A CFO worries about cash flow shortages at a college in the Bahamas and how changes to government may endanger the institution.
Michelle Murphy-Brown, CFO at The Bahamas College (The College) rose early on September 28, 2017, and headed into the office, where many tasks awaited her. An online payment solution was urgently needed, to address the long line of students who queued up daily at the Business Office. In three weeks the College’s annual budget was due; normally this would take three months to prepare. There were deadlines too, associated with several union negotiations. And, at a time of critical cash flow shortages, a three year audit backlog had put an important $30M loan in jeopardy. The loan was needed to facilitate The College’s strategic transition to university status. The Caribbean Development Bank had specified that The College’s three-year audit backlog must be completed before the loan would be finalized.
The Bahamas, a country with a population of 350,000 people, was still reeling from the global recession. Murphy-Brown recognized that government-imposed austerity measures were creating hardship throughout the public sector including The College. Public funding to The College was unexpectedly cut by 15%, and additional cuts were proposed. In a further complication, the government announced plans to implement a value-added tax (VAT) on all goods and services, including education, within a matter of months. This would be the first time in the country’s history that a direct tax would be imposed on citizens. Murphy-Brown was quite aware that nationally-imposed austerity measures could further worsen The College’s operating budget should The College fail to secure the $30M transition loan. In addition to the financial challenges, Murphy-Brown also contemplated whether political interference on the part of the governing College Council would jeopardize the loan. In recent weeks, the newspapers were littered with highly-publicized episodes of graft and corruption in several prominent public corporations. The newly elected Progressive Liberal Party (PLP) government had lost the election five years earlier, amid charges of widespread political interference, cronyism and corruption. Had they truly changed? Would the new Council promote shared governance of The College, and allow the management team to function?
Murphy-Brown’s career thus far spanned about 25 years, with professional and managerial positions in public accounting, financial services and academia. The CFO was certain that current auditors–selected prior to her appointment–did not have the requisite staff, technical resources and ability to carry out a high-quality audit of a $150 million institution of the size and complexity of The College. Now, the CFO was at an important turning point; she was seriously considering resigning from her position. This would not be an easy decision to make, and there were other options to consider.
Authors: Marlo B. Murphy-Braynen & Abdoulie Jammeh
Cite as: Murphy-Braynen, M. & Jammeh, A. (2018). The $30m dilemma: A new auditor for the college. Muma Case Review 3(4). 1-25. https://doi.org/10.28945/3943