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Business Officer Magazine

Multiple Missions, Single Voice

Since 1962, NACUBO has represented the interests of higher education, allowing business officers from colleges and universities across the country to speak as one in addressing the industry’s accounting, legislative, and regulatory challenges.

By Margo Vanover Porter

*He faced a Herculean task. When he chaired what was then called the NACUBO Accounting Principles Committee in the early 1980s, David J. Lyons tried to get hospitals, churches, museums, and higher education to reach consensus on one common set of principles for nonprofits. During the ensuing debate and eventual agreement, he learned a lesson that he believes holds true today.

"If you go through NACUBO, your conclusion has credibility and it's accepted because it's been debated and discussed," says Lyons, who is former vice president for business and finance, and former treasurer, the Rockefeller University, New York City. "It represents the best thinking of the group. We all know that if we didn't have NACUBO, we would have to invent an association to serve our industry. The need will always be there. We started out from regionals. Now we have professional staff and Washington connections."

"When the founding organizations came together to form NACUBO, they had three or four very important goals in mind," says John Walda, NACUBO's president and CEO since 2006. "One certainly had to do with educating business officers on best practices of how to do things in their offices on campus. But front and center was the need to find a common voice for higher education. The regional organizations did a fine job of representing the interests of four very different parts of this country, but to bring that together we needed a national organization. As resources were set aside for higher education through the federal budget, the requirement that we be responsible for those resources became even more important.

"NACUBO is the members' eyes, ears, and voice in Washington. We can't do any of what we do without our members, because we don't have campuses."

Mary M. Bachinger, NACUBO

"In the area of advocacy, NACUBO has stepped forward over the past 10 years to take a real leadership role in Washington, D.C.," Walda continues. "In the early days of advocacy, we talked about very specific business functions to very specific people who were decision makers. Today, NACUBO is looked to for discussion of the big issues of the day: How do we educate more students with constrained resources? How do we get more students into the classroom, to develop an educated workforce in this country?"

That reputation for credibility in its advocacy and public policy efforts is based on a number of factors, according to James E. "Jay" Morley Jr., president and CEO of NACUBO from 1995 to 2006. "The approach is one of collaboration, relationship building, and supplying information based on logic and real data," says Morley, who is now an independent consultant affiliated with Huron Consulting Group and working out of its Washington, D.C., office. For example, when negotiating with the Department of Education on financial accountability rules, Morley started the conversation like this: "We are not trying to defend irresponsible institutions, but rather to have in place rules, regulations, and reporting that will accomplish what the federal government is trying to get at, without mile-high reams of paper and draconian costs."

Perceptions of Higher Ed

It helps too that the industry as a whole has a reputation for playing by the rules, says Mary M. Bachinger, NACUBO's director of tax policy, when explaining association and member involvement in the redesign of the Internal Revenue Service's Form 990 in 2008.

"Only the members can determine how federal policy initiatives will play out on a college campus," she says. "Our members do a great job of being concise when they're in a room with regulators and lawmakers. It helps that our members are perceived as being rule followers. If they're out of compliance, it's not on purpose. It's usually rooted in confusion about a convoluted rule."

Flashback ... 25 Years Ago

In the July 1987 Business Officer issue celebrating NACUBO's 25th anniversary, in an article about the founding of the association ...

"What helped bring us together was action by the federal government on bond issues and research. We needed a voice to represent our interests. . . . I think NACUBO is one of the strongest, soundest organizations in the United States. When NACUBO turns its attention to something, I think it has a voice stronger than the presidents' associations."

KENNETH A. DICK, retired vice president for financial affairs, University of Idaho-and author of the original NACUBO bylaws, first NACUBO executive vice president, and a president of the Board of Directors

NACUBO was poised to engage members when the IRS announced it would be overhauling the Form 990. Because private colleges are required to file the form annually, "that's something we wanted to be involved with as early as possible and as often as possible," Bachinger says. "We were fortunate that the IRS let us know they would like to meet with some of our members and talk about the elements of the redesign. Twice we brought together a group of business officers to talk with the IRS staff running the redesign project."

One of those members was Anne Shapiro, university controller, Cornell University, Ithaca, New York, who recalls that the IRS had three goals for its ambitious expansion of the form and required disclosures. "One was to improve transparency. That succeeded," she says. "Another was to redesign page one of the 990 so that it provided lay readers with key information. That succeeded. The third goal was to manage the administrative burden. That was a failure. It is enormously burdensome to assemble this information. Burden comes with a dollar sign, which has to be paid by someone."

Bachinger jokes that what could have been a telephone book is now just a workbook, thanks to association advocacy efforts that spanned several years. "We like to say—because it's true—that NACUBO is the members' eyes, ears, and voice in Washington. We can't do any of what we do without our members, because we don't have campuses. NACUBO's successes in the tax area are attributable to the expertise of volunteers on the Tax Council, individuals responsible for tax compliance and administration on their campuses. They are our tax experts."

For example, Bachinger asked current and former members of the council, as well as other interested members, if they would like to work on the Form 990 redesign. "We divided the work, had lots of conference calls, and shared information, which worked really well," she says. "The members, and their ability to apply a practical reality to a massive proposal, were very effective in convincing the IRS to make changes in the final redesigned form that our members now have to file."

Members Identify Risk

Members also play a crucial role in determining which advocacy and public policy issues NACUBO should tackle.

"We design a portion of our advocacy agenda around what our members identify as being important on their campuses," says Walda. "Through our constituent and subject matter councils, we identify issues that our members are concerned about. We seek changes that are helpful-or try to avoid regulation that isn't helpful-in those areas our members identify."

For example, in the mid-1980s when institutions large and small started to complain about their insurance premiums-if they could find coverage at all-NACUBO staffers listened. "In 1985, we had what is called a hard market, which means if you could get insurance, it was very expensive," Morley explains. "General liability coverage was being doubled and tripled. Rates were going from $200,000 to a
half million or more for larger institutions, and the coverages were being reduced. Higher education was exposed to paying substantial amounts of money at the same time companies were reducing coverages."

Faced with a nationwide crisis, NACUBO created a task force to study the problem and identify alternatives to the commercial market. "The members of the task force developed an idea for education's own insurance company," says Janice Abraham, a former business officer who is now president and CEO of that company: United Educators Insurance, Chevy Chase, Maryland. "NACUBO brought smart people together to begin to develop a solution. NACUBO played the role of thought leader and gathered intellectual capital from people who understood the crisis and were willing to work on it.  NACUBO has the credibility and stature to call on really busy people to solve a problem and then support those who come up with a solution."

The task force worked with the risk management group, the University Risk Management and Insurance Association (URMIA). "United Educators came from this NACUBO task force 25 years ago," Abraham says. "We've grown from insuring a handful of educational institutions to about 1,200." Because United Educators is owned and governed by them, institutions have developed an understanding of what could go wrong at a campus and can actively try to prevent premium increases by putting money into risk management programs, she adds.

Katrina Creates Another Crisis

NACUBO also responded to the crisis left in the wake of Hurricane Katrina in 2005.

"Hurricanes Katrina and Rita passed after a number of days but left behind a path of destruction," says Barbara L. Johnson, vice chancellor for business and finance, University of Nebraska at Kearney. "At some of the institutions in New Orleans, college students started class one day, and the next day everything was completely destroyed. The K–12 public school system in New Orleans completely shut down. There were no hospitals. Fundamental community services were all gone. There were so many resources, but they were not getting to the right people and the right place."

When asked to come to Washington as a temporary NACUBO consultant to help address member institutions' problems following Katrina, Johnson didn't hesitate.  She arrived in September after a phone call from Matt Hamill, NACUBO's senior vice president for advocacy and issue analysis.

"In the aftermath of Katrina, it became clear that there was a growing interest by colleges and universities to find ways to help institutions that were affected by the hurricane and the students who had been displaced," Hamill says. "At NACUBO, we wanted to provide a forum for institutions offering to help. The most common offer was from institutions willing to accept students on an interim basis, so their course of study was not interrupted while their institution in the Gulf was closed."

Hamill describes the effort as advocacy in its broadest sense. "We communicated with our member institutions the importance of responding to an enormous need in any way they could. When we talk about advocacy, many times it is directed to external audiences, but from time to time we also advocate among our membership."

Once on board, Johnson helped create a warehouse of resources, not only for administrators, but also for faculty and students. "A number of colleges and universities across the country agreed to let faculty from the affected areas use their research facilities while their campuses were being put back together," she says.

"They also let students—because there were six or seven campuses that could not hold classes—take courses for that fall semester," she continues. "When the federal government made money available, some students and parents didn't know how to get the funds. We became a repository for those questions and answers, and put the students in touch with those who had access to desperately needed funds. NACUBO was a resource they knew they could rely on. We were a resource that connected the people in need with the resources that were available."

Members Tell the Most Compelling Story

At the federal level, NACUBO often combines forces for maximum impact.

"One of the most effective things we do is put together coalitions of higher education associations to speak on behalf of the higher education community," Walda says. "This happens regularly. Sometimes we are the initiating party; sometimes it's the American Council on Education or one of the other presidential associations. We have learned to live in a collaborative context with other higher education associations. That makes us much more powerful on Capitol Hill."

He cites the example of a recent coalition of higher education associations that banded together in opposition to contemplated changes to the regulations involving the New GI Bill. "We drafted a letter, and solicited support for this letter from other higher ed associations, and delivered it to key decision makers both in Congress and the Department of Education."

In addition to other associations, NACUBO relies on members to carry out advocacy and public policy efforts. "Once an issue has been identified, more often than not the most effective voice for the views we help identify and articulate are individual institutions that can tell the story in a concrete way," Hamill says. "They can communicate how a particular proposal will affect their  campus to representatives or senators who are familiar with that institution because they are alumni, or the institution is in their congressional district or home state.
That relationship between a college, its leadership and its students, and individual members of Congress and senators is a critical tool in terms of having our voice heard."

Last year, for the first time, NACUBO organized a contingent of members who were in Washington, D.C., for meetings, and sent them to Capitol Hill to speak to members of Congress. The representatives of two NACUBO constituent councils addressed three issues, explains Liz Clark, director of congressional relations.

"NACUBO has the credibility and stature to call on really busy people to solve a problem and then support those who come up with a solution."

Janice Abraham, United Educators Insurance

"One was continued robust funding for the Pell Grant program," Clark says. "One was to talk to members of Congress and their staffs about the importance of charitable deductions to colleges and universities, and the role that charitable giving plays in fundraising, and how important it is to many institutions. The third issue was a request to protect tax-exempt bond financing, which is an important tool available to public and nonprofit institutions to help with financing major construction and other capital-intensive projects."

She anticipates that Capitol Hill visits will become an annual effort involving all four constituent councils and other groups. "NACUBO does an excellent job in reaching out to legislators and staff on key issues, but when our members talk to their senators and representatives, they are able to personalize the issue and really demonstrate the importance and impact of the issue to the district or state."

Walda endorses this philosophy of grassroots activism. "When it comes to  representing higher education," he says. "I learned early on, as association staff, you need to have someone who is a constituent with you when you're talking about issues. That's why our members have become much more involved from a grassroots perspective in helping us influence public policy."

Accounting for Dollars

Not all NACUBO advocacy efforts have a happy ending.

"We don't always win," admits Sue Menditto, NACUBO's director of accounting policy. "We think of higher education as one industry, whether you are a public institution or private institution, so our accounting rules used to be the same. In 1989, the Financial Accounting Foundation officially changed the jurisdiction. They put certain industries, like state and local governments, under a new standards board, called the Governmental Accounting Standards Board [GASB]. They put other industries, private businesses and not-for-profits, under the Financial Accounting Standards Board [FASB].  They left two industries-higher education and health care-split between the two standards boards. We fought during the five-year experimental time frame to have our industry united, but we lost that battle, and public institutions went under the GASB."

Today's challenges, says, John Walda, are maintaining the current level of support for Pell Grants and other forms of student financial aid, continuing to make subsidized student loans available at a resonable interest rate and cost, and trying to avoid intrusive and costly regulation on campuses.

Giving a historical perspective, Morley explains that financial reporting has been in NACUBO's bailiwick since day one. "From the very beginning, one of the things NACUBO was established to work with was the accounting standards boards. The arm wrestling over GASB predated my time of coming to NACUBO."

Wrangling began anew when in 1999 the GASB floated a proposal for a different reporting model for public institutions. "Although it was before my time, it is well documented that NACUBO fought really, really hard to have higher education
public institutions present as a business-type activity," Menditto says. "That method of presentation is entirely different from how state and local governments present their financial statements. We won that battle. GASB understood that although public colleges and universities get some support from the states, we raise a lot of revenue from development efforts, endowment contributions, tuitions, and auxiliaries. That was a big win to get them to see that we should not report like state and local governments."

Morley remembers arguing that higher education didn't really resemble the military or a governmental department, such as transportation. "Whether you are Michigan State or Cornell University, you're basically doing the same stuff. We wanted to preserve the accounting that reported financial transactions, both revenues and expenses, in the same manner whether you are public or private. When you come under governmental fund rules and regulations, you come under a whole different set of categories for reporting."

This time, the GASB agreed.

"That was another major effort of NACUBO and its volunteers to try to preserve as much as possible the categories and the manner in which education revenues and expenses are reported in annual financial statements and internal accounting processes and procedures," he says. "That was major accounting policy work with national impact, and NACUBO was at the very heart of it, because we were the designated industry liaison to these entities. If it hadn't been for NACUBO, the financial statements of public institutions would look like government agencies, as opposed to colleges and universities educating students and doing research."

Whether the matter is legislative,  regulatory, or accounting-specific, NACUBO approaches advocacy the same way, according to Menditto. "I work through a council of members from institutions. I ask them questions. We might do a quick survey. We might do a posting on our listserver. We communicate to members using our experts to get the word out and to get feedback on an issue. When we know what we should do, I make sure the appropriate people at the standards-setting bodies know what higher ed needs and where we stand. That's how we organize. We also write comment letters to respond to various proposals. We participate in public roundtables and we testify on behalf of higher education when a proposal is very important to us.

"We communicate, communicate, communicate," she emphasizes. "And we have to be knowledgeable and persuasive when we communicate. We can't just whine. We have to be well versed in accounting literature and concepts and try to get them to see inconsistencies,
or to see the impact on higher education institutions."

What the Future Holds

Fifty years after initiating an advocacy and public policy effort, NACUBO continues to speak on behalf of business officers and higher education in the national arena. Today's challenges, according to Walda, are maintaining the current level of support for Pell Grants and other forms of student financial aid, continuing to make subsidized student loans available at a reasonable interest and cost, and trying to avoid intrusive and costly regulation on campuses.

For example, he says, "We partnered with other higher education associations to convince Congress this year that the federal government defining what a credit hour means is not a very good idea. They backed away from that. That's an example of what I call overly aggressive regulation."

Clark believes the biggest issue on the horizon is the reauthorization of the Higher Education Opportunity Act. "When President Obama put his budget request out this year, he presented specific policy proposals that would alter the way student financial aid is distributed and accounted for by the federal government. We see those as a real thought piece about where President Obama, if reelected, might stand on the Higher Education Reauthorization Act.

"The other big issue is that most observers in Washington predict there will be some type of tax reform package within the next five years. We've already seen proposals to limit the charitable deduction in recent years and we've seen proposals to limit the interest exclusion from tax-exempt bond earnings. Both of those could significantly alter the way business and finance are handled at colleges and universities."

Another dark cloud, Walda adds, is the shrinking level of government support for higher education, from the local level through the federal level. "As we have already seen, states and localities are disinvesting in higher education because of how they see the relative importance of higher education within their states. As we all know, this has caused the burden on families and students who pay tuition to go up significantly at public institutions. The big challenge for us and other higher ed associations is to continue to convince not only policy makers but also the public that investing in higher education is important for the future of our communities and our country as a whole."

Roger D. Lowe, senior vice president, Wichita State University, Wichita, Kansas, agrees. "As each year goes by, it seems that for public institutions the level of state revenues continues to decline," says Lowe, who was the vice president for administration and finance for 45 years before stepping into semiretirement. "We see the same coming from the federal government. To offset some of that and carry on business and keep faculty, student tuition has had to increase more rapidly than we would like, more rapidly than parents would like. It's a result of less money coming into universities from the state. Some of that is prompted by federal mandates on state governments to put more money in federal programs. I don't see that trend slowing down, unfortunately. That will be a real challenge for higher education in the future."

Walda worries that the process of balancing the federal budget could mean more cuts for higher education. "There is an important and serious discussion about balancing the budget. The way you do that traditionally is to cut discretionary funds, and we're in that category. We have to remain active and vigilant in advocating for federal support for higher education, as well as from the states."

MARGO VANOVER PORTER, Locust Grove, Virginia, covers higher education business issues for Business Officer.

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Picking Up the Pace

Her assessment is thoughtful and frank.

"Higher ed has been converted by various factors into a highly regulated industry," says Anne Shapiro, university controller, Cornell University, Ithaca, New York. "Every time you turn around, there is a new proposal. The enormous array of new regulations, and enforcement of old regulations, makes advocacy center stage at NACUBO."

Initiated five decades ago, NACUBO advocacy continues to evolve, with changes evident in its pace, focus, and method of communication.

Surrounded by Red Tape

With higher education under the microscope, NACUBO is emphasizing the higher education story, says Liz Clark, director of congressional relations. "For a number of reasons, the Congress and administration are taking a more critical eye to higher ed. NACUBO and the other associations are working harder to try to share the story of why higher education is a public good."

Shapiro worries about the trend toward more red tape. "Clearly, if the environment gets more regulatory—and that's been the trajectory—then we have to find ways to manage the risks of regulation without increasing our staffs a hundredfold. The cost of education can't tolerate it. The regulations absorb resources."

Shapiro, who plans to retire this year, praises NACUBO's ability—both past and present—to speak in a united voice  on behalf of the industry. "In all of its advocacy and activity on the business side in the last 50 years, NACUBO has  focused on what we're about-teaching, research, and public outreach. NACUBO is able to consolidate all of our views and channel our different concerns and objections into an articulate and compelling story for the industry. We can take an industrywide position. The power of numbers is incredible."

Shift in Focus

Part of the reason for the increasing pace of NACUBO advocacy efforts—besides increased regulation—is the widening scope of responsibility for business officers.

"In the early days, we were more focused on the traditional business issues, such as tax and accounting matters," says John Walda, NACUBO president and CEO. "As the role of the business officer expands and he or she becomes a more significant member of the leadership team on campus, the role of NACUBO expands, increasing the number of issues we have some influence upon."

He adds that as policy makers change their focus, so does NACUBO. "There's been a shift in the focus of what public policy makers are interested in influencing in higher education," he says. "These days a lot of it has to do with the cost of higher education, providing access to students, and making sure they are successful and able to graduate. The business officer has a very distinct and important role in all of the cost-related as well as student-success-related issues. NACUBO is the most likely association, outside of the presidential associations, to advocate on behalf of the higher education community in those areas."

Janice Abraham, president and CEO, United Educators Insurance, Chevy Chase, Maryland, is thankful that the association has been able to keep up with the times. "NACUBO has kept pace with tax issues, funding of deferred maintenance, investment strategy, debt issues, and the liquidity crisis," she says. "It has always been the primary voice for business officers. NACUBO has never lost that mantle. I can't imagine how far behind colleges and universities would be in serving the needs of current students, if NACUBO hadn't been such a thought leader and so progressive in its actions."

Ease of Communication

Looking back, Anne C. Gross believes that NACUBO advocacy altered forever with the advent of the Internet. "What's changed so much over the last 25 years is how we communicate with members and the speed and ease of doing so," says Gross, who is NACUBO's vice president for regulatory affairs. "When I started at NACUBO in 1986, the only way we got information to members was by printing something and mailing it to them. The only way they got back to us was by calling us or replying by mail. Before the Internet, when we wanted to tell people about proposed rules, we had to write an advisory report and mail it with a copy of the rules."

She remembers writing comment letters with several other staff members, all of whom would write, cut, and paste together. "We took handwritten and typewritten drafts, cutting this paragraph out and pasting it over here," she recalls. "Today, there is a huge difference in our ability to get information to and from our members. Quickly." For example, she says, if she gets a question from a government official, she can log onto a NACUBO listserver with 900 schools on it and get 95 responses in 24 hours.

The information flows back and forth in a continuous stream, Gross points out. "In everything we do, we call on our members. We can't operate without them. We're in Washington, not on the campus. Without our members and volunteers, we could never be successful."

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