Organizational compliance isn’t something that companies should take for granted. Often, organizational compliance only becomes urgent when a corporation is facing legal challenges. We can look at two significant reports to better understand organizational compliance as it exists, as well as how it could be improved.
A task force on the federal regulation of higher education produced an informative report called “Recalibrating Regulation of Colleges and Universities” that deals with the complexities surrounding higher education compliance and the need to simplify it. The US Justice Department also recently updated its report on “Evaluation of Corporate Compliance Programs.” This report provides guidance on the topics and questions that prosecutors should consider when determining whether a company has demonstrated sufficient commitment to corporate compliance to warrant credit in a legal settlement. Both reports highlight the fact that corporations must do more than have compliance programs — they need to be sure that they’re effective.
Recalibrating Organizational Compliance in Higher Education
The federal government invests heavily in higher education and this is a valid reason for ensuring that there is proper oversight over their investments. The graduates from colleges and universities bring their knowledge and expertise back into our communities, where their contributions bolster social and economic forces.
The Department of Education is responsible for developing the procedures to carry out laws and oversee compliance matters, which isn’t a task for the faint at heart. The need to recalibrate compliance becomes abundantly clear when you consider that Congress issued numerous mandates for higher educational institutions. The Department of Education has issued more than 2,000 pages of text that were published to amend or clarify its rules. These rules equate to more than one document per workday. It’s easy to see that college boards are allocating large amounts of financial resources toward ensuring compliance when it could be better allocated toward student education, safety or innovation.
In 2013, a bipartisan group of US Senators established a task force to evaluate the issue of the complexity of compliance in higher education, which became the Task Force on Federal Regulation of Higher Education. The group identified a long list of concerns and made many important recommendations to Congress. Following is a partial list of the concerns that the task force generated:
- Problematic financial responsibility standards
- Confusion and inconsistency in reporting requirements for campus crime
- Overreach in authorization of distance education programs
- Inefficient rules concerning verification of financial aid eligibility
- Counterproductive micromanagement of the accreditation process
- Policies that result in consumers being overwhelmed with information of questionable value
The task force made a host of recommendations to simplify organizational compliance. Among those, they broadly suggested the following:
- Making improvement in the regulatory process
- Developing formal regulations at the Department of Education
- Making improvements in the development of regulations
- Implementing regulations at the Department of Education
- Improving the implementation of regulations
- Enforcing regulations at the Department of Education
- Improving the enforcement of regulations
- Making improvements to the overall regulatory process
The task force broke down each category into more specific recommendations.
Recalibrating Organizational Compliance in All Corporations
In its most recent update of the “Evaluation of Corporate Compliance Programs” on April 30, 2019, the US Justice Department provides clarification to its earlier guidance on their expectations for corporate compliance programs. The guide recommends that corporations give their compliance programs the following three major considerations:
- Compliance programs should be well designed.
- Compliance programs should be effectively implemented.
- Compliance programs should work well in practice.
In past publications, the Justice Department has warned companies about having a compliance program in theory but not in practice. The Justice Department would like to see corporate leadership that sets the tone for compliance at the top and extends that tone downward through its management so that it filters throughout the entire organization.
All companies should make it a priority to develop a culture of ethics and compliance with all state and federal laws. As a complementary process, corporations should have and maintain a well-designed, comprehensive compliance program and not only implement it, but also review and revise it as appropriate. Middle management plays a strategic role in helping to develop policies and procedures for the training and education of staff with regard to the company’s compliance standards. Also, middle managers should be responsible to ensure that the expected compliance standards are reinforced and encouraged.
A well-designed compliance program requires a robust risk assessment process. Corporate leaders should ensure that they continually update the company’s policies and procedures in connection with any changes in compliance. Companies are expected to tailor training and communications to the compliance culture and any newly developing compliance issues. Compliance programs should have a confidential reporting structure and a designated process for investigations. As target companies come under consideration, corporate leaders should apply risk-based due diligence to third-party relationships so that the compliance program doesn’t become weakened through an acquisition.
Digital Solutions Support Compliance Programs for Entities
Entity management software by Diligent Corporation is your “go-to” solution for mitigating compliance risks. It’s the easiest and most efficient way to retain visibility of the full ownership structure of your company. The software allows you to diagram your entities, which makes it easier to ensure that the details and expectations for your compliance program extend through your entire entity. Entity diagramming not only charts your organization, but it helps to identify legal structure risks, as well, which may have a notable bearing on your compliance program. As an added benefit, Diligent Entities integrates seamlessly with Diligent Boards, a secure board portal system, and other board management software solutions.
The federal government has a responsibility not to squander public resources to protect students and taxpayers. Congress expects institutions of higher learning to be careful stewards of federal funding. These issues place a high level of importance on regulatory oversight, and it must be exercised appropriately.
Unnecessary and complex regulations create more problems than they cure. The costs and complexity of compliance shouldn’t strain the burden on the administration. A sound compliance program supports higher education, encourages innovation and demands efficiency.