Do you hear ticking? Is there is a bomb ready to detonate at your institution?
Considering how so many colleges are on the verge of an explosion from unresolved financial weaknesses, maybe you should just drown out the ticking with earplugs. Or, maybe you should take a look at which wires need to be cut… That is, maybe you had better check the ongoing professional development in your business office.
Some of us are smart enough to not dance blindfolded through a minefield. We want to know the common issues that spell doom to universities. What are they? We put that question to administrators at
- Association for Biblical Higher Education (ABHE)
- Association of Theological Schools (ATS)
- Transnational Association of Colleges and Schools (TRACS)
- Association of Business Administrators of Christian Colleges (ABHE)
21 Common Causes of Disaster: Choose your Favorite Calamity!
Ron Kroll, Director of the ABHE Commission on Accreditation, gave us the most commonly identified issues in financial stability cited in ABHE Commission decisions. His rank-ordered list based on frequency of citations is:
- Sufficient financial reserves to enable effective response to unforeseen financial circumstances and enrollment fluctuations;
- The cultivation of adequate revenue streams sufficient to realize institutional goals, usually evidenced by a lack of a balanced budget or recurring annual operating deficits; and
- A budgeting process that serves as an effective instrument of financial oversight and planning, coupled with evidence that planning informs the budgeting process.
The ATS Senior Director of Administration and CFO, Chris Meinzer, offered a longer list of suggestions:
- Operating infrastructure deficits – revenues not sufficient to cover expenses or just plain overspending;
- For majority endowment schools, overspending from endowment (ATS suggest 5% draw or less) to mask infrastructure deficits;
- For majority net tuition schools, declining enrollments that lead to lower net tuition and pressure toward deficits;
- For majority giving-dependent schools, donor fatigue leading to lower annual giving or ongoing pressure to raise sufficient money;
- Lack of cash reserves to fall back on to cover deficit years;
- Incremental budgeting process: cutting annual operations in simplistic ways and not changing operations significantly;
- Deferred maintenance. Deferred hiring. Cutting benefits and salaries;
- Fixed operating costs (faculty and facility) versus variable revenue streams; and
- Pressure from the budget (short-term myopia) leading to elementary strategic planning (long-term vision).
Barry Griffith, CFO for TRACS suggests that spectacular failures and on-going minor failures have a very few common causes.
- Failure to adjust budgeted expenditures to accommodate enrollment declines; and
- Trying to grow by adding new programs too rapidly.
The executive director of ABACC, Bruce Hoeker, is deeply involved in helping schools dodge torpedoes. He adds to the list:
- Too dependent on a single source of revenue;
- Loss of donors;
- Overextending (e.g., building too big a building);
- Mission creep, which loses donors and costs lots of money for the new programs;
- Not funding deferred maintenance;
- Declining enrollment while not watching population trends, not researching why, and cutting the marketing budget; and
- Cutting professional development budgets (which is a tragedy since ABACC offers the training and resources to keep schools on track).
Dance Lessons in the Mine Field
A well-educated, well-networked business officer makes a school more financially sustainable. The business officer who is too busy, keeps his door closed, has no time to talk to anyone, and isn’t continuing to study his field should not be surprised when things aren’t going well. In that crisis, he will not know where to turn for help. How does any institution expect their business officer to be the best possible strategist they can be without ongoing development or a well-tended network? In order to be a quality business officer, one must be continually growing and well networked.
We took a look at the ABHE, TRACS and ATS websites to read through their commission actions since 2016. Professional development and a helpful network could have made the difference for these troubled institutions and, sadly, that opportunity was not availed by most of them. Of the 10 institutions that were sanctioned or lost accreditation, only two of them were members of ABACC. The other eight may well have lacked colleagues to call for ideas when things went south… or the fountain of ideas that come with ongoing professional development.
Accrediting agencies do what they can to assure schools have well run business offices. But, there are limits to what accrediting agencies can do. They put a business officer on each site visit team. They include a set of important items under a standard pertaining to business management. They look favorably on the professional development offered by ABACC.
ABACC exists because business officers need dance lessons. Those who continually hone their skills and maintain solid networks of colleagues and vendors are more equipped to handle the difficult struggles inherent in faith-based organizations. One should not expect a business officer who isn’t well educated and well connected to handle the rigors of managing the complexities of a sustainable institution, the rigors of accreditation, or to have the skills necessary for creating financial strategies to keep an institution moving forward for the long term.
Financial face plants are heart breaks for all involved: employees, alumni, students, friends and even accrediting agencies. Barry Griffith laments that “I have a very strong emotional response to this topic because of many sad endings that could have been avoided if they had only done what I recommended soon enough!!!!!!” TRACS understands that, by investing in the professional development and network of their institutions, they are helping to create strong, sustainable institutions that will continue accomplishing the excellent work of their mission, long into the future.
This agency is doing all it can to encourage the ongoing professional development of their schools’ business officers. That is why they even pay 50% of the first-year dues ABACC. If ongoing professional development and a good network of professional resources for business officers is that important, should you make sure your business officers have signed up for dance lessons at ABACC?