The National Union of Students is heading towards a £1 million deficit after the collapse of a landmark internet deal last year.
National director Nick Gash confirmed this week that the union would declare a deficit of between £800,000 and £1 million for the year to July 2003, representing some 20 per cent of turnover. He insisted that the union could trade through without cutting services.
He also confirmed that plans to sell the union's headquarters were under way, although he said they were unrelated to the financial problems.
Some national executive members are alarmed. "Any business that makes a loss that amounts to 20 per cent of turnover knows the alarm bells have got to start ringing," said national executive member Joe Rukin.
The NUS blames its deficit largely on the collapse late last year of Blackpool-based dotcom company ITM, which held the contract to run the NUS websites and produce the NUS card.
The NUS signed over its internet rights for 30 years to ITM in 2000, in return for free services. But only 60 of 704 affiliated student unions signed contracts. The NUS had a 2.5 per cent share in ITM. Mr Gash said:
"We were left about £750,000 out of pocket."
He admitted that with a turnover of £4 million, the deficit was a worry, but he insisted there was no cause for panic. "By and large, this was expected. The bank knows about it and is supporting us, and the balance sheet remains strong. I am confident we will trade through."
Mr Gash confirmed that consultants were putting together a document for the sale of the union's headquarters in Holloway Road, London, thought to be worth £2 million to £3 million.
He said: "We started talking about moving about two years ago, and we revisited this after being approached by estate agents. We had previously had a valuation for office space, but the valuation of the building is now significantly higher for residential development."
He said plans were under discussion, but there was a strong consensus that the headquarters must remain in London and the union should have moved by December 2004.
Mr Gash said the union would make savings through "good housekeeping" and replacing some paper mailings with electronic communications.
Mr Rukin, a failed NUS presidential candidate, warned of a culture of mismanagement and excessive spending. "The national executive needs to take more responsibility for the financial affairs of the union. I was at a student union that was in severe financial trouble. I don't want to be in an executive looking at financial ruin again purely because the executive and managers are not keeping track of spending and going into stupid business decisions that have been worked out on the back of a matchbox."
Mr Rukin said that at the same time as briefing executive members on the deficit last month, the NUS agreed to abandon the £50-a-month mobile phone spending limit for 12 part-time executive members to allow unlimited calls. He was also concerned that disorganised travel arrangements were creating excessive travel expenses.
Some executive members are concerned about declining subscriptions from NUS branches. Southampton, Edinburgh and Glasgow universities, the University of Manchester Institute of Science and Technology and Imperial College London have all disaffiliated.