University Business - July 2010 - (Page 1)

adVertiseMent Feeling Unsettled? Regain Control With Direct Settlement Reduce Risk, Gain Fiduciary Peace of Mind By Eliminating the Middleman B ack in the dark days of late 2008 and early 2009, it seemed no financial institution was immune to the toxic turn of events and, for a time, neither was any business. We’ve come a long way since then, but the questions still remain: Where was your college or university’s money, and was it safe? What about money collected by a vendor on your behalf? even in this “recovery period” at least 64 more banks have failed in 2010, and poorly managed vendors can go belly up in any economy. schools have come to realize that proper due diligence is needed to determine who holds the school’s money. Many institutions are embracing the best practice of direct account settlement to mitigate those risks. Fdic insured? do the deposited funds ever exceed those limits? does the school have necessary documentation in hand from the bank and the Fdic? the deeper you go, the more questions arise: • How long do potential funds remain “exposed” in someone else’s bank? • If you need to transfer or withdraw them in a hurry, will they be accessible? • if there’s a discrepancy between your accounting and theirs, is there a specified dispute resolution process? how long does it take? • If the vendor goes bankrupt, could your money be considered a corporate asset, and thus subject to creditors and bankruptcy court rulings? • If a vendor (or its parent company) finds itself under financial stress, could/would your funds be “borrowed” against? Fewer Stops for the Buck Feeling unsettled? this is an area of due diligence that’s ripe for review, as many of these financial relationships were formed years before what some are calling the Great recession of 2008. Fact is, any service that requires transferring possession of funds to a third party makes you give up control of the institution’s money while maintaining responsibility for it. such an arrangement demands continuous due diligence. Much less is required when transactions are settled directly in the school’s bank account. skipping the middleman is the cleanest solution, and from a fiduciary standpoint, the most responsible. When students and parents pay the school, the money moves directly from their accounts into the school’s … without a pit stop in between. the same is true for refunds and disbursements. Money should move directly from the school to the payee’s account. technology allows colleges and universities to automate the functions many business offices have traditionally outsourced. refund, payment plan and convenience fee solutions should transfer funds directly from college accounts to student accounts, and vice versa, without any “stops” along the way. avoid inherent risky business practices whenever possible. if you must outsource processes that involve the transfer of money, be sure you know where it’s being held. Because when it comes to the school’s money, you can never be too careful. More Than a Passing Interest anytime a school outsources something like tuition payment plans, student financial aid refunds, or credit card convenience fees, the school’s money typically spends some amount of time in a vendor’s account. the most obvious drawback is lost interest. take a payment plan provider for example. Potentially millions of dollars of school money could be sitting in that vendor’s account for days, weeks or months at a time. even at today’s miniscule interest rates, the stay is worth thousands of dollars per day, perhaps more. Less obvious, but potentially more significant, is the fiduciary risk of having money in accounts over which the college or university has little or no control. how much do you know about the bank? is it

Table of Contents for the Digital Edition of University Business - July 2010

Univertsity Business - July 2010
Contents
Editor’s Note
College Index
Company Index
Advisory Board
Behind the News
Sense of Place
Community Colleges
Viewpoint
Money Matters
Annual Directory of Higher Education Consultants
Human Resources
Models of Efficiency
Lecture Capture: Policy and Strategy
Projecting New AV
Land Mines Ahead
End Note

University Business - July 2010

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