Debt Policy

This policy provides the framework for all University of Saskatchewan (USask) debt, assessment and issuance of internal loans, establishment of repayment sinking funds, and debt related investments. This policy also establishes financial health metrics used to monitor financial health of USask to ensure risk does not exceed acceptable levels.

This policy is founded on the following guiding principles:

• Holistic view of capitalization of USask including external debt, internal loans, investments, leases, and other financing sources including reserves, gifts, future revenue streams, grants and deferred contributions.
• External debt is a perpetual component of USask’s capital structure to advance the success and sustainability of USask.
• Capacity to borrow is determined by the size of USask’s net assets and sustainable student enrolments. Affordability to borrow is determined by USask’s ability to repay obligations. Both require ongoing management to achieve the lowest cost of capital within USask’s risk appetite.
• Debt shall not be incurred unless USask is able to service the debt through ongoing operating activities recognizing strength of USask net income and cash flows.
• Debt shall not be incurred unless USask is capable of leveraging the debt funding relative to the net assets of USask.

This policy includes all debt reported on USask’s consolidated statement of financial position within USask’s consolidated financial statements including, for example, all colleges, centres, administrative and ancillary units, and associated companies of USask.  Individual colleges, centres, and administrative units are not legal entities and are not permitted to borrow funds. Associated companies shall not incur debt without first consulting with the Chief Financial Officer of USask.

External Debt

External debt, such as mortgages, loans, debentures, must align with USask’s strategic priorities. External debt must be recommended by the Chief Financial Officer, endorsed by the President, approved by the Board of Governors and approved in accordance with the University of Saskatchewan Act, 1995. 

External financing will increase USask’s central bank and be used prudently to advance the success and sustainability of USask. Financing held must comply with USask investment policies.

The Chief Financial Officer will monitor financial health metrics, total debt (including loan guarantees), and credit ratings to minimize the overall weighted average cost of capital and limit USask’s exposure to credit risk. 

For amortizing debt, e.g. mortgages and loans, payments will include both interest and principal repayments. For non-amortizing debt, e.g. debentures, payments will be interest only and USask will establish a sinking fund to repay the principal owing at maturity (end of the term).

Sinking funds will be established in accordance with USask’s investment policy.  Investment returns on the sinking fund will be reinvested into the sinking fund balance. 

Sinking fund balances will be monitored for adequacy to cover repayments upon maturity and be considered a reduction of USask’s total outstanding long-term debt.

Interest rate swap agreements may be used to manage the mix between floating and fixed rates on USask’s debt, in accordance with the debt procedures for derivatives. Derivatives will not be taken for speculation or profit.

Internal Loans

Leaders are expected to manage unit expenditures within the financial resources entrusted to them within the approved budget or as specified by other revenue sources for those activities where a budget has not been approved. 

Leaders may borrow funds either as short-term bridge financing or as long-term internal debt financing from USask’s central bank to support capital projects. Internal loans are available to support Leaders where cash outlays occur before supporting cash inflows, or where expenditures for capital projects exceed the external and/or internal operating, donor, and capital funds available. A Leader can request an internal loan supported by a business case demonstrating repayment capability, which may be in the form of a return on investment. 

Long-term capital borrowing, loans exceeding one (1) year, will be at the rate approved by the Investment Committee, typically USask’s weighted average cost of capital plus half percent administration cost and a stabilization rate to round the internal borrowing rate up to the nearest quarter percent.

Short-term capital borrowing, or bridge financing, will be at the rate approved by the Investment Committee, typically USask’s bank rate plus one percent. 

USask may provide financing via an internal loan arrangement to a college, centre, administrative unit or subsidiary companies to support capital projects with approvals by the CFO or Board in accordance with the signing authority policy. Internal loans will only be provided for capital projects exceeding $500,000.

Principal payments and interest earned on internal loans will accrue to the central bank for reinvestment.

Metrics

USask has established financial ratios to manage and guide decisions regarding optimal outstanding debt to advance the mission. 

Key metrics guide debt issuance decisions. Key metrics are based on the financial viability of USask, affordability and capacity. Monitoring metrics indicate financial health trends and applied to projections signal where additional management action may be necessary.

The Chief Financial Officer will provide an annual debt report to the Board of Governors to confirm compliance with this policy, including total debt, total internal loans, sinking funds balance and projection to maturity, financial metrics, cost and effectiveness of derivatives, and include, when applicable, recommendations regarding new debt issuance and timing supported by financial projections and capital investment priorities.

The University of Saskatchewan expects that its faculty, staff, students, post-doctoral students, visitors, contractors and agents will comply with this policy. Should there be reason to suspect that laws or university policies have been or are being violated, and the university may suffer reputational, financial or other harm as a result of non-compliance, this may constitute grounds for disciplinary or legal action in accordance with any applicable agreements, contracts, collective agreements, regulations or policies, legislation or common law principles.

The official source of institutionally approved definitions is the Academic and Curricular Nomenclature policy.

For additional definitions related to this policy, please refer to the Debt Procedures document.

Academic and Curricular Nomenclature

Procurement Policy

Debt Procedures