the Board Capital Projects and Facilities Committee and are funded through a combination of donor and government contributions, new revenue streams, cost savings, and support from the Facilities Renewal budget for deferred maintenance items. $39.7 million was spent on large capital projects in which include the Dental Clinic, the Tupper Medical Building, Agricultural Campus Thermal Plant, IDEA (SIF) Projects and the Fitness Centre. The renovation and addition to the Student Union Building was also completed during the year. As at March 31, the University maintains 156 buildings (exceeding 5.8 million gross square feet of space with a replacement value of $1.5 billion), grounds and infrastructure. A substantial annual investment is required to maintain these facilities to meet the continued needs of students, faculty and staff Annual Financial Report - Financial Overview 9

15 Financial Overview The following graph shows the annual investment in facilities maintenance over 10 years Facilities Maintenance Spending to (in millions of dollars) * 14 15* 15 16* Facilities Renewal Research Infrastructure Funding Strategic Initiatives Reserves *Includes one time transition funds from the Province for Facilities projects on the Agricultural Campus. The Facilities Condition Index (FCI) is a measure of the condition of buildings. 40% of Dalhousie s buildings are in poor or very poor condition, which is above average compared to other U15 universities. The University's backlog of deferred maintenance increases over time as buildings age and necessary maintenance accrues. A commitment to annual investment in facilities renewal is imperative. The annual Facilities Renewal budget of $20.4 million supports projects on both the Halifax and Agricultural campuses. The larger projects undertaken in include exterior conservation projects on the Cox Institute, Henry Hicks Administration Building, Howe Hall and the Weldon Law Building. A significant one time contribution from the Federal Government s Strategic Infrastructure Fund will help address the backlog of deferred maintenance on the Sexton Campus. The University will continue to seek alternative sources of funding for capital infrastructure Annual Financial Report - Financial Overview 10

16 Operating Budget Results

17 Operating Budget Results INTRODUCTION The Board of Governors approved the University s operating budget in June of This report includes detailed financial information comparing the actual results for the year to the approved budget including commentary on the significant variances from budget. THE FINAL BUDGET The summary on page 12 shows the Approved Budget and the Final Budget for the University in The approved budget included a central provision for compensation adjustments that were distributed to Faculties and service units during the year and are reflected in the final budget. The final budget reflects base allocations from strategic initiatives made to Faculties/Units in the Responsibility Centre Expenditure category. Finally, the budget also includes increases in both tuition revenue and the Faculty of Health Professions expenditures. In , the nursing program was modified and during the phase in period ( to ) of the newly modified nursing program, tuition revenues and expenditures are adjusted. The schedules that follow the summary provide further detail on results for the individual Faculties and service units. ACTUAL RESULTS The University achieved a favourable variance (surplus) of $775,000 for the year. The following table provides a breakdown of the contributing factors for both the Halifax and Agricultural campuses: Summary of Significant Variances by Campus (favourable (unfavourable) in '000's of dollars) Halifax Campuses Agricultural Campus Total Operating Grant (Agriculture) (198) (198) Tuition revenue 1, ,674 Other Revenue Changes (515) 12 (503) Reserve funds* (1,300) 69 (1,231) Student Support (103) (95) (198) Energy Costs 1, ,241 UOE/ Contingency Unit Results: Shortfalls (17) (694) (711) Savings (132) 775 *In Halifax there was a reduction in the reserve funds required to balance the budget while in Truro additional reserve funds were required to achieve a balance. For further information on the assignment of the surplus see page 19. Commentary on the major revenue and expenditure variances for the year follows the summary and detailed schedules Annual Financial Report - Operating Budget Results 11

18 Operating Budget Results Summary (thousands of dollars) Approved Final Variance Budget Budget (1) Actual Fav (Unfav) REVENUE Provincial Government Grants Operating - Labour and Advanced Education 171, , , Department of Agriculture 19,957 19,957 19,759 (198) Scholarship and Bursary Program Grants 11,096 11,096 10,901 (195) Program Specific Grants 9,175 9,175 9,175 - Facilities/Space Grant 1,000 1,000 1, , , ,695 (393) Federal Research Support Fund Grant 7,133 7,133 7, Investment Endowment 24,843 24,843 25, Operating (net of bank & finance charges) 2,750 2,750 2,654 (96) Tuition Fees 152, , ,295 1,674 Facilities Renewal Fee 3,139 3,139 3, Use of Reserve Funds 1,300 1, (1,231) (2) TOTAL REVENUE 404, , , GENERAL OPERATING EXPENDITURES Equipment and Furniture Allocation 2,372 2,372 2,372 - Scholarships, Bursaries and Student Assistance Operating 10,641 10,641 10,839 (198) NS Government Scholarship & Bursary Programs 11,096 11,096 10, Endowment 6,161 6,161 6,212 (51) Campus Renewal- Annual Facilities Maintenance 20,382 20,382 20,448 (66) - Long term 6,466 6,466 6,466 - Strategic Initiatives - Projects 2,638 2,119 2,119 - Energy, Water, Taxes and Insurance (net of recoveries) 22,176 22,176 20,935 1,241 Endowment Management Expenses 2,800 2,800 3,046 (246) Contingency 1,900 1,900 1, (2) TOTAL GENERAL OPERATING EXPENDITURES 86,631 86,113 85, RESPONSIBILITY CENTRE EXPENDITURES Academic 233, , ,502 (641) Academic Support 13,920 14,189 14,416 (227) Administration 30,859 32,329 32,321 8 General 1,718 1,640 1, Facilities Management 20,932 21,238 21,312 (74) Student Affairs 7,404 7,522 7,521 1 Undistributed Operating Expenditures 9, (2) (2) (2) TOTAL RESPONSIBILITY CENTRE EXPENDITURES 317, , ,626 (737) TOTAL OPERATING EXPENDITURES 404, , , NET ANCILLARY EXPENDITURES (198) (128) 194 (322) TOTAL EXPENDITURES 404, , ,989 (115) TOTAL SURPLUS FOR THE YEAR (3) (1) The final budget includes the distribution of the Undistributed Operating Expenditures and Base allocations from Strategic Initiatives. The tuition revenue budget and the Faculty of Health Professions budget have also been adjusted by $482,000 respectively reflecting better than anticipated revenue during the phase in of the modified nursing program. (2) Actual endowment expenditures and related investment income will vary from the amount available for spending in any given year due to various factors. See note 2 on page 15. (3) The overall budget surplus has been appropriated and will be used as described in note 8 on page Annual Financial Report - Operating Budet Results 12

19 Operating Budget Results Detail (thousands of dollars) Transfer to Approved Final Variance (from) Budget Budget (1) Actual (2) Fav (Unfav) Appropriation ACADEMIC Agriculture (including Farm & Support Units) 16,452 17,064 16, (161) Architecture and Planning 4,506 4,665 4,665 - (214) Arts and Social Sciences 19,645 20,345 20,345 - (227) Arts and Social Sciences (special response) Computer Science 6,986 7,148 7, Dentistry 9,662 10,117 10,117 - (90) Engineering 19,624 20,462 20, Graduate Studies 2,111 1,940 1,940 - (6) Health Professions 28,054 29,151 29,151 - (539) Law 11,209 11,338 11,338 - (54) Management 12,741 13,201 13,201 - (685) Medicine 46,315 47,654 47,654 - (1,137) Science 34,635 35,774 35, University Library 15,467 15,752 15,752 - (121) College of Continuing Education 1,184 1,202 1, College of Sustainability 1,165 1,201 1, Centres, Institutes & Special Projects 2,660 3,135 3,688 (553) (561) Cooperative Education Office Faculty Related Costs (eg.travel, Leave Grants, PDA.) 2,593 2,643 2, Kings' Transfer (3,077) (3,077) (2,774) (303) - Academic Initiatives Endowment Expenditures greater than Budget (net) (10) 10 (3) TOTAL ACADEMIC 233, , ,502 (641) (1,582) ACADEMIC SUPPORT Art Gallery Centre for Learning and Teaching 1,454 1,491 1,491 - (59) IT Infrastructure 964 1,188 1,478 (290) 803 Information Technology Services 11,270 11,262 11,262 - (468) Printing Centre (46) 62 - Endowment Expenditures less than Budget (net) - - (1) 1 (1) (3) TOTAL ACADEMIC SUPPORT 13,920 14,189 14,416 (227) 275 ADMINISTRATION Application Fees and Services Recovery (1,465) (1,465) (1,345) (120) - Advancement 5,939 6,354 6,354 - (11) Communications & Marketing 3,057 3,106 3, Environmental Health and Safety Office 1,142 1,168 1,187 (19) (90) Financial Services 4,973 5,041 5,037 4 (91) Human Resources 3,487 3,626 3, Dalhousie Analytics Inter-University Services President's Office 4,102 4,261 4, Registrar & Admissions 5,847 6,188 6, Research Services 1,804 1,996 1, University Secretariat/ Internal Audit 1,006 1,025 1,025 - (43) TOTAL ADMINISTRATION 30,859 32,329 32, (1) The final budget includes the distribution of the Undistributed Operating Adjustments and Base allocations from Strategic Initiatives. The tuition revenue budget and the Faculty of Health Professions budget have also been adjusted by $482,000 respectively reflecting better than anticipated revenue during the phase in of the modified nursing program. The budget for MITACS and CREATE grants have been reallocated from Graduate Studies to Academic Initiatives. (2) The actual column includes transfers of variances in accordance with University policy. (see detailed analysis in Appendix A) (3) Actual endowment expenditures and related investment income will vary from the amount available for spending in any given year due to various factors. See note 2 on page Annual Financial Report - Operating Budget Results 13

20 Operating Budget Results Detail (thousands of dollars) Transfer to Approved Final Variance (from) Budget Budget Actual (1) Fav (Unfav) Appropriation GENERAL 1,718 1,640 1, FACILITIES MANAGEMENT 20,932 21,238 21,312 (74) (17) STUDENT AFFAIRS Awards Office & Student Services Centre -Sexton Counselling 1,375 1,342 1, Student Support Services (including Vice-Provost's Office) 4,436 4,582 4, Student Health Recreation and Athletics 1,019 1,029 1,029 - (208) Endowment Expenditures less than Budget (net) - - (1) 1 (1) TOTAL STUDENT AFFAIRS 7,404 7,522 7, ANCILLARIES Dalhousie Arts Centre Dalplex Food Services, incl. DalCard (43) (43) (43) Residence Life 1,460 1,508 1, University Bookstore (124) (123) (77) (46) (54) University Housing (2,040) (2,019) (2,019) - (286) Daycare (Truro) (276) - Endowment Expenditures excess of Budget (net) TOTAL ANCILLARIES (198) (128) 194 (322) 69 (1) The actual column includes transfers of variances in accordance with University policy. (see detailed analysis in Appendix A) Annual Financial Report - Operating Budget Results 14

21 Operating Budget Results COMMENTARY ON MAJOR REVENUE & EXPENDITURE VARIANCES 1. Government Grants a) Provincial Operating Grants: The University budget is supported by Provincial Government grants from the Department of Labour and Advanced Education as follows: i) Operating Grants ($171.9 million): received as budgeted (including a 1% increase over the grant.) ii) Program Specific grants ($9.2 million) and a grant to support space costs ($1.0 million): all received as budgeted for the year. iii) Bursary and Scholarship Program Grants ($10.9 million): Funding from the province directly offsets the spending for the programs (reviewed in section 5 below) resulting in no net impact on the operating budget. The University also receives a grant from the Department of Agriculture to support the Agricultural Campus ($19.8 million). The 1% budgeted increase was not advanced in resulting in a shortfall of $198,000. b) Federal Research Support Fund Grant: Universities receive an annual grant from the Federal Government to defray a portion of the indirect costs incurred to support federally funded research (i.e. NSERC, SSHRC and CIHR) that are included in the operating budget (e.g. utilities and maintenance costs for research space). Near the end of the fiscal year the government announced supplementary funding exceeding the budgeted amount. This funding has been earmarked for priority research infrastructure costs in Investment Income Endowment Income (and Related Expenditure Lines): The operating budget is supported by 1419 endowments and allocations from each endowment must be spent according to the purposes specified by the donor. This requirement means that annual investment income must equal the actual expenditures from the endowments for the year and therefore there is no overall impact on the bottom line of the operating budget Annual Financial Report - Operating Budget Results 15

22 Operating Budget Results The following table summarizes expenditures by Responsibility Centre and the offsetting variance in Endowment income: Summary of Endowment Income and Expenditures ( '000's of dollars) Budget Actual Variance Endowment Investment Income 24,843 25, Endowment Expenditures Student Assistance 6,161 6,212 (51) Endowment Management Expense 2,800 3,046 (246) Included in Responsibility Centres: Academic 15,432 15,442 (10) Academic Support Student Affairs University Housing Total Expenditures 24,843 25,148 (305) The Endowment management expense varies from year to year based on growth of the endowment and general investment performance. A detailed breakdown of endowment expenditures compared to Faculty and support unit budgets is included in Appendix A. Investment Income Operating: The University s short term investment revenue is less than budget by $96,000. This is a result of lower than anticipated cash flow but this has been mitigated somewhat by improved returns on new investments under the University s Expendable Funds Investment Policy. 3. Tuition Fees Overall enrolment in increased by 93 students. The number of international students increased by 387 while there was a decrease in domestic students of 294. International students pay a differential fee in addition to the regular tuition resulting in an overall net increase in tuition revenue of $1,674,000 compared to budget. In the tuition revenue budget reflected an adjustment relating to a modification in the nursing program which anticipated a planned temporary decline in revenue during the transition period ( to ). The actual decline in tuition revenue was less than anticipated and therefore an adjustment has been made to the final tuition revenue and Health Professions budgets of $482,000 respectively to reflect this positive experience Annual Financial Report - Operating Budget Results 16

23 Operating Budget Results 4. Use of Reserve Funds The budget for the Halifax Campus included a planned use of $1.3 million in reserve funds to balance revenues and expenditures. As a result of an overall improvement in tuition revenue and savings in energy expenditures resulting from lower natural gas pricing, these reserve funds were not required. The budget for the Agricultural Campus did not plan on the use of reserve funds. However, due to the shortfall in operating grant funding ($198,000) on the Agricultural Campus, $69,000 in available reserve was drawn to mitigate the shortfall. 5. Scholarships, Bursaries and Student Assistance During the year additional support was provided to students through the operating budget allocation and from University endowments designated for this purpose. The positive variance in tuition revenue allowed the University to provide $198,000 in additional support for students above the budget amount. The additional spending of $51,000 on the endowment line is supported by endowment revenue as described above. The Nova Scotia government also provides direct support for the Nova Scotia Bursary Program and the Nova Scotia Graduate Scholarship Program. Provincial funding for these programs directly offsets the variances in this section. The following table provides a breakdown of expenditures (and revenues) for both programs. Provincially Supported Student Assistance Programs ( '000's of dollars) Budget Actual Variance Nova Scotia Bursary Program 8,448 8, Nova Scotia Graduate Scholarship Program 2,648 2,711 (63) 11,096 10, Energy, Water, Taxes and Insurance There were savings of $1,241,000 in energy costs in which were mainly a result of lower than budgeted natural gas pricing. Importantly, this budget also benefits from energy savings resulting from sustainable energy projects. These savings are used in the first instance to retire the costs of these projects. Ultimately, these savings accrue to benefit the operating budget in the future years Annual Financial Report - Operating Budget Results 17

24 Operating Budget Results 7. Responsibility Centre and Ancillary Expenditures This section provides an explanation of the significant variances in Faculties and support units. The budgets for various units include endowment expenditures that vary from the amount available for spending in any given year as described in note 2 above. Other variances are described as follows: a) Academic University policy allows Faculties and major academic units to carry forward any budget savings/overruns. Overall, Faculties drew on $1.6 million in carry forward; some Faculties had savings for the year while others used carry forward for projects and initiatives. As a result of the carry forward policy, there are only four variances reported in the Academic area: i) The $145,000 favourable variance in the Faculty of Agriculture relates to improved revenues in Faculty support units (e.g. extended learning, farm revenue) which helped offset other cost pressures in the Agricultural Campus budget. ii) The $553,000 unfavourable variance in the Centres, Institutes and Special Projects line is the amount carried forward for research infrastructure relating directly to supplementary funding received during the year (see 1.b) above). iii) The favourable variance of $80,000 on the Cooperative Education Office line relates to one time savings from staff vacancies. iv) The University receives revenue from the University of King s College under the agreement to provide teaching services to King s students. As a result of lower enrolments at King s there is a $303,000 unfavourable variance on this line. b) Academic Support, Administration and General and Student Affairs i) The Centre for Learning and Teaching and Information Technology Services used carry forward balances to support information technology and other strategic projects during the year. ii) The Information Technology Infrastructure line has an unfavourable variance of $290,000 due to a critical investment required on the Agricultural campus for network upgrades. During a multi year plan to renew and upgrade IT infrastructure was developed and implemented late in the year. The funding carried forward will be devoted to approved projects planned in iii) The Agricultural Campus Print Centre produced a surplus which benefited the overall campus budget. iv) The net favourable variance in Student Affairs is being carried forward to support student wellness and other student support areas. c) Ancillaries The University Residence Operations on both campuses drew on carry forward for projects to improve residence facilities (e.g. a long overdue upgrade of residence rooms in Chapman House and washroom upgrades in Howe Hall). In Halifax, the Bookstore drew on carry forward to enhance space utilization to improve service to students Annual Financial Report - Operating Budget Results 18

25 Operating Budget Results Post merger the Province provided temporary transition funding to support the Day Care operation. Provincial support has ended and the results include $276,000 in unfunded costs related to the operation and then closure of the Day Care in the fall of The University continues to work toward finding a viable option to this service. A shortfall of $46,000 related to the operation of the bookstore was also reported. 8. Total Surplus for the Year Overall, the University results for produced a net surplus of $775,000. This is comprised of a $907,000 surplus for the Halifax Campuses and a $132,000 shortfall in the Agricultural Campus Budget. The Halifax surplus funds have been appropriated and will be used on a one time basis as follows: a) $600,000 to address priority projects arising from the introduction of the new provincial Accessibility Act. b) $307,000 for student assistance will be added to the program in As noted in the government grant section, the shortfall at the Agricultural Campus relates primarily to grant funding flows. This remains a topic of active discussion with the Province Annual Financial Report - Operating Budget Results 19

26 Operating Budget Results Detailed Analysis of Budget, Actual and Variance (thousands of dollars) Operating Endowment Consolidated * Column 1 * Column 2 * Column 3 * Column 4 * Column 5 * Column 6 * Column 7 * Column 8 * Column 9 * Column 10 * Column 11 Operating and Actual before Year End Actual before Year End Endowment Final Transfer of Transfer of Variance Final Transfer of Transfer of Variance Variance Budget Variance Variance (1) Actual Fav/(Unfav) Budget Variance Variance (1) Actual Fav/(Unfav) Fav/(Unfav) ACADEMIC Agriculture (including Farm and Support Units) 16,989 17,005 (161) 16, (33) Architecture and Planning 4,592 4,826 (234) 4, Arts and Social Sciences 18,876 19,073 (197) 18,876-1,469 1,499 (30) 1, FASS Special Response Computer Science 6,955 6, , (6) Dentistry 9,926 10,057 (131) 9, Engineering 19,688 19, , Graduate Studies 1,561 1, , (45) Health Professions 28,618 29,108 (490) 28, (49) Law 8,843 8,940 (97) 8,843-2,495 2, , Management 12,514 12,929 (415) 12, (270) Medicine 41,891 42,686 (795) 41,891-5,763 6,105 (342) 5, Science 33,282 33,429 (147) 33,282-2,492 2, , University Library 15,544 15,753 (209) 15, College of Continuing Education 1, , College of Sustainability 1,195 1, , Centres, Institutes & Special Projects 3,103 4,235 (579) 3,656 (553) (553) Cooperative Education Office Faculty Related Costs (eg. Travel, Leave Grants, PDA) 2,643 2, , Kings' Transfer (3,077) (2,774) - (2,774) (303) (303) Academic Initiatives Endowment Expenditures greater than Budget (net) (10) (10) TOTAL ACADEMIC 226, ,675 (1,615) 227,060 (631) 15,432 15,442-15,442 (10) (641) ACADEMIC SUPPORT Art Gallery Centre for Learning and Teaching 1,490 1,550 (60) 1, IT Infrastructure 1, ,478 (290) - (290) Information Technology Services 11,262 11,730 (468) 11, Printing Centre 16 (46) - (46) Endowment Expenditures less than Budget (net) - - (1) (1) 1 1 TOTAL ACADEMIC SUPPORT 14,120 14, ,348 (228) (227) ADMINISTRATION Application Fees and Services Recovery (1,465) (1,345) - (1,345) (120) (120) Communications and Marketing 3,106 3, , Environmental Health and Safety Office 1,168 1,277 (90) 1,187 (19) (19) Advancement 6,354 6,365 (11) 6, Financial Services 5,041 5,128 (91) 5, Human Resources 3,626 3, , Dalhousie Analytics Inter-University Services President's Office 4,261 4,258-4, Registrar & Admissions 6,188 6, , Research Services 1,996 1, , University Secretariat/ Internal Audit 1,025 1,068 (43) 1, TOTAL ADMINISTRATION 32,329 32, , (1) This column reflects the transfer of variances to (or from) appropriation or carry forward in accordance with university policy and accounting requirements. * The information in this report is a consolidation of the Endowment and Operating Expenditure budgets. Columns 1 and 6 above report the Final Budget, Columns 4 and 9 show the Total Actual expenditure and Columns 5 and 10 total column 11 which is the consolidated Variance on this schedule Annual Financial Report - Operating Budget Results 20

27 Operating Budget Results Detailed Analysis of Budget, Actual and Variance (thousands of dollars) Operating Endowment Consolidated * Column 1 * Column 2 * Column 3 * Column 4 * Column 5 * Column 6 * Column 7 * Column 8 * Column 9 * Column 10 * Column 11 Operating and Actual before Year End Actual before Year End Endowment Final Transfer of Transfer of Variance Final Transfer of Transfer of Variance Variance Budget Variance Variance (1) Actual Fav/(Unfav) Budget Variance Variance (1) Actual Fav/(Unfav) Fav/(Unfav) GENERAL 1,640 1,554-1, FACILITIES MANAGEMENT 21,238 21,329 (17) 21,312 (74) (74) STUDENT AFFAIRS Awards Office & Student Services Centre - Sexton Counselling 1,342 1, , Student Support Services (including Vice-Provost's Office) 4,582 4, , Student Health 117 (58) Recreation and Athletics 887 1,096 (209) Endowment Expenditures less than Budget (net) (1) (1) 1 1 TOTAL STUDENT AFFAIRS 7,380 7, , ANCILLARIES Dalhousie Arts Centre Dalplex and Arena Food Services (43) (296) 253 (43) Residence Life 1,508 1, , University Bookstore (123) (23) (54) (77) (46) (46) University Housing (2,258) (1,972) (286) (2,258) Daycare ( Truro) (276) (276) TOTAL ANCILLARIES (367) (114) 69 (45) (322) (322) (1) This column reflects the transfer of variances to (or from ) appropriation or carry forward in accordance with university policy and accounting requirements. * The information in this report is a consolidation of the Endowment and Operating Expenditure budgets. Columns 1 and 6 above report the Final Budget, Columns 4 and 9 show the Total Actual expenditure and Columns 5 and 10 total column 11 which is the consolidated Variance on this schedule Annual Financial Report - Operating Budget Results 21

28 Audited Consolidated Financial Statements

29 KPMG LLP Telephone (902) Suite 1500 Purdy s Wharf Tower 1 Fax (902) Upper Water Street Internet Halifax, NS B3J 3N2 Canada INDEPENDENT AUDITORS REPORT To the Board of Governors of Dalhousie University We have audited the accompanying consolidated financial statements of Dalhousie University, which comprise the consolidated statement of financial position as at March 31, 2017, and the consolidated statements of revenue, expense and changes in operating surplus, changes in net assets 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 Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Canadian accounting standards for not-for-profit organizations, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity s preparation and fair presentation of the consolidated financial statements 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 consolidated financial statements. 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 consolidated financial statements present fairly, in all material respects, the consolidated financial position of Dalhousie University as at March 31, 2017, and its consolidated results of operations and its consolidated cash flows for the year then ended in accordance with Canadian accounting standards for not-for-profit organizations. Chartered Professional Accountants, Licensed Public Accountants June 27, 2017 Halifax, Canada KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. KPMG Canada provides services to KPMG LLP. 22

30 Consolidated Statement of Financial Position March 31, 2017 (in thousands of dollars) Assets Current assets: Cash and cash equivalents $ 111,255 $ 100,906 Accounts receivable 34,448 34,326 Due from related parties (note 5) 56 Inventories 2,563 2,544 Prepaid expenses 5,475 5, , ,238 Investments (note 3) 696, ,436 Capital assets (note 4) 935, ,282 Liabilities and Net Assets $ 1,785,787 $ 1,684,956 Current liabilities: Accounts payable and accrued liabilities (note 6) $ 69,482 $ 70,285 Deferred revenue (note 7) 281, ,662 Current portion of long term debt (note 8) 7,084 8, , ,089 Employee future benefits (note 9) 17,988 87,157 Deferred capital contributions (note 10) 226, ,202 Long term debt (note 8) 122, , , ,615 Net assets: (note 11) Endowment 456, ,878 Excess of pension liabilities over pension assets (14,237) (83,483) Restricted funds 72,114 66,224 Capital fund 545, ,722 1,060, ,341 Commitments and contingent liabilities (note 12) $ 1,785,787 $ 1,684,956 See accompanying notes to consolidated financial statements Annual Financial Report - Consolidated Financial Statements 23