College's Year-end Surplus Much Larger Than Expected

fiscal year-end

A dozen or so computer screens were smacked with joyful “high-fives” on the evening of June 23, as a partially on-line meeting of St. Clair’s Board of Governors (BofG) learned that the college had concluded its 2019-20 fiscal year at the end of March with a $31 million budgetary surplus.

That was almost $20 million higher than the surplus which had been anticipated when the past year’s spending plans were set last spring.

(Like the provincial government, the college operates on a fiscal year of April 1 to March 31.)

In addition to the year-end financial report by Chief Financial Officer Marc Jones, the 2019-20 surplus was confirmed by the annual independent audit presented to the BofG by the KPMG LLP accountancy firm.

The 2019-20 surplus follows 2018-19’s record-setting surplus of $40 million.

Those two years worth of accumulated money could be needed during this current year (2020-21), to be injected into a budgetary scenario which may see some shortfalls in projected enrolment, tuition and other revenues due to the COVID-19 pandemic.

The 2020-21 budget was prepared in pre-pandemic days and, so, predicted continued enrolment growth, especially in the form of international students. It anticipated a 28 percent total revenue jump over 2019-20, and a year-end surplus of $25 million.

In a May-published story about the 2020-21 budget (http://stclair-src.org/news/need-know-news/how-will-pre-pandemic-budget…), The Scene observed:

The (pre-pandemic) plan, therefore, largely disregarded these new “facts of life”:

• Enrolment may be negatively affected by the pandemic. Both domestic (Canadian) and international students might have lost the employment they needed to pay for school. Further complicating the situation of international students is that air travel and visa-issuance restrictions may prevent them getting to Canada for the next several months. Also, if students aren’t especially thrilled about the significant quantity of on-line course delivery that might dominate the fall semester (at least), they might postpone their enrolment until the pandemic eases sufficiently to again permit in-person attendance;

• Might provincial grant funding of the Ontario-wide college system be reduced even further, given the huge expenses the government has had to bear to battle the pandemic?;

• Even a partial re-opening of the college during the year – to allow students to at least attend some of their hands-on labs, clinics and workshops – may entail substantial and unexpected new expenses for the college to ensure appropriate social distancing and group-gathering limitations: architectural alterations, scheduling changes for longer operational hours (and, thus, more salaries), the provision of personal protective equipment, etc.;

• Some non-academic, profit-making enterprises will be lost. For instance, parking revenues will probably decline, as will locker rental fees, banquet and event bookings at the Centre for the Arts, etc..

If all of those negative financial factors do, indeed, come to pass, the past two years of surpluses will provide the college with a comfortable financial cushion of injectible revenue.

As for the specifics of how the 2019-20 surplus came to pass, Jones’ report to the BofG explained:

The net surplus at March 31, 2020 of $31,083,110 is a significant increase of $19,949,277 from the net surplus budget of $11,133,733. The variance is primarily due to the following:

• Increase in tuition revenues for domestic and international students of $2,214,392 and $5,615,191 respectively.

• Increase in investment income of $1,373,630.

• Increase in Acumen revenue of $1,463,818. (The college has a “sister school” relationship with Toronto’s Ace Acumen Academy. International students of that English language training school can, upon completing that phase of their education, shift into a half-dozen, St.-Clair-overseen-and-diploma-granting programs delivered at two Toronto-area campuses.)

• Decrease in expenditures of $4,351,790, related to salary and benefits.

REVENUE

The following highlights the major changes in revenue compared to the fiscal year budget projection:

• Ministry of Colleges and Universities (MCU) Operating Grants are higher than budget at $495,058 or 1.1 percent, due to an increase in “Other MCU” funding of $504,399. This increase is a result of a decrease in the International Student Recovery program.

• Contract Income is lower than budget at $135,372 or 1.1 percent, due to lower stipends flowed from the Youth Job Connection program, and lower Apprenticeship funding as a result of postponed programming due to COVID-19.

• Total Tuition revenue is higher than budget at $12,763,831 or 11.3 percent, due to the following:

– Decrease in the revenue deferral for the Winter 2020 semester of $4,558,604, as a result of the shortened semester in response to the COVID-19;

– At the November 2019 Board meeting, a “best case” scenario was presented in the mid-year review budget as it related to international student enrolment at the Ace Acumen Toronto campuses. This “best case” scenario was realized as a result of timely approval of the Minister’s private/public college Binding Policy Directive. (The previous Liberal government had been intending to eliminate the sort of public/private college partnerships exemplified by the St. Clair/Acumen relationship. The Conservative government dropped that plan, and is now fostering such partnerships.)

– Lower student dismissals and withdrawals from the Fall 2019 semester.

• Total ‘Other’ income is higher than budget at $5,850,407 or 19.1 percent. When fiscal year-end accounting adjustments related to the Foundation ($534,656), Bursaries and Scholarships ($280,538), and Capital Support Grants ($175,673) are removed, the resulting “Other” income is higher than budget at $4,859,540 or 15.8 percent due to the following:

– Increase in Investment Income of $1,373,630, due to higher investment balances and interest rates, as a result of international student tuition, Ace Acumen revenue, and operating surpluses;

– Increase in Acumen revenue of $1,463,818, due to growth at the Toronto campuses for the Winter 2020 semester;

– Increase in Divisional Income of $1,531,435 is mostly, due to higher insurance fee revenue due to increased international enrolment to budget.

EXPENDITURES

The following highlights the major changes in expenditures compared to the fiscal year budget projection:

• Total Salaries & Benefits are lower than budget projection at $4,351,790 or 4.5 percent due to the following:

– Decrease in Part-Time Faculty, due to actual teaching hours being lower than budget;

– Decrease in Part-Time Support, due to conservative budget requests;

– Decrease in Fringe Benefits as a result of the overall lower salary and benefit costs.

• Total Non-Salary expenditures are higher than budget at $3,493,864 or 3.7 percent. When fiscal year-end accounting adjustments related to the Foundation ($534,656), Bursaries and Scholarships ($280,538), and Capital Support Grants ($185,110) are removed, the resulting Non-Salary expenditure is higher than budget at $2,493,560 or 2.7 percent due to the following:

– Increase in Contracted Education Services, due to the growth at the Ace Acumen Toronto campuses for the Winter 2020 semester. The College collects the tuition revenues from students attending the Toronto Campuses, and flows the applicable funds to Ace Acumen;

– Increase in Contracted Services Other due to agent commissions and other initiatives.

Like last year, the BofG voted to transfer a significant portion of this year’s surplus – $20 million of it – into the “sustainability reserve fund” which it created last year.

That “piggy bank” can only be cracked open upon the recommendation of college President Patti France (and the approval of the Board) in the event of a major economic downturn which drastically threatens the financial well-being of the college. Whether such a downturn may arise due to the COVID-19 pandemic remains to be seen, but the money will be there if needed.

The BofG also designated $5 million of this year’s surplus for the college’s deferred maintenance tasks: tackling long-overdue repair and renovation projects within some of the school’s 50-plus-years-old buildings.