Making College Finances an Open Book

Editor’s note: Guest writer Gil Brown is director of budget and financial planning at George Mason University. He previously served as budget director at Rice University, Georgetown University, and Oregon State.

Last year, the Pope Center released a thought-provoking article by Professor Robert Blumenthal that argued in favor of greater financial transparency for colleges and universities. At the time, I thought, “Well, it’s about time someone raised this issue!”

As a budget director who has served at several public and private research universities, over the years I have often witnessed sophisticated audiences including professors and trustees grow flustered trying to understand even simple financial relationships when framed in the complex web of higher education fund accounting. It doesn’t have to be that way.

A great deal of money flows through our colleges and universities. Even our own faculties ask, “Why is higher education so expensive?” The fact is that our organizations employ some of the most highly trained individuals in the economy (typically personnel costs comprise 80% or more of operating expenses), attempt to provide them with state of the art technology, laboratory equipment and facilities, comply with a catalogue of regulations in nearly every area of our operations, and strive to simultaneously provide quality, accessible and affordable education to students.

All of that has a high price tag, but there is no reason why intelligent people shouldn’t be able to understand the money flows. Unfortunately, college administrators have rarely concerned themselves with another fact: many people in government and the general public would like to know where all the money goes.

The combination of high dollar volume and high complexity gives rise to both the perception and possible reality of “funny business” in the use of resources. How can higher education finance officers allay such suspicions? That is the question we faced at Oregon State University when its visionary president Edward Ray and Chief Financial Officer Mark McCambridge, both economists, determined to “open the books” for all to see. By opening the books, Ray meant complete access to all the financial records of the university by any member of the campus community via a usable web interface.

For the last three years, any individual accessing the web from an Oregon State computer has been able to review the budget and actual activity of every unit on campus at the transaction level. The information goes back 10 years and is updated at the end of every business day. This system makes it possible to view financial data at the most granular level. For example, how much the president pays his speechwriter, how much is spent on jerseys for the baseball team, and so on. A demonstration of the OSU system is available here.

Building from a transaction data warehouse (which most institutions have), the Oregon State system was developed by a talented student programmer in a period of less than three months and deployed at a total cost of less than $10,000. In the three years these data have been available there have been no significant “embarrassing” revelations. Indeed, were problems found, we would want to know about them so they could be addressed! The system has served its intended purpose to lift the veil off institutional finances.

What good is this system? Higher education consultant Robert O’Hara of The Collegiate Way observes:

What does the Oregon State system mean? It means that students, parents, and the taxpaying public can finally discover (say) how much that new ornamental gate for the baseball stadium actually cost, and to whom the money was paid (a legislative crony, the coach’s brother-in-law, or an honest local business). It means the public can finally see how much money was spent redecorating the chancellor’s bedroom, or putting up the football team in a local hotel the night before a home (!) game, as is done at many big universities in the U.S., believe it or not. And when more than one campus operates a system like this, it means explicit comparisons can be made from one institution to another.

Public universities should be just that: public. They should be models of openness and transparency, not merely for the negative purpose of preventing corruption, but for the positive reason that “you’re always teaching.” In the way they manage their public funds, public universities should be teaching their students, and all citizens, about responsible stewardship.

I would go one step beyond O’Hara’s call for public institutions to model this level of transparency and also include private institutions that receive any government funds (as nearly all do). I left OSU before this system was pushed to its final goal of unrestricted public access and regret to say that the program has yet to be fully implemented. There is no reason to limit access just to people in the campus community if we truly want transparency.

So why don’t more institutions follow this example and open their books? After I showed the Oregon State system to a national audience of university business officers, almost everyone agreed this was a useful system — not only for its promotion of financial transparency but as a financial management tool for departments.

Yet the consensus was, “It will never happen on my campus.” When it comes to the sharing of financial information, many business officers say that sharing more information will further confuse an already complicated story.

Possibly, but that’s better than keeping people in the dark. Oregon State’s experience demonstrates that sharing information openly can be done without negative ramifications.