Does the influence of a higher education Chief Financial Officer extend beyond the institution’s accounting and finance departments? Absolutely, because financial stewardship spans the entire institution; from the admissions office to the athletics department, complex and diverse funding sources are required to serve the college or university’s mission. However, strategic cash management — a top priority of the CFO that involves improving earnings on investments while aligning funding with people and programs — becomes even more challenging given the present uncertainty surrounding state and federal compliance programs. For the higher education CFO, handling unique situations becomes the norm, extending well beyond simply monitoring the top line.
A CFO new to higher education has much to learn about the people and the funding, in addition to the general accounting principles. In this article, we offer insights to help prioritize and achieve quick wins for those new to higher education.
Key Stakeholders and the Importance of Building a Good Team
A top priority of a higher education CFO’s job involves understanding roles and responsibilities among key stakeholders. This diverse group, in addition to the direct finance teams and Board of Directors, typically includes:
- The President’s Cabinet or executive oversight committee.
- Faculty Senate or faculty leadership.
- Student advisors and leadership groups.
- School deans and department chairs.
- Nonacademic executive management teams (auxiliary services, facilities, investments, athletics).
- Academic management teams (student affairs, institutional research, admissions, student financial services and financial aid).
- Major donors and sponsored funding sources.
- Accrediting bodies.
- State and local higher education oversight offices.
Armed with a thorough understanding of the institution’s structure and funding sources, the CFO can help promote a clear financial strategy among team members and stakeholders. For example, a higher education CFO might hold monthly meetings with standing agendas to help ensure that key objectives and ongoing projects are fully staffed, funded and prioritized. Sharing information through regular meetings can preserve details and nuances that may be lost through emails and broad messaging. Such close communication can also build and maintain a strong team, creating a culture that reinforces collaboration and rewards effective outcomes.
Culture, communication, and fiscal strategic planning should never be overlooked, no matter how resource-strapped an institution may appear. Alignment of student outcomes with the bottom line is quickly becoming best practice, and to do so requires a common understanding of terms across campus and being able to speak to peers in a language they understand. While it takes time and effort to build an effective campus-wide network, the payoff and success can be obvious.
Communication and compliance can suffer when key finance positions remain vacant for any length of time. Any gap in leadership may trigger crucial missteps in management of the institution’s complicated funding sources. Given the CFO’s integral role to the institution’s overall success, CFOs may choose to hire interim staffing resources or consider outsourcing some finance and accounting functions to quickly stabilize operations and improve the planning and reporting functions that inform key decision-making.
Fiduciary Requirements, Funding, and the Compliance Calendar
A higher education CFO's foremost priority is to uphold their fiduciary responsibility, helping ensure the institution's financial health and sustainability to consistently achieve its mission. This involves diligently managing financial resources, safeguarding assets, mitigating risks, and maintaining compliance with all pertinent laws and regulations. While their influence is broad, these fiduciary duties are paramount.
In fulfilling their fiduciary duties, a CFO new to the higher education sector will face the challenge of navigating a diverse and often complex array of funding streams, some of which may be undocumented. While tuition and donations constitute the primary revenue sources, additional funds may come from government grants, endowments, corporate sponsorships, loans, and collaborations with other educational institutions. Each funding source may have specific compliance requirements, with some necessitating allocation to particular departments or initiatives, while others support long-term strategies for innovation, growth, and enhancement of infrastructure and curriculum. As the CFO oversees the institution's finances, meticulous attention to and adherence to these funding requirements are essential to help ensure compliance and the effective use of resources.
A higher education CFO typically relies on a compliance calendar, a management tool that serves as the “who, what and when” of maintaining compliance. This tool enables the CFO to track important deadlines, submit reports and other filings on time, and monitor nonfinancial information such as enrollment, accreditation, and insurance reviews that might impact the institution’s finances.
AI, Digital Transformation, and the CFO’s role
As technology rapidly evolves, colleges and universities must adapt. The CFO’s role often involves making the business case for technology that will have a long-term impact to the institution’s bottom line. Leveraging the relationships built across campus, a CFO can assist with identifying technology gaps, inefficiencies, and opportunities to prioritize solutions that work for everyone.
Few institutions have the expertise to identify how to implement AI in the back office. However, doing so could help the CFO achieve key performance metrics by reducing costs and improving critical services on campus. It is critical to identify a strong technology provider that can use existing systems to achieve quick wins while a longer-term investment plan is developed. Institutions can expect an experienced higher education technical advisor to conduct a comprehensive technology assessment and identify critical areas to prioritize that may facilitate cost savings and promote long-term success.
The CFO can leverage the value of AI and digital transformation initiatives by highlighting the importance of data driven decision-making to improve institutional performance. At the end of the day, the CFO is responsible for helping their peers prioritize and fulfill the institution’s mission — which includes figuring out how to keep the lights on and pay for mission-critical services. Harnessing the power of data, both financial and non-financial, often provides insight into operational efficiency, financial performance, and, consequently, student outcomes.
Forward-thinking schools may draw the connection between student outcomes and the institution’s financial performance, positioning themselves for success alongside their students. This begins with a robust digital transformation roadmap and being able to communicate the value of the roadmap to key stakeholders. To better understand how student success outcomes can be aligned with financial performance in higher education, new CFOs can read case studies and access free comparative data and tools available to universities at NACUBO Student Success Hub.
Filling the Critical Role of Higher Education CFO
The CFO’s leadership impacts institutions on many levels. When the role is vacant, it is imperative to find a qualified person to help ensure the institution continues striving to meet its objectives. At BDO, we understand that time is of the essence, and our experienced professionals are available to step into complex environments to assist when needed. Please contact BDO to discuss how our Outsourced Finance & Accounting Services team can help with staffing, interim staffing, full outsourced support, and transition planning.
Does your staff need training and a refresher on nonprofit accounting? Check out BDO’s Certified Nonprofit Accounting Professional (CNAP) program.