Best practices in procurement and suspension and debarment

Benchmarking doesn’t need to be time and resource consuming. Read on for four simple steps you can take to improve efficiency and maximize resources.

Stop us if you’ve heard this one before (from your Board of Trustees or Finance Committee): “I wish there was a way we could benchmark ourselves against our competitors.”

Have you ever wrestled with how to benchmark? Or struggled to identify what the Board wants to measure? Organizations can fall short on implementing effective methods to benchmark accurately. The good news? With a planned approach, you can overcome traditional obstacles and create tools to increase efficiency, improve operations and reporting, and maintain and monitor a comfortable risk level. All of this can help create a competitive advantage — and it  isn’t as hard as you might think.

Even with a structured process, remember that benchmarking data has pitfalls, including:

• Peer data can be difficult to find. Some industries are better than others at tracking this information. Some collect too much data that isn’t relevant, making it hard to find the data that is.
   
• The data can be dated. By the time you close your books for the year and data is available, you’re at least six months into the next fiscal year. Knowing this, you can still build year-over-year trending models that you can measure consistently.
   
• The underlying data may be tainted. As much as we’d like to rely on financial data from other organization and industry surveys, there’s no guarantee that all participants have applied accounting principles consistently, or calculated inputs (e.g., full-time equivalents) in the same way, making comparisons inaccurate.

Despite these pitfalls, benchmarking is a useful tool for your organization. Benchmarking lets you take stock of your current financial condition and risk profile, identify areas for improvement and find a realistic and measurable plan to strengthen your organization.

Here are four steps to take to start a successful benchmarking program and overcome these pitfalls:

1. Benchmark against yourself. Use year-over-year and month-to-month data to identify trends, inconsistencies and unexplained changes. Once you have the information, you can see where you want to direct improvement efforts.
2. Look to industry/peer data. We’d love to tell you that all financial statements and survey inputs are created equally, but we can’t. By understanding the source of your information, and the potential strengths and weaknesses in the data (e.g., too few peers, different size organizations and markets, etc.), you will better know how to use it. Understanding the data source allows you to weigh metrics that are more susceptible to inconsistencies.

3. Identify what is important to your organization and focus on it. Remove data points that have little relevance for your organization. Trying to address too many measures is one of the primary reasons benchmarking fails. Identify key metrics you will target, and watch them over time. Remember, keeping it simple allows you to put resources where you need them most.

4. Use the data as a tool to guide decisions. Identify aspects of the organization that lie beyond your risk tolerance and then define specific steps for improvement.

Once you take these steps, you can add other measurement strategies, including stress testing, monthly reporting, and use in budgeting and forecasting. By taking the time to create and use an effective methodology, this competitive advantage can be yours. Want to learn more? Check out our resources for not-for-profit organizations here.

Do you know what would happen to your company if your CEO suddenly had to resign immediately for personal reasons? Or got seriously ill? Or worse, died? These scenarios, while rare, do happen, and many companies are not prepared. In fact, 45% of US companies do not have a contingency plan for CEO succession, according to a 2020 Harvard Business Review study.  

Do you have a plan for CEO succession? As a business owner, you may have an exit strategy in place for your company, but do you have a plan to bridge the leadership gap for you and each member of your leadership team? Does the plan include the kind of crises listed above? What would you do if your next-in-line left suddenly? 

Whether yours is a family-owned business, a company of equity partners, or a private company with a governing body, here are things to consider when you’re faced with a situation where your CEO has abruptly departed or has decided to step down.  

1. Get a plan in place. First, assess the situation and figure out your priorities. If there is already a plan for these types of circumstances, evaluate how much of it is applicable to this particular circumstance. For example, if the plan is for the stepping down or announced retirement of your CEO, but some other catastrophic event occurs, you may need to adjust key components and focus on immediate messaging rather than future positioning. If there is no plan, assign a small team to create one immediately. 

Make sure management, team leaders, and employees are aware and informed of your progress; this will help keep you organized and streamline communications. Management needs to take the lead and select a point person to document the process. Management also needs to take the lead in demeanor. Model your actions so employees can see the situation is being handled with care. Once a strategy is identified based on your priorities, draft a plan that includes what happens now, in the immediate future, and beyond. Include timetables so people know when decisions will be made.  

2. Communicate clearly, and often. In times of uncertainty, your employees will need as much specific information as you can give them. Knowing when they will hear from you, even if it is “we have nothing new to report” builds trust and keeps them vested and involved. By letting them know what your plan is, when they’ll receive another update, what to tell clients, and even what specifics you can give them (e.g., who will take over which CEO responsibility and for how long), you make them feel that they are important stakeholders, and not just bystanders. Stakeholders are more likely to be strong supporters during and after any transition that needs to take place. 

3. Pull in professional help. Depending on your resources, we recommend bringing in a professional to help you handle the situation at hand. At the very least, call in an objective opinion. You’ll need someone who can help you make decisions when emotions are running high. Bringing someone on board that can help you decipher what you have to work with and what your legal and other obligations may be, help rally your team, deal with the media, and manage emotions can be invaluable during a challenging time. Even if it’s temporary. 

4. Develop a timeline. Figure out how much time you have for the transition. For example, if your CEO is ill and will be stepping down in six months, you have time to update any existing exit strategy or succession plan you have in place. Things to include in the timeline: 

• Who is taking over what responsibilities? 
• How and what will be communicated to your company and stakeholders? 
• How and what will be communicated to the market? 
• How will you bring in the CEO's replacement, while helping the current CEO transition out of the organization? 

If you are in a crisis situation (e.g., your CEO has been suddenly forced out or asked to leave without a public explanation), you won’t have the luxury of time.  

Find out what other arrangements have been made in the past and update them as needed. Work with your PR firm to help with your change management and do the right things for all involved to salvage the company’s reputation. When handled correctly, crises don’t have to have a lasting negative impact on your business.   

5. Manage change effectively. When you’re under the gun to quickly make significant changes at the top, you need to understand how the changes may affect various parts of your company. While instinct may tell you to focus externally, don’t neglect your employees. Be as transparent as you possibly can be, present an action plan, ask for support, and get them involved in keeping the environment positive. Whether you bring in professionals or not, make sure you allow for questions, feedback, and even discord if challenging information is being revealed.  

6. Handle the media. Crisis rule #1 is making it clear who can, and who cannot, speak to the media. Assign a point person for all external inquiries and instruct employees to refer all reporter requests for comment to that point person. You absolutely do not want employees leaking sensitive information to the media. 
 
With your employees on board with the change management action plan, you can now focus on external communications and how you will present what is happening to the media. This is not completely under your control. Technology and social media changed the game in terms of speed and access to information to the public and transparency when it comes to corporate leadership. Present a message to the media quickly that coincides with your values as a company. If you are dealing with a scandal where public trust is involved and your CEO is stepping down, handling this effectively will take tact and most likely a team of professionals to help. 

Exit strategies are planning tools. Uncontrollable events occur and we don’t always get to follow our plan as we would have liked. Your organization can still be prepared and know what to do in an emergency situation or sudden crisis.  Executives move out of their roles every day, but how companies respond to these changes is reflective of the strategy in place to handle unexpected situations. Be as prepared as possible. Own your challenges. Stay accountable. 

BerryDunn can help whether you need extra assistance in your office during peak times or interim leadership support during periods of transition. We offer the expertise of a fully staffed accounting department for short-term assignments or long-term engagements―so you can focus on your business. Meet our interim assistance experts.

Read this if your CFO has recently departed, or if you're looking for a replacement.

With the post-Covid labor shortage, “the Great Resignation,” an aging workforce, and ongoing staffing concerns, almost every industry is facing challenges in hiring talented staff. To address these challenges, many organizations are hiring temporary or interim help—even for C-suite positions such as Chief Financial Officers (CFOs).

You may be thinking, “The CFO is a key business partner in advising and collaborating with the CEO and developing a long-term strategy for the organization; why would I hire a contractor to fill this most-important role?” Hiring an interim CFO may be a good option to consider in certain circumstances. Here are three situations where temporary help might be the best solution for your organization.

Your organization has grown

If your company has grown since you created your finance department, or your controller isn’t ready or suited for a promotion, bringing on an interim CFO can be a natural next step in your company’s evolution, without having to make a long-term commitment. It can allow you to take the time and fully understand what you need from the role — and what kind of person is the best fit for your company’s future.

BerryDunn's Kathy Parker, leader of the Boston-based Outsourced Accounting group, has worked with many companies to help them through periods of transition. "As companies grow, many need team members at various skill levels, which requires more money to pay for multiple full-time roles," she shared. "Obtaining interim CFO services allows a company to access different skill levels while paying a fraction of the cost. As the company grows, they can always scale its resources; the beauty of this model is the flexibility."

If your company is looking for greater financial skill or advice to expand into a new market, or turn around an underperforming division, you may want to bring on an outsourced CFO with a specific set of objectives and timeline in mind. You can bring someone on board to develop growth strategies, make course corrections, bring in new financing, and update operational processes, without necessarily needing to keep those skills in the organization once they finish their assignment. Your company benefits from this very specific skill set without the expense of having a talented but expensive resource on your permanent payroll.

Your CFO has resigned

The best-laid succession plans often go astray. If that’s the case when your CFO departs, your organization may need to outsource the CFO function to fill the gap. When your company loses the leader of company-wide financial functions, you may need to find someone who can come in with those skills and get right to work. While they may need guidance and support on specifics to your company, they should be able to adapt quickly and keep financial operations running smoothly. Articulating short-term goals and setting deadlines for naming a new CFO can help lay the foundation for a successful engagement.

You don’t have the budget for a full-time CFO

If your company is the right size to have a part-time CFO, outsourcing CFO functions can be less expensive than bringing on a full-time in-house CFO. Depending on your operational and financial rhythms, you may need the CFO role full-time in parts of the year, and not in others. Initially, an interim CFO can bring a new perspective from a professional who is coming in with fresh eyes and experience outside of your company.

After the immediate need or initial crisis passes, you can review your options. Once the temporary CFO’s agreement expires, you can bring someone new in depending on your needs, or keep the contract CFO in place by extending their assignment.

Considerations for hiring an interim CFO

Making the decision between hiring someone full-time or bringing in temporary contract help can be difficult. Although it oversimplifies the decision a bit, a good rule of thumb is: the more strategic the role will be, the more important it is that you have a long-term person in the job. CFOs can have a wide range of duties, including, but not limited to:

• Financial risk management, including planning and record-keeping
• Management of compliance and regulatory requirements
• Creating and monitoring reliable control systems
• Debt and equity financing
• Financial reporting to the Board of Directors

If the focus is primarily overseeing the financial functions of the organization and/or developing a skilled finance department, you can rely — at least initially — on a CFO for hire.

Regardless of what you choose to do, your decision will have an impact on the financial health of your organization — from avoiding finance department dissatisfaction or turnover to capitalizing on new market opportunities. Getting outside advice or a more objective view may be an important part of making the right choice for your company.

BerryDunn can help whether you need extra assistance in your office during peak times or interim leadership support during periods of transition. We offer the expertise of a fully staffed accounting department for short-term assignments or long-term engagements―so you can focus on your business. Meet our interim assistance experts.

As a leader in a higher education institution, you'll be familiar with this paradox: Every solution can lead to more problems, and every answer can lead to more questions. It’s like navigating an endless maze. When it comes to mobile apps, the same holds true. So, the question: Should your institution have a mobile app? The Answer? Absolutely.

Devices, not computers, are how millenials communicate, gather, inform, and engage. Millennials, on average, spend 90 hours per month on mobile apps, not including web searches and website visits.

Students are no exception. A 2016 Nielsen study showed that 98% of millennials aged 18 – 24, and 97% of millennials aged 25 – 34, owned a smartphone, while a 2017 comScore report stated that one out of five millennials no longer use desktop devices, including laptops. Mobile apps have quickly filled the desktop void, and as students grow more reliant on mobile technology, colleges and universities are in the mix, creating apps to bolster student engagement.

So should you create an app? Here are some questions you should answer before creating a mobile app. Welcome to the labyrinth! But don’t be frustrated—answer these questions to help you avoid dead ends and overspending.

1. Is a mobile app part of your IT Strategy? Including a mobile app in your IT strategy minimizes confusion at all levels about the objectives of mobile app implementation. It also helps dictate whether an institution needs multiple mobile apps for various functions, or a primary app that connects users with other functionality. If an institution has multiple campuses, should you align all campuses with a single app, or if will each campus develop their own?

2. What will the app do? Mobile apps can perform a multitude of functions, but for the initial implementation, select a few key functions in one main area, such as academics or student life. Institutions can then add functionality in the future as mobile adoption grows, and demand for more functions increases.

3. Who will use the app? Mobile apps certainly improve engagement throughout the student life cycle—from prospect to student to alumni—but they also present opportunities for increased faculty, staff, and community engagement. And while institutions should identify the immediate audience of the app, they should also identify future users, based upon functionality.

4. Who will manage the app? Institutions should determine who is going to manage the mobile app, and how. The discussion should focus on access, content, and functionality. Is the institution going to manage everything in house, from development to release to support, or will a mobile app vendor provide this support under contract? Depending on your institution, these discussions will vary.

5. What data will the app use? Like any new software system, an app is only as good as its supporting data. It’s important to assess the systems to integrate with the mobile app, and determine if the systems’ data is up-to-date and ready for integration. Consider the use of application program interfaces, or APIs. APIs allow apps and platforms to interact with one another. They can enable social media, news, weather, and entertainment apps to connect with your institution’s app, enhancing the user experience with more content for users.

6. How much data security does your app need? Depending on the functionality of the app you create, you will need varying degrees of security, including user authentication safeguards and other protections to keep information safe.

7. How much can you spend for the app? Your institution should decide how much you will spend on initial app development, with an eye toward including maintenance and development costs for future functionality. Complexity increases costs, so you will need to  budget accordingly. Include budget planning for updates and functionality improvements after launch.

You will also need to establish a timeline for the project and roll out. And note that apps deployed toward the end of the academic year experience less adoption than apps deployed at the beginning of the academic year.

Once your institution answers these questions, you will be off to a good start. And as I stated earlier, every answer to a question can lead to more questions. If your institution needs help navigating the mobile app labyrinth, please reach out to me. 

NEW UPDATE October 2017:

The Federal Perkins Loan Program expiration date has passed without extension and now the countdown is on for the program wind-down. On October 6, the Department of Education issued a Dear Colleague Letter, GEN-17-10, which provides important wind-down information and indicates the Department will begin collecting the Federal share of institutions’ Perkins Loan Revolving Funds following the submission of the 2019-2020 FISAP (due October 1, 2018) using a similar process to the Excess Liquid Capital currently in place under HEA section 466(c). The Department of Education has promised more information on this process ahead of the October 2018 deadline.

Institutions should be reviewing their portfolios to determine if they will choose to assign their Perkins Loans to the Department or continue servicing their portfolio. Once the loans are assigned, institutions lose all rights to future loan collections, including their institutional share.

Loans that are not assigned to the department should continue to be serviced under Perkins Loan Program regulations until all loans are paid in full, fully retired or assigned to the Department. The process of requiring the distribution of assets from the Perkins Loan Revolving Fund will continue each year based on the annual submission of the FISAP, until all of the Perkins Loans held by the institution have been paid in full, fully retired or assigned to the Department of Education.

An administrative cost allowance cannot be charged against the Perkins Loan Revolving Fund after June 30, 2018.

For those considering liquidation and assignment, the Assignment and Liquidation Guide provides step-by-step instructions through the process, including the required a Perkins closeout audit. We are experienced with the Perkins closeout and stand ready to assist.
 

NEW UPDATE March 30, 2016: 

A new combined Federal Perkins Loan Assignment and Liquidation Guide has been posted. You can see the announcement and links to the updated guide here.

The Federal Perkins Loan Program has expired, effective October 1. While guidance has not yet been issued by the Department of Education in response to program’s expiration, there is a published process for institutions to follow to liquidate a Perkins Loan Revolving Fund.

We'll keep you informed as guidance is issued

BerryDunn’s Higher Education experts are monitoring the situation and assessing the implications for colleges and universities and their loan recipients with outstanding balances.

Need help or have additional questions?

Our experience with Perkins loan liquidation/closeout audits can be of great help to you as you navigate the complexities of closing your Perkins loans. Feel free to contact Renee Bishop, Emily Parker, Mark LaPrade or any of our Higher Education experts.

While GASB has been talking about split-interest agreements for a long time (the proposal first released in June of 2015, with GASB Statement No. 81, Irrevocable Split-Interest Agreements released in March of 2016), time is quickly running out for a well-planned implementation. With the effective date looming on the horizon, (statement effective for periods beginning after December 15, 2016 unless early adopted), now is the time to start gathering needed information to record existing agreements under GASB 81.

We have learned from GASB’s not-for-profit FASB cousins that irrevocable agreements are rarely where they should be: in the hands of financial professionals. Compiling these agreements will require participation from many stakeholders. Your finance team will likely have to provide some education to avoid a great deal of confusion when asking the “do we have any irrevocable split-interest agreements?” question.

So, where do you start?

1. Have you been tracking this information right along, nicely documented in a folder by your desk? Great! Do a quick check of others in your organization to be sure your file is complete and skip steps 2-5.
    
2. Dig into your general ledger. Have you been receiving regular distributions from a trust? Some of these trust agreements pay out on a quarterly or annual basis and your accounting staff should be able to identify these payors. It may require a quick call to the administrator for the trust agreement to be sure the agreement qualifies under GASB 81.
    
3. Look to your fundraising professionals. Development departments like to keep track of all types of donations. It helps to quantify their good fundraising work. Be clear about what you need from them. Remember, irrevocable split-interest agreements, often trusts or other legally enforceable agreements, are agreements wherein a donor irrevocably transfers resources to a third party to hold for the benefit of the government and at least one other beneficiary —the “split” in “split-interest agreement”!
    
4. Keep talking to your fundraising professionals. Many of the split-interest agreements we find are very old, often created well before your current development software was put into place. Do you have old files that track this kind of information? It may require some digging in the paper files. Remember those?
    
5. All hands on deck. While the finance and fundraising teams are scouring their records, look to others in the organization that might have record of these types of agreements. You know who holds the keys to historical knowledge at your organization, so be sure to include them in your search.

Once the finance department has collected all of the agreements, take one more look to be sure they meet the requirements of GASB 81.“Are they really irrevocable? Or do we just hope they are?” Then you can get down to the business of accounting for them. If you have questions about the accounting for these agreements, please contact me. I would love to chat. And that is irrevocable.

Recently the Governmental Accounting Standards Board (GASB) finished its Governmental Accounting Research System (GARS), a full codification of governmental accounting standards. The completion of the project allows preparers easy access to accounting guidance from GASB. The overall project, starting from the codification of older pre-1989 Financial Accounting Standards Board (FASB) pronouncements in 2010, was focused on pulling together all authoritative guidance, similar to what FASB had done in 2009.

Here’s what we found interesting.

Poking around the GARS (Basic View is free) I was struck by a paragraph surrounded by a thick-lined box that read “The provisions of this Codification need not be applied to immaterial items.” If you have ever read a GASB or FASB pronouncement, you have seen a similar box. But probably, like me, you didn’t fully consider its potential benefits. Understanding this, GASB published an article on its website aimed at (in my opinion) prompting financial statement preparers to consider reducing disclosure for the many clearly insignificant items often included within governmental financial statements.

After issuing more than 80 pronouncements since its inception in 1984, including 19 in the last five years, GASB accounting requirements continue to grow. Many expect the pace to continue, with issues like leases accounting, potential revision of the financial reporting model, and comprehensive review of revenue and expense recognition accounting currently in process. With these additional accounting standards come more disclosure requirements.

With many still reeling from implementation of the disclosure heavy pension guidance, GASB is already under pressure from stakeholders with respect to information overload. Users of financial statements can be easily overwhelmed by the amount of detailed disclosure, often finding it difficult to identify and focus on the most significant issues for the entity. Balancing the perceived need to meet disclosure requirements with the need to highlight significant information can be a difficult task for preparers. Often preparers lean towards providing too much information in an effort to “make sure everything is in there that should be”. So, what can you do to ease the pain?

While the concept of materiality is not addressed specifically in the GASB standards, by working with your auditors there are a number of ways to reduce the overall length and complexity of the statements. We recommend reviewing your financial statements periodically with your auditor, focusing on the following types of questions:

• On the face of the financial statements, are we breaking out items that are clearly inconsequential in nature and the amount?
• Are there opportunities to combine items where appropriate?
• In the notes to the financial statements are we providing excessive details about insignificant items?
• Do we have an excess amount of historical disclosure from years past?
• In the management’s discussion & analysis, is the analysis completed to an appropriate level? Is there discussion on items that are insignificant?

The spirit behind the box is that GASB was specifically thinking about material amounts and disclosures. It was not their intention to clutter the financials with what their article referred to as “nickel and dime” items. With more disclosure requirements on the way, now might be the time to think INSIDE the box.  

For more guidance on this and other GASB information, please contact Rob Smalley.

As we begin the second year of Uniform Guidance, here’s what we’ve learned from year one, and some strategies you can use to approach various challenges, all told from a runner's point of view.

A Runner’s Perspective

As I began writing this article, the parallels between strategies that I use when competing in road races — and the strategies that we have used in navigating the Uniform Guidance — started to emerge. I’ve been running competitively for six years, and one of the biggest lessons I’ve learned is that implementing real-time adjustments to various challenges that pop up during a race makes all the difference between crossing — or falling short of — the finish line. This lesson also applies to implementing Uniform Guidance. On your mark, get set, go!

Challenge #1: Unclear Documentation

Federal awarding agencies have been unclear in the documentation within original awards, or funding increments, making it hard to know which standards to follow: the previous cost circulars, or the Uniform Guidance?

Racing Strategy: Navigate Decision Points

Take the time to ask for directions. In a long race, if you’re apprehensive about what’s ahead, stop and ask a volunteer at the water station, or anywhere else along the route.

If there is a question about the route you need to take in order to remain compliant with the Uniform Guidance, it’s your responsibility to reach out to the respective agency single audit coordinators or program officials. Unlike in a race, where you have to ask questions on the fly, it’s best to document your Uniform Guidance questions and answers via email, and make sure to retain your documentation.  Taking the time to make sure you’re headed in the right direction will save you energy, and lost time, in the long run.    

Challenge #2: Subrecipient Monitoring

The responsibilities of pass-through entities (PTEs) have significantly increased under the Uniform Guidance with respect to subaward requirements. Under OMB Circular A-133, the guidance was not very explicit on what monitoring procedures needed to be completed with regard to subrecipients. However, it was clear that monitoring to some extent was a requirement.

Racing Strategy: Keep a Healthy Pace

Take the role of “pacer” in your relationships with subrecipients. In a long-distance race, pacers ensure a fast time and avoid excessive tactical racing. By taking on this role, you can more efficiently fulfill your responsibilities under the Uniform Guidance.

Under the Uniform Guidance, a PTE must:

• Perform risk assessments on its subrecipients to determine where to devote the most time with its monitoring procedures.
• Provide ongoing monitoring, which includes site visits, provide technical assistance and training as necessary, and arrange for agreed-upon procedures to the extent needed.
• Verify subrecipients have been audited under Subpart F of the Uniform Guidance, if they meet the threshold.
• Report and follow up on any noncompliance at the subrecipient level.
• The time you spend determining the energy you need to expend, and the support you need to lend to your subrecipients will help your team perform at a healthy pace, and reach the finish line together.

Challenge #3: Procurement Standards

The procurement standards within the Uniform Guidance are similar to those under OMB Circular A-102, which applied to state and local governments. They are likely to have a bigger impact on those entities that were subject to OMB Circular A-110, which applied to higher education institutions, hospitals, and other not-for-profit organizations.

Racing Strategy: Choose the Right Equipment

Do your research before procuring goods and services. In the past, serious runners had limited options when it came to buying new shoes and food to boost energy. With the rise of e-commerce, we can now purchase everything faster and cheaper online than we can at our local running store. But is this really an improvement?

Under A-110, we were guided to make prudent decisions, but the requirements were less stringent. Now, under Uniform Guidance, we must follow prescribed guidelines.

Summarized below are some of the differences between A-110 and the Uniform Guidance:

While the process is more stringent under the Uniform Guidance, you still have the opportunity to choose the vendor or product best suited to the job. Just make sure you have the documentation to back up your decision.

A Final Thought
Obviously, this article is not an all-inclusive list of the changes reflected in the Uniform Guidance. Yet we hope that it does provide direction as you look for new grant awards and revisit internal policies and procedures.

And here’s one last tip: Do you know the most striking parallel that I see between running a race and implementing the Uniform Guidance? The value of knowing yourself.

It’s important to know what your challenges are, and to have the self-awareness to see when and where you will need help. And if you ever need someone to help you navigate, set the pace, or provide an objective perspective on purchasing equipment, let us know. We’re with you all the way to the finish line.