Financial Statements of COMPUTE CANADA Year ended March 31, 2015
KPMG LLP Telephone (416) 228-7000 Yonge Corporate Centre Fax (416) 228-7123 4100 Yonge Street, Suite 200 Internet www.kpmg.ca Toronto Ontario M2P 2H3 Canada INDEPENDENT AUDITORS' REPORT To the Board of Directors of Compute Canada We have audited the accompanying financial statements of Compute Canada, which comprise the statement of financial position as at March 31, 2015, the statement of operations and 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 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. Auditors' 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 our 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, we consider internal control relevant to the entity'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 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. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 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.
Page 2 Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of Compute Canada as at March 31, 2015, and its results of operations and its cash flows for the year then ended in accordance with Canadian accounting standards for not-for-profit organizations. Chartered Professional Accountants, Licensed Public Accountants July 28, 2015 Toronto, Canada
Statement of Financial Position March 31, 2015, with comparative information for 2014 2015 2014 Assets Current assets: Cash $ 965,257 $ 44,024 Accounts receivable 302,285 461,187 Prepaid expenses 131,930 14,405 1,399,472 519,616 Capital assets (note 3) 18,049 22,671 Liabilities and Net Assets $ 1,417,521 $ 542,287 Current liabilities: Accounts payable and accrued liabilities $ 395,947 $ 140,921 Deferred revenue 30,605 40,000 Current portion of deferred lease inducement 2,558 2,361 429,110 183,282 Deferred lease inducement - 2,558 429,110 185,840 Net assets: Restricted (note 8) 605,345 - Unrestricted 383,066 356,447 988,411 356,447 Commitments (note 5) $ 1,417,521 $ 542,287 See accompanying notes to financial statements. On behalf of the Board: Director Director 1
Statement of Operations and Net Assets Year ended March 31, 2015, with comparative information for 2014 2015 2014 Revenue: Partner contributions $ 1,843,379 $ 978,516 Partner contributions - WestGrid (Note 7, Schedule) 834,212 - Membership fees - WestGrid (Note 7, Schedule) 606,746 - Gift in-kind services 444,788 - Membership fees 160,000 150,000 Consulting fees 19,300-3,908,425 1,128,516 Expenditures: Personnel 914,329 645,641 Expenses - WestGrid (Note 7, Schedule) 825,896 9,717 Professional fees 427,819 95,459 Gift in-kind services 444,788 76,096 Communications 182,685 2,972 Travel and professional development 163,653 33,907 Committee meetings 105,275 79,367 Occupancy costs 89,828 80,391 Office and administration 64,720 (30,206) Outreach 29,317 48,507 Amortization 22,628 16,560 Meals and entertainment 4,500 68 Institutional IT repairs and maintenance 1,023-3,276,461 1,058,479 Excess of revenues over expenditures 631,964 70,037 Net assets, beginning of year 356,447 286,410 Net assets, end of year $ 988,411 $ 356,447 See accompanying notes to financial statements. 2
Statement of Cash Flows Year ended March 31, 2015, with comparative information for 2014 2015 2014 Cash provided by (used in): Operations: Excess of revenues over expenditures $ 631,964 $ 70,037 Amortization which does not involve cash 22,628 16,560 Decrease (increase) in accounts receivable 158,902 (245,034) Decrease (increase) in prepaid expenses (117,525) 12,512 Increase in accounts payable and accrued liabilities 255,026 49,736 Increase (decrease) in deferred revenue (9,395) 40,000 941,600 (56,189) Financing: Increase (decrease) in deferred lease inducement (2,361) 4,919 Investing: Purchase of capital assets (20,135) (32,756) Proceeds from disposition of capital assets 2,129 - (18,006) (32,756) Increase (decrease) in cash 921,233 (84,026) Cash, beginning of year 44,024 128,050 Cash, end of year $ 965,257 $ 44,024 See accompanying notes to financial statements. 3
Notes to Financial Statements Year ended March 31, 2015 Compute Canada (the "Corporation") is a not-for-profit organization, incorporated in Canada without share capital under the Canada Corporations Act on September 27, 2012. The Corporation is a notfor-profit organization under the Income Tax Act and accordingly is exempt from income taxes, provided certain requirements of the Income Tax Act are met. The Corporation aims to promote and support the shared use of advanced computing that enables research and innovation for the socio-economic benefit of Canada; to promote the interest of the members in relation to advanced computing; and to provide members with resources and a forum for discussion and education in relation to advanced computing. The Corporation is responsible for the attribution of funds necessary for operating and maintenance support for the Canada Foundation for Innovation ("CFI") funded High Performing Computing ("HPC") infrastructure at each of the partner institutions. 1. Basis of presentation: These financial statements have been prepared for the Corporation, as a going concern, in accordance with Canadian accounting standards for not-for-profit organizations. 2. Significant accounting policies: (a) Revenue recognition: The Corporation follows the deferral method of accounting for contributions. Restricted contributions are recognized as revenue in the year in which the related expenses are incurred. Restricted contributions for the purchase of capital assets are recognized as revenue in the year in which the purchase is made. Unrestricted contributions are recognized as revenue when received or receivable if the amount to be received can be reasonably estimated and collection is reasonably assured. Partner contributions and membership fees are recognized in the year to which they relate. Membership fees are charged on an annual basis to partner institutions and recognized in revenue as earned over the year. (b) Financial instruments: Financial instruments are recorded at fair value on initial recognition. Freestanding derivative instruments that are not in a qualifying hedging relationship and equity instruments that are quoted in an active market are subsequently measured at fair value. All other financial instruments are subsequently recorded at cost or amortized cost, unless management has elected to carry the instruments at fair value. The Corporation does not have any financial instruments. 4
Notes to Financial Statements (continued) Year ended March 31, 2015 2. Significant accounting policies (continued): (b) Financial instruments (continued): Transaction costs incurred on the acquisition of financial instruments measured subsequently at fair value are expensed as incurred. All other financial instruments are adjusted by transaction costs incurred on acquisition and financing costs, which are amortized using the straight-line method. The Corporation believes that it is not exposed to significant interest-rate, market, credit or cash flow risk arising from its financial instruments due to the relatively short term to maturity. (c) Capital assets: Capital assets are stated at cost, less accumulated amortization. Amortization is provided using the declining balance method and following annual rates: Asset Rate Furniture and fixtures 20% Computer hardware 55% Computer software 100% The carrying amount of an item of capital assets is tested for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized when the asset s carrying amount is not recoverable and exceeds its fair value. (d) Gift in-kind services: Gift in-kind services received by the Corporation, for which fair value can be reasonably determined and which are used in the normal course of the Corporation's operations, are recognized in the financial statements. (e) Use of estimates: The preparation of the financial statements in conformity with Canadian accounting standards for not-for-profit organizations requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the year. Significant items subject to such estimates and assumptions include the carrying amounts of capital asset and provisions for impairment of trade accounts receivable. Actual results could differ from those estimates. 5
Notes to Financial Statements (continued) Year ended March 31, 2015 3. Capital assets: Cost Accumulated amortization 2015 2014 Net book Net book value value Furniture and fixtures $ 5,852 $ 2,481 $ 3,371 $ 4,215 Computer hardware 20,277 8,156 12,121 5,490 Computer software 31,048 28,491 2,557 12,966 $ 57,177 $ 39,128 $ 18,049 $ 22,671 4. Canada Foundation for Innovation: Major Science Initiatives ("MSI") Fund: University of Western Ontario, on behalf of Compute Canada has entered into an agreement with CFI under CFI s Major Science Initiative Fund for the period from April 1, 2012 to March 31, 2015. Under this program, CFI will contribute to the operating and maintenance ("O & M") costs of CFI-funded large scale research facilities, and also provide governance and management oversight of these facilities based on best practices. To date, the Corporation has earned $3,610,700 with $3,493,300 received by March 31, 2015. Under the MSI Fund, the CFI will provide O & M funding, beyond that currently offered through the Infrastructure Operating Fund ("IOF"), for up to five years. Funding decisions will be based on the demonstrated need for O & M funding to enable these facilities to fully exploit their capabilities; on their advanced governance and management structures; on their scientific excellence; and on their current and potential benefits to Canada. Under the agreement, the Corporation agreed, among other things, to obtain financial support from other parties. The maximum funding under the program is 40% of total eligible expenditures, with matching funds being provided by partner institutions, provincial granting agencies and membership fees. 5. Lease commitments: The Company is committed to minimum annual lease payments under an operating lease for office premises as follows: 2016 $ 3,711 6
Notes to Financial Statements (continued) Year ended March 31, 2015 6. Financial risks and risk management: The Corporation considers its total assets to be its capital. The Corporation's objectives in managing capital are to safeguard the assets and maintain liquidity. (a) Liquidity risk: Liquidity risk is the risk that the Corporation will be unable to fulfill its obligations on a timely basis or at a reasonable cost. The Corporation manages its liquidity risk by monitoring actual and projected cash disbursements against funding received or to be received from operations. The Corporation prepares budgets and cash forecasts to ensure it has sufficient funds to fulfill its obligations. There has been no significant change in exposure from 2014. (b) Credit risk: Credit risk refers to the risk that a counterparty may default on its contractual obligations, resulting in a financial loss. The Corporation is exposed to credit risk with respect to the accounts receivable. The Corporation manages its credit risk by assessing accounts receivable on a continuous basis. The Corporation deals with creditworthy counterparties and seldom has doubtful accounts. There has been no significant change in exposure from 2014. (c) Interest rate risk: Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair values of financial instruments. The Corporation is exposed to interest rate risk through the interest income it derives from the cash balance. The effect of the excess/deficiency of revenue over expenses of an increase or decrease in interest rates is not significant. The Corporation believes that it is not exposed to significant liquidity risk, credit risk or interest rate risk arising from its financial instruments. There has been no significant change in exposure from 2014. 7
Notes to Financial Statements (continued) Year ended March 31, 2015 7. WestGrid: Effective April 1, 2014 the payroll expenses of WestGrid were assumed by the Corporation. Effective July 1, 2014 the Corporation assumed all other WestGrid operational expenses. All WestGrid expenses are reimbursed to the Corporation from CFI funds flowing through the University of Alberta. This reimbursement is secured through a Service Agreement between Compute Canada and University of Alberta signed in October, 2014, supported by the revised University of Alberta MSI 30198 Award Agreement of November, 2014. Effective April 1, 2014 the Corporation invoiced WestGrid member institutions for the appropriate membership fees. For fiscal 2015, these membership fees were held by Compute Canada on behalf of the WestGrid institutions. In addition, $316,746 of WestGrid membership fees from prior years, previously held at the University of Alberta on behalf of WestGrid, was transferred to Compute Canada and recognized into revenue. In the event the CFI funds are not approved, or expenses are deemed ineligible, WestGrid expenses will be paid in part by the membership fees from the institutions in the WestGrid region. 8. Restricted net assets: At the conclusion of the fiscal year, the Board internally restricted net assets in the amount of $605,345 for WestGrid operating purposes. These funds flowed through revenue as WestGrid membership fees and are therefore intended for future WestGrid operations. 9. Comparative information: Certain comparative information has been reclassified to conform with the financial statement presentation adopted in current year. 8
Schedule of Revenues and Expenditures - WestGrid Year ended March 31, 2015, with comparative information for 2014 2015 2014 Revenue: Membership fee $ 606,746 $ - Partner contributions 834,212-1,440,958 - Expenditures: Personnel 719,844 9,717 Professional services 23,290 - Communications 2,240 - Committee meetings 8,987 - General and administration 30,897 - Travel and professional development 39,238 - Meals and entertainment 1,328 - Office and administration 72-825,896 9,717 Excess of revenues over expenditures (expenditures over revenues) $ 615,062 $ (9,717) 9