MIT had modest surpluses in the operating budget in fiscal 1984-1988, and modest deficits in fiscal 1989-1994. The deficit in fiscal 1994 was $6.2 million and, as noted above, the deficit for fiscal 1995 is $10.1 million. Current projections indicate deficits of $8.7 million in fiscal 1996, $6.4 million in fiscal 1997, and $4.1 million in fiscal 1998. It is expected that over time the results of reengineering will have a significant impact on the Institute's expenses and can bring financial operations into balance.
It is important to note that MIT is a financially strong institution with its over $2 billion endowment at market value, and continues to add to its financial resources. Its total invested assets exceeded $2.4 billion at June 30, 1995. Over the past five years the market value of all investments increased by 33%.
The Institute continues to control costs and has been engaged in a reengineering effort during the last two fiscal years. In financial operations this effort is focused on management reporting affecting all fiscal accounting, purchasing and payroll procedures. A decision was made to redesign MIT's management reporting procedures and systems, and the R/3 system from SAP AG in Walldorf, Germany was selected to replace the present applications. Work continues on this project, looking to initial implementation in fiscal 1997. Members of the administrative staff in financial operations, academic and administrative departments, centers and laboratories have been involved in all phases of this project. Their cooperation and valuable input assure the successful design and implementation of the management reporting system.
Since the end of the fiscal year, six staff members in financial operations have transferred to a new department dedicated to the Management Reporting/Financial Operations (MR/FO) Reengineering Project. Most of the staff involved in reengineering have continued their primary affiliation with their home departments.
The following reports of each department (Comptroller's Accounting and Lincoln Fiscal Offices, Purchasing and Stores, Audit Division and Office of Financial Planning and Management) will highlight the activities in their respective departments during the year.
This is my first report as Vice President for Finance and Treasurer. I am grateful to the financial operations staff for their dedication to the effective management of MIT's resources, and for their cooperation and support during this challenging time. It is my expectation that the changes envisioned in our new management reporting system will bring us to a higher level of efficiency with the ability to provide improved financial information while also simplifying administrative processes.
Glenn P. Strehle
Our audit coverage is coordinated with Coopers & Lybrand, the Institute's Certified Public Accounting firm, and the Defense Contract Audit Agency (DCAA), MIT's cognizant federal audit agency. Internal audits are conducted consistent with the Standards for the Professional Practice of Internal Auditing which guide us in the discharge of our duties to ensure proper objectivity, independence and audit quality control.
The Institute's continued budget shortfall remains a critical issue and the reengineering of major administrative processes aims at addressing this by reducing operating expenses. This year will continue to bring significant changes to MIT as reengineered business processes are put into place and the examination of other processes is started. Substantial Audit Division involvement has been devoted during the redesign efforts thus far with five members of our staff involved as members of reengineering teams and the entire staff serving as a resource to the process. Two individuals on our staff have been identified as key members to continue serving 100% time on the reengineering of financial operations. The Audit Division will maintain its effort so that we may help MIT maintain a strong internal control structure before, during and after reengineering.
Departmental Reviews have been a staple of our audit plans for several years. These are fundamental compliance audits aimed toward proper financial accountability within each department, center and laboratory. Many Institute guidelines and policies mirror expectations of Federal sponsors for responsible trusteeship of funds. This year's planned departmental review coverage will mark the beginning of our third Institute-wide departmental review cycle.
Our effort was re-focused this past year to keep abreast of the active growth of information technology, and the numerous and rapid changes within the Institute. Each auditor was given the responsibility for gaining a baseline understanding of several computer-based information systems and functions through ongoing contact with key individuals in various administrative areas. This approach will better equip us with an up-to-date broadened knowledge of MIT's information systems' risks and help us better prioritize audit coverage.
Staff highlights this past year included one member's completion of requirements for certification as a Certified Public Accountant. It is expected that all audit staff will pursue professional certification as a CPA, CIA (Certified Internal Auditor), or CISA (Certified Information Systems Auditor). Collectively, the Audit Division now holds 2 CPA, 5 CIA, and 2 CISA designations.
Charles A. Shaw
Testing has begun on receiving appointment forms in anticipation of the appointment process (TAP) under development by the Reengineering Team.
Work continues on the project to automate the recording of the Sponsored Research Staff vacation procedures; a project which was interrupted while other more critical projects were addressed.
Internal Revenue Service (IRS) audits continue to proceed both from the regional IRS office as well as the Coordinated Examination Program audits at the national level.
New procedures are being put in place to accept electronic feeds from three new procurement partnerships. To meet requirements of the Financial Accounting Standards Board, several changes were made to the Chart of Accounts along with requested changes from the Purchasing and Budget Offices. Changes were made to the General Ledger System to remove overhead from allocation, but charge employee benefits. We have completed the supplemental overhead changes and fund transactions fee changes for July 1995. Work was done to provide the MR/FO Team all Fiscal Year 1995 financial transactions that will be loaded into SAP R/3 in order that balance sheets and similar reports may be compared between our current systems and R/3 implementation.
Property management responsibilities increased with the added tasks of tracking all capital space changes, major renovations, and new building construction. The Property Office also has the added responsibility of capitalizing and tracking the 13,000 telephone lines at the Institute.
A Property Application (SumPROP) was developed by the Comptroller's Accounting Office programming staff which will give SumMIT users the ability to query and report on equipment data. Requests from various academic and administrative departments for equipment information resulted in over 600 reports being generated and distributed to the departments.
The Lincoln Executive Information System (LINEIS), which was developed by a cooperative effort between the Comptroller's Accounting Office, Lincoln Laboratory Fiscal Office, and Lincoln Laboratory, was introduced, implemented, and is considered a success. It replaces the Lincoln Information System (LFOINFO) which has been operational since 1981 and will be discontinued at the end of September 1995. The LINEIS System will be an ongoing task of new development and enhancement.
Philip J. Keohan
Reengineering was the dominant focus of management work during the year and will result in new processes for budgeting and reporting. The results of reengineering should hold expenses to modest increases or show a decline in terms of constant dollars.
Major projects completed during the year include the renovation of 311-312 Memorial Drive as an annex to McCormick Hall, the Institute's all-female dormitory, to house approximately 25 women; the renovation and upgrade of three undergraduate teaching laboratories and the student projects workshop for the Department of Mechanical Engineering, renamed The Pappalardo Engineering Projects Laboratory; and the renovation of 40 Massachusetts Avenue to accommodate the MIT religious counselors, the Kosher Kitchen, and other student religious activities. The construction of the Cogeneration Plant on Vassar Street, including the upgrade of the electrical distribution and control systems in the existing plant, continued during the year. Construction of the addition to 70 Memorial Drive, which will be called the Jack C. Tang Center for Management Education and used by the Sloan School of Management, is ongoing. The schematic design for the renovation and upgrade of the Dorrance and Uncas A. Whitaker Buildings was substantially completed during the year, and construction will begin in the Fall of 1995.
As part of the reengineering effort, three members of the staff were directly involved in the MR/FO Project. Two of these have joined the reengineering staff to work on a team to configure the new software to meet MIT's needs. The responsibilities of these valued staff members have been assumed by other members of the department.
John A. Currie
A partnership arrangement with Sterling/Olsten Staffing Services, a temporary help agency, was implemented this year. This was in accordance with an approved cost reduction reengineering plan which, in its full scope, will coordinate and support all of the Institute's substantial needs for temporary secretarial and clerical services.
MIT's purchasing offices employ a "Cambridge First" policy in their purchasing activities, with the goal of placing as much business as possible with Cambridge companies. This resulted in over $42 million of purchasing business placed this year with over 700 Cambridge companies.
As a service to departments, laboratories, and centers, the Assistant Director for Subcontracting coordinates with the Office of Sponsored Programs and principal investigators, prepares Subcontracting Plans for submission, negotiates changes when necessary, and reports accomplishments to federal sponsors and principal investigators. This year there were over 50 active Subcontracting Plans under Institute federal contracts which necessitated the submission of over 100 separate reports of accomplishments to federal sponsors. Additionally, in order to provide guidance and assistance to principal investigators, over 100 internal progress reports were issued.
MIT Reports to the President 1994-95