The principles of institutional effectiveness as outlined in Section III pertain to the governance, organization, administration and financial/physical management of the institution. It is expected that each office, function, or unit will establish goals which derive from and support the purpose of the institution, evaluate its success in achieving these goals, and use the evaluation in making appropriate modifications in resources, programs and services.

It is implicit in every requirement in the Criteria for Accreditation mandating a policy or procedure that the policy or procedure be in writing, be approved through appropriate institutional processes, be published in appropriate institutional documents accessible to those affected by the policy or procedure, and be implemented and enforced by the institution.

6.1 Organization and Administration
The administration of an institution of higher education has the responsibility for bringing together its various resources and allocating them effectively to accomplish institutional goals. Although the organizational pattern is important to an institution's development and affects the morale of its faculty, an identical pattern of organization for all member institutions is neither required nor expected.

6.1.1 Descriptive Titles and Terms

The name of an institution, the titles of chief administrators, the designations of administrative and academic divisions, the terms used to describe academic offerings and programs, and the names of degrees awarded must be accurate, descriptive and appropriate.

6.1.2 Governing Board

6.1.2.1 Although titles and functions vary, the governing board is the legal body responsible for the institution and for policy making. Except under clearly defined circumstances, board action must result from a decision of the whole, and no individual member or committee can take official action for the board unless authorized to do so.

 6.1.2.2 The duties and responsibilities of the governing board must be clearly defined in an official document.

6.1.2.3 This document must also specify the following: the number of members, length of service, rotation policies, organization and committee structure, and frequency of meetings.

6.1.2.4 There must be appropriate continuity in the board membership, usually provided by staggered terms of adequate length. In addition, the document should include provisions governing the removal of a board member from office.

6.1.2.5 A board member may be dismissed only for cause and by procedures involving due process.

6.1.2.6 The responsibilities of the governing board must include the following functions: establishing broad institutional policies, securing financial resources to support adequately the institutional goals, and selecting the chief executive officer.

6.1.2.7 In addition, the governing board must have in place proper procedures to ensure that it is adequately informed about the financial condition and stability of the institution.

6.1.2.8 The board must not be subject to undue pressure from political, religious or other external bodies. Furthermore, it should protect the administration from similar pressures.

6.1.2.9 There must be a clear distinction, in writing and in practice, between the policy-making functions of the governing board and the responsibility of the administration and faculty to administer and implement policy. General institutional policies should originate within the board or should be approved by the board upon recommendation of the administration. Once these have become official policies, the administration should implement them within a broad framework established by the board.

6.1.3 Advisory Committees

Whenever lay advisory committees are used by institutions, these committees should be active and their role and function clearly defined.

6.1.4 Official Policies

The institution must publish official documents which contain, but are not limited to, the following information: the duties and responsibilities of administrative officers, the patterns of institutional organization, the role of the faculty in institutional governance, statements governing tenure or employment security, statements governing due process, and other institutional policies and procedures that affect the faculty and other personnel.

6.1.5 Administrative Organization

6.1.5.1 The administrative organization must reflect the purpose and philosophy of the institution and enable each functional unit to perform its particular responsibilities as defined by the stated purpose of the institution.

6.1.5.2 Administrative responsibility and authority for all educational offerings and functions of the institution must be clearly identified, and each institution must develop, publish and make available an organizational chart clearly delineating lines of responsibility and authority.

6.1.5.3 The duties of the chief executive officer, and of other administrative officials directly responsible to the chief executive, must be clearly defined and made known to faculty and staff.

 6.1.5.4 Administrative officers must possess credentials, experience and/or demonstrated competence appropriate to their areas of responsibility.

 6.1.5.5 The effectiveness of all administrators, including the chief executive officer, must be evaluated periodically.

 6.2 Institutional Advancement
 Each institution should have a program of institutional advancement, which may include development and fund raising, institutional relations and alumni affairs.

 6.2.0.1 If there is an advancement program, it must be directly related to the purpose of the institution.

 6.2.0.2 Qualified persons should be responsible for administration of the program.

 6.2.1 Alumni Affairs

 6.2.1.1 The relationship between the institution and its alumni should be one that encourages former students to continue to participate in the development of the institution.

 6.2.1.2 It should also assist in the evaluation of institutional effectiveness.

 6.2.1.3 Institutions are encouraged to maintain up-to-date records on the location of former students and to employ periodic surveys.

 6.2.2 Fund Raising

 6.2.2.1 All fund raising must be related to the purpose of the institution.

 6.2.2.2 All aspects of fund raising must be incorporated into the planning process and evaluated regularly.

 6.2.2.3 An institution must develop policies and procedures to fund raising and ensure that such policies are appropriately disseminated and followed.

6.3 Financial Resources
 6.3.1 Financial Resources

 6.3.1.1 Because the financial resources of an institution influence the quality of its educational program each institution must possess sufficient financial resources to support all of its programs.

 6.3.1.2 The recent financial history of the institution must also demonstrate the financial stability essential to its successful operation. The adequacy of financial resources will be judged in relation to the basic purpose of the institution the scope of its programs and its number of students.

 6.3.2 Organization for the Administration of Financial Resources

 6.3.2.1 All business and financial functions of the institution should be centralized under a chief business officer reporting to the chief executive officer. The organization of the business office must be consistent with the purpose of the institution the size of the institution and the volume of transactions of a business or financial nature. The most important functions typically performed by the business office include assistance to the chief executive officer in preparation and control of the institutional budget; establishment and operation of an appropriate system of accounting and financial reporting; supervision of the operation and maintenance of the physical plant; procurement of supplies and equipment; control of inventories; financial oversight of auxiliary enterprises; receipt custody and disbursement of institutional funds; maintenance of personnel records; and administration of personnel policies governing the staff.

 6.3.2.2 The chief executive officer must report regularly to the governing board on the financial and business operations of the institution.

 6.3.2.3 The chief business officer should have experience or training in handling educational business affairs sufficient to enable the business office to serve the educational goals of the institution and assist in furthering its stated purpose.

 6.3.3 Budget Planning

 6.3.3.1 The budget is a statement of estimated income and expenditures for a fixed period of time, usually the fiscal year of the institution. An institution must prepare an appropriately detailed annual budget.

 6.3.3.2 Its preparation and execution must be preceded by sound educational planning. It follows that the instructional budget should be substantively developed by academic officers or deans, working cooperatively with department heads, appropriate members of the faculty and administration, and representatives of the business office.

 6.3.3.3 Procedures for budget planning must be evaluated regularly.

 6.3.3.4 Similarly, budgets for other areas should be developed after consultation with appropriate officers of the institution. The business officer may assist in assembling and compiling the budget requests, preparing income estimates, and advising the chief executive officer in the determination of budgetary allocations. The budget is presented by the chief executive officer through proper channels to the governing board for final approval. In reviewing the budget, the governing board should focus on matters of broad policy and normally should not concern itself with details.

 6.3.4 Budget Control

After the budget has been approved by the chief executive officer and adopted by the governing board, a system of control must be established. This ensures that the budgetary plans of the governing board and the chief executive officer will be implemented.

 6.3.4.1 The business officer must render interim budget statements on a periodic basis to department heads for their guidance in staying within budgetary allocations. Budgetary control is an administrative function, not a board function.

 6.3.4.2 Necessary budget revisions must be made when actual conditions require such change and must be communicated to those affected within the institution.

 6.3.5 The Relation of an Institution to External Budgetary Control

No outside or superimposed agency should exercise specific and detailed control over the financial affairs of an institution. Once funds have been appropriated, creating a budget, establishing priorities, and controlling expenditures become the responsibility of the institution--operating under the jurisdiction of the governing board and subject to its policies.

 6.3.5.1 Enforcement of budgetary law is imperative; however, the educational function of an institution must not be controlled through the use of budgetary techniques or controls by financial officials outside the institution.

 6.3.6 Accounting, Reporting and Auditing

 6.3.6.1 An institution must adopt an accounting system that follows generally accepted principles of institutional accounting as they appear in College and University Business Administration, published by the National Association of College and University Business Officers Proprietary institutions and certain public institutions mandated by law to follow a different system are exceptions to the requirement. Institutions exempted from use of the required accounting system must arrange to provide comparable information. All proprietary institutions must provide revenue/expenditure reports consistent with NACUBO/AICPA publications, either independently certified in the audit report or included as supplemental data in the audit report. Balance sheets may continue to follow the conventional for-profit format, if desired.

 6.3.6.2 The chief business officer is responsible for preparing financial reports for appropriate institutional officials, board officers and outside agencies.

6.3.6.3 Periodic written reports to the chief executive officer of the institution are essential.

6.3.6.4 An annual fiscal year audit must be made by independent certified public accountants, or an appropriate government auditing agency, employing as a guide for institutions under the jurisdiction of the Financial Accounting Standards Board (FASB). Audits of Not-For-Profit Organizations, published by the American Institute of Certified Public Accountants (AICPA), or, for institutions under the jurisdiction of the Government Accounting Standards Board (GASB), Audits of Colleges and Universities, also published by the American Institute of Certified Public Accountants (AICPA), or, in the case of for-profit institutions. conducted in accordance with generally accepted accounting principles.

6.3.6.5 If an institution is subject to Statement of Financial Accounting Standard (SFAS) No. 117 and elects to use the single column "Corporate" Statement of Financial Position in its report. it must provide an additional Statement of Financial Position using one of the four highest levels of disaggregation illustrated in F.A.R.M. These levels are the Financial Accounting Standards Board (FASB) Net Asset Class Disaggregation. Operating/Capital Disaggregation. Managed Asset Group Disaggregation. and AICPA Audit Guide Funds Group Disaggregation. The additional statement must be included either in the audit report as an audited supplemental schedule or independently certified if not included in the audit report.

6.3.6.6 A for-profit institution and its corporate parent, if any, must add to their audit report a separate schedule indicating the disposition of profits, including detailed information on corporate income taxes paid, both state and federal, and on dividends distributed to stockholders.

6.3.6.7 A public institution included in a statewide or system wide audited financial report, for which a separate institutional audit report is not available for the fiscal year ending immediately prior to the committee visit, must have available, in lieu of audited financial statements, a Standard Review Report in accordance with AICPA Professional Standards AR 100.35 to include current funds expenditure classifications and amounts in accordance with generally accepted principles of institutional accounting, and the institution=s current fund balance sheet. Institutions in this category must provide either a separate or a consolidated balance sheet.

6.3.6.8 The auditors must not be directly connected with the institution either personally or professionally.

6.3.6.9 An effective program of internal auditing and financial control must be maintained to complement the accounting system and the annual external audit.

6.3.6.10 However, in those cases in which a public institution's financial report is included as part of a comprehensive certified state or system financial report and a separate annual audited report is not available, the institution must have an established procedure to ensure the effectiveness of internal controls.

 6.3.7 Purchasing and Inventory Control

An institution must maintain proper control over purchasing and inventory management. The administration and governing board should protect responsible purchasing officials from the improper pressures of external political or business interests. A logical adjunct of the purchasing function is a system of well-organized storerooms such as those for physical plant, library and office and laboratory supplies, as well as an inventory system appropriate to safeguard the institution from loss of equipment.

 6.3.8 Refund Policy

 6.3.8.1 The institution must adhere to a published policy and procedure for refunding fees and charges to students who withdraw from enrollment.

 6.3.8.2 The policy and procedure must be in keeping with generally accepted refund practices in the higher education community, applicable to all students, and clearly stated in appropriate official publications.

 6.3.9 Cashiering

 6.3.9.1 There must be a suitable organization and adequate procedures for the management of all funds belonging to the institution.

 6.3.9.2 The cashiering function should be centralized in the business office, and there must be a carefully developed system for the receipt, deposit and safeguarding of institutional funds.

 6.3.9.3 All persons handling institutional funds must be adequately bonded.

 6.3.10 Investment Management

 6.3.10.1 The institution must have a written statement of its investment policies and guidelines approved by the board. The policies and guidelines should set forth the investment goals of the institution, conditions governing the granting or withholding of investment discretion, a description of authorized and prohibited transactions, and the criteria to be used for performance measurement of both short- and long-term investments.

 6.3.10.2 Members of the governing board should be aware of their fiduciary responsibility for the institution and their responsibility for securing maximum investment returns consistent with the approved investment policy. They should avoid involvement in conflict of interest situations.

 6.3.10.3 Investment policies and guidelines must be evaluated regularly.

 6.3.11 Risk Management and Insurance

 6.3.11.1 The institution should have a comprehensive risk management program which includes risk evaluation, risk avoidance and insurance.

Adequate replacement protection for all physical facilities should be covered by appropriate levels of insurance or appropriate provisions for obtaining funds.

 6.3.12 Auxiliary Enterprises

The institution may operate, or have contracted for operation, activities that may have a significant impact on the operation of the institution. These activities may include, but are not limited to, the following: bookstores, residence halls, food service operations, printing/duplicating services, child care and transportation services. These activities, when operated by or for the institution, must be documented and operated in a fiscally responsible manner.

6.4 Physical Resources
Physical resources, including buildings and equipment both on and off campus, must be adequate to serve the needs of the institution in relation to its stated purpose, programs and activities. The physical environment of the institution should contribute to an atmosphere for effective learning.

 6.4.1 Space Management

Space allocated to any institutional function must be adequate for the effective conduct of that function.

 6.4.2 Buildings, Grounds and Equipment Maintenance

 6.4.2.1 An institution must have a plan for the upkeep of its property.

 6.4.2.2 At a minimum, the plan must address routine, preventative and deferred maintenance of buildings, equipment and grounds. Where appropriate, it should verify the estimated costs of maintenance as well as when and how it is to be performed. There should be a written schedule for regular maintenance activities and a written record of projects completed.

 6.4.2.3 The plan must be operational and evaluated annually.

 6.4.3 Safety and Security

 6.4.3.1 The institution must take reasonable steps to provide a healthful, safe and secure environment for all members of the campus community.

 6.4.3.2 Administrative responsibility for environmental health and safety programs must be assigned.

 6.4.3.3 A comprehensive safety plan must be developed, implemented and evaluated regularly. The plan should give special attention to the adequate provision and use of safety equipment in laboratories and other hazardous areas; to the modification of buildings, if necessary, for easy egress in the event of fire or other emergency; and to familiarizing all building occupants with emergency evacuation procedures.

 6.4.4 Facilities Master Plan

The institution must maintain a current written physical facilities master plan that provides for orderly development of the institution and relates it to other institutional planning efforts.

6.5 Externally Funded Grants and Contracts
 6.5.1 Externally funded grants and contracts must be related to the stated purpose of the institution.

 6.5.2 The institution's policy on such grants and contracts must provide for an appropriate balance between grant and contract activity and instruction, and guarantee institutional control over the administration of research projects.

 6.5.3 The researcher's freedom to investigate and report results must be preserved. Research support from outside agencies should not undermine these basic research principles.

 6.5.4 The institution must establish a clear policy concerning a faculty member's division of obligations between research and other academic activities.

 6.5.5 It must ensure that this policy is published in such documents as the faculty handbook and made known to all faculty members.

 6.5.6 Where applicable, the institution must develop policies regarding summer salaries paid from grant and contract funds, salary supplements paid from grants during the regular academic year, and fees for consultative services provided by faculty members.

 6.5.7 These policies must also be published and made known to the faculty.

 6.5.8 In accepting funds from outside agencies, the institution must ensure that it maintains control over research and instruction.

 6.5.9 Because many agencies attach stringent regulations directing and limiting the activities for which they provide funding, the institution must safeguard control over its own activities.

 6.5.10 Continuity of support for general institutional activities must not be endangered by acquisition of research grants and contracts.

 6.5.11 Grants must be awarded and contracts must be made for specified periods of time.

 6.5.12 When the institution becomes even partially dependent upon such funds for faculty salaries and/or graduate student stipends, termination of grants and contracts can jeopardize an entire educational program. It is also important that an institution not become dependent upon indirect cost allowances from grants and contracts to support its regular operating budget.

 6.6 Related Corporate Entities
 6.6.1 Institutions are often associated with related separately-incorporated units, such as radio or television stations, athletic foundations, research foundations, scholarship foundations, hospitals, for-profit enterprises, press operations and publications, and insurance trusts. When an institution is reliant upon such an entity, or when a separately-incorporated or related entity is reliant upon the institution, documentation outlining the mutual relationship and benefits must be maintained by the institution.

 6.6.2 This documentation must include the following: a description of the separately-incorporated unit's activities; a statement demonstrating the manner in which the activities relate to the purpose of the institution; a current roster of board members of the unit, including institutional personnel and board members who have responsibilities with both the institution and the incorporated entity, whether they are additionally compensated by the entity or not; a copy of the separately incorporated unit's annual financial audit report for the most recently completed year; and copies of the charter and bylaws of the unit.

 6.6.3 If such entities are reliant upon the institution for fulfillment of their purposes, the institution should ensure that they complement, rather than detract from, the institution's purpose, and that they are subject to proper operating controls and risk-liability containment. The institution should demonstrate the manner in which each related entity contributes to its effectiveness.

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