Alarming. That’s how Laurentian University union leader Tom Fenske describes the situation after finally receiving the financial statements for the university’s 2020-2021 fiscal year, which showed a $65.9 million deficit.
Even though its 2020-2021 financial year is long since over, Laurentian University’s board of governors voted earlier this week to approve the financial statements from that year.
That financial year represents the first three months of Laurentian’s insolvency restructuring under the Companies’ Creditors Arrangement Act (or CCAA). During that period of time, LU announced massive cuts to its programs and employees.
This deficit is attributable to restructuring expenses of $79.1 million related to the university’s insolvency. Without the restructuring expenses, there would have been a surplus of $13.2 million.
Laurentian is more than 10 months into the current fiscal year, 2021-2022, which ends April 30. The next financial year, 2022-2023, begins May 1.
“Working at an institution that has such a deep deficit one year is very alarming,” said Fenske, president of the Laurentian University Staff Union (LUSU).
He said this is combined with a distrust of the university’s auditors, KPMG, which has also been the auditors of the university’s books for at least the past 15 years.
University administration had said KPMG’s national office would be leading the audit, but Fenske said he was dismayed to learn the local office was still involved.
He said it’s also hard to know what the future holds for Laurentian, in terms of recruitment and retention of students amid the restructuring.
“It is nerve-racking around this place to figure out where you are financially,” Fenske said.
He said the situation would be a lot easier to deal with “if there was a level of trust that there should be” with the university’s board and administration.
Given changes to Laurentian’s board of governors brought on as one of the terms of a financial package with the provincial government, Fenske hopes that the new appointees to the board “can start to rebuild that trust.”
“I hope that a new board is moving in a different direction, and will send the signals that we are able to trust and move forward.”
Sudbury.com reached out to Laurentian board of governors interim president Jeff Bangs for comment on the university’s 2020-21 financials, but we had not heard back from him as of press time.
The restructuring expenses of $79.1 million recorded by Laurentian in the 2020-21 fiscal year are broken down into several categories on the financials.
This includes more than $44 million for “employee restructuring and termination costs,” $24.7 million for termination of interest rate swaps (these were agreements with banks that helped manage the volatility of interest rates; these were terminated with the CCAA filing), $4.9 million for legal fees and $2.8 million for monitor fees.
Of that $79.1 million in restructuring costs, the draft financial statements say more than $70 million are “liabilities subject to compromise,” relating to what Laurentian may eventually pay out to creditors under the CCAA claims process.
Approximately $360 million in claims have been made against Laurentian by its creditors, which includes past and present LU employees owed severance, among other categories of debts.
Laurentian University Faculty Association (LUFA) president Fabrice Colin said two things struck him about the 2020-21 financial statements.
One is the high price Laurentian employees paid in the university’s restructuring, especially his own members (this is shown by the $44 million in employee restructuring and termination costs).
“The other thing I also noticed was the cost related to the restructuring, and especially the legal fees and all the related fees,” Colin said.
He said LUFA’s position has always been that Laurentian should have used the financial exigency clause in the collective agreement with the union instead of CCAA, avoiding these kinds of fees.
Colin said as far as he understands, the “plan of arrangement,” which will determine how much creditors will be paid out, will be finalized in the late spring or early summer.
“We’ve been told that members cannot expect more than 10 cents on the dollar,” he said.
