Student Group Reserve Account Policy to Remove/Limit Interest
By Jenny Zhang
EDITOR IN CHIEF
Under a new policy for accruing interest, student groups will no longer collect interest on deposits to reserve accounts. These accounts currently earn four percent interest compounded monthly, but the new policy will be implemented for the next fiscal year, beginning in July 2006, said Dean for Student Life Larry G. Benedict.
The reserve accounts formerly received interest as part of MIT’s Pool C (interest-bearing) account, but with tough financial times for the Institute about three years ago, Pool C stopped collecting interest, and still does not, Benedict said. At that time, Benedict began to pay the four percent interest from his discretionary fund, but this proved too costly as students began to allow their reserve account balances to snowball. “It was never the intention of the policy to encourage groups to build up reserves,” Benedict said.
The new policy, which will be finalized in the next few weeks, would essentially revert interest-collecting reserve account balances to what they were when Benedict began paying the interest. Therefore, groups that have built up balances in the past several years will only receive interest on the balance they had in 2003.
Benedict said with the new policy, “a handful” of groups would lose all reserve account interest, and about half a dozen groups would be affected by being forced to revert to the lower level. Under the new system interest will amount to $10,000 to $12,000 a year, rather than the approximately $17,500 Benedict paid last year.
Maintenance of reserve accounts, according to the Student Life Programs Web site, requires a minimum balance of $5,000 and limits transactions to four per fiscal year, excluding deposits or gifts.
Association of Student Activities treasurer Marcus Dahlem G said that the ASA would meet to discuss the new policy, but the ASA does not have an official opinion on the matter at this point.
Benedict said he is creating this policy because by spending large quantities paying the interest, he is less able to provide funds for other student groups that need the money. The reserve interest, he said, was designed for students to spend rather than use to build up the reserve account. It is unfair for student groups to save their reserve account, yet still ask for additional funding, he said.
Some student groups, such as the Lecture Series Committee and The Tech, hold reserve accounts they can use in case of a crisis.
Drew A. Reese ’07, chairman of the Lecture Series Committee, said that LSC has had a reserve account for “quite awhile” and uses the interest to go towards operations costs. According to Reese, LSC relies primarily on ticket sales for income and also uses its reserves account for extensive one-time purchases such as speakers. “We do try hard to shore up our reserve,” Reese said. “I don’t think that’s the best policy,” she said of the new system.
Tech Chairman Zachary A. Ozer ’07 said he could understand why Benedict would not want to foot the bill for the interest, but thinks that MIT student groups should have the opportunity to build interest on their money in some way, perhaps through an outside bank account that is overseen by MIT.
In July 2002, MIT ended support of all outside student group bank accounts, requiring ASA-recognized groups to hold their accounts with MIT.