2020-21 Operating Budget
Message from the Chief Financial Officer:
2020-21 Budget
October 21, 2020
A unique and unprecedented context
Fiscal year 2020-2021 represents one of the most important challenges Concordia University has had to face since its creation in 1974. The COVID-19 emergency has initiated a profound transformation of our academic and research mission, not only for this current year but also for the years to come.
After the turbulence of the early stage of the crisis — in winter and spring 2020 — we are now looking at the long-term impact and the transformation we will need to consider in the coming years. We can be certain about one thing: our future will be different from our past.
Over the past seven months, we have seen how our faculty and staff have responded with great creativity and agility to the new context, reinforcing their commitment to offer the best academic and research experience to our students. Now, it is time to address the financial impact of the crisis and how Concordia is proposing to manage its financial framework, for the near and long terms.
A different approach for 2020-2021
In our traditional financial cycle, we present a budget at the beginning of the fiscal year, based on different priorities and assumptions, and follow and adjust this budget during the year, depending on the circumstances. As discussed and approved at the Board of Governors meeting on May 20, 2020, the uncertainty created by the pandemic presented a context where it was not possible to implement this traditional model. Consequently, the Board approved an Autorisation de dépenses of $300 million and an additional envelope of $25 million to support COVID-19 investments. This framework has been in place to manage the financial resources of the university from May to October 2020, and the administration has presented monthly reports to the Finance Committee to provide visibility and transparency with respect to enrolment, revenues, expenses and cash-flow position over this period.
It is now time to approve a 2020-2021 budget that reflects our best estimates of our financial situation for the year. Considering the exceptional context we are facing, our proposed approach for the preparation of this budget is based on the four principles we have used to manage our financial framework: prudence, agility, continuity and long-term sustainability.
We need innovative and proactive solutions to adapt our budget framework in these extraordinary times; we have already presented most of these solutions to the Finance Committee and the Board:
- Use of different scenarios to explain the potential impact and management of our financial situation, depending on the evolution of the pandemic. Since it is difficult to present one budget based on a set of assumptions and priorities, today we present the most likely scenario as well as alternatives, should the actual results differ from this most likely scenario.
- A global financial framework that includes both operating activities and capital investments to protect the long-term sustainability of the university, and the use of the Debt-per-FTE as a key measure to assess our long-term financial capacity, combined with a close monitoring of our cash flow.
- A long-term approach to support our strategic real-estate investments to reinforce our long-term development.
2020-2021: A transition year
We achieved an important milestone with the 2019-2020 budget: the Board approved a balanced budget for the first time since 2013-2014. Despite a reduction in the number of students in 2019-2020, the university was able to manage its financial activities to maintain a balanced budget for its regular activities, before the impact of COVID-19.
Obviously, the repercussions of COVID-19 will create a significant deficit in 2020-2021. We estimate that the most likely scenario of operating deficit will consist of approximately 5% to 8% of our operating budget, representing between $28 million and $45 million. This 5% to 8% range of the deficit compared to the operating budget is similar to the investments made in the Quebec economy by the Government of Quebec to support the COVID-19 crisis.
Our current vision is to support our operating activities and slow down our capital investments in the short term. We propose this approach to focus our efforts and capacity to transform our academic and research environment to adapt rapidly to the new reality, keeping in mind the student experience, continuity of our activities, and safety and security of our students, faculty and staff. We will continue the discussions with the Finance Committee and the Board in the coming months to monitor and assess our orientation and maintaining this long-term vision.
We have proposed a non-traditional approach and framework for 2020-2021. Some of the fundamental changes we propose for the management of our financial resources will remain. However, our expectation is to present a budget in May 2021 for the 2021-2022 fiscal year. That means we anticipate presenting two budgets to the Board within a six-to-seven-month window. Considering that most likely we will be in a deficit position for the next three years, the 2021-2022 budget will integrate the COVID-19 structural impacts and the strategy to address and maintain our long-term financial sustainability.
A budget is more than numbers
Over and above numbers, dollars, cost allocations and financial monitoring, a budget is much more than an accounting exercise. A budget is about making choices, presenting priorities and highlighting critical decisions that will build the future and support our vision. A budget is the keystone, the clé de voûte to align our strategic priorities.
Clearly, even though our university has numerous projects — each more exciting than the next — 2020-2021 has forced us to adapt, modify or slow down our strategic priorities. We continue to increase our position in university rankings. We are recognized more and more across the country and the world. Our management of the COVID-19 crisis has demonstrated our agility and our capacity to go beyond.
Therefore, we will orient the 2021-2022 budget to express and support what makes Concordia so distinctive, coming back to our DNA: innovation, creativity, partnership — all elements that make a difference for our students and faculty.
Let’s use the 2020-2021 year as a springboard for the future to propose and articulate exciting and innovative projects. These include:
- Building on our academic strengths in increasingly critical fields such as health, cities and cybersecurity
- Continuing to show leadership as an institution committed to the United Nations Sustainable Development Goals (SDGs), with a particular focus on equity, diversity, decolonization and accessibility
- Supporting students’ academic success by expanding and upgrading our online and in-person support at the undergraduate and graduate levels
- Responding to societal needs in a post-pandemic world by increasing our commitment to innovation, whether in teaching and learning practices, research activities or student-led startups
Let’s move on
We will certainly remember 2020-2021 as a unique and challenging period in our history. We don’t know yet how long, how deep and how disturbing this crisis will be, and what permanent, structural changes this pandemic will produce. However, we know that universities will adapt to this new environment.
We have developed the proposed 2020-2021 budget framework to adapt to the current uncertainty. This budget will prepare the landscape for future years, our ability to adapt and our capacity to innovate. This transition year is a precursor of our future. Let’s move on and look to that future.
Denis Cossette
Chief Financial Officer
Message from the Chief Financial Officer:
Interim Budget until October 2020
While we were preparing our FY2020-2021 budget, the context in Quebec, Canada and around the globe shifted under our feet. As the COVID-19 pandemic unfolded and its devastating health and economic consequences became apparent, we knew we would need to take special measures to account for these unforeseen and ever-changing circumstances.
In the period from March to May 2020, with strong support from the Board of Governors, we invested heavily – more than $12M to support online courses, technology transformation, and other measures to continue our activities (net of savings realized since the beginning of the pandemic), and more than $1.6M in direct support to our students during these difficult times.
1. At present, a number of significant unknown factors make a normal budgeting procedure impossible. These unknowns include:
- The value of our annual operating grant from the Government of Quebec
- This grant accounted for 51.3% of our total revenues in 2019-2020, but we anticipate that the Government will adjust its budget announced on March 10, 2020 to account for the crisis.
2. What our student population will be in 2020-2021
- Tuition fees comprised 33.2% of our 2019-2020 operating budget.
- International travel restrictions could have a significant impact on our number of both new and returning international students (who made up more than 20% of our student body in 2019-2020), which could reduce our tuition revenue.
- The pandemic’s economic repercussions will also likely affect our domestic enrolment numbers.
3. Non-recurring special costs to adapt to the new reality
- Transferring courses online rapidly requires unprecedented levels of instructor and staff training and technical support.
4. Revenues derived from non-academic activities, events, residences (temporarily closed for 2020-2021), and space rentals
5. Structural long-term costs to operate in a new environment, including infrastructure costs
A proper budget necessarily requires accurate revenue projections. In view of the unprecedented uncertainty the next few months present, we are following the Bank of Canada’s lead in not providing a strictly costed plan, which would only portray a false sense of precision.
It is my intention to present a more conventional operating budget in October of this year. By then we should know, or know more about, our two main revenue sources: the Government of Quebec’s funding, both of our annual operating grant and any special COVID-19 financial support it may provide; and our tuition revenues.
To provide a financial bridge until we can predict revenues, the Board of Governors has granted us a six-month Authorization of Expenditure, which runs until October 31.
This special Authorization of Expenditure will cover two components of Concordia’s Operating Fund:
1. Regular Operations – up to $300M, calculated based on the 2019-20 budget, indexed by 2.5%, plus a 5% contingency cushion.
2. A separate $25M COVID-19 Emergency Fund to provide our leadership the agility to fund adaptations required in our academic, research and operational activities.
Conditions of this special Authorization of Expenditure include:
- Limiting hiring and procurement to essential needs
- No effect on full-time salaries
- Scheduled salary increases in collective agreements remain unchanged
- No freeze on full-time hiring, but an enhanced review and approval process
- Hiring only pre-approved positions for contract, part-time and time-sheet work
- Establishing a process to manage IT and office-supply procurement to support work from home
- A temporary freeze on funding new initiatives to focus on those underway and managing COVID-19 issues
Between May and October, rigorous monthly rather than quarterly reporting will help prevent overspending and broaden input so that we can remain agile and innovate as we make decisions in face of unprecedented financial challenges.
Concordia’s Department of Finance will also continue to prepare a variety of mid- to long-term financial scenarios as the pandemic evolves. We can anticipate that most of these will show a financial shortfall for 2020-2021.
Whatever the future holds, we remain committed to taking actions and articulating a budget framework that best ensures our long-term financial sustainability without compromising Concordia’s leadership position as North America’s top-ranked university under 50 years old.
Denis Cossette
Chief Financial Officer
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