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PUBLIC UBRARIES REFERENCE LIBRARY ^^ #- ^. .4^ 1 « :v*(^ ^''- *y^': a''-**' ,# rVt. •J^ *:^ -.'. » rf %-! » '■^f ^ ' * -^ is" 1** J: m & UNIVERSITY OF TORONTO. REPORT OF COMMITTEE APPOINTBD BY THB BOARD OF TRUSTEES TO CONFER WITH THB BURSAR AS TO THB CAPITAL AND INCOME ACCOUNTS AND OTHER MATTERS CONNECTED WITH THE ADMINISTRATION OF HIS OFFICE. A.r50P»'rE3D, STOTTEll^BEIIl 8a7HC, 3.903 TORONTO: WARWICK BROS. & RUTTER, PRINTERS, 68 akd 70 FRONT ST. WRST s 1893. *!i* UNIVERSITY OF TORONTO. REPORT OF COMMITTEE APPOINTED BT THB BOARD OF TRUSTEES TO CONFER WITH THB BURSAR AS TO THB CAPITAL AND INCOME ACCOUNTS AND OTHER MATTERS CONNECTED WITH THE ADMINISTRATION OF HIS OFFICE. J^1D0:E>TS11D, l^O'VJQXifBSlJR 8TX3:, 1893. TORONTO WARWICK BROS. & RUTTBR, PRINTERS, &c., 68 & 70 FRONT STREET WEST. 189 8. UNIVERSITY OF TORONTO. iom» ToKONTo, November Ist, 1893. To the Truateei of the UaioirsUij of Toronto and University College ; Gentlbmen, — At a meeting of the Board of Trustees held 1 9th November, Minute au- 1891, the following minute was recorded : mittee*^ Minute. — Mr. Walker suggests that there should be an inspection and valuation of the mortgages of the University. Mr. Walker alro enquires as to the system of book-keeping and audit adopted. It is also suggested that some plan for watching mortga^'es in arrear should be formed. Ordered, that Messrs. Walker and Hoskin be a Sub-committee to enquire into and report on these matters with their suggestions as to any improve- ments in administration. On Slst December, 1891, ycur Oommittee reported as follows : The Committee consisting of Messrs. Hoskin and Walker appointed to F>wt Rei)ort confer with the Bursar as to the Capital Accounts, Custody of Securities, °^ Committee. Auiiting of Books of the University, etc., beg to report as follows : The Committee find that the Bursar keeps on *he one hand no Capital Accounts ; and on the other hand no Assets Accounts covering the holdings of the University in debentures and mortgages, and the property of the University in lands, buildings, etc.; »n-j that the balance sheet prepared semi- annually for the Provincial Auditor 'j-sys merely the uninvested cash in the hands of the Bursar at the particular date. There is an account called " Capital Account " to which receipts from mortgages, sales of land, endow- ments or other sources are credited, and to which loans or other investments and expenditures for buildings, etc., are debited. The Committee recommend that proper Capital Accounts be at once opened and also Assets Accounts, covering the properties of the University under such heads as the following : 1. Debentures, stocks, etc. 2. Mortgages. 3. Lands under lease. 4. Lands sold, purchase money in course of payment. 5. Property held for sale or lease. 6. University buildings. 7. University Library. 8. University furniture account. Until such accounts are kept no proper audit can, in the opinion of the Committee, be made. The Committee understand that the debentures owned by the University are in the custody of the Provincial Auditor and the Bursar. The Bursar annually makes a return of debentures and mortgages owned by the University, but these do not bilance with any account in his books. No ledger accounts are therefore kept for the loans. A loan register, however, is kept in which the particulars of all loans are recorded, interest being entered as it becomes due, not as a book-keeping entry, but as a memorandum. The Committee would recommend in connection with the loans that here- after a black Hat be kept showing thn namea of borrowers in arrear for principal or interest, which book should b) pluced upon the table at each nieetiii},' of the Board of Trustees. The Oomniittee would also recommend that Mr. W. I{. Cross be appointed to assist the liirsar in opening a set of books in conformity with this report, and in opening; books for the accounts in connection with the Hetirement Fund; also th it a proper system of audit bo arranged. At the conclusion of his labors Mr. Cross should make a report to the Board. In connection with the loans made by way of mortgage, the Committee find that the Bursar employs no regular valu>itor, and it is recommended that the existing loaas of the University be re-examined by a competent valuator. It is also recommended that the entire question of making loans by way of mortgage be the subject of discussion by the Board of Trustees. In this con- nection it will be well to consid* r whether, in view of the moderate volume of capital at our command, loans should be made outside of the City oi Toronto. The Committee have not considered the question as to whether an improved system of book keeping will involve more work in the Bursar's Department, preferring to leave that question for the discussioa of the Board after Mr. Cross' report has been received. Toronto, 31st December, 1891. The recommendation of your Committee, that Mr. W. H. Cross, F.C.A., be employed to assist the Bursar in opening a set of books in conformity with their report, was adopted. Nothing definite, however, could be accomplished opening a new until the closing of the books for the fiscal year of the * University, ending •etof BookB. 30th June, 1892. When the books were ready to be closed the following letter was, with the approval of the Board, addressed to Mr. Cross : Employment of Mr. OroBB to assist the Bursar in Mr. Walker's letter of in- Btruction to Mr. Gross. Toronto, 17th August, 1892. Dear Mr. Cross, — The Bursar has about completed the closing of his books to 30th June, and will be in a position in a few days to make the entries in connection with the agreement between the Upper Canada College and the Toronto University. The property map necessary for the valuation of some of the assets of the University is now made and it is desired that the set of books contemplated in the report of Messrs. Hoekin and Walker to the Board of Trustees, dated 31st December, 1891, a copy of which is in your hands, be at once prepared. If there are any assets or liability accounts, accurate figures for which cannot be at once reached, we would suggest that the opening of the books be not delayed for that reason but that such accounts be added later. In this manner, while a balance sheet taken at the moment of opening the books would not exhibit a perfectly accurate state of the accounts of the University, we may hope to have a complete set of books within a few months ; and in the meantime the book-keeping will be carried on under the new system, with proper arrangements for audit. 1. Debentures, etc. The actual debentures should be compared with the Bursar's list and entered in the new books at par. The Upper Canada College debentures, now deposited with the bank as the property of that body, should be transferred to the University. * Throughout the report the referred to aithe " University." ' University of Toronto and University College " are e loans that here- ers in arrear for he table at each roBS be appointed with this report, the Uetirenient I the ooaclusion e, the Oommittee ecomtnended that npetont valuator, loans by way of aes. In this con- derate volume of City of Toronto, to whether an in the Buraar'a ton of the Board I. Cross, F.CA , I conformity with be accomplished niversity, ending led the following Cross : ugust, 1892. he closing of his ays to make the r Canada College for the valuation I desired that the id Walker to the which is in your Sgures for which ; of the books be 1 later. In this ening the books " the University, iths ; and in the ew system, with ursar's list and ith the bank as Jrsity. sity College" are 1 ( i The Order-in Council ordering the entrien rognrding Upper Canada College will contain the necessary authority to the bank. 2. MOHTUAOKS. The mortgas;e8 are to he taken at their face value. It is stated that thnre is a contingent fund and to it should be addtul any deduction made in taking over tlie Upper Canadii College niortga^^es and lands. You should send out notices to the mortga^^'ors stating the principiil and interest due, in order to check the correctness of th« UurHar's books. Interest matured but unpaid should be treated according to the practice of well managed loan companies. Hereafter the Biard of Trustees will have an investigation made as to the value of the properties mortg^iged as security. The black list referred to in our report should be prepired at on;e. 3. Lands under Lrasr. These are to be valued at the capital represented by the rentals, on the basis of money being worth live per cent, per annum. Thin rule cannot be applied tn the educitional institutions, and the property iHased to them should bo valued as follows : Victoria College land . $ 1 00 Observatory land 1 00 Wyolifie College land 2,500 00 School of Science land 1 00 It has been agreed that the rental for the School of Science shall be fixed by arbitration and when that is done an entry should be made adjusting this valuation. 4. Lands Sold. Purchase Money in Course of Payment. The mortgages or contracts are to be taken at face value. Hereafter an examination inuO the actual value of these contracts will be made under instructions of the Board of Trustees. 5. Property held for Sale or Lease. Queen'8 Park Property, Herewith we hand you a memorandum by Messrs. H. J. & W. A. Brown showing areas of land in Queen's Park. We also hand you a letter from the Bursar giving the boundaries and the sum of money offered by — for part of the Queen's Park property. A calculation attached to Messrs. Brown's memorandum shows that .Vlr. 's offer was about 38 cents per superficial foot. We desire this valuation to be a|)|)li^'d to the property No. 1 [1,213,720 sup. ft] and No. 2 [200,790 sup. ft.] This covers all the Queen's Park property held for sale or lease except the College street cfr Irving Walker lot. This we desire you to value at the estimate made for the Board of Trustees by Mr. Wads worth, given in the Bursar's letter. Upper Canada College Block. This is to be valued on th^ biiis of the offer referred to in the Bursar's letter. Olhttr Prop^rti^H. The few remaining propertiflB held for Rain or InHse wh unilerntand to be unimportant and these may he valued at tlie Bursar's eHtiinatP. Part of the property [lots ft3, 60, 08 and 72] for which Mr. offered is leaHehold and will, of course, fttll under No. 3. After arriving at the value of property No. 1 [1,213,720 Rup. ft] it will be necessary to deduct the amount lor which lotn Noi. 10, 1 1, 23, 26, 27 and 28 were 8olJ, the mortgages or contracts for which fall under No. 4. 6. UN1VIIK8ITY Land anh Kuildinqs, The number of superficial feet contained in the block of Unl reserved for Universitv purposes i>i given in the memoMndum of H. J ife W. A. Brown, property No. 3 [1,341,920 su|». ft.]. W« dnsire this also to be valued at 38 cents per su|)erticial foot. The buildings are to be taken at the ArchitHoi's valuHtion. This will be easily aHCfrtained in the case of the Biological and Library buildings, but the Main building presents some difBcultied. A recent valuation by Mr. Dick seemed too high to the TruswCes. Consult Dr. Hoskin as to this, 7. University Library Books. An official letter from Mr. Birwick or the Librarian should be obtained giving the value. Perhaps the last letter to the Board of Trustees giving value for insurance purposes will be sufficient. 8. University Apparatus and Furniturr Account. The apparatus of the UiiiverHity represents a large outlay and doubtlesa can only he valued by consulting the various professors. ThiH slmuld be done but any delay in obtaining the information need not interfere with the early opening of the books. 9. Insurancb. We desire you to make a report as to th^) suffi.-iency or otherwiHe of the insurance now carried on all the University properties. 10. Rbtirbmbnt Fund. We expect you to see that the septrate ledger or other book, showing the amount of the interest of each professor or other officer in the Retirement Fund, is properly opened and carried on hereafter. 11. Audit. You are in your report to suggest a complete system of audit. 12. Endowment Account. The capital arising from the variouH assets to be valued as heretofore mentioned, due allowance being made for all other assets and liabilities, will constitute the Endowment Fund of the University. It will be well to con- ■ider, in making the finoal iitatement at the 30th June in each year, whether It would not \>e well to divide the aueta ropregenting this Endowment Fund ai follow! : Ftndowmftnt Fund. 1 Invested in buildings, apparatus, land, etc., necessary for University purpobes. 2. Ansets producing revenue. 3. Assets other than No. 1 not producing revenue, 13. Statement or Cash B;i..NCRfl. We also hand you the ctish balances as at 30th Juno last. The Hcoounts do not in any case seem to require instructions from the Oomraittoe. We hope that you will be able to undertake the opening of the new books at once, so that thoy will be in operation when the Ohancellor returns. He sails we understand in a few days. Yours truly, For the Comiuittee, B. E. WALKER, W. H. Crosb. Esq., F.O.A,, Toronto. otherwise of the On r2th October, 1892, Mr. Cross reported as follows : To the Board of TruiteM of the University of Toronto : Qbntlrmen, — I have the honor to inform you that the requirements of First report oi the report of your Sub-oommittee, consisting of Dr. Hoskin, Q.C., and Mr. Mr. Grou. Walker, adopted by you on 31st December last, have, with the advice and assistance of the Bursar, been fulfilled. Capital Accounts have been 0|)ened in the Bursar's books, and the form of accounting has been adapted to show the additional information proposed to be embraced in the yearly returns. The details of the Retirement Fund authorized by the order of the Lieutenant Governor in Council, dated 20th November, 1891, are separately accounted for. The details of lands from which revenue is derived, or intended to be derived, separately appear, and the details of securities other than land have likewise been separately recorded. This plan of accbunt is simple, it will lessen rather than increase the office work which has hitherto been necessary, and no special clerical training will be called for. The office of fimt clerk has been vacant for some time, the duties thereof having been done under a temporary arrangement after office hours, and the work has neceHsarily been constantly in arrear. It is desir- able that some permanent arrangement be at once made in order that daily transactions may be recorded from day to day, and not until after the close of the month in which they have taken place as heretofore. The members of the Board would be able to execute their trust more speedily and not less efficiently if recent and sufficient information awaited them at each meeting. A series of progress reports during the year (quarterly or monthly) would supply this information, and hereafter the receipts and expenditures at the same date in the preceding year would show at a glance the fin ncial situation. 8 The balance sheet submitted herewith sets forth, as on 30th June last, the totals of the various funds administered by you on one side, and on the other the assets of which they were composed. Such a balance sheet at the close of each financial year will be an addition to the return made to the Minister of Education, which heretofore has consisted of a statement of cash received and expended. Owing to the ..bsence of past records it has been necessary to value cer- tain assets, particulars of the various methods, which in the judgment of your Sub-committee have seemed best, are at your service. In several instances no valuation has been attempted, a nominal amount having been entered in the meantime. ^r\ certain minor respects, therefore, this balance sheet does not exhibit the actual state of matters at the beginning of the current financial year, and it will probably be some time before this defect is altogether over- come. Genbrat. Endowments Fond. The main aim of the method of accounting now begun is that of exhibit- ing the true state of this account, and the relations to it and to Income of all receipts and expenditures. No other fund will be changed by the adjust- ments above referred to, and when they shall have been made, this account will be increased. It may also be said of other adjustments, which more accurate future information may render necessary, that it is unlikely that their effect will be to impair this fund in any instance. No change should be made in this account without your approval, and with this object in view before the closing entries of each yekr are made, a statement of all amounts affecting this account should be prepared and submitted to the Board. The fund has arisen in four ways : (1) Proceeds of Lands set apart by the Crown for this purpose. — The latest return shows that of the original grant of 225,497 acres, $1,446,363.31 had been realized as the proceeds of 220,279 acres, sold up to 30th June, 1877, an average price of $6.57 per acre. Of the 5,218 acres unsold on 30th June, 1877, only 121 acres &re now valued, the greater part of the remainder having been realized upon. A residue of perhaps 1,000 acres has failed to yield anything. As soon as office arrangements admit of it, the original list (embracing some 1,500 parcels) should be examined, and a statement of the lots and parts of lots that have produced nothing should be prepared and submitted to you with a report from the Bursar thereon. (2) Unexpended Revenues — Using the description in its ordinarily accepted sense, and also attaching to it a somewhat larger meaning so that it may embrace the unreceived earnings of investments which have been per- mitted to accumulate in the form of increased land values to the extent which the same amount would have earned if employed at current rates of interest, it appears that the contribution by the University to its Genq^ %l Endowment exceeds in amount that from all other sources put together. All revenues unexpended at the end of each financial year pass directly under section 22 of the University Act (50 Vict. cap. 44) to this fund. The additions in this way have been continuous and large. During the fifteen years preceding June, 1843, when the University was opened for the pur- poses of education, a large part of the net revenue was directly added to this fund. A portion of the large advances made to Upper Canada College before the opening of the University, equal to the revenue for four years at that period, has, under the recent arrangements with that institution, been restored to this fund. 9 Indirectly by the purchaue of books, apparatus aad other equipment, and by the erection of buildings out of moneys received as income, considerable additions have been made to this fund. Investments in debentures and municipal bonds bought below par have added $43,480 to this account since 1881, it having been the rule to treat only the actual interest received upon such securities as income. By far the largest addition ,0 this fund has arisen from investments, in land from which, as in the case of debenture investments, the rule has been to carry to Income Account the bare rentals received. The land bought as a site more than sixty-three years ago covered an area five times greater than that now reserved as sufficient for the present and future needs of the foun- dation. Until recently only a small part of the remaining four-fifths has yielded anything, so that for a long term, during which other portions of the Endowment Fund were returning from six to eight per cent, per annum, the capital invested in these lands, and the interest thereon, came to be repre- sented by an increased valuation of the subject matter of the investment. Treating the purchase of the Queen's Park lands as an investment, the interest upon which has been yearly re-invested, then this capital has yielded a ratn of interest approaching seven per cent, per annum. Adopting six per cent, as a basis, and asHuming that the small portion already sold has realized its cost, the value of all these lands, as it appears in the balance sheet of 30th June last, is $365,197 less than cost on that day. (3) Increaaed Land Valuea. — Any increase beyond cost computed as above would fall under this head. Some additions of this kind there are. The unpro- ductive lt«nds in Queen's Park, for instance, are valued at a sum which is $152,441 more than their cost upon a six per cent, basis, but this gain is offset by losses upon other portions to the extent of $517,638 — the main and only actual loss arising from the 48 acres leased to the City of Toronto, the cost of which to the University on 30th June last was $582,768. Having regard to the fact that in lieu of rental the amount yearly to be received is fixed at $6,000, your sub-committee selected $120,000 (the sum which at five per cent, would yield $6,000 per annum), as the true measure of the value of this asset. The effect of this entirely sound valuation is, that the General Endowments Fund is presented less to the extent of $462,768, than it would have been bad the lands leased to the city been vf.lued upon a basis of cost price. Other valuations upon the basis of capitalized rentals under term leases which show present loss are different in character, and the future promises important recoveries to the fund. (4) Bequests, Subscriptions or Gifts other than those for specific purposes which otherwise appear. — These have been considerable in themselves, but the recent large contributions have been so merged in the losses by the great fire which called them forth, that their effect has been rather to preserve the fund from impairment than to directly increase it. Specific Endowment Funds. With a single exception these accounts are brought forward from the previous books where the capital sums have always appeared, the exception being that in one instance a farm was bequeathed. This is leased until 1910, and the capitrilized rental has been added to ihe account as it previously appeared. Departmental Funds. These are brought forward from the previous books unchanged. All are for definite University purposes, and when so applied the entire amount of $85,137.30 will fall into the General Endowments. 10 I t ■ Contingency Account. This $24,620 consists of reservations from revenues in order to shield the endowments from impairment in case of loss upon investments. As no loss upon debentures, either principal or interest, has arisen during the past half century, and as the losses upon lands sold, in case the remainder of the purcbaHO money be not paid, cannot be large, it fol'ows that practi- cally the whole of this amount is available as against the principal money of loans secured by first mortgage upon real property. Several losses are expected and unforeseen losses can hardly fail to occur from securities ot this nature, however much care may be taken ; but in view of the smallness of arrears in interest, the amount of this reservation seems quite sufficient for ita intended purpose. Abnormal Receipts. This fund is diviHible into two parts, $4,164.77 brought unappropriated from last year, and $2,834.39 unused appropriations to various departments for apparatus, instruments and fittings. Should the entire amount be applied to these or similar purposes, it is evident that in increasing the value of the equipment of the University, this amount would fall into the General Endow- ments. Revenue Account. The item of $2,475.15 consists of the unexpended portion of last year's income. The item of $36,739.81 consists of the computed earnings to 30th June last (interest and rentals) and may be treated as a portion of this year's actual receipts. The introduction of these upon both sides of the balance sheet was necessary in order to show the true state of affairs in this respect at the beginning of this financial year. Liabilities. Unlike tAl the aforenamed funds these six amounts aggregating $324,- 162.92 may be regarded as liabilities. The $212,227.42 uince paid on behalf of Upper Canada College really reduced to that extent the bank balance shown on the other side. The Endowment Fund to be held for the benefit of Upper Canada College under the provisions of sections 4 and 18 of 50 Vict., Cap. 44, is to bear interest when certain assets are realized, and such interest as may be earned by $100,000 of the amount so realized. It would seem to follow from these provisions that specific portions of such realizations to that extent will fall to be allocated, and the earnings thereof either carried as received to an account to be kept for that purpose or paid over as received. No doubt you will pro- vide as to the mode ot procedure in due time. The Retirement Fund just begun will steadily increase. The computations of interest will be examined at each annual audit. In addition to this you may deem it proper to provide that each beneficiary should either be periodi- cally notified of the state of his account or that the account itself should be open to hill inspection. Assets. The value placed upon the lands, buildings and equipment needed by the foundations as teaching institutions is $1,217,688 85. The value of the Museum and also of the apparatus and instruments in use in the Biological, Chemical, Physical and Psychological Departments is unascertained, and pending the receipt of the necessary information a nominal sum has been ^ 11 order to shield the lents. t, has arisen during i case the remainder follows that practi- priucipal money of Several losses are >m securities ot this o{ the smallness of lite sufficient for its ;ht unappropriated 'arious departments 9 amount be applied ig the value of the bhe General Endow- rtion of last year's nings to 30th June rtion of this year's des of the balance airs in this respect aggregating $324,- ince paid on behalf the bank balance ser Canada College G!ap. 44, is to bear i as may be earned } follow from these extent will fall to lived to an account iloubt you will pro- The computations ddition to this you I eitder be periodi- Qt itself should be lent needed by the The value of the ) in the Biological, jnascertained, and inal sum has been entered in order to open the acciunta. The value of the Library wa-« at once obtained from an accession catalogue kept by the Librarian in which the date of receipt of each work and how acquired is duly entered. The proposed yearly balance sheet will oblige thn K(ursar to state the actual value ot all assets, and some adaptation to the circumstances of each department of the plan adopted by the Librarian would be found useful. The list of the cm- tents of the Museum now being prepared (involving much labor) may wall form the basis of some permanent record. Unproductive Lands. The greater portion of these lands are valued up)n the basij of offers made to you and declined. That for the lauds in Queen's Park was equal to cost . and six and one-half p^r cent, per annum with yearly rests, leaving out of consideration charges for maintenance and cost of management. The latter is ;^ an important omission since it appears that the aggregate of th)^ yearly outlay I for management to the end of the year preceding the opening of the University i exceeded the capital actually invested in the land. '■ Leased Lands. These have been valued at the capitalized rentals upon a five per cent basis, ; so that the values are rather those of the date at which each lease was executed than of 30th June last. 1» is evident that very different values are thus given to lands ininif diately adjacent to each other, but in the cas-e of renewabi • leases the method provides for periodic adjustments. The leases in Queen's Park (44 in number) bear dttes running from I5th September, 1862, to Ist July, 1886. The earlier 23 leases having Ist July, r, 1872, as a wean date yield ^ve per cent interest upon an amount equal to ~ $4,883 per acre, whilst after crediting ail earnings the land ban cost $6,700 i per acre. I The later 21 leases having 1st July, 1885, as a mean date yield five per I cent, interest upon $9,008 per acre, but the shorter period of the higher : rentals leaves the cost $11,830 per acre. In other words, $100 in rentals from fl 1st July, 1872, has proved as advantageous as $185 in rentals beginning 1 thirteen years later. I As already shown the land leased to the City of Toronto yields somewhat A more than one per cent, upon its cost price. To two parcels of land, some three and one-third acres in all, occupied by the Crown for other purposes, a nominal value has been given in the meantime. Investments. The amounts shown have been actuarially determined. The face amount of debentures is given ; some were bought above and others b«low par ; the actual cost has been somewhat less than the total shown. The date to which interest on loans was paid has been ascertained and each m irtgagor has been notified as t.) the principil moneys due by him and as to the position of his interest account. University College. No distinction has been attempted as between the University and Univer- sity College in the Capital Accounts. The original grant to these two oorpora- itions was one common to both. It may be that some of the bequests or gifts now forming part of the General Endowments were intended for one or other of the instituii ms. In the futur.-, any additions of a limited cature will of course bf* separately shojvn, but it would bo diffijultaocarately to adjust past additions of this kind. 12 The Bursar lias not included in his yearly returns receipts and expendi- tures of Residence moneyc. The Act seems to require the inclusion in his returns of all monetary transactions. The Residence hasbeea self-sustaining, and the officer who has been held personally responsible for the production of this result has reported to the College Oouncil. The system has worked well for many years. Insurance. 1! ! i I The Library building is uninsured ; the other buildings are insured to the extent of nearly sixty per cent, of the amount at which they are v i' '1 in the balance sheet herewith submitted. The contents of the liibrary are cove-ed to the extent of ninety-four per cent, of the present value — a very high ratio.* In the absence of information as to the value of the equipment of the other buildings and its disposition, I am unable to report to you as to whether $30,800 of total insurance upon these assets is sufficient, or if the said amount is properly apportioned or not. Audit. Such a complete system of audit as is contemplated in Mr. Walker's letter of 17th August, must rest upon past regulations as to payments and the authority therefor and such future requirements as you juay make. The yearly appropriations limit the amount which any department cin expend and a large proportion of each departm^^nt's r^quiremimts is in the nature of tixnd chargfs. Payments by way of investuent or re-investment will have the authority of a minute of the Board. The ai'dit of receipts will be assisted by the system now introduced, the accounts of lands and investments being in a sense self-checking. The fees and other receipts not directly paid to the Bursar have no such check and the audit of them will fall to l)e made in connection with the departmental rolls and the rolls of University College. 1 W. H. CROSS. Toronto, 12th October, 1892. Library books and Univers- ity equip- ment. il This report was accompanied by the balance sheet of 30th June, 1 892 subsequently approved by the Board, and which your Committee believe to be the first approximately correct balance sheet in the history of the Univer- sity which disclosed its financial condition. It was, however, incomplete in some respects for want of information and is not included in this report. The books in the Library, owing to the systematic cataloguing since the fire, hiid been valued, but the equipment in five departments of the University ■ had yet to be valued. With the approval of the Biard this information was asked from the Professors in charge of the departments on 26th January, 1893. Appointment On the 6th April, 1893, Mr. W. H. Cross, RCA, was appointed as as AudSor*for ■^"<^''^or for the Board of Trustees, and the book-keeping being now carried on the Board. under an entirely satisfactory system, the main object for which your Com- 1 mittee was appointed, was accomplished. It was, however, thought best by the Board that the final report of your Committee should accompany the | balance sheet taken from the books at the end of the first year under the new system. * Note.— The Library building wm at this time in the hands of the contractor. It it \ now insured. T)ie unusually high insurance on the books was effected whea they were stored in a building not of fire-proof construction. 13 'I'hey have, therefore, great pleasure in now being able to lay before the Balance Sheet oard a statement of the financial position of the University in the fortii of a il^^^ ''^"''®' itlance sheet with appendices, the relative accounts having been properly ,udited, and the assttts and liabilities as clearly set forth as possible. The etter of instruction from Mr. Walker to Mr. Cross and the tirst report of r. OrosB, together with the footnotes to the appendices accompanying the alance sheet, will, they hope, be sufficient to explain matters of detail. In the Beport of the Commission^ m of Inquiry into the affairs of the niversity, instituted in 1848, it is stated that " an entire new set of account ooks, framed upon correct commercial principles, was considered by them as ndispensable, alike for the purposes of their investigation and the future lervice ot the University." Your Committee were informed by the Bursar hat the system of bookkeeping in use until the present change came about as that which had been in use before the inquiry of 1848, the set of books pened by the accountants of the Commission not having been continued by ;be Bursar. It, perhaps, answered the purposes of the University when its iffairs were of less scope than at present, but no balance sheet taken from hese books pretended to disclose the financial position of the University. The k keeping was simply the machinery necessary to enable the Bursar to ransact his share of the business of the University, not to enable him or the Trustees to readily and accurately ascertain its financial condition. The Defects of the defects may be illustraied by stating that no one from the balance sheet could ^u^k**" **' tell that the University owned any land, buildings or equipments ; no one could tell what its interest-earning investments were. Its liabilities to the general public and to special funds were correctly disclosed, but no one could ascertain the extent of its Endowment. If a payment was received, say from the sale of land, it was ci^dited to an account called " Capital Account," and if this amount was loaned out on mortgage it was debited to this *' Capital Account," so that, while by searching the books the record of the two transactions could be found, the balance sheet disclosed no change in the accounts of the University. f Before the fire, however, and the building schemes which preceded and The extent followed it; the consequent depreciation of the interest earning assets ; and and nature of TT . ii. v^xvv/wo. » the complications which made necessary the Committee who prepared tbs theUnlTerBity ^Beport on Revenues and Requirements, dated April 13th, 1891 ; the old system render it ,, jhad become quite inadequate. It seemed to your Committee, therefore, even "1''^*^**'^ *° more necessary than it was forty years ago, that the bookkeeping of the more modern {University, however it might differ in detail, should be " framed upon correct Bystem of icommercial principles," and their labors have been directed to providing the book-keeping, {machinery necessary for an institution with assets valued at several millions >f dollars. Your Committee recognize that there is not a complete analogy between )uoh an institution as the University and a commercial corporation. The [University has no shareholders who would expect to receive annually a. iatatement shewing that their capital was unimpaired and that a dividend had [been earned. But the Trustees are required by the University Act to pre- lerve the Endowment from being impaired by expenditures for maintenance on [the one hand ; while on the other, the just claims for expenditure in order to [make the work of the University efficient, demand that the sources of income ihall be clearly understood, and that income shall not by imperfect book- ceeping pass to the Endowment when imperatively needed for maintenance. If the management of the Endowment for the purpose of earning an income is considered it will be seen that the University has interest-bearing invest- lents amounting to about $1,400,000 ; while if the unproductive lands had )en sold during the recent period of high prices, the sum to be administered |