Financial Presentation to Senate April 25, 2015 · Financial Presentation to Senate April 25, ... 2015 A swift response to the projected deficit was ... Consistency of message Measurable

Financial Presentation to Senate April 25, 2015

Financial Presentation to SenateApril 25, 2015


Questions posed by Council1. 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?


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

Focus on operating budget

http://www.usask.ca/reporting


Question 1:What was the origin of the previously

projected $44.5M deficit?


Original multi-year operating budget framework 2012-2016 (early March 2012)

200

250

300

350

400

450

500

550

600($ millions)

Expenses

Revenue

Forecast

Projecteddeficit$10M

Built upon decades of sound financial management

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

Actual


The original $10M projected deficit could be managed

157129

164 186 208 216 215 211 201 190

0

100

200

300

400

500

600

700

200

250

300

350

400

450

500

550

600($ millions)

Revenue

Reserves and savings

Expenses

Forecast


Actual

5.8% 4.0%

5.8% 4.0% 4.0%

4.0%4.5%

4.5%

(1,175) (4,003)

(9,461)

(10,523)0

RevenueProvincial base operating grant

Other government (WCVM)

Surplus / (Deficit)

Expenses Annual rate of increase

of provincial grantYEAR % change in provincial

operating grant (net)

2008-09 8.72009-10 7.32010-11 5.22011-12 5.4Average 6.7

2015-16

2014-15

2013-14

2012-13


And then one of our biggest assumptions changed…

2.1% 2.0%

2.1% 2.0% 2.0%

2.0%2.0%

2.0%

(15,481)

(23,487) (35,957) (44,438

)0

RevenueProvincial base operating grant

Other government (WCVM)

Surplus / (Deficit)

Expenses

Reduction in annual rate of increase of provincial grant

2012-13

2013-14

2014-15

2015-16


157129

164186

208 216 204 180 14398

0

100

200

300

400

500

600

700

200

250

300

350

400

450

500

550

600

Expenses 4.6%

Revenue 3.2%Reserves and savings

$44.5

Forecast

10


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


Question 2:What is the present actual deficits and the

future projected deficits?


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

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

8.0

6.67.6

9.8

12.5

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0

Mill

ion

dolla

rs

Distance to target

Workforce planning

Net faculty incentive plan for retirement(gross savings of $12.4M in 15/16)

Changes in investment strategy

Changes in institutional practice (non-salary, 2 up 1 down, other)

University Council meeting (June 19, 2014): usask.ca/secretariatUniversity finances blog (June 20, 2014):


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


8.0

6.6

7.6

9.8

5.0

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

Mill

ion

dolla

rs

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

Workforce planning

Net faculty incentive plan forretirement(gross savings of $12.4M in 15/16)

Changes in investment strategy

Changes in institutional practice (non-salary, 2 up 1 down, other)


305316

336

377

400

429

456484

315332

373

400

426

453

474

300.0

350.0

400.0

450.0

500.0

06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16Actual total op budget revenue in $MActual total op budget expenses - after y/e allocations

$7M

Projected revenueProjected expenses

Actual central operating budget with year end adjustments(in $ millions)

Forecast



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

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


305316

336

377

400

429

456

484

315332

373

400

426

453474

300.0

350.0

400.0

450.0

500.0

06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16Actual total op budget revenue in $M

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

… and the revenue growth rate would have fallen

Revenue

Expenses

Operating budget ($millions)

A swift response - actual central operating budget

17

Forecast


Projected revenueProjected expenses


Regular updates providedWhat do projections tell us about the future?



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

deficitIntended Consistency of message Measurable common

goal Ease of reference Facilitate understanding

importance of change

Unintended IP3 strategic focus

subsumed by focus on reducing expenditures

Institutional uncertainty Confusion between

actual and projected



$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

In summary

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…


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

grant$331M

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

$331M


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

Provincial grant

$331M

Tuition$117M


$331MTuition$117M



Provincial grant

$331M

Tuition$117M

Investment income$18M


$331MTuition$117M




$331MTuition$117M


All other$28M



Provincial grant

$331M

Tuition$117M


All other$28M


$331MTuition$117M


All other$28M

Academicunits

$322M



Provincial grant

$331M

Tuition$117M


All other$28M


$331MTuition$117M


All other$28M

Academicunits

$322M

Support units$93M



Provincial grant

$331M

Tuition$117M


All other$28M


$331MTuition$117M


All other$28M

Academicunits

$322M

Support units$93M

Central academic

$49M



Provincial grant

$331M

Tuition$117M


All other$28M


$331MTuition$117M


All other$28M

Academicunits

$322M

Support units$93M

Utilities$18M

Central academic

$49M



Provincial grant

$331M

Tuition$117M


All other$28M


$331MTuition$117M


All other$28M

Academicunits

$322M

Support units$93M

Utilities$18M

Student aid$10M

Central academic

$49M



Provincial grant

$331M

Tuition$117M


All other$28M

Academicunits

$322M

Support units$93M

Utilities$18M

Student aid$10M

General

$5M

Central academic

$49M


$331MTuition$117M


All other$28M



Tuition$117M


All other$28M

Support units$93M

Utilities$18M

Student aid$10M

Total allocations($497M)

Central academic

$49M

Academicunits

$322M

General

$5M

2014/15projecteddeficit$3M

Provincial grant

$331M



Tuition$117M


All other$28M

Support units$93M

Utilities$18M

Student aid$10M


Central academic

$49M

Academicunits

$322M

General

$5M


Provincial grant

$331M


2014/15projectedsurplus$21M

Combined surplus$18M

Distributed net expenditures ($476M)


Tuition$117M


All other$28M

Support units$93M

Utilities$18M

Student aid$10M

Central academic

$49M

Academicunits

$322M

General

$5M

Provincial grant

$331M




Fund balances – U15 median

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

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

(deficit balances have been excluded)

Unrestricted Funds as % of total expenditures median


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%)

Budget discussion item #1 (cont.):Why did the reserves and savings grow?

University fund balances


Institutional uncertainty Filling vacancies Launching new

projectsand programs

Discretionary spending

Debt avoidance Special project

i

Reserves: $98MRisk reserves (20%)Academic priority funds (12%)

Savings: $211MAPEFs and DSAEs (3%)Specific projects (65%)

Budget discussion item #1 (cont.): Why did the reserves and savings grow?


Budget discussion item #2:Who manages the reserves and savings?

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


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

Budget discussion item #2 (cont.):Who manages the reserves and savings?


Budget discussion item #3:How do we balance the budget going forward?

There are lots of options to explore…


Centre / institute(2014-15 in millions)

U of S funding

Other funding Total

Canadian Light Source/ Synchrotron $1.1 $33.7 $34.8

VIDO-InterVac $1.6 $20.3 $21.9Sylvia Fedoruk Centre $ - $9.8 $9.8 Global Institute for Food Security $ - $2.4 $2.4 Global Institute for Water Security $1.7 $4.5 $6.2Total $4.4 $70.7 $75.1

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

Budget discussion item #3 (cont.):Leveraging research


Budget discussion item #3 (cont.):Leveraging research

Examples of benefits:

Synchrotron $33M in economic impact

for SK 600 U of S faculty and

students 500 high school students Medical isotope

production

VIDO-InterVac Two world first vaccines Hundreds of patents Opportunities for research

and vaccine production $140M inflow of capital

investment


33% 31% 34% 34% 34% 34% 35% 35%

67% 69% 66% 66% 66% 66% 65% 65%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Percent of Total Staff (# FTE in Budget)

Academic Administrative

49% 48% 50% 48% 48% 48% 49% 48%

51% 52% 50% 52% 52% 52% 51% 52%

0%

10%

20%

30%

40%

50%

60%

70%

Percent of Total Staff Cost ($ in Budget)

Academic Administrative

Budget discussion item #3 (cont.):Efficiency gains

Admin staff have grown at the same rate as academic staffStaffing costs overall have grown as a percentage of total

budget


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

Budget discussion item #3 (cont.):Efficiency gains


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

Conclusion




($ millions) .

General fund balance (p. 24 of the 13/14 annual financial report) $268.6Add back

a) Ancillary internal loans (residences) $26.6b) Risk management liabilities (swaps) $3.6c) Future employee benefits (Actuarial adjustment) $25.6

Lessa) Subsidiaries ($15.3)

Unadjusted general fund balance $309.1

Tying it back to the financial statements

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


59.7%

5.1%16.8% 16.0%

26.3%0.8% 10.4%

58.3%

40.3%

94.9%83.2% 84.0%

100.0%

73.7%

99.2%89.6%

41.7%

0%

20%

40%

60%

80%

100%

Admin unit College

Employee location (college, school or administrative unit) by employee type(2013/14)

Documents

Financial Presentation to Senate April 25, 2015 · Financial Presentation to Senate April 25, ... 2015 A swift response to the projected deficit was ... Consistency of message Measurable