N.S. not adequately monitoring universities' use of public funds: AG report

A new report by Nova Scotia's auditor general says the provincial government is not effectively holding universities accountable for public funds.

The audit, released Tuesday morning, questions how the Advanced Education Department doles out operating grants, how it monitors funding targeted for health-care programs and how it traces accountability for long-term sustainability.

"It is a delicate balancing act. They are independent academic institutions," Auditor General Kim Adair said to reporters. "But on the other hand, they are on average receiving a third of their funding revenue streams from the department."

Nova Scotia's 10 universities received $2.5 billion in department funding over the last five years. The remainder of university funding comes from tuition and other fees, research funding and endowments.

Operating grants

Adair's audit found that over five years, $1.9 billion in public funds was given to universities for operating grants, which can be used for salaries, student aid and infrastructure, as well as executive compensation, debt servicing and other expenses.

The report found that allocation of those grants was "arbitrary and not supported" and based on a formula established over 25 years ago. 

The current system means that "universities may be receiving an inappropriate or inequitable allocation," the report said.

When calculated on a per student basis, operating funds vary wildly, according to the report. In 2023-24, on average, universities received just over $10,000 per student.

But some received significantly more than that, such as the Atlantic School of Theology, which got almost $26,000 per student, and Université Sainte-Anne, which received more than $16,000. Others received much less than the average, including Cape Breton University, which received the lowest amount per student at $2,452.

The report says new bilateral agreements introduced this year between individual schools and the province are intended to improve accountability, and include performance targets for $46.2 million of operating grants.

Health education funding

One specific area of concern noted in the report is that the Department of Advanced Education hasn't assessed whether $163.8 million in health education grants are achieving the government's priorities. For instance, it's unclear whether the nursing seat expansion, which has cost $65 million, has added more nurses to the workforce, the report says.

"It's not just enough to give out the funding and say this is funding earmarked for specific programs in health care.… At the end of the day, are there more nurses? Are those nurses staying in the province and working in our health-care system?" Adair said to reporters.

The report found that $119 million in health education grants was still unspent by September 2024.

"If it sits in their bank account, who gets the benefit of the interest?" Adair said. "It remains to be seen how long it's going to be sitting there."

Deficit and debt

The report also found that while some universities have a pattern of running year-end deficits, there are no indicators or benchmarks to assess their financial health and sustainability.

Universities in the province owe $370 million in long-term debt, which is often taken on to fund capital projects.

When the debt for each school is broken down into a per student figure, the average across all 10 universities in 2023-24 was $6,533. But the report notes that figure soared at some schools, including at St. Francis Xavier University, which had a debt per student of $15,580, and the University of King's College, where it was $12,167.

The report notes that Ontario's Laurentian University had a debt per student of $12,793 the year before it applied for creditor protection.

While universities list nearly $2 billion in capital assets such as buildings, land and equipment, almost $1 billion is needed in maintenance, the report says.

"If the department is more proactive in the financial monitoring, they can identify those concerns proactively and work with the universities to address them," Adair said to reporters.

Recommendations 

The report includes 11 recommendations, including that the Advanced Education Department create a new model for allocating operating funds that specifies what should be considered when determining the funding amount and that includes regular reviews.

The auditor general also recommends a plan for health education funding that details goals, costs, timelines, measurement of progress and public reporting of the effectiveness of funding.

Funding agreements with schools should include conditions that address conflicts of interest, the ability to audit, and the return of unused funds to the department, as well as performance targets. If universities do not comply with conditions, funding should not be disbursed, the report says.

The department should also define financial health of universities and development benchmarks to reflect it, and meet regularly with schools to review financial results.

Advanced Education Department responds

According to the report, the department agreed with all the recommendations.

In a statement, Advanced Education Minister Brendan Maguire said the report "confirms what our government already knew — that funding agreements signed by previous governments between the province and our 10 universities did not provide accountability to taxpayers for their investments."

The statement notes that the new bilateral agreements introduced in 2024-25 do include some performance targets. Those targets included a requirement for universities to fill 97 per cent of seats in their health-care programs and work toward providing campus housing for at least 15 per cent of their full-time students.

The agreements also include new financial reporting requirements and mechanisms to review administrative expenses, the statement said.

Maguire told reporters the province's post-secondary institutions are one of Nova Scotia's "guiding lights" and that they've "done an incredible job."

"What we need to do is just kind of work with them to make sure that they're around for another 100 years," he said.

Inadequate funding

Scott Stewart is the president of the Association of Nova Scotia University Teachers and a professor of philosophy at Cape Breton University. He says accountability is important, but the report misses one "obvious fact."

"If universities are struggling financially, it's not from lack of oversight, as important as oversight is. It's because we're not being adequately funded," he said.

Stewart points out that in the 1980s, about 70 per cent of university expenses were covered by government grants. That fell to about 47 per cent in 2018, and now stands at 33 per cent.

"No matter how fine-tuned you're going to be in the management of insufficient funds, it's still going to be insufficient funds," he said.

Newly proposed legislation

The report comes on the heels of a new bill introduced last month that would see the advanced education minister authorized to appoint up to half of the members of a university's board of governors.

Bill 12 would also allow the government to force a university to undergo a revitalization plan and to withhold funding if the institution doesn't comply. Universities would also need to link their funding decisions to the provincial government's social and economic priorities.

Some within the university community have raised concerns about the legislation, which they say would endanger the autonomy of universities and their ability to effectively serve their communities and society.