Surge in spending hits SCC cash flow

By Diana Hall and Mohamed Omar

Ryersonian Staff

Severe overspending has rendered Ryerson’s mecca of cost-saving student services fiscally frail and tight on cash.

Not only is the Student Campus Centre (SCC) dealing with a $63,154 operating deficit in this year’s budget, but it also started the 2013 fiscal year with less than $13,000 in operating cash — a gargantuan decrease from the $929,735 it had the previous year.

The Ryersonian obtained audited statements from the Palin Foundation, the not-for-profit entity that runs the SCC, which indicate the building had $372,939 in cash at the start of 2013 fiscal year.

But an accompanying report from SCC general manager Michael Verticchio called the figure “deceiving.” The Palin Foundation allocated $360,013 in restricted contributions from the available cash to recipients like the Ombudsperson’s Office, an independently run office in Oakham House.

That leaves the foundation with $12,939 overall, a situation the report calls “unacceptable.”

“At the moment, I am unclear on how much cash we can expect to save by the end of the year considering we are six months into the fiscal year,” Verticchio wrote.

The drop in cash from 2012 to 2013, the report states, is “caused by the (operating) deficit, a dramatic increase in accounts receivable, a dramatic decrease in accrued liabilities, and higher than expected spending on capital purchases.”

Capital purchases are investments in long-term assets, such as infrastructure upgrades.

While the audited statements contain information on fluctuations in accounts receivable — money an organization doesn’t yet hold but expects to receive from clients — and accrued liabilities, — an incurred expense that hasn’t been paid — specific details on which capital purchases and projects begged for more cash are unclear in the statements.

The Ryersonian approached Janice Winton, a Ryerson representative on the SCC’s board of directors, for details on the board-approved capital expenditures, but she directed requests for comment to the Ryerson Students’ Union’s (RSU) vice-president operations, Ifaz Iqbal.

Julia Hanigsberg, vice-president of administration and finance at Ryerson, did the same. Iqbal, who is the Palin Foundation’s treasurer, did not respond to requests for comment, and neither did Verticchio.

Although Melissa Palermo, president of the RSU who also sits on the SCC board, said the unexpected increase in capital spending was invested in “general maintenance and repair of the building,” she too would not provide specifics on which projects demanded the extra cash.

Palermo said the SCC had to take out a loan “to get through the summer months” — which the general manager’s report states has amounted to $200,000 to date — she added that the arrival of SCC funding from an annual student levy would free the Palin Foundation from having to borrow more cash.

Julia Hanigsberg, vice-president of administration and finance at Ryerson, did the same. Iqbal, who is the Palin Foundation’s treasurer, did not respond to requests for comment, and neither did Verticchio.

Although Melissa Palermo, president of the RSU who also sits on the SCC board, said the unexpected increase in capital spending was invested in “general maintenance and repair of the building,” she too would not provide specifics on which projects demanded the extra cash.

Palermo said the SCC, which was built in 2005, had to take out a loan “to get through the summer months” — which the general manager’s report states has amounted to $200,000 to date. She added that the arrival of SCC funding from an annual student levy would free the Palin Foundation from having to borrow more cash.

However, the report said the SCC still had to turn to overdraft financing to pay bills in September and October this year, and the possibility of not requiring “bridge financing” in summer 2014 is “highly unlikely.”
Verticchio also wrote that the foundation has “overly optimistic assumptions about the level of surpluses, cash reserves and when we will be able to fully (fund) our obligations.”

Despite the foundation’s financial shortcomings, Verticchio has asked the board to consider allocating a total of $90,000 to fund projects such as replacing the elevator in the aging Oakham House and manufacturing and installing a rooftop ladder and safety railing. He also wants to purchase a new display screen system for the SCC, which would include the computers, two screens, software and training.

The general manager also wants to hire a project manager and architect to oversee two bathroom renovations in Oakham House, noting that the facelift could cost more than $250,000.

“Our bathrooms are currently in very poor shape and unappealing to (just) about anyone who uses them,” Verticchio wrote in his report. “Student centre staff have noticed an effect on business as the bathrooms are the student centre’s largest complaint received from clients.”

But even as the board considers throwing money into these proposed projects, the building still faces outstanding structural problems. Construction on one of the SCC’s conference spaces, the Margaret Laurence Room, has lasted for more than one year.

Verticchio pointed to faulty payment schedules with contractors working on the room and unfinished projects as obstacles to managing capital expenses and repairs.

“Contractors have been paid in full, but the project is not finished. Electricians and trades need to come back to address the deficiencies and the issue of payment is sure to come up,” he wrote.
Structural repairs aren’t the only expenses weighing on the Palin Foundation’s wallet.

The cost of wages and benefits increased to $2,005,433 by April 30, 2013, a $298,925 jump from the previous year’s spending. According to the report, “general and administrative” costs came in at $310,261, up from $261,405, and food and beverages cost the foundation $1,177,670 — $274,396 more than in the previous school year ending on April 30, 2012.

Although Ryerson president Sheldon Levy said he hasn’t seen any recent reports on the state of the Palin Foundation’s finances, he has heard about the SCC’s financial woes.

As Ryerson owns and leases the SCC — and because the university contributes $400,000 annually to the building’s operational funding — Levy said the school can’t let the SCC fall into a state of disrepair. He added that he plans to follow up on The Ryersonian’s findings.

“I think the university has to ensure that the student campus centre is operational, (that) it’s working for the students and that it is fiscally responsible,” Levy said. “What we would do (to intervene), I’m not sure.”

If the crux of the overspending problem came from a lack of funds rather than mismanagement, Levy said the school would consider increasing its annual contribution to the foundation (which amounted to $392,850 at April 30, 2013).

The Palin Foundation also raked in $1,928,150 from a $30 per semester student levy dedicated to the building’s operations and upkeep.

Verticchio said in his report that the foundation will “attempt to reduce spending by at least $100,000.”

At the next board meeting, management hopes to propose a new budget focusing on rebuilding cash balances rather than breaking even.

The building’s management will also work to revamp the centre’s monthly financial statement reporting, which is “fairly simplified” and “lacks accurate information.”

This story was first published in The Ryersonian, a weekly newspaper produced by the Ryerson School of Journalism, on November 27, 2013.

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