$9.7 Million Budget Deficit Paints Gloomy Forecast for AUC’s Budget
By: Hana Afifi and Ahmed El Sebaie
With a forecast budget deficit of $9.7 million for the remainder of the 2013-2014 fiscal year (FY), AUC is considering measures in an effort to overcome the steep gap, Brian MacDougall, executive vice president for planning and administration told the Caravan.
The administration said they did not expect the deficit when they planned the budget in March 2013.
“We were really surprised in the magnitude of the drop of tuition income,” said MacDougall at a Faculty Senate meeting Tuesday.
The university had not anticipated that there would be a travel ban imposed on Egypt, said MacDougall, adding that the AUC budget is around $200 million for the current fiscal year that extends from July 1, 2013 to June 30, 2014.
The $9.7 Million Deficit
The deficit is mainly the result of a significant decline in enrolment and academic tuition income worth $10.6 million.
This is due to withdrawals, as well as the drop in the number of international students by more than 300, according to MacDougall.
AUC revenue was also hurt by a downfall in donations to the university, which plunged by almost 50 percent, from $6.3 million to $3 million.
The university also predicts exceeding the planned $45 million budget allocated for staff salaries and benefits by $200,000.
The total initial deficit from tuition, donations and salaries and benefits reached $13.8 million, but some revenue streams and measures helped reduce it to the current forecast $9.7 million.
The university expects some current faculty and staff positions to be vacant as a result of retirement or resignations, which would save $1.2 million worth of salaries and benefits, said MacDougall.
MacDougall added that the administration expects to cut spending on supplies and services by $2.6 million; including the cost of electricity, natural gas and water as well as the cost of bus services.
The recent lease agreement of the Greek Campus, which was singed this month, will help raise revenues by $300,000 for the remainder of 2013-2014 FY.
The Greek Campus lease agreement is not a recent measure to overcome the current forecast budget deficit, said MacDougall explaining that the Campus was offered for sale before the January 25 Revolution.
The university signed a 10-year lease agreement with Sawari Ventures, which will turn the Greek campus into the first technology park in Egypt. MacDougall said the value of the lease would grow every year.
Impact on Students
The university is considering measures to account for the deficit, some of which might have a direct effect on students.
The budget for financial aid might be reduced, said MacDougall at the Faculty Senate meeting without specify the exact amount.
Around 40 percent or 2,258 of enrolled students received financial aid in 2012, according to the 2012-2013 AUC Factbook.
MacDougall also said that the university is considering raising the current cost of residence fees. According to AUC’s website, the current residence as of Fall 2013 range from $1,750 to $3,530 depending on room type and whether it’s on the New Cairo Campus or Zamalek Dormitory.
The university is also considering implementing a new parking payment system with permits for parking slots near AUC buildings costing more than others, said MacDougall adding that parking hours might be extended to 6:30 p.m. The university currently offers free parking after 4 p.m.
MacDougall said at the meeting that the university does not intend to increase tuition.
“The Board of Trustees and the President [saw] that it would not make sense for [them] to increase the tuition fees above the 2.3 percent agreed upon,” said MacDougall.
President Lisa Anderson and former SU President Taher El-Moataz Bellah had signed an agreement on Sept. 30, 2012 to end a New Cairo Campus lockout.
The agreement included a cap on tuition increase for three years, “assuming no major changes” in domestic inflation and foreign exchange rates.
Impact on Faculty and Staff
Faculty and staff might be affected by the administration’s suggested changes to prevent the deficit in terms of changes in hiring, salary, benefit and overtime policies.
The university might also implement a freeze on hiring for both faculty and staff, said MacDougall at the Faculty Senate meeting.
He added that the university might reduce staff by not renewing their contracts.
“Legally, you can’t cut somebody’s salary,” said MacDougal, explaining that once a contract is signed, the salary cannot be reduced for any month within the contract’s duration.
However, MacDougall added that salary increases could be halted, which is needed when circumstances change. He said that the university might remove the two percent increase on salaries that are given in dollars.
The Vice President added that the university spends several million dollars on overtime. Caps on overtime will be reduced from 60 to 48 hours, especially for security, he said. This would add $100 thousand to the budget.
More Possible Measures
AUC will hold a forum today to discuss the budget deficit and consider ways to get out of the current situation.
“The presentation on Sunday is about sharing a collection of ideas that relate to the possibilities of increasing revenue, reducing the cost of supplies and services [and] thinking about the budget for human resources [to put] the university in a better financial position,” MacDougall told the Caravan.
MacDougall told the Faculty Senate that the administration might consider reviewing the auditors’ policy, which the university describes as not very effective.
MacDougall added that the university’s academic initiatives budget might be revisited and the consulting and professional development budget can be halted.
The Distinguished Visiting Professors (DVPs) program might also be stopped for the time being, he said.
In the program, the university brings a number of world-renowned scientists, eminent scholars, artists and writers to campus for a short period of time to give lectures or workshops.
MacDougall said the university prioritizes changes that will not affect academic standards or the AUC community.
“We will look at options first that do not affect people,” MacDougall told the Caravan.
The university’s facilities and properties might also be used to bring income.
As a short-term revenue source, AUC might consider renting some of its facilities to external clients and charge them in U.S. dollars, said MacDougall. As for the long-term revenue, he added that AUC is planning to accelerate the sale of certain properties.
MacDougall added that he met with the heads of workers syndicates last Tuesday to discuss the budget deficit, assuring them that no decisions have been made, but that everyone is invited to discuss solutions.
“I think it’s fair to say that we are sensitive to everybody’s interest in terms of first telling the story as to why we have a problem, and so that’s what we’re doing,” MacDougall told the Caravan in response to whether he expects any angry reactions from the AUC community.
MacDougall said there would be a conference call with the financial committee in the Board of Trustees about the budget on Nov. 26.
The AUC budget was planned around an exchange rate of EGP7.25, equivalent to $1. The recent decrease in foreign exchange is expected to improve the situation, but this is not taken into account in the current forecast, said MacDougall.
Number of Int’l Students
Soha Ali, program associate for the International Programs Office, told the Caravan that initially, the number of international students who applied for this semester was not a problem.
“The number of enrolled international students was not very different from the semesters that followed the revolution. But after the dispersal of both the Nahda and Rabaa sit-ins, we received too many withdrawal cases,” she said.
Ali mentioned the travel ban as the reason why there are no American students this semester. She added that AUC has less than 10 undergraduate non-degree international students this semester, most of which came from Europe not the US.
A number of countries, including the US, imposed a travel ban on Egypt following the political turmoil that took place after the removal of former president Mohamed Morsi from power on July 4.
Ali told the Caravan that the university witnessed a similar drop in numbers of international students following the January 2011 Revolution.
“Before the start of Spring 2011 semester, the number of International students that were supposed to join AUC was quite normal. But after the revolution, many international students withdrew from the semester before it started,” she said.
Ali explained that in the Spring 2011 semester, the number of international students that joined AUC dropped by almost 75 percent causing a financial problem.
Ali added that the number of internationals started to increase gradually in the following four semesters, yet they never got close to numbers prior to the revolution.
“It was around 40 percent or 50 percent compared to the number of international students before the January [25] Revolution,” she said.
