“Such a pervasive restriction of our audit work is unprecedented.” That was one of the key phrases in an update on the special audit of Laurentian University released Dec. 1 by the Office of the Auditor General of Ontario.
In the 13-page report, Auditor General Bonnie Lysyk’s office outlines Laurentian’s refusal to provide its office with privileged information as it completes a value-for-money audit of the insolvent university’s finances.
Earlier this year, Laurentian University declared insolvency, and filed for court-supervised restructuring under the Companies’ Creditors Arrangement Act (CCAA). Until Laurentian’s filing on Feb. 1, the CCAA process had been used exclusively in the private sector.
On April 28, the Office of the Auditor General was asked by the province’s Standing Committee on Public Accounts to conduct a value-for-money audit on Laurentian’s operations for the period of 2010-2020.
Lysyk said her office is entitled to privileged (confidential) information under the Auditor General Act as it completes its audits, but Laurentian disagrees.
This dispute is currently before the courts, with the auditor general filing an application before the Ontario Superior Court of Justice in September, asking for a declaration that her office has “a right of access to privileged information and documents.”
A court hearing on the matter is scheduled for Dec. 6.
The auditor general’s report also reveals that Laurentian University president Robert Haché and LU board of governors chair Claude Lacroix were to appear before the province’s Standing Committee on Public Accounts yesterday, Dec. 1.
Hearings for that committee were held in camera yesterday.
In the report, the auditor general’s office said that in October, it communicated the restrictions Laurentian was placing on its work to the Standing Committee on Public Accounts.
The committee then formally requested information from Laurentian University in conjunction with their motion.
The auditor’s report said the Legislative Assembly Act, Standing Orders and Parliamentary Privilege provide the committee the authority to command the production of papers or things that the committee considers necessary for its work.
After sending three letters, the committee began to receive material from Laurentian on Nov. 17, the auditor general said.
“However, Laurentian’s external legal counsel indicated that Laurentian would not provide privileged information, information subject to court-ordered confidentiality, and information that implicates third parties and the CCAA process,” the report said.
“A fourth letter was sent to Laurentian on Nov. 18, 2021 to request the President and the Chair of the Board of Laurentian appear before the Committee to explain their delay and refusal to provide material. It remains unclear whether all requested material will be received.”
The report outlines in detail the auditor general’s view of how Laurentian has stymied her office’s investigation by refusing to provide it with all the information the auditor feels is necessary to complete the value-for-money audit.
That privileged information includes board of governors and committee materials, legal invoices, emails of senior administrators and key decision-makers and electronic server folders for the university administration and human resource files and union grievance files.
In relation to the emails, Laurentian internal and external legal counsel took the position that they also needed to review every email and server file for privilege before sharing them with the audit team, said the auditor general in the report.
On Sept. 3, Laurentian’s external legal counsel told the auditor general that access to emails and server files would not be provided “because it would take years to vet them for privileged information and they do not have the capacity to review them before they are provided to us.”
“They suggested that we provide them with search terms to search the email database and review this material before providing it to us,” said the report.
“Under audit standards, this would be an unacceptable limitation on our work, as it impacts the independent performance of our audit procedures.”
The auditor general said in many instances, Laurentian has also declined to provide non-privileged information on the basis that to review documents to determine if information is privileged would be too resource intensive.
Regarding its request for a court interpretation of the Auditor General Act, “based on communications to date, it is unclear if Laurentian will provide our office unrestricted access to information even if the court agrees with our interpretation.”
As has been previously reported based on court documents, the Office of the Auditor General of Ontario also speaks about the “culture of fear” among Laurentian staff in relation to providing documents to the auditor general’s office.
Staff are being instructed to inform internal legal counsel if the auditor general’s office ask to meet or talk with them, seek approval to provide us with any documented information and share all information provided to the audit team (including public information) with internal and external legal counsel.
“This strategy is causing an additional strain on Laurentian’s resources and has the side effect of making staff hesitant to speak freely with us, for fear of reprimand,” said the report. “A culture of fear has been created.”
The report also gets into some specifics regarding Laurentian’s finances.
In the last five years, between 2016/17 and 2020/21, the Province of Ontario provided Laurentian on average $85.9 million annually, comprising more than 45 per cent of Laurentian’s revenues.
“Laurentian generated a net loss of $11.9 million in aggregate between 2012/13 and 2019/20,” Lysyk wrote. “During this time, its debt ratio increased and approached the Ministry’s benchmark maximum debt ratio of 35 per cent.”
By April 2016, for every dollar owed, Laurentian only had 67 cents to pay that amount.
The auditor general speaks to Laurentian’s debt ratio increasing steadily over the past decade as it completed several capital projects.
“Laurentian was historically able to manage its cash flows because the university did not have a significant number of capital projects under active development and its cash flows from operating activities tended to break even over the last decade,” said the auditor general’s report. “However ... between 2014/15 and 2018/19 the university completed several capital projects which put significant strain on the university’s cash flow.”
Sudbury.com has reached out to Laurentian University, requesting an interview with university president Robert Haché about the auditor general’s report. We are awaiting a response on this request.
In the meantime, Laurentian communications staff sent us a written statement on the subject. That statement is as follows:
“Laurentian has been co-operating with the Auditor General’s audit. The University has authorized and encouraged all staff to participate in interviews with the Auditor General.
“We have also granted her office direct access to our entire financial database, enrollment system, as well as all requested, non-privileged documents.
“Following the Auditor General’s application and agreement by Laurentian, a court hearing is scheduled for Monday, Dec. 6 on the issue of whether the Auditor General is entitled to receive privileged information between lawyers and their clients – a deeply valued right in our legal system. The Chief Justice of the Superior Court of Justice will determine the matter following Monday’s hearing.”
