Legislature votes to boost financial reporting requirements for higher education institutions

The Mass. Legislature has approved legislation to enable the state to more closely monitor the financial health of Massachusetts private colleges and universities and provide transparency and security to students and families in the Commonwealth.   

Known as an Act to Support Improved Financial Stability in Higher Education, the legislation requires higher education institutions to make public and accessible financial reports and requires any institution facing financial risk of closure to develop contingency plans to ensure a process is in place to assist and inform its students and other stakeholders. The legislation also establishes financial penalties on institutions for non-compliance with reporting and planning.The bill requires ethics and fiduciary training for higher education trustees and board members.

“This legislation helps to protect students, families, and staff of our higher education institutions by increasing the transparency of the financial health of institutions – requiring increased oversight, reporting and accountability,” said House Speaker Robert A. DeLeo, (D-Winthrop).

“It was a great day for students and their families as this legislation will provide transparency and restore confidence in our Higher Education institutions,” said Representative Jeffrey Roy, Chair of the Higher Education Committee (D-Franklin). “The strength of our colleges and universities is paramount to our success as a commonwealth; when students and their families invest in their future, they deserve to know that their institution stands on a solid foundation.”

The four major provision of the bill address the following topics listed below.

  • Financial reporting:  Requires that all public higher education and independent institutions post on their websites a copy of the institution’s financial report and a summary written in terms understandable by the general public. 
  • Financial screening: Enables the Board of Higher Education (BHE) to monitor the financial health of independent institutions of higher education in Massachusetts. 
    • Requires an independent institution to immediately notify BHE of any known financial liabilities or risks likely that may result in closure.
    • Requires BHE to establish a process to annually assess each institution’s financial information to identify any institution it deems may be at risk of imminent closure.  The BHE will keep confidential those assessments for independent institutions unless it is determined an institution is at risk of closure. 
    • Financial screenings may be conducted by an accrediting agency authorized by the U.S. Department of Education, or the Department of Higher Education. 
    • An institution determined to be at risk of imminent closure must prepare a contingency plan for closure, which includes a process to provide notice to a variety of stakeholders including, students, faculty, staff, pending applicants, and host communities. The closure plan must also include:
      • arrangements for students to complete their program of study;
      • a plan for the maintenance of student records; and,
      • a plan to provide funding for refunding any student deposits and for the cost of protecting and maintaining student records.
  • Enforcement: Requires penalties for failure to comply with financial screening requirements, which include fines of up to $1,000 per day, suspension of any state funds, or the suspension or revocation of any degree granting authority.  
  • Board training: Requires comprehensive training programs for members of the boards of trustees of the state’s public higher education institutions on the proper governance,  financial metrics, open meeting law and their legal and fiduciary responsibilities, at least once every four years. 

Having been passed by the House and Senate, the legislation now goes to Governor Baker for his signature.