What Happened with the 2023-2024 Budget?
2023-2024 was a very unusual budget year for SFU. It’s only the second year that the University has posted a deficit in two or, perhaps more, decades. The last deficit came in 2009 and that was around the time of the worst global financial crisis since the Great Depression. 2024 wasn’t 2009: there weren’t large macroeconomic forces undermining the University’s ability to maintain a balanced budget. Even during the darkest days of the pandemic, SFU posted healthy surpluses.
Granted, there have been documented difficulties across the post-secondary sector Canada-wide as regards international student enrollments: while this can’t be downplayed, international student woes only form a part of SFU’s revenue stream (see page 8 of the report link below) and thus, its overall financial picture. Among the other external factors that the University cited for its budget difficulties in the 2023-2024 fiscal year were pension issues, inflationary pressures and the University’s divestment from fossil fuels*.
Are these, however, the factors that resulted in an approximately $5 million deficit? Are there other significant factors that may also cast a different light on the University’s financial difficulties in 2023-2024?
Let me back up a little first.
As we noted previously in our newsletters, each bargaining year, we engage an external financial researcher to examine SFU’s public financial records. The idea is to assess SFU’s ability to pay you fairly in terms of wages and benefits and counter, where accurate, SFU’s narrative at the bargaining table that it can’t do so. During this very difficult fiscal year, we engaged our financial researcher to examine SFU’s quarterly financials, the University’s 2024-2025 Budget Book and the University’s 2023-2024 publicly-available actuals to learn more about SFU’s fiscal situation and try to learn what consequences may be expected to follow for you, our members. Some of those findings we published in a previous newsletter based on SFU’s third-quarter financials.
As I don’t have space in this article to go over each and every point in our researcher’s thirty-seven-page report for APSA (I very much suggest reading it in full via the link below), I’d like to address one key issue: SFU’s budgeting process for the 2023-2024 fiscal year. In its March 31, 2023, Annual Report, there was no suggestion that SFU was about to face its worst financial performance in years. And yet, 2023-2024 was one of turmoil and misery for many SFU community members, especially those who lost their jobs.
On page 7, the report to APSA draws this conclusion:
“Overall, based on SFU’s audited financial statements for 2023/24, it is impossible not to conclude that something went really wrong with the 2023/24 budget process. Contrary to the claims made by SFU, checks and balances were not in place to safeguard against deficit. SFU’s budgeting was $11 million off in 2023/24 — the Consolidated Budget projected a $6.2 million surplus, but at year-end SFU ran a $5 million deficit. It appears that internal controls were lacking.”
The 2023-2024 SFU Budget and Financial Plan described a new budgeting process at the University, which included the formation of an Integrated Planning Committee and the role that this new committee will play alongside the Budget Planning Committee in developing SFU’s budget. Both committees were chaired by the Provost and the VP Finance. SFU also outlined the five stages in its annual budget process, which is summarized on page 6 of the report to APSA.
But did this new budgeting process work? From our researcher’s report to APSA on page 6:
“Let’s look at one line item to test SFU’s budget process. The Budget Planning Committee would look at credit course tuition revenue actuals for the 2021/22 fiscal year, at $288 million. Then SFU would have referenced the forecast for 2022/23 which was $291.2 million. SFU would have then reviewed enrolment data and consulted with senior managers. All of this, and likely more, would have led SFU to set the 2023/24 credit course revenue line item in the budget. So why did SFU set this line item at $299.7 million in the 2023/24 budget? This is millions of dollars higher than credit course revenue forecast for 2022/23. At year-end 2023/24 credit course tuition revenue actuals are reported at $290.4 million - $9 million less than the budget projected.”
Further to the apparent difficulties in the SFU budgeting process, our researcher notes on page 7:
“As the following Table indicates [page 8 of the report], and with hindsight we have learned that the 2023/24 budget process produced line items that were way off — both over and under budget compared to actuals.
“When you examine individual revenue line items government revenue was significantly higher at year-end than reflected in the budget. The budget plan set BC government revenue at $286.6 million, while at year-end this revenue totaled $374.6 million. On the other hand, SFU over estimated credit course tuition revenue by $9 million. Sales of goods and services, donations, etc., and other revenue were all budgeted lower than actuals at year-end, while investment income and amortization revenues were lower at year-end than budgeted.
“On the expenses side, as the Table below [page 8 of the report] reveals, most expense line items came in over budget. Salaries and benefits expenses were much higher than budgeted. As well, supplies, professional and contracted services, scholarships and bursaries, and travel expenses were all over budget. Professional and contracted services expenses was $16 million over budget.”
The apparent difficulties with the 2023-2024 budget process may be why SFU adopted another new budgeting model to build the 2024-2025 budget. Again, the Provost and the Vice-president Finance led the budgeting charge along with what looks like a new budget committee and budget working group. This new budget process includes a “set of principles for transparency, accountability and consistency” and "quarterly monitoring of actual results”, among other measures to ensure financial health.
It will be a while yet, obviously, to know whether this revised budgeting process substantially differs from the 2023/2024 budget process and whether it will deliver better results. One area of concern, to start, is the University’s commitment to transparency in the 2024-2025 process: the 2024-2025 Budget and Financial Plan is only twenty-one pages long, as compared to the 2023-2024 Budget and Financial Plan, which was 114 pages. It’s unclear how a significantly shrunken plan supports a commitment to transparency.
In terms of accountability, if the 2023-2024 budget process did go awry, it’s also not clear if anyone in SFU’s leadership has been held accountable for what might have gone wrong last fiscal year. Many of our members who lost their jobs this year would certainly like to know.
Resources:
https://apsacentral.ca/sites/default/files/2024-0…
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Notes:
*I’ll note a couple of pieces from the report regarding external factors claimed by SFU to be among the reasons for its 2023/24 fiscal woes. Again, I’d recommend reading the report in its entirety.
On the subject of fossil fuel divestment, the report notes on page 26:
“It’s not unreasonable to wonder whether SFU could have better planned its divestment journey. SFU has been working on divesting from fossil fuels for a decade, but SFU investments took a $20 million ‘one-time loss’ due to divestments in fossil fuels in 2024.”
On the subject of international student enrollment:
“When SFU claims that “declining international student enrolment’ is one of the external factors to explain SFU’s revenue shortfall one could counter that enrolment has been flat for 3 years and SFU’s expectation that enrolment should have kept increasing from 2020/21 when total enrolment hit 27,344 was not based on the reality of present domestic and international factors such as Vancouver’s high cost of living, housing shortages and costs, and international turmoil and uncertainty.”