Monthly Archives: June 2021

Below, I highlight items from the publicly-available documents of the Carleton University Board of Governors that were released in conjunction with the board’s 1 June 2021 meeting.

Pay Equity

Both the university president and provost said that pay equity is a labour relations matter that is being actively pursued with unions across campus and that any pay equity compensation will be covered through “reserves and contingencies if required.” It is good news that this issue has finally reached the level of the Board of Governors, but ominous that this will only be paid “if required”.

Mandatory covid vaccination

When asked whether proof of covid vaccination will be required of students on campus this coming fall, “General Counsel responded that a sector-wide legal opinion has been sought for universities in terms of vaccination requirements which is currently being reviewed.” It would be useful for the sector to publicly release that legal opinion, however I expect it will remain confidential.

Long-term capital financing

The board’s finance committee approved long-term funding of $250 million for “five major capital projects”, although it was not specified exactly what those five projects are. Instead of financing each capital project separately, the board will aggregate “the capital requirements of the university into one single, 40-year, bullet-bond issuance with sinking fund”, thereby locking in a low interest rate. No re-payment will be required for 40 years, but this requires financial discipline in maintaining a reserve fund so that Carleton does not declare insolvency on or before 2062, especially since monies are easily moved between reserve funds at Carleton.

A 40-year bullet-bond reflects growing corporatization of universities. Just a few years ago, new university buildings were 100% financed by earmarked government grants. A 40-year bullet-bond reflects the increased borrowing power of universities. Imagine buying a personal car or home, but only being required to make a single balloon payment in 40 years. The good news with a 40-year bullet-bond is if someone is willing to issue such a bond, this would reflect positively on the university’s current financial health.

Financial health of the university

The remainder of this post is a long quote from the minutes of the board’s finance committee of 13 April 2021. Given that Laurentian is included in the following provincial averages, it genuinely matters how averages were computed. Is each university, regardless of size, weighted equally in computing the averages?

The Chair outlined that the committee received the 2018-2019 Provincial Metric Ratios in September 2020. The financial metrics are a tool for the government to monitor the financial health of the Ontario post-secondary sector. Mr. Tim Sullivan, Assistant Vice-President (Financial Services) provided an overview of five key financial metrics including:

Net Income/Loss Ratio – an indicator of the extent to which an institution’s revenues contribute to its net assets. Carleton’s is higher than the provincial average by 2.1%, however Carleton’s percentage is 8.6% lower in 2019-20 than 2018-19. It was noted this was primarily due to the 10% tuition decrease in 2019-20 mandated by the provincial government and the $18M loss in revenues to do the pandemic.

Primary Reserve Ratio (Days) – a measure of the financial viability that compares expendable nets assets to total expenses and provides an indication of the financial strength and flexibility by determining how many days an institution might theoretically function using only its existing unrestricted financial resources. Carleton is higher than the provincial average by 141 days, however the number of days has decreased in 2019-20 by 47 days.

Viability Ratio – an indicator of funds on hand that can be used should an institution be required to settle its long-term obligations. Carleton is well above the provincial average by 644.8% and even if the long-term debt (discussed earlier in the meeting) was approved, Carleton would be 24.7% above the provincial average.

Interest Burden Ratio – a measure of debt affordability that compares the level of current debt service with the institution’s total expenses. Carleton currently has very little debt therefore this ratio is quite low (1.4% below average) and was reduced by 0.5% in 2019-20. Additional long-term debt of $200M would move Carleton’s Interest Burden Ratio to 2% which is in line with the sector.

Net Operating Revenues Ratio – an indicator of the extent to which institutions are generating positive cash. Carleton had a significant decrease between 2018-19 (16%) and 2019-20 (2.9%) due to the extraordinary cash payment made to the Pension Plan during 2019-20. It is expected that ratio will rebound in 2020-21.