In a scathing report, Ontario Auditor General Bonnie Lysyk said he believed the data showed that Laurentian University did not need to apply for creditor protection under the Companies Creditors’ Arrangement Act (CCAA). The move was “strategically planned” and Laurentian “chose to take action to file a creditor claim in the Ontario Supreme Court on February 1, 2021.” “In our view, there were a lot of people hired by Laurentian who focused more on the line leading the train to the CCAA process and less on co-operation and full transparency with the Ministry of Colleges and Universities and the faculty.” said Lysyk. These allegations are contained in a 13-page preliminary report on Laurentian University economics submitted by Lysyk on 13 April. Laurentian University continues to undergo restructuring under judicial supervision after declaring bankruptcy more than a year ago. The restructuring included huge cuts in programs and staff, as well as the severance of ties with the federal campus-based universities. There comes another “settlement plan” in which Laurentian makes a plan to repay his creditors and eventually leave the CCAA. The Auditor General took over Laurentian’s quality / value ratio audit from the Ontario Legislature Standing Committee on Public Accounts almost a year ago. Lysyk said it was only able to submit a preliminary report on Laurentian at the moment because of the university’s resistance – which included legal challenges – to provide full information to its audit team. “The delays mean that our office continued to receive and process information from Laurentian until April 2022,” he said. Lysyk has decided to submit a preliminary report now “on what we have learned so far” due to the upcoming provincial elections in the spring. “We plan to work with Laurentian’s new president and board to complete a comprehensive special report and publish it in the near future,” Lysyk said in a press release with her report. “We hope Laurentian can get out of the CCAA process as soon as possible with a settlement plan and a strengthened base that he can use to attract and educate prospective students, hire top educators and conduct world-class research.”
Bad management is responsible for LU’s financial difficulties
Lysyk said that although external factors such as tuition freezes and the COVID-19 pandemic affected Laurentian, her team has determined that the main cause of the university’s economic deterioration from 2010 to 2020 was the pursuit of capital investment. were not well considered. “It has undertaken expansion projects without procedures that require senior management to make a reasonable assessment of the value and viability of projects or to fully consider the risks associated with rapid debt growth,” the report said. “We also found that there was poor management of the university’s financial affairs and operations, exacerbating the situation.” This mismanagement has been allowed to continue largely due to poor oversight by Laurentian’s board, Lysyk said. It lacked basic business and governance practices and expertise and allowed transparency to be reduced. For its part, the Ministry of Colleges and Universities, which is the main government ministry responsible for monitoring the financial health of post-secondary institutions, did not intervene proactively in time to provide guidance to help Laurentian slow down — or ultimately slow down. The worsening of its financial deterioration, the Lysyk report said. He said that an outside law firm that collaborated with the university in other activities first introduced the concept of the creditor protection process in 2019 to senior executives. “We believe that serious consideration of the idea remained dormant until the spring of 2020, when Laurentian made the decision to actively seek creditor protection,” he said. The report said that as Laurentian’s financial situation worsened, the university did not follow the normal precedent of the wider public sector by making comprehensive and clear efforts to seek financial help from the Ministry of Colleges and Universities. Instead, it focused on advocating for elected officials and their staff, with the advice of external advisers. In August 2020, Laurentian outlined the CCAA’s capabilities to then-Minister of Colleges and Universities Ross Romano, but did not specify how much financial assistance was needed from the province to avoid the CCAA filing, Lysyk said. An explicit request for funding to the ministry was not submitted until December 2020, when the request was “significant and the timeline for intervention was short”. “If he had sought to work earlier and more transparently with ministry staff, if he had not repaid early and waived the credit limit in 2020 and if he had accepted the temporary financial assistance finally provided by the province, Laurentian would have “enough time for His financial situation will be reviewed jointly with the province and a progress plan will be implemented,” said the report of the auditor general. Lysyk said that almost a year before Laurentian filed for CCAA protection, it had hired lawyers and other consultants to explore strategic options, but the main focus was on applying for CCAA protection. “We believe that Laurentian’s actions in this matter have been significantly influenced by these outside parties,” he said. As of March 3 this year, the university had been burdened with legal and other financial advice related to insolvency of more than $ 24 million.
Laurentian kept the school in the dark for financial problems
Lysyk’s report also describes Laurentian’s dealings with the Laurentian University Faculty Association (or LUFA), which represents the faculty at the university, in relation to the financial crisis. He said the university’s contract with LUFA contained an economic emergency clause designed to deal with dire economic conditions. Activating this clause – which is included in most college employment contracts in Canada, Lysyk said – would require senior management to work with LUFA to address Laurentian’s financial situation. In 2020, LUFA asked Laurentian’s senior management to activate this clause and provide it with additional information about the university’s finances, Lysyk said. “Laurentian’s top management deliberately delayed providing information and did not activate the clause,” he said. “On the contrary, senior management, with the approval of the Board, chose to use CCAA protection, starting a process that channeled more money to outside consultants through professional remuneration, was less transparent and probably had and will continue to have a greater impact on students. , the school, the Sudbury community and the reputation of the university. ” Lysyk said that before the CCAA process, Laurentian suggested that a major cause of his financial decline was “excessive school costs”. However, she said her audit team found that the total cost of the Laurentian School did not significantly exceed that of the comparable universities. “Instead, we found that it was the high salaries and expenses of senior executives that negatively affected Laurentian’s financial situation,” he said. “From 2010 to 2020, the cost of the university’s senior management increased by about 75 percent, peaking in 2018 at more than $ 4 million per year, and the relative size of its senior administration was consistently larger than most other Ontario universities. ». Lysyk also provided some observations on how a similar situation could be prevented from happening elsewhere. He said mechanisms should be set up to respect the academic independence of universities and prevent them from falling so deeply into financial hardship that the situation is adversely affecting students, teachers and staff. He said Ontario should consider the types of legislative limits for university deficits, borrowing and large capital expenditures found in other provinces. In Nova Scotia, for example, the government introduced the University Accountability and Sustainability Act in 2015 in response to cases of post-secondary education institutions facing financial difficulties. This operation serves to identify and correct financial difficulties before they become an emergency. “Whatever model Ontario chooses, annual funding should depend on each university proving to the Ministry that it has fully operational governance structures,” Lysyk said. “For example, each council should have and follow clear basic rules about how it oversees the activities of its university.” Sudbury.com contacted Laurentian University for its response to Lysyk’s report. We received a written statement from Jeff Bangs, the new interim chairman of Laurentian’s board. Bangs, one of several members of the provincial Laurentian board appointed as part of the board restructuring last December, said Laurentian would “carefully consider” Lysyk’s findings as we build a new foundation for success. and we take steps to ensure that Laurentian will never be able to repeat the mistakes of the past. “We look forward to working with the Auditor General and her team in an open and transparent manner to help her complete her final report.” Bangs added that after taking the time to digest the report, Lorentian will share information about additional actions he takes as a result of the findings. “We know that our successful recovery will come from …
