Financial Transformation: University Streamlines Operations for Sustainability

The Challenge

A small 150+ year-old liberal arts university faced a complex set of challenges that threatened its financial stability and long-term viability. The institution grappled with a structural deficit, declining enrollment in key programs and a deteriorating financial condition aggravated by the impact of the COVID-19 pandemic. Additionally, challenging student demographics, shifts in government support for higher education and an outdated infrastructure further compounded the university’s financial challenges. 

The university’s financial landscape was characterized by outdated accounting practices, inefficient administrative operations and a lack of transparency in financial reporting. These challenges hindered the institution’s ability to make informed financial decisions, track expenses effectively and maintain a balanced budget.

Furthermore, the university’s reliance on tuition dollars as a primary source of revenue necessitated a concerted effort to increase enrollment. However, previous enrollment strategies had fallen short, and unrealistic enrollment goals were set without a practical operational strategy in place. These factors collectively created a pressing need for a comprehensive financial transformation.

In the face of these challenges, the university recognized the need for an external partner to guide them through the financial transformation process.  BDO was enlisted to provide strategic recommendations and implementation support, given our extensive experience in working with nonprofit organizations and higher education institutions.

Our Recommendations

Following the retirement announcement of the current CFO, the university reached out to BDO with an interest in exploring some form of outsourced support and an immediate need to stabilize their accounting operation.  Leveraging its Industry Specialty Services team, BDO provided strategic analysis and assistance in transitioning the university’s procurement function following the departure of the Director of Procurement.

BDO ultimately recommended outsourcing the university’s finance and accounting function to leverage specialized expertise while reducing costs and improving operational effectiveness. BDO’s global service delivery capability generated cost savings while grounding the solution with the technical strength of the world’s fifth largest accounting network.

At the same time as a decision was made to outsource the Finance function, the client also moved to a Professional Employer Organization (PEO) staffing model to gain savings and advantage in Human Resources (HR).  BDO assisted the client with the negotiation of health insurance options when the PEO withdrew the offer to participate in their health plan. Subsequently, when the PEO no longer made sense, BDO helped the client transition back to insourced HR and outsourced payroll.  BDO’s Human Capital Management professionals provided consultative support in these transitions and periodically following the transition.

Prior to the client outsourcing the technology function, BDO provided support in assessing the technical capabilities of a key contractor and in developing a Gramm Leach Billey Act (GLBA) compliance plan.  BDO’s Insurance Advisory Services practice also assisted in a review of both coverages and costs from a consortium in which the client participated.

In addition to the outsourcing of the Finance function, BDO took a deep dive into how the accounting systems and financial reporting were configured and highlighted critical improvements required to meet the need for timely and accurate financial reporting. 

Enhancing Financial Management and Reporting: BDO identified the need for significant improvements in financial management and reporting processes. We recommended and implemented a robust financial system, specifically addressing the deficiencies in the university’s general ledger system. BDO proposed a deep dive review of the university’s ERP system functionality to identify and address gaps and issues, which would ultimately enable accurate and timely financial reporting, facilitate trend analysis and provide better insights into the institution’s financial health.

BDO’s recommendations and approach offered a comprehensive and innovative solution to address challenges faced by the university:

• Collaborative Project Management: BDO adopted a collaborative project management approach, working closely with the university’s leadership team, cabinet members and board of trustees. This approach facilitated alignment of goals, effective communication and timely decision-making. Regular meetings, updates and reporting structures were established to facilitate coordination and transparency throughout the project.
• Hybrid Outsourcing Model: BDO introduced a hybrid outsourcing model that combined outsourcing certain administrative functions (procurement, accounts payable, controllership, audit and reporting and CFO advisory services) while retaining essential roles in-house. The innovative combination of a fully functioning and experienced accounting team located in Bangalore, India coupled with an on-shore controllership and CFO leadership team based in McLean, Virginia led to tremendous cost savings in the university’s finance function. This groundbreaking approach allowed the university to benefit from external expertise and cost savings while maintaining local presence and control over critical functions such as payroll, human resources, financial aid and student accounts. 

Our Approach

BDO’s extensive experience in working with nonprofit organizations and educational institutions allowed us to tailor our recommendations and solutions to meet the university’s specific needs. Our team consisted of seasoned professionals who previously served in CFO-level roles and had in-depth knowledge of accounting practices relevant to higher education institutions. Additionally, the BDO team’s knowledge of best practices in enrollment management, financial aid, accreditation and digital transformation were integral to our approach on this engagement.

BDO’s approach involved a thorough assessment of the university’s financial portfolio and operational challenges. With our help, the university implemented a transition plan, remediated their accounting infrastructure and established a collaborative framework for regular communication and reporting. BDO’s experienced team provided ongoing support, including CFO-level guidance, coordination with auditors and training for staff.

Results/Financial Impact

This engagement yielded significant results for the university. When BDO was engaged to take on the outsourced accounting functions, there was a substantial need for coordination, staffing, technology enablement and communication across functional areas, which the BDO team also stepped in to navigate and manage. BDO worked with the university’s management and board of directors to remediate the accounting and general ledger gaps, close out prior year financial statements and audits, and proactively assess the finance functions of the university’s ERP system so that both resources and activities could be coordinated effectively going forward. 

By implementing BDO’s recommended best practice program management structure, financial reporting and accounting, necessary steps were taken to right-size the operational support of the university. This enabled the university to envision and enact a path forward to enhance and support long-term sustainability of the day-to-day operations.

Through this engagement, the institution has not only achieved streamlined operations, but for the first time in many years the Board was presented with grounded budgets and detailed cash flow analysis to assist them in guiding the critical next steps. The result? Improved financial reporting and enhanced compliance with auditing requirements.