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Business Officer Magazine

Good Governance Needed

In these sessions, attendees considered how they can redesign and implement new business practices, overcome resistance to institutional change, and cultivate efficiency.

A Road Map to Best Practices

Few institutions have faced a challenge of the gravity and scope as that encountered by the Pennsylvania State University (PSU or Penn State) in November 2011-and again when it received the Report of the Special Investigative Counsel (the "Freeh Report") on matters relating to child sexual abuse on campus and alleged failures by university leadership.

Stephen Dunham, Penn State vice president and general counsel, and Pamela Bernard, vice president and general counsel at Duke University, discussed how the recommendations serve as a blueprint for good governance and risk management for any institution.

Dunham emphasized that the report's recommendations are viewed by Penn State's leadership as a road map for best practices, helping the institution to establish a new risk mitigation and management structure.

The report included 119 specific recommendations for PSU, including expansion of faculty and staff training programs and increased background checks (both initial and annual) for individuals working with minors, new staff training programs, and beefing up campus security training.

Key to Penn State's response was the creation of a new administrative structure to assess and execute recommendations. This new structure included a response team composed of subcommittee chairs of the PSU board, including HR and legal subcommittees. An administration response team was composed of the vice president for administration, the senior vice president for finance and business, and the vice president and general counsel. Working with the board and administration teams is an advisory council including representatives from the faculty senate, the academic leadership council, students, medical center staff, and administration and athletics staff. 

Noting that preparation prior to a controversial incident is critical, Bernard encouraged all institutions to take advantage of Penn State's efforts in shoring up their own campuses' crime and abuse prevention policies and practices.

A Strategy for Stability

For Matt Easdown, deputy chief financial officer and director of corporate finance at the University of Sydney, Australia, financial sustainability "can mean the gradual adjustment to a changing landscape or a sudden lurch in response to a major policy reversal." It was the latter for Easdown, when in 2011 the Australian government no longer provided "funding clusters" to support much of the cost of education delivery, and it removed student quotas.

In the session "Using Data Analytics to Achieve Financial Stability and Trans-parency," Easdown and copresenter Anthony Pember, chief executive officer, Pilbara Group Inc., explained the process of creating a new strategic plan to control costs and keep budgets balanced.

"We had to break away from the old funding models," explained Easdown, "and make each of our 16 entities [faculties] responsible for its own numbers." To accomplish that, the financial staff had to unbundle established—and often "covert"—arrangements that had made it difficult to reflect the true costs associated with various programs.

By analyzing the related data, explained Easdown and Pember, the business office was able to establish that a number of faculties were not self-sustaining, many were financially troubled, and cross-subsidies between faculties masked further budget issues.

"We've now moved to a new economic model," explained Easdown, "in which we've established business centers based on retention of direct revenues and allocation of central services based on consumption. The idea is that over the next five to seven years schools will learn how to better manage their budgets so that they eventually work their way to financial sustainability."

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