Financial Presentation to Senate April 25, 2015

Financial Presentation to Senate April 25, 2015

Financial Presentation to Senate

April 25, 2015


Questions posed by Council

1. What was the origin of the previously projected $44.5M deficit?

2. What is the present actual deficits and the future projected deficits?

3. How and why was the $44.5M projected deficit adjusted to reflect the actual and future projected deficits?


Focus on operating budget

2013-14 annual financial report: usask.ca/reporting


Question 1:

What was the origin of the previously projected $44.5M deficit?


600

550

500

450

400

350

300

250

200

Question 1: What was the origin of the previously projected $44.5M deficit?

Original multi-year operating budget framework 2012-2016

(early March 2012)

Built upon decades of sound financial management

($ millions)

Actual

Expenses

Revenue

Forecast

Projected deficit

$10M



600

550

500

450

400

350

300

250

200

The original $10M projected deficit could be managed

($ millions)

700

Expenses

Revenue

600

500

400

157

129

164

186 208

Actual

216

215

Forecast

211 201 190

200

100

0

Revenue

Provincial base operating grant

Other government (WCVM)

Expense s

Surplus /

(Deficit)

2012-

13

5.8%

5.8%

2013-

14

4.5%

4.5%

2014-

15

4.0%

4.0%

2015-

16

4.0%

4.0%

Annual rate of increase of provincial grant

YEAR % change in provincial operating grant (net)

0

2008-09

2009-10

2010-11

2011-12

Average

(1,175)

(4,003

)

8.7

7.3

5.2

5.4

6.7

(9,461

)

(10,523

)


And then one of our biggest assumptions changed…

Revenu

2012-

13

2.1%

2.1%

2013-

14

2.0%

2.0%

2014-

15

2.0%

2.0%

2015-

16

2.0%

2.0%

Other government (WCVM)

Expenses

Reduction in annual rate of increase of provincial grant

Surplus /

(Deficit )

0

(15,481

)

(23,487

)

(35,957)

(44,438

)



Revised multi-year operating budget framework 2012-2016 (May

2012)

600 700

550

500

450

400

350

300

250

200

157

129

164

Expenses 4.6%

600

$44.5

500

186

Revenue 3.2%

400

Reserves and savings

300

208 216 204

180

143 200

98

100

Forecast

0

10


Question 2:

What is the present actual deficits and the future projected deficits?


Question 2: What is the present actual deficits and the future projected deficits?

Actions taken from 2012-2014: $32M narrowing of the gap

Distance to target

50.0

45.0

40.0

35.0

30.0

25.0

20.0

15.0

10.0

5.0

0.0

12.5

9.8

7.6

6.6

8.0

University Council meeting (June 19, 2014): usask.ca/secretariat

University finances blog (June 20, 2014):

Workforce planning

Net faculty incentive plan for retirement

(gross savings of $12.4M in 15/16)

Changes in investment strategy

Changes in institutional practice (nonsalary, 2 up 1 down, other)



Additional impact of actions taken $37M narrowing of the gap

40.0

Additional effects (pension, LTD, travel, supplies, etc.)

35.0

5.0

Workforce planning

30.0

9.8

25.0

20.0

15.0

7.6

Net faculty incentive plan for retirement

(gross savings of $12.4M in 15/16)

Changes in investment strategy

10.0

6.6

5.0

8.0

Changes in institutional practice (nonsalary, 2 up 1 down, other)

0.0



Actual central operating budget with year end adjustments

(in $ millions)

500.0

484

$7M

456

474

450.0

429

453

400

426

400.0

377

400

336 373

350.0

305

316

332

Forecast

315

300.0

06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16

Actual total op budget revenue in $M

Actual total op budget expenses - after y/e allocations

Projected revenue

Projected expenses


Question 3:

How and why was the $44.5M projected deficit adjusted to reflect the actual and future projected deficits?


Question 3: How and why was the $44.5M projected deficit adjusted to reflect the actual and future projected deficits?









A swift response to the projected deficit was required

No deficit was realized

Communication





Opportunities to submit ideas, comments and questions

Public town hall meetings





Meetings with stakeholders

Communication via blogs, websites, newspaper articles

Labelling the projected deficit

 Both intended and unintended consequences



500.0

450.0

400.0

350.0

300.0

A swift response - actual central operating budget

484

Operating budget ($millions)

456

If the actions had not been taken expenses would have continued to rise at the same rate 429

453

474

Revenue

377

400

426

400

Expenses

… and the revenue growth rate would have fallen

336 373

316 Forecast

305 332

315

06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16

Actual total op budget revenue in $M

Projected revenue

Projected expenses

17



Regular updates provided

What do projections tell us about the future?



Intended and unintended consequences: communicating $44.5M target to eliminate the projected

Intended deficit

Unintended

 Consistency of message

 Measurable common goal

 IP3 strategic focus subsumed by focus on reducing expenditures

 Ease of reference

 Institutional uncertainty

 Facilitate understanding importance of change

 Confusion between actual and projected


In summary

 $44.5 projected deficit





Based on IP3 multi-year operating budget forecast

Estimated the impact of 2% growth in provincial grant (changed nothing else)

 Actions and actuals closed gap by $37 million

 No deficit realized to date

 Expenses growing faster than revenues

 Intended and unintended consequences

Let’s continue the discussion and dig a bit deeper…


Budget discussion item #1:

Does the U of S currently have both a surplus and a deficit?

We don’t! Let’s explore this further as there may be confusion…

$331M grant

$331M


($494M)

$331M grant

$331M


$331M grant

$331M



Central Operating Budget Revenue 14/15 ($494M)

Provincial grant

$331M

Tuition

$117M

Investment income

$18M

All other

$28M

$331M grant

$331M

Academic units

$322M


$331M grant

$331M

Academic units

$322M

Support units

$93M


$331M grant

$331M

Academic units

$322M

Support units

$93M

Central academic

$49M



$331M grant

$331M

Academic units

$322M

Support units

$93M

Central academic

$49M

Utilities

$18M


$331M grant

$331M

Academic units

$322M

Support units

$93M

Central academic

$49M

Utilities

$18M

Student aid

$10M


$331M grant

$331M

Academic units

$322M

Support units

$93M

Central academic

$49M

Utilities

$18M

Student aid

$10M

Gener al

$5M


2014/15 projected deficit

$3M


Provincial grant

$331M

Tuition

$117M

Investment income

$18M

All other

$28M

Total allocations

($497M)

Academic units

$322M

Support units

$93M

Central academic

$49M

Utilities

$18M

Student aid

$10M

Gener al

$5M



$3M


Provincial grant

$331M

Tuition

$117M

Investment income

$18M

All other

$28M


($497M)

Academic units

$322M

Support units

$93M

Central academic

$49M

Utilities

$18M

Student aid

$10M

Gener al

$5M



Provincial grant

$331M

Tuition

$117M

Investment income

$18M

All other

$28M


$3M


($497M)

Combine d surplus

$18M

2014/15 projected surplus

$21M

Academic units

$322M

Support units

$93M

Central academic

$49M

Utilities

$18M

Student aid

$10M

Distributed net expenditures ($476M)

Gener al

$5M

30.00%

25.00%

20.00%

15.00%

10.00%

5.00%

0.00%


Fund balances – U15 median

U15 accumulated fund balances 2013/14 as a % of total expenditures

(deficit balances have been excluded)

Unrestricted Funds as % of total expenditures median


Budget discussion item #1 (cont.):

Why did the reserves and savings grow?

Reserves and savings

 4,800 funds across university

 Managed by individuals, departments, college/support units, institutional and central committees

Reserves

 Risk reserves (20%)

 Academic priority (12%)

Savings

 APEFs & DSAEs (3%)

 Specific projects (65%)

University fund balances



Why did the reserves and savings grow?

Institutional uncertainty







Filling vacancies

Launching new projects and programs

Discretionary spending

Debt avoidance

 Special project i

Reserves: $98M

Risk reserves (20%)

Academic priority funds

(12%)

Savings: $211M

APEFs and DSAEs (3%)

Specific projects (65%)



Who manages the reserves and savings?

The owners of each of the 4,800+ funds!



Who manages the reserves and savings?







Fund allocation process is generally one way

Surpluses go into reserves and savings

Funds have been returned to central:

Transition funding – $20M in 2012





Fund balance policy / guideline under development

Future allocations may consider college and unit fund balance levels



How do we balance the budget going forward?

There are lots of options to explore…



Leveraging research

Centre / institute

(2014-15 in millions)

Canadian Light Source/

Synchrotron

VIDO-InterVac

Sylvia Fedoruk Centre

Global Institute for Food Security

Global Institute for Water Security

Total

U of S funding

Other funding

Total

$1.1

$33.7

$34.8

$1.6

$20.3

$21.9

$ $9.8

$9.8

$ $2.4

$1.7 $4.5

$2.4

$6.2

$4.4

$70.7

$75.1

Fact: U of S contribution represents about 1% of the university operating budget



Leveraging research









Examples of benefits:

Synchrotron

$33M in economic impact for SK





VIDO-InterVac

Two world first vaccines

Hundreds of patents

600 U of S faculty and students

 Opportunities for research and vaccine production

500 high school students

Medical isotope production

 $140M inflow of capital investment



Efficiency gains

80%

70%

60%

50%

40%

30%

20%

10%

0%

67%

Admin staff have grown at the same rate as academic staff

Staffing costs overall have grown as a percentage of total budget

Percent of Total Staff

(# FTE in Budget)

Percent of Total Staff Cost

($ in Budget)

70%

69%

66% 66% 66% 66% 65% 65%

60%

51%

52%

50%

52% 52% 52%

51%

50%

50%

40%

49%

48% 48% 48% 48%

49%

52%

48%

33%

31%

34% 34% 34% 34% 35% 35%

30%

20%

10%

0%

Academic Administrative Academic Administrative



Efficiency gains

 Workforce planning reduced administrative complement by 150 (net) FTE in 2012-13,

10 FTE since

 Administrative and support position posting review process implemented

 Emphasis on retention and reassignment

 Continue to optimize staff structure and complement


Conclusion

Current state

 Proactive financial management = no actual deficit

 We are financially sound

 Able to fund one-time enhancements and projects (e.g. College of

Medicine)

 Better able to diversify revenue streams

Ongoing risks

 Economic shocks (oil price impact on provincial grant)

 Lack of diversity in funding sources

 Expenses projected to grow faster than revenue

 but no longer a solvency threat in the near term


Conclusion

Actions











Transition to a budget model where college and unit leaders have more authority over resource management

A policy that better helps us manage our savings and reserves

Strengthen our financial management and allocation

Continue to optimize staff structure and complement

Enhanced communication on financials




Tying it back to the financial statements

($ millions) .

General fund balance

(p. 24 of the 13/14 annual financial report)

$268.6

Add back a) b) c)

Ancillary internal loans (residences)

Risk management liabilities (swaps)

Future employee benefits (Actuarial adjustment)

$26.6

$3.6

$25.6

Less

($15.3) a)

Subsidiaries

Unadjusted general fund balance $309.1

2013-14 annual financial report: usask.ca/reporting


Employee location (college, school or administrative unit) by employee type

(2013/14)

100%

80% 40.3%

60%

94.9%

83.2% 84.0%

100.0%

73.7%

99.2%

89.6%

40%

20%

59.7%

26.3%

0%

5.1%

16.8% 16.0%

0.8%

10.4%

41.7%

58.3%

Admin unit College

Financial Presentation to Senate April 25, 2015

Financial Presentation to Senate

April 25, 2015

Questions posed by Council

Focus on operating budget

Question 1:

Question 2:

Question 3:

In summary

Budget discussion item #1:

Budget discussion item #1 (cont.):

Budget discussion item #1 (cont.):

Budget discussion item #2:

Budget discussion item #2 (cont.):

Budget discussion item #3:

Budget discussion item #3 (cont.):

Budget discussion item #3 (cont.):

Budget discussion item #3 (cont.):

Budget discussion item #3 (cont.):

Conclusion

Ongoing risks

Conclusion

Tying it back to the financial statements

Related documents

Products

Support

Financial Presentation to Senate April 25, 2015