Thursday 7 February 1991

Annual Report, Office of the Provincial Auditor, 1990

Ministry of Colleges and Universities

Continued in camera


Chair: Callahan, Robert V. (Brampton South L)

Vice-Chair: Poole, Dianne (Eglinton L)

Bradley, James J. (St. Catharines L)

Charlton, Brian A. (Hamilton Mountain NDP)

Conway, Sean G. (Renfrew North L)

Cooper, Mike (Kitchener-Wilmot NDP)

Cousens, W. Donald (Markham PC)

Hayes, Pat (Essex-Kent NDP)

Johnson, Paul R. (Prince Edward-Lennox-South Hastings NDP)

MacKinnon, Ellen (Lambton NDP)

O'Connor, Larry (Durham-York NDP)

Tilson, David (Dufferin-Peel PC)


Cunningham, Dianne E. (London North PC) for Mr Tilson

Daigeler, Hans (Nepean L) for Mr Conway

Fawcett, Joan M. (Northumberland L) for Mr Bradley

Haeck, Christel (St. Catharines-Brock NDP) for Mrs McKinnon

Hope, Randy R. (Chatham-Kent NDP) for Mr Hayes

Clerk pro tem: Carrozza, Franco

Staff: McLellan, Ray, Research Officer, Legislative Research Service

The committee met at 1005 in room 228.


Resuming consideration of the 1990 annual report of the Office of the Provincial Auditor.


The Chair: This morning we have the ministry back. We have Mr MacKay. We also have Mr Lyon.

Clerk of the Committee: That is Dr Benson.

The Chair: Dr Benson is in the middle, okay.

Mr Cousens: What is wrong with the Chair now?

The Chair: I do not know. My motor is not going yet. We have some questions and then we are going to try to write a report. Mrs Poole.

Ms Poole: Thank you, Mr Chair, and welcome back to the committee, or welcome to the committee, whatever the case may be.

I had a few questions about the formula you used with reference to enrolment and entitlement. When we had a presentation from Trent University yesterday, we were talking about the situation in 1968 where special criteria were adopted to take into account that they did not have an honours program at Trent University. There were criteria approved to make up for this situation.

What I did not really realize until that moment was that there are apparently a number of other universities in Ontario in the same situation, where they do not have a specific honours program and where they specialize more in the undergraduate arts and science programs. Could you tell us what universities in Ontario right now do not have an honours program and therefore have different criteria that they use for establishing their entitlement?

Mr MacKay: In the documents we produced for the committee yesterday, which I believe have been distributed to the members, there is a document entitled Ontario Council on University Affairs: Study of the Differentiation Between Honours and General Programs in Arts and Science, Interim Report. On page 14 of that document, OCUA specifically addressed that subject. That was one of the things the ministry asked OCUA to delve into after the Trent audit.

This finding suggests something a little bit different than what was suggested to the committee yesterday, according to the OCUA study. There were only two institutions that only used marks to differentiate honours students. I see right at the bottom of page 14 it states, "The remaining two institutions used only the average marks of students as a basis for differentiating between honours and general students." Other universities asked students to declare whether they were in an honours or general program or had other screens to determine whether students were in fact studying at an honours level. The short answer to your question is that as far as I know, Brock University is the other university besides Trent that used only marks to distinguish honours from general for reporting purposes.

Ms Poole: Maybe you could be a little indulgent, since the documents reached the committee members just before we began this morning, so we have not had a chance to actually peruse them. I would gather from your comments that while there are two, Trent and Brock, which use marks as a differentiation, there are other universities which do not have honours programs that use another system. Could you confirm whether that is so?

Mr MacKay: No. It is my understanding that except for Brock and Trent, and of course the University of Toronto with its unique program, all the other institutions do in fact have differentiated honours program study. It is only Brock and Trent that did not differentiate in that sense. Those were the two institutions that in 1968 were given permission to use marks to differentiate the students for reporting purposes.

Ms Poole: So Trent, Brock and U of T are the only three universities which vary.

Mr MacKay: That is right; which have had a different arrangement than the norm.

Ms Poole: Okay. Mr Chair, I had two other questions but I do not know whether you want me to continue.

The Chair: Go ahead. We will go to Mr Cousens after that.

Ms Poole: Okay.

The Chair: Maybe what we will do, in order to allow us enough time to complete our report, with the concurrence of the committee, is restrict it to one a caucus, or three questions spread among the caucus, or one person asking three questions. How is that? Do you have any more than that?

Mr Cousens: Then we get on with the report.

Ms Poole: Would you prefer just to divide the time among three caucuses?

The Chair: We could do that, actually. Maybe that is a better way. It is now just about a quarter after 10, so if we went till 11 that would give us an hour to do the report. I think that is probably ample. That would give us 45 minutes, so 15 minutes a caucus. You have already had a few, Ms Poole, so we will give you 10, 15 and 15.

Ms Poole: This will encourage each caucus member to be very brief. We were talking about tuition fees the last time you were with us and you mentioned that although technically the universities have the autonomy to set their own tuition fees, the ministry has a lever to ensure that they comply with the ministry's wishes. In other words, if they do not set the tuition fees that you want, they do not get their money. Are there other areas where technically the university has autonomy, but where the ministry might actually be able to use money as a lever to ensure that guidelines are adhered to?

Mr MacKay: Another example would be the fact that a university has autonomy to introduce any new program that it might wish to introduce, but for new programs the government reserves the right to decide whether they should be counted for funding purposes. Once again it is a matter of the government deciding what it will pay for, while the universities of course have the freedom to decide what programs they will offer. I think those are the only two real examples. It is the decision of what the government will consider for operating grant purposes

Ms Poole: So you cannot, off the top of your head, think of any other scenario where you are indeed forcing the universities to bend to the will of the ministry?

Mr MacKay: Certainly there are our various reporting requirements associated with the enrolment reports and the financial reports that are submitted annually. As we discussed earlier this week, we have targeted grant programs where we basically inform the institutions that they must spend these dollars on certain eligible items or they do not receive the grant, or we would reduce their grants.

Dr Benson: If I could just add a point, I think "forcing" is too strong a term to use. We would encourage certain types of behaviour rather than force it, in the sense that --

The Chair: It is like filing your income tax.

Dr Benson: -- the institutions will set their tuition fee levels. There is an offsetting revenue provision, so it is not necessarily of any advantage to them to do so, but they are fully capable of taking that action. Similarly with the programs, the institutions are in a position to mount whatever programs they deem appropriate with whatever funding arrangements they deem appropriate. It is just that there will be certain types of programs that we will fund. So I do not think it is forcing them. It is simply recognizing that certain things are public priorities and they are funded through the grant mechanism.

Ms Poole: Okay. One final question, and it is a matter of follow-up: We have noticed instances over the past couple of days where, for instance, with the University of Guelph, I believe it was 1977 that it was granted the right to treat its enrolment differently because of the fact it was on a semester system. However, it was not until the auditor's report that it came out that the 1977 provision was for a fixed period of time, yet nobody ever noticed, in 11 years or whatever, that they had not adhered to the fact that the deadline had been exceeded. Could you comment on what kind of follow-up system you have in place? When you notify a university that there is a procedure to be followed for a set period of time, what type of follow-up procedure do you have to ensure that they in fact are adhering to your rules?

Mr MacKay: The Guelph situation pointed out to us that we had no way of knowing how many of these special approvals or special arrangements have been made over time, with changes in personnel and with old files being sent out of the ministry and so on. So the first thing we did was indicate to all the institutions that any special provisions that differed from those set out in the manual for application to all institutions were waived or eliminated, no longer in effect, and that institutions would have to reapply for such special provisions so that we would have a record of them.

We also indicated to them that they would have to keep on file, for their external auditors, copies of those special provisions. At the same time we informed all the external auditors that as far as we were concerned, there were no special arrangements or special deals that were contrary to the provisions of the operating grants manual. I think that brought us up to date and we now have a system for including any of those special provisions right into the manual, so we have one set of records and that is it. There are no special rules or other kinds of arrangements for any individual institution.

Ms Poole: Okay. Now that you know what the special arrangements are, do you have a follow-up system in place to ensure that if there is variance from them or if the period expires the universities are adhering to the changes?

Mr MacKay: I believe we do in our instructions to the external auditors. We make it explicit to them that they are to look at those special approvals or special provisions and make sure they are being adhered to and to advise us if they are not.

Ms Poole: So would you send out a letter to that external auditor?

Mr MacKay: We corresponded with all the external auditors, as well as all the universities.

Ms Poole: But was this a one-time-only thing or are you corresponding with them every year when you say, "I want you to look at the special provisions," because external auditors change?

Mr MacKay: That is now a permanent part of our directions to them that we do send out each year, yes.

Ms Poole: Good. My colleagues might have some questions.

Mr Daigeler: I had one actually on some of the documents that you gave us today; I cannot remember. I asked regarding the other category for universities versus colleges upgrading income. I look at this now and I see that a certain amount, as you had indicated, is coming from the federal government. However, what you describe here again for the colleges as "Other" -- I presume this should read "Contract" instead of "Construct" -- under that category, it is $175 million interest, donations and, I guess, contract work. That in itself, that $175 million, is still more than what is indicated for the universities' income as "Other."

"Other" is only $109 million for the universities. Before you had indicated that the difference between colleges and universities is mostly that the federal government is providing more money. But even taking away the federal contribution for the colleges, the other operating income is significantly higher than what the universities are seeing. Where is that coming from? Why would it be that the colleges seem to be able to get more from other sources for their operating income?

Mr MacKay: These particular figures that we are using in this material for the university side are the operating funds, which excludes the money that comes from the federal government for sponsored research. That is accounted for under different funds or restricted funds. What we have tried to represent in these graphs are the operating funds that are used for instruction, etc. The reason there is more money on the college side is because of the federal money that goes for training or instruction.

Mr Daigeler: I know, but deducting that because you write down here, "Skills Training-Federal," that would be $147 million, right?

Dr Benson: There is one other item.

Mr Hope: What page is he on?

Mr Daigeler: There is no number on the page, but it is "College Revenues by Source."


Dr Benson: It would also be the "Skills Training-Ontario" through the Ministry of Skills Development and/or Ministry of Education and Ministry of Labour. So it would be $140 million plus the $147 million, which would be $287 million.

Mr Daigeler: That is right, but then you still have at the bottom $175 million.

Dr Benson: Yes.

Mr Daigeler: That in itself is higher than what is listed for the universities as the total other amount, which is listed as $109 million.

Dr Benson: The $175 million would include significant contractual moneys in that the colleges would mount a significant number of programs on a fee-for-service basis.

Mr Daigeler: Okay, now we are getting there. Are you saying then that the universities do not make use of that source of income?

Dr Benson: I am sure they do, but not to the same extent. The colleges, as you are aware, have about 9 or 10 part-time students for every full-time student. A lot of it is on a cost-recovery basis, whether it is management, training programs for the real estate bureau or whatever. There is a series of programs that are run, so it is a major part of the operation. That does happen with the universities, obviously, but I do not think it happens to the same degree. So that would be one major element to describe that difference. We would have to do a more complete analysis, but we certainly could if you wish.

The Chair: I think we are going to have to move on. That is the allocation of time for each caucus.

Mr Cousens: I appreciate the senior levels coming back to us this morning just to clear up some things before we come out with our thoughts about our report. There are two areas I just want to review with you if I may. I want to say for the record that I think the process of the Provincial Auditor doing an analysis the way he has has opened up my thinking in a way. I think the public deserves to have that kind of research done. I want to commend the auditor publicly for all the work he has done, and the way in which it has allowed us to open up the subject further. We could not have done without the research that has been done in the first place.

There are two things that I want to touch on and to bring forward when we are doing our report. I am unforgiving of the sweetheart deal that was done at Trent University for the outgoing president. It worked out that it was $680,000. When you ask for the accounting of those numbers by the staff and you look at it, they are able to come along and rationalize it down to $290,000, but that did not include the payout for the mortgage.

I do not care how people add it up, that deal stinks and it stinks badly. It would not have become public, as we found out through this exercise, had it not been for the Provincial Auditor's review of the situation, and it is the kind of thing that to me justifies public officials such as ourselves from all parties saying, "Hey, there is something that went on there."

There is an incident that took place at the University of Guelph. There could be an extended conversation about the deal for Mr Segal and his housing in Toronto and his commuting to Guelph, and there is a whole series of events around that one. I am talking about another kind of deal. One is a golden handshake and another is a sweetheart deal.

The other kind of thing is where within the university environment, we have seen in the University of Guelph, and the auditor's report, tendering procedures that are certainly not in line with what Management Board would allow in the province of Ontario. Not clean; not tight; not fair. I am asking your guidance before I start going in camera and saying this, so I am saying it publicly now.

Is there a way in which the ministry, top down, can come along and start giving some guidelines to the boards of governors and to the trustees of the universities or is there a way through the Ontario Council on University Affairs? This might well be the way in which it is done, in which some kind of direction could be made through your ministry or through our committee that says, "Can you not begin to work out some way in which you can address and respond to the kind of concern raised in the auditor's statement?" I am not trying to say that you have done it all. I do not even want to look for more. We do not have the time for that. But could you give me some guidance on how I could come forward with a recommendation on that?

Dr Benson: There are a number of models available. I think we all would like to see institutions and the ministry et al behave in as responsible a fashion as possible. In that sense we welcome the Provincial Auditor and I think he has been significantly value added as we look at this.

I do not have a specific recommendation. I think the ministry could be charged with the responsibility of developing some guidelines in conjunction with the institutions or maybe be requested to ensure that the institutions themselves develop appropriate guidelines either collectively or individually. There are a number of options. I think we are quite prepared to do whatever is necessary, but the model itself -- I do not know. Because of the nature of the institutions, my inclination would be to work it on a voluntary basis with the governors to come up with some type of normative models that could be applied individually, based on particular circumstances.

At this point, it is difficult without looking at it in detail to figure out what the best models are. It may be something that we, of course, could work on with the Provincial Auditor. Collectively, maybe the ministry and the auditor working with the institutions could come up with the normative models that they could then apply to ensure that things happen in such a way that they are objective, they are thorough, they are comprehensive and work in the best interests of our public institutions.

Mr Cousens: That is why it is so difficult when you are a politician and you do not want to upset the equilibrium. It is a delicate balance that is there, but you also know that the public good is not served unless some follow-up action is taken to the kind of findings that we are now making. It is in our hands, and I would feel much better if we were able to come out with a future direction that says, "Hey, there's a way of monitoring and controlling this."

Dr Benson: There are ways and they are done differently with each institution. For example, in the college system, the colleges are carrying out what we refer to as operation reviews. Again, there are some guidelines that are established, that were worked out collectively with the institutions, and the institutions then carry out an operation with you. There are different models. That one is appropriate for the colleges because they are crown agents. It may be that we need a different model because of the legal status of the universities, but I think there are many models that would meet the objectives and I think it would be supportive certainly of working in that direction.

Mr Cousens: My view is that I do not want to come up with the model. I guess I will go back to more of a policy development stage in which we should be as elected officials, and that is to find a way in which you come back with a method of resolving it for the future. Have I got a couple of minutes left, Mr Chairman?

The Chair: Yes, you have about nine minutes.

Mr Cousens: I will be finished in lots of time. I am concerned with the acts of incorporation by the different universities. Probably the one that stands out best, that explains my problem, is in a letter from the deputy minister, Dr Brzustowski, to the auditor.

He said in a letter of 29 September 1988: "The matters of plant assets, purchasing, payment and employment benefits and board approval procedures are strictly within the purview of the university, under the Trent University Act," and then, "It is accordingly appropriate that Trent University respond directly to you concerning these matters." We were able to have our auditor go into Trent and to the different universities where there were parameters around which he could -- and she; there were women involved as well -- develop an understanding of what was going on at those institutions.

But when we talked yesterday to the University of Toronto, it became very clear to me that the areas in which the auditor could assess financial responsibility covered only about 60% of what the institution was all about. There were boundaries built for other areas which really were the prerogative totally of the university. That had to do with legacies and other things that come to them. I am not thrilled about that. I do not want to see where the government comes in and starts robbing assets.


I want to see an equal funding base across the province so that we do treat students in universities equally. That is why we brought in the regional educational system and I have been part of that. I was chairman of the school board for a period of time and I know the value of equality. But I do not think you have a true public audit of an institution unless it is full and complete without boundaries, because at that point when more than 50% of the funding of that institution comes from the public dollars, I believe there should be a more wide-open freedom and scope for the auditor to review what is going on within that institution.

The institution may have auditors, and boy, they are very quick to show all the different audit committees, but that causes alarm signals to go off in my mind as well. I feel far better when I have got the Provincial Auditor as the one who has a complete review of a complete institution without the boundaries we are in. I have a feeling that the auditor -- you can confirm or deny -- really only covers about 60% of the financial assets and workings of the University of Toronto. It may have varied with some of the others. Because Trent does not have those assets. What is your response to my desire to see a more complete audit?

Dr Benson: I will make an attempt to respond to that. It is our perception that we have a responsibility to address those items that are in the public domain, and that refers basically to the capital and operating grants to the institutions and the other policies related to that in terms of the program dimensions. The other elements are in the private domain and as a ministry, it is effectively beyond our jurisdiction.

Mr Cousens: "Jurisdiction." You mean the law does not allow you to go beyond that? Is that what you are saying? I did not understand.

Dr Benson: I use "jurisdiction" in a non-legal sense.

The Chair: Can I just follow up on your question and the answer? Let's take another ministry. If somebody applied for a small business development loan and had assets of a private nature that perhaps would not allow him to have that loan, you would not feel there would be a necessity of looking at both of those aspects of financing? I find that incredible. The picture is not complete, I would suggest, without seeing everything.

Dr Benson: We have institutions that are creatures of the Legislature and we can build into that legislation whatever elements we deem to be appropriate, including whatever accountability functions, but at this point in time, the way we are structured, the responsibility of the Ministry of Colleges and Universities relates to the capital operating grants, and we think that is quite appropriate. Other private enterprises of the universities, which are possible under their acts, are not within our jurisdiction in that sense. Whether the act needs to be amended to address those is another issue, but at this time it is not within our Jurisdiction.

The Chair: How would you determine the needs of the university and how well the needs of the students were being served if you did not look at the overall -- I agree with you that you should not have any control over their private assets, that is private money, but certainly you have to know about it to be able to determine whether the grants that you are giving them are going to be adequate and are going to serve the needs of the university students to the best of their ability.

Dr Benson: We certainly do require an understanding of the operations of the institution, and it is provided to us, so that we can make a determination in respect to needs and the resources available, particularly, for example, in a capital campaign. We have an arrangement whereby a certain proportion is funded through the public sector and another proportion is private. Obviously, through that, we have to have an understanding of the financial capacity of the institution, the types of campaigns and a number of other variables. We do have that understanding, and it is provided generally on a voluntary basis from the institutions to the ministry. The degree to which we required anything in order to determine our operating or capital support would be provided as well. We have that.

The Chair: Sorry, Mr Cousens, I did not mean to interrupt.

Mr Cousens: I think you helped me out and I appreciate it.

I am not pleased at the limitations that have been placed on the Provincial Auditor through this and would like to find ways in which his staff are given a greater scope in order to review the whole scene. I think there is, and the way you asked the question, it helps to show how it does all interact. I will certainly leave it for now. It is something I would like to see us come back to. If you are able to come back with some suggestions to us, I personally would be interested in them and I am sure the committee would as well.

Mr Cooper: There is an article here from the Toronto Star of 21 December and it says that the U of T plans on raising tuition fees by $550 and that this has to be approved by the government. Is this how the guidelines are set up?

Mr MacKay: Mr Chairman, if I might respond to that particular question, first of all, it is my understanding that the article was not entirely accurate. The governing council of the University of Toronto endorsed the Council of Ontario Universities' recovery plan, which recommended tuition fee increases of that magnitude. The university did not actually decide to implement those tuition fee increases on its own and there was some misunderstanding in terms of what the governing council motion was meant to do.

Mr Cooper: All right. The question is, how are the guidelines set up for tuition fees from the ministry?

Mr MacKay: Normally, when the ministry announces the operating grant increase for a particular fiscal year, we also announce what the allowable tuition fee increase for that fiscal year will be. Frequently, the percentage increase is linked. If we were to announce a 5% increase in operating grants, we would also allow a 5% increase in tuition fees.

Mr Cooper: Okay. Now there is a 13% barrier where, if the universities do not go over it, there is no cutback in grants. Are there any universities right now that are over the 13%?

Mr MacKay: Not to my knowledge, no. In fact, I think I can state that quite affirmatively because we do get reports from them certifying that they are not charging over that maximum allowed.

Mr Cooper: If they did go over, how is the dollar reduction in comparison to the tuition? Is it dollar for dollar?

Mr MacKay: It is dollar for dollar. If they raise an extra $50,000 in excess tuition fees, we would deduct their operating grant by $50,000

Mr Cooper: So they are accountable in that way.

Mr MacKay: In that sense, yes.

Ms Haeck: I have two questions for you. We have two Trenties on this committee. Mrs Poole and I are alumnae of Trent and both of us were somewhat concerned around the issue of the 1982 letter and agreement. There seems to be some discrepancy in the information that we have been given between things that you have said and what the university has said. What we are concerned about is, did in fact Trent lower its standards to meet those guidelines?

Mr MacKay: I do not think we can say whether Trent lowered its standards. What we certainly can say is that after they changed their marking scheme, there was a considerable increase in the number of students that they reported as honours.

Ms Haeck: This is after 1982?

Mr MacKay: If we look at the number of students or percentage of students reported as honours in 1981-82 and look again in 1982-83, 1983-84, 1984-85, we see a very significant increase.

The Chair: I think they also told us, in fairness -- to my recollection anyway -- that when all was said and done, they determined at the end of the process that in fact the percentage was fairly close to -- I may be thinking of the wrong university, but I thought it was Trent -- that it actually worked out that they were in the honours category. That is my recollection. So in fairness to Trent, even though it made an assessment -- and I appreciate your answer was pretty political -- I think in the final analysis, in fairness to Trent, if the statement it made is accurate, and I am prepared to accept that it is accurate, I think as we all are, it found that its assessment was correct, that the percentage of people who actually attained honours was what it had projected. I just thought I would throw that in because I do not think it is fair to leave Trent out there hanging on the wall.


Ms Haeck: Basically, obviously being part of the alumni there --

The Chair: I appreciate that.

Ms Haeck: -- I would like to make sure that they survive and continue and all those wonderful things, but obviously the practices do have to be examined.

Further to that, we heard yesterday from the University of Toronto as well and there were some questions raised around moving moneys from what were operating grants into restricted funds. We did not have a chance to get into that maybe as well as we might have, but what kind of ministry guidelines are there from moving surpluses in the operating funds into restricted funds?

Mr MacKay: Mr Chairman, there is not a specific guideline with respect to moving funds from one particular fund to another, however I do believe that the operating funds manual that we distributed to you does stipulate how university operating grants may be applied. In fact, we do it in a negative sense in that we explain what things they may not spend operating grants on. If I could just quote from that --

The Chair: What page are you reading from?

Mr MacKay: This is page 1 of the manual, under the heading "General," the last paragraph: "The non-targeted university operating grants may be applied to any eligible university operating expenditure. Eligible expenditures include all operating expenditures, except those related to: (a) assisted/sponsored research, (b) principal and interest payments on capital indebtedness, (c) student aid, (d) ancillary enterprises, (e) capital projects."

Ms Haeck: So in fact from your guidelines it is not inappropriate for the university to move that into a restricted fund.

Mr MacKay: That is correct.

Ms Haeck: When it is in a restricted fund and you know that it is there, does that in any way affect what kind of operating grants they might get in the coming year?

Mr MacKay: No, it has no effect.

Ms Haeck: May I ask why not?

Mr MacKay: Because the operating grants are calculated on the basis of the enrolment reports that we get, and enrolment counts in various years, and are not based on any assessment of the financial situation of the institution at any particular time.

Ms Haeck: I see. That puts an interesting perspective on that. So even if there was a very healthy restricted fund, they would continue to get funding based on their enrolment whether or not they had the option of dipping into those restricted funds to alleviate any supposed deficit.

Mr MacKay: That is correct.

Dr Benson: If I may add just one point in response to that, one would obviously look at the macro position, though, in determining the overall allocation for any given year, for whichever sector it was. So one would look at your annual deficits, your accumulated deficit, look at any surplus position of the institutions, and if the situation demonstrates that there were significant surpluses, that might very well affect the allocation that, in a macro sense, the government would make to that type of institution. So in that sense, in a macro sense, it does. In a micro, for a particular institution, we do not look at it.

Ms Haeck: Okay. The University of Toronto was mentioned by the auditor in his documentation as having, in at least two years, surpluses -- one, I believe, of $32 million; the other of $22 million. I believe the years were 1987, 1988, somewhere in that range. What evidence do you have that this kind of situation occurs across the system and what those surpluses are, where they are located? Are they also in restricted funds, and what is the amount? Do you have a handle on the amount that might be put aside for a rainy day?

Mr MacKay: We certainly receive from each institution on an annual basis a copy of its audited financial statements, which include all funds, not just the operating funds. So we do receive a complete picture of the financial state of each institution.

We also receive from the Council of Ontario Universities a very comprehensive report which compares the revenues and expenditures of each institution on a comparable basis for all funds. They clearly indicate where there are interfund transfers. We could certainly provide for the committee the latest annual report from the Committee of Finance Officers -- Universities of Ontario.

I do not off the top of my head know exactly what the accumulated surplus or deficit situation for the institutions is, but we certainly could find that out readily.

Ms Haeck: I think that would provide rather an interesting perspective for all committee members.

Mr Hope: Dealing with the basic income units or the 2% allowance -- and I guess 2% of what number adds up to big bucks if you are talking amount of students -- it was mentioned something about 450 students being the 2%. This talked about money, and let me tell you, if we drive Highway 401 and the speed limit says 100 and we can get away with 110, we are going to drive at 110. I guess the 2% allowance --

The Chair: Is that an acknowledgement or an admission or what?

Mr Hope: No, no, no. I am just trying to point out an issue here. The allowance of that nature, 2% of the total, and you are talking about universities that have large enrolments, you are talking about big dollars; small enrolments, it is not so big. But I guess the 2% allowance does raise some questions in my head about that 2% issue. That was one of the main things that I just wanted to ask. The 2%, is it always above?

Mr MacKay: The 2% is an accounting term. I must admit I am not an auditor or an accountant, but my understanding is that when the external auditor certifies the enrolment audit which he presents to the deputy minister, he makes a statement to the fact that his sampling has been such that he is 95% certain that the enrolment total stated is within 2%, plus or minus, of the actual amount stated.

It is also my understanding that we could decrease that to 1%. We would want them 95% sure that the count was within 1% of the total given. What that would require would be a considerable increase in the amount of actual sampling that that auditor would have to undertake and it would result in a considerable expense. That was in fact an option that we suggested to the Provincial Auditor and the universities and their external auditors when we conducted our review following up the Trent audit, and it was decided that this questionnaire approach that we have adopted to identify errors would be just as effective and cheaper than actually changing that 2% figure.

Mr Hope: The other question deals with the aspect of dealing with special projects; for instance, where you give a professor X dollars to conduct a survey or a study or something like that and he is currently being paid at a ratio to perform as a facilitator and the student has enrolled to that course by the facilitator. Most of them say, "Well, this professor is the one I want to instruct me," but if we are allowing allocations for projects or whatever to occur, how much actual quality time is actually being treated to that student who has paid? In my calculations, when I look at it, it is over $5,000, according to the sheets in here, for tuition fees.

Are we really serving justice to the student that is perceived, instead of having a temporary teacher or professor in there, not actually getting that quality that he actually focused his attention on? I guess I raise some questions about that. What really takes place as far as the operations, the moneys and the grants that go towards developing research?


Mr MacKay: I will try to respond to that. Certainly I think the amount of actual contact time that individual faculty members spend with their students probably varies within each institution, and I think on average varies across the system. I think that would probably be better addressed by some of the institutional representatives.

Certainly we know that some distinguished professors spend a great deal of their time engaged in research activities and relatively little of their time teaching. Other professors have a greater interest in teaching and spend more time in that contact. We have heard from the institutions that class sizes vary tremendously and we have heard the view that quality is not necessarily dependent on the size of the class.

Mr O'Connor: Would the university audits that are submitted to the ministry be quite comparable to the audits the Provincial Auditor does? The universities seem to think their external auditor coming in is quite sufficient, yet the findings of the provincial audit appear to be quite different. Perhaps the auditing that was done by the Provincial Auditor went into much more detail and maybe should be continued occasionally.

Mr MacKay: Certainly the reports that we received from the Provincial Auditor with respect to his inspection audits of these three institutions differed rather substantially from both the enrolment audits that we received from the external auditors and the audited financial statements, because the Provincial Auditor indicated in his letter to our former deputy that he, the Provincial Auditor, has a concern that the financial audits that we receive are simply an expression of an opinion as to whether the financial statements of the universities are fairly presented. I recall we had some discussion here yesterday with the University of Toronto as to whether those kinds of audits could not be extended to value-for-money audits. We know that the Provincial Auditor has an opinion in that regard.

Mr O'Connor: So the audit by the Provincial Auditor is an audit that perhaps the universities should consider themselves for their external auditor to expand their mandate, or do you think that would be a recommendation that just places unnecessary financial drain on the assets of the university?

Mr Lyon: I guess we could go back to a couple of things that we talked about on Monday in the opening statement. In terms of the ministry's role in looking at the audits for the operating grants, the requirement we want from the external auditors is an attestation to the enrolment count that meets the requirements of operating from the manual. Beyond that, the type of audited financial statements that Mr MacKay has been talking about falls into the statutory requirement for them to submit it to the minister. The direct linkage between the audit opinion on the financial affairs and viability of the institution has little bearing on the operating grants in that sense.

Beyond that -- and I am no auditor, so I cannot comment on whether the institution should adopt the type of audit that the Provincial Auditor has done -- I think that is a matter for the board of governors to determine, the extent to which it wants the type of assurance that the Provincial Auditor has provided in a public forum.

Mr O'Connor: If provincial auditors had been maybe a little better received at some of these audits and had more details revealed to them, do you think their audit would have reflected closer to the audit that is presented to the ministry? Would it appear somewhat closer in their findings, as opposed to what has been shown, which are quite different?

Dr Benson: It is hard to speculate. I would anticipate, though, now that a procedure is in place, now that there have been three inspection audits and the institutions have noted the outcome of the audits, that it will change behaviour somewhat and that there will be -- I think there are more rigorous audits going on at this point in time as a result. I think the ministry itself is being more rigorous in its requirements. So I think it has been value added, moving us forward.

Whether additional work need be done with respect to financial audits, I think it might be quite appropriate for that to be discussed, if it has not been already, between maybe the Provincial Auditor and those who are doing the audits of the universities, those professional auditors. I think there may be additional information that could be shared and so on, and maybe different procedures could be adopted, but I think that is up to the professionals involved to determine those elements. The issue, though, for value-for-money audit is another issue that needs to be addressed, and the most appropriate way of dealing with that would have to be determined, as to who, how, when, why and where.

The Chair: You have already prepared or revised a questionnaire as a result of these audits, which is that document there, as I understand it. According to the included sheet, it says, "proposed change to be implemented in 1991-92; sample questionnaire attached." That was that the external auditors be required to complete a questionnaire -- item 4.81 -- concerning the procedures that they have examined in conducting their enrolment audits, so obviously that has come out of the auditor's process.

We are going to be doing our report and we would like to perhaps suggest -- I am just musing; I do not know whether the committee wants to suggest this or not -- that this might include some more details that would trigger a response in the ministry that something needs a bit of looking into or a bit of a change.

I am thinking specifically that when the financial statements are filed with the ministry, which I understand to be the case, if you had an extraordinary matter such as the Trent dismissal or letting go or whatever, that would be brought to the attention of the ministry by some sort of note in the financial statement that there was a long-term employee who was let go and here was the compensation package. So it could be looked at, or at least it would put the universities on notice that they cannot do that without it at least being brought to somebody's attention.

Mr MacKay: Perhaps I can clarify that this particular questionnaire is attached to the enrolment.

The Chair: I know that is enrolment. But is what I am thinking of something that could be done by the ministry as a matter of policy or would we require some sort of legislative change to require that?

Mr MacKay: That is a very good question. We have certainly never discussed in the ministry making any specific requirements relating to the financial audits that are produced.

Dr Benson: I think in this regard we have to function within the context of the individual university acts, and a quick response is that it might require a legislative change. Notwithstanding, I think a very effective vehicle would be to work on a voluntary basis with the audit community to address some of the possible problems or problems that have been encountered, and figure out ways to overcome them. I would think the institutions would only be too happy to make whatever adjustments are deemed to be appropriate. They have the same goal in this regard, so I do not see any problem with respect to the level of inclusiveness or the appropriate way of carrying out a financial audit. I think they would be only too pleased to do whatever is considered to be professionally competent and appropriate.


Ms Haeck: You made a comment about the Trent situation and the departure of Dr Theall. I think you understand that yesterday I did ask some questions of Trent.

The Chair: My comments were not meant to be derogatory. I thought they made a good deal, actually.

Ms Haeck: Actually, Dr Theall came out very well. I understand, from the point of view of the ministry and also from the universities, that you may not be able to answer this question because the ministry may not have the information, but I feel it is only proper to ask it. In light of the fact that Mr Cousens has done the quick tabulation of $680,000 that went to Dr Theall, are you aware of other situations in other universities that come up to a similar dollar amount?

Dr Benson: No.

Ms Haeck: So this is an extraordinary instance?

Mr MacKay: We do not normally have any information on the salaries or settlements.

The Chair: I am sorry. I should not have asked that question, frankly.

Ms Haeck: I must admit I am concerned that the taxpayer is going to be on the hook for a lot of money down the road, or could conceivably be.

Mrs Cunningham: On that question, it would be nice to have a comment here. Mr Cousens and I just had a chat about it. I have been involved with elections of directors of education and university presidents. I cannot imagine the ministry having ever been involved or asked any questions. The one time the regional office of the Ministry of Education asked us some questions, we told him to blow it out his ear, given the mandate we had and given the mandate the universities have. But my point is --

The Chair: I have caused all this. I should have kept my big mouth shut. All I was trying to do, Mrs Cunningham --

Mrs Cunningham: I am just saying, that does not make it right. I think this committee has now asked the question. In spite of the controversy and the embarrassment, I would say that Trent is simply not alone at all. You may look at school boards or others in these days and it is becoming a bigger issue. Anybody listening to this conversation would say, "Who do they think they are?" That is what they think about us even asking the question. The point is that it is public money and there should be some agreement or some discussion with perhaps school boards or colleges or universities as to the concern of the public representatives. I would like the ministry representatives to advise this committee about what can be done, if anything. I think at this point in time they would say absolutely nothing.

The Chair: I think they have already said they do not get that information. That is what I am trying to --

Mrs Cunningham: They would not ask for it.

The Chair: We had agreed that we would try to start as close to 11 to get into our report. Maybe that is something we can include in our report as an item, that there be some sort of asterisk put there of some of these extraordinary happenings.

I want to thank you very much for your attendance. You will get a copy of our report, which will be awaited, I am sure, with bated breath by thousands, perhaps millions. We will probably charge big dollars for it.

Mr Hope: On a point of information, Mr Chair: The clock is still running and we are slated to be stopped at 12. I do not know if this is going to be open when we have this discussion. Is it going to be closed?

The Chair: Closed.

Mr Hope: Closed? Then I would ask that the clock stop until such time as --

The Chair: Do not worry about it.

Mr Hope: Just so we are not cutting ourselves short of time.

The Chair: When we are doing our report we will probably have concurrence that we continue beyond if we have to, because we have to complete that report.

One item I bring to your attention before we go in camera is the fact that Mrs Dodds, you recall, asked if she could come before our committee, as she was the chair of Lakehead Board of Education at the time the audit was done. She wanted to come before us. She has asked us to pick up the cost of her transportation here. I would imagine that would entail the airfare. She can fly up and down on the same day, I think, so it is probably just her airfare and taxicabs back and forth to the airport.

I do not know the committee's position on that. It has been the custom, if we invite witnesses, for committee, more often than not, to pay the cost. Here we have this person who has requested to come before us, but in the final analysis she may be the best witness to be questioned. I guess if we had known about her we probably would have.

Ms Haeck: What if we split it?

The Chair: I do not think that is fair. She is coming from Thunder Bay.

Ms Poole: I would just like to tell the committee that when the select committee on education looked at the financing of education quite extensively in the last term, we did have Mrs Dodds as a witness and found her extremely knowledgeable, extremely helpful, and she gave us some quite valuable information on the whole issue of accountability. I would recommend strongly to the committee that it would be worth every dollar we paid for her to come down here.

The Chair: Okay. Do any other members wish to comment on that?

Mr O'Connor: Given Ms Poole's recommendation, it sounds as if it would be a wise move for us.

The Chair: Do we have unanimous consent that we pay for her airfare, round trip, and taxicabs? Unanimous consent? All right. Thank you very much.

We will now move in camera to deal with our report.

The committee continued in camera at 1106.