REPORT CHAIRPERSON OF THE FINANCE COMMITTEE OF COUNCIL

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REPORT CHAIRPERSON OF THEFINANCE COMMITTEE OF COUNCILOVERVIEWDespite a tough economic environment, UJ achieved positive operating resultsduring the year under review. Very tight budgetary controls, NSFAS fundingshortfalls, rising utility bills, increase in the cost of higher education and the shiftin the socio-economic circumstances of the University’s students were some ofthe factors impacting on the financial results for the year. UJ once again registeredmore students than expected, which resulted in additional tuition fee income ofR59 million in 2014. UJ also received R37 million more government subsidy thanbudgeted for. Occupancy management at our residences improved, resulting in acollection of R6 million more than budget. Externally generated income was alsoR36 million more than budget.The financial principles adopted by UJ clearly state that the University will at all times endeavour to ensure amatch between recurring expenses and recurring income and this assisted in managing the finances duringthe tough times. Non-recurring income is used to finance once-off capital expenditure, to further enhance theoverall sustainability of the University and for strategic intervention of a non-recurring nature.The budget process is strategy-led whereby all faculties and departments are required to indicate their strategicgoals, how these goals will ensure goal congruence with University-wide strategic goals and what resources arerequired to achieve these goals. Once all these inputs are collated, a discussion between the budget ownersand the finance budget team deals with detailed issues such as affordability of the budgeted requests andthe priorities of the relevant faculty or department in order to reach the desired outcome. When the recurringincome budget levels have been determined (ensuring sustainability), a budget proposal is made to the MEC forconsideration. On recommendation by the MEC, the Finance Committee of Council will consider the suggestedbudget and recommend the final approval of the budget to the Council.As the University moves forward on the implementation of its 2025 Strategic Plan, it is clear that additionalincome generated from the strong Statement of Financial Position, as well as third-party financial contributions,will remain very important in supporting and funding future strategic initiatives.The widening gap between funding allocated by NSFAS and demand from students continues to place pressureon the operating results and eventually the reserves of the University. While UJ has contributed R46 million towardsthis funding gap, the sustainability of this contribution is a concern. The MEC is, on a continual basis, seekingalternatives to fund the difference and is also in discussion with NSFAS and the Department of Higher Educationand Training (DoHET) as this is a systemic financial risk. This year saw improved collection of amounts owed to UJ byNSFAS (allocated by DoHET), which provided a relief to the cash flow of the University. However, the recoverabilityof conduit funding provided by other government entities through NSFAS has become a concern.383

Financial control involves monthly reporting to appropriate line managers, approval of all expenses as requiredby the Finance Committee of Council, an approved Financial and Contract Delegation of Authority Frameworkand budget control as exercised by relevant financial business partners in the various faculties and departments.To this end continuous internal audits are performed to evaluate the effectiveness of the internal controls.The 2014 Annual Financial Statements were again prepared to comply with the International Financial ReportingStandards (IFRS) and the Department of Higher Education and Training reporting requirements. UJ achievedan operating surplus on budgeted activities of R120 million (2013: R79 million). A total surplus, before postretirement obligation adjustments, fair value adjustment and after taking investment income into account,of R353 million (2013: R301 million) was achieved. The main drivers for this outperformance include higherthan-expected enrolments, resulting in higher tuition fee income; better-than-expected state subsidy income;improved residence fee income generation; increased external funding and savings on operating expenses.UJ closely monitors the ratio of remuneration and related expenses (including leave payments, post-retirementmedical aid – PRMA – and pension fund liability increases) to recurring income. This ratio is an indication of theoperating risk of the institution. During 2014 the actual ratio was 61% (2013:61%). Management is satisfied thatthis ratio is not too high but continuous efforts are made to manage the ratio.Reserves were positively impacted by good investment management during the year. In total our investmentsoutperformed the risk-adjusted benchmarks despite the poor economic outlook. Reserves consist of individualresearch reserves, departmental and faculty reserves, general University reserves, the fair value adjustment oninvestments, the reserves of the UJ Trust and funds managed on behalf of external parties (mostly bursary funds).UJ’s financial position, as stated in the Statement of Financial Position, reflects the financial control measuresimplemented in 2014. The MEC is convinced that, based on the financial position, UJ is adequately funded andwill be able to successfully execute its mandate in 2015 and beyond.J.P. Burger (Mr)Chairperson: Council Finance Committee384

CONSOLIDATEDANNUALFINANCIALSTATEMENTSFOR THEYEAR ENDED31 DECEMBER 2014385

CONSOLIDATED ANNUALFINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2014CONTENTSStatement of responsibility of the Members of Council387Report of the independent auditors 388-391Consolidated statement of financial position392Consolidated statement of comprehensive incom393Consolidated statement of changes in equity 394-395Consolidated statement of cash flows396Notes to the consolidated annual financial statements 397-445Department of Higher Education and Training consolidated statementof comprehensive income 61-64 446-449UJ Council Remuneration386450

STATEMENT OF RESPONSIBILITY OF THE MEMBERS OF COUNCIL FOR THEYEAR ENDED 31 DECEMBER 2014The Council is responsible for the maintenance of adequate accounting records and preparation, integrity andfair presentation of the consolidated and separate financial statements of the University of Johannesburg and itssubsidiaries. The auditors are responsible for reporting on the fair presentation of the consolidated and separatefinancial statements.The consolidated and separate financial statements presented in this Annual Report for 2014 have beenprepared in accordance with International Financial Reporting Standards, and the requirements of the HigherEducation Act of South Africa as amended, and include amounts based on judgements and estimates made bymanagement. The Council has also prepared other information as required to be included in this Annual Reportand is responsible for both its accuracy and consistency with the consolidated and separate financial statements.The going concern basis has been adopted in the preparation of the consolidated and separate financialstatements. The Council has no reason to believe that the University of Johannesburg and its subsidiaries is nota going concern in the foreseeable future based on forecasts and available cash resources. The viability of theinstitution is supported by the content of the consolidated and separate financial statements.The consolidated and separate financial statements have been audited by PricewaterhouseCoopers Inc., whowere given unrestricted access to all financial records and related data, including minutes of all meetings of theCouncil and its committees. The Council believes that all representations made to the independent auditorsduring their audit are valid and appropriate.APPROVAL OF THE CONSOLIDATED FINANCIAL STATEMENTSThe consolidated financial statements on the following pages of the Annual Report were approved by theCouncil on 11 June 2015 and signed on its behalf by:Ihron Rensburg (Prof.)Vice-Chancellor and PrincipalRoy Marcus (Prof.)Chairperson of CouncilJaco van Schoor (Mr)Deputy Vice-Chancellor: Finance387

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2014ConsolidatedNotesASSETSNon-current assetsProperty, plant and equipmentIntangible assetsInvestment in associates and joint venturesAvailable-for-sale financial assetsOther long term employee '0005 251 0041 983 83911 07882 6143 107 75865 7154 771 2491 645 9165 61483 2122 967 82668 6815 287 1951 920 5287 96882 6143 210 37065 7154 796 0561 578 2444 55383 2123 061 36668 681436 6094 197176 781106 03770 744255 631535 8904 270306 140237 86068 280225 480421 1624 197175 256106 03769 219241 709529 2274 270304 106237 86066 246220 851Total Assets5 687 6135 307 1395 708 3575 325 283EQUITY AND LIABILITIESEQUITYNon-distributable reservesFunds invested in property, plant and equipmentNon-current investment revaluation2 488 6671 893 778594 8892 189 7961 547 819641 9772 492 2501 897 361594 8892 189 7951 547 818641 977Reserve fundsRestricted use fundsStudent residences fundsTrust/donor/bursary funds2 222 071990 74675 715915 0312 263 263924 18768 858855 3292 237 916990 74675 715915 0312 271 825924 18768 858855 329Unrestricted use fundsDesignated/committed fundsUndesignated funds1 231 325152 1881 079 1371 339 07636 6021 302 4741 247 170168 0331 079 1371 347 63845 1641 302 474Total Equity4 710 7384 453 0594 730 1664 461 620Current AssetsInventoriesTrade receivables and prepayments- Students fees- Other receivablesCash and cash equivalents345615789LIABILITIESNon-current liabilitiesBorrowingsDeferred revenueLong term employee benefit obligation101215378 86227 285117 364234 213300 05131 61198 153170 287378 86227 285117 364234 213300 05131 61198 153170 287Current liabilitiesTrade payables, accruals and other liabilitiesStudent deposits and income received in advanceBorrowingsDeferred revenue13111012598 013405 978111 4983 84976 688554 029353 736101 0273 36795 899599 329407 294111 4983 84976 688563 612362 631101 7153 36795 899Total Liabilities976 875854 080978 191863 6635 687 6135 307 1395 708 3575 325 283(0)73920(0)(0)

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE PERIOD ENDED 31 DECEMBER 2014ConsolidatedNotesRevenueState appropriations - subsidies and grantsTuition and other fee incomeResearch incomeOther operating incomeOperating 3R'0002 919 0721 389 1351 412 080117 857265 2293 184 3012 629 5571 303 5131 212 996113 048281 0382 910 5952 913 2111 389 1351 412 128111 948263 6603 176 8712 627 9741 303 5131 212 996111 465279 6002 907 574Personnel costsDepreciationAmortisationBursariesOther operating expensesOperating surplus/(deficit)14341817(1 844 026)(89 801)(8 664)(234 736)(1 049 558)(42 484)(1 647 900)(79 197)(2 443)(204 807)(949 062)27 186(1 817 208)(88 017)(8 611)(234 703)(1 061 865)(33 533)(1 630 930)(78 865)(2 407)(204 807)(960 548)30 017Share of profit/(loss) of associateIncome from investmentsFinance incomeFinance costsOther gains/(losses)Surplus for the year52021216(2 571)384 70718 150(18 024)(9 427)330 351(2 184)281 73712 594(18 364)300 969(2 571)384 70718 015(18 024)(9 427)339 167(2 184)281 73711 906(18 364)303 1126(47 088)269 869(47 088)269 86915(25 718)257 54533 867604 705(25 718)266 36133 867606 848Other comprehensive income/(loss)Items that may be subsequently reclassified to profitor lossFair value adjustments on available-for-sale financialassetsItems that will not be subsequently reclassified toprofit or lossActuarial gains and losses on defined benefit plansTotal comprehensive income for the year8393

394-1 302 4746 47933 867202 5951 059 53336 602(378 780)--415 382(3 022)418 404152 188115 5861 339 074(372 303)33 867202 5951 474 915(3 022)1 477 9371 231 325(281 528)(25 718)197 3111 341 2602 1841 339 076R'000TotalUnrestricted usefunds855 32984 3759-89 982680 972-680 972915 031(64 812)-124 514855 329-855 329R'000Trust / Donor /Bursaries Funds2. "Restricted Use" funds available as referred to in note 2.3.2.3. "Non-Current Investment Revaluation" and "Funds invested in Property, Plant and Equipment" are Non-Distributable Reserves.1. "Unrestricted Use" funds available as referred to in note 2.3.2.Notes:Balance as at 31 December 2013TransfersOther comprehensive incomeSurplus for the yearPreviously unrecognised immaterial subsidiaries1 059 5331 079 137Balance as at 31 December 2014Balance as at 01 January 2013(397 114)Transfers-197 311(25 718)Surplus for the yearOther comprehensive income/(loss)36 6022 18436 602R'0001 302 474R'000UndesignatedFunds1 304 658Share of Profit / Loss in associate 2013Balance as at 01 January 2014ConsolidatedDesignated /CommittedFundsCONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 201468 858(1)-8 39260 467-60 46775 715(1 669)-8 52668 858-68 858R'000StudentResidenceFunds924 18884 375-98 374741 439-741 439990 746(66 481)-133 040924 187-924 187R'000Total Restricteduse funds641 977-269 869-372 108-372 108594 889-(47 088)-641 977-641 977R'000Non-CurrentInvestmentRevaluation1 547 819282 119--1 265 700-1 265 7001 893 778345 959--1 547 819-1 547 819R'000Funds investedin Property,Plant andEquipment4 453 059(5 808)303 736300 9693 854 162(3 022)3 857 184-4 710 738(2 050)(72 806)330 3514 455 2432 1844 453 059R'000TOTAL

3951 059 533Balance as at 01 January 201345 164(376 640)--421 8043 400418 404168 033122 8691 347 638(364 351)28 058202 5971 481 3373 4001 477 9371 247 170(274 243)(25 718)197 3081 349 8222 1841 347 638R'000TotalUnrestricted usefunds855 32982 23410-92 123680 972-680 972915 031(73 631)-133 333855 329-855 329R'000Trust / Donor /Bursaries Funds3. "Non-Current Investment Revaluation" and "Funds invested in Property, Plant and Equipment" are Non-Distributable Reserves.2. "Restricted Use" funds available as referred to in note 2.3.2.Notes:1. "Unrestricted Use" funds available as referred to in note 2.3.2.1 302 47412 286TransfersBalance as at 31 December 201328 058202 597Other comprehensive incomeSurplus for the year1 059 533-1 079 137Balance as at 31 December 2014Previously unrecognised immaterial subsidiaries(397 111)Transfers--197 308(25 718)Surplus for the yearOther comprehensive income45 1642 18445 164R'0001 302 474R'000UndesignatedFunds1 304 658Share of Profit / Loss in associate 2013Balance as at 01 January 2014UniversityDesignated /CommittedFundsCONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 201468 858(1)-8 39260 467-60 46775 715(1 669)-8 52668 858-68 858R'000StudentResidenceFunds924 18782 233-100 515741 439-741 439990 746(75 300)-141 859924 187-924 187R'000Total Restricteduse funds641 977-269 869-372 108-372 108594 889-(47 088)-641 977-641 977R'000Non-CurrentInvestmentRevaluation1 547 818282 118--1 265 700-1 265 7001 897 361349 543--1 547 818-1 547 818R'000Funds investedin Property,Plant andEquipment4 461 620-297 927303 1123 860 5843 4003 857 1844 730 166-(72 806)339 1674 463 8042 1844 461 620R'000TOTAL

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2014ConsolidatedNotesCash flows from operating activitiesCash generated from/(utilised in) operationsFinance costFinance incomeNet cash generated from operating activitiesCash flows from investing activitiesPurchases of property, plant and equipmentProceeds from disposal of property, plant andequipmentPurchases of intangible assetsPurchase of investmentsProceeds from sale of available-for-sale financialassets(Increase) in loan to associateInterest incomeDividends received2014R'0002013R'000325 944(18 024)18 150326 070221 090(18 364)12 594215 320324 283(18 024)18 015324 274235 173(18 364)11 906228 7153(428 553)(431 114)(431 165)(363 032)23468469 706(1 103 818)7 268(3 995)(1 847 860)84611 793(1 112 891)7 190(2 898)(1 941 401)62520201 107 101(2 000)83 68740 9561 949 677(29 700)76 15537 0641 109 202(2 000)83 68740 9561 956 093(29 700)76 15537 064(292 075)(242 505)(299 572)(260 529)(3 844)(3 844)67 634(4 379)63 255(3 844)(3 844)67 634(4 379)63 25530 15136 07020 85831 441225 480189 410220 851189 410255 631225 480241 709220 8511210Net increase in cash and cash equivalentsCash and cash equivalents at beginning of the yearCash and cash equivalents at end of the year2013R'000232121Net cash (outflow) from investing activitiesCash flows from financing activitiesIncrease/(Decrease) in government grantRepayments of borrowingsNet cash inflow/(outflow) from financing activities2014R'000University911396

StatementsNotesDoHET Comprehensive incomeNOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 20141General informationThe consolidated and separate financial statements were authorised for issue by the Council on 11 June 2015.The University of Johannesburg is a Higher Education Institution governed by the Higher Education Act 1997 (Act no 101 of 1997 asamended) and is domiciled in South Africa.2Accounting policiesThe principal accounting policies adopted by the University of Johannesburg and its subsidiaries are set out below. These policies have beenapplied consistently to all the years presented, unless otherwise stated.2.1Basis of presentationThe consolidated financial statements of the University of Johannesburg and its subsidiaries have been prepared in accordance withInternational Financial Reporting Standards, and the requirements of the Minister of Higher Education and Training as prescribed by theHigher Education Act, 1997 (Act No. 101 of 1997) as amended ("IFRS").The consolidated and separate financial statements are prepared on the historical cost convention as modified by the revaluation of availablefor-sale financial assets.The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requiresmanagement to exercise its judgement in the process of applying the University’s accounting policies. The areas involving a higher degree ofjudgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed innote 24.2.1.1Going concernThe University's forecast and projections, taking account of reasonably possible changes in operating circumstances, show that the Universitywill be able to operate within its current financing.Council has a reasonable expectation that the University has adequate resources to continue in operational existence for the foreseeablefuture. The University therefore continues to adopt the going concern basis in preparing its annual consolidated financial statements.2.1.2Changes in accounting policies and disclosuresa) During the year, the following IFRS, amendments and interpretations of IFRS became effective:Amendments to IAS 32 – Financial Instruments: Presentation (01 January 2014) - The IASB has issued amendments to the applicationguidance in IAS 32, ‘Financial instruments: Presentation’, that clarify some of the requirements for offsetting financial assets and financialliabilities on the balance sheet. However, the clarified offsetting requirements for amounts presented in the statement of financial positioncontinue to be different from US GAAP.Amendments to IFRS 10, consolidated financial statements’, IFRS 12 and IAS 27 for investment entities (01 January 2014) - Theamendments mean that many funds and similar entities will be exempt from consolidating most of their subsidiaries. Instead they will measurethem at fair value through profit or loss. The amendments give an exception to entities that meet an ‘investment entity’ definition and whichdisplay particular characteristics.IASB issues na

NSFAS (allocatedby DoHET), which provided a relief to the cash flowof the University.However, the recoverability of conduit funding provided by other government entities through NSFAS has become a concern. REPORT CHAIRPERSON OF THE FINANCE COMMITTEE OF COUNCIL

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