PRESIDENT’S PAGE Nick Shorten VP (Finance)
Mary Koziol President
Joe Finkle VP (Education)
John McIntyre VP (Administration)
RESULTS OF THE 2009/2010 MSU AUDIT Annual financial report reflects some deficiencies in various departments, but a comprehensive restructuring of the MSU budget will address financial woes Nick Shorten VP (Finance) firstname.lastname@example.org ext. 24109
The MSU is required every year to complete an audit by an external firm to ensure our financial position is accurately reflected in our financial statements. This process was performed by our auditors Deloitte & Touche LLP, with some preliminary fieldwork prior to the end of the fiscal year and most in-house work occurring in April. The audit covers the fiscal year from May 1st 2009 to April 30th 2010. The fiscal year for 2009-2010 presented a combination of both challenges and positive results for the MSU. Now halfway through this fiscal year, we are proactively addressing some of the issues from last year and developing new strategies to improve our financial situation. There are several key tests the auditors must perform to fulfill the mandate of an audit under the generally-accepted Canadian auditing standards. These tests are primarily– but not limited to– revenue recognition, completeness of investment recording, recording
and payment of taxes and ensuring transactions related to the Health and Dental plans are properly recorded. Each test has specific procedures that determine whether or not the MSU accounting statements accurately reflect its records. The audit was largely successful in this regard. Our auditors noted, “Our [Deliotte] audit did not uncover any errors or irregularities, conflicts of interest, unusual related party transactions or non-compliance with regulatory or accounting disclosure requirements.” In fact, the audit celebrates the disclosure of our transactions as some of the most transparent they have seen. Yet there are many realities that we must confront as a result of our fiscal position. The three most pressing issues that need to be addressed are our Health Plan, our Dental Plan and TwelvEighty. The MSU’s Income Statement, which details expenses and revenues added – or “netted” together, reveals the substantial impact on the bottom line under 2010 Total. This number appears staggering at first glance, however there are several key explanations behind this figure which demand elaboration.
First, the Health Plan a result, the structure of the suffered a considerable loss last plan must be changed, and the fiscal year due to a PST audit. MSU will have to either lower In 2009-2010, the MSU was the coverage or increase the notified that fee. Provided it had not we take the completed its aforementioned We created one PST payment steps, both of the most on the Health of the MSU detailed budgets Plan for a insurance plans ever produced period of should produce by the MSU. It seven years. a small amount is a budget This expense of money to has been paid be placed in that allows all in full, rather reserves and it is material lines than making not anticipated to be expanded smaller annual that this will upon for further payments, negatively evaluation. which resulted impact our in a dramatic i n c o m e one-time outflow in the audit. statement. Another issue to address is the The fees associated with inevitable fee adjustment to the both plans are low relative to MSU Health Plan, due to the other academic institutions and dramatic increase in Health need to be amended in order to plan usage by undergraduate continue providing the services students. The increase ensures that students utilize. Neither that the plan is financially viable the Health Plan nor the Dental and will subsequently produce plan have been amended since a small surplus to bolster our they came into effect in 2000 reserves. and 2005, respectively. These Secondly, the Dental Plan two areas alone account for 76 also incurred a small loss over percent of the net loss on the the previous fiscal year. As MSU’s income statement and claims and student opt-outs rise, must be addressed this fiscal the expenditures associated with year. this plan exceeded our revenues Finally, TwelvEighty saw and ate into our reserves. As a rise in revenue, yet costs
continue to be an issue. Though the cost of sales for TwelvEighty improved, staffing remains the issue most impacting the restaurant’s expenditures, primarily as a result of increases to minimum wage. The budget planning process this summer saw that TwelvEighty salaries and wages were given the realistic target of 40 percent of all sales, in combination with sound margins of 40 percent. Anticipating a poor performance from the fiscal year of 2009-2010, this term began with the goal of restructuring the organization’s entire budget. Myself, our Comptroller and the SRA Finance Commissioner James Steels assessed each department line-by-line to evaluate the strategy and projection of our budget. We created one of the most detailed budgets ever produced by the MSU. It is a budget that allows all material lines to be expanded upon for further evaluation. Though we conservatively estimated a deficit for this year, we are in a position where we can be proactive and react with sufficient information. Despite a poor financial position last year, we are poised to respond strategically to address the deficit.
AT A GLANCE
$13,158,415 total 2010 revenue - an increase from the $11,701,116 in 2009
$14,116,605 total 2010 expenditures - an increase from the $12,057,205 in 2009
$958,190 total 2010 deficit - an increase from $356,089 in 2009
The President’s Page is sponsored by the McMaster Students Union. It is a space used to communicate with the student body about the projects, goals and agenda of the MSU Board of Directors.
HEALTH & DENTAL PLANS accounted for
$726,459 of the 09/10 deficit - equal to 76%
MORE DATA FROM THE AUDIT The Statement of Cash Flows breaks down where cash is being spent within the organization into operating, investing and financing activities. Net income (excess of expenditures over revenue) has non-cash items (amortization), and non-cash working capital items (money
currently in inventory and accounts receivables, minus accounts payable) added back to show money tied up in operating activities. Investments, primarily those in capital assets, are then subtracted from operating activities to physically show how much cash has out-flowed from the MSU. The
$570,065 designated as “purchase of capital assets” were mainly expensed during the renovations to TwelvEighty. As seen in this statement, there was an out flow of $258,412 which is a strong improvement from the previous fiscal year of $814,859.
The Balance Sheet is a snapshot of the organization at any given time, which follows the ubiquitous formula of assets (economic resources) = liabilities (obligations) + equity (reserves). The main purpose of this document is to show where
transactions are taking place and how they are being paid. The key figure to note is that by incurring a net loss out, equity was eaten into as shown under the ‘Net Assets’ line, second from the bottom. Our Net Assets dropped by the same amount of
our net income under our income statement from 2009-2010. This shows that we primarily financed our deficit through the liquidation of our net assets. Moreover, our reserves remain strong, totalling more than $3.5 million.
The Income Statement for TwelvEighty shows that we have been quite successful in increasing our revenues and lowering our cost of sales, but staffing costs continue to be the main area of focus in
controlling our expenses. We anticipated these concerns in structuring our budget adjustment over the summer months and have targeted these costs to be 40% of sales. Moreover, we have
strategized to lower our costs of sale by reinventing our menu, introducing more fresh products in our food and ensuring financial controls are being closely followed.