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Reserves

Although there are many competing short-term demands in budget planning, our community must recognize the importance of maintaining adequate reserves to cover both unplanned and planned future requirements to ensure our overall fiscal health. We must set aside funds to stabilize our budget over the multi-year period. At the November 2021 Audit and Finance Committee meeting, financial sustainability and reserves were discussed, confirming the university will use these monies for future investments in large-scale repairs/replacements, the creation of a strategic pot for new priorities/infrastructure, and operating contingencies to offset unanticipated external budget impacts.

While we have achieved an estimated balanced budget for 2025-2026, including more than $3M set aside for future maintenance costs or new capital investments, it falls short of the desired amount. For context, the facilities portfolio consists of 24 buildings, covering more than 1.3M gross square feet of space, with an estimated current replacement value of $440M. Industry practice suggests investing 0.5 to 1.5 per cent of current replacement value in annual maintenance and setting aside 1.5 to 2.5 per cent for future capital renewal/maintenance [1] . For our university, that equates $2.2M to $6.6M per year in maintenance, and between $6.6 to $11M in recommended savings. At our current annual maintenance investment of $2M, deferred maintenance costs could exceed $40M by 2034 and grow at an even faster pace thereafter ( Figure 9). Our current budget surplus of $3M allows us to invest approximately half of the low end of the annual recommended reserves.

In addition to facility maintenance, we also need contingencies for enrolment fluctuations, unplanned external challenges (e.g. international political tensions that restrict international students, imposed tariffs) and large-scale strategic priorities. Moreover, while the operating budget reflects revenue from growth, it does not account for the funds required to create more space to support this growth. We anticipate meeting these needs through government investment, philanthropic donors and other development opportunities. As discussed at the May 2022 Strategy and Planning Committee meeting, we will continue exploring mutually beneficial capital projects with development partners. However, external sources alone will not suffice; most major infrastructure projects now require matching funds. We must allocate more resources to reserves to finance future projects and safeguard our financial future. 

Our current reserves position ( Figure 10) as of March 31, 2024, is outlined in Note 20 of the 2024 Annual Financial Statements. These funds, designated for purposes such as capital projects, research, and academic priorities, exclude sponsored research and direct donations, which are treated as deferred contributions. The 2024-2025 reserves include:

  • $10M (35 per cent) linked to contractual obligations (e.g. faculty start-up funds).
  • $6M (21 per cent) in working capital, allocated as recommended by the Ministry of Colleges and Universities to stabilize the university’s financial position.
  • $3.2M (11 per cent) for revenue-generating units’ carry-forward budget.

This leaves only $9M (33 per cent) for strategic initiatives, including support for the deans’ initiative fund, academic strategies and upgrades to the university’s digital and physical infrastructure.

[1] National Research Council. 1990.  Committing to the Cost of Ownership: Maintenance and Repair of Public Buildings. Washington, DC: The National Academies Press.