Poor management, new buildings led to Laurentian University insolvency, Ontario AG's preliminary report says

Laurentian University's capital expansions from 2010 to 2020, along with "poor management of its financial affairs," were big factors in the Sudbury school's insolvency last year, according to a preliminary report by Ontario's auditor general.   

In her "Preliminary Perspective on Laurentian University," which was submitted to the Legislature on Wednesday, Bonnie Lysyk says Laurentian refused to seek financial assistance from the province and made a mistake when it opted to go through the Companies' Creditors Arrangement Act (CCAA) for restructuring.

"As of March 3, 2022, the university had incurred legal and other financial consultant fees associated with its insolvency of more than $24 million," the auditor general said in the document.

The Sudbury university announced it was insolvent in February 2021. On April 12 that year, it cut 69 programs, which affected an estimated 932 students. Laurentian also fired 195 staff and faculty members with little notice and severance.

Like all universities, Lysyk said, the COVID-19 pandemic affected Laurentian's finances, but its problems started long before, in 2010, when it went on a building spree to expand its Sudbury campus.

"There wasn't the revenue coming in to support the payment down of the principal and interest from those investments," Lysyk told CBC News.

She said there doesn't seem to be any intentional wrongdoing by Laurentian, and added its capital expansion plans were well meant. But she said the university's board of governors failed to provide proper oversight, and the Ministry of Colleges and Universities did not intervene in time when it was clear Laurentian was in financial straits. 

From 2010 to 2020, Lysyk also found, Laurentian senior administration costs grew by 75 per cent, and in 2018 they peaked at more than $4 million annually.

In her preliminary perspective, she said the size of Laurentian's senior administration had been consistently larger than most other Ontario universities. As well, some senior administrators' salaries exceeded limits set by legislation meant to put a ceiling on public-sector pay.

Lysyk said Laurentian's solution to its financial problems, restructuring under the CCAA, was a mistake.

The CCAA was created as a tool for insolvent private companies to restructure, but it had never been applied to a public university like Laurentian.

"In this particular case, we do believe that Laurentian needed to pull together a stronger ask of the ministry and work with the Ministry of Colleges and Universities to pull together a plan, even a year ahead of time, to support them in their endeavours going forward," Lysyk said.

She noted that nearby Nipissing University, which is in North Bay, ran into financial difficulties in 2014. But Nipissing worked with the Ministry of Colleges and Universities early on to seek funding and improve its position.

In her preliminary perspective, Lysyk said she believes Laurentian was influenced by external parties to use the CCAA, up to a year before it announced it was insolvent.