financial disclosures by ontario universities: 1988–1993

Financial Disclosures by Ontario Universities: 1988-1993

William Banks Morton Nelson

Accountability has become an increasingly important issue, particularly in thepublic sector. One important aspect of accountability is the financial information which is disclosed to an organization S various stakeholders. Several initiatives are presently considering the accounting disclosure standards in the not-for-profit sector. This study empirically examines the financial statement disclosures by Ontario universities for the six-year periodfrom 1988 to 1993.

INTRODUCTION

The purpose of this study is to examine empirically the disclosures by Ontario universities. The disclosures examined include only publicly available information released on a regular basis by each university. For most universities, this disclosure consists of only the annual audited financial statements. However, some universities also include an annual president’s report similar to that provided to the shareholders in the private sector. This information, similar to the corporate annual report, may be used by the general public to evaluate university performance.

This study is important because the value of accounting is determined by the information it conveys (Skinner, 1987; CICA 1994, Section 1000). Therefore, the presentation and the extent of financial information provided by institutions is important. In addition, annual reports are generally regarded as a primary vehicle by which individual entities communicate information about their activities and achievements to their stakeholders, and so are fundamental to discharging accountability to these stakeholders (Walker, 1988).

Journal of International Accounting Auditing & Taxation, 3(2):287-305 ISSN: 1061-9518 Copyright @ 1994 by JAI Press, Inc. All rights of reproduction in any form reserved.

William Banks and Morton Nelson l School of Business and Economics, Wilfrid Laurier University, Waterloo, Ontario, Canada N2L 3C5.

288 INTERNATIONAL ACCOUNTING AUDITING & TAXATION, 3(2) 1994

The next section describes the disclosure index used in this study. It was developed by Dixon, Coy, and Tower (1991) and is currently being used to complete similar studies in both New Zealand and Australia. A later study will

compare the results for all Canadian universities to those in New Zealand and Australia. The next sections outline data collection procedures, scoring, and analysis. The final section states our conclusions and future research.

DISCLOSUREINDEX

Cooke and Wallace (1989) recognized that financial disclosure is an abstract concept which cannot be measured directly. However, an indication of the level of disclosure can be gained by using a surrogate measuring device. A disclosure index is a qualitative instrument designed to measure a series of

items which, when the scores for the items are aggregated, gives a total score

indicative of the level of disclosure. Thus, in order to ascertain a valid total score, the items comprising the index must be selected by reference to the context

and their scores combined in a meaningful way. This study employs the Disclosure Index developed by Dixon, Coy, and Tower (199 1) to evaluate trends

in annual reporting by tertiary educational institutions in New Zealand. The index was crafted empirically using a contingency approach which combined

a study of the relevant accounting literature; a detailed analysis of annual reports; intuition; trial and error; and judgement.

Copeland and Fredericks (1968) outlined a disclosure quality scale similar to the one used here for company accounts, which claimed to meet the needs of an “educated investor.” Similarly, Wiseman (1982) used a scale of 1 to 3

for different degrees of specificity of disclosure of each item in a study of

environmental disclosures in company reports, and Lauzon (199 1) ranked the disclosures of Canadian companies. Given these precedents and the independent derivation of the qualitative scale set out above, there is some

a priori reliability to the scale in terms of its expected ability to measure the quality of disclosure.

After a selection of items on which to base the index was determined,

each item in every report was examined and scored on an ordinal scale according to whether the disclosure item was absent (0) or, if present, on a qualitative scale from poor disclosure (1) to excellent disclosure (5). This qualitative scale is important because the quality of disclosures in reports varied, and the reports of some universities changed from year to year. Not only did the number of items disclosed change, but the way in which particular items were disclosed also changed. Appendix A lists the disclosure excellence criteria.

Following are two illustrations of the application of the scale.

Financial Disclosures by Ontario Universities 289

Illustration 1: Objectives of the Organization

It is now widely accepted that information about the objectives of an organization is important and should be disclosed. This is particularly true of educational institutions, which are likely to have multi-faceted objectives. These objectives are discretionary to a considerable extent, even though they are forwarded to the Ministry of Education in detail as part of the funding process. The exercise of this discretion affects all stakeholders to various degrees and in a variety of ways. Despite these considerations, institutional reporting of objectives in precise terms has been diverse. Some institutions do not provide this information, and the statements of those which do can range from poor quality (a series of bland platitudes confirming the organization’s commitment to providing education in the community) to high quality (containing for each of the main areas of activity, concise and interpretable objectives with a measurable dimension and a time limit). The latter facilitate a comparison by stakeholders of the objectives for the university and those which the university claims to be pursuing. Also, stakeholders can assess the extent of the university’s achievements with measurable objectives.

Illustration 2: Investments

Investments are a significant asset for many universities. The value of these assets, in conjunction with information about other items, provides an indication of universities’ underlying wealth and liquidity. The funds with which investments are purchased have many origins; surpluses from previous years’ operations, short-term cash surpluses, private donations and bequests, interest and dividends on past investments, and so on. Due to their origin, some of the funds represented by the investments are restricted in that the institution holds them in trust or as an agent, and only limited uses may be made of the funds.

Excellent disclosure of investments includes a comprehensive list of the material investments held, showing both cost and market values and distinguishing between those which are restricted, including the nature of the restrictions, and those which are unrestricted. The composition of the list would depend on the number of different individual investments. If these were relatively few, a full listing would probably be in order; however, if the individual list was extensive, a summary by type of investment (e.g., equities, debt, and fixed interest bearing deposits), riskiness, and maturity would seem to be in order. In addition, it would be in order to provide a quantitative analysis of changes to the investment portfolio during the period covered by the annual report. All this information would be presented in a way that is easy for the report user to locate and understand. Poor disclosure could be viewed as a one-line item in the balance sheet, valuation at cost only, and only scanty additional data.


Weights

The weights used in relation to each item of the index are on an ordinal scale of low importance (l), to medium importance (2) and high importance (3). The weight for each item was arrived at based on a review of the literature. This was done independently by each researcher, following which general criteria were established through discussion. These weights are shown in Appendix B.

Three criteria emerged to justify a weight of 3 (high). First, several items were identified as crucial to comprehensive coverage of performance and position. These were: the Statement of Objectives, Statement of Changes in Financial Position, Balance Sheet, Operating Statement(s), Statement of Commitments, and Statement of Accounting Policies. These elements are strongly advocated in the CICA Handbook (1994) and Exposure Draft on Non- Profit Organizations (CICA, 1992). Second, several items such as targets, review of the institution, and disclosure of the budget were regarded as crucial to the achievement of accountability tenets, in that each provides context and evaluation criteria to the report audience. Third, as the major driving force of the institutions are their academic staff, this item by organizational unit was also weighted 3 (high).

Of the remaining items, several were weighted as medium on the grounds of having more potential significance to institutional accountability. Other segmental information was considered significant in the university context based on the argument that unit-based information is more important for stakeholder understanding than aggregated institutional information (see Tower and Coy, 1990; Coy and Tower, 1990). There were several nonfinancial items for which a distinction was made between aggregated and segmented information. These related to student numbers, faculty-student ratios, graduates, research grants, publications, and unit cost per student, in addition to the academic items already mentioned above. The authors decided that the segmented figures provide richer information for users than aggregated information alone. Therefore, for each item, the segmented data was given a weight of 2 (medium). Finally, several items, such as summary of courses offered, other honors received, and endowments and prizes, were considered to be items which embellish reports and were of less significance in the overall context of reporting, and were given a weight of 1 (low).

DATA COLLECTION

The data were collected by means of a letter to the vice president-finance, or equivalent, of all universities in Ontario. The initial letters requesting the president’s annual report and audited financial statements for 1988 to 1992 were

Financinl Disclosures by Ontario Universities 291

sent in May 1993. Reminders were mailed in August 1993. Follow-up telephone calls were made in September and October. By the end of October 1993, all 16 Ontario universities had submitted the requested information (see Appendix C). The letters also requested the reports for fiscal years 1993 through 1997, as they became available. By mid-December, we had also received 1993 data from all but one university.

The focus of this article is similar to studying the annual reports issued by corporations. Government reports are not easily available to the general public and, therefore, were not included in this study. University calendars and other promotional materials were not included in the study.

SCORING AND ANALYSIS

The authors first independently analyzed and ranked the disclosures from the material according to the criteria in Appendix A. After comparing and discussing any differences, they determined a mutually acceptable ranking and consolidated the data. The score is calculated as the quality score (Appendix A) multiplied by the corresponding weight (Appendix B), summed over the appropriate activities and expressed as an index where 100 represents a quality score of 5 on all items. Table 1 reports the overall scores for each university.

TABLE 1 Modified Accountability Disclosure Scores: Overall scores (maximum = 100)

University 1988 1989 1990 1991 1992 1993

A 17 17 18 18 18 17 B 17 17 19 19 14 14 C 12 10 11 13 15 14 D 9 9 12 15 12 13 E 12 12 12 12 14 13 F 11 11 11 12 12 12 G 9 16 16 15 12 12 H 12 12 13 13 13 12 I 11 11 11 11 11 11 J 18 13 18 15 20 11 K 10 10 10 10 10 10 L 11 11 11 11 10 10 M 12 12 12 12 12 10 N 17 17 18 18 18 10 0 9 8 9 8 9 9 P 8 8 13 8 15 9

Mean 12 12 13 13 14 12

University of Waikato na na 65 75 81 na


TABLE 2

Modified Accountability Disclosure Scores: Overview (maximum = 100)

University 1988 1989 1990 1991 1992 1993

A 18 18 18 18 18 18 B 29 29 29 29 18 18 C 11 13 16 16 16 16 D 11 11 11 20 11 11 E 11 11 11 11 11 11 F 11 11 11 11 11 11 G 11 25 25 25 11 11 H 11 11 11 11 11 I1 I 11 11 11 11 11 11 J 25 18 35 20 36 11 K 11 11 11 11 11 11 L 11 11 11 11 11 11 M 11 11 11 11 11 16 N 36 36 36 36 36 11

0 11 11 11 I1 11 11 P 11 11 22 11 22 11

Mean 16 16 18 16 16 13

University of Waikato na na 75 76 82 na

The scores in all tables indicate only the relative quality of disclosures: for example, a score of 60 does not indicate disclosure twice as good as a that with a score of 30.

The universities were given letter designations so that the individual schools would not be identified. We do not wish this report to be used as another competitive tool in the same manner as A4acleanS’ magazine. Rather, we wish to encourage better reporting by all universities.

Scores vary from year to year because of differences in the information reported from year to year. The larger inter-year differences generally occur because several universities publish biennial (rather than annual) “president’s” reports which include information regarding student numbers, research efforts, board of governors, future initiatives, and/or other material in addition to the audited financial statements.

The scores from the University of Waikato’s annual reports are included for comparative purposes. Waikato’s reports have won awards in New Zealand’ for best annual reports in the not-for-profit sector. Waikato’s reports were scored by Coy, Dixon, and Tower, the authors of the scoring instrument. Care was taken to ensure that Ontario and New Zealand universities were scored consistently.

The Modified Accountability Disclosure Index consists of four sections: Overview; Service Performance; Financial Performance; and Physical and


Financial Condition (Appendices A and B). Table 2 presents the scores for the Overview, which includes items such as objectives, summaries, and accounting policies.

All universities follow GAAP and/ or the accounting guidelines set out by the Canadian Association of University Business Officers (CAUBO, 1984). Therefore, they all provide adequate disclosure of their accounting policies. However, unless the universities also provide an annual or biennial (president’s) report, they seldom provide a statement of objectives, a general or financial review, or a directory of the officers or board of governors. All of this information is typically provided in the annual reports in the private sector, and all companies surveyed by the CICA included the names of the members of their boards of directors (CICA, 1991). More and better disclosure of the items in this “overview” section would be consistent with the recommendations of the Broadhurst committee with respect to transparency (Broadhurst, 1993, p. 32). With the inclusion of a mission statement and financial summaries, according to the Canadian Comprehensive Auditing Foundation:

institutions will be better able to explain and discuss their performance and plans at the Board level in a way that all concerned will judge to be fair, complete and relevant to their respective interests. And second, they will be better able to focus their own thinking and discussions and, from this, provide broad more unified direction to underlying planning,

programs and operations, and performance measurement and reporting processes (CCAF,

1993, p. 11).

In particular, the scores for universities J, N, and to a lesser extent P fell between 1992 and 1993. To date, these universities have not issued a president’s report

for 1993, although they did in 1992. The Service Performance section measures how well universities report

their outputs. Table 3 provides the scores for student numbers, graduates, publications, and student-faculty ratios. Few universities disclosed any

information in this section. In some cases, where a biennial report or other type of report was provided, the university included data with respect to student numbers, research output, or the number and, perhaps, destination of graduates. Only one university provided this type of information with any regularity as part of its annual report and financial statements. This lack of information is somewhat puzzling given that it is provided to Muclean’s as part of their annual ranking of universities. In particular, universities A and N traditionally report student numbers but did not in 1993. University J discloses this information biennially.

The section on financial performance includes the operating statement, budget information, cost per student, statement of cash flows, research grants, and overhead allocation. Depreciation is also included because of the direction from the Accounting Standards Board. Table 4 provides the scores for this


TABLE 3 Modified Accountability Disclosure Scores: Service Performance (maximum = 100)

University 1988 1989 1990 1991 1992 1993

A B C D E F G H I J K L M N 0 P

Mean

13 9 0 0 0 0 0 0 0 9 0 0 0 9 0 0

2

University of Waikato na na

13 9 0 0 0 0 4 0 0 0 0 0 0 9 0 0

2

13 13 13 9 9 0 0 4 0 0 0 0 0 0 0 0 0 0 4 4 0 0 0 0 0 0 0 9 0 9 0 0 0 0 0 0 0 0 0 9 9 9 0 0 0 4 0 I

3 2 2

63 16 70

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

na

section. All universities presented their operating statements in accordance with the CAUBO guidelines, thus providing a certain level of consistency. While the financial performance disclosures are certainly better that those for service performance, they pale by comparison to the University of Waikato. No Ontario university provided budget information or an explanation of overhead allocation, though several provided some breakdown of different functions such as ancillary services. Several universities included a statement of cash flows. However, some excluded this statement in 1992 or 1993 after having included it earlier. Other items which were provided somewhat sporadically include information on research grants and costs per student.

The largest change was for university M. The deterioration from 21 to 9 was a direct result of discontinuing the Statement of Cash Flows. University J fell from 19 to 13 because it did not report research grants. University A improved from 27 to 34 because of improved disclosure in the Operating Statement and research grants.

Table 5 provides the scores on Physical and Financial Condition. It includes the balance sheet, investments, information on faculty and staff, library, future commitments, building usage, and employment and educational equity. The balance sheets were generally presented in accordance with CAUBO guidelines. However, there was some variability between universities in their degree of aggregation, and in investments and commitments. Some universities


TABLE 4 Modified Accountability Disclosure Scores: Financial Performance (maximum = 100)

University 1988 1989 1990 1991 1992 1993

A B C D E F G H I

J K L M N 0 P

Mean

University of Waikato

24 24 13 13 21 13 13 13 13 13 13 13 9 16

21 21 19 19 16 16 13 13 16 16 21 21 11 11 13 13 9 9

15 15

na na

27 27 21 21 13 13 21 21 13 13 13 13 16 16 21 21 19 19 16 19 13 13 16 16 21 21 11 11 13 13 11 9

17 17

67 81

27 21 24 21 20 13 19 21 19 19 13 13 21 11 13 11

18

89

34 21 21 24 20 13 19 21 19 13 13 13 9 9

13 9

17

na

TABLE 5 Modified Accountability Disclosure Scores: Physical and Financial Condition

(maximum = 100)

University 1988 1989 1990 1991 1992 1993

A 13 B 19

C 17

D 13

E 26

F 20 G 19 H 14

I 13 J 19

K 17

L 19

M 16 N 17

0 13 P 13

Mean 17

University of Waikato na

13 19 16 13 26 20 21 14 13 19 17 19 16 17 9

13

16

na

16 16 16 19 19 19 16 19 19 16 19 16 26 26 26 20 23 23 20 19 19 19 19 19 13 13 16 19 21 21 17 17 17 19 16 16 16 16 16 21 21 21 11 9 11 17 13 21

18 18 18

54 67 84

17 19 19 16 26 23 17 16 16 19 17 16 16 21 11 16

17

na


provided a detailed listing of their major investments, but the majority provided only an aggregate figure. In accordance with the Handbook, all provided market values. Information on university libraries was very sparse and no details on holdings, acquisitions, and so forth were provided, despite the fact that this is one of the criteria in the Maclean S survey. The largest shift was in university P. This university did not report staff, library, or building usage in 1993, but did so in 1992. The university provided only the audited financial statements and no annual report for 1993.

CONCLUSIONSANDFUTURERESEARCH

In conclusion, we first note that the disclosures of the universities are consistent with the CAUBO reporting guidelines. This degree of reporting, however, is insufficient to be consistent with the accountability tenets developed in the Broadhurst report (1993) and in Gibbins et al. (1992). Just as some companies in the private sector provide more information than others, some universities provide more than is required by the CAUBO guidelines through a vehicle that has become commonly known as the president’s report. The president’s report, similar to the management report section of a corporate annual report, is not audited. The information reported is discretionary. Some universities issue this report annually, some biennially, some infrequently, and some not at all. The sporadic provision of the report makes its usefulness questionable: “The onus is on management to respond to the changing needs of users by making objective assessments of disclosures to be included in the annual report” (CICA, 1991, p. 5).

With accountability becoming increasingly important for universities, the release of additional information should be beneficial to the universities. This additional information should not be expensive to collect and report. For example, an extra few pages could easily be attached to the audited financial statements to provide a document similar to a corporate annual report. It could include a review of the financial results, a discussion of the objectives of the university, and a discussion of the indicators of success in attaining those objectives. The Broadhurst Report states:

each institution should have a mission statement and accompanying academic and financial plans sufficiently specific to permit assessment of progress towards the fulfillment of its mission. Recognizing the propriety of each university itself deciding these matters, the Task Force recommends that each governing body determine the measures to be applied to assess performance (1993, p. 3).

We contend that the annual reporting of these results to a university’s stakeholders/ community should be an important component of accountability. For example, a report on the number of students and research publications


could easily be added, along with a directory of the university’s officers and Board of Governors. As is the case with corporate annual reports, the university would have considerable latitude in its content and format. Offering more accountable information would allow the university community to be proactive rather than reactive to external pressures such as the Mu&an’s report.

We plan to track the financial disclosures of Canadian universities for the next five years to determine if their disclosure practices change in light of expected developments in accounting standards by the CICA and other bodies. Also, it will be interesting to note if the pressure by the public for increased accountability will have an impact on university reporting.

APPENDIX A: UNIVERSITY ANNUAL REPORT ANALYSIS- QUALITATIVE RANKING CRITERIA

lke listings below give the item number and name of the items in the Modified Accountability Disclosure Index. Shown below each of these are the criteria by which the items, if disclosed, are graded 5, 4, 3, 2, or 1 according to their quality.

Overview

1. Statement of Objectives 5 Separate statement which must include following items: mission, goals, and

performance targets in specific, concise, understandable and realistic terminology. The items must have measurable/quantitative dimensions and a given timeframe.

4 As per 5, but deficient in one significant item.

3 General and specific, some breadth, and including only some significant measurements.

2 Lacking any significant measurement. 1 Brief (rhetorical), incomplete.

2. Descriptive Report/General Review 5 Report(s) by Board Chairperson and/or CEO (President or equivalent).

Title(s); thorough yet inviting to read; full review; reference to broad spectrum of activities and achievements; set in context of social, economic,

and political environment. Includes some quantification with comparatives. 4 As per 5, but lacking some of its substance.

3 Broad discussion or subclassification and some numbers. 2 Descriptive only. 1 Bare discussion.

3. Summary Facts and Figures 5 Separate, titled section providing key facts and figures, including five-year

trends and comparatives; possibly illustrations.


4 As per 5, but lacking some significant feature.

3 Comprehensive one-year summary only.

2 One-year summary but lacks comprehensiveness.

1 Sparse.

4. Financial Review

5 Separate, titled section providing review of revenues, costs, assets, liabilities,

capital projects and any other significant financial issues. Includes

explanation of trends; possibly illustrations.

4 As per 5, but lacking some depth.

3 Titled, brief review.

2 Brief review as part of another section/report.

1 Sparse.

5. Accounting Policies

5 Separate headed sections for General and Particular Accounting Policies,

and for Changes. Under General, excellent detail, showing full basis of

presentation. Under Particular, >7 issues explained. Under Changes, if

none, stated fully and consistency of application stated. If some, reason for

change, detailed explanation, with quantitative impact; clear statement that

all changes have been disclosed and consistent application of all other items

stated.

4 As per 5, but one section only with significant deficiency.

3 As per 5, but for General >2 principles explained, for Particular >3 issues

explained and under changes, limited reference to quantitative impact.

2 As per 3, but one section only with significant deficiency.

1 Any reference which fails to meet criteria in 2.

6. Directory Information

5 Address, telephone, fax numbers; Contents page; Date of issue; Board

members; Senior Administration.

4 As per 5, with all or part of one set omitted.

3 As per 5, with all or part of two sets omitted.

2 Two of the items in 5 only.

1 One of the items in 5 only.

Service Petformance

7. Student Numbers

5 EFTE-based information both in aggregate for institution and by Faculty.

At least five-year trend and including illustration(s).

4 As per 5, but less than four-year trend.

3 As per 4, excluding illustrations.

2 As per 3 (EFTE based), but either aggregate or organizational unit

information only.

1 Raw numbers, enrollments, number of students.

Financial Diwlosures by Ontario Universities 299

8. Graduates 5 Separate statement with title, type of award (e.g., degrees/diplomas) by

discipline, comparatives, includes illustration(s).

4 As per 5, omitting illustration(s).

3 As per 4, omitting comparatives.

2 As per 3, omitting type of award. 1 Sparse information.

9. Employment/Educational Destination of Graduates 5 Separate statement with title and including the following items: detailed

analysis by Faculty/discipline, five-year trends, and illustration(s).

4 As per 5, but with one item omitted.

3 As per 5 but with two items omitted. 2 Separate statement with title, but limited analysis only.

1 Sparse information.

10. Publications 5 Separate section with title, narrative, analysis by discipline and publication

type (e.g., refereed journals, newspapers), and at least five-year trend and illustration(s).

4 As per 5, but omitting narrative, and either shorter or no trends, or omitting illustration(s).

3 As per 4, but omitting trends and illustrations, and with only limited analysis. 2 List of publications without any summary analysis. 1 Raw number(s) of publications.

11. Student-Faculty Ratio 5 Clear titled statement, showing ratio (EFTE/ EFTF) in total and by faculty/

school, with at least five-year comparative, and with narrative and illustration(s).

4 As per 5, but omitting either narrative or illustration(s). 3 As per 4, but omitting narrative and illustration. 2 Discloses ratio in total and by faculty/ school for one year only. 1 Discloses ratio in total only.

12. Targets 5 Comprehensive nonfinancial (or part financial) targets for year of report

shown alongside at least 5 items (e.g., student numbers, staff-student ratio,

etc.) 4 As per 5, except for 4 items.

3 As per 4, except for 3 items. 2 As per 3, except for 2 items. 1 Sporadic targets.

Financial Information

13. Operating Statement 5 A Summary Statement(s) by input items (e.g., salaries, consumables), or

organizational unit (e.g., faculty, school) or program (e.g., course of study,


research discipline); and a series of Cost of Services Statements by appropriate service divisions. Detailed disclosure with informative footnotes, one-year comparative and subheadings and other aids to understanding. Includes all

expenses (e.g., depreciation, leave accruals) and revenues. Not more than 10% of total expenses in any single unanalyzed item.

4 As per 5, but either lacks some detailed disclosure or is more aggregated. 3 As per 5, but lacks some detailed disclosure and is more aggregated. 2 A Summary Operating Statement and Cost of Services Statement, but lacks

any further attributes as described in 5 above. 1 A Summary Statement(s) by input items (e.g., salaries, consumables).

14. Depreciation 5 Comprehensive disclosure of depreciation of all assets in use. Includes

policies and amounts analyzed by asset type. Depreciation to be included as operating expense and as a movement on accumulated depreciation

account(s). 4 As per 5, but some assets used are omitted or over-aggregated. 3 As per 4, but limited policy disclosure and/ or analysis. 2 As per 3, but movement on accumulated depreciation account(s) omitted. 1 Minimal information, depreciation not shown as operating expense.

‘5. Budget Information 5 Comprehensive disclosure in all major accounting statements, including

variances. 4 As per 5, but omitted in one significant statement and variances excluded.

3 Included in cost of services and summary operating statements only.

2 Included in summary operating statement only. 1 Sporadic disclosure only.

16. Unit Cost per Student 5 Clear statement, showing EFTE unit cost in total and by faculty/school,

at least five-year trends and illustration(s). 4 As per 5, but with less than four-year trends or lacking illustrations.

3 EFTE unit cost in total and by school/faculty for one year only.

2 EFTE unit cost in total or by school/faculty for one year only.

1 Minimal reference.

17. Statement of Changes in Financial Position 5 Cash flow format, comparatives, subheadings, informative footnotes and

other aids to understanding, clear reconciliation with surplus/deficit.

4 As per 5, but lacking one significant feature.

3 Basic statement using indirect method with comparatives. 2 Basic statement without comparatives. 1 Inaccurate or incomplete or nonstandard statement.

18. Research Grants 5 Separate section with title, narrative, analysis by project types or disciplines

including amounts, and at least five-year trends and illustration(s).

Financial Dkclosures by Ontario Universities 301

4 As per 5, but omitting narratives, and either shorter or no trends or omitting

illustration(s).

3 As per 4, but omitting trends and illustrations, and with only limited analysis.

2 List of grants without any summary analysis.

1 Sparse information.

19. Overhead Allocation

5 Clear titled statement showing composition of total overheads. In addition,

detailed allocation of overheads to faculties/ schools; basis of allocation;

comparative for previous year.

4 As per 5, except basis of allocation not disclosed.

3 As per 4, except composition of total overheads not disclosed.

2 As per 3, except allocated amounts highly aggregated.

1 Minimal overhead allocation disclosed.

Physical and Financial Condition

20. Balance Sheet

5 Detailed statement, disclosing all assets including land and buildings and

inventories, and all liabilities. Details of reserves and movements on

reserves. Comparatives, extensive footnotes, subheadings, appropriate

classifications, not more than 20% of assets in a single item, assets analyzed

by faculty/department. Assets controlled but not legally owned, clearly

stated.

4 As per 5, but does not indicate assets controlled but not legally owned.

3 As per 4, but more than 20% of assets disclosed in a single analyzed item.

2 Basic, includes comparatives and some footnotes, but over-aggregated.

1 Poor or no classification, major assets omitted, sparse footnotes.

21. Faculty/Staff

5 Clear titled statement, showing faculty/staff EFT in total and by faculty/

school, classified into academic by seniority, administrative, technical and

other, with at least live-year comparative.

4 As per 5, but with less than four-year comparative and seniority not

disclosed.

3 As per 4, but current year information only.

2 Some detail, but lacking comprehensiveness to merit 3.

1 Sparse raw numbers only.

22. Library

5 Narrative description, nonfinancial and financial information. periodicals

and volumes held: collection changes. Details of patronage. IT, videos, and similar collections. Staff and library facilities. Comparatives. Valuations and

valuation method disclosed.

4 As per 5, but lacking two significant parts.

3 As per 4, but lacking two significant parts.

302 INTERNATIONAL ACCOUNTING AUDITING 8t TAXATION, 3(2) 1994

2 Includes at least two significant parts identified in 5. 1 Brief cursory data only.

23. Investments 5 Separate schedule showing all holdings, movements, and investment

income. Comparatives, valuations at cost and current market value. Basis of valuation. Any restrictions (e.g., trusts, endowments).

4 As per 5, but omitting one significant component. 3 As per 4, but omitting two significant components. 2 Separate schedule but lacking in detail. I Minimal disclosure.

24. Commitments and Contingencies 5 If no commitments and contingencies then clear statements to this effect.

If yes, then for contingencies. Separate, clear statement disclosing individual items with financial impact, clearly stating that all items disclosed. If yes, then for commitments: Separate statement with full disclosure, stating purpose/ project and showing total expected expenditure and expenditure to date, with expected completion date. A clear statement that all items disclosed.

4 As per 5, but incomplete for either commitments or contingencies.

3 As per 4, but incomplete for both. 2 Commitments and contingencies referred to but no disclosure of financial

impact. 1 Sparse reference to either commitments or contingencies.

25. Equal Employment/Educational Opportunities Information 5 Separate titled section, disclosing quantitative and descriptive information

about appropriate groups (e.g., gender, ethnic, disabled), level of positions, illustration(s) and comparatives.

4 As per 5, but lacking illustration(s).

3 As per 4, but lacking comparatives. 2 As per 3, but descriptive information only. 1 Sparse reference.

26. Building Usage 5 Titled section showing buildings owned and leased, Crown assets, and

significant changes. Valuations showing cost, nbv and mv, area (total and by faculty), usage, illustration(s), and comparatives.

4 As per 5, but lacking one significant section. 3 As per 4, but lacking one significant section. 2 Balance sheet valuation and significant reference to usage. 1 Balance sheet valuation and minimal reference to usage.

Note: Index developed by David Coy, University of Waikato, New Zealand; Keith Dixon, Massey University, New Zealand; and Greg Tower, Murdoch University, Australia.

Financial Disclosures by Ontario Universities

APPIZNDIX B

TABLE B.l Modified Accountability Disclosure Index-Weights

Weight

Overview Statement of objectives Descriptive report/general review Summary facts and figures Financial review Accounting policies Directory information

Total

Service Performance

Student numbers Graduates Employmentleducation destination of graduates Publications Student-faculty ratio Targets

Total

Financial Performance

Operating statement Depreciation Budget information Unit cost per student Statement of cash flows Research grants Overhead ~location

Total

Physical and Financial Condition Balance sheet Faculty/Staff Library Investments Commitments and contingencies Employment and educational equity information Building usage

Total

3

3 1 1 2 1

11

3

2

1 3 3

2 14

3 1 2 2 2 2

1 14

3 3 2 1 2 2

r 14

303

Source: Index developed by David Coy, University of Waikato, New Zealand; Keith Dixon, Massey University, New Zealand; and Greg Tower, Murdoch University, Australia.


APPENDIX C: LIST OF PARTICIPATING UNIVERSITIES

Brock University

Carlton University

Lakehead University

Laurentian University

McMaster University

Queen’s University

Ryerson University

Trent University

University of Guelph

University of Ottawa University of Toronto

University of Waterloo

University of Western Ontario

University of Windsor

Wilfrid Laurier University

York University

NOTES

1. The popular Canadian news magazine, Muclean’s, publishes an annual edition rating all Canadian universities. The contents of this issue are frequently used by university

administrators in press releases and promotional materials.

2. In 1989 increased disclosures such as those found in the Waikato report were written into

New Zealand law. In Canada the discussion continues.

3. Broadhurst chaired a committee, for the Ontario government, which performed an in-depth

analysis of accountability and the disclosure of information by universities. The report

proposes several performance measures that universities should report each year.

REFERENCES

Broadhurst, W.H. 1993. University Accountability: A Strengthened Framework. Toronto: The Task Force on University Accountability.

Canadian Association of University Business Officers (CAUBO). 1984. 7’he Guide to Accounting Principles, Practices and Standards of Disclosure for Universities and Colleges of Canada

Ottawa: Author.

Canadian Institute of Chartered Accountants (CICA). 1991. Information to be Included in the

Annual Report to Shareholders. Toronto: CICA. Canadian Institute of Chartered Accountants. 1994. CZCA Handbook. Toronto: CICA.

Canadian Comprehensive Auditing Foundation (CCAF). 1993. Reporting on Effectiveness in Colleges and Institutes. Ottawa: CCAF.

CICA Accounting Standards Board. 1992. Exposure draft: Non-profit organizations. CA Magazine (January): 59.

Cooke, T.E., and R.S.O. Wallace. 1989. Global surveys of corporate disclosure practices and audit firms: A review essay. Accounting and Business Research 20: 41-57.

Copeland, R.M., and W. Fredericks. 1968. Extent of disclosure. Journalof Accounting Research 6: 106-l 13.

Coy, D., and G.D. Tower. 1990. Information lack underscores education crisis. National Business Review (September 12): 13.

Dixon, K., D. Coy, and G.D. Tower. 1991. External reporting by New Zealand universities 1985- 1989: Improving accountability. Financial Accountability and Management 7(3, Autumn): 159-178.


Gibbins, M., A.J. Richardson, and J. Waterhouse. 1992. Il7re Management of Financial Disclosure: Theory and Perspectives. Vancouver: The Certified General Accountants’ Research Foundation.

Lauzon, L-P. 1991. The Best Annual Reports-1991. Hamilton, Canada: Society of Management Accountants of Canada.

Skinner, R.M. 1987. Accounting Standards in Evolution. Toronto: Holt, Rinehart and Winston of Canada, Ltd.

Tower, G.D., and D. Coy. 1990. Urgent need to end crisis in academia. National Business Review (August 29): 16.

Walker, M. 1988. The information economics approach to financial reporting. Accounting and Business Research 18(Spring): 170-182.

Wiseman, J. 1982 An evaluation of environmental disclosures made in corporate annual reports. Accounting, Organizations and Society I: 53-63.

financial disclosures by ontario universities: 1988–1993

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