Deficit Lower Than Expected This YearBy A. Arif Husain
The Institute's budget deficit dropped $1.6 million from last year to $8.5 million for this fiscal year ending June 30. This year's deficit was $200,000 less than expected.
The Institute's deficit was balanced with monies from investment income and a $34-million research reserve fund, according to the MITNews Office.
Total revenues from research sponsors increased by $8.2 million to total about $720 million, despite a slight decrease in federal funding.
Federal funding, most of which is granted for research, has remained fairly steady, taking some pressure from large-scale government cutbacks, said Vice President for Finance and Treasurer Glenn P. Strehle '58, though "it's not even growing as fast as inflation."
Unrestricted Institute gifts went up 4.5 percent to $7.3 million. The increase comes as a "post-campaign recovery" after a fundraising campaign that ended in 1992, Strehle said. Such fundraising efforts are usually followed by a decline and then a rise, which we are now experiencing, he said.
The initial costs of the early retirement incentive were curbed by funds accumulated in prior years, Strehle said. The incentive, which totaled $52.1 million last fiscal year, was accepted by 642 people.
The early retirement program should have a "favorable effect," in the coming years, Strehle said. The resulting reduction of expenses should amount to seven million dollars in net savings in general funds over a two-year period, Strehle said.
Re-engineering costs high
Non-recurring re-engineering costs totaled $6.5 million this year. The majority of the costs went toward the complete replacement of the Institute's financial accounting system - covering the software and hardware package - and the fees for the outside consultants hired to coordinate the installation.
The costs did not affect the deficit, since funding was taken from tuition, gifts, and grants from research sponsors, Strehle said. The funds functioned as endowment and would not have been utilized otherwise, he said.
"Almost all research universities are redoing their finances," Strehle said. MIT last replaced its accounting system in the 1960s, and the outdated system was in place until last year with only some enhancement done previously. The new system, called SAP, is "a complete redo," Strehle said.
Though the system was received at "quite a reduced price [for] an educational institution," the one-time installation costs were distributed over last year and this current year, he said. Non-recurring re-engineering costs for the current fiscal year are therefore expected to be "the same order of magnitude" as last year's, Strehle said.
The non-recurring re-engineering costs are expected to be "modest after fiscal year 1997," he said.
Recurring costs related to the re-engineering effort were not included in the total, and no estimate was made of their aggregate, Strehle said.
Such expenses are covered "as we go along," since they overlap with a other activities and can not be isolated, Strehle said. The costs come out of general spending resources, he said.
Total Institute revenues last year from tuition, gifts, investment income, auxiliary activities, and unrestricted funds combined to cover the $1.255 billion operating budget. Income was up 2.1 percent from last year.