Oshawa’s Ontario Tech, three others called out by Auditor General for financial practices

Laurentian University’s “unprecedented” decision to file for creditor protection last year put the financial health of all Ontario’s post-secondary schools in the Auditor General’s spotlight, with Ontario Tech University one of the schools getting personal treatment.

Ontario Auditor General Bonnie Lysyk looked at how effectively four small- to medium-sized universities are fulfilling their objectives in the wake of the financial decline of the Sudbury school. The audit reviewed financial operations at Algoma University, Nipissing University, Ontario Tech and the University of Windsor.

The report notes that in the face of significant long-term debt, the universities did not always establish or follow policies limiting external financing. “We found that Ontario Tech University and the University of Windsor did not have formal debt management policies, (and) while Nipissing University and Algoma University had debt policies, they would have exceeded limits if the new debt policies were applied retroactively.”

As of the university’s year-end on March 31, 2021, Ontario Tech’s debt totalled $188 million. The school developed debt guidelines in January 2020 instead of a formal capital debt policy.

Additionally, the report found that all four universities did not develop comprehensive business cases for all capital projects to help their Boards decide whether the projects warranted the investment. The report also notes deficiencies in the Ministry’s procedures to monitor universities’ financial conditions. For instance, the Ministry does not have a formal process that fully utilizes the financial health information it collects from universities each year. Even if it does discover financial conditions are poor or deteriorating, the Ministry does not have the legislated authority to intervene unilaterally in the operation of a publicly assisted university.

“The government must be able to see clearly how taxpayer-funded universities are faring, and step in when an institution needs help,” Lysyk said. “That’s the kind of oversight that ultimately benefits university students, faculty, staff and the communities where we have universities.”

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Ontario Auditor General Bonnie Lysyk

Ontario Tech also does not present a budget to its Board that includes individual ancillary services or large capital expenditures, with capital projects costing more than $5 million approved individually. Nor does it present to its Board its projected cash flows, Lysyk’s report claimed.

The school was also cited for its Board members not possessing “critical competencies” required to provide effective oversight. Ontario Tech did not track the competency level of two of five critical skills for a university Board – risk management and cybersecurity, Lysyk’s report stated, and more than a third of the members had little or no financial literacy expertise or experience.

Lysyk also discovered in her annual report to the Provincial Legislature that too many schools have an “overreliance” on international students that makes them more susceptible to steep and sudden drops in revenue that could result when global circumstances and federal immigration policies change, and international student intake declines.

“Because of the reduction and freeze on domestic tuition in Ontario and lower domestic per university student funding in Ontario compared to the rest of Canada, the universities are turning towards international student revenue for financial sustainability,” Lysyk said. “While attracting more post-secondary students to Ontario is positive, universities need to adjust recruitment strategies by diversifying the populations targeted to lessen the inherent risks.”

Ontario Tech had an in-year surplus of $12.4 million in 2021-22 and achieved surpluses in four of the last five years partly due to increased international student enrolment, But the school has avoided overreliance on international student enrolment from a single country by setting an internal benchmark where no single country is to comprise more than 30 per cent of total undergraduate international student enrolment. Students from India make up the largest segment of international applications at the Oshawa school at 20 per cent.

Lysyk added that the Ministry of Colleges and Universities, while responsible for ensuring post[1]secondary institutions offer high quality education to all deserving students, has no clear strategy or long-term vision for the post-secondary sector in Ontario.

All four universities were financially sustainable at the time of the audit and unlike Laurentian, all four cooperated with the Auditor General’s office and provided all information requested. “They were open to discussion and were receptive to our recommendations,” Lysyk said.