More money, more problems

By Kern Vijayvargiya and Catherine Bratic     10/2/08 7:00pm

Colleges and clubs at Rice will soon find their finances extensively restructured under a new proposal that will move all external accounts on-campus and impose new restrictions on check-writing and tax records, according to Vice President for Finance Kathy Collins. While the details of the plan, from specific proposals to the date when transitions will begin, are not yet finalized beyond the closure of the accounts, many organizations are already dreading its potential consequences.

The proposed plan

The plan would create a separate fund for each student organization in the BANNER financial system, a banking service offered by an external vendor which was established at Rice in the 1980s. The new system would move student funds from outside banking and checking accounts into this in-house system and would allow organizations to maintain multiple accounts for different purposes.

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In the current arrangement, student organizations have their own accounts at outside banks. These organizations include both graduate and undergraduate student groups as well as each of the residential colleges. As of June, there were 188 of these accounts at JPMorgan Chase with a total balance of $580,720. This does not include the value of student organization accounts at other banks in the area.

Each residential college handles its funds differently. For example, checks paid out of the Hanszen College fund need two signatures, whereas the Jones College fund only requires one signature. Under the plan, college treasurers and club leaders would still be responsible for accounting for all financial transactions.

In the past, the Office of Internal Audit has looked into improving the financial system. Over the summer, Collins talked with President David Leebron and researched the financial systems at other schools, comparing them to Rice's current arrangement.

Collins cited several concerns with the present arrangement. Currently, student organizations typically associate Rice's taxpayer identification number with their external accounts. This system leaves the university liable for overdrafts. Also, bank fees to maintain these outside accounts average $4,000 a month.

In addition, the financial activity of student organizations is not reflected in Rice University financial statements or tax returns, Collins said. This may result in inaccurate financial statements and understated expenses. There is also a risk that appropriate tax reporting is not occurring. For instance, the IRS requires Form 1099 for vendor payments in excess of $600 and a W-2 for all salary payments. Under the new system, all IRS reporting would be handled by the Controller's Office.

Furthermore, gifts received in support of student activities may not be acknowledged appropriately.

Collins said that the new system would be beneficial for students. First, BANNER would provide a financial history from year to year. Collins said this would be useful for student groups during leadership transitions. Treasurers would have viewing access on BANNER to monitor whether checks cleared, and the amount of available funds.

Another advantage that the system may provide is legitimacy to student organizations, Will Rice College Treasurer Michael Rog said.

"If I go to a company as a club and try to do business with them, I don't have the reputation of the university behind me," Rog said. "If I go to them and say I am Rice University, and I can give you a check from a Rice University account, there's an implied legitimacy to that. It gives companies a lot of confidence in doing business with us."

Student responses

However, despite the claims to the merits of the proposed system, club and college leaders are concerned about how the control given to the University under the new system could detract from their financial autonomy.

Shamoor Anis, Muslim Student Association President, said that he is concerned this new financial system would harm clubs' freedom to spend their own money.

"Financial independence is very important," Anis said. "Because we want to make sure that if something does not sit well with the administration, that they cannot control the money that we have raised."

According to Sarita Panchang, the co-President of the Partnership for the Advancement and Immersion of Refugees club, the new system may pose an undue burden on new student organizations because of the added recordkeeping.

"It makes handling financial affairs a lot more bureaucratic and involves a lot more paperwork," Panchang said. "That is a problem because we are a new organization at Rice with a large outreach but a developing volunteer base and limited funding. We want to use these funds to develop the program and don't have the resources or volunteer base for enough people to manage all our financial affairs as that would require."

One of Rog's reservations about the new system is a fear that the new system could cause delays in accessing student money.

"If 20 people sign up for an event, and then two more show up at the last minute, how do you pay for the extra two?" Rog said.

Collins said it is important to understand that the details of the plan are still under discussion and development.

"I want to stress that this is a work in progress," Collins said. "We do want to hear the concerns, and I am happy to meet with students."

The new system will not be implemented immediately. According to Collins, there needs to be a transition process to allow written checks to clear and for certificates of deposit to mature under the old system. In addition, the process for closing the current bank accounts requires a letter from Rice indicating a date to close specific accounts.

Lovett College Senator Alexander Wyatt said the lack of a concrete plan was the most frustrating part of the process.

"Kathy Collins seems to have a complete disconnect with the student body," Wyatt said. "She's unaware of the concerns that we have presented to her. I'm not sure if this is because she doesn't have the time to listen to these concerns or rather that it is her position of power and prerogative to make these changes without our input."

Wyatt encouraged all students who might be affected by the policy to attend the Student Association meeting at 10 p.m. on Monday night to learn more about the policy and make sure that their concerns are heard.

The Jesse H. Jones Graduate School of Management's student clubs will be the first organizations to transition into the new BANNER system. Their finances will be handled by the Jones School's Business Officer. Collins said that this would serve as a test case. During the transition period for the rest of the university, each club and college would be assigned a staff adviser to help them through the changeover.

Jones College President Daniel Hodges-Copple said that saw merit in the new system despite his reservations.

"I think that there is some real benefit to consolidating the college accounts," Hodges-Copple said. "I think it has the potential to make it a lot easier for everyone. I just want to make sure that they are mindful of all the challenges we face."

The presidents of the other eight colleges declined to comment individually on the new financial plan to the Thresher, instead issuing a statement on their views, which is published alongside this story.

Letter from the college presidents

Dear Thresher,

We would like to take this opportunity to address the discussion over changes to the current financial structure of student-run organizations and residential colleges. When this idea was initially presented to us, we were naturally concerned about the implications of such a plan on the autonomy of the colleges that we work so closely with and the independent student organizations that make Rice unique. Upon reflection, we were able to acknowledge that some aspects of financial restructuring may be beneficial to many organizations. For instance, we think that access to BANNER, Rice's financial accounting software, could enhance institutional memory of how money is spent within organizations. Furthermore, the ability to make deposits to our accounts here on campus will allow for easier transactions by club and college treasurers.

However, as the proposal for this restructuring is developed, we would like to note some points that warrant careful consideration. We realize this plan is far from being formalized and expect that the Division of Finance will take our concerns to heart.

First, we were immediately concerned about changes to students' ability to receive reimbursement checks in a timely manner. Currently, most clubs and organizations value the agility that comes with having their own checkbook. We feel strongly that any plan put forth must not impede the speed and frequency of transactions made by colleges and clubs and the necessity of quick reimbursement.

Second, most colleges and a few clubs have some sort of external investment, be it in the form of mutual funds, savings accounts, or CDs. We want to ensure that these organizations can maintain accounts in which their money will continue to accrue interest. We believe that the financial prudence and foresight shown by these colleges and clubs should not go unrewarded because of changes to the structure of their accounts.

Third, while the adoption of BANNER by colleges and clubs offers several advantages, we want to make sure that organizational accounting does not become overly burdensome to treasurers. Issues such as the amount of access student treasurers have to BANNER must be addressed so that accounting remains smooth and easy for students. We would also like to see any increase in paperwork for student-run organizations kept to a minimum.

Fourth, any change from the current accounting procedures to a more consolidated system must address issues associated with the transition period. Clubs and colleges need access to their bank accounts daily and unforeseen expenses are common. In addition, closing accounts involves fees that colleges and clubs have not budgeted for and may find difficult to pay. We ask that regardless of the form a change may take, the administration assists student-run organizations through this complicated situation.

Finally, a consolidation of accounts under the Rice financial structure raises issues associated with organizational autonomy. We believe that Rice does an exceptional job of fostering student initiative and student leadership by allowing clubs and colleges to operate outside of direct University control. This genuine autonomy is one of Rice's greatest strengths. While administrative financial oversight has always been a part of the way in which colleges and clubs operate, we are wary of complicating this procedure. This is especially pertinent to organizations that draw significant funding from sources outside of the University. Furthermore, consolidating funds under the Rice financial system may present a conflict of interest for media organizations responsible for commenting on the University.

As a proposal takes shape, we are confident that the administration, in association with leaders from colleges, clubs and student organizations, will address the above issues while ensuring that student organizations continue to flourish. For anyone interested in this issue, there are multiple ways to express your opinions and concerns. We encourage you to attend the Student Association meeting on Monday, Oct. 6 at 10 p.m. in Farnsworth Pavilion. Kathy Collins, Vice President of Finance, will be speaking on this matter and answering questions. If you have any questions that you would like addressed at this meeting, please send them to Student Association President Matt Youn. In the meantime, feel free to contact any of us.

Chris Goldsberry

Rahul Agrawal

Abbie Ryan

Bo Qiu

Daniel Hodges-Copple

John Land

Dana Helbling

Claire Shorall

M. David Albers

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