new and budgets - unb...costs of the richard j. currie center, including campus recreation services....

University of New Brunswick

Finances and Budgets The Last Four Years

and The Next Four Years

May 2013

Daniel V. Murray, C.A. Vice‐President (Finance and Corporate Services)

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Table of Contents

Page

a) A brief recap of key aspects of UNB’s finances and budgets for the past four fiscal years.

3

b) A look ahead at key financial aspects for the next four years.

32

c) An analysis of University assets and liabilities as at April 30, 2012, along with a summary analysis of major balances over recent years

39

d) Summary charts that compare UNB operating resource allocations to other Canadian universities over a longer period of time.

51

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PART A

A BRIEF RECAP OF KEY ASPECTS OF UNB’S

FINANCES AND BUDGETS FOR THE PAST FOUR FISCAL YEARS

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Finances and Budgets The Last Four Years and The Next Four Years

Recap of UNB Finances for the Last Four Years 2009‐10 to 2012‐13

Information contained in this section of the report includes:

‐ A summary of UNB’s operating budget, including an analysis of key aspects of revenue and expenses,

as well as final actual results in comparison to budget;

‐ An overview of the University’s capital budget and activities over the past four years, including major

projects and a summary of deferred maintenance totals;

‐ Overall performance of the UNB investments portfolio for endowments and other long‐term trust

accounts;

‐ A recap of the financial position of the Pension Plan for Academic Employees of the University of

New Brunswick;

‐ An illustration of overall research figures for the University for this four‐year period;

‐ A summary of recent fundraising results.

‐ A review of UNB real estate development activity

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Operating Budget Four‐Year Summary to 2012‐13

Revenue

Over the four‐year period ended April 30, 2013, UNB’s operating budget grew by a total of 10.5%, or by a

simple average of 2.62% per year.

At $178.3 million, the 2012‐13 operating budget accounts for approximately 60% of UNB’s overall funding

and provides funding for the day‐to‐day operations of both campuses of the University. The operational

expenses include salaries and benefits for faculty and staff, as well as heating, utilities, maintenance, library

costs, and other non‐salary costs of running the University. The balance of University funding includes

research funding, fundraising proceeds, earnings from investments, and capital funding, is restricted for the

specific purposes for which the funds were secured.

Provincial Operating Grant

Budgeted at $108 million in 2012‐13, the provincial operating grant is the largest component of UNB

operating revenue.

The $108 million includes two components, the basic unrestricted operating grant $99.4 million and $8.6

million received by UNB in return for freezing tuition fees for 3 years from 2008‐09 to 2010‐11.

UNB Operating Revenue Growth

4‐Year Simple Average 2009‐10 to 2012‐13 2.62%

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Basic Unrestricted Operating Grant

The average increase in the base provincial operating grant for the four years ended April 30, 2013 was 1.2%.

The annual changes are illustrated below.

4‐Year Historical Change in UNB

Base Provincial Operating Grant

-0.60%

3.70%

1.60%

-0.10%

‐1.00%

‐0.50%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

2009‐10 2010‐11 2011‐12 2012‐13

Average 1.2%

Grant in Lieu of Tuition Fees

During this four‐year period, the Province chose to provide universities with funding to offset a freeze in

tuition fees for 2009‐10 and 2010‐11. The funding was calculated equivalent to a 5% increase in tuition fees

and is included in the overall total change in the Provincial Operating Grant of 2.89%.

Tuition Revenue

Revenue collected from UNB tuition fees was budgeted at $58 million for 2012‐13. This represents a 6.1%

increase over the four‐year period (simple average increase of 1.52%). There are essentially two

components to calculating the tuition fee revenue, the level of UNB student enrolment and the tuition fees

related to the programs in which the students are enrolled.

Student Enrolment

Overall student FTE enrolment over the four years ended April 30, 2013 decreased by 65 FTE, or .68%. In comparison to the previous four years ending April 30, 2009, FTE student enrolment had decreased by 1,558, or 14%. The previous four years included impacts from the double cohort in Ontario.

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University of New Brunswick Student Enrolment (FTE’s)

Undergraduate Graduate Total Change % Change 2001‐02 A 9,106 855 9,961 ‐ ‐2002‐03 A 9,523 971 10,494 533 5.4%2003‐04 A 9,961 1,093 11,054 560 5.3%2004‐05 A 9,973 1,144 11,117 63 .6%2005‐06 A 9,858 1,190 11,048 (69) (.6%)2006‐07 A 9,341 1,155 10,496 (552) (5.0%)2007‐08 A 8,910 1,180 10,090 (406) (3.9%)2008‐09 A 8,389 1,170 9,559 (531) (5.3%)2009‐10 A 8,199 1,229 9,428 (131) (1.4%)2010‐11 A 8,143 1,306 9,449 21 .2%2011‐12 A 8,281 1,397 9,678 229 2.4%2012‐13 A 8,174 1,320 9,494 (184) (1.90%) FTE is based on MPHEC definitions with figures as of December 01, excludes out‐of‐province offshore arrangements

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Actual student FTE enrolment on the UNB Fredericton campus decreased by (122), or (1.68%), during this

period, while FTE enrolment on the UNBSJ campus increased by 188, or 8.76%.

7,576

7,986

8,3398,389 8,401

8,004

7,817

7,432

7,281 7,2487,294

7,159

5500

5750

6000

6250

6500

6750

7000

7250

7500

7750

8000

8250

8500

2001/FA 2002/FA 2003/FA 2004/FA 2005/FA 2006/FA 2007/FA 2008/FA 2009/FA 2010/FA 2011/FA 2012/FA

Actual

University of New Brunswick – Fredericton CampusStudent Enrolment FTE

2,3852,508

2,715

2,737

2,647

2,492

2,273

2,127 2,1462,201

2,384

2,334

0

250

500

750

1000

1250

1500

1750

2000

2250

2500

2750

3000

2001/FA 2002/FA 2003/FA 2004/FA 2005/FA 2006/FA 2007/FA 2008/FA 2009/FA 2010/FA 2011/FA 2012/FA

Actual

University of New Brunswick – Saint JohnStudent Enrolment FTE

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Tuition Fees

Over this four‐year period, UNB basic undergraduate tuition fees increased by $375, or from $5,482 to

$5,857, an increase of 6.84%. Increases in major components of UNB tuition fees increased in accordance

with the table below:

University of New Brunswick Tuition Fee Changes 4-Year History

09-10 10-11 11-12 12-13

Undergraduate Fees

$ change from previous year $0 $0 $200 $175

% change from previous year 0.00% 0.00% 3.6% 3.1%

Graduate Tuition Fees


Undergraduate International

Supplemental Fee

$ change from previous year $421 $320 $200 $175


During this same four‐year period, average undergraduate tuition fees in Canada (as determined by Statistics

Canada) increased by $857, or 18.1%. At $5,917, average undergraduate tuition fees in New Brunswick were

ranked 4th in Canada and compared to the Canadian average of $5,581.

Average Undergraduate Tuition Fees

for Canadian Full‐time Students by Province

4‐Year % Change

2008‐09* 2012‐13** $ Change % Change Average

Canada 4,724 5,581 857 18.1 4.5

Ontario 5,388 7,180 1,792 33.3 8.3

Saskatchewan 5,015 6,017 1,002 20.0 5.0

Nova Scotia 6,110 5,934 ‐176 ‐2.9 ‐0.7

New Brunswick 5,590 5,917 327 5.8 1.5

Alberta 5,122 5,883 761 14.9 3.7

Prince Edward Island 4,440 5,470 1,030 23.2 5.8

British Columbia 4,922 5,015 93 1.9 0.5

Manitoba 3,271 3,729 458 14.0 3.5

Quebec 2,056 2,774 718 34.9 8.7

Newfoundland and Labrador 2,632 2,649 17 0.6 0.2

*Statistics Canada, The Daily, October 9, 2008

**Statistics Canada, The Daily, September 12, 2012

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In each of the relevant four years, the provincial government played a role in establishing the level of tuition

fees for New Brunswick universities. In 2009‐10 and 2010‐11, tuition fees were frozen (in return for

compensation equal to a 5% tuition fee increase). In 2011‐12 and 2012‐13, the province suggested tuition

fee increase limitations of $200 and $175 respectively.

Other Revenue

Other revenue amounted to $12.3 million in the 2012‐13 operating budget. Over the four‐year period, this

category grew by 24.6%, or a simple average of 6.15% per year. This category includes federal indirect cost

of research funding of $3.4 million, recoveries and overhead contributions from various units across the

University of $2.8 million, interest earned from short‐term (non‐trust) investments and cash flow of $1

million, parking fines and fees of $745,000, and numerous other similar items. In the 2011‐12 budget, a new

mandatory facility access fee was implemented on the UNB Fredericton campus of $150 per student. This

fee generates approximately $1 million in annual revenue which helps to offset a portion of the operating

costs of the Richard J. Currie Center, including campus recreation services. $750,000 of the revenue is

included in this category, $250,000 is included as a cost offset in the category of Academic and Student

Support. Excluding this new source of revenue, which basically offsets costs, overall other revenue growth

was a simple average of approximately 4.2% per year.

Operating Expense – Overall

Over the four budget years ended 2012‐13, operating expense net growth was $14.9 million, or 9.1% (a

simple average of 2.28% per year).

This growth in operating expenses is after making budget adjustments of $12.1 million. Without these

adjustments, the overall expense increase would have been 16.5%, or a simple average of 4.1% per year.

Overall average expense growth of 2.28% was less than overall revenue growth of 2.62% as in 2008‐09

budgeted expenses were greater than revenues and this imbalance was gradually reduced over the period.

On a campus‐by‐campus basis, the budgeted level of expense increase (simple average, 4 years) was:

‐ UNB Fredericton and University‐wide units 2.22%

‐ UNB Saint John campus 2.55%

The following is a breakdown of budgeted expense changes by major expense category:

UNB Average Annual Expense Growth Over the Past

Four Years was 2.28%

Without budget reductions the amount would have

been 4.1%

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4‐Year Budgeted Operating Expense Changes

$ million Change

Overall

% Change

Simple Average % Change

Faculties and Departmental costs $5.6 6.3% 1.58%Academic and Student Support 1.2 4.1% 1.02%Administration and Development 2.9 12.3% 3.07%Maintenance and Utilities 3.8 21.6% 5.40%Net costs of Ancillary Operations (0.3) (16.2)% (4.06)%In‐Year Priority Allocations .08 5.4% 1.34%Contingency Provision 1.5 N/A N/A

$14.78 9.1% 2.28%

Appendix A illustrates the overall budget amounts to major revenue and expense categories in 2008‐09 and

2012‐13 for the University overall and on a campus‐by‐campus basis.

Analysis of Budgeted Expense Changes

Faculties and Departmental Costs

This category of expense includes the salaries and benefits for UNB faculty, stipends paid to contract

academic employees, support staff within faculties and academic departments, as well as day‐to‐day

operational supplies and materials for laboratories and classrooms.

The net increase in this category is made up of increases to salaries as outlined in Appendix B, benefit costs,

cost of progression‐through‐the‐ranks costs, non‐salary increases provided, net of reductions outlined in

Appendix C. Without the budget adjustments of $7 million made over the four‐year period, the overall

percent change in this category would have been 14.2%, or a simple average of 3.5% per year.

Academic and Student Support

This budget line includes costs for graduate research assistantships, teaching assistantships and

undergraduate (scholarships) services to students such as Intercollegiate Athletics and URec, as well as

offices oriented toward academic and student support such as the VP (Research), Associated VP (Academic

Learning Environment), Centre for Enhanced Teaching and Learning, Student Affairs and Services and

libraries. The net overall increase results from adjustments to related salaries, as outlined in Appendix B,

benefit and pension costs, applicable progression‐through‐the‐ranks, changes to non‐salary net of budget

reductions as outlined in Appendix C.

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Administration and Development

This category includes the cost of administrative support units such as, Office of the President, University

Secretary, Vice‐President (Finance & Corporate Services), Vice‐President (Fredericton), VP (Saint John),

Associate VP (Capital Planning and Property Development), Human Resources, Financial Services, ITS,

Advancement (Development, Fundraising, Communications, Marketing and Alumni). The net cost increase in

this category was driven by increases in salaries as outlined in Appendix B, benefits, pensions, and other

operating expenses net of reductions outlined in Appendix C. This category includes the following additions

to the budget:

2012‐13 $74,000 Improvements in Security 206,000 Moving Alumni support from undesignated, soft

dollars, to the operating budget for stability in funding.

216,000 Support to oversee administration of new contract

academic employee agreements and outreach activities.

2011‐12 370,000 Base funding to Development and Advancement to

stabilize operating budget from soft dollar exposure. 150,000 International recruiting and related 77,000 To establish Office of Human Rights 2010‐11 432,000 Base funding to Development and Advancement to

stabilize operating budget from soft dollar exposure. 100,000 Staffing to comply with privacy regulations and

records management requirements.

$1,628,000

The $1.6 million in additions to the operating budget illustrated above is included in the net growth of $2.9

million. Without these elements, the category would have grown by 5.4%, or a simple average of 1.35%.

Maintenance and Utilities

At $21.7 million, the operating budget for maintenance and utilities increased by $3.8 million, or 21.6%, (a

simple average of 5.4%) over the four‐year period. This category includes the wages and salaries of facilities

management staff, benefit and pension costs, as well as heating, utilities, snow removal, day‐to‐day general

maintenance, cleaning supplies and other non‐salary costs to operate and maintain nearly 300,000 sq.m of

buildings, with a replacement value of approximately $1 billion, and nearly 7 kms of roads on UNB’s two

main campuses.

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During this period of time, there were two significant new building additions at UNB, the Richard J. Currie

Center on the Fredericton campus and the Hans W. Klohn Commons on the Saint John campus. These new

facilities had the following impact on the operating budget:

Richard J. Currie Center

‐Annual debt service costs included in maintenance & utilities $618,000 ‐Heating, cleaning and maintenance costs for 139,145 sq. ft included in maintenance and utilities

1,072,000

‐Provision for capital renewal included in maintenance & utilities 250,000

Additional expenses 1,940,000 LESS offset in other revenue from facility access fee (750,000)

Net cost $1,190,000

Hans W. Klohn Commons ‐Heating, cleaning and maintenance costs for 45,721 sq.ft. included in maintenance & utilities

$250,000

Excluding these additional new costs in maintenance and utilities of $2.2 million, overall maintenance and utilities expenses would have increased by a net of $1.6 million, or 8.97% (a simple average of 2.2% per year) as savings from energy management programs helped to alleviate increasing fuel and electricity costs. Ancillary The budgeted net cost to operate University ancillary operations, residences, Bookstore, Aitken Centre, BMO campus soccer field, Wu Convention Centre, decreased by $282,900 over the four‐year period to a budgeted net cost of $1.4 million in 2012‐13.

In‐Year Priority Allocations

In order to provide a degree of flexibility in the operating budget to respond to opportunities that vary from

year to year, a certain amount of the operating budget is left unallocated in each annual budget and is

allocated to highest priorities during each year. The overall amount of $1.6 million, or .9% of operating

expenses, increased by $83,200 over the four‐year period.

One‐Time Sources (Uses) of Funds

In any given year, ongoing operating budget revenues may fall short of expenses, a structural shortfall, this

amount has been covered from one‐time funding sources. In some years, total revenues may temporarily

exceed expenses, these revenues are utilized to fund one‐time expenses.

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Contingency This budget line of $1.5 million is intended to offset unforeseen negative variances in either revenue or expense budget provisions. The contingency provides risk coverage of about .5% for operating revenues and expenses combined. During the four‐year period, the approach to budgeting for contingences changed. Previously, each major budget expense line had a built‐in contingency as the budget assumed positions would be filled most of the time. Savings resulting from vacancies provided for contingencies. This approach was changed with contingencies stripped out of the individual budget lines and consolidated in an overall total. Actual in Comparison to Budget – Operating

The annual operating budget is comprised of a number of estimates and assumptions that are based on

information that is available at the time the budget is proposed. Throughout the course of the year, events

will occur that may result in different actual financial results than those estimated. For example, student

enrolment, levels of salary adjustments during periods outside of collective agreement dates, benefit

utilization, the price and consumption of utilities, and fuel, etc. At each year end, the University

Comptroller’s office compiles the final actual figures and these are compared to the budget estimates.

Over the past few years, the world economy began the process of recovering from the 2008‐09 recession.

During this period, UNB faced a number of financial uncertainties and risks. To assist in helping to manage

these risks, the University administration took a cautious approach to budgeting for student enrolment and

undertook extraordinary measures to ensure that budget savings would be realized and utilized in a strategic

manner. In regards to student enrolment, while overall enrolment decreased over the four‐year period, it

decreased significantly less than in the previous four years and less than budget estimates. A comparison of

actual to budgeted enrolments is illustrated in Appendix D.

During this period, all new faculty and staff positions required the approval of senior administration. In

many cases, the filling of positions was delayed. This measure was taken in order to reduce exposure to

sudden declines in provincial funding, or sudden increases in other expenses, by holding down the level of

ongoing committed costs. The result of these actions helped to generate extraordinary levels of in‐year

salary savings. After reflecting replacement costs in the most vital areas, the salary savings were mainly

withheld centrally and used for strategic purposes.

As a result of these strategies, there were positive budget variances in student fee income and salary savings

in each of the past four years. There were also positive and negative variances in other budget lines over

this period.

In 2009‐10, the net overall position was a $3 million budget shortfall. From 2010‐11 to 2012‐13, the actual

net position was positive. This positive position allowed the University to pay off the previously accumulated

operating deficit of $6 million.

Positive Net Operating Results over the past 4

years have eliminated the University’s

Accumulated Operating Deficit

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By eliminating the accumulated operating deficit, the University does not incur the cost of financing the

shortfall, avoids being subjected to potential sanctions from the MPHEC for accumulating a deficit in excess

of 2% of annual funding and ensures intergenerational equity with students as future cohorts are not

funding costs associated with past cohorts of students.

The positive net operating results have also provided funds for reduction of other debts, funds for

investments aimed at better positioning University finances into the future or provided funds to acts as a

buffer against increasing future risks, especially in regards to the level of future provincial funding and

deferred maintenance concerns. The University does not provide for the depreciation of capital assets

within the operating budget, therefore, the application of in‐year net budget savings towards capital renewal

provides a source of funding to help fund deferred maintenance projects.

A listing of major variances between budget and actual results is included in Appendix E. A detailed breakdown of complete annual financial results is included in the Annual Report of the Comptroller located at http://www.unb.ca/financialservices/report_of_the_comptroller.html

‐$2.9

‐$6.0

‐$3.0

$0.01

‐6.50‐6.00‐5.50‐5.00‐4.50‐4.00‐3.50‐3.00‐2.50‐2.00‐1.50‐1.00‐0.500.000.501.001.502.002.503.00

2008‐09 2009‐10 2010‐11 2011‐12

UNB Schedule of Accumulated Operating Deficit

$(millions)

In‐Year operating budget savings have also been utilized

to reduce University debt, make investments in revenue

generating areas and provide protection against future

financial risks associated with the sluggish economy

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Capital Budget Four‐Year Summary to 2012‐13

Over the four‐year period ending April 30, 2013, UNB capital budgets totaled over $163 million. This was a

period of exceptional capital activity, buoyed by the Provincial Stimulus based University Deferred

Maintenance Program (UDMP), Federal stimulus based Knowledge Infrastructure Program (KIP) and the

proceeds from UNB’s recent Forging Our Futures fundraising campaign. The following table summarizes the

annual capital activity:

The following is a summary of new construction at UNB over this time period:

Level of Accumulated Deferred Maintenance Like many of the older universities across Canada, the University of New Brunswick has accumulated a large backlog of major maintenance. As facilities age and there is insufficient funding sources to perform the necessary replacements and repairs, a backlog of deferred maintenance projects accumulates. The estimated level of this work at UNB is approximately $187 million, with a full replacement value of

2009‐10 2010‐11 2011‐12 2012‐13 Totals Notes

Buildings and Space

‐Major maintenance, improvments $22,039 $14,487 $10,782 $18,173 $65,481 Provincial UDMP funding to UNB

and infrastructure renewal to UNB $32 million from 2009‐10

to 2012‐13

‐ New Construction 37,332 50,000 0 0 87,332 Detail below

‐ Equipment and Technology 2,615 2,600 2,664 2,670 10,549

$61,986 $67,087 $13,446 $20,843 $163,362

UNB Capital Budget

4‐Year Activity

$(000's)

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approximately $950 million, the ratio of deferred maintenance to the current replacement value (the FCI index) for UNB is 20. UNB’s FCI figure is higher than the Canadian average estimated to be in the order of 14 (a level above 10 is considered poor). It has been estimated that UNB should be spending approximately $19.5 million per year on major maintenance. Without any special programs or other sources of funding, UNB has base funding of approximately $5.5 million a year for spending on deferred maintenance. When UNB spends less than $19.5 million annually on actual deferred maintenance projects, this generally means the level of deferred maintenance increases.

Fundraising Four‐Year Summary to 2012‐13 Over the four‐year period ended April 30, 2013, UNB benefited from over $60 million in fundraising. The annual totals follow:

The $25.2 million total in 2011‐12 represented the second highest annual total in fundraising at UNB. Over

this same period of time, UNB raised approximately $19 million in scholarship funding. During the four‐year

period, University operating budgets were adjusted to bring more stability to the basic funding model for

fundraising activities (this continued on into 2013‐14). The previous fundraising model was based on a

combination of funding sources, base operating budget, reliance on undesignated funds, and a utilization of

a 10% levy applied on donations provided to the University. This model proved to be unstable as

undesignated funds were becoming more scarce and annual gift totals would vary providing instability to the

operating budget and to Development funding. Even though a system of smoothing reserves was in place to

“bank” proceeds from the 10% levy in years where donations exceeded the annual required target of $15

million, the budget was exposed to excessive volatility. Accordingly, more stability was brought to the model

by increasing the proportion of funds from the operating budget.

UNBAnnual Fundraising Totals

$(millions)

$12.5$13.4

$25.2

$8.5

$0.0

$5.0

$10.0

$15.0

$20.0

$25.0

$30.0

2009‐10 2010‐11 2011‐12 2012‐13

UNB’s Level of Deferred Maintenance

in 2012‐13 was estimated at $187 million

Putting Development and Fundraising on a more

sustainable funding basis has been a multi‐year

challenge that will continue over the next 3 years

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Investments – Endowment and Long‐term Trust Accounts Four‐Year Summary to 2012‐13

UNB has an investment pool in which the proceeds from donor endowments or other long‐term trust

accounts are invested. The pooling of assets allows for economies of scale and provides the University with

opportunities to access more diversified and specialized investment vehicles which should result in greater

returns over a longer period of time. When the investment markets declined significantly in 2008 and 2009,

UNB’s investment portfolio was also impacted, however, the impact of this has been more than offset and

UNB investment balances have grown over the past four years. The net growth represents investment

earnings, less spending, plus new donations to the University. Overall, the investment portfolio grew by over

$54 million during this four year period ended April 30, 2013.


Investments % Change

April 30, 2009 April 30, 2013 $ Change % Change Average

Balance $145,698,397 $200,880,920 $55,182,523 37.87 9.46

The annual investment performance of the investment pool for each of the last four fiscal years is illustrated

below. The table also includes the investment returns for the 2008‐09 fiscal year and compares the returns

to annual spending rates.


Investment Pool

Endowment Returns and Endowment Spending Rate

One Year Returns % Spending Rate %

30‐Apr‐09 ‐16.30%

30‐Apr‐10 19.17% 2009‐10 4.25%

30‐Apr‐11 10.02% 2010‐11 4.25%

30‐Apr‐12 0.88% 2011‐12 4.25%

30 Apr‐13 9.52% 2012‐13 4.25%

UNB Investments portfolio has recovered from the

impacts of 2008‐09, however, markets remain

uncertain

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Pension Plan for Academic Employees ‐ Recent Four‐Year Summary

This Plan has been in operation since January 01, 1993, UNB’s academic employees were previously covered

by the Public Service Superannuation Plan of New Brunswick.

The Plan is a defined benefit, risk shared arrangement and is funded and administered on a 50/50 basis

between the active members (as represented by the AUNBT) and the University. The University matches the

contributions of Plan participants.

Like many pension plans around the world, the Plan has financial challenges. The following table illustrates

the most recent four actuarial valuations of the Plan:

UNB Academic Pension PlanFinancial Position

$(millions)

July 01 July 01 July 01 July 01

Actuarial Valuation 2009 2010 2011 2012

Assets $171.8 $175.7 $188.3 $208.6

Liabilities ‐233.4 ‐245.6 ‐262.8 ‐289.3

Shortfall ‐61.60 ‐69.90 ‐74.50 ‐80.70

Funded Ratio 73.6% 71.5% 71.65% 72.1%

Valuation Funding Rates (each Party) 10.61% 11.63% 12.39% 13.15%

(as a % of pensionable earnings on average)

A six‐year Plan to improve the financial position of the Pension Plan and to provide contribution rate stability

was implemented in July of 2007.

The Pension Plan for Academic Employees has a

funding shortfall of $80 million

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When the recession stuck in 2008 and 2009, financial markets were adversely affected which impacted the

financial position of many pension plans, including the UNB Academic Pension Plan.

As called for under the Improvement Plan, the parties to the Plan began to review and assess the outlook for

the Plan and other potential options.

Based on actuarial assessments, it was determined that it was highly likely that the already high level of

contribution rates for both parties would likely continue and increase even further. The parties reviewed the

new pension model that was enabled by the New Brunswick Pension Legislation in 2012. As at the end of

April 2013, the parties have agreed to negotiate the possible conversion of the existing Pension Plan to the

new Shared Risk model.

Sponsored Research Revenue – Four‐Year Summary to 2012‐13

Sponsored research revenue has averaged approximately $52 million over the past four years with annual figures as follows: 2012‐13 $52.0 million estimated 2011‐12 $51.9 million 2010‐11 $48.2 million 2009‐10 $55.8 million These levels follow the recession in 2008 and 2009 with the corresponding pressure on public funding and private sector contracts. Accordingly, they represent a significant accomplishment and are comparable to annual research revenue levels of $23 million in 2003‐04.

Real Estate Development to 2012‐13 The University owns approximately 8300 acres of property in the Province of New Brunswick, approximately 142 acres comprised in the Fredericton campus footprint and 222.8 acres in the Saint John campus footprint and surrounding areas. The University developed a Land Management Strategy in 2003 which included a comprehensive assessment and categorization of all of UNB’s land holdings into various categories. One of the parcels of land within several kilometers of the Fredericton campus, known as “The Woodlot”, approximately 3800 acres, was divided into two new categories, Heritage Development Lands, total 1900 acres and the Creighton Conservation Forest, total 1900 acres. The Heritage Development lands were to be slowly developed on a sustainable mixed‐use basis over time via land lease. UNB had previously leased some pockets of land and property on an ad hoc basis. The Creighton Conservation Forest is to become a world‐class facility for teaching and research to be used by many faculties at the University, as well as the Maritime College of Forest Technology and the community. In 2012‐13, the University generated approximately $1.4 million in gross lease revenue from Heritage land leases and prior property leasing activities. After reflecting for costs associated with developing the lands and costs to market, secure and administer the leases, including University obligations, the net cash flow was

UNB continues to responsibly lease designated

portions of its land holdings for development

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approximately $1 million. Of this, $525,000 is allocated to the UNB capital budget, with $265,000 included in the operating budget and the balance available for further reinvestment in development activities or to support future related infrastructure requirements.

Other Financial Information

The complete annual University budget package, annual audited financial statements, annual reports of the University Comptroller and the Annual Financial Report to Senates can be found on the University website at: http://www.unb.ca/vpfinance/budgets/index.html http://www.unb.ca/financialservices/consolidated_financial_statements.html http://www.unb.ca/financialservices/report_of_the_comptroller.html http://www.unb.ca/vpfinance/reports‐presentations.html 2012‐13 financial information will be posted once the year‐end audit is complete and the financial statements approved by the Board in the fall of 2013.

22 | P a g e


University‐wide Consolidated Operating Budget

4‐Year % Change

2008‐09 2012‐13 $ Change % Change Average

Revenue

Provincial Operating Grant $96,820.20 $108,000.10 $11,179.90 11.5 2.89

Tuition Revenue 54,680.10 58,006.90 3,326.80 6.1 1.52

Other 9,857.40 12,283.10 2,425.70 24.6 6.15

Total Revenue $161,357.70 $178,290.10 16,932.40 10.5 2.62

Operating Expenses

Faculties and Departmental Costs 88,777.70 94,378.00 5,600.30 6.3 1.58

Academic and Student Support 29,260.80 30,459.50 1,198.70 4.1 1.02

Administration and Development 24,235.00 27,208.50 2,973.50 12.3 3.07

Maintenance and Utilities 17,895.30 21,760.50 3,865.20 21.6 5.40

Ancillary (net) 1,741.10 1,458.20 ‐282.90 ‐16.2 ‐4.06

In‐year Priority Allocations 1,550.10 1,633.30 83.20 5.4 1.34

Contingency 0.00 1,500.00 1,500.00 0.0 0.00

163,460.00 178,398.00 14,938.00 9.1 2.28

One‐time Sources (uses) 2,102.30 107.90 ‐1,994.40 ‐94.9 ‐23.72

Net Position ‐$0.00 $0.00 $0.00 0.0 0.00

APPEN

DIX A1

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Fredericton Campus Operating Budget

4‐Year %

Change

2008‐09 2012‐13 $ Change % Change Average

Revenue


Tuition Revenue 40,381.90 41,050.00 668.10 1.7 0.41

Other 7,810.80 9,356.60 1,545.80 19.8 4.95

Total Revenue $129,422.50 $140,787.00 11,364.50 8.8 2.20

Operating Expenses

Faculties and Departmental Costs 70,761.40 74,189.30 3,427.90 4.8 1.21

Academic and Student Support 24,116.60 25,121.10 1,004.50 4.2 1.04

Administration and Development 19,288.90 21,922.20 2,633.30 13.7 3.41

Maintenance and Utilities 13,503.10 16,676.80 3,173.70 23.5 5.88

Ancillary (net) 1,549.70 1,266.80 ‐282.90 ‐18.3 ‐4.56

In‐year Priority Allocations 890.10 973.30 83.20 9.3 2.34

Contingency 0.00 1,500 1,500.00 0.0 0.00

130,109.80 141,649.50 11,539.70 8.9 2.22

One‐time Sources (uses) 702.30 862.50 160.20 22.8 5.70

Net Position $15.00 $0.00 $0.00 0.0 0.00

APPEN

DIX A2

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Saint John Campus Operating Budget

4‐Year Average

2008‐09 2012‐13 $ Change % Change %

Change

Revenue


Tuition Revenue $14,298.2 $16,956.9 2,658.70 18.6 4.65

Other $2,046.6 $2,926.5 879.88 43.0 10.75

Total Revenue $31,935.2 $37,503.1 5,567.88 17.4 4.36

Operating Expenses

Faculties and Departmental Costs 18,016.20 $20,188.7 2,172.50 12.1 3.01

Academic and Student Support 5,144.20 $5,338.4 194.20 3.8 0.94

Administration and Development 4,946.20 $5,286.3 340.10 6.9 1.72

Maintenance and Utilities 4,392.20 $5,083.7 691.50 15.7 3.94

Ancillary (net) 191.42 $191.4 ‐0.02 0.0 0.00

In‐year Priority Allocations 660.00 $660.0 0.00 0.0 0.00

Contingency 0.00

33,350.22 $36,748.5 3,398.28 10.2 2.55

One‐time Sources (uses) 1,400.00 ‐$754.6 ‐2,154.60 ‐153.9 ‐38.48

Net Position ‐$15.00 $0.0 $0.00 0.0 0.00

APPEN

DIX A3

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Appendix B


Economic Adjustments and CPI Calendar Year Figures Last Four Years

2009 2010 2011 2012 4‐Year Totals UNBEA 2.5% 2.5% 0% 2.5% 7.5% CUPE 0% 0% 2.5% 2.5% 5.0% APT 0% 0% 2.5% 2.5% 5.0% Graduate Students 0% 2.5% 2.5% 2.5% 7.5% AUNBT Full‐time 1.25% 1.75% 2.5% 3.5% 9.0% CPI 0.3% 1.8% 2.9% 1.5% 6.5%

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Appendix C1


Summary of Budget Adjustments (by campus for each of the past 7 years)

$(millions)

Expressed

as a % of

2013‐14

2009‐10 2010‐11 2011‐12 2012‐13 Total Budget

UNBF & University‐wide units $2.0 $1.8 $3.2 $3.2 $10.2 7.2%

UNBSJ 1.0 0.6 0.6 0 2.2 6.0%

$3.0 $2.4 $3.8 $3.2 $12.4 6.9%

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Appendix C2


Budget Adjustment Schedule

By Major Budget Category

Last Four Years

2009‐10 2010‐11 2011‐12 2012‐13 Total

Fredericton Campus

and University‐wide Units

Faculties and Departments $1,352,778 $1,182,313 $1,908,260 $2,112,976 $6,556,327

Academic and Student Support 33,685 367,198 67,586 ‐214,048 254,421

Administration and Development 343,264 114,380 568,213 802,581 1,828,438

Maintenance and Utilities 151,540 128,500 50,000 410,689 740,729

Ancillary Operations ‐ 91,993 ‐ ‐ 91,993

One‐time Priorities ‐ ‐ ‐ ‐ 0

Revenue 83,045 ‐ 559,354 63,622 706,021

Grand Total 1,964,312 $1,884,384 $3,153,413 $3,175,820 $10,177,929

Saint John Campus

Faculties and Departments $237,084 $85,166 $195,064 ‐ $517,314

Academic and Student Support 36,000 ‐2547 52,532 ‐ 85,985

Administration and Development 204,641 39,217 50,035 ‐ 293,893

Maintenance and Utilities 82,000 77,447 50,000 ‐ 209,447

Ancillary Operations ‐ ‐ ‐ ‐ 0

One‐time Priorities 450,000 200,000 100,000 ‐ 750,000

Revenue ‐ 192,508 192,500 ‐ 385,008

Grand Total 1,009,725 $591,791 $640,131 ‐ $2,241,647

Combined

Faculties and Departments $1,589,862 $1,267,479 $2,103,324 $2,112,976 $7,073,641

Academic and Student Support 69,685 364,651 120,118 ‐214,048 340,406

Administration and Development 547,905 153,597 618,248 802,581 2,122,331

Maintenance and Utilities 233,540 205,947 100,000 410,689 950,176

Ancillary Operations ‐ 91,993 ‐ ‐ 91,993

One‐time Priorities 450,000 200,000 100,000 ‐ 750,000

Revenue 83,045 192,508 751,854 63,622 1,091,029

Grand Total $2,974,037 $2,476,175 $3,793,544 $3,175,820 $12,419,576

28 | P a g e

Appendix C3


Budget Adjustment Schedule

By Major Budget Category

Last Four Years

As a % of

2012‐13 % of Total 4‐Year Total

Budget Budget Adjustments Adjustments

Total Revenue $178,290 100% $1,091* 8.8%

Operating Expenses

Faculties and Departments $94,378 52.9% $7,073 56.9%

Academic and Student Support 30,459 17.0% 340 2.7%

Administration and Development 27,208 15.2% 2,122 17.1%

Maintenance and Utilities 21,760 12.2% 950 7.6%

Ancillary Operations 1,458 0.8% 92 0.7%

In‐Year Priority 1,633 0.9% 750 6.0%

Contingencies 1,500 0.8%

Total $178,396 100% $12,418 100%

*Budget units were provided the option of meeting budget adjustment targets through reduction of expenses or

through generation of new revenue. Elements within this category include, additional net revenues from the

College of Extended Learning, Saint John College, and enhanced HST recovery processes.

29 | P a g e

Appendix D


FTE Student Enrolment Actual Compared to Budget

2008‐09 2009‐10 2010‐11 2011‐12 2012‐13 Actual 9,559 9,428 9,449 9,678 9,494 Budget 9,870 9,573 9,311 9,185 9,586

Better (Worse) (311) (145) 138 493 (92)

UNB FTE enrolment budget decreased in each year from 2008‐09 to 2011‐12. In the following

year, 2012‐13, budget levels were increased, “reset”, to reflect what was deemed to be a

sustainable level for the near term. In 2012‐13, actual FTE enrolments were less than budgeted,

indicating that the “reset” upwards was likely too high. The positive budget variances in student

fee income in 2010‐11 and 2011‐12 were as a result of actual enrolment being better than

budgeted. The “reset” in 2012‐13 added additional ongoing revenue into the budget base.

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Appendix E1

University of New Brunswick Four‐Year Operating Budget Results

Main Budget Variances and Application of In‐Year Savings

2009‐10

‐Main positive variances from budget: ‐ Total salaries and benefits $3,900,000 ‐ Utility costs 1,400,000 ‐Main unfavorable variances from budget: ‐ Fee Income 300,000 ‐ Unrecoverable research activity 1,300,000 ‐ Legal services 471,000 ‐ Admin fee shortfall in Development 594,000 ‐Overall Budget $3,000,000 Shortfall ‐Final actual net results $3,000,000 Shortfall

(1.85% of budgeted revenue)

2010‐11

‐Main positive variances from budget: ‐ Total salaries and budgets $4,000,000 ‐ Utility costs 1,600,000 ‐ Fee income 1,900,000 ‐Main unfavorable variances from budget: ‐ Legal services $349,000 ‐ Unrecoverable research activity 206,000 ‐Application of net budget savings: ‐ Funding applied to capital projects $1,600,000 ‐ Replacement of new heating boiler 1,000,000 ‐ Capital projects 718,000 ‐ Strategic initiatives 1,600,000 ‐ Risk and contingency 1,300,000 ‐Overall Budget 0 ‐Final actual net result $2,900,000 Surplus

1.73% of budgeted revenue, applied towards reducing the accumulated deficit

31 | P a g e

2011‐12 Appendix E2 ‐Main positive variances from budget: ‐ Fee income $4,600,000 ‐ Other revenues 1,300,000 ‐ Benefit savings (non‐pension) 1,500,000 ‐ Salary savings 3,000,000 ‐Main unfavorable variance from budget: ‐ Legal expenses 300,000 ‐Application of net budget savings: ‐ Ward Chipman redevelopment project $2,300,000 ‐ Funding outstanding fundraising gap on UNBSJ

Residence project 1,700,000

‐ Risk reserve against future provincial grant 1,800,000 ‐ Capital projects on UNBF campus 1,000,000 ‐Overall budget 0 ‐Final Actual net result $3,000,000 Surplus 1.74% of budgeted

revenue. This eliminated the remaining balance of the previously accumulated deficit

2012‐13

‐The fiscal year ended was April 30, 2013. Final audited actual results are expected in the fall of 2013. Interim reports indicate that:

‐ There is expected to be a positive variance of approximately $1 million in student fee income. While overall FTE enrolment was less than budgeted, there was a higher mix of international students than estimated. This resulted in additional differential fee income.

‐ Savings on maintenance and utilities of approximately $1 million were also identified. A portion of these savings will be utilized to further fund deferred maintenance within the Central Heating Plant.

‐ Legal expenses are expected to be over budget by approximately $300,000. The budget will be increased in 2013‐14 as additional real estate activity, growth in research and an increase in the number of bargaining groups has risen the cost base to an ongoing higher level.

‐ A positive variance of over $2 million on salaries and benefits is anticipated for 2012‐13.

‐ Net in‐year budget savings will be utilized to make investments in generating future revenues by bolstering funding to student recruitment and assisting in funding the impending fundraising campaign. A portion of net savings will also be utilized to assist in balancing the 2013‐14 operating budget.

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PART B

A LOOK AHEAD AT KEY FINANCIAL ASPECTS

OF UNB FOR THE NEXT FOUR YEARS

33 | P a g e

Outlook for UNB Finances for the Next Four Years – 2013‐14 to 2016‐17

Operating Budget – 2013‐14 to 2016‐17 The 2013‐14 operating budget provides a basis from which to view the potential budget context for the

following three years with the following key items.

Low revenue growth

- Overall operating revenue growth was budgeted to increase by $124,600, or .1%. This low

growth was driven by three key factors

· The provincial operating grant was again frozen for 2013‐14.

· FTE student enrolment was budgeted to decrease by 219 students, or 2.31%

· UNB implemented the $150, 2.56%, cap on tuition fees that was suggested by the

province.

New Brunswick Universities currently have no indication from the province as to what level of

annual operating basic funding to expect in future years or what the context for tuition fee

increases will be.

UNB has modeled various scenarios, including a continued freeze over the following three years,

as well as a tuition fee increase in each year of $175.

When combined with Registrars’ forecasts of a continued annual slight decline in FTE student

enrolment, annual growth in operating revenues would continue to be less than 1% in each of the

next four years, including 2013‐14.

UNB Operating Revenue Growth

Outlook for 2013‐14 to 2016‐17

Annual Revenue Growth of Less than 1%

The level of future Provincial funding and future tuition

fees are large unknowns. The base Provincial grant was

frozen for the last two years. Over this same period,

tuition fee increases were limited to $175 and $150

There are ongoing challenges associated with declining

university aged demographics in Atlantic Canada that

will continue to place financial pressures on UNB

34 | P a g e

2013‐14 Operating Expense Growth for existing operations exceeds revenue growth

- Net operating expenses in the 2013‐14 budget grew by just over $3.0 million, or 1.7%. This

growth is after budget reductions of $3.8 million, or 2.0%. The total of operating expense

reductions over the last eight years (including the 2013‐14 budget) totaled $25.5 million. This

makes the prospects of continued expense adjustments within the current operational model

and context highly difficult for the next three years. Without expense interventions, scenario

models illustrate baseline expense growth (for existing operations) could increase by 3.75% to

4% per year.

Structural Funding Shortfall

- With a low growth revenue environment of less than 1% annually, compared to baseline operating expense growth of between 3.75% and 4%, a structural imbalance in the operating budget would quickly magnify.

- The 2013‐14 operating budget contains a structural shortfall of $3.0 million, which was funded from non‐recurring sources (including $1.8 million in one‐time funding provided by the province). Based on the size of the operating budget of approximately $150 million and the modeled gap between revenues and expenses, the built‐in structural gap at UNB in four years’ time, 2016‐17, would be $20 million annually and, if left unchecked, would result in an accumulated shortfall of $41 million.

160.0

170.0

180.0

190.0

200.0

210.0

220.0

2014‐15 2015‐16 2016‐17Total Costs Total Revenues

$40.5 million cumulative shortfall

GAP$20

million

UNB Operating BudgetCurrent Estimates Illustrate

Potential for a Large and Growing Funding GapPro‐forma $ millions

1

UNB Operating Expense Growth Outlook for 2013‐14 to 2016‐17

Annual Expense would grow by between 3.75% ‐ 4% without interventions

Scenario modeling illustrates a large and widening gap

between revenues and expenses could rapidly develop

35 | P a g e

The detailed 2013‐14 budget, along with the results of the pro‐forma modeling of revenues and expenses for the following three years, including detailed assumptions, can be found on the UNB website at http://www.unb.ca/vpfinance/budgets/index.html

The University had a combination of positive and negative budget variances over the past four‐year period, more positive variances than negative, mainly in the areas of student fee income and salary savings from vacancies. It is expected that over the next four‐year period, there will also be a combination of positive and negative budget variances, however, the level of positive variances is likely to be lower due to the following reasons:

‐ The FTE student enrolment budget was reset upwards in 2012‐13 by 401 FTE’s. The revenue from this new level of enrolment budget is now reflected in the base budget.

‐ Some positions that had previously been held vacant have now been taken out of the budget as part of budget reductions. In the 2013‐14 budget, an additional $1 million in savings from active management of vacant positions has been assumed. This approach to utilization of excess vacancy savings is not a sustainable approach as operational impacts and risks associated with excessive position vacancies cannot proceed indefinitely.

Fundraising 2013‐14 to 2016‐17

UNB is currently in the planning stages of launching a new fundraising campaign that would be undertaken during the next four‐year period. Preliminary discussions have indicated that the fundraising campaign will have an ambitious target with approximately 50% designated for student scholarships and financial aid. The University Strategic Plan identified this area as a key priority going forward. Reasons included the increasing competitiveness of these programs at Canadian universities, the importance in student recruitment and retention, the ability to attract and retain the best and brightest students to UNB. Increasing scholarship endowments will also help offset the impact of lower earnings expectations and corresponding reduced spending rates.

In 2012‐13, UNB developed a new model to fund ongoing fundraising costs. In the previous model, nearly 75% of the funding came from a 10% gift levy and undesignated gift sources, with the remaining 25% coming from the operating budget.

In the prior four‐year period, the percentage of funding for Development budgets coming from “soft sources” was higher than 75%. UNB had been gradually reducing this through increased operating budget support. Under the new model, “soft sources”, including a new reduced 5% gift levy, account for 40% of overall departmental funding with 60% coming from the operating budget. This approach is aimed at providing more stability to Development office funding and further encouraging donors to support UNB by lowering the gift levy.

Also in 2012‐13, the University developed a plan to fund the impending fundraising campaign without further utilizing operating budget resources.

New Fundraising Campaign

UNB will soon be launching an ambitious fundraising campaign targeting approximately 50% of the campaign

towards scholarships and student financial aid

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Capital Outlook 2013‐14 to 2016‐17

The 2013‐14 capital budget amounted to $16.7 million, with $13.8 million designated for major

maintenance, building and classroom improvements and infrastructure renewal, and $2.9 for technology

and equipment.

The capital budget included $1 million in funding from a new Provincial University Deferred Maintenance

program and $4 million in UNB funding for renewal of the Central Heating Plant (phases 3 and 4). These

UNB funds will be repaid from resulting future energy savings. It is estimated that total funding from all

sources that was spent on deferred maintenance projects was $9.5 million. This means that UNB

continues to add to levels of deferred maintenance, with the current balanced estimated at

approximately $200 million.

University of New Brunswick‐ 2013‐14 Capital Budget

In Spite of Creative Leveraging of Resources Deferred Maintenance Grows

In subsequent years, the level of capital activity will depend on the amount of funding that is available.

UNB will continue to leverage available funds to accomplish several objectives. For example, classroom

improvements will improve the learning environment while also reducing some levels of deferred

maintenance. Energy management projects will lower future costs, lessen UNB’s impact on the

environment, and also reduce deferred maintenance. Without new stable and increased levels of capital

funding, UNB’s level of deferred maintenance will continue to grow in the foreseeable future.

$19.5

$4.5 from Recurring Sources

$5.0 from Special Sources

$0.00

$5.00

$10.00

$15.00

$20.00

Annual Spending According to Guidelines 2013‐14 Budget

$10 million Deferred Maintenance Funding Gap

Deferred Maintenance Will Likely Increase

Without new sizeable sources of sustainable funding, deferred maintenance will continue to grow at UNB

37 | P a g e

Investments Outlook 2013‐14 to 2016‐17

UNB’s Investments Committee recently undertook a significant review of the asset classes that UNB is

utilizing for investments. This process included a review of consensus expectations for returns of various

asset classes. The results of the review indicate that many investment professionals, economists,

actuaries and other pension and endowment funds are rethinking long‐term investment return

expectations. With interest rates at historic lows and volatile equity markets, many investors are

lowering return expectations and recognizing that we may have entered a “new normal” state, having

been reset after the recession. The implications are that endowment and pension funds are lowering

their return expectations which, for endowments, means potentially less earnings to spend and for

pension funds either higher contributions or adjustments to benefits.

UNB has adjusted its long‐term asset allocation for the endowment pool by increasing foreign equity

exposure and opening up the ability to invest in other types of assets such as infrastructure, real estate,

and different sources of yield‐generating instruments, such as high yield and emerging market debt.

These adjustments are considered prudent with an expectation that, through proper diversification, UNB

will maintain the same overall risk profile while slightly enhancing returns. Even so, in these market

conditions, the Investments Committee has advised the Board that the long‐term spending rate target

should be adjusted down from 4.25% to 4.0% and be closely monitored for further possible adjustments.

This places further financial pressure on already challenged spending on scholarships.

Academic Pension Plan 2013‐14 to 2016‐17

As outlined in the recap of the past four years, UNB’s Academic Pension Plan faces challenges like many

pension plans around the world. The context for these challenges, low interest rates, unstable equity

markets, longer‐life expectancies is not expected to change in the near future.

UNB Investments

‐ Outlook is for lower earnings due to market conditions

‐ UNB spending rate has been adjusted from 4.25% to 4.0%

Risk of Increasing Contributions

During the 12 months ended July 01, 2011, UNB and Plan members made $15.8 million in contributions to the Academic Pension Plan. Without some change, this figure will go up

38 | P a g e

The financial costs to UNB and the contributing members of the Plan relates to the level of Plan deficit,

nature of the Plan, level of benefits provided and the level of risks the parties are willing to accept. All

these factors are currently being reviewed and negotiated by the parties as the possible conversion to the

new Shared Risk Model is being examined.

Research Funding 2013‐14 to 2016‐17

The Vice‐President of Research will collaborate in developing a new Strategic Research Plan for UNB

during 2013‐14. The strategic direction chosen, along with the nature and level of government funding

available and private sector appetite for research contracts, will bear directly on the level of research

funding received or generated by UNB. The recent announcement of the $80 million Provincial

Innovation Fund provides UNB with new opportunities over the next four‐year period.

Real Estate Development to 2016‐17

UNB intends to continue to pursue the leasing of Heritage Development lands. The current focus is on

securing leases on an 18 acre parcel of land adjacent to current leased development lands in Fredericton

between the Corbett Centre retail plaza and the City of Fredericton’s Grant Harvey Centre.

‐ New Provincial Innovation Fund provides Research opportunities for UNB

‐ Changes in funding priorities to Federal granting agencies may provide challenges

UNB intends to lease at least 18 additional acres of land over the next four years

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Part C

AN ANALYSIS OF UNIVERSITY ASSETS AND LIABILITIES AS AT APRIL 30, 2012,

ALONG WITH A SUMMARY ANALYSIS OF MAJOR BALANCES OVER RECENT YEARS,

AND A DETAILED BREAKDOWN OF UNIVERSITY DEBTS.

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Analysis of Major Items on the Consolidated Balance Sheet

The Consolidated Balance Sheet reports the assets owned and controlled by the University; the Liabilities

owed by UNB and the Net Assets of the University as at the end of the fiscal year – April 30, 2012 (with

comparative amounts from the prior year). Assets and liabilities are categorized according to their liquidity,

or how quickly they are expected to be converted into cash or require the use of cash with assets and

liabilities closest to cash being classified as current and those with time horizons greater than one year

shown as long term.

The following charts illustrate the values reported in various categories on the Consolidated Balance Sheet

for the past 6 years.

Total Assets

($ millions)

Total Liabilities

($ millions)

$0

$100

$200

$300

$400

$500

$600

$700

2007 2008 2009 2010 2011 2012

$0

$100

$200

$300

$400

2007 2008 2009 2010 2011 2012

Description: Total assets represent the lower of cost and fair market value of all assets (excluding approximately 8,300 acres of land holdings) owned by the University in accordance with GAAP. 2011-12 Comments: The major driver of the increase in assets is an increase in cash and equivalents ($27.8 million in 2012) due to favourable cash flows. Trends: Total assets have trended upward since 2007 from $421.5 million to $584.9 million in 2012 primarily due to increased capital activity. The changes in the major asset components are discussed in the subsequent tables.

Description: Total liabilities represent the sum of amounts owed to external parties under various contracts and arrangements. 2011-12 Comments: Long term debt and unearned revenue increased and accounts payable decreased by corresponding amounts in 2012 resulting in virtually no change in the total liability balance. Trends: Total liabilities have generally shown an increase over the past 5 years from $307.8 million. However, the growth has ceased over the last year with total liabilities remaining somewhat constant at around $384 million.

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Total Net Assets ($ millions)

Current Assets ($ millions)

Cash and Equivalents

($ millions)

$0

$50

$100

$150

$200

$250

2007 2008 2009 2010 2011 2012

$0

$50

$100

$150

2007 2008 2009 2010 2011 2012

$10

$30

$50

$70

$90

$110

2007 2008 2009 2010 2011 2012

Description: Net assets is the result of deducting total liabilities from total assets. This amount is categorized as restricted, invested in capital assets, endowed, related to unfunded non-pension employee benefits or operating. 2011-12 Comments: Net assets increased by $30.6 million in 2012 in the categories of Restricted ($13.1 million), Endowed ($10.9 million) and Invested in capital assets ($6.6 million). Trend: Net assets have shown a steady increase over the past 5 years in the same categories – Restricted ($31.9 million), Endowed ($26.4 million) and Invested in capital assets ($27.8 million).

Description: Current assets represent assets that are cash or near cash or are expected to be converted to cash within the next 12 months. 2011-12 Highlights: Current assets increased by $ 24.7 million primarily due to an increased cash position. Trend: Total $138.8 million in 2012 versus $103.7 million in 2007. The bulk of the increase is in cash balances. Inventory values have also declined as the Saint John bookstore operations were outsourced in 2011-12. Bookstore operations on both campuses are now outsourced.

Description: Includes cash and short term investments with maturity dates of less than 12 months. Cash is invested in short term, fixed income vehicles with an emphasis on preserving liquidity and capital. 2011-12 Comments: Cash and equivalents increased by $27.4 million during 2011-12. Cash balances are dependent on the timing of receipts and disbursements and can fluctuate significantly depending cash requirements. Trend: The past two years have seen large year-end cash balances. This is not unprecedented as can be seen from the 2007 and 2008 fiscal years.

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Long Term Investments

($ millions)

Capital Assets

($ millions)

$60

$80

$100

$120

$140

$160

$180

$200

2007 2008 2009 2010 2011 2012

$0

$50

$100

$150

$200

$250

$300

2007 2008 2009 2010 2011 2012

Description: Long term investments primarily represent the assets of the Endowment Fund and specific purpose contributions held in Trust. The investment pool assets are under the oversight of the Board Investment Committee. 2011-12 Comments: Investment returns on the Endowment Fund in the year were low so that new gifts and interest just covered spending requirements resulting in virtually no growth in long term investments. Trend: Like the rest of the world, UNB’s investments suffered a major decline in the recession of 2008 of $33.4 million but have rebounded subsequently to $188.4 million in 2012 representing a net increase since 2007 of $9.4 million. The Investment Committee continues to monitor the investments and ensure the assets are invested in accordance with approved Investment Objectives and Policy.

Description: Capital assets represent the un-depreciated cost of University owned buildings, infrastructure, equipment and other tangible assets used in University operations. 2011-12 Comments: Net capital assets grew by $8.9 million in the year representing the completion of a period of major capital development at UNB. Both the Richard J. Currie Center and the Hans W. Klohn Commons were completed in the year. Trend: The past 5 years has been a period of unprecedented capital activity in UNB’s history, resulting from the Forging our Futures capital campaign and infrastructure renewal funding provided by both the federal and provincial governments.

43 | P a g e

Current Liabilities

($ millions)

Long Term Liabilities ($ millions)

Accumulated Operating Surplus (Deficit)

($ millions)

$0

$20

$40

$60

$80

$100

2007 2008 2009 2010 2011 2012

$0

$25

$50

$75

$100

2007 2008 2009 2010 2011 2012

‐$7

‐$5

‐$3

‐$1

2007 2008 2009 2010 2011 2012

Description: Current liabilities are made up of regular accounts payable and unearned revenue. 2011-12 Comments: Unearned revenue decreased by $9.1 million due to the timing of receipt of the Provincial operating grant payment for May. Trend: Accounts payable has remained fairly constant at between $25 and $28 million. Unearned revenue has decreased as the timing of receipt of the May operating grant payment has changed.

Description: Long term liabilities consist of long term debt and employee future benefits. 2011-12 Comments: The net increase in long term debt in the year related to borrowing required to finance the Richard J. Currie Center of $7.5 million. Trend: Long term debt has increased over the past 5 years related to financing for capital projects. This has included residences on both campuses as well as the Richard J. Currie Center. The long term debt increase has been offset by the reduction in the liability to improve the Academic Pension Plan as the University has made the amortization payments over the past 5 years.

Description: This represents the accumulation of operating surpluses and deficits since the inception of the University. It changes each year by the amount of annual surplus or deficit. 2011-12 Comments: The University reported an operating surplus of $3.0 million in the year. Trend: 2012 was the second successive year the University reported an operating surplus of $3.0 million following a year with a $3.0 million loss. This positive trend has enabled the University to eliminate its accumulated deficit as of April 30, 2012 resulting in an accumulated surplus of $11 thousand.

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Net Assets Restricted for Specific Purposes

($ millions)

Unfunded Non-Pension Employee Benefits

($ millions)

$0

$20

$40

$60

$80

2007 2008 2009 2010 2011 2012

$0

$10

$20

$30

$40

$50

2007 2008 2009 2010 2011 2012

Description: This represents net assets that have been restricted either through restrictions by Board policy or specific decisions of the Board. 2011-12 Comments: The main restricted areas that increased in the year were funds for Capital projects ($6.8 million) and Specific projects ($4.8 million). Trend: Internally restricted net assets have increased over the past 5 years from $47.0 million to $75.9 million.

Description: These benefits include retiring allowances, post-retirement benefits, early retirement plans and unused vacation. This amount represents the extent to which these liabilities have not been funded by the University. 2011-12 Comments: The unfunded amounts of retiring allowances, post-retirement benefits and early retirement plans all increased in the year, largely due to decreases in the discount rates used to value the liabilities. Trend: The balances have remained fairly constant over the past 5 years with only slight growth as the University has partially funded the early retirement plans. The other plans are budgeted for annually and funded out of on-going operations on a pay-as-you-go basis.

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16. Net Assets Restricted for Specific Purposes The University restricts the use of portions of its operating net assets for specific

purposes. In support of multi‐year and specific purpose planning, the University has a

policy which permits departments to carry over unspent current non‐salary budget

amounts to future fiscal periods. This carry forward is affected by an internal restriction

of operating net assets.

Other restrictions are recorded to reflect funds that have been internally restricted for

specific projects and purposes including one‐time non‐recurring expenditures and

specific contingencies for areas of operational risks, as approved by the University’s

Board of Governors.

Amounts included in Net Assets Restricted for Specific Purposes have been reclassified in

2012 to better reflect the intended purposes of the funds. The restricted amounts have

been classified into the following categories which are defined below.

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UNIVERSITY OF NEW BRUNSWICK NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended April 30, 2012 (in thousands of dollars)

Capital These amounts have been restricted for specific capital projects to be completed in a future year. Risk These amounts have been generated from operations and restricted for the mitigation of specific and general risks of the University, including self‐insurance reserves. Entrepreneurial activities Faculties and departments undertake significant levels of activity that generate revenue above that in the operating budget. These amounts represent excesses of revenues over expenses from these activities that have been restricted for use in completion of the activity, enhancement of the program or to offset future costs in the area. Specific projects Sourced from operating funds, these items have been restricted for use in a number of specific projects or for specific purposes over varying time horizons. Strategic priorities Sourced from operating funds, these items have been restricted for future use in implementing strategic directions and priorities. Operating budget carry‐forwards These amounts represent unspent non‐salary budget savings related to timing, multi‐year planning or savings realized through efficiencies. These amounts are restricted according to policy for future use in the department or faculty. Scholarships, bursaries and awards These amounts have been sourced from restricted donations and internally restricted income and can only be spent according to the originally designated purpose. Contract overhead These funds were received for research or contract overhead in accordance with the terms of the granting agency or contractor and been restricted for use by the Office of Research Services and originating units in accordance with University policy.

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UNIVERSITY OF NEW BRUNSWICK NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended April 30, 2012

(in thousands of dollars) Details of net assets restricted for specific purposes are as follows:

Figures for the 2011 year have been reclassified to conform to this presentation.

1. Net Assets Invested In Capital Assets

2012 2011

Capital assets 250,564$ 241,650$ Amounts financed by long-term debt (27,950) (21,834) Amounts financed by working capital (3,799) (19,321) Deferred contributions invested in capital assets (Note 14) (155,892) (145,705)Unrealized loss on swap contracts (Note 10 (b)) (4,185) (2,621)

Net assets invested in capital assets 58,738$ 52,169$

The change in net assets invested in capital assets is calculated as follows:

2012 2011

Changes during the year: Purchases of capital assets funded from operations 2,844$ 25,319$ Net (increase) decrease in internal financing 15,522 (5,324) Net increase in long-term debt (6,116) (5,848) Amortization expense -14,398 -12,022 Amortization of deferred contributions invested in capital assets (Note 14) 10,281 8,659 Decrease (increase) in unrealized loss on swap contracts (1,564) (720)

Net increase in net assets invested in capital assets 6,569$ 10,064$

Capital 20,039$ 13,190$ Risk 14,421 12,220 Entrepreneurial activities 13,322 12,176 Specific projects 9,920 5,083 Strategic priorities 6,880 6,159 Operating budget carry forwards 6,567 7,759 Scholarships, bursaries and awards 2,697 3,835 Contract overhead 2,087 2,460

75,933$ 62,882$

2012 2011

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Campus Breakdown of Note 16 to the Financial Statements

2011/12 2010/11

Fredericton Campus Entrepreneurial $ 10,346 $ 9,694 Committed to Capital 9,242 6,690 Strategic priorities 5,481 3,195 Operating Budget Carry Forward 5,078 6,243 Contract Overhead 1,940 2,297 Scholarship, Bursaries and Other Award funding 2,631 3,766 Specific Projects 5,070 4,120 Risk 13,267 10,913 Sub-total Fredericton Campus 53,055 46,918

Saint John Campus

Committed to Capital 10,797 6,500 Entrepreneurial 2,976 2,482 Operating Budget Carry Forward 1,488 1,516 Strategic 1,399 2,964 Contract Overhead 147 163 Scholarship, Bursaries and Other Award funding 65 69 Specific Projects 4,852 963 Risk 1,154 1,307 Sub-total Saint John Campus 22,878 15,964

Combined $ 75,933 $ 62,882

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University of New Brunswick Schedule of University Debt

$(millions)

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Part D


SUMMARY CHARTS THAT COMPARE UNB OPERATING RESOURCE

ALLOCATIONS TO OTHER CANADIAN UNIVERSITIES OVER A PERIOD

OF TIME

This information was prepared from figures compiled by the Canadian Association of University Business Officers (CAUBO). The report format is consistent amongst

universities, including UNB. The format differs from internal UNB budget documents as budget units have certain revenues allocated against their costs in internal budget

documents for accountability purposes.

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The following charts indicate that:

Reference Page

‐ UNB has consistently allocated more resources to instruction and non‐sponsored research than the Canadian average and the average of peers

53

‐ UNB has consistently allocated more resources to academic salaries than the Canadian average and average of peers

54

‐ UNB has consistently allocated less resources to administration and general expense than the Canadian average and the average of peers

55

‐ UNB has consistently allocated less resources to non‐academic salaries and wages than the Canadian average and the average of peers

56

‐ UNB has consistently allocated less resources to student services than the Canadian average and the average of peers. UNB has increased its allocation and so have the rest.

57

‐ UNB’s allocation of resources to non‐credit instruction has been similar to the Canadian average and the average of peers, and recently has been greater

58

‐ UNB has consistently allocated more resources to libraries than the Canadian average and the average of peers

59

‐ UNB’s allocation of resources to centralized computing services has been similar to the Canadian average and the average of peers

60

‐ UNB’s allocation of resources to physical plant expenditures has been consistently higher than the Canadian average and the average of peers.

61

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University of New BrunswickCompared to Canadian Average and Maclean’s

General Operating ExpendituresInstruction and Non‐Sponsored Research

58.258.0

59.3 59.360.0

58.958.2

57.3 56.8

57.9

57.0 56.6

55.8

58.5 58.357.9

57.257.4 58.2 58.2

56.9 57.0 56.5 56.156.6

57.357.4

57.1 56.956.1 55.5

56.656.4

54.0 54.2 54.0

48.749.6

54.2

41.0

46.0

51.0

56.0

61.0

66.0

1999‐00 2000‐01 2001‐02 2002‐13 2003‐04 2004‐05 2005‐06 2006‐07 2007‐08 2008‐09 2009‐10* 2010‐11* 2011‐12

UNB All Canadian Universities Macleans

Source: CAUBO*Excludes Quebec

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General Operating ExpendituresAcademic Ranks as a % of General Operating Expenditures

35.335.9

36.4 36.436.6

36.135.6

35.7 35.0 35.435.8

35.8 36.0

32.131.9 31.9

30.7

30.5 30.529.6 29.1 29.9 29.7

29.429.4

29.7

32.0 32.032.0

31.1

30.3 30.029.2 28.8 28.9 29.3

29.8 30.0

29.6

20.0

25.0

30.0

35.0

40.0

1999‐00 2000‐01 2001‐02 2002‐13 2003‐04 2004‐05 2005‐06 2006‐07 2007‐08 2008‐09 2009‐10* 2010‐11* 2011‐12

UNB All Canadian Universities Maclean's


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Administration and General as a % of General Operating Expenditures

10.710.7

10.8 11.29.5

9.5

9.9

9.5

9.28.7

8.5

9.6

8.0

11.7 11.811.6 12.0

10.2 10.5 10.810.8 10.9

10.810.2

10.610.7

11.6 11.111.3

12.0

9.2

9.9

9.6

10.7 10.6 10.6

9.18.9

10.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

1999‐00 2000‐01 2001‐02 2002‐03 2003‐04 2004‐05 2005‐06 2006‐07 2007‐08 2008‐09 2009‐10* 2010‐11* 2011‐12



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General Operating ExpendituresOther Salaries and Wages as % of General Operating Expenditures

27.6

27.127.2 27.0 27.0 27.0

26.1 26.3 26.0 26.627.4

26.7 26.6

29.327.8

28.2 27.4 27.727.6 27.2 27.1 27.4 27.4

27.2 26.8 27.028.4

29.0 29.4 29.7 29.7 28.928.8 28.4 28.5

29.4 29.3 28.928.5

12

17

22

27

32

UNB All Cdn Maclean'sSource: CAUBO*Excludes Quebec

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General Operating ExpendituresStudent Services as % of General Operating Expenditures

4.64.8 4.6 4.4 4.8

5.4 5.4 5.6 5.56.2 6.1

7.27.5

6.4 6.8 7.2 7.57.9 7.7 7.7

8.1 8.48.7

10.0 9.89.1

7.17.4

7.9 8.2

8.8 8.99.9

9.29.6

10.610.1

10.110.6

0

2

4

6

8

10

12

14

1999‐00 2000‐01 2001‐02 2002‐03 2003‐04 2004‐05 2005‐06 2006‐07 2007‐08 2008‐09 2009‐10* 2010‐11* 2011‐12

UNB All Cdn Macleans


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General Operating ExpendituresNon‐Credit Instruction as % of General Operating Expenditures

3.0

2.7 2.6

3.1

2.72.6

2.8

3.5 3.5

4.04.2 4.3 4.3

2.82.9 3.0 3.0

2.82.6 2.5 2.5 2.6 2.6 3.0

2.8

2.6

3.3 3.33.1 3.2

3.3 3.2

3.0

3.6 3.7

3.5 3.33.0

3.1

0.0

1.0

2.0

3.0

4.0

5.0

6.0

1999‐00 2000‐01 2001‐02 2002‐03 2003‐04 2004‐05 2005‐06 2006‐07 2007‐08 2008‐09 2009‐10* 2010‐11* 2011‐12



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General Operating ExpendituresLibrary as % of General Operating Expenditures

7.1 7.16.9

6.5 6.66.4 6.2

6.3 6.5

5.95.9

5.4 5.4

6.0 5.85.7 5.7

5.4 5.45.2 5.0

4.8 4.84.6

4.44.2

6.5 6.5

6.3 6.35.7 5.5

5.1 5.3 5.04.9

4.4 4.3

4.5

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

1999‐00 2000‐01 2001‐02 2002‐03 2003‐04 2004‐05 2005‐06 2006‐07 2007‐08 2008‐09 2009‐10* 2010‐11* 2011‐12



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General Operating ExpendituresComputing as % of General Operating Expenditures

4.6

4.4

3.7

4.44.0

3.9

3.8 3.6

3.8

4.1

3.6

2.9 3.2

3.73.9 4.0

3.73.9

3.6

3.83.8

3.7 3.83.6

3.6

3.8

4.1 4.1 4.24.1

3.93.9

3.94.0 3.9

3.93.6 3.6 3.8

0.0

1.0

2.0

3.0

4.0

5.0

6.0

1999‐00 2000‐01 2001‐02 2002‐03 2003‐04 2004‐05 2005‐06 2006‐07 2007‐08 2008‐09 2009‐10* 2010‐11* 2011‐12



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Physical Plant as a % of General Operating Expenditures

11.8

12.3

11.4 11.010.6

11.4 11.7

12.4

13.2

11.8

13.1

12.2

14.1

10.9 10.5 10.511.0

10.5 10.511.0 11.0

10.6 10.7 10.410.0 10.2

10.1 10.5 10.3 10.3 10.5 10.2 10.8 10.710.5

10.2

9.0 8.8

10.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

1999‐00 2000‐01 2001‐02 2002‐03 2003‐04 2004‐05 2005‐06 2006‐07 2007‐08 2008‐09 2009‐10* 2010‐11* 2011‐12



new and budgets - unb...costs of the richard j. currie center, including campus recreation services....

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