College Ends 2018-19 With "Super-sized" Surplus

budget surplus

Big bucks from exponentially escalating international enrolment, coupled with penny-pinching management on the expenditure side of the ledger, combined to see the college conclude its 2018-19 fiscal year with a $40.24 million surplus – almost four times what it had anticipated when it initially approved its annual budget last March.

That unprecedented quantity of “black ink” was highlighted in the year-ending budgetary review presented to St. Clair’s Board of Governors (BofG) during its June 25th meeting, and confirmed by the independent audit that was also presented at that session (conducted by the KPMG LLP accountancy firm).

The college’s fiscal year runs from April 1 to March 31.

When the 2018-19 budget was approved by the BofG in the spring, it had projected total revenues of $182.7 million, and total expenditures of $172.2 million, for a projected surplus of about $10.5 million.

The “actual” year-end figures, however, showed revenues of $198.3 million, versus expenditures of $158 million, resulting in the $40 million surplus.

Chief Financial Officer Marc Jones detailed the causes of the higher revenues and lower expenditures in his report to the BofG (see below), while President Patti France and Governor/Audit Committee Chair Egidio Sovran discussed what should be done with this newfound cash bonanza.

Reflecting on the dire circumstances the college found itself in just five years ago, when it was saddled with a deficit, France noted, “If you have money, you have choices” – to invest in existing and new academic programming, make equipment upgrades, to renovate and develop facilities. “If you don’t have money, you don’t have those choices.”

The size of this surplus allows this year’s BofG to extend that flexibility to those that follow it, France said. While some of the cash could be injected into the 2019-20 revenue stream to carry out some current-year projects, “holding some (portion of the surplus) in reserves (a ‘piggy bank’ of short- and long-term investments) means that future boards and presidents will have choices”, even if they are occasionally confronted with economic downturns.

Sovran said the Audit Committee had directed Jones to develop some recommendations about specific uses of the surplus, including how much should be socked away into reserves. The CFO will provide those recommendations to the BofG when it resumes its regular meeting schedule in September.

Sovran added that the Audit Committee has recommended that the administration should conduct a study of international enrolment trends.

Historically, he noted, China had been the chief source-country of international enrolees at Canadian postsecondary institutions. But its flow of students to our shores has declined substantially during the past few years. India has now superseded it as the chief source-country of international students.

Given how important international enrolment has become to the college’s financial well-being, Sovran said it is essential that St. Clair regularly gauges global economic and geo-political trends that may affect academic migration.

Now, the details, from Jones’ 2018-19 year-end report to the BofG:

REVENUES

• Provincial Ministry of Training, Colleges and Universities (MTCU) Operating Grants are higher than budget at $2,520,881 or 5.4% due to an increase in “Other MTCU” funding of $2,463,989. This increase is a result of the following:

- Increase in unconfirmed funding allocations for the 2018-19 fiscal year;

- Decrease in the International Student Recovery program.

• Overall, Contract Income was consistent with the budget projection.

• Total Tuition revenue is higher than budget at $8,272,173 or 9.6% due to the following:

- Increase in international postsecondary tuition revenue of $6,901,688 due to actual enrolment exceeding budget, and student withdrawals and dismissals being lower than projected. A major factor of that hike in global revenue, France noted, was the college’s addition of a spring/summer semester for a dozen or so popular programs. That “May intake” (courses running until mid-August) attracted an unexpectedly large number of international students to the college (and did again this year too);

- Increase in domestic postsecondary tuition revenue of $1,620,836 due to student withdrawals and dismissals being lower than projected

• Total “Other” income is higher than budget at $3,699,979 or 14.3%. When fiscal year-end accounting adjustments related to the Foundation ($544,345), Bursaries and Scholarships ($303,734) and Capital Support Grants ($152,954) are removed, the resulting “Other” income is higher than budget at $2,698,946 or 10.4% due to the following:

- Increase in International Project revenue of $1,091,522 due to higher application and administrative fees from increased international enrolment;

- Increase in International Insurance revenue of $505,706 due to increased international enrolment;

- Increase in investment income of $393,794 due to excess cash being invested;

- Increase in revenue of $396,587 from Research & Development grant funding.

EXPENDITURES

• Total Salaries & Benefits are lower than budget at $7,432,245 or 7.9% due to the following:

- Decrease in Full-Time Faculty and Support due to unplanned retirements, delayed hiring, and lower overtime;

- Decrease in Part-Time Faculty due to increased section sizes, actual teaching hours lower than budget, and actual hourly rates being under budget;

- Decrease in Fringe Benefits of $1,772,185 as a result of the overall lower Salaries & Benefits costs.

• Total Non-Salary expenditures are higher than budget at $6,970,393 or 10%. When fiscal year-end accounting adjustments related to the Foundation ($544,345), Bursaries and Scholarships ($302,737), and Capital Support Grants ($152,954) are removed, the resulting Non-Salary expenditure is higher than budget at $5,970,357 or 8.6% due to the following:

- Decrease in Contracted Services Other due to agent commissions;

- Decrease in Insurance expense due to health and dental benefits for international students;

- Decrease in “Other” expenses due to bad debt expense related to student receivables;

- Decrease in Utilities due to energy conservation improvements made to facilities;

- Decrease in discretionary spending across contracted educational services, equipment repairs and maintenance, instructional supplies, janitorial supplies, office supplies, and travel.

This conservative approach to expenditure management allowed Administration to be flexible and adjust resources where required.

ANCILLARY OPERATIONS

Total Ancillary operations surplus is higher than budget at $1,084,206 or 95.7% due to the following:

- Increase in Parking Lot surplus of $398,914 due to increased parking fees and a change in permit sales from annual parking to per semester parking;

- Increase in Residence surplus of $475,644 due to lower operating expenses and increased capacity over the summer months;

- Increase in St. Clair College Centre for the Arts surplus of $251,460 due to higher banquet revenue.

... AND ...

• In the past five years – the half-decade of huge growth in international enrolment – St. Clair has gone from a $2.6 million budget deficit in 2014-15, to surpluses of $1.05 million (2015-16), $7.9 million (2016-17), $13.3 million (2017-18), and last year’s $40.2 million.

• The 2019-20 budget forecasts revenues of $188.2 million, and expenditures of $177 million … for a projected year-end surplus of just over $11 million. It is possible that the revenues projection might be “conservative”, if the ever-upward trend of international enrolment continues.

See, also, the story about the mothballing of some college programs: http://stclair-src.org/news/need-know-news/gone-wind-not-yet