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May 16, 2014

Indebted RSOs under watch in new ORCSA plan

In an attempt to prevent Recognized Student Organizations (RSOs) from incurring debt, ORCSA is instituting a new plan in the fall that has RSOs go through a three-stage process as they attempt to discharge their debt. Indebted RSOs lose access to resources over time, and failure to discharge debt within three years could result in the closure of the RSO.

Arthur Lundberg, assistant director for the Student Activities Center, said that roughly 15 percent of RSOs were in debt at the end of last year.

The new plan attempts to end deficit spending and force RSOs to focus on their finances before they enter debt. “Historically, RSOs have been given freedom to spend themselves into debt, and then work to fundraise themselves out of debt. However, if an RSO is unsuccessful in paying back the debt, and their leadership graduates, the debt becomes a large burden on future RSO leaders,” Anthony Martinez, the vice chair of Graduate Council and chair of the Student Government Finance Committee (SGFC), said. “The new plan will help improve the RSO funding process by creating accountability…and it will also promote a healthier approach to funding initiatives, which is to fundraise up front, and only incur debt when calculated risks don’t work out.”

The plan would take effect at the start of next year and increase support and penalties as RSOs advance through each stage of the debt. RSOs that end any quarter in debt would be subject to Debt Plan 1, under which, according to an ORCSA document announcing the changes, “quarterly/Ad hoc funding,” such as SGFC funds, would be unavailable until the RSO discharges its debt. RSOs would also have to file a debt-reduction plan and receive additional financial training.

For RSOs that enter next year already in debt, the plan would be modified on a case-by-case basis for each RSO. Debt-reduction benchmarks would be set that these RSOs would have to meet to avoid advancing through the Debt Plan stages.

If organizations remain in debt for three academic quarters after entering Debt Plan 1, they would enter Debt Plan 2 and would lose access to all SG funding. They would also need to have monthly meetings with their adviser, quarterly meetings with the financial advising staff, and further financial training.

Organizations that remain in debt for an additional year would enter Debt Plan 3, under which all previous support requirements would still apply and their RSO status would be frozen until they repay their debt. Failure to pay back debt within one year of entrance into Debt Plan 3 would result in potential closure of the RSO, although Lundberg, one of the writers of the plan, said there would be some flexibility in this last step.

“I think that’s not sort of a robotic situation where the clock strikes and you’re done. I think it would definitely be, when talking about something as serious as that, a conversation between the financial team, the adviser, and any sort of, any progress they’ve made could potentially stave that off,” Lundberg said.

Martinez said that neither SG nor RSO leaders were heavily involved in the creation of the plan and that ORCSA discussed the plan with him only after it was mostly set in place, but added that he didn’t think SG would have had much to add.

Third-year Mason Heller, president of the a cappella group Voices in Your Head, which has been in debt since Heller joined the group in his first year, said in general he supports the plan, but wishes that there was a probationary period before the penalties are enforced.

He added that in addition to attempting to prevent RSOs from going into debt, he hopes that ORCSA will also work on a plan to help RSOs that are already in debt. “A debt-reduction plan should come with a reform in terms of the way in which RSOs can raise money,” he said. “The sooner that can be figured out in a way that groups can raise money easily for their projects, or their events, I think the less that there will be a tendency for groups like ours to get in debt in the first place.”

Lundberg said that this plan is in line with RSO interests.

“We’re not looking to hang anyone out to dry; these are all steps that we’re taking together with the groups,” he said. “Any groups that have experienced debt in the past would probably be glad to share that it’s really challenging and it makes it hard to focus on the really important things that your group is doing. So [we’re] really making a push to keep as many organizations from being in that situation as possible.”

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