Auditing and Adapting to Change on Campus
November 12, 2020
In our world, we can count on uncertainty. Before the COVID-19 pandemic, change affected campuses through factors such as technology, management philosophy, organizational restructuring, and process changes. COVID-19 has complicated the campus audit world further and internal audit now has an even greater opportunity to provide value.
With sizeable budget cuts and campus safety as a top priority, college campuses are under great pressure to meet their commitments of attaining student success, reaching or maintaining high-level research programs, providing a quality education, and securing technology. If an institution has an athletics division, additional pressure exists to build or maintain a distinctive program. Now, more than ever, every college campus faces the challenge to do more with less.
How can internal audit help?
Foster Communication
Communication is essential and should involve all members of the campus community, rather than being limited to senior leadership. Through effective communication, internal audit can use the information gathered to identify and assess new and existing risks.
During this time of crisis, internal audit should seek out opportunities to participate in ongoing campus committee meetings. Occasionally, it may be difficult to convince others to allow internal audit’s presence in these meetings and it may require perseverance with discussing the benefits of including an outside, objective party within these committees.
One example may be if your campus is forming a committee to study additional potential sources of revenue. This is a great opportunity for a member of the audit staff to use his or her business acumen to add value. Additionally, this collaboration could lead to a stronger and more trusted relationship within the campus community.
Identify Efficiencies
With college campuses experiencing greater stress to meet their same objectives with fewer resources, developing efficient processes becomes imperative. As college campuses are continuing to adapt to the evolving environment, it is expected that each will have to endure a learning curve. For example, the medical community is currently experiencing this with COVID-19: administrating tests, determining the most efficient way to test a large number of individuals, processing results, and contact tracing. The medical community is becoming more proficient in, and making improvements to, these processes over time. No industry is exempt from being affected by the pandemic.
Rapid change brings more risk, such as opportunities for fraud, non-compliance, and degradation of service and instruction delivery.
Higher education will likely forever be changed by this pandemic, similar to how 9/11 changed commercial flying. Technology is a significant element in helping institutions become more efficient and assisting with achieving campus objectives. However, rapid change brings more risk, such as opportunities for fraud, non-compliance, and degradation of service and instruction delivery.
An example of available technology which could help campuses attain efficiency is Robotic Process Automation (RPA). RPA is configurable software that sits on top of a company’s existing IT infrastructure. It pulls data, performs algorithms, and creates reports. RPA is most beneficial for manual work processes that are repetitive and recurring.[1] One example in which RPA may be used is while performing bank statement reconciliations. Bank statement data can be extracted and compared to the institution’s own records using a flexible set of rules, thus searching for transactions that are perfect matches.
With a renewed importance on increased efficiency, and because internal audit should be familiar with campus processes, there are opportunities to reevaluate those processes through continuous auditing. For example, if internal audit performed an engagement over admissions within the last 5 years where inefficient processes were identified, internal audit could utilize data analytic tools to identify areas for improvement, such as lengthy times for application processing. In the absence of data analytics, a walkthrough and actual analysis of the process may help identify the inefficiencies in need of solutions.
The challenge now is for internal audit to become more efficient and prioritize work. Although we must perform our jobs, we should be flexible and empathetic when working with our clients. Our campus clients are under great pressure given resource challenges among other restraints. It may be useful to periodically meet with the institution’s compliance function and collaborate to address some of their challenges associated with COVID-19.
Cutting Edge Risk Identification
Internal audit has the ability to identify various risks. With the economy ever-changing, and the risks associated with an in-person education, many campuses may be predicting a moderate to significant decline in enrollment for one or more semesters. With fewer students on campus, the method previously used to deliver courses may be significantly impacted. There may be other institutions that have improved accessibility and flexibility for delivering instruction to students in order to reduce the risks related to an on campus presence.
Other risks to consider within this new environment are:
- Security – Risks concerning student privacy (e.g., personally identifiable information) and data security (e.g., transmitting confidential intellectual property in cyberspace) are increasing. Cybersecurity becomes a great concern with hundreds, or perhaps thousands of faculty, staff, and students accessing university IT infrastructure. For example, many of us may have already heard of fake e-mails using campus administrative accounts by hackers trying to perpetrate scams.
- Liquidity – Closed campuses may save money (e.g., lower utility bills, lower liability insurance premiums, no/minimal costs associated with sporting events). However, revenues will also be lost (e.g., housing revenue, international student revenue, athletics revenue), which increases the need for greater fiscal responsibility.
- Academic Integrity – How can faculty be certain that the student enrolled is the person completing the assignments and tests? More consideration is needed for access controls.
- Student Life – Before COVID-19, sexual harassment, bullying, and mental health were high priorities within the campus setting. These issues remain prevalent, as campuses must find ways to address new compliance and litigation risks. For students who chose to or must stay on campus (e.g., international students, athletes), consideration must be given to litigation for health risks. [2]
With universities cutting resources, such as personnel, the first and second lines of defense may be impacted.
In addressing new risks, fraud is a very real possibility. The rapidly changing environment allows the opportunity for fraud because a perpetrator who knows his/her processes can easily identify weak controls. Additionally, with universities cutting resources, such as personnel, the first and second lines of defense may be impacted. Lastly, internal audit should be aware of higher probabilities of error due to the declining resources, which could be the result of overworked staff.
Continuous Brainstorming and Education
Processes are rapidly and continually changing with a continuous emergence of new risks. To help addressing and identifying risks in the evolving environment, brainstorming and continuous communication with clients is important, as well as communication among audit staff. Opportunities also exist for audit shops among different institutions to collaborate and share ideas.
Regardless of the existence of the pandemic, it is useful to utilize all of your resources to stay connected. This includes news media, journals, ACUA, or any other outlet that may be available.
Conclusion
The higher education environment is complex and situated in a unique setting. Although many reasons to be stressed exist, internal audit always has opportunities to add value through the identification and assessment of risks or improving processes. It is said that we learn something new every day. Even without the pandemic, internal audit is constantly faced with challenges because there will always be change.
Special Thanks to Kari Zahar, Stinnett & Associates
About the Author
Jaime Fernandez
Jaime Fernandez is a Certified Internal Auditor (CIA), a Certified Fraud Examiner (CFE) and a Certified Government Auditing Professional (CGAP). Jaime graduated from Texas A&M University with a Bachelor of Business Administration in Marketing...
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Jaime Fernandez
Jaime Fernandez is a Certified Internal Auditor (CIA), a Certified Fraud Examiner (CFE) and a Certified Government Auditing Professional (CGAP). Jaime graduated from Texas A&M University with a Bachelor of Business Administration in Marketing and Our Lady of The Lake University with a Master of Business Administration in Finance.
Jaime’s work experience includes 23 years in the financial industry, more specifically in credit unions. His credit union experience included 17 years in staff and management positions and 6 years in internal auditing. Following his experience with credit unions, Jaime joined UTSA in September 2006, thus giving him nearly 16 years of experience in higher education.
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