With the Board of Trustees meeting this week, the administration has provided a series of reports for the Board’s meeting. In this post we provide details of two interesting developments:

  1. the updated financial projections for the 2023-24 year; and,
  2. a review of the Investment Committee’s Terms of Reference.

A lower deficit and a win for transparency

As part of the meeting agenda, the VP Finance and Administration provides the board with an updated financial projection. Interestingly, this report to the Board now provides two figures for the projected deficit.

The first figure is the usual mode of reporting and states that the projected deficit has declined to $40.7 million (down from the opening projection of $62.8 million). This decline is attributed to the hiring freeze, decreases in spending, and higher than budgeted investment returns from the university’s short-term fund. While still large, this figure is $22.1 million less than initially projected.

The second figure is newly reported and a win for transparency.

Those who have followed QCAA publications know that we have drawn attention to the administration’s decision to limit the use of investment income from the Pooled Investment Fund (PIF) for operations to $5.2 million. We argue that the decision to limit contributions to 0.9% of the value of the fund is a political decision about how to allocate resources that has been hidden through the use of a seemingly technical rule.

The new report acknowledges the need to ‘increase transparency’ around the PIF and reports what the deficit would be if all investment income from the PIF ($27.3 million) were used for operations. Using this calculation, the VP Finance and Administration reports that the projected deficit would further decline to $18.6 million dollars (down $44 million from initial projections).

There is reason to believe that this second figure may be even lower at the current moment. The calculated deficit is based on PIF earnings as of November 30th. Since that time, markets have performed well with the value of Dow Jones Industrial Average, for instance, increasing by 7.3% since the end of November. As another indicator, as of January 31st the value of the PIF was $613 million dollars, up $50 million from fiscal year end (April 30th). While we cannot be sure this increase is all investment income (other possibilities include transfers to the PIF from other funds), this is a further indicator that the PIF may have earned more income since its reported value on November 30th.

However, despite reporting this new figure, the report makes clear that this investment income will not be used for operations or to manage the deficit. Instead, it reiterates that investment income above $5.2 million ‘will be allocated to the general capital reserve’. Nevertheless, reporting this figure is an important win for transparency.

Based on this reporting, it is now clear how the university is deciding to allocate its resources in the face of budgetary pressures.

And, as a result, this can now be a subject to open debate.

A new terms of reference for the Investment Committee

The report from the Investment Committee to the Board of Trustees states that the committee is currently reviewing its terms of reference. While there is no detail provided about this process, the report does state that the committee is undertaking an environmental scan of investment approaches to university endowments and that this will inform the update of the terms of reference. Given the size of the endowment ($1.54 billion) and how much revenue could be provided to protect the academic mission of Queen’s by even a modest increase to the endowment’s spend rate, we are interested in the results of this process and whether the broader university community will be engaged in this discussion.