ASSOCIATION OF AFRICAN UNIVERSITIES FINANCIAL STATEMENTS 30 JUNE 2018 -q ASSOCIATION OF AFRICAN UNIVERSITIES FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 PAGE GENERAL INFORMATION 1 REPORT OF THE EXECUTIVE BOARD 2-3 INDEPENDENT REPORT OF THE AUDITORS 4-6 STATEMENT OF FINANCIAL PERFORMANCE 7 STATEMENT OF FINANCIAL POSITION 8 STATEMENT OF CHANGES IN RESERVES 9 STATEMENT OF CASH FLOWS 10 NOTES TO THE FINANCIAL STATEMENT 11-31 ASSOCIATION OF AFRICAN UNIVERSITIES FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 GENERAL INFORMATION EXECUTIVE BOARD MEMBERS Prof. Orlando Antonio Quilambo- President Prof. Edward Ako - Vice President Prof. Nicholas N.N. Nsowah-Nuamah- Vice President Prof. Bakri Osma Saeed - Vice President Prof. Etienne Ehouan Ehile - Secretary-General Prof. Elifas Tozo Bisanda Prof. Hassan Mohamed H. Kaafi Prof. Abdulganiyu Ambali Prof. Brice Sinsin Prof. Olusola Oyewole Prof. Rungano Jonas Zvobgo Prof Nqosa L. Mahao Prof. Ezzat Abdel Wahab Prof. John Ssentamu Ddumba Prof. Faqir Muhammad Anjum Prof. Quinton Kanhukamwe REGISTERED OFFICE Association of African Universities P. 0. Box AN 5744 Accra - North Ghana AUDITORS Ernst & Young Chartered Accountants G15, White Avenue Airport Residential Area P. 0. Box KA 16009 Airport, Accra BANKERS Standard Chartered Bank Ghana Limited First Atlantic Merchant Bank Ghana International Bank Plc Union Togolaise de la Banque Barclays Bank Ghana Limited Zenith Bank Ghana Limited Home appliance REPORT OF THE EXECUTIVE BOARD TOTHEMEMBERSOF ASSOCIATION OF AFRICAN UNIVERSITIES (AAU) The Executive Board has pleasure in presenting their report and audited financial statements of the Association for the year ended 30 June 2018. EXECUTIVE BOARD'S RESPONSIBILITY STATEMENT The Association's Executive Board is responsible for the preparation and fair presentation of the financial statements, comprising the statement of financial position and the statement of financial performance and statement of cash flows for the year then ended, and the notes to the financial statements, which include a summary of significant accounting policies and other explanatory notes in accordance with procedures and guidelines for the preparation of Association of African Universities funds in the manner required by international financial reporting standards and agreements between AAU and respective donors. The Executive Board responsibilities include: designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of these financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies, making accounting estimates that are reasonable in the circumstances. GOING CONCERN The Executive Board have made an assessment of the Association's ability to continue as a going concern and have no reason to believe the Association will not be a going concern in the year ahead. FINANCIAL RESULTS The financial results of the Association for the year ended 30 June 2018 are set out below: US$ Excess of income over expenditure for the year was 109,721 To which is added deficit brought forward on accumulated fund of (36278) Giving a surplus carried forward on the accumulated fund of 73,443 NATURE OF BUSINESS The Association of African Universities is an international non-governmental organization set up in 1967 by Universities in Africa. It is the apex organization and principal forum for consultation, exchange of information, and cooperation among universities in Africa. The AAU's mission is to raise the quality of higher education in Africa and strengthen its contribution to African development by fostering collaboration among its member institutions, by providing support to their core functions of teaching, learning, research and community engagement; and by facilitating critical reflection on and consensus building around, issues affecting higher education and the development of Africa There was no change in the nature of business of the Association during the year. 2 AUDITORS Ernst & Young, having indicated their willingness, continue in office. APPROVAL OF THE FINANCIAL STATEMENTS The financial statements of the Association were approved by the Executive Board members on 21 January 2019 and are signed on their behalf by: ecutive oar em er Executive Board Member 3 3 INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF ASSOCIATION OF AFRICAN UNIVERSITIES Opinion We have audited the financial statements of the Association of African Universities on pages 7 to 31, which comprise the statement of financial position as at 30 June 2018, and the statement of financial performance, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. In our opinion the financial statements present fairly, in all material respects, the financial position of the Association of African Universities as of 30 June 2018, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS). Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the "Auditor's Responsibilities for the Audit of the Financial Statements" section of our report. We are independent of the Association of African Universities in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code) and other independence requirements applicable to performing audits of the Association of African Universities. We have fulfilled our other ethical responsibilities in accordance with the IESBA Code, and in accordance with other ethical requirements applicable to performing the audit of the Association of African Universities. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Other information The Executive Board are responsible for the other information. The other oformation comprises the Executive Board's Report. The other information does not include the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and we do not express an audit opinion or any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information attached prior to date of the audit report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. 4 Responsibilities of the executive board for the financial statements The Executive Board is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards and for such internal control as the Executive Board determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Executive Board is responsible for assessing the Association's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the executive board either intend to liquidate the Association or to cease operations, or have no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Association's financial reporting processes. Auditor's responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: * Identify and assess the risks of material misstatement of the fin,ncial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. * Obtain an understanding of internal control relevant to the audit 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 Association's internal control. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. * Conclude on the appropriateness of the Executive Boards' use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Association's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Association to cease to continue as a going concern. 5 * Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with the Executive Board regarding, among other matters, the planned scope and timi the audit and significant audit findings, including any significant deficiencies in internal ntrol tha we identify during our audit. Signed by Victor Gborglah (ICAG/P/1151 For and on behalf of Ernst & Young (ICAG/F/2019/126) Chartered Accountants Accra, Ghana Date: 6 ASSOCIATION OF AFRICAN UNIVERSITIES STATEMENT OF FINANCIAL PERFORMANCE FOR THE YEAR ENDED 30 JUNE 2018 Notes 2018 2017 US$ Us$ Income Subscription 5 532,471 502,113 Ghana Government grant 6 152,319 152,319 Restricted grants 7c 1,123,421 1,584,813 Other income 8 1,012,121 755,523 Total income 2 2320332 2,994,768 Expenditure Administrative expenses 9 1,222,186 999,739 Information and communication costs 10 167,580 158,957 Programmes costs 11 1,123,421 1,584,813 Others operating expenses 12 _197 424 131,808 Total Expenditure (2,710,611 (2,875,317) Net surplus for the year 109,721 119,451 Other comprehensive income - - Total comprehensive income for the year 109,721 119,451 7 - ASSOCIATION OF AFRICAN UNIVERSITIES STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2018 2018 2017 Notes US$ US$ Non-current assets - Intangible asset 13 1,200 - Property, plant & equipment 14 3,626,778 3,728,990 Investments 15a 95,O60 92, 652 Total non-current assets 3,723,038 3 82 1642 Current assets Investments 15b 225,250 226,240 Accounts receivable 16 91,089 184,579 Bank and cash balances 17 3,308,242 _842600 Total current assets 3624581 1253419 Total assets 7347 619 5075,061 Funds Accumulated fund 73,443 (36,278) Endowment fund 18 6001 6 Total reserves and funds 133A459 _ 23738 Non-current liabilities Deferred government grant 22 3,503,328 3,655,647 Employee benefit obligation 19 438,618 383 422 Total Non-current liabilities 3,94 1946 4 039,069 Current liabilities Restricted funds 20 313,825 637,235 Accounts payable 21 400,080 375,019 Accounts payable - World Bank PASET 23 2,558,309 Total current liabilities 3,272214 1 012 254 Total liabilities 7214160 5 051 323 Total liabilities a equity 7,3417619 5 Q075 061 x i te Bofard Mbr Executive Board Nfember Date: -Date: 8 ASSOCIATION OF AFRICAN UNIVERSITIES STATEMENT OF CHANGES IN RESERVES AND FUNDS FOR THE YEAR ENDED 30 JUNE 2018 Accumulated Endowment 2018 fund funds Total US$ US$ US$ Balance as of 1 July 2017 (36,278) 60,016 23,738 Excess income over expenditure 109,721 - - 109,721 Balance as of 30 June 2018 73,443 60,016 133,459 2017 Accumulated Endowment Total fund funds Us$ Us$ Us$ Balance as of 1 July 2016 (155,729) 60,016 (95,713) Excess income over expenditure 1 194 - 119,451 Balance as of 30 June 2017 (36,278) 60,016 23,738 9 ASSOCIATION OF AFRICAN UNIVERSITIES STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2018 2018 2017 Note US$ US$ OPERATING ACTIVITIES 7 Excess of income over expenditure 109,721 119,451 Adjustment for: Depreciation 14a 227,876 163,248 Amortisation 13 300 - Government of Ghana grant released 22 (152,319) - Movement of employee benefit obligation 19 55,196 47,101 Restricted grant released 7a & 7b (323,410) 106570 Operating loss/profit before working capital charges (82,636) 436,370 Decrease/(Increase) in accounts receivable 93,490 (122,225) Increase in accounts payable 25,061 47,762 Increase in accounts payable - PASET 2,55839 - 0 Net cash generated from in operating activities 2,594, 361,907 INVESTING ACTIVITIES Purchase of software 13 (1,500) Purchase of property, plant and equipment 14 (125,664) (3,860,764) - Investments purchased 15a & 15b (1,418) 8631 Net cash flow used in investing activities (12 8582) C3869,395) FINANCE ACTIVITIES Government of Ghana grant - 3,65547 Net increase in cash and cash equivalents 17 2,465,642 148,159 Cash and cash equivalents at 1 July 17 842,600 694,441 Cash and cash equivalent at 30 June 17 3,308,242 842,600 10 ASSOCIATION OF AFRICAN UNIVERSITIES NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2018 1. CORPORATE INFORMATION The Association of African Universities was established in 1967 to facilitate co-operation between its members and with the international academic community. It is based in Accra, Ghana. The Association of African Universities (AAU) is the apex organization and forum for consultation, exchange of information and co-operation among institutions of higher education in Africa. It represents the voice of higher education in Africa on regional and international bodies and supports networking by institutions of higher education in teaching, research, information exchange and dissemination. 2. BASIS OF PREPARATION The financial statements of Association of African Universities have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB). The financial statements have been prepared on a historical cost basis and are presented in United States dollars (US$), except where otherwise indicated. 3. SIGNIFICANT ACCOUNTING POLICIES 3.1 Current versus non-current classification The Association presents assets and liabilities in statement of financial position based on current and non-current classification. An asset as current when it is: > Expected to be realised or consumed in normal operating cycle D Expected to be realised within twelve months after the reporting period Or 0 Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period All other assets are classified as non-current. A liability is current when: > It is expected to be settled in normal operating cycle > It is due to be settled within twelve months after the reporting period Or There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period 11 ASSOCIATION OF AFRICAN UNIVERSITIES NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2018 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.2 Revenue Revenue is recognised to the extent that it is probable that the economic benefits will flow to the association and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is recognised for transaction resulting from the ordinary course of business. Income not resulting from the association's ordinary course of business is recognised as other income. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty. The association assesses its revenue arrangements against specific criteria in to determine if it is acting as principal or agent. The association has concluded that it is acting as a principal in all of its revenue arrangements. 3.3 Cash and cash equivalent Cash and cash equivalents in the statement of financial position comprise cash on hand and deposits in banks that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, with original maturities of three months or less. Short-term investments that are not held for the purpose of meeting short-term cash commitments and restricted margin accounts are not considered as 'cash and cash equivalents'. For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts when applicable. 3.4 Foreign currency transactions The financial statements are presented in US dollars, which is also the association's functional currency. Transactions and balances Transactions in foreign currencies are initially recorded by the association at their respective functional currency spot rates at the date the transaction first qualifies for recognition. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date. Differences arising on settlement or translation of monetary items are recognised in profit or loss. 3.5 Leases The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified In an arrangement. 12 ASSOCIATION OF AFRICAN UNIVERSITIES NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2018 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.5 Leases (continued) Association of African Universities as a lessee A lease is classified at the inception date as a finance lease or an operating lease. A lease that transfers substantially all the risks and rewards incidental to ownership to the Association is classified as a finance lease. Finance leases are capitalised at the commencement of the lease at tho inception date fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in finance costs in the statement of profit or loss. A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term. An operating lease is a lease other than a finance lease. Operating lease payments are recognised as an operating expense in the statement of profit or loss on a straight-line basis over the lease term. 13 ASSOCIATION OF AFRICAN UNIVERSITIES NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2018 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.7 Property, plant and equipment Property, plant and equipment are stated at cost, less accumulated depreciation and accumulated impairment losses. The initial cost of an asset comprises its purchase price or construction cost, any costs directly attributable to bringing the asset into operation, the initial estimate of any decommissioning obligation, if any, and, for qualifying assets and borrowing costs. The purchase price or construction cost is the aggregate of the amount paid and the fair value of any other consideration given to acquire the asset. A full year's depreciation is charged in the year of acquisition as follows Buildings 4 Computers 33 1/3 Office equipment 10 Plant and Machinery 10 Motor vehicles 20 Residual values, useful lives and the depreciation method are reviewed and, adjusted if appropriate at each reporting date. Changes are accounted for prospectively. The cost of assets built by the Association includes the cost ol material and direct labour as well as any other costs directly attributable to bringing the asset to a working condition as intended by management. Once the assets are available for use, depreciation commences. A full year's depreciation is charged in the year of acquisition and in the year of disposal. Expenditure on major maintenance or repairs comprises the cost of replacement assets or parts of assets and overhaul costs. Where an asset or part of an asset that was separately depreciated and is now written off or is replaced and it is probable that future economic benefits associated with the item will flow to the Association, the replacement expenditure is capitalised. Where part of the asset was not separately considered as a component, the replacement value is used to estimate the carrying amount of the replaced assets which is immediately written off. All other maintenance costs are expensed as incurred. The carrying amount of property, plant and equipment is reviewed for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable. An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the income statement in the period in which the item is derecognized. 14 ASSOCIATION OF AFRICAN UNIVERSITIES NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2018 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.8 Impairment of non-financial assets Property, plant and equipment are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated. For the purpose of measuring recoverable amounts, assets are grouped at the lowest levels for which there are separately identifiable Cash Generating Units (CGUs). The recoverable amount is the higher of an asset's fair value less costs to sell and value in use (being the present value of the expected future cash flows of the relevant asset or CGUs). An impairment loss is recognized for the amount by which the asset's carrying amount exceeds its recoverable amount. The association evaluates impairment losses for potential reversals when events or circumstances may indicate such consideration is appropriate. The increased carrying amount of an asset shall not exceed the carrying amount that would have been determined (net of depreciation) had no impairment loss been recognised for the asset in prior years. 3.9 Financial instruments A financial instrument is any contract that gives rise to a financial asset of one party and a financial liability or equity instrument of another party. _ All financial instruments are classified into one of the following categories: held-for-trading, held-to-maturity investments, loans and receivables, available-for-sale financial assets or other financial liabilities. Financial instruments classified as held-for-trading are measured at fair value with changes in fair value recognized in statement of profit or loss. Financial instruments classified as available-for-sale are measured at fair value using quoted prices in an active market. Changes in fair value are recognised in other comprehensive income until the item is derecognised or determined to be impaired, at which time the cumulative gain or loss previously reported in other comprehe-sive income is recognised in profit or loss. When actively quoted prices are not available, fair value is determined using other valuation techniques. If fair value cannot be reliably estimated, the item is carried at cost. Financial instruments classified as held-to-maturity investments, loans and receivables or other financial liabilities are measured at fair value upon initial recognition and subsequently measured at their amortised cost using the effective interest method. Transaction costs on financial instruments are expensed when incurred. Purchases and sales of financial assets are accounted for at trade dates. Financial instruments include disclosures on their liquidity risk and the inputs to fair value measurement, including their classification within a hierarchy that prioritizes those inputs. The three levels of the fair value hierarchy are: Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities; Level 2 - Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and Level 3 - Inputs that are not based on observable market data. 15 ASSOCIATION OF AFRICAN UNIVERSITIES NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2018 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.10 Employee benefits Short-term employee benefits, such as salaries, paid absences, and other benefits, are accounted for on an accruals basis over the period which employees have provided services in the year. Bonuses are recognised to the extent that the association has a present obligation to its employees that can be measured reliably. All expenses related to employee benefits are recognised in the stdtement of financial performance within employee benefits cost. The Association contributes to the defined contribution scheme (the Social Security Fund) on behalf of employees. (i) Defined Benefit Plans Under the national pension scheme, the Association contributes 13% of employees' basic salary to the Social Security and National Insurance Trust (SSNIT) for employee pensions. The Association's obligation is limited to the relevant contributions, which have been recognized in the financial statements. The pension liabilities and obligations, however, rest with SSNIT. (ii) Defined Contributory Plans The Association has a provident fund scheme for senior and junior staff. Under the scheme, the Association contributes 4% and 5% of basic salary for senior and junior staff respectively. The Association's obligations under the plan is limited to the relevant contributions and have been recognized in the financial statements due dates. (ii) Other long term employee benefits Additionally, staff are entitled to gratuities entitled determined as 15% of the staff's terminal basic annual salary for each completed year of service and pro-rata for a fraction of a year's service. 3.11 Taxation The association is classified as a tax exempt organisation under Section 98 of the Income Tax Act (2015) Act 896. 16 ASSOCIATION OF AFRICAN UNIVERSITIES NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2018 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.12 Significant accounting judgments, estimates and assumptions The preparation of the association's financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods. Estimates and assumptions The preparation of the association's financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the Association's disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods. In the process of applying the association's accounting policies, management has made various judgements. Those which management has assessed to have the most significant effect on the amounts recognised in the financial statements have been discussed in the individual notes of the related financial statement line items. The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are also described in the individual notes of the related financial statement line items below. The association's based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the association. Such changes are reflected in the assumptions when they occur. 3.13 Standards issued but not yet effective The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Association's financial statements are disclosed below. The Association intends to adopt these standards, if applicable, when they become effective. IFRS 9 Financial Instruments In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments which reflects all phases of the financial instruments project and replaces IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. The standard introduces new requirements for classification and measurement, impairment, and hedge accounting. IFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early application permitted. Retrospective application is required, but comparative information is not compulsory. Early application of previous versions of IFRS 9 (2009, 2010 and 2013) is permitted if the date of initial application is before 1 February 2015. The adoption of IFRS 9 may not effect on the classification and measurement of the Association's financial assets, but no impact on the classification and measurement of the Association's financial liabilities. 17 ASSOCIATION OF AFRICAN UNIVERSITIES NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2018 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.13 Standards issued but not yet effective (continued) IFRS 15 Revenue from Contracts with Customers IFRS 15 was issued in May 2014 and establishes a new five-step model that will apply to revenue arising from contracts with customers. Under IFRS 15 revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The principles in IFRS 15 provide a more structured approach to measuring and recognising revenue. The new revenue standard is applicable to all entities and will supersede all current revenue recognition requirements under IFRS. Either a full or modified retrospective application is required for annual periods beginning on or after 1 January 2017 with early adoption permitted. The Association is currently assessing the impact of IFRS 15 and plans to adopt the new standard on the required effective date. Amendments to IAS 7 Statement of Cash Flows In January 2016, the IASB issued amendments to IAS 7 Statement of Cash Flows with the intention to improve disclosures of financing activities and help users to better understand the reporting entities' liquidity positions. Under the new requirements, entities will need to disclose changes in their financial liabilities as a result of financing activities such as changes from cash flows and non-cash items (e.g., gains and losses due to foreign currency movements). The amendment is effective from 1 January 2018. The association is currently evaluating the impact. IFRS 16 Leases The IASB issued the new standard for accounting for leases IFRS 16 Leases in January 2016. The new standard does not significantly change the accounting for leases for lessors. However, it does require lessees to recognise most leases on their balance sheets as lease liabilities, with the corresponding right of-use assets. Lessees must apply a single model for all recognised leases, but will have the option not to recognise 'short-term' leases and leases of 'low-value' assets. Generally, the profit or loss recognition pattern for recognised leases will be similar to today's finance lease accounting, with interest and depreciation expense recognised separately in the statement of profit or loss. IFRS 16 is effective for annual periods beginning on or after 1 January 2019. Early application is permitted provided the new revenue standard, IFRS 15, is applied on the same date. Lessees must adopt IFRS 16 using either a full retrospective or a modified retrospective approach. The associate does not anticipate early adopting IFRS 16 and is currently evaluating its impact. 18 ASSOCIATION OF AFRICAN UNIVERSITIES NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2018 5. SUBSCRIPTION Subscriptions represent amounts received from both associate and full member universities. 6. GHANA GOVERNMENT GRANT Ghana Government Grant refers to the portion of deferred Government Grant released to the Statement of Financial Performance on an annual basis. Deferred Government Grant will be released to the Statement of Financial Performance over a period of 25 years. See Note 21 for details of deferred Government Grant. 7a. RESTRICTED GRANTS 2018 Balance at Amount Available Amount Balance at Description 1 July Received Receipts Disbursed 30 June US$ US$ US$ US$ US$ ACBF/CADRE (2) 45,133 96,812 141,945 141,945 ECOWAS MOBILITY SCHEME (28,792) - (28,792) 34 (28,826) SIDA SAREC (CURRENT) 405,308 - 405,308 379,350 25,958 WORLD BANK - AFRICA CENTRE OF EXCELLENCE (note 18) 206,714 1,190,996 1,397,710 946,502 451,208 AfriQAN - QUALITY ASSURANCE 53,779 52,763 106,542 54,909 51,633 HAQAA - QUALITY ASSURANCE (45,673) 90,951 45,278 230,399 (185,121) ACTS 45,189 45,189 46,812 (1,623) ADEA 765 - 765 169 596 Total 637,234 1,476,711 2,113,945 1,800,120 313,825 7b. RESTRICTED GRANTS 2017 Balance at Amount Available Amount Balance at Description 1 July Received Receipts Disbursed 30 June US$ US$ US$ US$ US$ ACBF/CADRE (2) (48,114) 331,385 283,271 238,138 45,133 ECOWAS MOBILITY SCHEME 91,422 150,000 241,422 270,214 (28,792) SIDA SAREC (CURRENT) 424,959 395,977 820,936 415,628 405,308 WORLD BANK - AFRICA CENTRE OF EXCELLENCE (note 18) 52,074 995,820 1,047,894 841,180 206,714 AfriQAN - QUALITY ASSURANCE 39,496 26,740 66,236 12,457 53,779 HAQAA - QUALITY ASSURANCE (29,172) 176,045 146,873 192,546 (45,673) ADEA - 40,965 40,965 40 200 765 Total 530,665 2,116,932 2,647,597 2,010,363 637,234 7c. RESTRICTED GRANT 2018 2017 US$ US$ Restricted grants (7a &7b) 1,800,120 2,010,363 Programme contributions (8) (676,699) 425,550) 1,123,421 1,584813 19 ASSOCIATION OF AFRICAN UNIVERSITIES NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2018 ECOWAS MOBILITY SCHEME The purpose of the fund is to create within the region, an academic mobility system for students and teachers (including diaspora); and to encourage institutions to put in place language immersion programmes to promote mobility of students and teachers in the region. SIDA SAREC The purpose of this grant is towards support institutional support and research cooperation. The grant includes an amount of 16.million Swedish kronor for the period December 2013 to 30th December 2017. WORLD BANK - AFRICA CENTRE OF EXCELLENCE The project's objective is to promote regional specialization among participating universities in areas that address specific common regional development challenges; strengthen the capacities of these universities to deliver high quality training and applied research and meet the demand for skills required for Africa's development such as the extractive industries. The project is focusing on strengthening 22 existing institutions in West and Central Africa. The investment is around US$8 million per institution. HAQAA - QUALITY ASSURANCE Grants received are to support the development of a harmonized quality assurance and accreditation system at institutional level, national, regional and Pan-African continental level. 8. OTHER INCOME 2018 2017 US$ US$ Conference registration fees income 233,333 156,026 Programme contributions (7c) 676,699 425,550 Others 95,903 173,833 Interest income on Investments 6,1 114 1,012,121 755,523 9. ADMINISTRATIVE EXPENSES 2018 2017 US$ US$ Employee benefit expense (9a) 720,341 692,391 Transportation and Subsistence(9b) 89,147 12,287 Materials/Supplies/Maintenance 3,463 5,102 Postage, Cables and Telephone 2,067 2,347 Audit Fees 17,719 17,625 Vehicle Running and Maintenance 33,387 26,884 Bank Charges 16,127 13,115 Secretary General's Residence (9c) 14,748 1,005 Sundry Expenses (9d) 97,011 65,736 Amortisation of Intangible assets 300 - Depreciation 227,876 163,247 1,222,186 999,739 20 ASSOCIATION OF AFRICAN UNIVERSITIES NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2018 9a. EMPLOYEE BENEFIT EXPENSES 2018 2017 US$ US$ Salaries and Allowances 623,065 604,699 Staff Medical 32,978 31,259 Gratuity accruals 55,196 54,677 Leave accrued expenses 7,595 - Support Staff Provident Fund 1L507 1,756 720,341 692,391 9b. TRANSPORTATION AND SUBSISTENCE 2018 2017 US$ US$ Secretariat 89,147 12,287 9c. SECRETARY GENERAL'S RESIDENCE 2018 2017 US$ US$ Utilities 5,640 1,005 Others 14,748 1,005 9d. SUNDRY EXPENSES 2018 2017 US$ US$ Electricity and Water 67,741 21,015 Insurance 3,644 4,824 Legal Fees and Professional Fees 1,588 19,801 Other expenses 24 038 20 096 7. 97,011 65,736 21 ASSOCIATION OF AFRICAN UNIVERSITIES NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2018 10. INFORMATION AND COMMUNICATION 2018 2017 US$ US$ Employee benefit expense 143,845 143,054 Postage and Distribution 8,650 8,728 Other expenses 15085 7,175 167,580 158,957 11. PROGRAMME EXPENSES 2018 2017 US$ US$ Direct project costs 1,800,120 2,010,363 Programme contributions (8) (676,699 _425550) 1,123,421 1,584,813 12. OTHER EXPENSES 2018 2017 US$ US$ Workshops and Meetings 197,424 131,808 13 INTANGIBLE ASSET Intangible assets represents the cost of acquired Accounting Software by the Association. The software was initially capitalised at cost and subsequently ca ried at cost less accumulated amortisation and impairment losses. These costs are amortised to the statement of financial performance using the straight-line method over their estimated useful life of five years. 2018 2017 US$ US$ - Cost Balance as of 1 July 2017 - Additions 1,500 Balance as at 30 June 2018 1,500 Amortisation Balance as at 1 July 2017 - Charge for the year 300 Balance as at 30 June 2018 300 Net Book Value as of 30 June 2018 1,200 22 ASSOCIATION OF AFRICAN UNIVERSITIES NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2018 14a. PROPERTY, PLANT & EQUIPMENT Tent Office Fixtures & Motor Plant & Capital Work- Buildings Building Equipment Fittings Vehicles Machinery In- Progress Total US$ US$ US$ US$ US$ US$ US$ US$ Cost Balance as of 1 July 2017 3,807,966 - 127,724 102,246 52,458 - 48,426 4,138,820 Additions - - ,48 63495 347 - 9,778 46,506 125,664 Balance at 30 June 2018 3,807,966 2,408 191,219 105,723 52,458 9,778 94932 4,264,484 Depreciation Balance as at 1 July 2017 152,319 - 123,789 102,246 31,476 - - 409,830 Charge for the year 152319 - 639739 348 10,492 978 - 227,876 Balance at 30 June 2018 304,638 - 187,528 102,594 41,968 978 - 637,706 Net Book Value as of 30 June 2018 3,503,328 2,408 3,691 3,129 10,490 8,800 94,932 3,626,778 23 ASSOCIATION OF AFRICAN UNIVERSITIES NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2018 14b. PROPERTY, PLANT & EQUIPMENT Office Fixtures & Motor Capital Work- Buildings Equipment Fittings Vehicles In- Progress Total US$ US$ US$ US$ US$ Cost Balance as of 1 July 2016 - 123,352 102,246 52,458 - 278,056 Additions 3,807,966 4,372 - 48,426 3,860,764 Balance at 30 June 2017 380L966 127,724 102,246 52 458 48_426 4,138,820 Depreciation Balance as at 1 July 2016 - 123,352 102,246 20,984 - 246,582 Charge for the year 152,319 437 - 10,492 - 163,248 Balance at 30 June 2017 152,319 123789 102,246 31A76 - 409,830 Net Book Value as of 30 June 2017 3,655,647 3,935 - 20,982 48,426 3,728,990 24 ASSOCIATION OF AFRICAN UNIVERSITIES NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2018 15a. LONG TERM INVESTMENTS 2018 2017 US$ US$ GIB investment - Endowment fund 95,060 92,652 This represents the investment of seed fund introduced by the originators of AAU at the inception of the Association. 15b. SHORT TERM INVESTMENTS 2018 2017 US$ US$ First Atlantic Bank Dollar investment 225,250 221,951 First Atlantic Bank Cedi investment -__ 4,289 225,250 226,240 The short term investments are in fixed deposits with tenors of 91 days and below earning an average rate of 24% p.a. for Ghana cedi investments, and a range of 0.5% tol%p.a. for the United States dollar investments. 16. ACCOUNTS RECEIVABLE 2018 2017 US$ US$ Staff Advances 7,617 400 Sundry Debtors - 110,814 Accountable imprest 8S472 73,365 91089 184,579 The maximum amount due from staff of the Association during the year was US$4,017 (2017: US$400). Staff advances are for short periods usually below 12 months. The carrying amounts of these approximate its fair value. 17. BANK AND CASH BALANCES 2018 2017 Change US$ US$ US$ Cash on hand 3,534 4,164 (630) Cash at bank 3,04,708 838 436 2,466 272 Bank balances and cash 3,308,242 842,600 2,465,642 18. ENDOWMENT FUND This represents seed fund introduced by the originators of AAU at the conception of the Association and has since been invested in long term investment. 25 ASSOCIATION OF AFRICAN UNIVERSITIES NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2018 19. EMPLOYEE BENEFIT OBLIGATION 2018 2017 US$ US$ End of Service Benefit 438,618 383,422 This represents gratuities entitled to staff determined as 15% of the staff's terminal basic annual salary for each completed year of service and pro-rata for a fraction of a year's service. 20. RESTRICTED FUNDS These are amounts received from various donor institutions that support the activities of AAU. The funds are made available subject to the Association meeting certain specific criteria. These have been treated as deferred income and shown as a current liability totalling US$313,825 in 2018, (US$637,235; 2017). 21. ACCOUNT PAYABLE 2018 2017 US$ USS Support Staff Provident Fund 18,866 25,359 Accrued employee benefits 46,760 39,165 MasterCard Foundation 119,960 120,360 Others 214,494 190 135 400,080 375,019 22. DEFERRED GOVERNMENT GRANT 2018 2017 US$ US$ At 1 January 3,655,647 3,807,966 Amount released to statement of financial performance _152 319 _(152319) At 31 December 3,503,328 3,655,647 Government grant represents the cost of constructing the Association's new office premises. Funding for the new office building was provided by the Government of Ghana through the Ghana Educational Trust Fund. Deferred government grant will be amortised over a 25 year period through the statement of financial performance. 26 ASSOCIATION OF AFRICAN UNIVERSITIES NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2018 23. ACCOUNTS PAYABLE - WORLD BANK PASET The Partnership for skills in Applied Sciences, Engineering and Technology (PASET) is an initiative to train doctoral and post-doctoral students to address the human resource gap of highly qualified specialist in the fields of applied sciences, engineering and technology in Sub- Sahara Africa. The initial allocation to the fund of US$2 million per country was provided by the Government of Ethiopia, Rwanda and Senegal. The Association of African Universities (AAU) was selected in May 2016 to be the Regional Implementation Unit (RIU) of the project. Since then, the AAU has undertaken several tasks, including selection of four host universities, selection of 16 RSIF scholars and overall managing of RSIF accounts. To date, US$2 million (less Bank fees for the transfer) each from the Kenyan and Rwandan governments have been transferred to the RSIF accounts. The AAU hired an Administrator, who started in January 2018 to lead the implementation of the scholarship program. A few months ago, another institution was competitively selected by the World Bank to serve as the implementation unit which means that the initiative has to be transferred out of the AAU to this new entity. At the year-end of the Association (i.e. 30 June 2018) the PASET funds had not been transferred to the new entity selected to management the funds. The funds have therefore been moved out of Restricted Grants and disclosed as an Accounts Payable pending their subsequent transfer. 24. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The association is exposed to various risks in relation to financial instruments. The main types of risks are market risk, credit risk and liquidity risk. The association's risk management is managed by the Head of Administration in close cooperation with the board, and focuses on actively securing the association's short to medium-term cash flows by minimising the exposure to volatile financial markets. Short-term financial investments are managed to generate lasting returns. The most significant financial risks to which the association is exposed are described below. Market risk analysis The association is exposed to market risk through its use of financial instruments and specifically to currency risk, interest rate risk which result from both its operating and investing activities. Foreign currency sensitivity Most of the association's transactions are carried out in US dollars. The association has limited or foreign currency exposure. Interest rate sensitivity The association's policy is to minimise interest rate cash flow risk exposures on long-term financing and investing activities. The association has no interest rate risk as its short term investments are held at a fixed rates. 27 ASSOCIATION OF AFRICAN UNIVERSITIES NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2018 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Credit risk analysis Credit risk is the risk that counterparty fails to discharge an obligation to the association. The association is exposed to this risk for various financial instruments, for example by receivables from customers and placing deposits etc. The association's maximum exposure to credit risk is limited to the carrying amount of financial assets recognised at 30 June, as summarised below: Classes of financial assets - carrying amounts 2018 2017 US$ US$ Investment 320,310 318,892 Trade and other receivable 91,089 184,579 Cash at bank and short term deposits 3,308,242 850 728 Total 3,719,641 1,354,199 The Association continuously monitors defaults of counterparty, identified either individually, and incorporates this information into its credit risk controls. The association's policy is to deal only with creditworthy counterparties. The association's management considers that all of the above financial assets are of good credit quality. At 30 June the association has certain receivables that have not been settled by the contractual due date but are not considered to be impaired The amounts at 30 June analysed by the length of time past due, are: Neither due nor impaired Past due but not impaired More than 3 More than months but 6 months not more but not than 6 more than More than months 1 year one year Total US$ US$ US$ US$ US$ 2018 91,089 - - - 91,089 2017 184,579 - - - 184,579 25. LIQUIDITY RISK ANALYSIS The association's objective is to maintain a balance between continuity of funding and flexibility through the use of customer's deposits, loans and other payables. The table below summarises the maturity profile of the association's financial liabilities based on contractual undiscounted payments. Year ended 30 June Less than 3 to 12 2018 On demand 3 months months 1 to 5 years Total US$ US$ US$ US$ US$ Accounts payable and other liabilities 3,272,214 - 3,272,214 28 ASSOCIATION OF AFRICAN UNIVERSITIES NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2018 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Year ended 30 June Less than 3 to 12 2017 On demand 3 months months 1 to 5 years Total US$ US$ US$ US$ US$ Accounts payable and other liabilities 1,012,254 - 1,012,254 Amounts disclosed above are the association's maximum possible credit risk exposure in relation to these instruments. Financial instruments and cash deposits Credit risk from balances with banks and financial institutions is managed by the Institute's Finance Department in accordance with the association's policy. Investments of surplus funds are made only with approved counterparties and within credit limits. 26. FAIR VALUE MEASUREMENT The carrying amounts of the Institute's financial assets and liabilities approximate its fair values and none of its non-financial assets or liabilities were measured or presented based on fair values. 27. RELATED PARTY DISCLOSURES Compensation of key management personnel Compensation US$ 2018 Short term benefits 362,855 2017 Short term benefits 3633 74 28. POST-REPORTING DATE EVENTS No adjusting or significant non-adjusting events have occurred between the 30 June reporting date and the date of authorization of the financial statements. 29. COMMITMENTS AND CONTINGENCIES There was no contingent liability as at the reporting date (2018: nil) 29 ASSOCIATION OF AFRICAN UNIVERSITIES NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2018 30 (i) WORLD BANK - AFRICA CENTRE OF EXCELLENCE STATEMENT OF RECEIPTS AND PAYMENTS 2018 2017 US$ US$ INCOME Receipts 1,190,996 995,820 LESS: EXPENDITURE ACE project verification - 68,627 Consultancy financial management/ M & E baseline studies 106,461 67,343 ACE workshop 108,987 - National review committee meetings 5,456 - Project steering committee meetings (PSC) 134,934 349,392 Project coordinator Salary 72,000 72,000 Monitoring & supervision missions 225,112 122,370 Website management 1,604 11,385 Communication & equipment 7,802 - Translation services 5,836 4,908 Bank Charges 8,058 10,239 Running cost 40,000 75,000 AAU staff time 215,746 25,258 Audit fees 11,813 11,750 Miscellaneous expenses 2,693 22,908 Total project expenditures 946,502 841,180 Excess of receipts over expenditure 244,494 154,640 30 ASSOCIATION OF AFRICAN UNIVERSITIES NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2018 30(i) WORLD BANK - AFRICA CENTRE OF EXCELLENCE STATEMENT OF ACCUMULATED FUND 2018 2017 US$ US$ Opening fund balance as at 31 July 2017 206,714 52,074 Excess of receipts over expenditure 244,494 154,640 Closing fund balance as at 30 June 2018 451,208 206,714 30(iii) WORLD BANK - AFRICA CENTRE OF EXCELLENCE STATEMENT OF FINANCIAL POSITION 2018 2017 US$ US$ Current assets PASET pre-financing 180,662 - Account receivables 5,515 98,162 Cash and bank balance 276,844 130,302 463,021 228,464 Current liabilities Accrued audit fees 11813 21,750 Net current assets 451,208 206,714 Financed by: Accumulated fund 451,208 206, 714 31