North Bay's Nipissing University needs to manage its debt and improve the competence of its board of governors, says Ontario's Auditor General Bonnie Lysyk.
When a university is negatively impacted by administrative and financial issues it puts the education of its students, employment of its staff, and contributions to the economy of the Province, at risk says her report, titled Value-for-money Audit.
Read the complete report Financial Management in Ontario Universities.
The auditor general's report said Nipissing University was $34.7 million in debt as of April 30, 2021.
The report looks at key operations and governance structures at four Ontario universities including Nipissing, Algoma, University, Ontario Tech University, and the University of Windsor.
"Ontario universities have faced several uncontrollable challenges over the past five years, including a 10% province-wide tuition reduction and freeze, and disruptions as a result of the COVID-19 pandemic," concludes the report.
In 2021/22, 6,200 students attended Nipissing and the university employed 478 full-time employees.
"It received $31.3 million in tuition revenue and was provided with $35.5 million in government funding (44% of total revenue)," says Lysyk. It had an in-year operating deficit of $4.5 million."
Specific findings for Nipissing University include:
- Financial sustainability is weakening with declining revenues and consistent annual losses. Nipissing accumulated $9.4 million in net losses from 2016/17 to 2020/21, which contributed to drawing down its net assets from $25.2 million in 2016/17 to $16.1 million for the year ending 2020/21, along with other adjustments for external contributions and employee benefits. Nipissing has not actively engaged in international recruitment, with only 1% of enrolment being international students. Therefore, it is primarily reliant on domestic tuition and government grants
- The university does not prepare and present to its Board its projected cash flows. Nipissing does not prepare and present to the Board the impact of the university’s projected cash flows from operations, financing and capital purchasing activities to inform senior management and the Board of the extent to which each contributes to or draws on the university’s resources.
- Deficits were continuously budgeted for, with no plan on how the university will become profitable.
- The university commingled externally restricted funds with cash from operations. However, Nipissing managed and maintained endowments and externally restricted funds using separate ledgers and held separate investment accounts for endowment funds. It also had sufficient cash and short-term investments at the end of fiscal 2020/21 to cover externally restricted funds and endowments.
- Retroactive application of its 2021 capital debt policy showed the university was overburdened by debt. As of its year-end on April 30, 2021, Nipissing University had $34.7 million in debt from various undertakings, including the construction of residence buildings and a research innovation centre.
- Over the five-year period from 2016/17 to 2020/21, Nipissing has realized a net profit of $2.1 million in its ancillary services. However, it does not review or monitor the profitability of individual ancillary services. This is a missed opportunity for the university to determine which services are generating a profit and which are not, in order to take any necessary corrective actions to maximize profits.
- The university had not adjusted program offerings to improve financial sustainability, despite financial losses in its academic programming.
- The university did not assess the financial feasibility of major capital projects before proceeding with them.
- The university does not track graduating international students to see if they stayed in its region and contributed to the economy. Nipissing does not actively maintain an up-to-date record of international student postgraduate progress or location. Doing so could help the university adjust its program offerings, improve its recruitment efforts and help in promoting the university.
- Large size and composition of the Board are not aligned with best practices. Having a 26-member Board has resulted in the establishment of an executive committee that has the authority to make decisions on behalf of the Board, meaning the committee could act as a “board within a board.” The term limit for Board members at Nipissing is six years compared to the best practice of nine years.
- The university’s Board has not conducted presidential succession planning. Nipissing does not have an emergency succession plan for the president, including identification of an interim president if an unplanned replacement of the president is required, nor does it have a permanent plan for presidential succession.
- Members of the university Board did not possess critical competencies required to provide effective governance. Nipissing did not track the competency level of two of five critical skills for a university board—executive management and cybersecurity. Further, about half of the Board members had little or no financial literacy expertise or experience, where nearto-all members of a board should be competent in this area to be able to question management accordingly.
- Key internal oversight functions for effective governance were absent.
However, the report concludes that Nipissing is currently financially sustainable, having a positive net asset balance as of the end of 2020/21.
"Nipissing has experienced an in-year deficit in four of the five years, drawing down its net assets by $9.4 million, but still maintains a positive net asset balance."
The report adds that between 2016 and 2021, Nipissing University has consistently recorded annual losses, drawing down on its net assets.
"Nipissing’s operating budgets for these years that it presented to its Board reported deficits without a strategy for how it would return to a surplus position."
It also criticizes the university for not assessing the financial feasibility of major capital projects completed in the past before proceeding with them.
In response, Nipissing says it pledges to act upon the recommendations "as soon as possible."
"We have initiated many changes in our operations and many of the improvements that have been recommended in the audit. We have paid particular attention to Board financial and operational reporting, to program review, and to the planning, development, and operationalization of alternative revenue streams and to international recruitment to place us on track for a sustainable future."
It points out that the cost of educating students is significantly higher than for larger institutions in southern Ontario.
"As the data clearly demonstrates, our revenues in total are 90% dependent upon government grants and student tuition. Consequently, shifts in policy can, and have had, a unique impact on our university over time, in comparison to other universities in Ontario. The 10% cut in tuition and the freeze on tuition has had a devastating impact on our financial position, in addition to unintended consequences of the province’s funding model, both affecting our capacity to return balanced budgets annually for these audited years."