Bonnie Lisik: Many people hired by Laurentian were “more focused on laying the track that steered the train to the CCAA process” than on working with the province and the unions
In an ulcer report, Ontario chief auditor Bonnie Lisick said she believed the data showed that Laurentian University should not have applied for creditor protection under the Companies ‘Creditors’ Agreement (CCAA).
This action was “strategically planned” and Lorentian “chose to take steps to apply for creditor protection to the Ontario Supreme Court on February 1, 2021.”
In our opinion, there were many people hired by Laurentian who were more focused on laying the rails that guided the train to the CCAA process, and less on working in cooperation and in full transparency with the Ministry of Colleges and Universities and faculty and staff unions, “Lisik said.
These allegations are among those in a 13-page preliminary report on Laurentian University finances presented by Lysyk on April 13.
Laurentian University continues to be restructured under judicial supervision after declaring bankruptcy more than a year ago.
The restructuring includes massive layoffs of programs and staff, as well as the severance of ties with federal universities operating on campus. An “agreement plan” is yet to come, in which Laurentian makes a plan to pay off his creditors and finally leave the CCAA.
The Auditor General was tasked with auditing Laurentian’s value for money by the Standing Committee on Public Accounts of the Ontario Legislature almost a year ago.
Lisik said he was currently able to present a preliminary report on Laurentian only because of the university’s resistance – which includes legal challenges – to provide full information to its audit team.
“The delays mean that our office will continue to receive and review information from Lorentian until April 2022,” she said.
Lysyk has decided to present a preliminary report now “on what we have learned so far” over the forthcoming spring provincial elections.
“We plan to work with the new chairman and board of directors of Laurentian to finalize a comprehensive special report and release it in the near future,” Lisik said in a press release issued with her report.
“We hope that Laurentian can get out of the CCAA procedures as soon as possible with a ranking plan and a strengthened foundation that it can use to attract and train prospective students, recruit the best teachers and conduct research from around the world. class.
Poor governance is to blame for LU’s financial difficulties
Lisik said that although external factors such as the training freeze and the COVID-19 pandemic affected Laurentian, her team found that the main reason for the university’s financial deterioration from 2010 to 2020 was its drive for ill-considered capital investment.
“Continue with enlargement projects without procedures in place, requiring senior administrators to reasonably assess the value and viability of plans or to fully consider the risks associated with rapid debt growth,” the report said.
“We also found that there is poor management of the university’s financial affairs and operations, which worsens the situation.
This mismanagement was allowed to continue largely due to poor oversight by Laurentian, Lisik said. It lacked key operational and management practices and expertise and allowed transparency to decline.
For its part, the Ministry of Colleges and Universities, the main government ministry responsible for monitoring the financial health of institutions after secondary education, did not intervene proactively in time to provide guidance to help Lorentian slow down – or ultimately to answer – the deteriorating financial deterioration, says the report of Lysyk.
She said that an external law firm that works with the university in another business has for the first time presented the concept for the creditor protection process in 2019 to the top administration.
“We believe that serious consideration of the concept lay dormant until the spring of 2020, when Lorentian decided to actively seek creditor protection,” she said.
The report says that as Lorentian’s financial situation became more difficult, the university did not follow the normal precedent for the wider public sector, making a comprehensive and clear effort to seek financial assistance from the Ministry of Colleges and Universities.
Instead, it focuses on advocacy for selected officials and their staff, on the advice of external consultants.
In August 2020, Laurentian raised the CCAA’s potential to then-Minister of Colleges and Universities Ross Romano, but did not specify how much financial assistance was needed from the province to avoid filing with the CCAA, Lisic said.
An explicit request for funding to the ministry was not made until December 2020, when the request was “significant and the intervention period was short”.
“If he tries to work earlier and more transparently with ministry staff, if he doesn’t pay off early and give up his credit line in 2020, and if he accepts the temporary financial aid that the province eventually offered, Laurentian there would be enough time for its financial situation to be reviewed with the province and a progress plan introduced, ”the auditor general’s report said.
Lysyk said that nearly a year before Laurentian applied for CCAA protection, she had hired lawyers and other consultants to explore strategic options, but the main focus was on applying for CCAA protection.
“We believe that Lorentian’s actions in this regard have been significantly influenced by these outside countries,” she said.
As of March 3 this year, the university has paid more than $ 24 million in fees to legal and other financial advisers related to its bankruptcy.
Lorentian kept the teachers in the dark about financial problems
Lysyk’s report also describes Laurentian’s relationship with the Laurentian University Faculties Association (or LUFA), which represents university professors, regarding the financial crisis.
She said the university’s contract with LUFA contained a financial necessity clause designed to deal with difficult financial circumstances.
Activating this clause – which is included in most employment contracts of university professors in Canada, Lisik said – would require senior management to work in partnership with LUFA to deal with Laurentian’s financial situation.
In 2020, LUFA asked Laurentian’s top administration to activate the clause and provide it with additional information on the university’s finances, Lisik said.
“Laurentian’s top management deliberately delayed the provision of information and did not trigger the clause,” she said.
“Instead, the top administration, with the approval of the board, chose to use CCAA protection by launching a process that diverted more money to external advisers through professional fees, was less transparent and probably had and will continue to have more impact on students, faculty, the Sudbury community and the university’s reputation. ”
Lysyk said that before the CCAA process, Laurentian suggested that a significant reason for its financial decline was “excessive costs for teachers”.
However, she said her audit team found that the total cost of Laurentian faculty did not significantly exceed that of comparable universities.
“In contrast, we found that the high salaries and expenses of a senior administrator had a negative impact on Lorentian’s financial situation,” she said.
“From 2010 to 2020, the cost of the university’s top administration increased by about 75 percent, peaking in 2018 at more than $ 4 million a year, and the relative size of the university’s top administration was consistently higher than most other universities. in Ontario.
Lysyk also provided some observations on how such a situation could be prevented elsewhere.
She said mechanisms should be put in place to respect the academic independence of universities and prevent them from falling into financial difficulties so deeply that the situation would have a negative impact on students, faculty and staff.
She said Ontario should consider the types of legal restrictions on university deficits, loans and high 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 where higher education institutions are experiencing financial difficulties. This act serves to identify and correct financial difficulties before they become urgent.
“Whichever model Ontario chooses, annual funding must depend on each university demonstrating to the ministry that it has fully functioning governance structures,” Lisik said.
“For example, each council must have and follow clear basic rules about how it monitors the activities of its university.”
Sudbury.com contacted Laurentian University for its response to the Lysyk report. We received a written statement from Jeff Bangs, the new interim chairman of Lorentian’s board of governors.
Bangs, one of several members appointed to Laurentian’s provincial board of governors as part of the governors’ shake-up last December, said Laurentian would “carefully examine” Lysyk’s findings “as we build a new foundation for success and take steps to to ensure that Lorentian never repeats 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, Laurentian will share information on further action it is taking as a result of the findings.
“We know that our successful recovery will come from …
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