As the 21st century approached, leaders at Carnegie Mellon University (CMU) made a strategic decision to fashion the institution into a global leader of creativity and innovation. At the time, the university already engaged in global recruitment of students and faculty, student exchange opportunities, and international research collaborations, but wanted to do more. The goal: Expand CMU’s presence beyond the physical boundaries of its home campus in Pittsburgh, particularly in geographical areas with needs that meshed well with the university’s existing capabilities.
Starting in 2004, the desired growth came rapidly. Within 10 years, CMU went from launching its first international program to managing eight major programs and 40 degrees (both graduate and undergraduate). What started with one small, collaborative program in Greece now encompasses 13 degree-granting programs in countries ranging from Australia to Rwanda and from Portugal to Singapore. CMU also operates its own campus in Qatar.
Today, 41 percent of CMU’s 13,300 students come from outside the United States. Some of those international students earn their CMU degrees without ever traveling to Pittsburgh; others start their studies in one country and finish in another. While such diversity brings operational challenges and a higher level of complexity into a business office, Carnegie Mellon has been able to meet the needs of its expanding global community with relative ease, thanks to its plan-ahead approach.
"Even before the major expansion, we created an infrastructure to support global operations from our primary campus," says Amir Rahnamay-Azar, vice president for finance and chief financial officer for Carnegie Mellon. The university created the international finance department, part of the finance division, in 2004. The department provides financial reporting and analysis, handles general accounting functions, prepares financial statements, and coordinates audits for all international initiatives.
"We wanted to make sure, from a financial perspective, that we had consistent, adequate, and strong internal controls and reporting," Rahnamay-Azar adds. "Beyond that, we wanted to ensure that the student experience—regardless of whether you’re in Pittsburgh or Qatar—is consistent with the culture and values of Carnegie Mellon University." For example, the international finance department also manages shipping and relocation services, so the global campuses all have access to textbooks and resources as well as CMU faculty and staff.
Currency Challenges
In 2006, the university began contemplating an upgrade to its Oracle financial system—and staff saw an opportunity. "We realized that the upgrade would give us more flexibility and functionality to support global operations," says Carrie Nelson, assistant vice president of international finance. "By then, we had noticed some challenges and process improvement needs that came from being a more globalized university."
Finance staff, for instance, often employed manual workarounds to convert other currencies into U.S. dollars before entering information into the financial system. "If we received a currency other than U.S. dollars, there was a need to convert the currency for accurate reporting," notes Nelson.
On the other hand, procuring goods in another country typically involves the local currency, not U.S. dollars. "In some cases, we’d receive an invoice in another currency, convert it to U.S. dollars for the system, manually wire the payment in the original currency, and then translate it again into U.S. dollars," recalls Kathy Proch, associate controller. "As global operations and the volume of payments both increased, we were spending a lot of time on manual calculations which, from a controls and processing perspective, wasn’t ideal."
In addition, CMU bank accounts in other countries needed to be reconciled with the general ledger in the local currency and then converted to U.S. dollars for reporting. Keeping track of all the information could be cumbersome and time-consuming.
While the upgraded Oracle software had the capability to handle different currencies, the university still had a long way to go to implement a globalized, integrated financial system. As Nelson explains, "We not only had to adjust the financial system, but also look at all the other systems and processes that feed into the multiple ledgers, including HR, enrollment, advancement, and even legal because of different countries’ registration requirements."
Making Adjustments
CMU’s financial globalization initiative took about 18 months to plan and implement. International finance partnered with financial systems to create and lead a large project team that represented myriad university and geographical areas.
"For every system that fed data into our Oracle financial system, we had to decide whether it would need to process transactions in a foreign currency. Because the way the system handles transactions didn’t necessarily match our manual processes, we had to rethink some of our approaches," explains Deanne Weaver, associate vice president of financial systems. "If we made a change in one area, we had to determine the impact it would have on a different area downstream."
Weaver estimates that, at times, as many as 30 people were part of the project team. CMU hired a consulting firm to provide organizational structure and technical expertise; the university also ensured it had representation from its larger global programs.
"It was a huge benefit to have people from other countries involved," says Nelson. "Much of what we were doing was to serve them, and the project would not have been as successful if we had made decisions without their input." As an example, the team needed to identify when it would be most reasonable for all locations to load currency rates into the system each day.
"They also helped us understand local laws and compliance requirements, so that we could design the system to handle complicated areas such as taxes," adds Weaver.
With none of CMU’s international programs located within the same time zone as that of Pittsburgh, the global representation required the project team to schedule most video conferences and calls in the early morning and late evening hours of U.S. Eastern time. Such time shifting has become a way of life for CMU’s international finance department, which offers 24/7 customer service to all program locations.
"We are fortunate to have a high level of collaboration between the Pittsburgh and Qatar campuses and other CMU international programs to adjust availability and schedules," Nelson says. "After we looked at the various time zones and schedules, the financial systems team updated many of its domestic processes to accommodate the global differences."
A university that serves only U.S.-based locations, for instance, might process systems updates on a Saturday or Sunday night to minimize disruptions. In Qatar, however, Sunday is a business day. Banks in Australia close on different days than banks in Rwanda or Portugal, meaning payroll schedules and check runs must be customized by country, even though all CMU locations use the same financial system. What didn’t change is CMU’s July-to-June fiscal year, which applies to all locations, even though their academic years vary slightly from one another.
Global Gains
Nelson acknowledges the global finance project was a huge undertaking, which culminated in a simultaneous "big bang" rollover at all Carnegie Mellon locations. She explains, "We spent about a year doing internal testing, plus one month of training, before going live with the global system in 2008. At the same time, we were still handling the day-to-day operations of processing invoices and managing financials."
The months of early mornings, late nights, and global collaboration have been paying off ever since. Except for one system upgrade, the university has made few revisions to its global finance system in the last seven years, even as it added new locations.
While the changeover had a minimal impact on staff members who worked with domestic programs and U.S. dollars—and were already familiar with Oracle—the integrated system has produced these benefits for CMU’s finance division and its global locations:
- Faster, more accurate, currency conversions. Every day, each location loads the going rate for converting its local currency into U.S. dollars. The global finance system automatically handles the conversion and records foreign currency gains and losses, removing the need for manual calculations and data entry.
- Easier procurement. "We now have different purchasing card programs for Australia and Qatar tied to their applicable ledgers in the financial system," says Proch. "Not having those programs in place previously required a lot of manual calculations and increased reconciliations, and was affecting our business operations." The controller’s office has designated one employee in accounts payable to handle all payments for the various international locations.
- Streamlined reporting. Nelson notes, "Our global locations enter transactions in their currency and can run reports based either on their functional currency or U.S. dollars. The finance division has access to all of that information, which has helped with compliance reporting."
- Improved risk management. The elimination of manual processes means financial statements from CMU’s global locations can flow seamlessly into the university’s overall consolidated financial statements. "When the auditors come in or when we have to provide financial reporting to our executive team or the board, the information is already on hand and we pull it directly from the system," says Weaver.
Because all CMU locations use the integrated system, they rely on the same system controls established in the United States and have equal access to updated forms and internal procedures. As a result, U.S.-based auditors do not need to take a separate look at programs in other countries.
Quality Controls
Several years after rolling out the global financial system, Carnegie Mellon upgraded its Oracle-based grant management system. Doing so gave the Qatar location’s principal investigators and business managers access to a system that handles not only conversion of multiple currencies, but also offers award-tracking capabilities.
The past decade has brought an increase in the number of both global education and research programs and staff dedicated to international finance. The international finance office, which started with Nelson and a few others, now numbers 11 employees, each of whom specializes in a particular area (see sidebar, "Around-the-World Operations"). The office is primarily funded through the global programs and academic units it supports.
"As we’ve continued to expand, we’ve developed best practices for everything we do operationally—and those apply to serving our domestic customers as well as our global ones," says Nelson. "Part of the CMU culture is to adopt faculty, systems, and resources, and to follow the same procedures globally, all to ensure delivery of the same education and standards."
One of CMU’s best practices entails regularly reviewing the financial performance of its global offerings. "The university has not withdrawn from any major international engagements in the past few years, but some programs have run their natural course and have scaled back or concluded," notes Amir Rahnamay-Azar. "Some programs have been much more beneficial to the bottom line than others. Nonetheless, we don’t use only that single financial formula for evaluating overall performance, as there may be other, qualitative reasons for us to have a presence in a specific location."
Still, the financial implications of providing education globally can be complex. Even with its sophisticated global finance system, for example, Carnegie Mellon finds payroll an ongoing challenge. Faculty working abroad can be paid from the U.S. payroll, with a shadow payroll accounting for the appropriate taxes in the host country—but not all faculty are U.S. citizens, some employees prefer paychecks in the local currency, and local payroll solutions are typically expensive or nonexistent.
Such intricacies, from Rahnamay-Azar’s perspective, underscore the need to think through your institution’s mission, identity, strategy, and capabilities before exporting any educational programs to another country. "Globalization is not a hobby," he believes. "It’s having a presence in the short term as well as the long term—one that requires much effort, financial oversight, and a persistent dedication to success."
SANDRA R. SABO, Mendota Heights, Minn., covers higher education business issues for Business Officer.