Thursday, October 29th 2009

By unknown

By Alex McColl

When Mr. Ian Finlay, last year’s MSU vice-president (finance), made his 2008-2009 Financial Update, I outlined through various channels how his presentation of the MSU’s finances were inconsistent with generally accepted methods, made little sense, and suggested to me that the MSU would run a deficit in spite of his confident statement to the contrary: “It is my expectation to have a balanced budget or small net surplus at the conclusion of the fiscal year.”

Based on the MSU’s published budget and a number of the additional expenses they made public, I estimated that the MSU would run a best-case deficit of around $60,000. When the 2009 MSU audit came out last week I found out that Ian “expect a surplus” Finlay had lead the MSU to a deficit of $356,089. This deficit consumed 7.43 per cent of the MSU’s net assets. To put this into context, the 2008 deficit was $41,879 and ate 0.87 per cent of net assets. It gets worse when you consider that the $375,000 earmarked for the Quarters (1280) renovation was not part of this deficit. This will hit the 2010 and subsequent budgets.

To his credit, current MSU V.P. (finance) Andrew Caterine has already released a commentary on the MSU’s website regarding the audit. He opens with the statement that the MSU “is in fact in a strong financial position.” This statement is technically true, for now. For years the MSU had hypocritically demanded lower tuition while raising MSU fees by the maximum amount allowable. Together with burgeoning enrolment, which outgrew expenses, this lead to years of large surpluses which have allowed the MSU to accumulate a few million dollars in liquid reserve assets.

The MSU is a government which enjoys guaranteed revenues from your MSU fees. The MSU has a monopoly for many of its on campus businesses. Since the deficit consumed one sixth of the Operating Fund’s Reserve Assets, the status quo won’t leave the MSU in a strong position for long.

The Marmor has suffered from years of back issues needing to be completed, printed and shipped. This is given as the main reason for the $129,367 increase in the Marmor deficit this year. However, it should be noted that in 2008 the Marmor shipping expense was $0.00 while it ran a $75,129 deficit. It is still unclear how much it would cost simply to print and ship a single edition of the yearbook. The Marmor management should be praised for their ability to keep administrative costs, and wage and salary costs constant over the past two years. The yearbook requires a balanced budget going forward based on realistic costs and a concrete plan to deliver yearbooks on time. Not doing so will only cause similar administrative and budgetary hardships in the future.

The Ombuds office had the most dramatic increase in costs at 872.5 per cent. This increase from $15,888 to $154,512 is a catch-up payment to make up for the MSU’s share of the joint costs of running the Ombuds office which the MSU has not fully paid for a number of years. The correct payment to the Ombuds office is around $50,000 per year. This is still a sizable increase and needs to be properly budgeted for in the future. The fact that the expenses were not being properly paid and recorded for years leads me to question the transparency, accuracy and integrity of the MSU’s fiscal management.

Although the Dental Plan deficit was only $45,834 the swing from surplus to deficit means that the Dental Plan did $112,957 worse in 2009 relative to the surplus it ran in 2008. This is the result of both decreased revenue from more students opting out and from the students who remain in the plan making more claims.  Evidently students are paying attention to the “Free Whitening” advertisements that off-campus dentists run in this very newspaper. The MSU Dental Plan is a separate fund with around $193,000 worth of accrued past Dental Plan surpluses remaining. I recommend that the MSU removes coverage of cosmetic from the coverage in order to reduce the amount of claims made and to keep costs down. Otherwise the MSU would be forced to increase the dental fees to make up for the more expensive claims.

In his 2008-2009 Financial Update Mr. Finlay made the following statement: “The MSU wants to maintain our commitment to students in providing meaningful work at fair wages, to the tune of over 300+ part-times positions.” In 2009 the MSU spent over $2.28 Million on wages and salaries to its employees (this includes students as well as full-time non-student employees).  This is an increase of $88,053 or 4.01 per cent. However, this figure includes the considerable savings made from Quarters being closed on Saturdays in the second semester. When you remove 1280 from the calculations, the MSU increased wage and salary expenses by $139,713 or 8.16 per cent relative to 2008. In fact, Underground, Undercovers, and Short Stop each spent more on wages and salaries than they generated in sales revenue less cost of goods sold. While it is obvious that should 1280 break even it would eliminate the deficit, it is worth noting that few profitable businesses list job creation as an aim. As long as this aim remains, there is a high probability of the MSU being locked into operating fund deficits.

With regards to 1280, the first issue that needs to be clearly addressed by Mr. Caterine this year is how the $375,000 renovation will impact the 2010 budget and how the amortization schedule will impact future years. The only way for students and the SRA to comprehend where the MSU will fall at the end of 2010 is for Mr. Caterine to be diligent in outlining the situation and working with the SRA to budget accordingly. The second issue is in regards to the Quarters wage/salary expenses. While it is true that the Quarters/1280 deficit shrank from $424,921 in 2008 to $376,556 in 2009, the aforementioned Saturday night closures heavily skewed the results. I forecast that should Saturdays return to normal, then the wage/salary expense will increase to around half a million dollars a year. This would cause the 1280 deficit to increase to about $450,000 in 2010. The March, 2010 Ontario minimum wage increase will force further increases in the wages of 1280 employees. The first step towards fiscal responsibility at 1280 is to end the MSU’s policy of paying more than the minimum wage.

The SRA cannot be entirely blamed for voting in favor of ruinous expenditures if the V.P. (finance) gave them a false sense of fiscal security. That being said, the SRA elected Mr. Finlay, gave him a 22.4% raise, and failed to hold him accountable by demanding a proper annual budget review as required by MSU Bylaws. If students don’t care enough to hold their representatives responsible, then they shouldn’t ask for their $356,000 back.