DBRS Morningstar鈥檚 May 2024 ratings report for Queen鈥檚 University listed the university鈥檚 expendable net assets as $777.2 million at April 30, 2023. Please provide clarity on what is included in this number.
A breakdown of expendable assets as calculated by DBRS at April 30, 2023 is presented in the table below, with comparative numbers at April 30, 2024.
Expendable Net Assets, as defined by DBRS:
Operating contingencies (or departmental carryforwards) have been and continue to be used by units across the institution to fund in-year operating deficits as well as departmentally funded renovations and alterations, research start-up funds etc. Operating funds used to support research or capital are transferred to those respective funds through inter-fund transfers.
The majority of the Expendable Net Assets balances, as defined in the table above is not available to help mitigate annual deficits as noted below:
Unspent research funds are operating funds (internally restricted) used to support research, such as Research Initiation Grants for new faculty appointments to help start-up their research program or Special Research Projects established for faculty taking on administrative positions to enable continuation of their research.
Sinking funds are investments purchased that will mature when the University鈥檚 debenture debt is due. Unlike amortizing debt, like a mortgage, only interest is paid annually on debentures. The university budgets for interest and principal payments and the principal portion is invested in the sinking fund in bonds that will mature on the debenture due date. These funds must be preserved for the debt repayment.
Capital Reserves are funds set aside for capital projects in progress, such as renovations and alterations or deferred maintenance, or for future investment in the university鈥檚 infrastructure in support of our academic/research mission. Please refer to the next Q&A for details on the make-up of the capital reserve at April 30, 2024.
The pension reserve has been set aside to fund potential future pension commitments related to past service under the Queen鈥檚 Pension Plan, as with the transition to the University Pension Plan the university remains responsible to fund pension deficits related to past service, should they arise.
Internally restricted endowments are operating or matching funds for endowments that provide a stable source of ongoing funding to support the university鈥檚 operating budget (approximately $8 million), as well as departmental operations such as chairs, visiting scholars, etc. Spending from the Pooled Endowment Fund is governed by a Board of Trustees approved Spending Policy.
The Capital reserves at April 30, 2024 were $211.6 million. Why Can't we use these reserves to manage the budget deficit?
The majority of the university's capital reserves are committed for specific purposes, as detailed in the table below.
Can Queen鈥檚 pause any current or planned capital projects to save money?
Almost all of the approved capital projects currently underway at the University are funded primarily from sources outside of the operating fund (i.e. funds such as donations, student contributions to the John Deutsch Centre Revitalization Project, government grants, and ancillary funds). Pausing these projects would not provide a source of funds to offset the operating budget pressures.