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End Note

Don't Fudge the Numbers

How to avoid the mistakes some institutions have made in misrepresenting nonfinancial data
University Business, March 2013
The institutions making headlines aren’t the only ones active in reporting misconduct.

The idea of yet another administrative process doesn’t tend to sit well with college and university officials. Yet, when assessing data that is not included in financial audits—such as admissions criteria, crime reports, retention and graduation rates, and degrees conferred—a thorough review process is integral to the success of an institution and to upholding its reputation.

Recently notable colleges and universities, including Claremont McKenna College (Calif.), Emory University (Ga.), Tulane University (La.), and The George Washington University (D.C.), have received press coverage for misrepresenting nonfinancial data. These practices misrepresented each institution and damaged their reputations.

The deception has ranged from inflating standardized test scores and the class rankings of admitted students to misreporting job placement rates and the starting salaries of graduates. The malfeasance at GWU was substantial enough that U.S. News & World Report listed the university as unranked this year.
Tulane faced a similar issue last month when it reported that it sent incorrect information to U.S. News about the test scores and total number of applicants for its MBA program. Robert Morse, who heads up the rankings, wrote on his blog that the data submitted was a major determiner of Tulane’s MBA ranking.

University officials are currently trying to account for the disparity between the numbers.

Unfortunately, the institutions making headlines aren’t the only ones active in reporting misconduct. A recent Chronicle of Higher Education report noted that data submitted to U.S. News is often inflated: one-fourth of the 224 ranked schools submitted different scores to the publication than to the Department of Education Integrated Postsecondary Education Data System (IPEDS). On average, the scores were five points higher; a dozen schools inflated the numbers by at least 15 points.

This key comparative information from colleges and universities is used by various constituencies, including prospective students, faculty, and donors, to determine the quality of an institution. Internal stakeholders use the nonfinancial information to evaluate the success of an institution, assess its ability to attract students, compensate faculty, garner resources, and evaluate the efficacy of operations. For prospective students, these factors help to determine where they apply, and ultimately what school they attend.

Checks and Balances

The fallout from this year’s incidents highlights the need for comprehensive audits of nonfinancial data. It should also be a call for widespread implementation of rigorous internal controls.

Before enacting such measures however, officials must create an inventory of nonfinancial information and review the risk associated with each. Institutions should establish consistent data elements and definitions, ensure the reliability of each source, and provide explicit descriptions of the qualifications and accountabilities of those charged with producing the information.

Checks and balances are vital to the oversight process. Universities must establish policies to determine what information will be routinely made public and what processes need to be put into place to prevent individuals from exerting singular influence over the data. Incorporating nonfinancial information into the institutional code of ethical conduct whistleblower procedures and existing audit structures should be an eventual goal of all colleges and universities.
Trustees and senior officers, particularly those on the audit committee, need to make a conscious effort to proactively protect the integrity and reputation of their institution. By undertaking a thorough review of all practices, and then implementing the appropriate policies and procedures, they can identify key risk areas.

Doing so, and regularly assessing these policies and related controls, can help trustees avoid significant reputational setbacks that can challenge not only their institutional and personal integrity, but can significantly hurt the institutions’ market position.