University of Waterloo (UW) November 2009
Universities use an accounting principle known as 'fund accounting'. Monies are segregated in several different funds, depending on their source and purpose. Each of these funds can be viewed as a 'bank account' which receives income each year, from which various expenses are paid. Transfers between funds are subject to stringent rules.
Each year, the Senate Finance Committee (SFC) reviews the Operating Budget, which describes projected income and expenses for the Operating Fund. A major source of operating income is the operating grant from the Ontario Ministry of Training, Colleges & Universities (MTCU). The Basic Grant is allocated on the basis of an enrolment corridor system. UW must maintain average enrolment above its corridor floor in order to retain a share of the basic operating grant. The university also receives allocations for both undergraduate and graduate growth and these funds are shared with faculties and academic support units based on their activity levels.
The university receives several special purpose funds (e.g. Access for Disabled, Grant in lieu of Taxes) which must be used for specific expenses. Certain components, such as Research Infrastructure, are funded based on UW's share of funding from the federal granting councils (NSERC, CIHR. SSHRC). Tuition fees form the other major source of operating income. The preliminary 2009-10 budget projects, for the first time, that tuition fees will exceed operating grants. A portion of the funds from tuition increases up to 2005-06 must be allocated to needs-based student assistance (shown under the heading 'Tuition Set Aside' in the expense budget). A portion of the grant and tuition income is transferred to the Federated & Affiliated Colleges (with a percentage retained for services provided by UW to the Colleges). Other sources of income include co-op and student services fees, overhead on research contracts, and interest on non-endowed funds held temporarily in UW accounts. Miscellaneous income includes OHIP billings and professional services income in Optometry and Health Services, application processing fees, tuition for continuing education courses, and other general revenues.
The largest expenditures in the Operating Budget are salaries and employee benefits for faculty and staff. Other major expenses include student support, utilities, library acquisitions, and supplies. Several special purpose funds are administered centrally and include: Academic Development (ADF), Co-operative Academic Enhancement, Faculty Recruitment & Retention, International, Learning Infrastructure, New Initiatives, Quality Improvement and Special Projects. The expense budget shows the base level of on-going expenditures as well as temporary budget adjustments to recognize unusual expenses or savings in the current fiscal year an operating surplus (deficit) occurs if operating income is greater than (less than) operating expenditures in a particular year. The 2009-10 Operating Budget (April 2009 BOG) shows a projected operating deficit of ($2.4M) This preliminary budget will be updated for the February 2010 BOG meeting.
The largest area of expenditure, after the Operating Fund is research. The university administers on behalf of UW researchers about $117 million per year, The university acts as a trustee for these monies, and must ensure that they are spent for the purposes intended. The federal granting agencies (NSERC, CIHR, SSHRC) provide for direct costs of research (e g salaries, supplies, equipment) and, through a multi-year commitment, provide funding to help offset the indirect costs arising from federally funded research.
The Ancillary Enterprises generate about $74 million annually and include the Residences, Retail Services, Food Services, Graphic Services, WATCARD and Parking. They pay the university operating fund for space, utilities, administrative services, maintenance, etc. and must maintain contingency funds for major repairs such as roof replacements renovations. Additional annual contributions to the operating fund are made by Retail Services and Parking of $160,000 and $350,000, respectively
Trust & Endowment Funds
The university has many trust & endowment accounts, most of which support scholarships, Chairs, and student activities. Total endowment contributions (principal) amount to about $232 million (at cost). A percentage of the investment income only is expended each year for purposes designated by the donor and the remainder, if any, is used to preserve the 'purchasing power' of the fund, as the principal must be permanently maintained.
Each year, MTCU provides funding to support building repairs and related maintenance and alterations. This funding is intended to supplement each university's in-house maintenance program. Funding is allocated to the universities by formula on the basis of their respective 'space entitlements'. Strict guidelines apply, and projects must be submitted to MTCU for approval. From time to time, special government programs (e.g., CFI, ORF, Knowledge Infrastructure Program) may provide capital funding for construction or renovation costs, generally with a portion of the costs to be provided by UW. Commencing in 2007/08 the government is providing capital funding for new or enhanced physical space to support graduate growth. The total support available to Ontario institutions is $550 million and is allocated for a period of 20 years based on actual enrolment growth.