Changes needed to prevent another Laurentian fiasco, auditor says

More oversight and a commitment to transparency would go a long way toward preventing another financial meltdown like the one at Laurentian University.

That's the word from Ontario Auditor General Bonnie Lysyk, who told CTV News the university should not have been able to resort to a private-sector tool like the Companies' Creditor Arrangement Act.

"It's a private-sector tool," Lysyk said.

"We would be recommending it not be used in a public-sector institution, where people want transparency and want to understand what's happened."

In her preliminary report on the crisis, Lysyk made it clear Laurentian had options other than to declare insolvency under the CCAA, sparking devastating program and staffing cuts and a plunge in enrolment close to 44 per cent.

She wrote in her report the crisis was largely caused by gambles on pricy capital projects from 2010-2019 to attract new students that failed, combined with a weak board of governors that didn't understand what was going on.

When cash flow became an issue and lenders reluctant, the administration began relying on reserve funds earmarked for other projects.

With outsiders – and some insiders – unaware of the depth of the problem, Laurentian received external advice to use the CCAA to restructure itself. The school refused a financial lifeline from the province in favour of declaring bankruptcy.

"It was a choice," Lysyk said.

"We do think Laurentian had the opportunity to work closer with the Ministry of Colleges and Universities to obtain funding, in a way that the ministry would be understanding of all the nuances and what would be needed."

Nickel Belt MPP France Gelinas said transparency would have prevented a lot of heartaches and other damage.

"Nipissing University actually was in a worse financial position than Laurentian a few years back, but they reached out to the staff of the ministry and they told the truth," Gelinas said.

Instead, LU and the government kept quiet about what was going on and led to the shock that took place Feb. 1, 2021, when the university declared it was insolvent.

"They went down the path of the CCAA with all of the devastations that that brought to students, to staff, to our community, to our economy," she said.

"Every aspect of our community with was touched in a negative way."

Gelinas said she was going to introduce tougher legislation "in order to ensure this never happens again."

It would "give the government the power to take over universities if they go down a path of financial instability," she said, while still ensuring academic independence.

"The government gives $80 million a year to Laurentian to offer courses to the people of the north," Gelinas said.

"They have a right to make sure that this money is used wisely that we get value for money."

'It's the truth'

Fabrice Colin, president of the Laurentian University Faculty Association (LUFA), said Lysyk's report validated what his members have suspected for a long time.

"Bittersweet and probably painful for many people, but it's the truth," Colin told CTV News.

Knowing what really happened is an important step toward recovery, he said, and for charting a new course for the university in the future.

"Also it's the first step of a significant healing process for the community," Colin said.

For her part, Lysyk said it's important that lessons be learned from the fiasco, primarily the need for public institutions to be open about the challenges they are facing.

She had to appeal to the Legislature to force LU to hand over documents she needed for her audit, and accused the school of creating a "culture of fear" when it came to dealing with her office.

That needs to change, Lysyk said, because the long-term success of institutions like LU is critical for people in the north.

"When Laurentian chose to follow the CCAA path, a lot of people were surprised and it affected the community," she said.

"So we're big on transparency. If you're transparent, you know, I think I think you gain more respect and trust in an organization. When you're doing things that are for the public good, it's easy to be transparent."