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November 1, 2014
 
 
Canadian Excellence

WLUFA Newsletter, January 4, 2012: Financial Crisis? No. Bargaining Crisis? Yes!



Wilfrid Laurier University’s Clarifications & Corrections webpage is an opportunity for the university to provide comments and corrections to information written and published about it by other sources.

The following paragraphs marked "original story" are excerpts from an article published about Laurier. The bullet points that follow each of these paragraphs are the university's response.

The excerpts represent a selection of key points but may not be an exhaustive list of all erroneous or misleading information contained in the original article.


1. Original Story:
FINANCIAL CRISIS? NO, BARGAINING CRISIS? YES!
At this point, what remains on the bargaining table are proposals by the Administration to:
(1) reduce pension benefits and ultimately eliminate our existing pension plan,
(2) reduce retiree health benefits, and
(3) implement a low-cost second-tier teaching stream that will be incapable of any significant research or service contribution to Laurier.

Correction/clarification:
The university’s commitment to bargaining in good faith prevents detailing, at this time, what is being proposed at the negotiating table. However, these opening statements misrepresent the university proposals, as clarified below, as well as the number of proposals that remain on the table. The university can only conclude that by providing its members with erroneous information prior to scheduled conciliation near the end of January, WLUFA is trying to create a bargaining crisis when one does not in fact exist.

  • As has been stated in previous clarifications, nearly every pension plan in Canada is experiencing significant funding issues as a result of broad economic and demographic forces. Given widely accepted expectations for low interest rates, lower investment returns and pensioner longevity, the Laurier Pension Plan design – like many other plans – is not sustainable in its current form. The university is committed to ensuring the plan is sustainable and its proposals reflect this.
  • With regard to retiree health benefits, there is no proposal for reduction. The proposals deal with funding the benefits so they can be maintained.
  • The teaching stream being discussed contains expectations and opportunities for service contributions on par with other faculty positions. Furthermore, it meets the vast majority of the OCUFA criteria (see http://ocufa.on.ca/2011/any-discussion-of-expanding-teaching-stream-faculty-should-adhere-to-certain-principles-says-ocufa%E2%80%99s-lawson/)



2. Original Story:
In addition, the Administration has tabled a compensation proposal that will definitely keep us near or at the bottom of the Ontario University System. Furthermore, the Administration has insisted that the compensation proposal is contingent on our accepting their proposals for the pension benefit and retiree health benefit cutbacks. This contingency leads us to believe, of course, that our unwillingness to compromise on our pension and retiree health benefits will mean that the Administration’s compensation proposal will be reduced even further, undoubtedly putting us firmly at the bottom of the Ontario University System.

Correction/clarification:
It is in the best interest of the university, its faculty, staff and students, to have a competitive (not “at the bottom”) salary stream and the university’s proposals reflect this.



3. Original Story:
There is absolutely no reason why our existing pensions should be cut back and eventually eliminated, no reason for retiree health benefit cutbacks and no reason why our compensation should be well below other comprehensive universities in Ontario. In addition, there is absolutely no reason why a low-cost second-tier teaching stream should be created. Laurier has the financial resources to easily address the continuance of our pension plan and retiree health benefits – as they exist today - well into the future, as well as the financial resources needed to hire additional faculty for years to come.


Correction/clarification:

  • Correction/clarification information provided after the November 30, 2011 WLUFA Advisory clearly disputes this claim. Please see: /page.php?grp_id=28&p=20815. As indicated in this previous clarification, according to the Dominion Bond Rating Services (DBRS) most recent review of Laurier: “Laurier’s greatest single item of financial concern remains its pension plan deficiency. The university also shares the same challenges as other Ontario universities with regard to uncertainty surrounding future tuition and provincial government funding policies.” The university has recently been informed by DBRS that they will be doing a special review of pension liabilities that could result in a rating downgrade /docsnpubs_detail.php?grp_id=59&doc_id=46708
  • The university’s pension and benefits proposals are structured to ensure a competitive total compensation program for faculty.


4. Original Story:
As you know, in the past three years, the Administration has been presenting budgets that show a financial crisis at Laurier. Keep in mind that budgets are a tool of the Administration to get you to do what the Administration wants you to do. Budgets have no relationship to actual financial results, yet, it appears that the budgets are the basis for the Administration’s proposals.

Correction/Clarification:
Budgets are not intended to manipulate, as stated above. A budget is a resource-allocation tool tied directly to achieving the mission of the university.



5. Original Story:

Let’s look at the actual financial results for the last three years on a number of dimensions so that you can have a good working knowledge of why the proposals on the table by the Administration do not make sense. All of these amounts and percentages are from the Audited Financial Statements for the year indicated. These amounts and percentages are some of the standard measures used by analysts to assess the financial condition of a not?for?profit organization like Laurier.

Year

Surplus in General Fund

Cash Inflow from Operations

Cash and Deposits At Year End

Percent increase in Revenues

2009

$ 6,061,000

$12,800,000

$31,525,000

10.13%

2010

$17,894,000*

$28,039,000*

$41,817,000*

6.41%

2011

$19,527,000*

$31,324,000*

$61,199,000*

9.08%

Totals

$43,482,000

$72,163,000



* indicates that this amount is a record amount in the history of Laurier.


Correction/Clarification:
The cash inflow information in the chart is misleading; it provides figures at a point in time without reference to outstanding financial obligations. An analogy would be to look at a person’s bank account soon after a pay cheque has been deposited. The account could appear flush with cash, but commitments such as mortgage payment, car payment, insurance premiums, credit card bills or other loans, and household expenses such as groceries have not yet been accounted for. The picture of the same bank account at the end of the month could be vastly different.

University financial statements are much more complicated than many simple not-for-profit enterprises. A University’s financial structure is based on funds. Funds within a university are designated for specific purposes. The funds include an operating fund, research fund, ancillary fund, endowment fund and capital fund. Current financial statement presentation practice is to aggregate these results into one single statement. The belief is that this aggregation will help general readers of financial statements better understand an institution’s financial position. However, readers should be cautioned not to apply general cash flow measures in order to assess a University’s financial position.

The attached table (Table 1) provides a clearer picture of the University’s cash position after current financial commitments are taken into account. It includes expenditures for accrual accounting, changes in investing/financing activities, changes in current assets/liabilities, funds held due to external restrictions on use, and internally restricted net assets (funds the university has committed to specific projects). The information contained in table 1 is data directly from the university’s financial statements. Item C is the surplus in the general fund ($19,527,000 for 2011), from that we add item D which results in the Cash Flow from Operations (Item E - $31,324,000 for 2011).  Then adjustments of Items F to I results in the university’s Cash & Deposits at Year-end (Item J - $61,169,000 for 2011).

But in order to get a clearer picture of the University’s cash position an analyst should consider all other current commitments on cash and deposits at year-end.  Item M is the University’s working capital position.  The notion of working capital is that if all current assets were converted to cash and all current liabilities came due immediately, then what balance of cash would the organization have available. This is shown in Item T ($35,285,000 for 2011).

Next one should consider funds that were given to the university from external organizations for an explicit purpose. If we did not use these funds for the intended purpose then the external organizations would expect those funds back. The total of these funds is Item S totaling $24,336,000 in 2011.  Subtracting these funds from the working capital results in a cash balance of $10,949,000 (Item T).

Finally, one should consider internally restricted net assets of the university. These items are funding commitments that have been made but not yet spent. A detailed listing of the internally restricted net assets is contained within a note to the financial statements. Items W to AA is a summary of these items into general categories. For example, capital expansion and renovations (Item W) are specific capital projects that are planned for but expenses have not yet been incurred. Department Carry Forwards include the surpluses faculties retain at year-end then use to pay for faculty-related, one-time expenses in the following year (labs, equipment replacement, etc). The operating budget carry forwards helped the university avoid budget cuts as these funds are applied to the following budget year. A Reserve is a fund set aside for a specific purpose. The university has increased the amount of funds in reserve in order to better maintain its capital assets and manage less predictable expenses. The new reserves include funds to support IT hardware and software renewal which will allow the university to keep its IT infrastructure up to date. Item AA is unbudgeted operating costs which are high priority, one-time expenses that occur after the financial statement year-end.  Some of these items include funds for the 2012 Congress of Humanities and Social Sciences and Centennial Scholarships. So, subtracting internally restricted net assets from Item T results in a DEFICIT of funds of $30,561,000.

Therefore, the true bottom line is that Laurier does not have significant financial resources currently at its disposal. But in fact, if all these current commitments came due at the same time then the university would need to borrow over $30 million. It is true that the University’s cash amounts have increased but this is expected as an organization grows. Also it is important to consider that financial statements denote a cash position at a point in time. These amounts can change significantly as expenses are paid.


WLU Cash Position per Financial Statements




As at April 30, 2011 (in thousands of dollars)




Item

Description

2011

2010

2009

A

Excess of Revenue over Expenses

$11,275

$9,288

($2,487)

B

Add: Amortization expenses

$8,252

$8,606

$8,548

C

Surplus in General Fund

$19,527

$17,894

$6,061

D

Add: Other Accrual Expenses

$11,797

$10,145

$6,739

E

Cash Inflow from Operations

$31,324

$28,039

$12,800

F

Less: Financing Activities

$696

$861

$1,113

G

Less: Investing Activities

$11,276

$16,886

$9,916

H

Increase in net cash position

$19,352

$10,292

$1,771

I

Add: Net Cash Position - beginning of the year

$41,817

$31,525

$29,754

J

Cash & Deposits at Year-end

$61,169

$41,817

$31,525

K

Add: Other Current Assets

$19,781

$31,408

$21,384

L

Less Current Liabilities

$45,665

$50,866

$39,751

M

Working Capital

$35,285

$22,359

$13,158

N

Less: External Funds




O

Research Grants

$7,333

$5,974

$6,627

P

Scholarships & Bursaries

$5,293

$3,893

$2,158

Q

Donations

$7,882

$6,970

$5,494

R

Other

$3,828

$2,103

$1,096

S

Total External Funds

$24,336

$18,940

$15,375

T

Working Capital less External Funds

$10,949

$3,419

($2,217)

U





V

Less: Internally Restricted Net Assets




W

Capital Expansion & Renovations

$7,413

$4,696

$2,712

X

Departments Carry Forwards

$7,187

$4,756

$4,024

Y

Operating Budget Carry Forwards

$8,227

$10,661

$5,286

Z

Reserves

$12,268

$5,430

$4,620

AA

Unbudgeted Operating Costs

$6,415

$5,436

$2,051

AB

Total Internally Restricted Net Assets

$41,510

$30,979

$18,693






AC

Working Capital less External Funds and Internally Restricted Net Assets

($30,561)

($27,560)

($20,910)




6. Original Story:
The bargaining team needs a way to “unstick” the Administration from their fascination with budgets that show financial crisis when no financial crisis exists. We need a way to bargain using financial reality from the Audited Financial Statements that show unbelievably positive financial success at Laurier. To do this, your bargaining team needs you to bring a strike enabling vote that will support us further at the bargaining table…

A strike enabling vote by WLUFA members allows the WLUFA Executive to call on members for a strike vote in the future. A strike enabling vote is not a strike vote. It is the authorization to hold a strike vote. No strike can be called from a strike enabling vote; however, with a strike enabling vote, the WLUFA Executive would have the authorization to call for a strike vote in the future. The strike enabling vote sends a strong signal to the Administration that WLUFA members support the bargaining team.

Correction/Clarification:
There is no such thing as a “strike enabling vote” in labour law and one is not required as authorization to call for a strike vote in future. The university can only question why WLUFA would introduce this new term if not to heighten concern among members and support its erroneous implication that the university is causing a bargaining crisis. The university is committed to reaching a fair and equitable settlement, and believes the best agreements for all concerned are those negotiated without job action.



7. Original Story:
WHAT DO THE ADMINISTRATION’S PROPOSALS MEAN TO YOU?
Our compensation ranks 14th out of 16 in the Ontario University System. Our average faculty salary is $9,646 lower than the average faculty salary of the Ontario University System adjusted for age and rank. All but one age/rank classification of Laurier faculty are underpaid. The Administration’s proposals would keep us at or below where we are now. In addition to the cutbacks in retiree health benefits, faculty with an average salary would pay $2,142 more in pension contributions each year for reduced pension benefits. In effect, the Administration’s proposals would result in faculty taking a pay cut in exchange for inadequate compensation, retiree health benefit cutbacks and pension benefit cutbacks.

Correction/Clarification:

As previously noted, the university’s commitment to bargaining in good faith prevents detailing, at this time, what is being proposed at the negotiating table. However, the assumptions used in the analysis leading to these figures contain numerous flaws and the information provided misrepresents the university’s proposals.

All original article excerpts: © 2012 Wilfrid Laurier University Faculty Association (WLUFA)