2021-22 financial statements and year end

Today, the University of Alberta Board of Governors approved the university’s consolidated financial statements for the fiscal year ending March 31, 2022. My thanks to all of the staff involved in the year end process, which resulted in the university receiving a clean audit report—this is a major annual undertaking and your efforts are very much appreciated. 

The university ends the year in a surplus position largely due to unusual, one time factors. On a consolidated basis, the university ended with a surplus of $153.6M, of which $23.3M consists of donations directed to endowments and endowment capitalized investment income. These are restricted funds and therefore are not available for spending. This leaves an operating surplus of $130.3 million versus a budgeted surplus for the year of $3.2 million.

This operating surplus is the result of four main factors:

1. The sale of tangible capital assets ($34.9M)

The sale of Newton Place (North Campus) and Husfloen Centre (Augustana Campus) resulted in revenues of $34.9M. Newton Place, an ancillary, is a cost-recovery operation and as such is funded by their own revenue. As a result, revenue from its sale will be used to cover ancillary losses of the past two years due to the COVID-19 pandemic.

2. The recovery of a cumulative endowment encroachment ($31.2M)

In fiscal 2020, the investments held by the university realized a loss. As a result, there were insufficient investment earnings to cover the endowment spending allocation for that year. Endowment expenditures incurred were funded by a temporary encroachment on endowment principal, which led to an operating deficit in that fiscal year (2020). In the current fiscal year (2022), with the investment gains realized, we must now repay the endowment principal (as per university policy). This appears as a one-time $31.2M revenue increase in our operating results since there were no offsetting expenses (those expenses were incurred in FY2020). This is a timing difference between expense and revenue.

3. Lower expenditures than budgeted ($7.7M)

A small part of the surplus ($7.7M) resulted from the fact that fewer expenditures were made than budgeted. 

4. Higher than anticipated realized gains on non-endowed income ($53.3M)

Due to strong performance in the markets, the university’s non-endowed funds gained $53.3M more than was budgeted in operating investment income. 

Due to their inherent instability, unusual investment gains like these cannot be used to fund ongoing operating expenses which must rely on stable sources of revenue. In addition to the $34.9M that will be reinvested in ancillaries, the surplus will be directed towards investment reserves and one-time strategic initiatives.

Supporting strategic initiatives

This year’s results strengthen our long-term financial health. As per university policy, $48M will be transferred into the university’s investment income reserve to meet the reserve’s threshold (determined by the Board policy). This year, the higher than anticipated gains mean that after meeting that threshold, we are also able to allocate $32M to the Strategic Initiatives Fund for the first time; this has been a long-time goal under For the Public Good. This $32M—pending Board of Governors approval—is intended to fund one-time strategic priorities, including the following:

• $20M to address a portion of the university’s deferred maintenance liability, with an immediate focus on high priority issues associated with life, health and safety as well as potential critical building failures
• $2M to pension reserve
• $10M to be retained within the Strategic Initiatives Fund for allocation at a further date

The full Consolidated Financial Statements, with discussion and analysis, will be posted on the university’s website once the signed auditor’s report is received. This typically takes 1-2 weeks from the date of Board approval.

Thank you,

Todd Gilchrist
Vice-President, University Services and Finance