McGILL UNIVERSITY BUDGET

Transcription

1 McGILL UNIVERSITY BUDGET Office of the Provost and VicePrincipal (Academic) October 31, 2018

2 TABLE OF CONTENTS INSTITUTIONAL SETTING 03 BUDGET AT A GLANCE 04 INTRODUCTION 05 McGill STRATEGIC PLANNING 05 The Strategic Academic Plan 05 The Strategic Research Plan 06 The McGill University Physical Master Plan 06 The IT Services Strategic Plan 06 CURRENT ECONOMIC AND POLITICAL ENVIRONMENT 07 University Enrolment in Québec and Canada 07 Attraction of International Students 08 Disposable income per capita 08 Provincial Grants 09 Tuition and fees 10 Federal funding 10 Interest Rates 11 Currency Exchange Rate 11 Inflation 12 Regulatory Environment 13 REVIEW OF THE BUDGET UNRESTRICTED FUND 16 UniversityLevel 16 BUDGET Priorities for Student Aid 16 Academic Renewal 16 Student Mental Health Action Plan 17 Protection of Library Collections 17 Salary Policy 17 Pension Plan Employer Contributions 17 Preparation of the McGill Bicentennial Campaign 18 Budgetary Outlook for Unrestricted Fund 18 Restricted Fund 20 Endowment Fund 21 Plant Fund 21 Overall Borrowing and Debt Position 23 Appendix 1: Budget , Unrestricted Fund 25 Appendix 2: MultiYear Financial Outlook by Revenue and Expense, by Fund 26 Appendix 3: Proforma Budget , All Funds 29 Appendix 4: Financed Accumulated Deficit, Unrestricted Fund, MultiYear Outlook 30 Appendix 5: Enrolment Statistics 31 Appendix 6: Staff Statistics 31 Appendix 7: Budget of Faculties, Unrestricted Fund 31 Appendix 8: Budget of Administrative Units, Unrestricted Fund 32 Appendix 9: University Significant Accounting Policies 33 Appendix 10: Glossary 34 02

3 INSTITUTIONAL SETTING In fulfilling its mission, McGill University embraces the principles and values of academic freedom, integrity, responsibility, equity and inclusiveness. MOTTO Grandescunt Aucta Labore (By work, all things increase and grow) PRIORITIES OF THE PRINCIPAL AND VICECHANCELLOR After a wide consultation with members of the McGill community at the beginning of her mandate, the Principal and ViceChancellor has translated her vision of the direction of the University into five stable priority areas organized around three academic mission themes (student life and learning, research, community engagement) and two mission support themes (work culture, physical and virtual campus). The McGill Commitment: Providing all students with a stimulating, innovative, and inquirybased educational experience. MISSION The mission of McGill University is the advancement of learning and the creation and dissemination of knowledge, by offering the best possible education, by carrying out research and scholarly activities judged to be excellent by the highest international standards, and by providing service to society. Unleashing Our Full Research Potential: Laying the foundation for McGill to excel in the increasingly competitive and challenging global research environment. Enhancing Our Community Partnerships: Making McGill a responsive and dynamic collaborator with a wide range of communities and partners, locally, nationally and globally. My Workplace: Turning McGill into a true learning organization, where administrative and support staff are empowered to use their knowledge to increase agility and effectiveness. Transforming Our Campus: Providing our physical and virtual campuses with the resources necessary to continue our mission in a sustainable, safe and welcoming environment. 03

4 BUDGET AT A GLANCE Revenues Unrestricted Fund: $870.9M Unrestricted revenues are expected to increase by 3.1% compared to Tenure Stream Instructional Faculty 1,682* McGill added 15 incremental tenurestream instructional faculty between January 2017 and January Expenses and interfund transfers Unrestricted Fund: $886.3M Expenses (including interfund transfers) in the unrestricted fund in include an increase of $15.7M in salary expenses, $9.5M in nonsalary expenses and a reduction of net interfund transfers of $7.5M. NonTenure Stream Instructional Faculty: 1,625* McGill added 222 instructional faculty in non tenure stream between January 2017 and January Number of students: 40,971 The number of students increased by 1.2% in fall 2017 compared to fall McGill s students are intensively committed to their experience, with 82% of them being enrolled as fulltime students. NonAcademic Staff: 4,045* There were 4,045 nonacademic staff at McGill in January 2018, compared to 3,798 in January *: See Appendix 6 04

5 INTRODUCTION We are pleased to present the McGill Budget for fiscal year This budget enables the implementation of the McGill University s strategic plans and initiatives and reflects the decisions the University has made regarding its activities for fiscal year The budget of McGill University covers four funds: the unrestricted fund, the restricted fund, the endowment fund and the plant fund. The first two funds the unrestricted fund and the restricted fund directly support the mission of the University of advancing learning and creating and disseminating knowledge. The plant fund and the endowment fund provide financial resources to activities that support the development of the University in achieving this mission. This document presents details on the budget of the unrestricted fund, and provides a financial overview of the other funds. This budget supports transparency, accountability, and communication with members of our community. When a term appears in bold typeface within the text, the reader can find the definition in the Glossary (Appendix 10). McGill prepares its budget on a modified accrual basis. With the exception of unused vacation days, postretirement benefit obligations, and accrued pension liabilities, which are recorded as yearend audit adjustments, transactions are recognized when the generating activity takes place rather than when the revenue is received, or when the expense is incurred. 1. McGill STRATEGIC PLANNING The Strategic Academic Plan The Strategic Academic Plan supports the implementation of priorities of the Principal and ViceChancellor by serving as a guide for central strategic planning and providing opportunities for expression and implementation at the local level. The plan focuses on the following objectives: Be open to the world: McGill will strive to remain an institution of choice for international students and faculty and will make a commitment to providing undergraduate and graduate students with a 21st century education by increasing the number of enriched educational opportunities that offer opportunity for global engagement. Expand diversity: We will deepen our commitment to excellence and diversity in faculty recruitment and career progression. We will also enhance accessibility for students from underrepresented groups, especially Indigenous students. Lead innovation: We commit to supporting pedagogical and curricular innovation, including increased numbers and availability of active learning classrooms, and the implementation of robust programs to prepare undergraduate and graduate students for the full range of careers available to them, as well as to contribute to the innovation ecosystem of Montreal, Québec, and Canada. Connect across disciplines and sectors: we will reduce administrative barriers to academic appointments across academic units and facilitate interdisciplinary teaching and research. Connect with our communities: we will embrace our cultural milieu and physical location to build collaborative relationships with educational, commercial and policy sectors in Montreal and Québec and across Canada. More details about the Strategic Academic Plan can be found here: demicplan

6 The Strategic Research Plan The Strategic Research Plan expresses McGill s core commitments to ideas, innovation, sustainability, collaboration and partnership, and social engagement in research. Furthermore, under the banner of primary inquiry to addressing major societal challenges, seven broad areas of research excellence have been identified: Examine fundamental questions about humanity, identity, and expression. Strengthen public policy and organizations and create a deeper understanding of social transformation. Capitalize on the convergence of life sciences, natural sciences, and engineering. Support health research and improved delivery of care. The McGill University Physical Master Plan In support of the University s mission, the McGill University Physical Master Plan was intended to guide infrastructure projects and future physical growth to help create a dynamic intellectual community and academic experience. It was developed with extensive consultation with McGill and greater Montreal communities. The plan was approved by the Board of Governors in April 2008 and continues to be updated. Guided by nine overarching principles, the Plan was designed to modernize both the Downtown and Macdonald campuses, improve spaces for teaching and research, steward our historic and green spaces to further campus sustainability, and ensure that future development meets the needs of the McGill community. More details about the University Physical Master Plan can be found here: masterplanning Unlock the potential of the human brain and the entire nervous system. Advance knowledge of the foundations and applications of technology in the Digital Age. Explore the natural environment, space, and the universe. More details about the Strategic Research Plan can be found here: At its meeting of December 14, 2017, the Executive Committee of the Board of Governors, on the recommendation of the VicePrincipal (Research and Innovation), endorsed the extension of the McGill Strategic Research Plan until December 31, The IT Services Strategic Plan Approved in April 2015, the ITS Strategic Plan includes a fiveyear roadmap with a mission centered on the following three components: Providing valuedriven services: strengthening McGill s commitment to providing internationally renowned quality education, research and scholarly activities. Providing the best user experience: providing best practices, costeffective, and timely solutions that emphasize the user experience. Meeting McGill s needs: supporting the growth of McGill's evolving technology needs. More details on the ITS Strategic Plan can be found here: 06

7 2. McGill STRATEGIC PLANNING The planning represented by the McGill Budget is shaped by the economic and political environment that impacts the demand and supply of the McGill student and research experience. University Enrolment in Québec and Canada University enrolment has increased between and in Québec and Canada by 7% and 4%, respectively. This increase occurred despite a shrinking potential pool of traditional Canadian students. The population aged between 15 and 24 years old has declined by 7% in Québec between 2011 and 2017 and is projected to be 13% lower than its 2011 level by This decline represents a challenge for enrolment strategies targeting to preserve stability in the representation of students from Québec. Population projections beyond 2021 show a reversal of course, with the 1524 years old population expected to be back to its 2017 level by

8 FIGURE 1: UNIVERSITY ENROLMENT AND POPULATION 1524 YEARS OLD FIGURE 2: UNIVERSITY ENROLMENT, BY STUDENT STATUS = = / / / / / P 2026P Enrolment CAN Enrolment QC Pop1524 CAN Pop1524 QC Canadian students CAN Canadian Students QC Intnl students CAN Intnl Students QC Source: Statistics Canada. Postsecondary Students Information System. Census Population estimates and projections. Ministère de l éducation et de l enseignement supérieur du Québec. Système de gestion des données de l effectif universitaire (GDEU). Attraction of International Students Despite a shrinking pool of domestic potential applicants, universities across Canada and Québec have increased enrolment through a significant increase in enrolment of international students. According to Statistics Canada, 168,000 international students were enrolled in a program at Canadian universities in a 40% increase since with Québec accounting for 38,000 of these students. Source: Statistics Canada. Postsecondary Students Information System. Disposable income per capita Disposable income per capita is used by the provincial government to set the maximum annual increase of base tuition fees (with a twoyear lag), which represents a major source of revenues for universities. It also provides indications of the financial capacity of households in Québec to spend and save, after taking taxes into consideration. Québec has experienced considerable increases in disposable income per capita between 2014 and Preliminary data also suggest that disposable income per capital grew at a rate of 2.8% in 2017, which will impact tuition fees to be collected in

9 FIGURE 3: DISPOSABLE INCOME PER CAPITA, QUÉBEC, ANNUAL GROWTH RATE 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 2.1% 2.1% Source: Statistics Canada. Preliminary 2017 calculated by McGill University. Provincial Grants 2.9% 2.7% 2.8% p The Government of Québec sets rules regarding two major streams of revenues for McGill: revenues coming from the MEES operating grant which supports teaching activities and revenues generated by regulated tuition fees. The MEES operating grant and regulated tuition fees kept by McGill represent approximatively half of McGill s annual revenues. In its Budget 2018, the Government of Québec announced additional increases of $173M in funding for universities, of which $148M represents new cumulative commitments made for (retroactive) and and $25M can be attributed to growth in student complement and. These amounts are considerable, but still fall below the investment estimated by the system in 2013 of a required annual injection of $850M would be required to bring Québec to the level of funding per student equivalent to the rest of Canada. TABLE 1: REINVESTMENT IN GENERAL FUNDING FOR QUÉBEC UNIVERSITIES, BUDGETS 2017 AND 2018, IN MILLIONS OF DOLLARS Budget 2017 Budget 2018 Total Source: MEES. Calculations by McGill University Millions of dollars 145 Over the past two years, the Government of Québec has worked on updating the funding formula of Québec universities. The outcome of this work is expected to be communicated to universities in May 2018 and details are to be confirmed when the Government releases the Budget Rules (Règles Budgétaires) for fiscal year More than half the plant fund revenues are also provided by the Government of Québec. Budget 2018 announced commitment to an incremental investment of $282M for university infrastructure projects over the next five years, including a $220M envelope for maintenance and deferred maintenance, and $62M for new initiatives. The government has taken a new step to create a fund for patrimonial buildings. The fund is $148M, of which universities have access to $12.5M. This move represents a positive step, but in the context of McGill s $1.3B deferred maintenance deficit, of which $300M can be attributed to the patrimonial aspect of many of our buildings, it is hoped that the government will make such funding recurrent. McGill University also continues its discussions with the provincial government to transform the old Royal Victoria Hospital into a global hub for learning, research and innovation in environmental sustainability and public policy. The Royal Victoria Hospital site is now vacant and could be transformed into modern academic and research space. The site could potentially provide approximately 700,000 square feet of space, which would help to mitigate McGill s space deficit. It could also create a real estate reserve that will ensure McGill s longterm development and create a landmark site for Montreal, Québec, and the McGill community Total ,096 09

10 Tuition and fees All regulated students pay a base tuition fee, which is indexed annually following the most recent disposable income per capita measure available. For , the base tuition fee will increase by 2.7%, reaching $81.85 per credit (or $2, for a students taking 30 credits). The same rate of increase applies to all ancillary fees, unless an agreement is reached with the students to apply a higher rate. Regulated Canadian outofprovince and international students are also charged an additional supplement (or forfaitaire) that is returned to the government, thus having a nil impact on the McGill s budget. However, universities are allowed to charge an additional 10% over and above the forfaitaire to help cover the costs of recruitment and support related to this population. The deregulation of tuition fees for first cycle and second cycle professional international students requires the development of a pricing strategy to set the optimal tuition fees by program. national framework to address genderbased violence at postsecondary institutions ($5.5M over five years). By March 2018, the federal government had awarded 24 Canada 150 Research Chairs, out of a potential of 35 to be funded by the onetime funding of $117.6M that was announced in Budget Two of the 24 Canada 150 Research Chairs that were announced were awarded to McGill researchers. In February 2018, the federal government also designated the five Innovation Superclusters announced in Budget 2017 ($950 M over five years), including SCALEAI a Québecbased Supercluster on supply chains powered by artificial intelligence in which McGill is a partner. Although the data is outdated, as of Budget 2016, the federal government was expected to be a major contributor to higher education in Canada with spending on postsecondary education expected to reach $15.7 billion by Federal funding The Government of Canada s research granting agencies are major contributors to research funding of postsecondary institutions. Federal budget 2018 contained additional funding in research in response to Canada s 2017 Fundamental Science Review (FSR) chaired by former University of Toronto President David Naylor. The FSR called to increase federal research spending by $1.3B over four years, balanced across four areas: (1) investigatorled research operating grant; (2) enhanced personnel supports for researchers and trainees at different career stages; (3) targeted spending on infrastructurerelated operating costs for small equipment and Big Science facilities; and (4) improved coverage of the institutional costs of research from 25% to 40%. Budget 2018 announced an increase in funding of $1.2B over five years for the tricouncils including $275M for a new fund aimed at research that is international, multidisciplinary and fast breaking, $210M over five years for the Canada Research Chair program, $763M for the Canadian Foundation for Innovation and $572.5M for a Digital Research Infrastructure Strategy. Spending to cover institutional costs of research through the Research Support Fund is set to increase by $235M over five years, keeping the indirect costs of research covered by federal funding at 25%. While other amounts impact restricted funds of institutions, indirect costs of research impact the operating budget of universities. In line with its genderbased budgeting policy, Budget 2018 also announced the development of a harmonized 10

11 FIGURE 4: TOTAL FEDERAL CONTRIBUTIONS TO POSTSECONDARY EDUCATION, AS OF BUDGET 2016 FIGURE 5: GOVERNMENT OF CANADA MARKETABLE BONDS, AVERAGE YIELD 510 YEARS Source: Parliamentary Budget Officer. URL: Source: Bank of Canada. Interest Rates Interest rates have an impact on McGill s investment revenues and borrowing expenses, as well as its liabilities related to employee benefits. The cost of future benefits decreases as interest rates increase. Between May 2017 and April 2018, the Bank of Canada raised the overnight interest rate three times, bringing it from 0.50% to 1.25%. The average yield on Government of Canada marketable bonds with durations between 5 and 10 years are back to pre2015 levels. Yields increased from 1.1% in May 2017 to 2.3% in April The economic outlook included in the federal budget 2018 and recent communiqués from the Bank of Canada suggest other increases are expected moving forward. Currency Exchange Rate The exchange rate of the Canadian dollar relative to the American dollar impacts McGill s budget through several channels. First, a lower Canadian dollar relative to the U.S dollar makes McGill s tuition fees significantly lower for American students. Second, a lower Canadian dollar may also make McGill less attractive when recruiting and retaining the talented faculty from other countries. Third, a lower Canadian dollar makes purchases of goods in U.S. currency more expensive, including library serial collections, books, and research equipment. McGill is a net purchaser of U.S. goods. The Canadian dollar appreciated during summer The exchange rate of an American dollar then floated between $1.23 CAD and $1.26 CAD between September 2017 and April

12 FIGURE 6: MONTHLY AVERAGE EXCHANGE RATE, CANADIAN DOLLAR PER U.S DOLLAR, MAY 2017APRIL FIGURE 7: CONSUMER PRICE INDEX, QUÉBEC, ANNUAL GROWTH RATE, AS OF APRIL 2.0% 1.8% % 1.4% 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% Source: Statistics Canada. Source: Statistics Canada. Inflation The cost of several items in the University s basket of goods and services typically increases more rapidly than the Consumer Price Index. However, the latter is an important factor in determining the economic component of salary increases. The Consumer Price Index increased by 1.7% between April 2017 and April This marks a significant increase after four years of CPI inflation below 1.4%. Apart from indexation of salaries, additional resources are typically not allocated to deal specifically with inflation. From time to time, allocation parameters are updated, and adjustments are made to deal with sizeable changes in big ticket items (e.g., library collections), but in most cases the University counts on units finding ways to adjust their operations in order to meet the higher costs. 12

13 Regulatory Environment Pension Plan Under government regulations, every three years McGill s pension plan is required to undertake an actuarial valuation exercise. The University is obliged to make supplementary contributions from the budget of the unrestricted fund to the pension plan to make up for any shortfalls in the ability to cover the defined pension benefits to departing employees as well as shortfalls in annuity plans written for some pensioners. The annual report on the McGill University Pension Plan for the year ended December 31, 2017 reminded members that the actuarial valuation of the Pension Plan completed as of December 31, 2015, revealed a going concern deficit of $78M and the degree of solvency of the Pension Plan as at December 31, 2016 was 81%. The next valuation exercise is due no later than December 31, 2018, with the results to be filed with the government by the regulatory deadline of September 30, Discussions are ongoing to perform a valuation earlier due to the favourable interest rates. Immigration and Work Permits Over the past several years, the federal government has tightened certain rules and regulations for renewing work permits. For example, recruiting or retaining a professor who has an existing right to work in another country but who would lose that status by applying for Canadian permanent residence rather than simply holding a work permit, might be discouraged from accepting employment. Work permit renewals for citizens of countries with which Canada does not have a free trade agreement require an application to be submitted and a relevant fee to be paid. This complicates the process for Assistant Professors who seek to renew their work permit in line with their pretenure reappointment, following their initial threeyear appointment. The Québec government has tightened both French and English language requirements to qualify for immigrant status, entailing increased costs for demonstrating language competence, but also posing challenging time limits for midcareer and senior scholars to acquire the language competency needed under Québec s immigration point system. The Québec processing times have increased as well, which have resulted in the necessity of renewing work permits instead of professors acquiring permanent residency. These regulations and factors also present budgetary challenges. 13

14 3. REVIEW OF THE BUDGET UNRESTRICTED FUND UniversityLevel The forecast deficit of the unrestricted fund for fiscal year stands at $24.1M vs. a budgeted deficit of $9.9M at the beginning of fiscal year. Revenues in the unrestricted fund in are 29.5M$ higher than budgeted, forecast at $844.5M. Higher than budgeted tuition fees ($11.4M) and sales of goods and services ($10.0M) account for a large part of the difference. Tuition fees are forecast to be higher due to higher enrolment of deregulated students relative to targets used in Budget , which generated an additional $7.3M in tuition fees. Higher sales of goods and services were observed in selffinancing operations of residences (including food services). Higher sales of goods and services are also observed in the Faculty of Medicine due to additional revenues generated by medical residents from the Middle East. Grants from the provincial government are $3.4M higher than budgeted, partly due to additional funding announced by the provincial government during the fiscal year. Grants from the federal Research Support Fund to cover indirect costs of research are $2.7M higher than what was budgeted, due to an inyear allocation by the federal government. 14

15 TABLE 2: BUDGET OF UNRESTRICTED FUND, Revenues Grants Québec Tuition and Fees Sales of Goods & Services Grants Canada Investment and interest income, forex gain Gifts and Bequests Unrealized gains (losses) Revenues total (actuals) 313, , ,384 28,865 9,418 7,907 4, ,736 Budget * (thousands of dollars) 332, , ,067 25,708 7,992 6, ,031 YearEnd Forecast , , ,074 28,422 8,849 7, ,516 Expenses and net transfers from the unrestricted fund in are forecasted to be $43.7M than budgeted, with higher than originally budgeted administrative and support staff salaries, employer pensionrelated expenses, and a pay equity provision accounting for the largest differences. The University added 297 nonacademic staff members between January 2017 and January Headcount as of January 31 st snapshots. Exclusion: staff on unpaid leave, trades and services staff, casual staff. Expenses Salaries Academic Administrative & Support Benefits Student and student aid Salariestotal 265, ,705 87,584 42, ,546 (thousands of dollars) 271, ,038 94,177 43, , , , ,136 46, ,843 NonSalary (net) Building and occupancy costs (including energy) Services (contracts/professional/travel) Cost of Goods Sold & Services Rendered Materials, Supplies & Publications Hardware and Software Maintenance Interest and Bank Charges Other NonSalary Expenses Contributions to Partner Institute NonSalary (net) total Expenses total Interfund transfers Increase/(decrease) in Fund Balance 41,445 35,812 19,361 13,069 9,925 2,145 10,083 11, , ,369 (38,335) $5,032 *: Before reclassifications of nonsalary expenses. 33,820 23,318 21,547 12,584 11,703 2,740 38,650 9, , ,338 (44,622) (9,929) 45,024 36,820 25,941 19,714 10, ,822 11, , ,240 (34,377) (24,101) 15

16 4. BUDGET McGill University has reached a watershed moment in its budgeting. It has started planning for the integration of a new provincial funding policy, as well as for an unprecedented capital renewal of the campus. In addition, the provincial government continues to require of universities running a deficit a plan to return to a balanced budget in order to be eligible for its conditional grant. Failure to conform to this requirement has the following consequences: postponement of the conditional grant until an acceptable plan to return to balanced budget is accepted by MEES. Given the current forecast of a deficit from to , adhering to a longterm balanced budget plan will be critical. McGill remains committed to support activities that support its primary mission by promoting academic excellence and improving services to students. Currency Exchange Rate Student Aid Amount: $32.6M in McGill continues its commitment to accessibility by contributing at least 30% of incremental net tuition towards student aid and support, taking into account incremental amounts received from donations. McGill maintains its commitment to provide financial support to students by contributing $32.6M of its unrestricted fund towards student aid and support in Academic Renewal Amount: $4.2 M in While the number of new tenure stream faculty represents a relatively low percentage of total tenured faculty every year, each new tenure position represents a potential multimillion dollar commitment of the University from a budget perspective. Net new hires of tenure stream faculty will be nil from until , with both planned new hires and planned departures set at 55 per year. Costs of new hires should be contained as the higher salaries of departing senior faculty members could compensate for the cost of additional positions, most of which are expected to be at the entrylevel. 16

17 FIGURE 8: ACADEMIC RENEWAL, TENURE TRACK COMPLEMENT, END OF YEAR 1,700 1,695 1,690 1,685 1,680 1,675 1,670 1,665 1,660 1,655 1,650 1, p p p p p Source: McGill University. Academic Renewal Budget Framework. Updated as of January 29, Student Mental Health Action Plan Amount: $8.7M/7 years The Health and Wellness Committee consulted the McGill community in 2017 on mental health and wellness at McGill. Following this consultation, the Action Plan for Addressing Student Mental Health at McGill proposes the implementation of the following initiatives to facilitate access to campus and communitybased resources: 1) the creation of a Student Wellness Hub in the Brown Student Services Building; 2) the establishment of a network of wellness advisors anchored to the Hub and located in the Faculties and other studentoriented units across campus and 3) the creation of comprehensive website to map and facilitate access to such resources. The plan commits $13M over seven years towards the implementation of this Action Plan, $8.7M of which will be contributed from the University s unrestricted fund and the remaining being expected to be provided by an external philanthropic partner. Indigenous Studies and Education Initiatives Amount: $1.4 M onetime and recurring. Based on recommendations of the Provost s Task Force on Indigenous Studies and Indigenous Education, two new positions, including that of Special Advisor, Indigenous Initiatives, will be created. A bursary fund will be created to support incoming Indigenous students, and an Indigenous Artist in Residence Program will be created. Support for Faculty initiatives, including the Indigenous Studies minor is included in this amount. Protection of Library Collections Amount: $1.25M in The collections budget remains whole and is dominated by the scholarly journal budget in accordance with the University s status as one of Canada s topranked research intensive institutions and the concomitant user demand for journal literature. The PVPA will continue to support the collection with onetime annual adjustments, as it is one of the reputational pillars of McGill. McGill also maintains its commitment to demonstrate the potential for digital resources to enhance education and continue to serve both students and faculty. Salary Policy Amount: $12.2M in Salaries and benefits represent close to 80% of the University s total operating expenses. In order to attract and retain top academics in a global market, both starting salaries and annual salary increases for McGill professors must remain competitive. McGill must also be able to provide starting salaries and interesting career prospects to talented administrative and support staff that have the skills to support the academic mission of the University in a professional manner. The average salary policy rate for is 2.68% on a salary mass of $454.5M, for cost of salary policy of $12.2M. Pension Plan Employer Contributions Amount: $21.5M in All employees who joined McGill on or after January 1, 2009 are members in the McGill definedcontribution pension plan. However, McGill must still cover the unfunded liabilities related to the defined benefits component of the hybrid plan that were accrued before January 1, 2009 for members who joined or were eligible to join the plan before this date. McGill University is the only university in Québec that currently offers a definedcontribution pension plan. 17

18 Preparation of the McGill Bicentennial Campaign Amount: $275,000 in TABLE 3: BUDGET , UNRESTRICTED FUND Over the past 200 years, McGill has been and continues to be a leader in education and research. McGill s greatest strength is its people students, alumni, faculty, and staff. The University is committed to being Canada s most international university while being firmly rooted in Montreal and Québec and is wellplaced to address the grand challenges and complexities of the 21st century. As the plan for the bicentennial celebration comes together, it is being supported by discretionary funds in Principal and Provost and VicePrincipal (Academic) s respective budgets Budgetary Outlook for Unrestricted Fund UniversityLevel The budgeted deficit of the unrestricted fund for stands at $15.4M. Revenues are expected to increase by $26.3 M and reach $870.9M while expenses (not including interfund transfers) are expected to increase by $25.2M and reach $859.4M. Revenues Grants Québec Tuition and Fees Sales of Goods & Services Grants Canada Investment and interest income, forex gain Gifts and Bequests Revenues total Expenses Salaries Academic Administrative & Support Benefits Student and student aid Adjustment to pay period Salariestotal Budget * (thousands of dollars) 350, , ,884 30,438 10,309 7, ,863 (thousands of dollars) 286, , ,981 47,775 1, ,525 Change vs forecast 14,860 12,895 (4,190) 2,016 1,460 (693) 26,347 10,966 6,059 (4,155) 987 1,825 15,682 NonSalary (net) Building and occupancy costs (including energy) Services (contracts/professional/travel) Cost of Goods Sold & Services Rendered Materials, Supplies & Publications Hardware and Software Maintenance Interest and Bank Charges Other NonSalary Expenses Contributions to Partner Institute NonSalary (net) total Expenses total Interfund transfers Increase/(decrease) in Fund Balance 40,422 31,923 24,351 14,288 11,116 3,720 39,897 11, , ,401 (26,904) (15,442) (4,602) (4,897) (1,590) (5,426) 181 2,752 23,075 (15) 9,478 25,161 7,473 8,659 Note: Before potential reclassifications of nonsalary expenses. See Appendix I for details. 18

19 Revenues are set to increase by $26.3 M in , mostly as a result of higher provincial grants ($14.9M) and tuition and student fees ($12.9M). The provincial government announced additional funding related to the implementation of the new funding policy which will result in $7.4M additional grants for McGill University. The remainder of the increase in the provincial grant comes a higher teaching grant resulting from an increase in the number of funded doctoral students (see appendix 5 for details). Tuition fees for undergraduate international students in deregulated disciplines are increasing by 7.7% in , and annual rates of increase are set at this level until This increase is a minimum, and may be adjusted upward as market and economic indicators demand. Expenses in the unrestricted fund are set to increase by $25.2M in , with about 60% of the increase in salary expenses and 40% in nonsalary expenses. Salary expenses are set to increase by $15.7M, including $12.2M in increases as a result of salary policy. Benefits are set to decline by $4.2M as a result of reduced contributions to cover pension plan liabilities. This takes into account interest rates increases that occurred in , as well as increases that are anticipated in FIGURE 9: ACADEMIC UNIT BUDGET, UNRESTRICTED FUND, : $510.1M Agr./Env. Sciences Arts Cont. Studies Den stry Desautels Management Educa on Engineering Law Libraries $12.0 $9.8 $22.2 $16.5 $26.3 $39.0 $37.0 $48.3 $65.1 Nonsalary expenses are set to increase by $9.4M, mostly as a result of the creation of provisions and contingencies for future initiatives. The University charges an overhead recovery fee on revenues earned in noncore unrestricted funds in order to cover part of the central services provided and for the use of the infrastructure. As planned, the overhead recovery fee is increasing from 5.0% in to 7.5% in The process for collecting and recording of this fee is applied on a quarterly basis. Medicine Schulich Music $19.6 Sciences $64.0 Note: Excluding interfund transfers. See Appendix 7 for details. $150.3 Faculties and Administrative Units The Office of the PVPA enters into annual budget planning agreement with each academic and administrative unit. The multiyear and multifund budget planning agreement describes various actions pertaining to the academic or administrative unit s development objectives and priorities within the context of the University s strengths and values. 19

20 FIGURE 10: ADMINISTRATIVE UNITS BUDGET, UNRESTRICTED FUND, : $326.9M FiveYear Outlook Athle cs Campus Planning and Development Dep. Provost (Student Life and Learning) Facili es Mgmt / Ancillary Services Financial Services Food and Dining Services Graduate & Postdoc Studies Human Resources IT Services Interfaculty Studies Legal Services Macdonald Campus Principal And Vice Chancellor Provost & VP (Academic) Residences & Student Housing Secretariat Student Services VP (Admin and Finance) VP (Com. and External Rela ons) VP (Research and Innova on) VP (University Advancement) $0.8 $2.9 $2.1 $1.3 $1.3 $6.7 $5.1 $11.2 $10.8 $13.0 $12.2 $17.3 $14.8 $20.1 $22.5 $39.0 $36.9 The fiveyear outlook shows a reduction of the deficit from $15.4M in to a surplus of $3.7M in This projection takes into account the provincial funding policy that was in effect at the end of $8.7 $14.9 $18.8 $66.4 Strategic budget reallocations have been mandated on administrative units for These reallocations are built into the budget and failure to meet these requirements would impact the University s annual results. In addition to administrative units, some funds are managed by central administration for specific purposes. Central funds have a budget of $33.9M in These funds include, for example, provisions for the pension plan deficit, as well as other central contingencies. Restricted Fund The two major components of the restricted fund are the research grants and contracts, and the spendable income from endowments along with nonendowed gifts and bequests that must be spent in accordance with the terms of the donor. As of January 31, 2018, revenues (net of deferrals) of the restricted fund totalled $274.0M, compared to $264.3M for the same period in Corresponding expenses of $265.1M were $6.3M higher compared to the same period last year. Figure 11 represents a projection of the restricted fund revenues. These are forecast by applying the third quarter to final result ratio to the third quarter number for the current fiscal year. To this total is applied the percentage growth in the forecast values given by units in the context of the budget process for the restricted fund. $M Note: (a): Actual (o): Outlook $426.3 $373.3 $374.3 $372.6 FY14a FY15a FY16a FY17a FY18o FY19o FY20o FY21o 20

21 Endowment Fund The University is a careful steward of the gifts and donations it receives and is mindful of the obligations it undertakes whenever accepting philanthropic support. Principal among these obligations is the alignment of endowments with University needs and to ensure that the funds are indeed spent to support our mission. Pledges from fundraising and other donations are recorded in the period in which they are collected (excluding commitments). In terms of McGill s predicted philanthropic revenues, total cash in (gifts plus pledge payments) is forecasted to be between $105M $125M in and budgeted to be between $115M $135M for For the most part, donations are received for restricted purposes with more than half being destined towards the endowment fund. The market value of McGill s endowment, including trust funds, has achieved steady growth during the past few. Additional donations to the endowment fund as well as capitalizations allow the purchase of more units while the performance of related investments impacts the unit value. As of February 28, 2018, the market value of the endowment fund was $1.634B. While the market value of the fund has increased by 2.2% in the first 10 months of , interfund transfers from the endowment fund are expected to be higher in compared to the previous year (see details in appendix II). TABLE 4: DONATIONS BY TYPE, TABLE 5: ENDOWMENT FUND, AS OF APRIL 30 Year For more information, please refer to the annual Report on Endowment Performance: Plant Fund MIP Market value ($M) 1, , , ,612.3 Number of MIP units 3,446,226 3,579,365 3,694,641 3,796,339 MIP Unit Value The plant fund includes capital grants received primarily for the purposes of renovating existing space, addressing deferred maintenance projects, and from time to time, constructing new space in addition to purchasing capital assets. As well, there are contributions in the way of gifts and bequests as well as contributions from student groups. McGill s capital budget includes projects worth $1.4B between and The budget for those projects amount to $260.4M, including $101.4M of construction financed by debt, $52.2M of capital budget coming from the MEES (including the deferred maintenance portion) and $33.8M of IT projects financed by debt. This planned budget does not include amounts related to the potential redevelopment of the Royal Victoria Hospital. McGill s share of the provincial capital grant has been declining in recent years mostly due to the age factor of buildings being maximized at 50 years old. Each year, the average age of McGill s heritage campus gets closer to that of the newer campuses, and our share of the renovation grant is thereby reduced. Fund Unrestricted Restricted Plant(1) Total Endowment 0 31, ,279 Note: (1): Plant fund gifts are largely gifts in kind. Direct Spend Thousands of dollars 7,907 51,662 6,094 65,663 Total 7,907 82,941 6,094 96,942 In , a Provincewide exercise led by Bureau de Coopération Interuniversitaire (BCI) sought to identify our deferred maintenance inventory. Officially, our deferred maintenance deficit, in MEESsubsidized buildings (excluding downtown residences), is estimated at $728M. Because of limitations in the methodology, this number is an absolute minimum (e.g., it does not include building facades, etc.). For , there were 26 deferred maintenance projects submitted in the Plan décennal des investissements universitaires (PDIU) , with $128.4M to be spent that year. 21

22 TABLE 6: CAPITAL PROJECTS IN PDIU Funding Source FY 2018(e) FY 2019(e) FY 2020(e) FY 2021(e) FY 2022(e) FY 2023(e) Sum of Total Project Costs (FY18 FY23) $300M Debt Construction $100M Debt IT Ministry of Education (MEES) Capital Budget (1) Strategic Investment Fund Other Special Grants Research Funds Operating Funds Donations Internal Loans Other Internal Funds Unknown at present (2) Placeholder for Research Portfolio (3) $52,935 $28,115 $35,136 $13,225 $1,104 $7,258 $9,867 $2,492 $11,508 $7,538 $2,445 $101,405 $33,827 $52,259 $31,618 $9,065 $2,720 $2,196 $2,099 $8,253 $4,353 $12,617 $50,800 $17,566 $57,462 $13,578 $27,730 $455 $3,033 $1,400 $1,069 $14,000 $119,971 $32,525 $4,615 $53,630 $1,006 $28,354 $12,147 $273,155 $8,878 $42,493 $16,000 $131,82 $47,384 $15,750 $19,280 $246,543 $84,123 $288,363 $59,426 $66,252 $9,978 $12,517 $7,624 $21,162 $12,960 $72,959 $544,228 Total anticipated cashflow $171,623 $260,412 $307,064 $405,432 $199,193 $82,414 $1,426,138 TABLE 7: CAPITAL PROJECTS IN PDIU, HIGHER EDUCATION COMPONENT, EXCLUDING RESEARCH Fund Budget ($M) Total Budget ($M) Student Services Building McTavish Houses McLennanRedpath Library Renovation 680 Sherbrooke Wilson Hall Macdonald Farm Information Centre Source: Plan décennal des investissements universitaires

23 Overall Borrowing and Debt Position In February 2015, the Board of Governors approved an initiative to address the University s accumulated backlog of deferred maintenance, information technology and space needs, and the Executive Committee approved, on the recommendation of the Finance Committee, for the University to borrow or issue debt up to $400 million as a financing plan in support of this initiative. The Finance Committee of the Board of Governors was informed that as at December 31, 2017, $121.2M had been committed to approved capital projects, out of $300M allocated to meet the University s most pressing deferred maintenance needs. The Finance Committee was also informed that as at December 31, 2017, $84M had been committed to approved ITrelated projects, out of $100M allocated to meet the University s most pressing information technology needs. Impact of Capital Investments on University Funds ($M) [C=A+B] Net cash flow for McGill Operating Fund [VALUE] ($11.50) ($23.00) ($23.00) ($23.00) FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 [A] Capital Payment ($0.72) ($8.61) ($8.61) ($8.61) [B] Interest payment ($10.78) ($14.39) ($14.39) ($14.39) [D] Rate lock (M to M) ($1.20) [E] Interest earned $1.43 $0.51 $0.97 $4.68 $6.65 $6.07 [F] Expenses ($0.67) ($0.57) The $400M investment in deferred maintenance will come at a significant financial cost, which will be part of the unrestricted fund budget over the next 40 years. Repayments from the unrestricted fund will start in with a payment of $11.5M and increase to $23.0M annually from to

24 Consistent with prior years, FinancementQuébec has asked the University to institute a régime d emprunts for the period between now and June 30, 2018, to borrow from FinancementQuébec as a way to receive the next installment of the Québec capital grant. This maximum borrowing amount for McGill for the period ending June 30, 2018 is $173,591,522. Both the annual interest and the capital amount borrowed are repaid by MEES. In most circumstances, both the interest and capital are repaid via additional issuances of longterm borrowings. MEES requests that each university board adopt a resolution authorizing the university to borrow long term. The new debt is issued by FinancementQuébec to refinance the province s maturing debt, and to reimburse shortterm bank borrowings incurred by the University on behalf of the Québec government. As at January 31, 2018, the University s total borrowings were $1.1B, all of which was longterm debt. Exceptionally at this date there was no bank indebtedness. Included in the longterm debt is $160M of McGill Senior Unsecured Debentures issued in January 2016 and $150M of McGill Senior Unsecured Debentures issued in The remaining $802.1M is substantially all due from MEES, for which University charges MEES interest. Overall longterm debt increased by $23.9M in compared to the previous year. The projected MEES total debt is expected to be approximately $791.6M by April The cost of borrowing is expected to be approximately 1.05% over the course of and total interest and bank charges expenses are forecast to be $1.0M in The average borrowing rate is expected to rise from 1.05% in to 2.25% in , and borrowings are expected to increase for purposes of extrapolation of future budget estimates. As such, our interest and bank charges expenses will be approximately $3.7M. S&P Global affirmed its AA (stable) rating in their report dated February 21, 2018, unchanged from that of February Moody s performed its annual review in mid November confirming McGill s rating of Aa2 (stable), on both the Series A ($150 Million) and Series B ($160 million) issuances. 24

25 APPENDIX 1: BUDGET , UNRESTRICTED FUND Unrestricted Fund ($000 s) Budget Forecast Change ($) Change (%) Revenue Grants Québec Tuition & Fees Sales of Goods & Services Grants Canada Investment and Interest Income Gifts & Bequests Foreign Exchange Gain Unrealized Gains (Losses) (1) Total Revenues 350, , ,884 30,438 9,809 7, , , , ,074 28,422 8,349 7, ,516 14,860 12,895 (4,190) 2,016 1,460 (693) 26, % 4.0% 2.9% 7.1% 17.5% 8.7% 0.0% 3.1% Expenses Salary: SalaryAcademic SalaryAdministrative & Support Benefits Student Aid Salary Student Yearend audit adjustments(pension liability & postemployment benefit restatements) (2) Yearend audit adjustments `(vacation, pension obligation, postemployment benefits) (2) Total Salary 287, , ,981 32,574 15, , , , ,136 32,713 14, ,843 13,242 5,608 (4,155) (139) 1,126 15, % 2.5% 3.5% 0.4% 8.0% 2.4% NonSalary: Cost of Goods Sold & Services Rendered Building Occupancy Costs Energy Materials, Supplies & Publications Contract Services Contributions to Partner Institutions Hardware and Software Maintenance Professional Fees Travel Interest and Bank Charges Other NonSalary Expenses Total NonSalary Total Expenses Excess of revenue over expenses 24,351 22,209 18,213 14,288 12,076 11,159 11,116 10,491 9,356 3,720 39, , ,401 11,462 25,941 25,301 19,723 19,714 15,184 11,174 10,935 11,470 10, , , ,240 10,275 (1,590) (3,092) (1,510) (5,426) (3,108) (15) 181 (979) (810) 2,753 23,075 9,479 25,160 1, % 12.2% 7.7% 27.5% 20.5% 0.1% 1.7% 8.5% 8.0% 284.5% 137.2% 5.7% 3.0% 11.5% Interfund Transfers (negative is a debit, positive is a credit) Net change in fund balance Pension Liability and PostEmployment Benefit Remeasurements (2) Interfund Transfers Internal Loan Repayments Capital purchases via interfund transfers Over (under) Distributed Endowment Income Book to Market Adjustment (1) (Capitalization) Decapitalization of Current Year Investment Income Total Interfund Transfers Increase (Decrease) in Net Assets 16,003 (10,000) (30,000) (2,500) (407) (26,904) (15,442) 8,490 (10,000) (30,000) (2,500) (366) (34,377) (24,101) 7, (41) 7,473 8, % 0% 0% 0% 11% 22% 36% Net Assets, Beginning of Year Net Assets, End of Year Decrease (Increase) in Accumulated Financed Deficit (2) (344,034) (359,476) (15,442) (319,933) (344,034) (24,101) (24,101) (15,442) 8,659 Note: (f): Forecast. (1) Unrealised gains (losses) and the offsetting BooktoMarket Adjustment are not forecasted or budgeted. (2): The forecast and budget do not include estimates for yearend audit adjustments: pension liability and postemployment benefit restatement, as well as, accruals for vacation, pension obligation and postemployment benefits. 7.5% 4.5% 35.9% 25

26 APPENDIX 2: MultiYear Financial Outlook by Revenue and Expense, by Fund Unrestricted Fund ($000 s) Revenues Grants Québec Tuition & Fees Sales of Goods & Services Grants Canada Investment and Interest Income Gifts & Bequests Foreign Exchange Gain Unrealized Gains (Losses) (1) Total Revenues (f) 336, , ,522 25,832 9,127 6, (6,284) 781, , , ,384 28,865 6,761 7,907 2,657 4, , , , ,074 28,422 8,349 7, ,516 Budget , , ,884 30,438 9,809 7, ,863 Expenses Salary: SalaryAcademic SalaryAdministrative & Support Benefits Student Aid SalaryStudent Yearend audit adjustments (pension liability & postemployment benefit restatements) (2) Yearend audit adjustments (vacation, pension obligation, postemployment benefits) (2) Total Salary 249, , ,303 29,120 11,786 (26,853) 13, , , ,705 87,584 30,055 12, , , , ,136 32,713 14, , , , ,981 32,574 15, ,525 NonSalary: Cost of Goods Sold & Services Rendered Building Occupancy Costs Energy Materials, Supplies & Publications Contract Services Contributions to Partner Institutions Hardware and Software Maintenance Professional Fees Travel Interest and Bank Charges Other NonSalary Expenses Total NonSalary 17,193 23,101 18,427 15,590 12,004 9,832 8,069 9,059 9,031 10,334 13, ,931 19,361 22,702 18,743 13,069 14,303 11,983 9,925 11,118 10,391 2,145 10, ,823 25,941 25,301 19,723 19,714 15,184 11,174 10,935 11,470 10, , ,398 24,351 22,209 18,213 14,288 12,076 11,159 11,116 10,491 9,356 3,720 39, ,876 Total Expenses Extraordinary Revenues Excess (deficiency) of revenue over expenses 736,164 20,638 65, ,369 43, ,240 10, ,401 11,462 Interfund Transfers (negative is a debit, positive is a credit) Net change in fund balance Pension Liability and PostEmployment Benefit Remeasurements (2) Interfund Transfers Internal Loan Repayments Capital purchases via interfund transfers Over (under) Distributed Endowment Income Book to Market Adjustment (1) (Capitalization) Decapitalization of Current Year Investment Income Total Interfund Transfers Increase (Decrease) in Net Assets (26,853) 3,830 (11,447) (31,202) (4,213) 6,284 (336) (63,937) 1,792 8,295 5,755 (7,539) (38,204) (1,285) (4,979) (378) (38,335) 5,032 8,490 (10,000) (30,000) (2,500) (366) (34,377) (24,101) 16,003 (10,000) (30,000) (2,500) (407) (26,904) (15,442) Net Assets, Beginning of Year Net Assets, End of Year Decrease (Increase) in Accumulated Financed Deficit (2) (326,757) (324,965) 15,741 (324,965) (319,933) 5,032 (319,933) (344,034) (24,101) Note: : (f): Forecast. (1) Unrealised gains (losses) and the offsetting BooktoMarket Adjustment are not forecasted or budgeted. (2): The forecast and budget do not include estimates for yearend audit adjustments: pension liability and postemployment benefit restatement, as well as, accruals for vacation, pension obligation and postemployment benefits. (344,034) (359,476) (15,442) 26

27 Restricted Fund ($000 s) Revenues GrantsCanada GrantsQuébec Investment and Interest Income Gifts & Bequests GrantsOther sources Contracts Sales of Goods & Services Grants United States Unrealized Gains (Losses) (1) Total Revenues (f) 174,928 52,054 42,829 41,031 9,074 21,133 6,386 7, , ,109 43,186 48,909 51,662 36,352 17,363 6,379 6, , ,432 58,740 58,544 47,317 37,016 17,079 7,032 6, ,300 Budget ,782 59,327 59,129 47,791 9,450 17,250 7,102 6, ,033 Expenses Salary: Student Aid SalaryAcademic Salary Administrative & Support Salary Student Benefits Total Salary 76,902 69,340 22,597 25,532 16, ,980 81,447 68,805 23,905 25,126 17, , ,122 83,311 29,690 29,299 20, ,250 87,706 72,981 26,009 25,666 17, ,877 NonSalary: Contributions to Partner Institutions Materials, Supplies & Publications Travel Professional Fees Contract Services Building Occupancy Costs Hardware and Software Maintenance Energy Interest and Bank Charges Other NonSalary Expenses 30,836 28,071 16,999 11,622 10,638 4, (174) 3 27,966 39,239 28,829 17,069 11,739 10,956 4, ,255 39,135 30,382 18,644 14,791 12,689 5, ,278 34,282 26,614 16,332 12,957 11,115 4, ,072 Total NonSalary 131, , , ,111 Total Expenses 342, , , ,459 Excess (deficiency) of revenue over expenses 12,783 14,690 12,043 12,574 Interfund Transfers (negative is a debit, positive is a credit) Interfund Transfers Internal Loan Repayments Capital purchases via interfund transfers (Capitalization) Decapitalization of Current Year Investment Income Total Interfund Transfers Increase (Decrease) in Net Assets 2,480 (739) (13,672) (11,931) ,713 (11,719) (13,684) (14,690) 0 10,000 (10,000) (12,000) (12,000) (10,000) (13,000) (13,000) (426) Net Assets, Beginning of Year (971) (119) (119) (81) Net Assets, End of Year (119) (119) (81) (503) Note: (f): Forecast. (1) Unrealised gains (losses) and the offsetting BooktoMarket Adjustment are not forecasted or budgeted. 27

28 Plant Fund ($000 s) Revenues GrantsQuébec GrantsCanada Gifts & Bequests Investment and Interest Income Sales of Goods & Services Unrealized Gains (Losses) (1) Total Revenues (f) 54,567 16,412 6, (2,032) 76,194 54,301 15,616 6,094 2, (2,525) 76,709 55,539 15,073 6,067 5, ,037 87,147 Budget ,662 33,466 6,189 5, ,881 Expenses NonSalary: Amortization Interest and Bank Charges Other NonSalary Expenses Total NonSalary 113,432 29,521 3, , ,475 34,218 2, , ,623 35,638 4, , ,115 36,351 5, ,044 Total Expenses 146, , , ,044 Extraordinary revenues 2,513 Excess (deficiency) of revenue over expenses (67,856) (75,287) (77,238) (51,163) Interfund Transfers (negative is a debit, positive is a credit) Net change in fund balance Interfund Transfers Internal Loan Repayments Capital purchases via interfund transfers (Capitalization) Decapitalization of Current Year Investment Income Total Interfund Transfers Increase (Decrease) in Net Assets Net Assets, Beginning of Year Net Assets, End of Year 387 1,431 12,186 44,874 58,878 (8,978) 270, , ,885 (3,174) 51,888 72,330 (2,957) 261, , ,000 20,000 42,000 72,500 (4,738) 259, , ,000 43,000 73,500 22, , ,609 Note: (f): Forecast. (1) Unrealised gains (losses) and the offsetting BooktoMarket Adjustment are not forecasted or budgeted. 28

29 Endowment Fund ($000 s) Revenues Total Revenues (f) Budget Expenses Total Expenses Excess (deficiency) of revenue over expenses Interfund Transfers (negative is a debit, positive is a credit) Net change in fund balance Interfund Transfers Over (under) Distributed Endowment Income Book to Market Adjustment (1) (4,499) (7,741) 4,213 (6,284) 187,564 (16,921) 1,285 4,979 42,225 (28,490) 2,500 43,070 (36,003) 2,500 (Capitalization) Decapitalization of Current Year Investment Income Total Interfund Transfers Increase (Decrease) in Net Assets 336 (13,975) (13,975) , , ,602 16, ,974 11,974 Net Assets, Beginning of Year 1,436,131 1,422,156 1,599,441 1,616,043 Net Assets, End of Year 1,422,156 1,599,441 1,616,043 1,626,016 Note: (f): Forecast. (1) Unrealised gains (losses) and the offsetting BooktoMarket Adjustment are not forecasted or budgeted. 29

30 APPENDIX 3 : Proforma Budget , All Funds Unrestricted Fund ($000 s) (f) Budget Grants Canada Quebec United States Other Sources Contracts Tuition & Fees Sales of Goods & Services Gifts & Bequests Foreign Exchange Gain Investment and Interest Income Unrealized Gains (Losses) (1) Total Revenues 30, , , ,884 7, , , ,782 59,327 6,201 9,450 17,250 7,102 47,791 59, ,033 33,466 72, ,189 5, , , ,834 6,201 9,450 17, , ,386 61, ,103 1,361, , ,263 6,140 37,016 17, , ,473 61, ,957 5,037 1,357, , ,356 6,440 36,352 17, , ,176 65,663 2,657 58,480 2,454 1,246,845 Expenses Salary: Academic Administrative & Support Student Student Aid Benefits Yearend audit adjustments (pension liability & postemployment benefit restatements) (2) Yearend audit adjustments (vacation, pension obligation, postemployment benefits) (2) Total Salary NonSalary: Materials, Supplies & Publications Contributions to Partner Institutions Contract Services Professional Fees Travel Cost of Goods Sold & Services Rendered Building Occupancy Costs Energy Other NonSalary Expenses Hardware and Software Maintenance Amortization Interest and Bank Charges Total NonSalary 287, ,347 15,201 32, , ,525 14,288 11,159 12,076 10,491 9,356 24,351 22,209 18,213 39,897 11,116 3, , ,401 73,066 26,039 25,696 87,810 17, ,148 26,650 34,322 11,128 12,972 16,351 4, , , ,459 5, ,115 36, , , , ,386 40, , , ,672 40,938 45,481 23,204 23,463 25,707 24,351 27,113 18,586 68,580 11, ,115 40, ,231 1,388, , ,464 43, , , ,402 50,136 50,355 27,887 26,278 28,832 25,941 30,899 20,149 49,262 11, ,623 36, ,480 1,412, , ,610 37, , , ,540 41,898 51,222 25,259 22,857 27,460 19,361 27,242 19,304 39,641 10, ,475 36, ,535 1,264,075 Total Expenses Extraordinary Revenues (Expenses) 11,462 12,574 (51,163) (27,127) (54,920) (17,230) Excess (deficiency) of revenue over expenses Net Assets (deficiency), beginning of year (negative is a debit, positive is a credit) Net change in fund balance Pension Liability and PostEmployment Remeasurements (2) Interfund Transfers Internal Loan Repayments Capital purchases via interfund transfers Over (under) Distributed Endowment Income Book to Market Adjustment (1) (Capitalization) Decapitalization of Current Year Investment Income Net Assets (deficiency), end of period (344,034) 16,003 (10,000) (30,000) (2,500) (407) (359,476) (76) 10,000 (10,000) (13,000) (503) 254, ,000 20,000 43, ,609 1,616,043 43,070 (36,003) 2, ,626,016 1,526,204 43,570 1,542,647 1,538,399 42,725 1,526,204 1,359, ,295 8,295 1,538,399 30

31 APPENDIX 4 : Proforma Budget , All Funds 31

32 APPENDIX 5: Enrolment (headcount) Undergraduate Master Doctoral Other Graduate Total Graduate Total students (credits) Others All students APPENDIX 6: ENROLMENT STATISTICS Fall ,526 4,771 3,532 1,401 9,704 37,230 3,741 40,971 Fall ,475 4,641 3,406 1,426 9,473 36,948 3,545 40,493 Fall 2012 To get detailed enrolment statistics, please refer to Enrolment Services reports: STAFF STATISTICS Staff Headcount, as of January Budget ($M) Instructional Faculty Tenure stream Nontenure stream Total Nonacademic staff Executive Managerial and Professional Clerical Library Assistant Technical Trades and services Other (Residences, Nurses, Hospital) Total Total staff Unpaid nontenure stream Total staff (incl. unpaid nontenure stream) 26,349 4,212 3,378 1,771 9,361 35,710 3,069 38,778 1,671 1,493 3, , ,748 6,912 3,130 10,042 %Change (1 year) %Change (5 years) Total Budget ($M) 1,682 1,625 3, , ,045 7,352 3,220 10,572 APPENDIX 7: Faculty Faculty of Arts Faculty of Dentistry Desautels Faculty of Management Faculty of Education Faculty of Engineering Faculty Agricultural & Environmental Sciences Faculty of Science Faculty of Law McGill University Libraries Faculty of Medicine School of Continuing Studies Schulich School of Music Total BUDGET OF FACULTIES, UNRESTRICTED FUND Notes: 1) Most student assistants are no longer on the HR file as they are now paid through BSAC 2) Staff whose administrative unit is Long Term Disability are not included in these staff counts 3) Staff on leave are included in these staff counts Budget ($000) 65,111 12,023 48,336 16,452 38,963 22,239 63,972 9,788 36, ,311 26,310 19, ,121 32

33 APPENDIX 8: BUDGET OF ADMINISTRATIVE UNITS, UNRESTRICTED FUND Unit Associate VP (Macdonald Campus) Athletics Downtown Campus Campus Planning and Development Deputy Provost (Student Life & Learning) Facilities Management & Ancillary Services Financial Services Food and Dining Services Graduate & Postdoc Studies Human Resources Information Technology Services Interfaculty Studies Legal Services Principal And Vice Chancellor Provost & VP (Academic) Residences & Student Housing Student Services University Secretariat VP (Administration and Finance) VP (Communications and External Relations) VP (Research and Innovation) VP (University Advancement) Total Administrative Units Total Administrative Units including central funds Budget ($000) 2,132 14,939 11,164 18,809 66,390 8,698 17,325 20,118 10,810 38, ,946 1,332 12,955 36,942 22,479 1,251 6,687 5,081 12,235 14, , ,742 33

34 APPENDIX 9: UNIVERSITY SIGNIFICANT ACCOUNTING POLICIES The University s audited financial statements are prepared in accordance with Canadian accounting standards for notforprofit organizations ( ASNPO ) using the deferral method. The following significant accounting policies are included in the annual audited financial statements of the University: Revenue Recognition The University follows the deferral method of accounting for contributions, which include gifts and bequests, contracts and government grants. Research grants are recognized as revenue in the year in which related expenses are recognized. Interest and dividend revenue is recorded on an accrual basis. Realized gains or losses on sales of investments are recorded when securities are sold based on the cost. Unrealized gains and losses related to the change in market value are recorded as investment income. Capital assets Capital assets are recorded at cost. Purchases made using restricted funds are capitalized directly in the plant fund. Restricted fund contributions will be recorded in the plant fund as deferred contributions and recognized as revenue simultaneous to the amortization expense. Constructed assets do not include interest incurred during construction. Contributed capital assets are recorded at appraised fair value at the date of contribution when fair value can be reasonably estimated; otherwise they are recorded at a nominal amount. Amortization of assets under development commences when development is completed. 3. Grants receivable Under GAAP, these amounts meet the criteria of an asset. An offsetting liability is recorded as a corresponding deferred contribution. Please refer to 21.2 regarding revenue recognition for grants Pledges Donation pledges are not recognized until received and are disclosed in the notes to the financial statements, consistent with other Canadian Universities and accounting standards for notforprofit organizations. Discounting of LongTerm Grants Receivable Under GAAP, longterm receivables are discounted to their present value. A rate based on risk of the counter party will be agreed to. Deferral of Research and Capital Grants Under the deferral method, unspent research and capital grants are recorded as deferred contributions, rather than as grant revenue. Revenue recognition occurs in the year as related expenses are incurred. Longterm debt Longterm debt is presented at the gross value of all outstanding debt. 9. Unused Vacation Days, PostRetirement Benefit Obligations, and Accrued Pension Liabilities In the case of unused vacation days, postretirement benefit obligations, and accrued pension liabilities, accruals are recorded over the periods of service. An actuarial accounting valuation is performed annually at yearend to determine the amounts related to the pension liability and the postemployment benefit obligation. The valuation will use estimates and assumptions as agreed to by management. The triannual actuarial valuation for the pension plan was last performed as at December 31, Funding of operating and capital goods and services by fund type Expenses are either operating (i.e., value of goods and services expended in current fiscal period) or capital (i.e., value of goods and services expended beyond the current fiscal period). Operating and capital expenses are funded through four fund types: unrestricted, restricted, plant and endowment. Operating expenses are funded from both unrestricted and restricted funds, while capital expenses are funded from both restricted and plant funds. The endowment fund generates payout that can be used to fund either operating or capital expenses. 34

35 APPENDIX 10: GLOSSARY Academic Renewal: The program by which the University sets Facultybased tenuretrack academic targets and provides Faculties with the operating support needed to reach the targets, including operating salaries, startups, and recruitment funds. Accrual: The accrual accounting method reports revenue when earned (rather than received), and expenses when incurred (rather than paid). Accumulated Deficit: The total debt (i.e., the sum of the deficits from the unrestricted fund) incurred to support the accumulated spending that is in excess of revenues. Activity: Production under the responsibility, control and management of an institutional units, that uses inputs of labour, capital, and goods and services to produce outputs of goods and services. Amortization: The accounting of a purchased asset, which represents a noncash expense over a period of time. Also, for those units required to repay internal loans, it represents the systematic repayment of the debt over the agreed period. Asset: A tangible or intangible item of positive value to the University (e.g., cash, government receivables, a building, or a piece of equipment). Bequest: A gift given to the university at the time of a person s death as set forth in the individual s last will and testament. Bequests can have a variety of forms including, but not limited to: cash, marketable securities, tangible fixed assets, and consumable commodities. Bequests are classified according to the absence or presence of donor stipulations as unrestricted, temporarily restricted, or permanently restricted. Budget: An organizational plan stated in monetary terms; functions as a tool to measure revenues and expenditures against expectations. Budget Planning Agreement: A multiyear and multifund operating plan signed by the PVPA, and the Dean or VicePrincipal, which reports on previous year achievements and challenges, and describes activities that support strategic objectives, aspirations and priorities. It includes a summary of key performance indicators over a multiyear time frame. Finally, it includes all financial requests for a threeyear period and the related decisions made by the PVPA. Budget Reclassification: Action of moving budget from one budget expense category to another one. This typically happen throughout the fiscal year when a global amount for a given initiative is budgeted but the detailed breakdown is not yet available. Often, the budget will be classified in a residual budget expense category (e.g., other nonsalary expenses). Capital Assets: Assets used in operations, either tangible (e.g., plant, property, equipment) or intangible (e.g., software) that have an initial useful life of more than one year. See also plant fund. Capitalization: Term used in relation to the endowment fund when unspent distributed income is reinvested in the endowment fund Conditional grant: 10% of the provincial grant, which can be withheld by the MEES if a university runs an annual deficit, based on a predetermined formula (excluding yearend audit adjustments), without providing a plan to return to a balanced budget. This grant is accrued and typically paid subsequent to yearend. Contribution: Gifts, grants, bequests and any similar transfer of resources (both monetary and inkind). Decapitalization: Term used in relation to the endowment fund when previously capitalized distributed income is credited back to the spendable fund. Deferred Maintenance: The amount of renovation and upgrade required for the University s physical infrastructure. The repairs are serious and urgent innature as preventive maintenance was not performed in prior years. Examples include: upgrading ventilation systems, roof replacements, and building facade replacements. Deficit: Also known as overdraft; the amount by which a fund s expenses and transfers out exceed revenues and transfers in. Deregulated: Refers to tuition fees that are set by the University rather than by government regulation. See also Regulated. Donation: An act of presenting something as gift, bequest, or contribution, especially to a public institution or charity. Endowment Fund: Consists of all gifts, donations, and bequests, including those for Chairs, financial aid, and other specific purposes, held in perpetuity and invested to earn a reasonable rate of return over time, while 35

36 APPENDIX 10: GLOSSARY attempting to protect the purchasing power of the original gift. The earned income is distributed according to the University policy in effect, and is spent as specifically designated by the donor. Expenditure: The amount spent for goods delivered or services rendered, whether paid or accrued, including expenses, debt service, and capital outlays. Expense: Charges incurred, whether paid or accrued, for operation, maintenance, interest, and other charges that are presumed to benefit the current fiscal period. Fiscal Year (FY): Twelve consecutive months used for accounting purposes. As of the 12month financial year starts on May 1 and ends on April 30. Forfaitaires: (also called tuition supplements) the additional tuition, above the Québec student tuition, charged to outofprovince Canadians and International students. These amounts are determined by MEES annually and the universities remit them back to the Province in exchange for having the students funded through the grant at the level for inprovince students. Fund Balance: The difference between assets and liabilities in a fund; also defined as the cumulative results of a fund. Gift: A resource provided by a donor who enters into the transaction voluntarily and receives nothing other than a token of appreciation in exchange for the resource he/she is providing. Contributions can have a variety of forms including, but not limited to: cash, marketable securities, tangible fixed assets, and consumable commodities. Gifts are classified according to the absence or presence of donor stipulations as unrestricted, temporarily restricted, or permanently restricted. See also Bequest, Contribution, and Donation. Grant: A monetary award, allowance or subsidy. Indirect costs of research: The institutional costs incurred by the University to support research projects. Costs include items such as central administrative support, Library, computing infrastructure, utilities and other plant costs. Investment: Refers to an exchange of cash for a less liquid asset that is expected to increase in value beyond the initial purchase price. Investment vehicles include corporate stocks and bonds, government bonds and real estate. MEES: Ministère de l éducation et de l enseignement supérieur du Québec. MEES operating grant: The grant received from the MEES in support of teaching and research. Also known as the subvention de fonctionnement in French. Plant Fund: Capital projects and assets; including those funds from Québec capital grants, donations, and other sources. Regulated: Refers to tuition rates set by the government (MEES), either frozen or indexed to changes in disposable household income. Resource allocation: The process of distributing resources to units in order for them to conduct their designated activities and to absorb operating and/or facilities costs in order to achieve goals. Restricted Fund: Any fund with stipulations imposed by a sponsor or donor external to the University. A particular project or activity is specified in writing by the donor. These funds also refer to researchrelated funds from Canadian, Québec, and international sources. Revenue: Income generated by the supply of goods or services by the University unit to an external customer. Some examples are: tuition and fees, sales of goods and services to external entities, and earnings on investments. Selffunded: Students for whom universities in Québec are allowed to establish the fees but for whom no grant is received. This represents a small number of students enrolled in specialized Masterslevel programs in Management as well as nonquébec students studying in distance programs outside Québec. Selffinancing: Funds for which the source and/or use are outside the realm of operating budgets. They represent unrestricted activity for a unit, with continuation dependent on participation and availability of funding. Surplus: the amount by which a fund s revenues and transfers in exceed expenses and transfers out. Tenure stream. A term that refers to either tenured or tenuretrack academic staff. Tenured: permanent academic appointment 36

37 APPENDIX 10: GLOSSARY granted to Associate and Full Professors who have demonstrated excellence in teaching and research. Tenuretrack: academic appointment that includes future consideration for tenured status. University Resources: Assets available (actual and anticipated) for University operations; includes people, equipment, and facilities. Unrestricted Fund: Revenue is primarily from grants, tuition and fees, overhead on research grants, Investment and endowment income, and annual gifts. The revenue is pooled and then allocated to units concerned with fundamental and ongoing operations, dealing primarily with those activities normally associated with the University s core teaching and research. There are no external constraints as to how these funds are spent as long as the University policies and procedures are respected. YearEnd Audit Adjustments: Costs related to major institutional obligations unused vacation days, postretirement benefit obligations, and accrued pension liabilities for which we are required to record accruals over the periods of service. These three adjustments explain the difference between the GAAP Accumulated Deficit and the University Financed Accumulated Deficit. These adjustments are also excluded from the provincial calculation of annual operating results in determining eligibility for the conditional grant. 37

38 McGILL UNIVERSITY BUDGET Office of the Provost and VicePrincipal (Academic) October 31, 2018