For-profit and Cost Recovery Ventures at Post-secondary Institutions
The Department of Innovation and Advanced Education provides funding for post-secondary institutions in Alberta. As part of its mandate to improve Alberta’s performance in advanced education, the department made financial sustainability for institutions a priority in its 2015–2020 business plan. The government recently announced a review over the next two years of the funding model for institutions, reinforcing the importance of stable and predictable funding for post-secondary institutions.
What we examined
We examined whether the department has documented its expectations and guidelines for postsecondary institutions entering into for-profit and cost recovery ventures. We also examined whether the department has processes to provide effective oversight of boards entering into, and monitoring the success of, these ventures in their institutions.
The department does not have adequate processes to oversee the unique risks that post-secondary institutions take on when they generate revenue from for-profit and cost recovery ventures.
As a result, ventures with the intended purpose of reducing an institution’s reliance on public funding could, in fact, increase the risk exposure and ultimate cost to Albertans.
What we found
Department expectations and approved guidelines for institutions that seek to participate in for-profit and cost recovery ventures do not exist. Without these expectations and guidelines, the department’s oversight processes of boards’ monitoring the risk management of these ventures is not effective.
What needs to be done
The department must document its expectations in terms of desired results and risk management, and formalize guidelines to support these expectations for institutions participating in for-profit and cost recovery ventures. The department must develop and follow a process for ongoing communication of these expectations and guidelines to all institutions.
The department must strengthen its processes to assess whether boards have ensured that their institution’s management have appropriate policies and controls to mitigate risks regarding for-profit and cost recovery ventures. Effective department oversight must include obtaining, from institutions, complete information about proposed ventures and the results of their subsequent operations.
Why this is important to Albertans
An increasing number of institutions are looking for new revenue sources to reduce their reliance on government funding. Without adequate expectations, guidelines and oversight from the department, ventures designed to reduce institutional reliance on public funds will result in unjustifiable risk exposure or cost to Albertans.