Executive Summary


Investigation Report to the Minister of Education, Province of Ontario regarding the Toronto District School Board

August 19, 2002

I was appointed under the Education Act of Ontario to investigate the financial affairs of the Toronto District School Board ("TDSB"), especially the financial reasons for their failure to submit a balanced budget for 2002-2003. I performed the investigation in association with members of my firm. We met with most of the TDSB's Trustees and many of the senior Staff, as well as officials at the Ministry of Education ("Ministry"). We reviewed written and oral submissions from the Trustees, and applicable TDSB documents including those submitted to the Ministry.

On July 31, 2002, TDSB's Trustees voted to not submit a budget to the Ministry of Education for the 2002-2003 school year. The Trustees thereby were in violation of the Education Act. As of July 31, 2002, the TDSB's estimates for 2002-2003 indicated a deficit of $89.5 million. But, when restructuring costs and other possible adjustments are incorporated, our estimate is that TDSB's deficit would exceed $140 million.

The TDSB is the largest School Board in Canada. The demographics of its student base are in many ways different from those of most other School Boards in Ontario. TDSB is responsible for about one-seventh of the Ontario-funded School Board population. On average, in the past four years, the taxpayers of Ontario have provided about $2 billion per year to the TDSB.

Data shows that the TDSB has received at least its proportionate share of Provincial education funding. The direct costs of the TDSB's additional programs for high-risk (urban) youths are extensively, or fully, funded by grants, at least to the extent that we could ascertain under our financial mandate.

We reviewed the Province-wide historical funding and expenditure statistics in an attempt to ascertain the validity of the Trustees' concerns. Many Trustees have complained extensively about the funding of the TDSB. Our mandate does not include a review of the Provincial educational funding formula. However, we delved into those Trustees' assertions that came within our terms of engagement. We do not agree with many of the Trustees' complaints, for the reasons specified in the body of our report.

The Trustees have stated that their principal focus should be upon the education of their Elementary and Secondary school students. It would logically follow from their comments that the Trustees should have been voting to spend a large portion of the available dollars on classroom activities. The financial data that we reviewed have some accounting inconsistencies. Nevertheless, we have serious concerns that a disproportionate share of available funding dollars have been, and are being, diverted away from the classrooms.

Since 1998, the Province has provided $912 million for the TDSB to transition itself over five years to the Province-wide education standards. Over three-quarters of the nearly $900 million that has been spent to date did not go to direct classroom activities. Significant transitional resources were directed to central administration, school secretaries and supplies and school operations. A figure of three-quarters' usage on non-classroom expenditures requires careful examination.

The statistics on how annual budget money, other than the $912 million, was spent shows the same non-classroom spending orientation of the Trustees, but to a lesser degree. It is granted that the separation of classroom from non-classroom activities is subject to debate. For example, teacher curriculum preparation time appears to have been accounted for differently over the years within the TDSB, and is different among the School Boards. However, after allowing for these data deficiencies, it is still clear that TDSB has to re-examine how it spends available taxpayer money, and who are the beneficiaries. Improvements are being made, but the progress towards real savings is slow.

Various TDSB Trustees listed for us many concerns of theirs and their constituents. A large number of the Trustees' concerns have little or no relationship to how the Provincial government has defined "Education" at the Elementary and Secondary school level. To some Trustees, virtually every societal issue is thought to have education roots. However, the Province has funded education based on a clear definition of what constitutes Elementary and Secondary education. Trustee spending beyond the Province's education definition obviously will lead to a cash budget shortfall.

Trustees of School Boards have responsibilities to the students, teachers, various education system stakeholders and to the taxpayers of Ontario. Some TDSB Trustees do not agree that they have broad responsibilities, such as to Ontario's taxpayers. Where economies and efficiencies exist within TDSB, they ought to be pursued. Based on the evidence that we saw, the Trustees' voting patterns do not show a steady progression of trying to obtain efficiencies and to transition to the government's educational definition and funding program. Meetings of the Trustees too often seem to be dysfunctional and are not focused on improving the education of students.

To a large extent, the Trustees have chosen to maintain (and in some cases to expand) the former Toronto Board of Education's program delivery model. The TDSB has elected to operate a number of supplementary programs, unlike other Ontario School Boards. The Trustees, and at least some of the senior Staff, somehow continue to believe that permanent changes to existing delivery models are not necessary, because additional Provincial funding will be forthcoming.

TDSB has essentially exhausted $912 million that was provided to transition to the Province-wide standards. Yet, many of the necessary TDSB structural changes have not been made over the past four years, such as the phasing-out of non-funded activities. The existence of non-funded programs and the absence of transition dollars for 2002-2003, therefore became instrumental in the Trustees failing to prepare a balanced budget for 2002-2003. The Board now finds itself in a position of having to make an immediate transition that was expected to evolve over a five-year time frame.

In our opinion, both the Staff and the Trustees are responsible for the current budget deficit. Over the past four transition years, the Staff failed to identify and recommend the requisite dollars of budget efficiencies that would have enabled the TDSB to operate within its available resources. The Trustees, as a group, have demonstrated a clear reluctance to accept necessary structural changes, such as necessary school closures. Many Province-wide standards were partially or fully ignored by TDSB at the very same time that the Board was accepting and spending the transitional funding of over $900 million. In essence, the taxpayer-funded transition dollars were not used for their intended purpose.

Many of the TDSB's inefficiencies and discretionary programs are addressed in our budget recommendations. However, attaining the necessary cost savings for the 2002-2003 school year will be difficult and will exact significant consequences in program delivery. The impact of the recommended actions could have been mitigated, or perhaps avoided, had the Trustees introduced a gradual implementation over three or more years. Nevertheless, the 2002-2003 budget can be balanced.

Cost savings will occur gradually for several programs of the TDSB. A principal reason is that many TDSB employees are unionized, and have severance arrangements that will be very costly to the TDSB in the next few years.

Throughout our investigation, two matters repeatedly arose: the decision-making conduct of some Trustees, and the effects of previously-negotiated union contracts. Both affected what action could be taken at this date to effect otherwise achievable cost economies and efficiencies. As an example, we considered a proposal to replace a fraction of the School Board's in-house, unionized caretakers with external, non-unionized cleaners. The replacement of caretakers was not deemed to be feasible because of union restrictions against using non-unionized workers. The change to contract cleaners was expected to generate annual savings of $5.6 million. The Trustees have literally locked themselves into inflexible union contracts that prevent savings.

Twelve Trustees of the 22 voted to not submit a balanced budget for 2002-2003. Interestingly, the 12 together appear to represent constituencies with less than one-half of the TDSB's students. Nevertheless, the 12 constitute a majority of the Trustees and can vote to not implement what we believe are many reasonable cost efficiencies. A deficit will therefore result in 2002-2003, or is probable.

Consequently, given the repeated decisions of the Trustees to not provide a balanced budget for 2002-2003, we are not confident that cost savings will be approved. A deficit is contrary to the Education Act. Accordingly, we are recommending to the Minister that control and charge over the administration of the affairs of the TDSB should be vested in the Ministry, in accordance with Division D of Part IX of the Education Act.

In summary, in our opinion, the majority of the TDSB Trustees have simply ignored the Government's concept of having education equality across the Province. Nevertheless, these Trustees accepted a special grant of $912 million, which was intended for transitioning TDSB to the Province-wide education standards. However, the dollars were not spent for their intended purpose of restructuring the TDSB's programs, so as to obtain cost efficiencies. Equally important is that much of the transition money did not reach the classroom, for direct student benefits. Instead, the transition dollars and other budget money was spent on a variety of non-funded programs. Overall, TDSB's expenditures were often well in excess of what other School Boards were incurring per student.

TDSB's current financial crisis should have been easy to predict two or more years ago. Decisions could have been taken many months earlier to head off problems. Quite obviously, the transition and other budget money was not being used to restructure TDSB so as to make operations more efficient and effective. An assumption seemed to exist in TDSB that whatever dollars were spent would somehow be provided by the government. Inappropriate financial management therefore is the major reason for the deficit budget for 2002-2003.