On Tuesday, the province’s top watchdog, Auditor General Kim Adair, released her report on government funding to universities. It looked at how the Department of Advanced Education monitored the $2.5 billion it gave to Nova Scotia’s 10 universities over the past five years.
“These post-secondary institutions rely on government, on average, for a third of their annual revenue,” Adair told reporters Tuesday, but concluded that the department has not been “effectively funding, monitoring, or holding universities accountable for those billions of dollars.”
Of the $2.5 billion spent in the past five years, the report says $1.9 billion was in “unrestricted operating grants” managed by the university’s governance system. Since there are “no restrictions or accountability requirements for how this funding is spent,” the report says, universities can spend this “as they choose.” This could be on staff salaries, student aid, new academic programming and building maintenance, or it could be on executive compensation and debt servicing costs. The audit did not look at how this happened at each university.
The remaining $600 million grant money was given to “restricted” program grants and project funding, the audit says, and to student bursaries and scholarships.
But this is not an audit on spending “at the university level,” Adair told reporters Tuesday. It’s not an audit of how Dalhousie University spent its share of $1.9 billion or how St. Francis Xavier University spent its share. It’s an audit of whether the department is doing its due diligence “in monitoring the use of that [public] money” across all 10 universities.
An outdated funding model.
Over the past five years, the $1.9 billion in “unrestricted” funding has been divided among the province’s 10 universities. However, the report found that the annual allocation of these funds was “arbitrary” and based on a formula from over 25 years ago.”
In 1998, the department created an allocation model “based on average enrolment and weighted program costs,” the report notes. But, “due to infrequent updates to enrolment numbers and program cost data, the formula quickly became outdated.” The report also notes the funding calculated using this formula “exceeded what the province was able to pay.” It hasn’t been used since 2010, the department told the AG.
The last time the AG audited the department, in 2015, an updated formula was recommended, but it didn’t happen.
Tuesday’s report notes that, instead, the department decided on a “base operating grant” for each university that would “grow annually at a predetermined rate.” The department could not tell the AG how the base amount was determined or what factors were considered.
Adair’s audit recommended the department develop a new allocation model for grant funding–one that could explain which factors were considered when calculating funding levels and would be reviewed and updated regularly. The department has agreed to “explore and evaluate options” for a new university funding model by April 2027.
A pattern of year-end deficits.
Despite funding being largely “unrestricted” and “arbitrary,” the report says there is legislation the department could use to better ensure this money is spent responsibly. But, in the 10 years since the Universities Accountability and Sustainability Act passed into law, the department has not effectively used this to hold universities accountable, said Adair.
The 2015 act authorizes the department to transfer public funds to universities and sets conditions for monitoring, withholding, or restricting funding or requesting emergency cash. Among them is a revitalization plan.
Although the law exists, Adair said the department hasn’t effectively held universities accountable. “As a result, a pattern of year-end deficits and cash flow challenges has continued unchecked for certain universities.”
The report examined five years of audited financial statements from all 10 universities and found that “most universities reported at least one deficit” during that period. A table in the report shows a pattern of reported deficits at St. Francis Xavier University and the University of King’s College and a sharp turn from surplus to deficit at Saint Mary’s University.
Bill 12 is not the answer.
A piece of legislation introduced last month–Bill 12–amends the 2015 Universities Accountability and Sustainability Act by tweaking the guard rails for funding and giving the minister of advanced education the power to initiate a revitalization period for a school in financial trouble.
This is part of what Adair called a “delicate balancing act” on Tuesday, between government oversight for public funds, institutional autonomy and academic freedom. Universities are “independent academic institutions with their own governance structure between the board of governors and the senate to make decisions about their operations and degree programs they offer,” said Adair.
On the other hand, they receive just under half a billion dollars a year from the province, so the question is: “Is the department doing its appropriate role in monitoring, funding, and looking at the sustainability of the universities?”
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Adair couldn’t say whether Bill 12 was introduced in response to this audit, which wrapped up in September 2024 and included the department in a process to respond to the report’s recommendations.
Scott Stewart is the president of the Association of Nova Scotia University Teachers and a professor of philosophy at Cape Breton University. In an interview with The Coast, Stewart said he supports increased financial transparency and sustainability and supports universities using standardized financial reporting templates, as the audit recommends. However, Stewart says “the elephant in the room” is that “no amount of government oversight is going to fix the problem of chronic underfunding.”
Stewart says government funding to universities accounted for 70% of their revenues in the 1980s, which dropped to 47% in 2018. Now, says Stewart, “it’s unbelievably down to 33% in Nova Scotia, which hardly means you have a public university anymore.” He says the AG’s report concentrates on ways to control the smaller and smaller percentage of funding the government provides to universities. “It’s looking only at fiscal accountability and not the bigger picture,” he says, “which is chronic underfunding.”
ANSUT, which represents over 1400 full-time faculty, librarians, and contract academic staff in Nova Scotia, released a statement in response to Tuesday’s audit. It said Bill 12 is “not the way to hold universities accountable,” because it will take things “too far the other way.” Bill 12 gives the minister of advanced education the power to appoint up to 50% of a university’s board of governors, despite the diminishing funding to universities. The department covers one-third of the financing to universities, the rest coming from tuition, student housing and research grants.
When speaking with The Coast, Stewart said “Bill 12 puts the old act on steroids.”
He says it takes away institutional autonomy because it allows the department to decide when a university needs to be revitalized. “And then [the rest of the bill] would kick in: they put 50% of their members on the board of governors; they come up with a plan to restore financial sustainability to the institution; and then they make sure that the universities’ research aligns with government priorities. I mean, it’s very Trumpian.”
$913 million in deferred maintenance.
As another pitch for better financial accountability, Tuesday’s audit highlights the $913 million backlog in “deferred maintenance” reported to the department in March 2022. This is “the practice of postponing maintenance activities such as repairs to save costs or reapportion available budgets,” says the report. Think old heating systems, leaking roofs, accessibility upgrades and the routine maintenance of buildings–or pools. Acadia University, which received close to $170 million in operating grants from 2019-2024, announced in February that it will be closing its pool this summer because the cost of maintaining it has become unsustainable.
G Saleski is the executive director of Students Nova Scotia, a group which represents 20,000 students across the province.
They say rising deferred maintenance costs should be taken seriously “when looking at financial stability in a university” because this “makes sure our buildings are accessible for everyone.” Paying for deferred maintenance costs to improve accessibility would also align with provincial priorities of an accessible Nova Scotia by 2030.
SNS has been advocating for the importance of planning for this cost, “because deferred maintenance impacts students, faculty and staff and it shouldn’t be left out of the conversation when we’re looking at the future of funding for our institutions.”
$370 million in long-term debt.
The report did not independently audit universities but ran a financial analysis of five years of audited financial statements the 10 universities submitted to the department. It looked at surpluses, deficits, and patterns of each. It also examined the cost of infrastructure and the backlog of deferred maintenance. It examined long-term debt and debt-to-student ratios. It looked for warning signs.
The report found that universities owe $370 million in long-term debt, and some have previously needed additional funding.
The report analyzed debt-to-student ratios with one key figure in mind: $12,793. That’s the debt-to-student ratio that Laurentian University had when it filed for creditor protection, in 2021.
“That’s the very thing that, if the department is more proactive in its financial monitoring, it can identify those concerns and work with universities to address them,” said Adair.
Adair said that is one of many financial indicators to pay attention to.
One of the report’s recommendations is that the department works with universities to define exactly what financially healthy and sustainable universities look like in a Nova Scotia context, and set indicators to watch for. “The department needs to decide, ‘How do we measure and compare the 10 universities?’” The department says this will happen collaboratively with universities, by November 2025.
“Going forward,” says SNS executive director Saleski, “when we’re having conversations about financial sustainability, we need to ensure that we’re not increasing the high tuition rates. Here in Nova Scotia, we have the most expensive undergraduate tuition anywhere in the country, and we have had for years.”
When setting indicators and goals for a sustainable future, says Saleski, “we need to consider that students are fronting the cost of their education, the cost for their institutions, as well as the benefits of having 10 universities here in Nova Scotia.”
Saleski says that, along with increased accountability and transparency, “we need to ensure that institutions are financially sustainable.” For many, that means looking at their base operating grants and increasing them, “in some cases, where we know that if those increases don’t happen, students are going to take the brunt of it.”
A financially healthy university looks like one that’s “not only held accountable through transparency and sustainability metrics, through partnerships and agreements with the province, but also one that’s receiving the appropriate funding so that students don’t become further relied upon as their primary revenue source.”
Bilateral agreements
The report speaks favourably of the 2024-25 bilateral agreements signed between each university and the department, which expire at the end of March. These replaced a five-year memorandum of understanding between the department and all 10 universities, from 2019-2024.
The one-year agreements divide grant payments into chunks, which are released when performance targets are met, such as increasing student housing and reducing administrative costs.
They add new terms and conditions, which align with those recommended by the AG–the ability to audit funding, a conflict of interest clause, the return of unused funds to the department–in a new funding letter template introduced this January, which will be attached to future agreements.
These conditions are meant to act as guardrails for spending, and if new bilateral agreements are followed, they should improve accountability, according to the report.
But, they need to be longer than one year, says Saleski. “If we’re continuing with these agreements, they need to be longer,” they say, “to be sustainable. One year is not enough time to collect data, create and execute a plan.”
This article appears in Mar 1-31, 2025.
