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U of T reports $1.6 billion increase in net assets for 2020–2021 fiscal year

Audited financial report reflects less income from on campus services, higher infrastructure costs
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JENNIFER AYOW/THE VARSITYThe consolidated financial statements showed a great increase in net assets
JENNIFER AYOW/THE VARSITYThe consolidated financial statements showed a great increase in net assets

On June 24, 2021, the Governing Council held a meeting to discuss the audit of the university’s financial statements for the 2020–2021 fiscal year. The financial statements had been examined by the audit committee on June 16, 2021 and were approved by the Governing Council during the council meeting.

Fiscal year financial highlights

The report noted some key financial highlights. The university reported a $1.6 billion increase in its net assets as a result of investment gains on external restricted endowments — external donations where the donor has requested that the university invest the assets and use the investment returns in a specific manner — that totalled to $445 million. The university also received $124 million in endowed donations that have supported the university’s research and teaching objectives as well as miscellaneous academic projects which also contributed to the $1.6 billion increase in net assets. 

Additionally, the university reported an increase of $726 million in its net income, $314 million of which it has already allocated for capital infrastructure costs meant to cover projects such as the UTSC Student Residence, the UTSC Instructional Centre Phase II, the UTM Science building, the Schwartz Reisman Innovation Centre West and the Robarts Library Pavilion. 

Breaking down the balance sheet

As of April 30, 2021, the university’s net assets were composed of $3.2 billion in endowments and $5.1 billion in internally restricted net assets, which are funds set aside for a specific internal purpose. The university also reported a $144 million deficit, mainly caused by internal financing of capital construction. The most notable costs incurred by the university over the last fiscal year were from salaries and employee benefits with a total cost of $2 billion — representing 60.2 per cent of U of T’s total expenses, which totalled $3.3 billion. The second highest area of expenditure was on miscellaneous expenses, which cost $337 million; followed by scholarships and bursaries, at $279 million; materials, supplies and service, at $255 million; and inter-institutional contributions at $266 million.

COVID-19 and financial losses

The pandemic changed the way the university operated. Since all students were required to complete the term remotely as a result of COVID-19 restrictions, U of T had to provide support to students, scholars, and researchers in ways that had never been done before. This included offering online course delivery, socially distanced student residence options, and support for research related to COVID-19.

Despite U of T’s efforts to ensure that the transition to remote course delivery and research went smoothly for the entire campus, the shutdown of all non-essential operations on campus in March 2020 decreased the university’s revenue from some sources dramatically, especially for Hart House and for the university’s food and transportation services. In 2021, these and other operations incurred net losses of $23 million.

Residence buildings that remained open also incurred extra costs from additional cleaning and sanitation measures to prevent the spread of COVID-19. To mitigate these costs, some of the university’s capital projects and renovations were put on hold, some staff were temporarily laid off, and the university implemented a hiring freeze. Residence operations alone reported a loss of $25 million in 2021. Sales, services, and sundry income — a sector of the university which includes food, parking, and residence operations — also reported revenues in 2021 that were $100 million lower than 2020.

Signs of recovery and future growth

Amid the uncertainty and losses that have stemmed from the pandemic, some financial metrics discussed in the report show signs of improvement. The university’s expenses from repairs, maintenance, and leases increased from $131 million in 2020 to $141 million this year, demonstrating more on-campus activity. Revenues for 2021 totalled just under $4 billion — $373 million more than 2020.

The university also employs a careful debt strategy to maintain its financial position. U of T has a ‘target debt burden ratio’ of five per cent, which means the university can fund up to that percentage of their assets using debt. The university tries to strategically use debt to only fund high priority capital projects, as well as its pension plan for staff and faculty members. This year’s planned external debt was $1 billion, with an additional $890 million in internal financing, which fell below this year’s total debt limit of $1.94 billion.

As the university enters its 2021-2022 fiscal year, the care and effort placed by the Governing Council and audit committee has left U of T in a satisfactory financial position.