On September 25, APUO members received a communication from Jacques Frémont, President and Vice-Chancellor of the University of Ottawa. President Frémont informed all members of the University community of a budgetary surplus of $15M instead of a balanced budget. The President argues that the $15M surplus is not structural but rather a one-time effect. One day earlier, on September 24, the Board of Governors approved the 2017-18 audited Financial Statements.
This communication will focus on the following questions:
- What are the real financial results for the University for the 2017-18 financial year according to the audited Financial Statements?
- Why are the numbers presented by the President and the APUO so different? What are the differences between a budget and audited financial statements?
- Why are the budget and the audited financial statements numbers so different? What are the potential solutions to this problem?
- Is the financial surplus structural or rather a one-time effect?
What are the real financial results for the University for the 2017-18 financial year according to the audited Financial Statements?
The University of Ottawa audited Financial Statements show a $69.77M surplus for the 2017-18 fiscal year. This surplus is significantly higher than last year’s surplus of $48.57M. Actually, it is the highest surplus of the past 10 years. Over the past 10 years, the cumulative surpluses are over $429.46M.
| Fiscal year | Audited Surplus (deficit) |
| 2007-2008 | $52.06M |
| 2008-2009 | $16.89M |
| 2009-2010 | $63.19M |
| 2010-2011 | $41.47M |
| 2011-2012 | $28.16M |
| 2012-2013 | ($1.48M) |
| 2013-2014 | $61.22M (rectified in 2015) |
| 2014-2015 | $62.84M |
| 2015-2016 | ($13.23M) |
| 2016-2017 | $48.57M |
| 2017-2018 | $69.77M |
Last year, Central Administration argued that the $48.57M surplus was higher than expected due to a significant increase to the return on our investments ($38.5M). While it may be true that the Central Administration’s investments are doing well, it still left the University with a $12.1M operating surplus. This year, the operating surplus was actually higher, at $76.84M, reduced by a $7.06M decline in fair value of investments.
Why are the numbers presented by the uOttawa President and the APUO so different?
You will notice that President Frémont’s communication refers to a “budgetary surplus” while the APUO refers to the “audited financial statements.” In simple terms, the budget is a financial projection generated by the Central Administration without any third-party oversight (no audit). In this case, the President is simply stating that there is a surplus in relation to the budget. By contrast, audited financial statements are third-party verified facts about the financial situation of an organisation. The generation of the Financial Statement have to follow Canadian Accounting standards.
| Audited Financial Statement | Budget | |
| Third-party (auditor) oversight? | Yes | No |
| Who decides the assumptions and definitions? | Canadian Accounting standards | Central Administration |
| Past or future oriented? | Past (facts, verified by an auditor) | Future (projection) |
The Central Administration could decide to use the Canadian Accounting standards in preparing the budget but instead uses “modified cash basis accounting.” As you can see below, the decision not to use Canadian Accounting standards consistently generates significantly different results:
| Budget year | Accounting standard used | Surplus/Deficit |
| 2018-2019 | Modified cash basis accounting | Balanced budget |
| CA accounting standards | Not published | |
| 2017-2018 | Modified cash basis accounting | $4.6 million deficit |
| CA accounting standards | $15 million surplus | |
| 2016-2017 | Modified cash basis accounting | $4.9 million deficit |
| CA accounting standards | $16 million surplus | |
| 2015-2016 | Modified cash basis accounting | $1.9 million deficit |
| CA accounting standards | $13 million surplus |
Interestingly enough, the University of Ottawa budget no longer includes a Surplus/Deficit prediction using the Canadian accounting standards contrary to previous years. Using the “modified cash basis accounting” standards allows the Central Administration to advertise major budgetary deficits (often associated with cuts) while knowing that, even if their budget is 100% correct, their audited Financial Statements will show significant surpluses. Thus, the decision to use “modified cash basis accounting” allows the Central Administration to cut staff and services knowing that such cuts are not necessary to achieve a balanced budget, which then allows them to reallocate surpluses at their discretion. In other words, it is a political (and centralizing) decision hidden by an accounting technique.
Why are the budget and the audited financial statements numbers so different? What are the potential solutions to this problem?
As stated above, one of the major sources of confusion between the budget and audited Financial Statements numbers lies with the decision of the Central Administration to use “modified cash basis accounting” instead of the Canadian Accounting standards to prepare the budget. One simple solution would be for the Central Administration to use Canadian Accounting standards to prepare their budgets.
Is the financial surplus structural or rather a one-time effect?
This is an extremely difficult question for the APUO to answer since we do not have access to all the necessary information. That being said, the history of the past ten (10) years, i.e. cumulative surpluses of over $429.46M (see table 1 above), suggests that the University of Ottawa’s surplus is ‘structural.’ This money represents in part education services non-delivered. It is time for the Central Administration to be accountable to the University community for these cumulative surpluses and, more generally, for its management of our University. It is also time to put an end to austerity and put back in place the services that have been cut on the basis of erroneous premises.