Why Waterloo is not at risk of insolvency

In light of the devastating announcement about Laurentian University, members have been asking FAUW whether there is a need for concern about the University of Waterloo’s financial situation. We’ve asked Linda Robinson, fresh from a deep dive into UW’s finances as a member of our negotiating team, to answer this question. We hope this post from Linda will put your mind at ease by explaining that UW is in a healthy financial condition.

First, be aware that I have no inside knowledge about the University’s financial situation, but I did extensive analysis of the publicly available information as part of the recent salary negotiations. Unlike public corporations, who report their results quarterly, the University only reports annually through the release of their audited financial statements. With an April 30 year-end, we won’t see the full impact of the pandemic until the April 30, 2021 statements are released in the fall of 2021. What we do know is how the University fared as of April 30, 2020, and although this was only six weeks into the shutdown, it does reflect the impact of the ten percent tuition reduction for 2019/2020 and the provincial government’s funding freeze.

There are many financial metrics we could consider when analyzing the University’s finances, and I will comment on a few. Perhaps the most important consideration is that the University of Waterloo has no debt, nor have we since it was paid off in 2018.

Working capital

Working capital tells us the liquidity of an organization and could be viewed as the amount of money an organization can safely spend. At April 2020, the University’s working capital was $110 million and has been on a steady increase. Working capital is calculated as current assets less current liabilities. Current assets are cash and items that can be converted to cash quickly, such as short-term investments and tuition receivable. (Non-current assets would include fixed assets such as buildings and long-term investments.) Current liabilities, similarly, are items that must be paid within the year, such as accounts payable, unspent externally restricted grants, and donations for specific purposes.

Net assets

Net assets is a calculation of all the assets less all the liabilities of the University. If UW were a corporation its net assets would be the equity of the company (as in share capital and retained earnings) but, since UW is not a profit-oriented organization, the equity is referred to as net assets. The net assets at the last year-end were $896 million. This metric has also been on a steady incline although there was 7% decrease over 2019. The 2020 decrease was mainly due to an increase in the liability for unfunded pension obligation.

Not all the University’s net assets are available to be spent at will, as it is made up of cumulative surplus and endowments. Endowments are financial assets that are donated and restricted to a specific purpose such as research and teaching. Endowments are 40–45% of the net assets. The balance of the net assets is surplus which has been created by revenues exceeding expenses each year. Annually, the University sets aside the bulk of their surplus and labels it ‘Internally Restricted.’ These funds are not legally restricted like the endowments but arbitrarily set aside. Cumulative surplus and internally restricted funds totalled approximately $500 million at April 30, 2020.

While it is fiscally prudent to have funds available for unexpected events like we have experienced in the past year, keep in mind that the University of a not-for-profit organization. Unlike a corporation who wants to earn profits, this is not the goal of a university.


While the University earns revenues from a number of sources, in 2019-20, 82% was generated from tuition and government grants. While revenue from government grants declined in 2020, tuition increased by an offsetting amount. Unlike most of our competitors who saw a decline in enrolment during the pandemic, enrolment at the University of Waterloo was up 20%. This trend has continued as applications for Fall 2021 are up 12.7% over 2020. This increase in applications in second only to Queen’s.

Excess revenue over expenses

Excess revenue over expenses, which would be considered net income for a corporation, was $56 million in 2020, which is in line with 2017 and 2018 but a decline compared to 2019. The decline was mainly due to a decrease in income from investments which was unusually high in 2019.

Waterloo vs Laurentian University

The University of Waterloo will not face similar financial struggles as those of Laurentian University for two main reasons. Firstly, Laurentian, unlike Waterloo, had expenses in excess of revenues for 12 of the past 13 years. UW, conversely, has had excess revenues over expenses each year over the same period. When an organization continually operates in a deficit, their debt can only grow. Secondly, Laurentian did not appear to be following proper financial management techniques. Laurentian was not correctly segregating their funds and, as a result, used funds for operations which were received for restricted purposes such as research. This lack of proper financial controls can hide other problems that do not come to light until it is too late.

What about the pandemic?

The discussion above is all based on historic results, but what about the current situation? We won’t know the financial impact of the past year until it is reported, but we do know that the bulk of revenue—tuition and government grants—will be relatively stable. Revenue from sales and services such as food services and residence will have declined sharply in 2020-21, but so too will the cost of these services. There have been savings in areas such as travel, which has been virtually eliminated, and with everyone working from home, the cost of running offices—heating, cooling, electrical, printing, etc.—has declined. There have also been hiring freezes in some areas.

The University of Waterloo came into the pandemic in a very healthy financial position. While the pandemic will have an impact on some areas, this strong starting point and steady enrolment mean that the University will remain financially strong going forward.

Linda Robinson is a continuing lecturer and has been with the School of Accounting and Finance since 2003. Prior to joining the University, she was a partner in a Forensic Accounting Practice.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.