Office of the Auditor General Victoria Hall 11 Victoria Street Hamilton HM 11, Bermuda WAW Tel: Fax: " (441)296-3148 (441)295-3849 Email: auditbda@gov.bm Website: www.oagbermuda.gov.bm AUDITOR'S REPORT To the Board of Governors I have audited the statements of revenues and expenses and fund deficit of The Governors of the Berkeley Institute Capitation Grant Account for the year ended March 31, 2006. These financial statements are the responsibility of the Board of Governors. My responsibility is to express an opinion on these financial statements based on my audit. Except as explained in the following paragraph, I conducted my audit in accordance with auditing standards generally accepted in Bermuda and Canada. Those standards require that I plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I was unable to obtain sufficient appropriate audit evidence to support the accuracy and completeness of accounts receivable relating to the wireless laptop program. As a result, I was unable to determine whether adjustments might be necessary to accounts receivable, expenses, deficiency of revenues over expenses and deficit. In my opinion, except for the effect of adjustments, if any, which I might have determined to be necessary had I been able to satisfy myself with respect to the balance of accounts receivable described in the preceding paragraph, these financial statements present fairly, in all material respects, the financial position of The Governors of the Berkeley Institute Capitation Grant Account as at March 31, 2006 and the results of its operations and cash flows for the year then ended in accordance with the stated accounting policy as described in note 2 of the financial statements. These financial statements, which have not been, and were not intended to be, prepared in accordance with accounting principles generally accepted in Bermuda and Canada, are solely for the information and use of the Ministry of Education to comply with section 21 of the Education Act 1996 to provide an accounting for the use of the Berkeley Institute Capitation Grant. The financial statements are not intended to be and should not be used by anyone other than the specified users or for any other purpose. Hamilton, Bermuda October 24, 2007 Larry T. Dennis, C.A. Auditor Genera] 153 THE GOVERNORS OF THE BERKELEY INSTITUTE CAPITATION GRANT ACCOUNT STATEMENT OF REVENUES AND EXPENSES FOR THE YEAR ENDED MARCH 31, 2006 (Expressed in Bermuda dollars) 2006 2005 $ $ 3,295,129 8,340 7,200 2,870 2,639,565 16,965 6,300 2,935 3,313,539 2,665,765 1,117,672 557,546 434,193 286,869 176,935 142,286 133,387 72,154 69,046 52,364 42,600 7,200 6,192 938,920 1,038,426 357,570 111,653 175,872 134,462 127,706 93,776 68,249 48,789 41,400 6,300 5,445 REVENUES Government grant Discounts received Donated audit services Interest EXPENSES Salaries, wages and employee benefits Computer systems cost (note 3) Departmental Consulting Security Electricity Maintenance Office supplies Telephone, postage and courier charges Interest on wireless laptop loan (note 3) Accounting services Audit fee Bank charges and interest Transportation Furniture and equipment Insurance Miscellaneous 545 9,901 3,108,890 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENSES 35,464 12,781 10,223 3,207,036 204,649 The accompanying notes are an integral part of these financial statements. 154 (541,271) THE GOVERNORS OF THE BERKELEY INSTITUTE CAPITATION GRANT ACCOUNT STATEMENT OF FUND DEFICIT AS AT MARCH 31, 2006 (Expressed in Bermuda dollars) 2006 $ EXCESS (DEFICIENCY) OF REVENUES OVER EXPENSES 2005 $ (545,800) (882,422) (1,087,071) 59,241 242,640 (283,927) (750,336) (4,426) (145,614) 33,504 241,949 (270,049) (971,804) (4,426) (116,245) (882,422) DEFICIT, END OF YEAR (541,271) (1,087,071) DEFICIT, BEGINNING OF YEAR 204,649 (1,087,071) REPRESENTED BY: Cash Accounts receivable (note 3) Accounts payable Wireless laptop loan (note 3) Due to the Board of Governors (note 4) Due to Government of Bermuda (note 5) The accompanying notes are an integral part of these financial statements. 155 THE GOVERNORS OF THE BERKELEY INSTITUTE CAPITATION GRANT ACCOUNT NOTES TO THE FINANCIAL STATEMENTS MARCH 31, 2006 1. AUTHORITY The Berkeley Institute is governed by the Berkeley Institute Act 1933 ("the Act") and its subsequent amendments. The Act provides for the management of the school by "The Governors of the Berkeley Institute". The Governors of the Berkeley Institute are empowered to pass bye-laws for the proper administration of the real estate, funds and investments vested in it by the Act. The Governors of the Berkeley Institute Capitation Grant Account reflects only the transactions and deficit of the Capitation Grant Account. As such, the financial statement does not purport to show all the transactions, assets, liabilities and equity of the Berkeley Institute. 2. SIGNIFICANT ACCOUNTING POLICIES (a) Physical assets Physical assets such as inventories of supplies, furniture and equipment are expensed in the year of acquisition. (b) Cash Cash includes all cash on deposits with financial institutions that can be withdrawn without prior notice or penalty and time deposits with an original maturity of 90 days or less. (c) Translation of foreign currencies Assets and liabilities in foreign currencies are translated to Bermuda dollars at rates of exchange in effect at the statement of fund deficit date. Revenues earned and expenses incurred in foreign currencies are translated at the rate of exchange prevailing on the transaction date. (d) Fair value of financial instruments The capitation grant account's financial instruments consist of accounts receivable, prepaid expenses, accounts payable, wireless laptop loan, due to the Board of Governors and due to the Government of Bermuda. Unless otherwise noted, it is management's opinion that the Capitation Grant Account is not exposed to significant interest, currency or credit risks arising from the financial instruments. The fair value of these financial instruments approximates their carrying values, unless otherwise noted. 156 THE GOVERNORS OF THE BERKELEY INSTITUTE CAPITATION GRANT ACCOUNT NOTES TO THE FINANCIAL STATEMENTS MARCH 31, 2006 2. SIGNIFICANT ACCOUNTING POLICIES (continued) (e) Use of estimates The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues earned and expenses incurred during the year. Actual results could differ from these estimates. 3. WIRELESS LAPTOP LOAN During the year, the Berkeley Institute purchased computer hardware and software totalling $258,400 (2005: $732,637). Payments are being made in monthly instalments of $46,633 (2005: $38,633). $209,760 (2005: $199,375) of these costs were for laptop computers which were given to students as part of the wireless laptops program. The Berkeley Institute is recovering 75% of the cost of the computers from the students. At year end, the receivable balance from the students is $242,640 (2005: $241,949). The remaining 25% of the cost is included as part of computer systems cost on the Statement of Revenues and Expenses. 4. DUE TO THE BOARD OF GOVERNORS The amount due to the Board of Governors, a related party, is interest free and has no fixed terms of repayment. 5 DUE TO THE GOVERNMENT OF BERMUDA . The amount due to the Government of Bermuda represents accruals for payroll tax, health insurance and social insurance. 6. STATEMENT OF CASH FLOWS A statement of cash flows has not been prepared as it would not provide any additional useful information. 7. ECONOMIC DEPENDENCE The Berkeley Institute is economically dependent on the Government of Bermuda for its daily operations and cash flow. 157 THE GOVERNORS OF THE BERKELEY INSTITUTE CAPITATION GRANT ACCOUNT NOTES TO THE FINANCIAL STATEMENTS MARCH 31,2006 COMPARATIVE FIGURES Certain comparative figures have been reclassified to conform to the current year's presentation. 158