The central administration's management of Harvard's financial assets is seriously flawed, according to a report released to the full Faculty today by the Faculty of Arts and Sciences (FAS) Committee on Resources.

The committee's central concern is with the General Operating Account (GOA), a University bank of sorts where Harvard requires its nine schools deposit all their non-endowment assets--a total of $1.676 billion in fiscal '96.

All transactions between the University, its units and outside organizations are handled through the account. The central administration, in turn, invests the funds not needed for immediate use by the schools and uses the profits to cover about 47 percent of its budget, by far its largest income source.

The report takes issue with the administration's profiting from the schools' funds--or, at least, not returning part of those profits to the schools.

"We don't get any interest on it, and there's something sort of vague about the whole thing," said William Paul, Mallinckrodt professor of applied physics and a member of the Faculty Council. "That upsets me because there may be millions of dollars involved."

The Faculty Council discussed the report at a previous meeting, and a discussion of the report is on the agenda for next week's meeting of the full Faculty.

The committee also questions the prudence with which the center is investing the GOA--as well as the very advisability of the center relying so heavily on the investments for its income. It has now requested an annual report on the fund's performance.

"One obvious concern is that a serious downturn in investment markets would have a detrimental effect on the current account of the University and would require alternative financial sources, very possibly from the Faculties," the report says.

The report notes that the central administration has undertaken its own review of the GOA, led by Vice President for Finance Elizabeth C. "Beppie" Huidekoper.

The GOA was created in the 1970s, and at the time, the administration did not invest the money but got most of its funding through fees assessed on the Faculties based on their sizes. Harvard began investing the account in the 1980s.

The report also called for the central administration to report its finances with more lucidity and to be more accountable to the Faculties--particularly the FAS--when making major financial decisions.

Former Provost Albert Carnesale prepared a letter to the Faculties this summer, which summarized the center's finances, though some Faculty members said they had hoped for a more substantive analysis, something akin to Dean of FAS Jeremy R. Knowles' annual budget letter.

The center is currently implementing Project ADAPT, a $50 million initiative to coordinate financial record-keeping University-wide, a move that should improve its ability to report on its finances.

"The committee's greatest concern...is that the University does not have formal governance structures to ensure consultation for major decisions by the Center, or by other Faculties, that will have an impact on all parts of the University," the report says. "No structures have been put in place to protect us from another MATEP."

The University constructed the Medical Area Total Energy Plant (MATEP) in the 1970s to provide steam, chilled water and electricity to the Longwood Medical Area and the affiliated hospitals.

Original projections placed the plant's cost at $50 million, but final construction costs ballooned to nearly $350 million.