Performance Audit in The Educational Institution

Performance Audit in the Educational Institution
We are all aware that business performance can be measured by several

criteria:
1. Profit
2. Return on Investment
3. Brand equity
4. Market Share
5. Customer Satisfaction
6. Employee Retention, etc
When it comes to service sectors and business of intangible services, the same
criteria cant be applied. Similarly, for education, some of these criteria become
redundant. At the same time, to make these institutions viable & sustainable,
proper MIS & performance appraisal reporting are required. Moreover, many of
these get some form of direct/indirect financial support from government.
As we have seen over the years, many institutions in these sectors have been
set up with much fanfare and have been serving the society. However, with
passage of time, they lose the qualities which made them stand apart from
other peers. Often, this is because inertia sets in. This can happen with
businesses as well, but the management keeps checking the pulse of the
organization as outlined above and keeps changing with the times as also keeps
on deploying additional resources (monetary/non monetary) to take the business
to not only sustain, but take it to the next level.
Everybody understands that Education should not be run purely as businesses
and need to maintain their dignity as noble professions. At the same time, our
experience has shown that we need to nurture and sustain these institutions. In
spite of many competitors coming up, IIMs & IITs have retained their premier
positions. To continue doing so for next 50 years, will need faculty,
infrastructure, new curriculum, control over costs & sustained goodwill. To keep
them on track, Performance Reporting relevant for them needs to be devised.
These cant be captured on financial reporting formats of a business as we all
know, financial reports, such as Balance Sheet and P & L A/c do not tell the
complete story of a business.
The governing authorities of education institutions are often eminent persons
from various strata of society and government nominees. Often they do not
have domain expertise. However, they have entrepreneurial & administrative
skills. Given the right reporting support, they can discharge their duties more
effectively.
Institutions in these sectors are often not competitors to each other, but serve
a certain pocket of population. Hence sharing of performance parameters can
help to achieve the best through benchmarking.
Many of these get direct government funding. Rather than just get a fund
utilization report, it is better to get Performance Report for the benefits
derived from deployment of these funds. Often it happens that there is need to
put more funds to get the desired benefit, which may not be visible in financial/
conventional reporting.
Certain subsidies are extended to these institutions. Reporting of the benefits
derived there from and justification for the same needs different form of
reporting. There are cases where tax benefits end up benefiting the people who
can afford to pay higher price. Hence, this angle needs to be brought out.
By collating reports of all organization, the apex body can often spot gaps in the
service for the area. It may happen that there is no Management Educational
Institution in a district, which cant be brought out by conventional reporting.
Similarly, to direct future capex and infrastructure buildup, paradigm shift in
reporting is required.
In addition to the above, it is also necessary to apply Cost Accounting tools to
ascertain the following & include in the Performance Appraisal:
Product/Service wise costs & revenues: To identify segmental
profit/loss and identify cross-subsidiasation.
1.
Fixed & variable cost analysis: For proper pricing of services and
identification of need to subsidise Capital / Operational costs
2.
Optimum utilisation of assets by increasing utilisation, cost per unit

impact can be reduced
3.
4.
Ideal ways to recover the above
How proper pricing can meet twin objectives of meeting costs and
sustaining operations
5.
6.
Industry norms for benchmarking
7.
Fair return to all stakeholders
Need for Assurance:

While it is good to get Performance Report from institutions, audit thereof is
equally important. While there may be initial resistance to the same, this need
to be formalized for the following:
1.
Major Improvements in Governance have in most cases come only with
force of law
2.
Any system improving governance is a huge VALUE ADD for the Society
i.e. you and me
3.
Authentic Past Cost Data helps in preparation of reliable
Budget/forecast
4.
Ensure proper end-use of funds
5.
Identification of visible & invisible losses/waste
6.
This is suggestive in nature and not punitive & provides timely signals for
corrective actions
7.
Can be a good tool for price determination
8.
The benefits of performance far outweigh costs thereof
Under the above backdrop, I suggest that being Management Teachers
Consortium, MTC Global should put up a proposal to the Institute of Cost
Accountants of India (ICAI) for preparing a Guidance note on Performance
Audit Format for economic viability and sustainability of the Institution in the
future days to come.

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Performance Audit in The Educational Institution

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Performance Audit in the Educational Institution

We are all aware that business performance can be measured by several

Optimum utilisation of assets by increasing utilisation, cost per unit

Ideal ways to recover the above

Industry norms for benchmarking

Fair return to all stakeholders

Need for Assurance:

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