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E. Capital Projects (Policy D-12)
E.3 Significant Assumptions and Management of Risks (cont’d)
When developing any capital project in preparation for proceeding to tender, the College’s
architects and consulting engineers work together to develop cost estimates based on the
scope of the project and their best assessment of current market conditions. In some instances,
a cost consultant, whose job is to do construction project estimating, is retained to conduct a
relatively detailed cost analysis. The actual cost of the project is determined through tender.
This detailed planning process involving experts usually results in tenders consistent with the
College’s cost estimates. Occasionally, tender amounts exceed the College’s cost estimates.
In these circumstances, plans are modified and components are adjusted to ensure that the
project falls within the financial budgets identified. If this is not possible, then the project will not
proceed until such time as alternate sources of funding are identified.
There is some risk associated with a small portion of the sources of financing related to these
capital projects. In particular, the very nature of a fundraising campaign carries an element of
risk, especially in difficult economic times. However, given the ongoing support the College
receives from the community and results of fundraising efforts to date, there is confidence that
the fundraising component of this plan will be successfully achieved. Should it become
necessary to do so, the timing of a number of the projects will be delayed to match funding
availability.
Where funding agreements are required, they are negotiated keeping in mind appropriate risk
management for the College. However, these agreements must at the same time be balanced
with the funder’s own risk management requirements. The funding agreements with the City of
London and MTCU for the School of Applied and Performance Arts are recent examples.
Agreements with donors that involve the transfer of real property to the College similarly must
be negotiated keeping in mind the best interests of the College, which may from time to time
involve the College declining a donation.
Decades of underfunding, exacerbated by competing demands to maintain the quality education
and educational facilities, has led to the build-up of a significant deferred maintenance/
infrastructure renewal problem system-wide. While government has recently attempted to
reduce the impact of this chronic problem somewhat through funding targeted towards
infrastructure renewal, the extent of funding remains below what is necessary to maintain the
facilities within normally accepted industry-established standards. In an effort to mitigate the
level of risk associated with the unfunded facilities infrastructure renewal, the College has
supplemented these government targeted funds with College operating funds directed towards
renewing more critical facilities infrastructure, such as building envelope and major electrical/
mechanical systems, that would otherwise cause significant, costly challenges should failure
occur (e.g., boiler system failure resulting in no heating during winter months). To do so, the
College has had to forego other necessary, but less urgent, facilities infrastructure renewal,
such as painting, carpeting, ceiling tile replacement, etc. Furthermore, as indicated earlier, the
Board established in 2005 a Capital Reserve for the purpose of investing into renewal of aging
College facilities infrastructure. As of March 31, 2012 this Capital Reserve sits at $6.2 million.
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