Budget errors leave Student Union facing £110,000 deficit
The Student Union has been thrown into financial crisis after an assessment of its accounts discovered a £110,000 black hole in its accounts. The report, carried out by Vice-President (Finance) Chris Allan, found that instead of the projected £50,000 profits, an estimated £50,000 loss was incurred in the year 2004•2005. In addition, instead of the £12,000 expected surplus for this academic year, it is estimated there will be a £60,000 deficit.
This means that OUSU will be £110,000 in the red over two years. According to the assessment, the shortfall is largely due to a massive overestimation of the profits of Oxford Student Services Limited (OSSL) contained within an amended OUSU budget of January 2005. The overly optimistic projections went unnoticed at the time, despite these estimates being passed by the OSSL board and subsequent budget being passed by OUSU Council.
The budget for 2005•2006, the spending of which this year’s current executive is responsible, was based upon the January 2005 amended budget. As a result, the Student Union decided to spend more than it was actually able to afford, leaving a gaping hole in their finances, the extent of which has only just been discovered.
The January budget was presented to OUSU Council in fifth week of Hilary Term 2005, by the then president, John Blake, who said, “OUSU’s projected surplus is up over four times the original projected figure, from £12,000 to £51,000. This in itself hides a great leap forward in many of our commercial projects, which have smashed all previous records for income.” OSSL's profits in the amended budget were predicted to be over £170,000, an increase of £50,000 on the original budget.
In fact they are thought to be less than £80,000. The staggering overestimates include: • Zoo, the entz provider, for which profits were estimated to be £68,000, over three times the new estimate of around £20,000. This is the most wayward prediction in the January budget. • The Oxford Student, the profits for which were overestimated by approximately 200 per cent. • The Freshers’ Guide and sales of academic gowns, for which costs were underestimated by between £2,000 and £7,000.
Income from the two projects was overestimated by more than £8,000. Both the gowns and the Freshers’ Guide were distributed over three months before the profits were revised upwards. The January budget accurately revised OSSL expenditure upwards to £290,000. But the company failed to match this with an increase in income in line with the prediction of £470,000.
Traditionally, the OUSU budget is planned in Trinity Term using projected profits and losses for each of the Student Union’s campaigns, publications and activities. The amended budget is then published in January, which takes account of the difference between the projected profit margin and what was actually achieved.
Usually this means it is a more accurate estimate of Student Union income and frequently contains cuts in expenditure, if the previous May's projections have turned out to be optimistic. The financial assessment was triggered by the discovery last term that OSSL was missing its projected profits. Further examination of the accounts showed that the previous year's estimates had also been missed.
A Student Union press release issued this week stated, ‘Full details about OUSU’s financial status will be brought to OUSU Council on Friday of first week.’ Responsibility for this loss lies with last year’s OSSL board that created and passed the figures upon which the amended budget was based. The budget and its projections were then passed by the OUSU Executive before being brought to Council.
The procedures which led to the budget being passed by both the OSSL Board and OUSU Council are also certain to come under scrutiny. When asked why the OSSL board did not question the January projections, Chris Allan said, ”I would imagine that in January 2005 they were optimistic about the future of Zoo after having run it successfully for one term.
“Looking at the data, costs rose substantially towards the end of the year which contributed to lower profits than those predicted in the budget.” One ex-OSSL board member, who was at the meeting when the amended budget was presented by Dan Finley, told The Oxford Student, “It was the first time any of us were [examining the budget]. We asked Dan if the projections were realistic and Dan said that they were based on current income. When they were broken down it all looked sensible...
There were reasonable explanations for everything. “There was no precedent for our discussions... I don’t remember going through [the budget] in immense detail.” However, Allan confirmed that as the amended budget was drawn up in January, the Student Union was forced to use uncertain predictions: “It’s an institutional problem, most businesses wouldn’t have to rely on guesswork to that extent.
After the OSSL board passed the overestimated predictions, there was no debate in OUSU Council when the amended budget was presented in Hilary 2005. When Blake presented the budget, Chair of Council Daniel Simpson described it as coming “disgracefully late”.When introducing a motion to pass the budget at the Council meeting, Blake said, “We are well beyond the expected income and I have to say well done to the business team for that.
No questions were asked about the budget and it was passed without any opposition. Jo Lee Morrison, Christ Church JCR President at the time, told The Oxford Student: “These are really technical documents and only OUSU people would really know anything about it. The amended budget wasn’t circulated before council… Generally the budget is presented in OUSU as a done deal. Blake was authoritative and a good orator [and] my overwhelming impression was always that the financial side of OUSU was completely opaque.” When the budget was presented, Finley told The Oxford Student: “We are delighted to be able to announce such a large increase in our revenues. It has been a remarkable year and these results are the culmination of many months of hard work.
Despite the fact that he had already been elected to the position of VP (Finance) for the academic year 2005•2006, Allan said he was not personally talked through the accounts by Business Manager Dan Finley. He also stated that, as he was doing finals at the time of the amended budget, he did not spend much time examining it. “I’m embarrassed I didn’t notice this earlier. It’s never been known for the projections in an amended budget to be that far out.
The signs that the estimates were wrong have been getting stronger all through Michaelmas term.” Nevertheless, Allan also confirmed that there was no formal public review of the amended budget in Trinity 2005, when Finley and the OUSU executive were drawing up the budget for the academic year 2005 • 2006. “[In Trinity] there was no indication that anyone knew anything had gone wrong,” he said.
The results of the financial assessment have raised questions about the future of OUSU’s financial organisation. “Even if OUSU were to stop all discretionary expenditure (which would include all campaigning budgets) it could only save £10,000,” Allan said, adding, “the only options seem to be cutting expenditure or gaining a large new income streams.” Such income could only realistically come from a university grant.
A university spokesperson confirmed that OUSU had informed them about the deficit, but that there had not yet been enough time to consider the possibility of such a grant. “The amount we would give them would depend on the circumstances… The initiative for such a proposal must come from OUSU,” she said. A grant would be unlikely to be given without some serious reconsideration of OUSU’s finances.
It has been suggested that reducing the number of sabbatical officers would alleviate funding problems, but OUSU President Emma Norris said, “Any suggestions of cutting sabbatical positions must be made with care. “All jobs have responsibilities that must be fulfilled by someone. It should also be noted that as next year’s sabbaticals have already been elected, cutting sabs will not offer any short-term savings.
She went on to say that the OUSU Executive would examine the budget’s review process, adding, “I definitely want an OUSU budget committee to have a more detailed look at it in the future. “The ideal situation is for the Student Union to be a year ahead of itself financially, that is, for us to be spending last year’s profits, rather than spending as we go,” she said.
According to the assessment, this would only be possible by obtaining an amount of money equivalent to OSSL’s annual profits. Daniel Finley declined to comment. He previously told Termly Council in Trinity 2005, “Making money is not easy. Making lots of it is even harder.” His report to Council also states, ‘It is no small task to turn a £17,000 loss into a £200,000 profits [sic].
In Michaelmas 2004 Finley told OUSU Council, “[This term] has been one of tremendous success for the commercial operations of [OUSU]. Thefinancial gains made have been enormous and will safeguard the financial future of OUSU for years to come.
12th Jan 2005