After several years of work to tame operating deficits and increase Brock’s financial stability, the University has received encouraging news. Its credit rating has been upgraded from A to the next level of A (High).

The Dominion Bond Rating Service (DBRS) stated that the upgrade reflects a sustained improvement in fiscal discipline, most recently demonstrated by the adoption of a new Fiscal Framework. As mandated by Brock’s Board of Trustees, and as identified in the Fiscal Framework, Brock continues to target balanced budgets through 2019-2020 with deficits only permitted when mitigation targets have been clearly identified.

In announcing the new assessment, DBRS cited four factors that were key to the upgrade:

• Stable revenues. Because government funding and tuition fees provide more than 80 per cent of total revenues, the University can make plans based on fairly constant and predictable income levels.
• Brock’s debt burden is relatively low compared to other universities rated by DBRS, and is well below the range considered to be acceptable for an A (high)-rated institution.
• Industry-leading financial reporting and transparency. Since fiscal 2013-14, Brock has presented its budget in accordance with Canadian accounting standards for not-for-profit organizations, allowing line-by-line comparisons with audited financial statements. Brock is the only DBRS rated university to do so. Furthermore, annual reports now have a management discussion and analysis section that provides transparency regarding financial performance and objectives.
• Pension and other non-pension post-employment obligations are relatively low compared with other DBRS rated universities. (Unlike most universities, Brock has started reserving for non-pension post-employment benefit liabilities by setting aside $900,000 annually.)

However, in looking ahead, the DBRS said Brock still faces significant challenges, including:

• Competition and demographics. The St. Catharines-Niagara CMA has a relatively small and stable population of about 408,000, meaning Brock must compete for students from outside its local catchment area.
• Limited ability to grow revenue. Since 2013-14, annual tuition increases have been capped at 3% per cent for domestic students. Tuition rates for international students are not subject to the cap and have increased at a faster rate, but remain below the provincial average. Furthermore, with no indexation component to provincial operating grants, revenue growth is even further limited.
• Salary and benefit pressures. Growth in compensation costs continues to outstrip revenue growth, a pressure that Brock will need to carefully manage if recent improvements in fiscal performance are sustained.
• Low level of expendable resources. Expendable resources — which comprise unrestricted net assets, internally restricted net assets and internally restricted endowments — totalled $36.1 million in 2015-16. This equates to 23.8% of total debt and remains near the low end of DBRS rated universities.

DBRS cautioned in their report that downward rating pressure could arise from a relaxation in fiscal discipline that leads to a sustained deterioration in operating performance and increased debt tolerance.

Brian Hutchings, the University’s Vice-President of Administration, attributed the improved credit rating to the Brock community’s recognition that everyone has to be a part of the solution.

“Most people accept that the challenges are real,” said Hutchings, “and we would be putting the University into danger if we did not all join the effort to make Brock more sustainable.

“For several years now there has been a campus-wide effort in terms of budgeting and operations to try and regain control of our future. It’s heartening to see that we’re making progress, but we have to continue to be vigilant and realistic about not slipping back into old habits.”