Auditors reviewing Associated Students’books recently found those pages awash in red ink.

An independent audit of A.S. shows the organization has been operating in debt for two years. The audit found that A.S. does not currently have enough funds to cover Trustee Accounts for the student groups that receive funds through A.S. In 2001, A.S.’ expenses exceeded income by $846,465, followed in 2002 by losses of $226,592. The budget disparity was mainly due to the decreased value of stock market holdings.

“We did take some losses in the market, but A.S. has not lost any of the initial investment,” A.S. Executive Director Don Daves-Rougeaux said.

A.S. has $389,276 invested in mutual funds and single stocks. Among the single stock holdings are Chevron Texaco Corporation, Phillips Petroleum and Transocean Sedco Forex, the largest offshore drilling company in the world. The audit counts the values of the holdings as expenses.

The audit, conducted by the Santa Barbara accounting firm Nasif, Hicks, Harris & Company, began in July and is performed every year pursuant to A.S. Legislative Council policy. It provides an overview of A.S.’ fiscal standing.

“It serves as an evaluation of the organization,” A.S. President Chrystine Lawson said.

The accounting firm examined A.S.’ records and provided recommendations for the organization.

“The biggest issue was the need for long-term strategic planning.” Daves-Rougeaux said.

At a recent Legislative Council meeting, Jeff Harris, one of the accountants who worked on the audit, recommended A.S. cut its expenses during this fiscal year. Harris also warned that endorsing or campaigning in public elections might affect A.S.’ nonprofit status and cause an Internal Revenue Service audit. The warning followed an appearance by Lawson in a No on Recall advertisement for 3rd District Supervisor Gail Marshall.

Harris said he could not comment on the audit without authorization from Daves-Rougeaux.

The audit shows A.S. incurred over $4 million in expenses for each of the past two fiscal years. The expenses include student honoraria and staff salaries, the A.S. Bike Shop, student programs and losses in the stock market. A.S. receives its income largely from its base fee and sales of services and products.

The overspending has prompted officials to review the organization’s budget. Daves-Rougeaux said if new forms of revenue are not found, student staffing may be cut and A.S. services may be considered “revenue creators” rather than “services.”

Other changes to A.S. could be on the way. All university groups that receive funding from A.S. have Trustee Accounts that roll over a maximum of $5,000 from one year to the next. These accounts, according to Daves-Rougeaux, might be placed in a University-wide investment pool. Presently, A.S. does not have the resources to provide every student group the total amount in their Trustee Accounts.

A.S. has proposed a base fee increase to raise revenue twice in the last year. Each time, the increase was voted down by a student general election. The A.S. base fee has not been raised since 1972.

While A.S. manages the budget discrepancy, it is optimistic about the work it performs.

“We provide a tremendous amount of services for a modest amount of money,” Daves-Rougeaux said.