Budget Error Results in $1.7 Million Shortfall
Danny Reinan, staff writer
When planning Augsburg’s budget and distributing financial aid for the academic year, an error occurred that resulted in a deficit of $1.7 million. Augsburg faculty and staff were alerted through an email sent out by President Paul Pribbenow in late February of a budgetary error that would impact the activities of the Augsburg community for the remainder of the academic year.
“For the current academic year, the total amount entered into the financial aid system, and distributed in financial aid awards to students, was $1.7 million more than the amount put into the budget system,” Rebecca John, Vice President and Chief Operating Officer of Finance and Accounting explained. “The reason the numbers differed is that the financial aid calculation assumed that scholarship awards (i.e., money funded by donors) would be in addition to the amount that Augsburg would fund, but the budget assumed that scholarship money would reduce the amount that Augsburg would fund.” This error slipped through the cracks largely because Augsburg uses two different applications for financial aid and budgeting. “Since the different numbers were in two different systems, the discrepancy was not noticed,” John added.
As John explained, the situation necessitated that all departments cut back on their spending in order to make up for the deficit. “Once the issue was identified, budget managers across the university were asked to identify 5 percent of their expenses that would not negatively affect the student experience to save $1.2 million,” John said. Augsburg would be receiving the remaining $500,000 from additional revenue sources.
Unfortunately, this response inevitably had an adverse effect on faculty and staff who were caught-off guard by the sudden request from President Pribbenow to cut back on their spending for the remainder of the year. Among these faculty were seven representatives from the Social Work department, who wrote a letter to the Faculty Senate expressing their concerns. “We were extremely alarmed by this email,” the faculty members wrote. “We are concerned that, at present, the President and Administrative leadership are not taking responsibility for the error, and yet faculty, who were not involved, are being asked to take additional programmatic cuts in order to fix the problem. Most importantly, we are deeply concerned about the financial stability and future of our university if mistakes like these are allowed to happen without any accountability or transparency.”
The representatives from the Social Work department were troubled by the fact that this error was requiring that their department operate on a deficit for the second consecutive year, and felt that President Pribbenow’s statement to staff and faculty was vague in explaining how the error came to be. The faculty representatives concluded their letter by requesting that the Faculty Senate communicate with the Board of Regents about taking greater responsibility when it comes to the University’s finances.
The Finance and Accounting Office is working to enact a strategy that will eliminate the impact of this error on the following academic year. “The financial aid strategy is set by November of each year for the following year (that is when financial aid packets begin to be mailed to high school seniors admitted to Augsburg for the following fall),” said John. “The budget is set in April and May each year. Since this issue was identified in February – after the financial aid total was set for Fall 2020 but before the budget was done for the 2020-21 academic year – we will be able to ensure the budgeted number equals the financial aid number for 2020-21.”
Although there is a financial plan in place to account for the error, the dramatic changes that have come as a result of COVID-19 have forced those addressing the budgetary error to shift their priorities. “By mid-March, a number of solutions had been identified that reduced the gap we needed to close to under $500,000 without significant impact to the Augsburg community,” said John. “However, much has changed given the impact of COVID-19, and Augsburg’s primary focus for the final five weeks of the semester is supporting students so they can successfully complete the spring term.”
Editor’s note: A previous version of this article incorrectly stated that the $1.7 million shortfall was a deficit, and that the Finance and Accounting office (instead of the office of the President) were in charge of addressing the issue. This has now been fixed.