Nova Scotia is not effectively funding, monitoring or holding universities accountable for billions of dollars in public funds, Auditor General Kim Adair says in a new report.
Over the past five years, Nova Scotia's 10 universities received $2.5 billion from the Department of Advanced Education. These post-secondary institutions rely on Government, on average, for a third of their annual revenue.
In May 2023, the department signalled its concern with the long-term financial sustainability of certain universities, but at the time of our audit it had not made financial accountability a condition for funding.
The audit found the Province gave out $1.9 billion in unrestricted operating grants in the last five years.
"As there are no restrictions on this funding, the universities could freely decide to spend it on areas such as student aid, routine maintenance, staff salaries or executive compensation," Adair said.
We found the annual allocation of the unrestricted operating grants among the 10 universities is arbitrary and based on a formula from over 25 years ago.
In 2015, the Government passed the Universities Accountability and Sustainability Act to promote greater financial accountability. At the time of our audit, we found the department was not effectively holding universities accountable for public funds in the 10 years since the Act became law.
As a result, a pattern of year-end deficits and cash flow challenges has continued unchecked for certain universities. Collectively, universities owe $370 million in long-term debt.
We are aware new legislation was introduced in the House of Assembly in February 2025 to amend the Act. However, this was not part of the audit.
Last year, the department introduced new bilateral funding agreements to improve accountability, but the one-year contracts expire at the end of this month. These new agreements include performance targets for portions of the operating grant funding as well as terms and conditions to hold universities accountable for those funds. For example, universities with health education programs are required to fill at least 97 per cent of available seats to qualify for the funding.
"The new bilateral agreements, if followed, should improve accountability," said Adair. "We encourage the use of performance targets in future bilateral agreements."
Recently, the Government has turned its focus -- and more of its funding -- toward health education to expand existing nursing and medical programs.
Despite the investment, the department does not have a plan to advance health education priorities and there are no targets in place to assess whether the $277 million in health education funding handed out in the last five years will achieve intended outcomes. At this point it's unclear how many healthcare professionals have been added to the provincial workforce as a result of this funding.
The Auditor General makes 11 recommendations in the report. The department has accepted all the recommendations and has a plan in place to begin implementing them immediately.
"Considering the significant public funds involved, I'm pleased the department intends to explore and evaluate options for a new university operating grant funding model."
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