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McGill ends financial year with $15 million surplus

Upcoming 2014-15 budget deficit discussed at Board of Governors

McGill ran an operating surplus of over $15 million in the 2013-14 academic year, Vice-Principal (Administration and Finance) Michael Di Grappa informed the McGill Board of Governors (BoG) at its first meeting of the year on October 2. The BoG – the highest governing body of the university, whose 25 voting members include two students – also approved a new gift acceptance policy and discussed contract compliance.

Financial statements and government funding

Presenting the audited 2013-14 financial statements to the BoG, Di Grappa said that McGill ran an operating surplus of over $15 million last year, instead of a projected operating deficit of about $10 million. Di Grappa explained that the difference of $26.4 million was due to a reduction in pension plan liabilities – due to additional contributions made by employees, as well as favourable market conditions – and to an increase in revenues from the provincial government following a recalculation of enrollment numbers.

“This was not something that was foreseeable to us,” said Di Grappa.

Di Grappa also noted that the University saw a $19.5 million increase in accounts payable due to pay equity payouts. The University also retains an accumulated financial deficit of $96 million, as well as $835 million in deferred maintenance costs, according to a 2007 estimate.

According to BoG Chair Stuart “Kip” Cobbett, the surplus is not an indication that McGill is in a healthy financial situation. “We’re as deep in the woods as we ever were,” he said.

In her opening remarks, Principal Suzanne Fortier informed the BoG that the University has received details about provincial funding for the 2014-15 academic year. Fortier said that the funding will amount to around $340 million, a substantial decrease from last year’s $359 million.

Fortier said that even though the administration had foreseen lower funding than was announced by the previous provincial government in March, the final numbers were even lower than anticipated. There is currently a projected deficit of $20 million in this year’s budget.

“We had prepared our budget in a careful way […] we know at this point we don’t have the money,” said Fortier.

Further complicating the University’s financial situation is the Liberal government’s requirement that Quebec universities balance their budgets by 2015 as a condition for a part of their provincial funding.

“If this year is tough, next year will be tougher,” Fortier said.

Provost Anthony Masi noted that the deregulation of tuition for international students in the Management, Science, Engineering, and Law faculties starting in 2014-15 will allow McGill to retain the entirety of the tuition fees paid by students and will result in a $2.5 million net increase in revenue.

In a similar vein, Fortier expressed hope that the government would allow universities to increase tuition for international students who pay Quebec tuition – by virtue of an agreement between Quebec and their country – to the same amount as out-of-province Canadian tuition; McGill would keep the difference.

Compliance with requirements on public contracting

Di Grappa presented for the BoG’s approval a declaration to the Quebec Treasury Board attesting that McGill complies with reporting obligations related to public contracts. Although the Vice-Principal (Administration and Finance) has the power to authorize the contracts granted by McGill, the BoG is required by law to produce a declaration of compliance.

Cobbett noted that the memo circulated among BoG members stated that six contracts were exempted from the bidding process, and asked for a justification.

Procurement Services Director François Pouliot explained that a contract may be exempt from the public bidding process if it is of a confidential nature, or if “it would not serve the public interest” for economic reasons to go into such a process.

Alumni Association Representative Tina Hobday expressed discomfort with the low level of detail provided about the contracts. “We have to make a decision as a board, and [all] we got [was] a 13-page memo – I felt a bit uncomfortable,” said Hobday. “I did want to voice my concern.”

The declaration was approved without opposition.

Gift acceptance policy

The BoG also approved a policy regarding the acceptance of philanthropic gifts in money and in kind by the University, presented by Vice-Principal (University Advancement) Marc Weinstein. Weinstein argued that the policy, which had not been reviewed in 35 years, will now provide a framework for accepting and rejecting philanthropic gifts and reduce “[legal] compliance and reputational risk” for the University.

BoG Vice-Chair Claude Généreux suggested that a mandatory process to investigate the source of the gift would be beneficial. Weinstein responded that he “wouldn’t want a bureaucracy impeding [the acceptance of] gifts,” noting that the policy provides for the Approval Committee for Gifts (ACOG) to conduct reviews on a case-by-case basis.

“With ACOG, we have a much better process than we ever had,” said Weinstein.