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Salient. Official Newspaper of the Victoria University Students' Association. Vol 42 No. 21. September 3 1979

A Legacy of Financial Problems

page 8

A Legacy of Financial Problems

Money, organisation, administration: surely these three things are the heart of any body such as NZUSA. Well some may think so, but it is not my view. In essence NZUSA is its 38,000 members, and the test that must be applied to it, as an organisation, is its effectiveness in presenting the views of those members, and where possible actioning them. Money and administration are merely the tools that are used to achieve these ends.

However money does assume some importance when one's activities are limited by the lack of it, and presently NZUSA is broke. In this climate the Finance and Administration Commission (which is charged with consideration of matters of money and the like) has enjoyed a reputation of "being the place where it all happens." However at both Councils this year the spotlight has moved away from F&A, generally onto Education Commission, where NZUSA's policy and activities in this vital area are planned.

The reason is basically that NZUSA has been studying the economic philosophies of both the Labour and National governments over the years. When things got tricky for New Zealand, both governments started running a tight ship and praying frantically for the discovery of oil off Maui. In its case, NZUSA is running a tight ship and praying for the Student Travel Bureau to pay off its losses and bale the organisation out. It must be admitted though, that compared with the chances of a major oil find, STB is a very safe bet, like say four kings.

Some Accounts Presented

I have already reported at some length on the position regarding the Student Travel Bureau in an earlier Salient, and the only thing that is worth adding at this stage, was that STB's Annual Accounts for the period ending 31 March 1978 were presented showing a profit of $17,000. Not of course that that represents any money in the bank, or dividends to NZUSA (the shareholder), there are still a few debts outstanding, around $200,000 worth. However the profit in the 1977/78 financial year lends credence to the directors' claim that STB Ltd may well be declaring dividends within four years (the profits in the following years are expected to be considerably larger than this year's). So it seems that STB is on the way up. It was remarked that this was probably the first profit that STB had ever made.

NZUSA's accounts for the year ended 31 December 1978 were also presented to Council. They were not quite as encouraging as STB's. At 31 December last year, NZUSA's balance sheet showed a net deficit of about $10,000 (ie its liabilities exceeded its assets by that amount). Because of the vagaries of accountancy, this figure is a little bit gloomier than the real situation. The real situation is that NZUSA's deficit is actually about $3,000 (chicken-shit!). However NZUSA is compelled to live with this unpleasant fact of life until STB comes alive, at which stage the balance sheet will rapidly begin to improve.

The reasons why an improvement in NZUSA's books depends on STB's recovery is due to the relationship between the two organisations. Firstly we own STB and have shares listed as assets, valued at $100 (which some might think excessive for a company that has presently $200,000 of debts). Once STB comes right (ie solvent) these shares can be written up to their real value, $50,000. Furthermore, many of the debts on NZUSA's books are to STB, and these debts cannot be repaid until STB starts declaring dividends. So the balance shed looks bad, but once STB comes into its own, it will dramatically improve.

How NZUSA Got into the Shit

However balance sheets are things of little interest to people other than account ants, (presumably) accountancy student and bank managers. A more pertinent question is why NZUSA got itself into this mess. Suprisingly perhaps, to some, it was not a result of "politicos" rushing around organising campaigns on this "irrelevent" issue or the other with total disregard for budgettary allocations. In fact the only occasion that I know of when NZUSA ran over budget, it was covered by a special levy so that we didn't lower accumulated reserves

Cynics would say that the reason NZUSA got into the financial shit was because they set up a Travel Company (or in fact just entered commerical operations). This is the long held position of the Auckland University Students' Association (AUSA), and they feel they have a classic example in STB. It is not a view easily countered in that particular example. The development, as I understand it, was as follows:

USA found itself with the ISIC [unclear: nchise] (ie the franchise to sell the (card) in the early 1970s, and it was king money hand over fist.

USA saw dollar signs beckoning over [unclear: ry] airport, under every aeroplane [unclear: ig] and sitting on every empty airline [unclear: t], and set up a fully fledged travel [unclear: npany].

set up the travel company (STB), USA raised loans from its constit- [unclear: its] (loans that have yet to be repaid).

the company grew, NZUSA was left [unclear: h] a surplus of cash for short periods [unclear: r] a more detailed explanation read B: The DC10 in Student Union use in Salient No. 15 1979) and not [unclear: nting] to waste it, used it to buy a [unclear: lding], supplementing this cash (which is effectively a short-term loan with [unclear: ther] loans from constituents (again to be repaid) and a bank mortgage. [unclear: USA] still owns this building (Student [unclear: ion] House on the corner of Blair [unclear: ect] and Courtenay Place).

[unclear: te] Australian Union of Students' [unclear: idem] Travel Service (AUSSTS) [unclear: apsed] in late 1977 and when its [unclear: unts] were unravelled it was revealed [unclear: at] NZUSA owed AUSSTS some [unclear: 0,000]. To show their good faith, [unclear: USA] wrote out a cheque for $22,000 that debt (the balance of the debt [unclear: ing] transferred to STB — again see [unclear: licnt] No. 15). However as this cheque [unclear: u] not drawn against an extra $22,000 income, it just meant that NZUSA [unclear: TU] into overdraft (NZUSA raised a facto loan from the bank).

[unclear: be] Board of Directors of STB announced that STB would declare no dividends [unclear: mil] it had repaid its debts

[unclear: ell] if you can form a coherent picture all of that, you are doing a good deal [unclear: with] than a number of the people involved [unclear: ZUSA] and STB at the time. For sake of [unclear: i] will just summarise the effects:

[unclear: ZIJSA] had effectively gone into over- [unclear: raft] by $22,000

[unclear: USA] had no income from STB

[unclear: ZUSA] had large loans from the con [unclear: tuents] with no visible means of repaying them until STB started declaring dividends.

4. NZUSA was committed to paying off $5,000 per year on the mortgage taken out on the building, plus interest on that mortgage

So why didn't NZUSA sell the building? At least that would cut its problems by half. Well there was a problem. The calls against the building; mortgage, overdraft, constituent loans and a debt to STB for the balance of the AUSSTS debt (which remember STB had taken over) totalled more than the expected sale price of the building. NZUSA was in the embarrasing position of not being able to afford to realistically live in the building, but neither could it afford to sell it.

The various decisions made that attempted to resolve these questions were in the main made last year or early this year, and those who participated in the making of them, can do little now but look to STB to dig, first themselves, and then its partner in disaster, NZUSA, out from their deep holes. One regrettable consequence of this enforced hiatus is that various increased costs cannot be absorbed by NZUSA and must be passed on to the constituents, in the form of loans and/or increased levies. The one important decision that was made at this Council was to endeavour to raise an extra $22,000 in constituent loans to cover the overdraft. Another set of loans to be repaid when STB declares dividends.

In some quarters perhaps this tale of woe will serve to add fuel to the fires of those that wish to attack NZUSA. Before doing this though there is one important point that must be remembered. Most of these problems arose from decisions taken four or five years ago. What we are now attempting to do is pick up the pieces and try to ensure that the same mistakes cannot be made in the future. It is the view of AUSA, though not widely supported, that once it has traded its way out of its difficulties, the Student Travel Bureau should be wound up, to prevent this ever happening again. Although I personally do not support this view, as soon as NZUSA is in a position of choice regarding its commerical ventures, a long, hard, look will have to be taken at the advantages in them, offset against the hidden dangers.

Peter Beach