Business process problems happen in all sorts of environments. While most of my career has been spent working in industrial companies, I have recently started to take a look at what goes on in not-for-profits and the academic world. Financial and executive management in all worlds share many of the same challenges and in the vast majority of circumstances are working diligently to do a good job. Unfortunately, I also have learned that just as in the industrial world, there is some bad news about academic business processes to be shared.

The September/October 2009 issue of Fraud Magazine, from the Association of Certified Fraud Examiners (www.acfe.org), includes an article titled “Fraud Found Close to Home: Federal Grant Monies Tempt Some Academics.” The article’s authors describe several cases where academics have been investigated and/or convicted for things like submitting duplicate claims for reimbursement, misappropriating federal grant funds, mail fraud, money laundering, and tax evasion.

This quote is quite chilling to think about:

• “Considering the trillions of dollars the federal government is earmarking for grants to stimulate the economy, this misappropriation of federal grant monies might be a warning signal to us all that this fraud story might have many sequels in the coming semesters.”

Now, I do not mean this blog post to be a widespread indictment of academic business processes. It is just support for the notion that diligence and proper internal control over business processes is important in all environments, including academia and not-for-profits.

I had a conversation with Joe Oringel of Visual Risk IQ, (www.visualriskiq.com) who is working with academic institutions to help them improve their oversight of their grant-related funds and programs. Joe noted that most university financial aid offices check compliance of financial aid and grants like the Pell Grants only once or twice a year. Depending on the timing of drop/add classes, grades, etc., students can get books for a class, enroll, receive money, and yet not actually complete that class. This makes the financial aid void and puts the school in a liability situation with the grantor. Universities need to consider how information included in databases that are external to the main university systems (e.g., travel records) could impact whether or not the university is in compliance with the terms of the grant.

Sounds to me like a strong case for more timely review of how grant money is being spent not only in academia but in all grant programs. It also seems to me that these examples support the notion that organizations of all types need to look at the benefit of continuous controls monitoring. Grant program managers, recipients, and auditors likely can head off these grant compliance problems before they are found and become a huge cost to the university.

That cost is not just monetary … it includes the cost of damage to a school’s integrity and reputation. ###