The Canadian Federation of Students (CFS) is still connected to travelcuts, the travel agency it used to co-own, by way of a secret bank account that was revealed in a summary report of an audit released this summer. The CFS issues International Student Identity Cards (ISIC) and also receives revenue from the Summer Work Abroad Program (SWAP).

The original purpose of the bank account was to pay off debt from travelcuts — which the CFS sold to Merit Travel Group in 2009 — but it was also used for unauthorized transactions.

“Today Merit has a services agreement with the CFS-S, which is the Canadian Federation of Student Services, to operate the SWAP program, the Summer Work Abroad Program, and to be an alternative issuer of ISIC cards through our travel business,” a spokesperson for Merit told The Varsity.

The business of ISICs

In the summary report of the audit, there are 27 transactions listed as “International Student Identity Card applicant,” with the total sum of money from those transactions amounting to $584.

According to the CFS budget from 2001–2002, the federation received around $1.1 million in revenue from travelcuts between 1999 and 2000.

The CFS has not released the full report of the audit, meaning that any information on where the money came from or where it went is unknown.

According to the audited CFS financial statement of the 2013 fiscal year, the CFS recorded a loss of $37,506 from “ISIC income.”

In the 2016 fiscal year, the CFS had a net loss of $96,366.73 from the cost of selling ISICs.

In Canada, the CFS owns the license for distributing ISICs, but travelcuts, under Merit’s services agreement, can also sell the cards.

“Today, however, the majority of ISIC cards are distributed as a benefit of membership so the program doesn’t generate profit,” CFS National Treasurer Peyton Veitch told The Varsity via email.

Veitch detailed that the ISIC is a free benefit of membership in the CFS, but $20 for everyone else. The individual amounts from the 27 ISIC transactions in the secret bank account varied among $20, $21.50, and $43.

According to a draft report from a 2016 UTSU ad hoc committee on the CFS, in 2014­–2015, the CFS received revenue of $120,000 from the sale of ISICs.

“But what is the point of an ISIC? In theory, the cards grant access to student discounts, but most student discounts are available to anyone with a valid student ID; there are few, if any, discounts available only to students who have ISICs,” the draft report reads. “In short, the value of ISICs is overstated, principally by the CFS (which is, again, a partial owner of the for-­profit travel agency that issues ISICs).”

Veitch added, “The Federation also receives around $5,000 each year related to promoting Merit Travel through SWAP.”

U of T professor Richard Powers, whose areas of expertise include business and corporate law, wrote to The Varsity that “student governing organizations often own and run services for students – printing centres, pubs, housing co-ops – nothing sinister about that.”

Powers did question what happens to the profits from CFS businesses. “They should be going back into improvements in the services, or into other student-related activities and services – not into someone’s pockets,” he said.

Selling travelcuts

The spokesperson for Merit said that “the interesting thing about the deal was… we did not buy the shares of the travelcuts business. We bought the assets of the travelcuts business.”

In a share deal, the buyer acquires 100 per cent of the company’s shares, meaning that it takes on any and all pre-existing liabilities.

In an asset deal, the buyer can pick and choose the parts of the company that they want to purchase, which means that they do not have to take on any unwanted liabilities.

“In order not to be responsible for the liabilities (debts, etc.) you just buy assets–the liabilities remain with the seller,” said Powers.

UTSU Vice-President Internal Daman Singh wrote in an email to The Varsity that in principle, there’s nothing wrong with a student organization like the CFS securing discounted goods and services for students.

“However, the CFS mismanaged Travel CUTS into bankruptcy, and now the CFS seems to be a partial owner of a for-profit travel agency. The whole arrangement is very strange, and the members of the CFS know very little about it,” Singh wrote. travelcuts went into receivership in October 2009, when it was bought by Merit Travel, after incurring severe debt.