A roundup of short news articles and useful resources for business officers
- Kuali System Surprises Skeptics
- Financial Reporting of Research Activities
- By the Numbers: Students from Afar
When Kuali was created in 2004 to develop an open source financial system, the idea was met with some skepticism, and maybe rightly so. Although higher education open source software solutions were found in operating systems and learning management systems, it seemed improbable that a group of universities and like-minded companies could develop, deliver, and maintain open source systems for mission-critical areas of finance, research administration, student, or library.
CFOs themselves questioned whether this was too risky an option. Although they were aware that most vended solutions were not made for higher education—and often had to be customized at great expense—and they recognized that the other option of continuing to build these systems on their own was not sustainable, the idea of collaboration seemed a bit pie-in-the-sky.
An EDUCAUSE Center for Applied Research study, “The Promise and Performance of Enterprise Systems for Higher Education” (ECAR, 2002) addressed one of the most important IT issues facing higher education. Incorporating nearly 500 college and university survey responses, and more than 100 interviews with ERP suppliers and leaders, this study evaluated a number of key developments:
- Why we invested heavily to renew systems between 1997 and 2002.
- What affected the outcomes of these projects.
- Implementers' levels of satisfaction.
- The role these systems will play in future campus IT architectures.
- How they will enhance institutional performance.
The survey noted: “At the end of the twentieth century and into the twenty-first, higher education has invested, by a conservative estimate, $5 billion in administrative and enterprise resource planning [ERP] systems.” (Go to www.educause.edu/ers0204 for the full study.)
Kuali forged on through the skepticism about an open source solution, and the believers who were involved at the beginning persisted. The partners delivered the Kuali Financial System (KFS) in July 2009, the proposal and award functionality on the research system in April 2010, and the curriculum management for the student system in March 2011. Accompanying these modules is the middleware—Kuali Rice—which is the underlying technology for smooth integration of all Kuali applications for the enterprise. Now being used by more institutions than those involved in other Kuali software, it handles workflow, identity management, notifications, electronic document templates, and other shared services.
Since 2004, Kuali has become very real—so real that with more projects, more implementations, and increasing partnerships than even originally envisioned, the skepticism is turning to certitude.
Here's a quick summary of projects and status.
Early stages of development: Student, Library, and HR/Payroll.
Mature and in sustainment: KFS, Coeus (for research administration), and Rice.
Developed quickly: Kuali Mobility, a framework that provides functionality to all types of mobile devices, delivered in October 2011.
Delivered in the cloud: Kuali Ready, a product for business continuity planning, with 69 subscribers.
Implementations and Institutions
Here's what's happening with Kuali on various campuses.
Kuali Financial System (KFS): Now running at Colorado State University, San Joaquin Delta College, Michigan State University, Cornell University, University of Southern California, Indiana University, and Stevens Institute of Technology, to name a few.
First small institution to run KFS: Haverford College, a liberal arts college outside Philadelphia, planning to go live in July 2012, and establish best practices for similar small institutions. Read the background to this decision in Vantage Point, on page 13.
Kuali Coeus (KC): Now running at Indiana University, University of Arizona, and Boston University, with at least five other institutions planning implementations in 2012.
Kuali Rice: Being run by numerous institutions, too many to name.
Kuali Student (curriculum management): Now running at University of California Berkeley, University of Maryland College Park, and North-West University South Africa.
The Kuali Family
Partner institutions are joining the community because they understand the value of engaging with the collaboration up front. These partners guide the priorities, determine the requirements, and shape the direction; thus, they know the details of future modules and are able to time their implementations, upgrades, and training.
Most institutions recognize that implementation of any ERP system is a substantial effort requiring outside expertise. The Kuali commercial affiliates, which have been active participants in the community all along, provide that necessary support for both large and small implementations.
Since 2004, the Kuali Foundation has grown from 3 members to 64 in mid-2011, with total net assets of $28 million. The projects have grown from one to eight, encompassing all administrative systems found in a typical enterprise resource planning (ERP) suite. The Kuali Days User Conference attendance has risen from about 80 in 2005 to 750 in 2011.
The Kuali model represents some of the best aspects of the concept called “cloud computing”: aggregating demand; leveraging above-campus services; and placing hardware, software, and services off-site. Kuali builds on resources across many institutions to deliver the best product, and it provides a community of like-minded institutions and supporting companies that create very sustainable support mechanisms. The result: a long-term cost containment model that will affect the bottom line for the next decade.
If your institution hasn't considered Kuali, ask yourself: Why pay licensing costs and the resulting annual (in perpetuity) maintenance costs when we can obtain excellent software without those costs? Why not leverage our resources with those of other institutions for the best possible outcomes? Why not reduce risk in a volatile marketplace?
Perhaps you'll decide to adopt the Kuali vision, which for so many institutions is now a very successful reality for delivering enterprise software in a way that really works and is more cost-effective over the long term.
SUBMITTED BY Jennifer Foutty, executive director, Kuali Foundation, Bloomington, Indiana
Have you ever reported the financial results of your sponsored research to the board of trustees and had someone say, “That's not the number that we were given in a previous presentation?” All too often, the amounts reported for research activities differ—sometimes significantly.
A committee of NACUBO's Accounting Principles Council (see sidebar for a list of committee members) that studies inconsistencies in financial reporting across institutions reviewed the various ways that the financial results of research activities are reported. They focused on research results that are reported externally and are publicly available. Committee findings can provide some tools to help explain to stakeholders the reasons why differences exist.
Many factors contribute to inconsistencies when accounting for research. It is important to understand that there are different financial metrics for reporting research—expenditures, expenses, and revenues—with each metric producing a different result.
Expenditures. The reports that use expenditures as a metric contain cash outlays by the institution during the reporting period, including those for the purchase of capital assets.
Expenses. Reports based on expenses include accruals and allocation of overhead but do not include amounts spent for the purchase of capital assets.
Revenue. These reports use amounts from external sources that are earned in the period, in accordance with revenue recognition accounting standards or Internal Revenue Service (IRS) guidelines.
The committee focused its work on research results that are reported externally and are publicly available. The figure “Explanation of External and Publicly Available Reports” displays the different types of reports sorted by the metrics noted earlier and the categories of cost used to calculate the research activity totals.
Expenditure reports. Each report contains amounts expended during the reporting period, including those for the purchase of capital assets; they do not include allocations of actual overhead costs, such as depreciation and interest, but they do include allocations of indirect overhead costs such as those for facilities and administration.
- National Science Foundation (NSF) Survey of Research and Development (R&D) Expenditures at Universities and Colleges. This annual survey collects information on research and development expenditures by academic field as well as by funding source. Results are used primarily to assess trends in the fields of science and engineering. Institutions report total direct expenditures, reimbursed indirect expenditures, and estimated unreimbursed indirect expenditures. Also included are amounts expended for the purchase of capital assets. Beginning in FY10, research in nonscience disciplines such as education, law, humanities, and so forth, is included in the survey.
- Schedule of Expenditure of Federal Awards included in financial statements audited for compliance under OMB Circular A-133. This schedule includes all direct and reimbursed indirect expenditures on federally sponsored projects, including clinical trials. These costs include amounts expended on pass-through awards to recipients or subrecipients. This schedule also includes amounts expended for capital assets. Excluded from this schedule are amounts expended for research from sources other than federal funding.
Expense reports. These reports include expenses incurred for research during the reporting period.
- Integrated Postsecondary Education Data System (IPEDS). Research reported for IPEDS purposes includes expenses for activities specifically organized to produce research outcomes, whether funded through external sources or separately budgeted by an organizational unit within the institution. Actual or allocated amounts for the operation and maintenance of plant, depreciation, and interest expense are included. To the extent that an institution separately budgets and tracks expenses related to research, these amounts may also be included. Amounts expended for the purchase of capital assets are excluded. Note that the IPEDS survey should reconcile to the institution's audited financial statements.
- Functional expenses as presented in the institution's audited financial statements. As with the IPEDS survey, the research functional classification includes all separately budgeted expenses for activities specifically organized to produce research. Actual or allocated expenses for overhead related to research are included using the same criteria as IPEDS reporting. Departmental research that is not separately budgeted is excluded, as are amounts expended to purchase capital assets.
Revenue reports. These reports include amounts earned from external sources in accordance with revenue recognition accounting standards or IRS guidelines.
- Organized research as presented in the institution's audited financial statements. This category includes amounts earned from external sources during the reporting period. Revenue generated from research is typically recognized in one of three ways: (1) as costs are incurred and billed; (2) upon completion of milestones based on costs incurred; or (3) in the amount of predetermined payments, unrelated to costs incurred.
- Council for Aid to Education (CAE) Voluntary Support of Education Survey. This annual survey reports fundraising results. It includes gifts and grants of cash and property from nongovernment sources, which the donor has restricted for scientific, technical, or humanistic investigation. It specifically excludes amounts received for clinical trials. In general, if a charitable donation does not meet the recognition criteria of the IRS, it should not be recognized for CAE reporting.
With so many different reports, it's easy to see why confusion exists. To provide the “right” information to the various stakeholders, it is important to be able to convey, reconcile, and describe what is being reported. Explaining the various reporting nuances to those involved in governance and upper-level management is a good first step toward answering the questions posed earlier.
SUBMITTED BY the NACUBO Accounting Principles Council's committee on reporting inconsistency issues across institutions