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Eclectic Perspective

January/February 2019

By Sue Menditto

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Extensive experiences as a city treasurer and a community college CFO have enabled Brian Caputo to bring a wide-ranging view to governmental financial reporting.

Set to conclude his first term as board member on the Governmental Accounting Standards Board (GASB) on June 30, 2019, Brian Caputo, vice president of administration and treasurer,the College of DuPage, Glen Ellyn, Ill., confides that time management has been integral to many of his accomplishments in his career of 35 years.

Recently named by the College of DuPage’s board of trustees as interim president—a position he began after President Ann Rondeau stepped down on December 31—Caputo has a busy year ahead of him. As GASB continues its work on its “Big Three” projects—financial statement disclosures, the financial reporting model, and revenue and expense recognition—Caputo will play a large part in their development, while continuing to listen to stakeholders and serving them by understanding their concerns. (Read also “Future Potential.”)

Caputo has always been drawn to the hard work of serving others. After graduating from the United States Military Academy at West Point, N.Y., Caputo spent six years on active duty and nearly 17 years in the Army Reserve. Having earned a Ph.D. with a focus on public administration and master’s degrees in accounting and public administration, Caputo continued his commitment to service, working for 26 years as a finance officer in municipal governments throughout Illinois.

The depth and the breadth of Caputo’s varied work and life experiences have equipped him with a unique perspective through which to understand the mission of higher education as a business officer, as well as governmental accounting and reporting as a GASB board member.

In an interview with Business Officer magazine, Caputo shares GASB’s top priorities, challenges for community colleges, and how his diverse background helps him in his position on the board and as a chief business officer.

With a military and city government background, what attracted you to the CBO position at a community college, and how did you get involved with GASB?

After working for 26 years in different municipalities throughout Illinois, and more specifically working 19 years as the chief financial officer/city treasurer in Aurora, I knew that I had a decision to make—stay for another 10–15 years or try to do something different. Given that my staff and I had accomplished most of the goals that we had set when I first started, I decided to try a different, but related, field.

The opportunity to learn more about the higher education industry was attractive to me. Although there are some differences between general-purpose accounting in the government sector and accounting in higher education, the transition was eased by the fact that there are many similarities. While I previously understood the technical aspects of financial reporting by colleges and universities, working at an institution has given me a better appreciation for how financial statements are used in public higher education.

As for GASB, I have always been very active, working mostly at the state level in governmental accounting and financial reporting. I served for several years on the Technical Accounting Review Committee of the Illinois Government Finance Officers Association—a state-level committee, where I also served as chair—that looked at GASB due-process documents and submitted comments to GASB in much the same way that NACUBO’s Accounting Principles Council provides feedback on proposed standards.

I was also a frequent speaker on accounting and financial reporting topics at professional seminars and served as an adjunct professor for graduate public finance courses at Northern Illinois University, DeKalb. When a seat on the GASB board opened in 2015, I pursued it as an opportunity to further serve the profession and our society, which also benefits from the reliable information provided by financial statements based on high-quality standards.

Explain how the GASB positions work and if there are any dedicated spots specifically for the higher education sector.

GASB looks for people who have diverse backgrounds and have worked for various constituency groups. There isn’t a designated higher education seat. I’m considered a practitioner for local government, with experience in higher education. Currently, there’s another member on the board who works in higher education, but he brings an academic perspective. When his term ends, the board of trustees for the Financial Accounting Foundation might look for someone with a similar background to fill that spot. In general, we don’t represent any group or sector.

How has having a diverse portfolio of accounting experiences helped your work as a GASB board member?

When I served in local government, I worked for four different municipalities, with populations ranging from 15,000 to 200,000 people. Across that spectrum, financial reporting issues and challenges varied. In public higher education, there are many different issues and challenges for institutions. I am now becoming acquainted with those matters, and these experiences help inform my work as a GASB member.

You have made the transition from local government to a community college. As we think about future CBOs, it is likely that some will come from the private industry. What are some of the challenges that they can expect?

There will be a learning curve, but I don’t think it will be difficult. Higher education will continue to gain talent from a variety of sources, and that includes the public and private sectors.

Will there ever be a straight pipeline into higher education accounting after graduation? Occasionally, that will be the case, but accounting programs often tend to encourage public accounting as a starting point because of the broad experience that it provides in a short period of time.

Chief business officers will continue to come to the profession with a variety of different accounting experiences, but it won’t be impossible to make the transition.

Do you think it is more important to have leadership skills, as well as the ability to communicate financial results to stakeholders, than to have an intimate knowledge of the technical aspects of accounting and financial reporting?

Those skills are just as important as having a deep understanding of the technical aspects of the work. When you enter the profession, being technically competent is of paramount importance. However, as you progress throughout your career and attain higher-level positions, leadership and communication skills are required.

A CBO typically leads a large staff and must interact with other senior executives, a governing board, and external stakeholders. To be successful, the CBO must possess “soft” skills in addition to technical skills.

The roles of CBO and city finance director are similar because they both involve managing finances, facilities, security, and other areas. What’s the most interesting thing that you’ve learned since working at a community college?

There’s more collaboration in higher education. When I worked in municipal government, there was collaboration between leadership and staff, but in higher education the collaboration is more deliberate and thorough. In higher education, we tend to seek input from multiple stakeholder groups and formal organizational leaders.

For example, when we are formulating an administrative procedure or policy at the College of DuPage, there are protocols that must be followed to get buy-in from the cabinet officers and each stakeholder group through a shared governance council. It’s a structured process and leads to improved decision making, but it takes more time to implement those policies and procedures.

Another difference is that my work now includes a diverse portfolio of responsibilities. The core is finance, but I also manage information technology, the radio station, the conference center, the bookstore, dining facilities, risk management, campus police, budgeting, and other functions. At the College of DuPage, we’ve consolidated administrative affairs, so that we have a coordinated effort to address resource management problems as they arise. The work that I do allows me to make an impact across the institution.

Brian Caputo

How do you manage your GASB board responsibilities and your full-time job?

In order for me to do my work, I have to manage my time efficiently. Two weeks before the GASB board meeting, board members are asked to read a considerable amount of material in the form of staff papers and provide comments.

To do this, I dedicate my lunch hours, a couple of hours each evening, and a weekend to read and prepare my comments.

What are the most important—and challenging—elements of the community college mission?

Community colleges fill a critically important role in society, and three of our most important issues are: (1) providing a quality education at a reasonable cost, (2) managing campus safety, and (3) developing student success initiatives.

Students come to a community college for different reasons—to develop skills in order to obtain a job in the workforce, to transfer to a four-year institution, or to work on personal enrichment—and it is our job to find the sweet spot of delivering a quality education and preparing students for their next steps.

The College of DuPage, which has 25,000 students, provides many technical education programs and options for career training. We also offer a number of different on-campus activities, such as performing arts and athletics, so we might even be considered a “comprehensive” community college. We deliver a cost-effective education while also offering many of the same services that you find at a four-year institution.

Campus safety also rises to the top as an area that is important to the community college mission. Of course, this is relevant for all institutions, and as business officers we need to figure out how to prepare for the worst. What can we do to mitigate potential incidents? The problems that keep me up at night are not related to a debit or credit being in the wrong place. It’s always about how to keep the student body safe.

In terms of student success, community colleges need more support personnel [counselors and advisers] to work with students to ensure that they (1) meet program requirements, (2) don’t take unnecessary classes, and (3) graduate on time.

To address this issue, many institutions are implementing “guided pathways” programs. These initiatives create more efficiencies for students throughout their enrollment. For example, if a student is required to take several English and/or math developmental courses and then becomes frustrated, he or she might decide to drop out. Or, if a student takes more courses than needed to graduate, that student ends up with credits that won’t transfer to a four-year institution. By redesigning developmental education and increasing advising resources, a guided pathways program can help address these pitfalls and eliminate unnecessary roadblocks on the path toward degree completion.

Unfortunately, implementing a guided pathways program on campus can be a complex process, and it requires meticulous management to ensure that students remain on track. You must also consider your institution’s software capabilities. Can it provide the functionality needed, or will it need to be upgraded? Guided pathways require coordination and collaboration across departments, but with the proper resources and management tools, they can increase student success.

What’s your greatest challenge as a GASB board member and how does the group ensure that everyone’s ideas are represented?

Our biggest challenge is balancing the benefits and costs of the alternative courses of action that are available to us. The goal is to ascertain what accounting and financial reporting solutions make the most sense given their cost and benefits. If you have an infinite amount of time and resources, you select the most sophisticated approach to convey the information, but it might not be the most cost-efficient route.

The challenges for GASB board members are determining the problems and implementing the most pragmatic solutions.

It’s not always an easy process to find solutions because there are always differing opinions. But, we deliberate and listen to each other, and we take everything into consideration. We are a cohesive group, and the board and its processes work very well together to ensure that all voices are heard and we adopt practical standards.

The basis for conclusions to a standard (or due process document) is always interesting to read. Can you explain how the process works?

The basis for conclusions (BFC) explains GASB’s rationale for the various provisions of a standard. As GASB deliberates on an issue, board members explain the reasons for their positions. GASB staff capture the collective and prevailing thoughts of the board members and articulate those views in a draft BFC. Before an Exposure Draft or final standard is released, board members review the related BFC for accuracy. We make changes as appropriate.

A basis for conclusions is not part of the standard itself. In fact, when a standard is codified, its BFC is not included. The standard must stand on its own.  However, a BFC provides the reader with the board’s intent.

For years, higher education institutions have asked GASB for a meaningful income statement—a Statement of Revenue, Expenses, and Changes in Net Position that strikes a “bottom line” that indicates how a public institution financially performed. Do the Preliminary Views on the financial reporting model reflect NACUBO’s recommendations? If so, we would like to provide positive comments to the board.

The current proposal for an operating statement includes a subtotal “higher” in the statement that considers taxes, subsidies, and certain other items. At this point, we believe that this subtotal will be informative for the users of financial statements. But, you bring up a good point about providing comments. When the Preliminary Views are issued, commenting—in support or disagreement—is very important. If we only hear from those who disagree, it doesn’t provide an accurate picture of what institutions want or need. The Preliminary Views reflect that the board has heard the concerns of its constituents, and as a result, the operating statement proposal looks different than it has in the past. That signals the importance of stakeholder input.

Which sleeper projects should higher education focus on in the immediate future?

In addition to revenue and expense recognition, which isn’t really considered a sleeper project because it’s part of the Big Three, institutions should continue to monitor their subscription-based information technology arrangements. Although cloud computing is a large part of it, there’s a lot of confusion about how these arrangements are supposed to be accounted for and reported. Do you have an asset or a period expense? In all the varied arrangements out there, is there a difference between what is generated internally and what is purchased externally? This needs to be addressed. There are some that are analogizing to Statement No. 51 (intangible assets), and even though we advise against it, some also analogize to Statement No. 87 (leases). There’s a lot of variety out there, in terms of what people are doing.

How can NACUBO, and more specifically higher education, work more effectively with GASB?

NACUBO is doing a good job working with the board. It’s an active participant on many projects, providing input during the decision-making process, participating in public hearings, and having good representatives on the advisory council and in meetings with staff. GASB appreciates NACUBO’s insightful and helpful participation.

At the same time, NACUBO can encourage individual colleges and universities to respond during public hearings and/or get involved in other processes. This will provide a broader spectrum of opinions.

SUE MENDITTO is director, accounting policy, NACUBO.

Related Topics

To be successful, the CBO must possess “soft” skills in addition to technical skills.

Students come to a community college for different reasons, and it is our job to find the sweet spot of delivering a quality education and preparing students for their next steps.