Financial Statements Brock University Students' Union, Inc.
Contents Page Independent Auditor's Report 1-2 Statement of Financial Position 3 Statement of Changes in Fund Balances 4 Statement of Cash Flows 5 6-13
Independent Auditor's Report Grant Thornton LLP 80 King Street Suite 200 St. Catharines, ON L2R 7G1 T +1 905 682 8363 F +1 905 682 2191 www.grantthornton.ca To the Members of Brock University Students' Union, Inc. We have audited the accompanying financial statements of Brock University Students' Union, Inc., which comprise the statement of financial position as at, and the statements of changes in fund balances, operations, and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Management's responsibility for the financial statements Management is responsible for the preparation and fair presentation of these 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 financial statements that are free from material misstatement, whether due to fraud or error. Auditor's responsibility Our responsibility is to express an opinion on these 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 financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the organization's preparation and fair presentation of the 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 organization'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. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Audit Tax Advisory Grant Thornton LLP. A Canadian Member of Grant Thornton International Ltd 1
Independent Auditor's Report (continued) Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of Brock University Students' Union, Inc. as at, and the results of its operations and its cash flows for the year then ended in accordance with Canadian accounting standards for not-for-profit organizations. St. Catharines, Canada November 9, 2016 Chartered Professional Accountants Licensed Public Accountants Audit Tax Advisory Grant Thornton LLP. A Canadian Member of Grant Thornton International Ltd 2
Statement of Operations and Changes in Fund Balances Internally Operating Restricted Capital Year ended April 30 Fund Funds Funds 2016 2015 Revenues Commissions and fees $ 1,531,612 $ 6,082,404 $ 742,044 $ 8,356,060 $ 8,251,336 Photocopiers 225 - - 225 1,777 Student services portfolio 23,290 112-23,402 25,966 Finance portfolio 41,611 - - 41,611 61,591 Product sales 1,782,235 - - 1,782,235 2,000,314 Entertainment 210,095 - - 210,095 238,577 Rents and other 321,047 1,558 (1,962) 320,643 228,370 Investment income (loss) (Note 14 ) 8,715 (29,616) (22,497) (43,398) 139,320 3,918,830 6,054,458 717,585 10,690,873 10,947,251 Expenses Cost of product sold 883,305 - - 883,305 996,340 Insurance and professional services 183,676 84 3,375 187,135 186,653 Office 38,797 2,912-41,709 38,684 Photocopiers 5,266 - - 5,266 4,477 Equipment and property costs 378,115 12,571 16,346 407,032 359,149 Wages and benefits 1,688,247 302,686-1,990,933 2,058,294 Conferences and travel 52,184 2,267-54,451 50,391 Advertising, awareness and promotion 97,432 38,484-135,916 96,582 Fees, dues, and memberships 175,313 3,967-179,280 186,478 Student services 131,510 6,020,513-6,152,023 5,932,214 Amortization 28,683 34,192 403,047 465,922 447,379 Brock University (Note 13) - - 200,000 200,000 - Entertainment 259,383 181-259,564 245,114 Emergency student loan program write-offs 63,070 - - 63,070 24,575 Other 35,509 35,254-70,763 136,583 4,020,490 6,453,111 622,768 11,096,369 10,762,913 (Deficiency) excess of revenues over expenses $ (101,660) $ (398,653) $ 94,817 $ (405,496) $ 184,338 Fund balances, beginning of year $(1,238,202) $ 5,645,780 $ 5,212,618 $ 9,620,196 $ 9,435,858 (Deficiency) excess of revenues over expenses (101,660) (398,653) 94,817 (405,496) 184,338 Interfund transfer (Note 12) 2,172,295 (1,072,582) (1,099,713) - - Fund balances, end of year (Note 11) $ 832,433 $ 4,174,545 $ 4,207,722 $ 9,214,700 $ 9,620,196 See accompanying notes to the financial statements. 4
Statement of Cash Flows Year ended April 30 2016 2015 Increase (decrease) in cash Operating (Deficiency) excess of revenues over expenses for the year $ (405,496) $ 184,338 Amortization 465,922 447,379 Gain on disposal of property and equipment 4,018 1,934 Realized losses on disposal of marketable securities 341,488 75,314 Unrealized (gain) loss on marketable securities (22,537) 91,820 Unrealized foreign exchange gains on marketable securities (100,604) (141,035) 282,791 659,750 Change in non-cash working capital items Accounts receivable (51,737) 144,130 Emergency student loans program receivable 70,110 37,771 Note receivable 8,156 712 Inventories (9,254) 277 Prepaid expenses 4,323 (11,227) Accounts payable and accrued liabilities (48,244) (198,794) Employee future benefits (6,500) (6,075) 249,645 626,544 Financing Proceeds of loan from Brock University - 280,460 Repayment of loan from Brock University (93,487) (31,162) (93,487) 249,298 Investing Purchase of marketable securities (5,733,522) (4,564,407) Proceeds on disposal of marketable securities 5,567,055 4,425,034 Purchase of property and equipment (237,378) (527,005) Proceeds on disposal of property and equipment 6,280 4,528 (397,565) (661,850) (Decrease) increase in cash (241,407) 213,992 Cash Beginning of year 2,223,587 2,009,595 End of year $ 1,982,180 $ 2,223,587 See accompanying notes to the financial statements. 5
1. Nature of operations The organization was established to provide services for the social and educational welfare of the students of Brock University in St. Catharines, Ontario. It is incorporated by Letters Patent as a corporation without share capital under the laws of the Province of Ontario, and is a non-profit organization exempt from taxation under the Income Tax Act of Canada. 2. Significant accounting policies These financial statements are prepared in accordance with Canadian accounting standards for not-for-profit organizations in Part III of the CICA Handbook and include the following significant policies: Financial instruments Measurement The organization initially measures its financial assets and liabilities at fair value. The organization subsequently measures all of its financial assets and financial liabilities at amortized cost, except for marketable securities that are quoted in an active market, which it chose to measure at fair value. Changes in fair value are recognized in the statement of operations and changes in fund balances. Financial assets and liabilities measured at amortized cost include cash, accounts receivable, emergency student loans program receivable, notes receivable, accounts payable and accrued liabilities and loan from Brock University. Financial assets measured at fair value include marketable securities. Impairment Financial assets measured at cost are tested for impairment when there are indicators of impairment. Previously recognized impairment losses are reversed to the extent of the improvement provided the asset is not carried at an amount, at the date of the reversal, greater than the amount that would have been the carrying amount had no impairment loss been recognized previously. The amounts of any write-downs or reversals are recognized in the statement of operations and changes in fund balances. Fund accounting The organization follows the restricted fund method of accounting for contributions. It maintains three funds; operating, internally restricted and capital. The operating fund accounts for day-to-day operating revenues and expenses. The internally restricted and capital student levies are restricted as to their respective purposes and are not available for general operating purposes without appropriate authorization. 6
2. Significant accounting policies (continued) Revenue recognition Restricted contributions related to general operations are recognized as revenue of the operating fund in the year in which the related expenses are incurred. All other restricted contributions are recognized as revenue of the appropriate restricted fund. Unrestricted contributions are recognized as revenue of the operating fund in the year received or receivable if the amount to be received can be reasonably estimated and collection is reasonably assured. Investment income earned on restricted funds is recognized in the appropriate fund. investment income is recognized as revenue of the operating fund when earned. Other Cash The organization's policy is to present bank balances under cash, including cash on hand and bank accounts with balances that fluctuate frequently from being positive to overdrawn. Inventories The cost of inventory comprises all costs of purchase in bringing inventories to their present location and condition. Inventories are measured at the lower of cost and net realizable value, with cost being determined using the average cost method. Net realizable value is the estimated selling price in the ordinary course of business less any applicable selling costs. Inventories are comprised of items held for resale including food products, beverages and convenience items. Property and equipment Property and equipment are initially measured at cost and subsequently measured at cost less accumulated amortization. Amortization is provided on a straight-line basis over the estimated useful life of the asset. The amortization rates used for each class of property and equipment are: Furniture and equipment 5 years Computer equipment 3 years Leasehold improvements 7 years The estimated useful lives of property and equipment are reviewed by management and adjusted if necessary. 7
2. Significant accounting policies (continued) Intangible assets Intangible assets are amortized on a straight-line basis over their expected useful life, except for certain franchise fees which are not amortized as they are deemed to have an indefinite useful life. The following rates applied on a straight-line basis will allocate the cost over the estimated useful lives of intangible assets: The amortization method and estimated useful lives are reviewed annually. Franchise fees 10 years When events or circumstances occur that indicate that the carrying value of an intangible asset with a finite useful life may not be recoverable, the asset is tested for impairment. Where the carrying amount exceeds fair value, an impairment loss is recognized in an amount equal to the excess. Pension expense and obligation The organization offers a defined contribution pension plan to certain employees. An expense is recorded in the period when the organization is obligated to make contributions for services rendered by the employee. Any unpaid contributions are included in accounts payable and accrued liabilities on the balance sheet. Post-employee benefits The organization accrues its obligations under an employee benefit plan and the related costs. Use of estimates Management reviews the carrying amounts of items in the financial statements at each statement of financial position date to assess the need for revision or any possibility of impairment. Many items in the preparation of these financial statements require management s best estimate. Management determines these estimates based on assumptions that reflect the most probable set of economic conditions and planned courses of action. These estimates are reviewed periodically and adjustments are made to excess of revenue over expenses as appropriate in the year they become known. 8
3. Marketable securities 2016 % of total 2015 % of total Investments quoted in an active market, at fair value: Equities $ 4,196,862 67 % $ 3,574,706 56 % Bonds 2,046,223 33 % 2,728,295 44 % $ 6,243,085 100 % $ 6,303,001 100 % 4. Property and equipment 2016 2015 Accumulated Net Book Net Book Cost Amortization Value Value Furniture and equipment $1,481,445 $1,213,828 $ 267,617 $ 241,620 Computer equipment 640,244 617,794 22,450 13,308 Leasehold improvements 3,822,561 2,956,378 866,183 1,128,128 $5,944,250 $4,788,000 $1,156,250 $1,383,056 5. Intangible assets 2016 2015 Accumulated Net Book Net Book Cost Amortization Value Value Franchise fees $ 47,546 $ 24,500 $ 23,046 $ 27,046 6. Credit facility The organization has an authorized overdraft lending account of $400,000 bearing interest at prime plus 1%, none of which was used at year end. The facility is secured by a general security agreement constituting a first ranking security interest in all assets of the organization. 7. Employee future benefits The organization has an unfunded defined benefit plan that provides retirement and postemployment benefits to a retired employee. At, the accrued benefit obligation relating to post-retirement benefit plans is $13,449 (2015 - $19,449) with $6,000 being repayable in 2017. The total amount of the obligation is fixed and terminates in 2019. There are no pension costs in the current year. 9
8. Loan from Brock University 2016 2015 Loan payable to Brock University, non-interest bearing, principal repayments in triannual instalments of $31,162 until January 15, 2018 the due date. $ 155,811 $ 249,298 Less current portion 93,487 93,487 Due beyond one year $ 62,324 $ 155,811 Scheduled repayment on the long-term debt over the next three years are as follows: 2017 93,487 2018 62,324 $ 155,811 9. Funds held in trust The organization is holding levies collected in the year on behalf of Fed Up - The Affordable Food Project. The organization will administer these funds on behalf of Fed Up - The Affordable Food Project in line with the original intention of the levy. 10
10. Internally restricted fund balances The balances in the Safety, Betterment of Student Life, Student Health Plan, Student Dental Plan, Student Bus Pass, WUSC, Green Levy, Clubs Levy, Brock TV, Student Justice Centre Levy, Capital, Deferred Maintenance and Strategic Expansion Funds are internally restricted as to their respective purposes and are not available for general operating purposes. The Safety Fund is used for campus security costs. Any residual balances in the Betterment of Student Life, Health, Dental, Bus Pass, WUSC, Green Levy, Clubs Levy, Brock TV, and Student Justice Centre programs is retained for future years. Students can authorize use of up to 3/4 of the annual Capital Fund fees by presenting a motion at Council meetings which must attain the support of 2/3 of Council at two consecutive meetings. The Strategic Expansion Fund is to be used for the expansion of student space at the University. The Deferred Maintenance Fund is to be used for repair and maintenance of Student Union assets. The balances in the internally restricted funds are as follows: 2016 2015 Safety Fund $ (13,679) $ (22,296) Betterment of Student Life Fund 13,977 37,794 Student Health Plan 2,238,434 2,390,875 Student Dental Plan 651,448 1,134,395 Student Bus Pass 806,427 1,282,864 WUSC 42,740 30,599 Green Levy 681 317,697 Clubs Levy 98,989 249,006 Brock TV 115,068 85,711 Student Justice Centre 57,794 46,737 $ 4,011,879 $ 5,553,382 The balances in the internally restricted capital funds are as follows: Capital Fund $ 1,341,583 $ 618,463 Deferred Maintenance Fund 12,703 (40,435) Strategic Expansion Fund 2,059,236 3,652,685 $ 3,413,522 $ 4,230,713 Total internally restricted funds $ 7,425,401 $ 9,784,095 11
11. Fund balances Internally Operating Restricted Capital Fund Fund Fund Total Invested in property and equipment $ 43,574 $ 162,666 $ 794,200 $ 1,000,440 Internally restricted (Note 10) - 4,011,879 3,413,522 7,425,401 Unrestricted 788,859 - - 788,859 Fund balances $ 832,433 $ 4,174,545 $ 4,207,722 $ 9,214,700 12. Interfund transfer On April 6, 2016, the organization's board of directors approved the transfer of $2,172,295 to the operating fund from the following internally restricted funds and capital funds: Student Health Plan $ 201,911 Dental Plan 387,853 Betterment of Student Life Fund 23,884 Green Levy 281,499 Clubs Levy 177,435 1,072,582 Strategic Expansion Fund 1,099,713 $2,172,295 13. Commitments The organization has a $3,349,688 contract with the St. Catharines Transit Commission for transportation services for the 2016-2017 school year. The organization has $340,193 in contracts with other local municipalities for transportation services for the 2016-2017 school year. The organization has committed $1,000,000 from the Strategic Expansion Fund to the University for construction of a turf field. The annual obligation is $200,000 over 5 years beginning in fiscal 2016 and finishing in fiscal 2020. 12
14. Investment income (loss) Investment income (loss) earned on investments recorded at fair value consists of the following: 2016 2015 Interest $ 48,583 $ 84,674 Dividends and other investment income 93,691 59,502 Realized loss on disposal of marketable securities (341,488) (75,314) Unrealized foreign exchange gain 100,604 141,035 Realized foreign exchange gain 32,675 21,243 Unrealized gain (loss) on marketable securities 22,537 (91,820) $ (43,398) $ 139,320 15. Economic dependence The organization has entered into an agreement with Brock University whereby it has the right to act as a representative organization for students of the University. The agreement can be cancelled by Brock University if the organization does not observe certain established guidelines. As the organization's sole source of income is derived from levies on student fees and related products and services, its ability to continue viable operations is dependent upon maintaining its right to act as a representative of Brock students. 13
16. Financial instruments The organization is exposed to various risks through its financial instruments. The following analysis provides a measure of the organization's risk exposure and concentrations at. Credit risk Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The organization's main credit risks relate to its accounts receivable. The organization provides credit to its customers in the normal course of its operations. Liquidity risk Liquidity risk is that risk that an organization will encounter difficulty in meeting obligations associated with financial liabilities. The organization is exposed to this risk mainly in respect of its accounts payable. Market risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices comprises three types of risk: currency risk, interest rate risk and other price risk. The organization is mainly exposed to currency and other price risk. (i) Currency risk Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The organization conducts certain of its operations in the United States dollars. As at, the following balances were included in the financial statements: US Can equivalent Marketable securities $1,087,671 $1,364,810 (ii) Other price risk Price risk relates to the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices of securities held. The organization is exposed to price risk through its marketable securities. 14