Calgary Board of Education administration is expecting a more than $43.8 million unrestricted deficit in its accumulated surplus from operations (ASO) according to financial statements covering the 2023-2024 fiscal year, despite millions of dollars of transfers into and out of reserves.

Brad Grundy, the CBE’s chief financial officer, said the ASO is a number that reflects the sum of all past financial transactions and events undertaken by the CBE over time.

According to a report presented to trustees at board meeting this week, the unrestricted deficit more than doubled the deficit from the 2022-23 fiscal year at around $21.1 million. The deficit increase is due to several compounding factors, the report said, including inflation and rapid enrolment growth.

The $43.8 million unrestricted ASO deficit also includes a more than $4.77 million operating deficit in the last fiscal year (2023-2024 school year). The CBE’s ASO is expected to be around $1.5 million after accounting for reserve provisions.

Generally, an organization wants to have an ASO but organizations can end up with an accumulated deficit from operations, Grundy said. However, the CBE does not have an accumulated deficit from operations because there are still funds in the ASO.

“The myriad of actions impacting the ASO can include things like inflationary cost pressures over time, the increasing cost of labour, the record levels of enrollment growth or decline and the increasing levels of complexity within that enrollment. The CBE’s prudent and necessary actions related to school space also impacts, or potentially impacts, the ASO balance over time,” Grundy told trustees at Tuesday’s board meeting.

“Those factors and the range of other decisions over the last few years to maximize resources in the classroom have contributed to the drawdown of the CBE’s accumulated surplus from operations.”

Around $235,000 from an operating surplus of the EducationMatters flow-through fund will be transferred into restricted reserves. The surplus is not available to support CBE operations, the report added, and the district must consolidate the financial results of EducationMatters for financial reporting purposes. This increased the total amount of money sitting in the reserve to around $2.12 million as of Aug. 31, 2024.

More than $7.3 million will be transferred into designated operating funds, bringing the total to more than $16 million. This money came from unspent budgeted funds from projects initiated in the last academic year that were not fully completed. This amount will be carried forward to be used in the following year, according to the report.

The report also said the $7.3 million transfer includes $4.2 million in service unit funds that were carried forward and $3.1 million in school funds that were carried forward from the 2023-2024 academic year.

Around $37,000 will be transferred out of the CBE’s fiscal stability reserve, which was established at the end of the 2006-2007 academic year to stabilize the district’s operating activities year to year if provincial funding does not keep pace with student growth. It is also pot of money used to stabilize the CBE’s operating activities year to year when the district experiences a temporary decline in the student population, when the district experiences a planned or unexpected “dramatic” operational emergency and to provide funds for one-time initiatives that generate operating budget savings.

After the transfer, the fiscal stability reserve will have more than $37.2 million in total.

The CBE will also transfer almost $5.2 million out of its capital reserves, which includes the carry forward of unspent budgeted funds from the previous year. The report attributes the net decrease to a $11.3 million transfer from the capital reserve to fund approved capital projects in the 2023-2024 academic year, which was offset by an approved one-time transfer of $3.6 million in solar rebate revenue and an increase in capital carry-forward funds of 2.5 million year over year.

“If the board chose not to approve [the transfers] the implications are that those dollars would fall into our accumulated surplus from operations … If the transfer is not approved, then those dollars are not available for those things, and those activities would cease until administration could identify an alternative source of funding or outright cancel whatever that initiative was,” Grundy said.

The CBE’s board of trustees unanimously voted to approve the reserve transfers at Tuesday’s meeting.

“As I look through this report, I have full confidence that the CBE’s finance staff members are carefully managing the CBEs finances … The amount of funding we receive from the provincial government, is not within our locus of control, but the way we manage the funds we are given is within our locus of control, and this report demonstrates to me that the CBE’s chief superintendent and her staff are managing our finances in a prudent and fiscally responsible fashion,” said Trustee Susan Vukadinovic .

Plans already in place to address ASO deficit: CFO

Grundy said the additional funding from Alberta Education that was announced in July will impact the ASO balance in the 2024-2025 school year.

Previously, Education Minister Demetrios Nicolaides announced $215 million in additional funding for school divisions across the province for the 2024-2025 school year to address historic enrolment growth.

“So the funding we received by the provincial government in July of this year impacts the current school year, not the school year related to this report, so it has limited impact on our accumulated surplus operations and the movement between the funds for this year,” Grundy said.

“But for the current school year, it absolutely assists in ensuring that we’re providing the necessary services and supports to students, as well as turning the corner on our ASO balance.”

Grundy said CBE staff and administration are “already taking action” to address the ASO balance and deficit. This includes monitoring expenditures and maximizing the value of each dollar spent by the 2024-2025 school year.

It also includes developing plans to grow the ASO balance into the 2025-2026 school year, he said, but that growth depends on financial decisions made between now and the end of the school year.

“We look forward to the provincial government’s budget 2025 to understand its investment in education to more closely align with enrollment growth and rising costs,” Grundy added.

“Trustees, please know that CBE administration remains committed to maximizing funds flowing to teaching and learning in the classroom consistent with maintaining the overall financial health of the CBE. Acting now minimizes the risk of needing bigger interventions later.”