Kim Ansell , Managing Consultant at Advance HE explores why Internal Auditors are well placed to support a more holistic approach to measuring and communicating institutional performance, by creating the conditions for integrated thinking and demonstrating value in its widest sense.
With the HE sector faces many challenges and considerable change, some universities have started to embrace a new approach to reporting . Universities’ are undergoing ever more scrutiny and public accountability, with the Auger review, KEF, TEF, REF, and OfS regulation to face in the next year. Recent calls for greater transparency in the sector combined with the dominant narrative about value focusing on inputs such as VC pay or tuition hours sells the sector short.
“Integrated thinking and reporting can change the way universities describe and use their resources – not just their financial inputs – to the benefit of all stakeholders,” said Colin Campbell, Strategy Director at the University of Newcastle, in his Wonkhe blog of the 26 April. And in her report ‘Let’s Talk Value’  Professor Carol Adams challenges the sector to do better at telling their story, through reporting value created and outcomes.
At the CHEIA northern conference in November internal auditors discussed their potential role in using the principles-based framework, Integrated Reporting, to help support more holistic performance measurement and better articulation of institutions contribution to students, society and the economy.
So why would leadership teams want to involve their internal audit (IA) function in integrated thinking and reporting? IA is uniquely situated within an organisation to provide insight on data sources which support the implementation of integrated reporting; they are familiar with process implementation in the organisation and can affect consistency of communication of metrics across business units.
Institutions who are exploring this concept believe that if universities can create a more joined-up approach to thinking and reporting, aligned to clear business and value-creation models, they will more successfully navigate the journey ahead and overcome barriers to sustainable strategic planning. They will tell a more comprehensive and credible story about the value that they create by reporting not just onthe bottom-line, but also on relationships, their people, their intellectual capital and their environment. Part of reporting holistically, means understanding the data/information you are using to make decisions, making sure it is robust, consistent and credible over time and understanding what tradeoffs needs to be made in one area when making decisions in another.
Outside of higher education, there are calls around the globe for more non-financial measures, with more focus on the UN sustainable development goals, a need for more assurance and credibility of information and data, and a move towards value beyond the balance sheet. In the 1970s tangible assets (buildings, equipment, cash etc) were the primary driver of a company’s value. That has now reversed with intangible assets such as intellectual capital, relationships and people taking centre stage.
Evidence suggests that these intangibles are difficult to compare between organisations and across sectors,and the accounting profession itself does not have a clear cut formula. This presents us with another challenge, but also an opportunity to tell a credible, but also unique, story, based on information and data which is transparent and assured.
At the University of Abertay,they are taking a ‘deep dive’ in articulating how value is created through learning, research and knowledge exchange activities which benefit students, staff, their community and society. Alongside this, they have started to consider the motivations, competencies, capabilities and experience of their staff and students. Their KPIs cover each of these key resources and relationships.
At Sheffield Hallam University, non-financial measures are an important component of their ‘Transforming Lives’ strategy. These now take equal prominence to the financial KPIs in both the annual report and in quarterly reporting activities. IA has been keen for the University to evidence due diligence in relation to significant investments - especially around estates. The business case process has developed an integrated approach with consideration given to all capitals (assets), this has allowed them to be able to assure IA and the Audit and Risk committee that due diligence/business case/benefits work has been carried out.
So, how can institutions measure what matters, and what is the role of IA?
Further, what skills, competences and knowledge does IA have to help institutions think differently and why should IA be engaged in these issues?
Institutions will need to provide assurance for reporting information and will require data and information to be seen as a reliable for assessing sustainability and providing credibility.
IA provides assurance on non-financial metrics and can enhance this with advice and recommendations to the relevance and reliability of reporting. It has the potential to influence improvements to the credibility of metrics in reporting and offer insight on potential risks over the short, medium and long term. 
IA also has a specific responsibility to provide an opinion on their Universities arrangements for securing Value for Money. This can be a challenge when as a sector we are unable to offer a robust and well-articulated definition of value – when we focus on inputs and not outcomes. The integrated reporting framework which considers value creation and outcomes might well offer institutions and internal auditors a much better basis on which to approach this task – particularly if OfS decides that this is something they might support when it issues guidance to the Sector on how it sees value and what it will require institutions to do.
The CHEIA conference group also agreed that IA can bring insights from different sectors, make information more visible, support data collection and capacity.
The IIA discussed integrated reporting at their recent conference and tweeted:
“at #IA18 today on #integratedreporting. Loved the suggestion from a delegate that internal auditors could do self assessment of their org’s integrated report against @theiirc Framework. V smart! @CharteredIIA”
More strategically internal audit could influence improvements to the credibility of metrics in reporting, offer insight on potential risks and undertake audit of the strategic plan, business cases and management reporting to provide assurance on these.
So, what are the important considerations for your institution?
- Do you want to change the narrative about value in your communications to stakeholders and could integrated reporting help?
- How can your institution use the concepts of integrated thinking and reporting to provide credibility and build confidence in the value you offer to all stakeholders?
- How might you implement this?
Feedback from Internal Auditors on the nature of the audit they would conduct to test an Integrated Thinking approach would also be very welcome. Please contact firstname.lastname@example.org