Chapter 2 Institutional Financial Reporting

The purpose of this section is to provide a high level overview of the university's institutional financial reporting.

The university operates under, and is subject to the specific reporting requirements, of the following authorities: 

  • Post Secondary Learning Act, Statutes of Alberta, 2003.
    “The Governors of the University of Alberta” is a corporation which manages and operates the University of Alberta (the university) under the Post Secondary Learning Act (Alberta). All members of the Board of Governors are appointed by either the Lieutenant Governor in Council or the Minister of Enterprise and Advanced Education, with the exception of the Chancellor and President, who are ex officio members. Under the Post-Secondary Learning Act, Campus Alberta Sector Regulation, the university is a comprehensive academic and research institution offering undergraduate and graduate degree programs as well as a full range of continuing education programs and activities.”

  • Income Tax Act (Canada) 
    The university is a registered charity and is exempt from the payment of income tax under Section 149.

  • Public Sector Accounting Standards
    The university follows Canadian Public Sector Accounting Standards (PSAS).

External Reporting

To continue to receive government funding and to maintain its status as a registered charity, the university must comply with a number of external reporting requirements. The following are some examples:

  • annual audited consolidated financial statements
  • Government of Alberta legislative and statutory reporting requirements
  • Federal government legislative and statutory reporting requirements (e.g. Statistics Canada, Canada Revenue Agency (CRA) Registered Charity Information Return)

  • U.S. charitable returns and other government requirements

  • financial reporting to sponsors (e.g. research project)

As part of the Government of Alberta (GOA) reporting entity, the university is required to provide an annual report for the purposes of consolidating the university's financial results into the GOA's financial statements. This report identifies all assets, liabilities, revenue and expense transactions attributable to all GOA related parties, which are eliminated for the purposes of the consolidation. Therefore, transactions with GOA related parties must be identified when processed. Refer to Guide Chapter 6: Government of Alberta Related Parties for further information.

Note: there are some accounting treatments that are reflected differently between external reporting requirements (i.e PSAS) and internal reporting. Some of these examples are:

  • capital assets – reflected as an expenditure (507xxx expense account) in internal reporting and for external reporting the expenditure is capitalized  (i.e. an asset) and amortized to expense over the life of the asset.
  • restricted revenue  –  grants received or receivable are reflected as revenue (40xxxx) in internal reporting and for external reporting the unspent revenue is reflected as deferred revenue (i.e. a liability). 

Internal Reporting

Internal reporting is used by many levels of users for a variety of reporting needs such as:  

  • management reporting (stewardship)
  • budgetary control (funds available)
  • accountability (units responsible for accuracy and completeness)

For more information on internal reporting, refer to Guide Chapter 5 (Reporting).

Classification of Revenue and Endowment Principal Contributions

The university receives revenue from a variety of external sources. Revenues are classified as operating or restricted. The university also receives endowment principal contributions (endowment net assets). Within operating and restricted, the university further classifies by fund to facilitate internal reporting.

The following describes the university’s fund classifications and recognition of revenues and endowment principal contributions.

Classification (1)

Description

Recognition for Financial Reporting Purposes

Operating (unrestricted) Revenue

Funds:

  • Central Institution F100
  • Operating F210
  • Ancillary Enterprises F310
  • Research (Operating) F330

Includes revenues with no external restrictions as to the purpose for which the funds can be used:

  • Campus Alberta operating grant
  • student tuition and fees
  • investment income, excluding that earned on endowments
  • sales of products and services
  • indirect cost recovery
  • donations designated to a faculty or department with no other restrictions
  • other revenue not classified as restricted

Recognized as revenue immediately when received or receivable.

 

Restricted Revenue

Funds:

  • Capital F520
  • Sponsored Research F530
  • Special Purpose F55x
  • Endowment Spending Allocation – Research & Special Purpose Exxxx

Includes revenues with external restrictions imposed by an agreement with an external party, or through legislation of another government, that specify the purposes for which funds are to be used:

  • grants and donations from external sponsors and donors where the funding is to be used for one of the following specific purposes:
    • sponsored research or special purpose projects
    • student awards and bursaries
    • capital projects
  • endowment annual spending allocation (investment income earned on endowments and allocated for spending). This can be used only in accordance with the purposes established by the donors or the Board of Governors.

Recognized as deferred revenue as the terms for use create a liability. These grants and donations are recognized as revenue when the terms are met. Generally the terms are met when spending occurs, or in the case of a capital expenditure, over the useful life of the asset. Restricted funds do not have an impact on the excess (deficiency) of revenue over expense and therefore do not impact the overall net asset position, as any difference between current year funding and the current year expenditures is reflected as either an increase or decrease in deferred revenue.

 

Note: The deferral occurs at the financial statement level. Users will see the revenue in their internal reports when it is received or receivable.

Endowment Principal (Endowment Net Assets)

An endowment is the creation of a legal relationship known as a charitable purpose trust in which funds are held by the Board of Governors of the university as trustee and not in its own right.

Includes:

  • donations to endowments
  • investment income and unrealized gains and losses required to be maintained in perpetuity as per university investment policy

Endowment donations are recognized as a direct increase in endowment net assets when received. These donations are invested in perpetuity. The investment income (spending allocation) generated is used to support the purpose.

(1) When an activity is funded from both restricted and operating funds (e.g. centres, institutes), a determination will be made as to the appropriate classification. Generally, operating and restricted funds cannot be commingled.

For further information, refer to the following:

  • Information on funds: Guide Chapter 4 (Chart of Accounts)
  • Information on sources of revenue: Guide Chapter 7 (Revenue and Banking)

 

Last Updated: November 2015