“While the soul of an institution can be found in its curriculum, its conscience can be found in its budget.” - University of Tulsa Provost Thomas Staley
What better way to sum up how essential the budget is to a higher education institution – and not just for the current budget year, but for years to come?
So it’s troubling to still see so many colleges and universities mired in old processes that leave them vulnerable to inaccuracies, guesswork, confusion and disconnection. Such was the assessment last September at the National Association of College and University Business Officers (NACUBO) Planning & Budgeting Conference in Denver. In a session titled “Budgeting & Capital Planning Best Practices,” Indiana Weslayan University’s Dr. Duane Kilty joined Tanya K. Hahn of Robert W. Baird & Co. and Wallace Wetherill of BKD, LLP. Attendees were shown a list of “issues and observations” from CFOs. According to Kilty et al, finance, business and budget officers report a list of maladies in the business office.
1. They’re dissatisfied with their current systems. Existing planning and budgeting systems take too long and lack time-saving automation. The group cited an APQC study that found the average organization spends four months budgeting, with financial managers devoting 20 to 30 percent of their time to the task.
2. They’re looking to change their budgeting process. Half of organizations polled by BPM Forum said manual spreadsheets are “too time consuming,” with 73 percent eyeing a change.
3. Institutions don’t budget for non-operating activities. The non-operating bucket is large – grants and bequests, long-term investment activity, losses on extinguishment of debt, changes in annuity valuations – and budgets that fail to encompass these activities are anything but comprehensive.
4. Processes are not forward-looking enough. Many institutions are stuck in a cycle of focusing solely on the coming fiscal year. This leads to overlooking crucial expense and revenue trends, and getting caught off-guard by developments that could have been predicted.
5. Budgets aren’t aligned with the strategic plan. When your budget isn’t connected to your institution’s investment, capital and development policies, then you’re making decisions that may be divorced from crucial details, such as the status of existing campus assets, your organization’s borrowing parameters, acknowledgement of debt financial covenants, and more.
6. Institutions don’t have enough reserves. In many cases, this can be a byproduct of incomplete budgets that beget the kind of unwelcome (and costly) surprises mentioned earlier.
7. Cabinets don’t own parameters or challenges. Without accountability and goals, budget owners and financial decision-makers can’t be expected to take real ownership of the results. This very often leads to results you won’t like.
8. Organizations are calcified, siloed and resistant to change. Governance and decision-making suffer when budgeting lacks transparency, fiefdoms hold sway, and participants are unwilling to collaborate. And siloed processes often mean plans and budgets are completely disconnected from actual results.
For many in higher-ed, that list probably looks awfully familiar. But as Kilty, Hahn and Weatherill point out, these symptoms are merely the result of ineffective legacy processes and the decay that naturally comes from maintaining the status quo, no matter how bad it is.
By taking a fresh and strategic look at the role of the budget, by focusing on key process improvements, by reframing the budget from mere cost-containment to a margin-based and accountability-oriented approach, and by creating a comprehensive plan that incorporates all budget drivers, institutions can reclaim control over the beast they know today as the budget.
At Tidemark, we’re intimately familiar with these challenges and have developed a financial planning app specifically for higher-ed institutions. Designed with input from colleges and universities of all sizes, Tidemark Planning and Analytics for Higher Education tackles these shortcomings with a born-in-the-cloud, mobile-first platform that has helped an array of institutions shave months off their budget cycles and make stakeholders from throughout the organization part of a continuous, collaborative planning process.
If the conscience of an institution can be found in its budget, then perhaps it’s time to listen to what that conscience is saying. Brown University does it, and so does the University of Miami. In fact, Florida Atlantic University does to, as well as all of the colleges in the Claremont University Consortium.
When will you?