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Union Facing Financial Black Hole

Sep 24 2007 23:23
Ashley Brown
ICU is facing the prospect of "belt tightening" after auditors revealed a massive black hole in the reserves.
Either the amount left in the union reserve, or the beer prices for next year. We're not sure.

A decision 18 months ago to take money from Union reserves may have lasting repercussions for club finances. The reserves are now far below the amount needed to keep the organisation running should a traumatic event occur, leading to the risk of "belt tightening" this year.

this sum is no where near enough to cover the items outlined in the reserves policy
Paper to the executive committee

In the spring of 2006 ICU Council approved £384,000 for the Beit redevelopment project, while it was apparently not in full possession of all the facts, nor understanding the consequences of its actions. The committee left ICU with just £215,000 in its reserve fund to cover emergency expenditure in the event of a major catastrophe or large cut in subvention from the College.

According to a paper by current DPFS Chris Larvin this expenditure "should never have been authorised", as it has left ICU with no means to cover its legal responsibilities in the event of an expensive unforeseen circumstance, such as a major fire in the bars. In that instance staff costs would have to be paid even with the bars having no income.

Low Top-ups

It is estimated that the reserves should sit around £1m, making them £600,000 adrift with more building work planned. The reserve would generally be topped up year-on-year through an operating surplus, but this is not happening quickly due once again to the redevelopment. Much of the extra money Miss Misbahuddin claimed to have sourced from College for the first phase was in fact a loan, not a donation: around £1m is being paid back over five years. Profits from trading are also unable to help with the reserve deficit, having been wiped out due to the costs of last year's restructuring. Indeed, part of the money for the new awning for the quad came from the executive committee's reserve fund rather than trading.

Council Confusion

The auditors, ICU officers and College are now asking serious questions about how ICU has found itself in such a predicament. It appears to be the result of an ill-informed Council having the wool pulled over their eyes. In the sixth meeting of ICU Council during 2005-2006 ICU President Sameena Misbahuddin sought approval to spend £384k on the Union redevelopment, taking money from the Union's general reserve. The request was not presented as a separate item but buried in a report, allowing it to slip by with less scrutiny than would normally be expected. Council allowed the money to be taken from the reserve after reassurances from the President, being told that £215k would remain. Live! journalists questioned the wisdom of depleting the reserves at the time, but were told by the President that they were there for big projects such as the redevelopment and were wasted just sitting there.

It seems that for most of the 2005-2006 session Council was not properly informed of the Union's financial activities, with the masterplan being vigorously forced through.

Indefinite hold

With the finances in such a shambles the redevelopment looks to be even more of an expensive and lengthy proposition than it first appeared. Indeed, College seem likely to continue withholding extra money because of the mess, putting the next phase on indefinite hold.

Both the current President and DPFS have made it clear that no immediate cuts are planned, but the Union will have to make cost savings from somewhere. Failing that, Stephen Brown may have to use the skills he learnt last year as RAG chair and take some collecting tins to the Blue Cube.

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Discussion about “Union Facing Financial Black Hole”

The comments below are unmoderated submissions by Live! readers. The Editor accepts no liability for their content, nor for any offence caused by them. Any complaints should be directed to the Editor.
Sep 25 2007 04:25
 

Could people not auction off the Sabb team responsible a la Slave Auction night, but instead keep the profits and never take the aforementioned Sabbs back? That should get another ?20 back towards fiscal security...

Sep 25 2007 09:21
 

Wasn't the Summer Ball just gone a big success? Wasn't it supposedly raising money for the Redevelopment Fund?

How much did it actually raise in the end?

Sep 25 2007 09:43
 

About ?12k apparently. Quite a long way off the budgetted profit of ?44k. Did someone forget ticket printing?

4. IMHO   
Sep 25 2007 11:23
 

I think this shows why Council is incapable of dealing with important financial decisions and we'd all be better off if this sort of business was dealt with by the Trustee Board. Of course, this doesn't mean Council shouldn't be consulted.

I'd also be interested to know what sort of advice the Union's finance team were offering to the Executive Committee at the time this decision was made.

5. nd   
Sep 25 2007 12:49
 

'as it has left ICU with no means to cover its legal responsibilities in the event of an expensive unforeseen circumstance, such as a major fire in the bars.'

No consequential loss insurance then? Tut tut.

Sep 25 2007 16:04
 

Inept members of council appear to have pulled a fast one, without considering where the money would actually come from. Union has insurance, but in the event of financial catastrophe the reserve is supposed to keep us solvent until we can sort out more permenant solutions.

At least our current Sabb team is keeping people informed instead of covering up. I don't envy the job of trying to sort out the financial mess.

Sep 25 2007 18:15
 

We have a reserve policy? Kept that one quiet.

Sep 26 2007 22:48
 

So what is the trustee board doing as we speak?

Was this all because the council was incapable to deal with money or was it because the sabbs were trying to hide the truth from the council?

Sep 29 2007 00:16
 

"'as it has left ICU with no means to cover its legal responsibilities in the event of an expensive unforeseen circumstance, such as a major fire in the bars.'"

d?j? vu a http://live.cgcu.net/news/180

"The elimination of reserves which are linked to specific areas of the union's activities such as the bar or the shop is a particularly risky, if currently unavoidable situation. Should for example the Union Bar suffer a major fire over the summer there would be no funds available for renovation."

Sep 30 2007 21:25
 

We made what we felt was the best decision for the Union at the time, taking as much as advice and information into consideration as we could. There was certainly no false information given.

If 1 & a half years on the situation has changed, which it seems to have, then it needs to be addressed, but simply blaming the past sabbaticals and council isn't really the answer.

11. Bob   
Sep 30 2007 22:53
 

There was a large group of people (me included) who voiced our concers with the likes of Mr Tibbits at the ridiculous situation of spending all the reserves on the building. The decision was "hidden" nicely in a President's report to Council. The past sabbaticals are entirely to blame.

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