Audit: sluggish processing and a ‘hidden deficit’ caused UA crisis

‘No issues of misappropriation’ came to auditor’s attention

Slow transaction processing and a burgeoning “hidden deficit” caused the UA to overestimate its available funds each fiscal year since 2011, according to an Institute audit that UA President Matthew J. Davis ’16 released to undergraduates Tuesday.

“No issues of misappropriation of UA funds came to our attention,” the audit read.

The report, which was requested by the UA following a summer debt crisis, indicated that the debt was caused by underlying flaws in the communications between the Student Activities Office (SAO) and the UA. The UA’s budget for FY15 was based on a cumulative balance report from the SAO that was not up to date. The SAO did not deduct the expenditures from FY14, totaling $238,692, until July 2015. This caused the UA to overestimate its balance by that amount when allocations were made for FY15.

“When it talks about settlements not being processed,” said Davis regarding the report, “that is not the UA’s purview; that is an SAO purview.”

The SAO manages transactions for the UA. Student groups submit their RFPs, or requests for payment, to the SAO, which then processes them and distributes reimbursements. When the UA creates its budget preceding each fiscal year, it asks for a cumulative account balance report from the SAO. On this report, only processed transactions appear.

“The assumption is that everything has been properly reconciled,” Davis said in an interview with The Tech, adding that student groups don’t generally ask the SAO: “‘Are you sure that these are all the transactions that we have? Prove to me that this is the case.’”

The report observed that the Finboard account has been accumulating a deficit for several years. “Since FY11,” the report from MIT Audit Division said, “funds transferred into the Finboard account were not sufficient to cover student group actual expenditures.” This “hidden deficit” was corrected during FY15, meaning that the account balance was overestimated, by an additional $71,831, at the beginning of FY15.

Going forward, the UA plans to reform its accounting system so that RFPs go through the UA before being processed by the SAO. That way, the UA can keep track of its own records to check against cumulative balance reports from the SAO. “Now what we will be moving to is a system where the expense comes to us, we check it off, then it goes to SAO, and then they process the RFP,” said Davis. “That way, there is nothing that is approved as an expense before it comes to us.”

The UA Council passed a proposal this week to increase the student life fee by $4, which would add to the UA umbrella income’s steady revenue.

The UA is also planning to form a committee to assess their finances. The committee “will be composed of faculty, staff, undergraduates and graduate students from across MIT,” Davis wrote in his email to undergraduates.

The UA announced that it was in a state of financial crisis this past June when, in an email to undergraduates, UA President Matthew J. Davis ’16 wrote that the UA finished fiscal year 2015 with an unexpected liability of $52,255.22 on its umbrella account. This is the account from which the UA allocates funding for student groups and class councils, among other expenses. The annual UA allowance of about $315,000, which comes from student life fees and other fundraising, paid the deficit after being collected in July 2015; however, this left the UA with less resources than anticipated. As a result, summer funding for student groups was halved from that in FY15, and student groups also experienced funding cuts for Fall 2015.