Article | Finance and administration
Navigating operational risk with a business office assessment
Jan. 10, 2023 · Authored by James Schoppe
The Great Resignation has affected the labor market across the country. Higher education institutions are no exception. Finance and accounting professionals have always been in short supply and now many institutions are scrambling to fill vacant positions while still maintaining essential business functions.
Critical risks associated with business office operations
Business office functions are fundamental to the operations of any college or university. Many institutions do not have the proper head count or place too much reliance on one or a small group of employees. A business office assessment may be required to reallocate employee work loads, better utilize technology or identify key skills that are lacking in the business office.
Key human capital risk
Many institutions have long-tenured employees that possess a wealth of knowledge and understanding of integral business operations. These individuals are consistently relied upon to ensure that these functions are properly maintained. The seasoned employee or small team may be involved in every function of the business office such as billing, payables, endowments, grant reporting, financial aid, reporting, etc. They have often been with the institution for a long time and realize the big picture – the mission – but have no succession plan in place. If this person were to leave, the institution may struggle to execute key functions.
Lack of managerial accounting skills
Higher education institutions can be very complex. A trending issue that many institutions struggle with is accounting for foundation activity. Foundations are separate legal entities that are created to receive donations on behalf of the university or college. The accounting responsibilities normally fall to the institution’s business office, but these employees may not have the proper knowledge, skill or access to records to execute these responsibilities. Additionally, foundation accounting follows not-for-profit accounting standards whereas institutions follow Governmental Accounting Standards Board (GASB) principles. It is crucial to have accounting professionals that understand these differences, or the institution may be exposed to unknown compliance risk.
Underutilization of technology
As accounting rules have become more complex, so too has the technology to manage these requirements. Many different software applications are used to prepare financial statements, receive tuition payments and pay vendors. The maintenance of these applications requires qualified information technology (IT) professionals as well as business professionals that understand the optimal manner to leverage these technologies. Insufficient use of technology may lead to duplicate efforts, over-processing and/or inaccurate reporting.
Case study: business office assessment in action
Client need
A college identified the need to assess their accounting roles and responsibilities for their foundation.
Baker Tilly solution
The Baker Tilly team reviewed applicable college policies, procedures and other documentation related to the college foundation and conducted interviews with process owners and other personnel involved to understand current practices. The team evaluated the accounting processes and resources against peer institutions and industry best practices and provided recommendations for strengthening and enhancing processes and staff resources.
Results achieved
Recommendations were presented to the client related to the streamlining of processes, technology utilization, staffing and training. Since the completion of the review, institutional management has:
- Determined that processes are decentralized causing duplication of work and inefficient processes
- Evaluated staffing and identified a knowledge gap in not-for-profit accounting standards
- Enhanced policy and procedure documentation to encourage accounting staff cross-training
- Implemented automated processes and additional reporting tools to enhance data integrity
For more information on business office assessments, or to learn more about how Baker Tilly’s higher education internal audit specialists can help your institution, contact our team.
