5 Higher Education Vendor Compliance Risks- PaymentWorks

by Ashley Poynter

Content Manager

5 Higher Education Vendor Compliance Risks to Address in 2025

Universities rely on a vast network of vendors to keep operations running—from IT and construction to catering and research partnerships. But these relationships come with significant compliance risks. Fraud threats, regulatory requirements, and financial missteps can lead to funding losses, reputational damage, and legal consequences.

At PaymentWorks, we work closely with higher education institutions to streamline vendor onboarding and help reduce risk exposure. We see firsthand how manual, outdated processes leave institutions vulnerable. And we hear the same concerns time and again—fraud attempts are rising, compliance is complex, and managing vendors manually isn’t working.

As universities head into 2025, here are five key compliance risks institutions need to address—before they lead to bigger problems.

The Growing Threat of Vendor Fraud

The Hidden Risk of Culture and Process Failures

Manual Processes That Lead to Compliance Breakdowns

Heightened Due Diligence Requirements for Vendor Onboarding

The Risk of Decentralized Vendor Management

Higher Education Vendor Compliance Risks Require a Proactive Approach

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1. The Growing Threat of Vendor Fraud

Fraud is no longer an if—it’s a when. And universities are prime targets. With decentralized procurement systems, massive numbers of payees, and often outdated security processes, bad actors have plenty of opportunities to exploit vulnerabilities.

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It’s not just speculation. Fraud is a real and growing issue in higher ed. As our own Angela Sarno put it:

“Every one of our customers reports that fraud is a major concern for them. Every single one. Some organizations have been scammed into sending payments to entities posing as legitimate payees, and some have risked serious data breaches with unsecured processes.”

Risk factors

Fake vendor requests: Fraudsters impersonate legitimate vendors, tricking institutions into sending payments to fraudulent accounts.
Phishing attacks: Cybercriminals target finance and procurement staff, attempting to gain access to sensitive financial data.
Paper-based processes: Universities still relying on manual, human-dependent workflows are more vulnerable to fraud.

How to address it

Automate payee identity verification to ensure vendors are who they claim to be before payments go out.
Train staff to recognize fraud tactics like phishing emails and social engineering attempts.
Eliminate manual onboarding processes in favor of a digital, secure vendor management system.

As Dan Alden, Director of Procurement at Texas State University, explained:

“Everything was being handled with paper forms. Everything was human intervention… We were doing what we could to try to confirm [payee identity] data, but we were very limited.”

The bottom line? Fraudsters know how to exploit outdated systems. If your institution is still relying on paper forms and manual validation, you’re putting yourself at unnecessary risk.

2. The Hidden Risk of Culture and Process Failures

Fraud and compliance failures don’t just happen because of bad actors—they happen because of bad processes. Too often, vendor compliance issues arise not from a lack of policies but from a failure to follow them. People make exceptions, rush approvals, or skip verification steps, and that’s where things go wrong.

Universities rely on multiple departments to onboard and manage vendors, which creates opportunities for process breakdowns. If there’s no clear ownership of vendor management—or if policies are seen as “in the way” rather than essential—compliance risk skyrockets.

Risk factors

Exception-based approvals – “Just this once” decisions lead to long-term vulnerabilities.
Lack of accountability – Without a clear audit trail, it’s impossible to know who approved what.
Overworked staff under pressure – Manual processes create bottlenecks, leading employees to cut corners.

How to address it

Standardize vendor onboarding – Create a single, enforced process for every vendor.
Implement automated workflows – Remove manual decision-making where possible.
Require clear audit trails – Ensure every vendor approval is tracked and documented.

When compliance is seen as a burden rather than a necessity, institutions become vulnerable. The key isn’t just having policies—it’s ensuring people follow them, every single time.

3. Manual Processes That Lead to Compliance Breakdowns

If your vendor management process relies on spreadsheets, PDFs, and emails, compliance is already at risk. Manual systems mean data is scattered, inconsistent, and difficult to verify, making it easy for errors—and fraud—to slip through.

Every time a vendor is onboarded through email chains and paper forms, there’s a chance for missing documentation, incorrect payment details, or compliance gaps. And when vendor data isn’t centrally managed, institutions struggle to track who’s been vetted, who’s compliant, and who’s even being paid.

Risk Factors

Missing documentation – Tax forms, certifications, and approvals can be lost in email threads.
Duplicate vendors – Without centralized tracking, the same vendor could be added multiple times.
Inconsistent vetting – Different departments may follow different onboarding procedures.

How to address it

Adopt a digital vendor management system – Centralize vendor data and onboarding approvals.
Require automated documentation collection – Ensure every required form is submitted before approval.
Regularly audit vendor records – Clean up outdated or duplicate vendors to reduce risk.

When vendor compliance depends on email, PDFs, and scattered spreadsheets, universities lose control over their risk exposure.

4. Heightened Due Diligence Requirements for Vendor Onboarding

Vendor fraud is a growing concern in higher education. Universities often receive fraudulent payment requests from entities posing as legitimate vendors. Without proper due diligence, institutions risk making payments to bad actors.

Dan Alden, Director of Procurement at Texas State University, shared his experience with outdated manual processes:

“Everything was being handled with paper forms. Everything was human intervention. […] We were doing what we could to try to confirm [payee identity] data, but we were very limited.”

A lack of automated identity verification creates serious security risks. Institutions need better onboarding processes to ensure they’re working with legitimate vendors.

Risk Factors

Fake business credentials: Fraudulent vendors may use falsified information to get paid.
Failure to screen financial risks: Vendors with histories of bankruptcies or sanctions may go unnoticed.
Limited visibility into vendor ownership: Understanding beneficial ownership is crucial for preventing fraud.

How to Address It

Use an automated onboarding platform: Digital verification tools can flag suspicious vendors before payments are made.
Require background checks: Conduct due diligence on high-risk vendors.
Maintain a central vendor database: Ensure all vendor data is stored securely and regularly updated.

Universities can’t afford to take vendor onboarding lightly. A single fraudulent vendor can lead to huge financial losses and reputational damage—and once that trust is broken, it’s hard to regain.

5. The Risk of Decentralized Vendor Management

Universities are big, complex organizations, often with decentralized procurement processes spread across multiple departments, schools, and campuses. While this structure allows for flexibility, it also creates major compliance gaps—especially when it comes to vendor management.

Without a centralized system, different departments may onboard and pay vendors using their own processes, which can lead to inconsistent vetting, duplicate vendors, missing tax documents, and increased fraud risk. Worse, when auditors come knocking, tracking down vendor records across multiple departments can become a logistical nightmare.

Risk factors

Inconsistent vendor vetting: Some departments may follow strict protocols, while others rely on outdated or manual processes.
Lack of visibility into vendor relationships: Universities may unknowingly work with vendors that have compliance red flags or financial risks.
Duplicate or inaccurate vendor records: Without a single source of truth, multiple departments may onboard the same vendor, leading to overpayments or conflicting information.

The bottom line? A lack of centralized vendor management increases compliance risks, financial waste, and administrative headaches.

How to address it

Adopt a university-wide vendor management platform to ensure all vendors are onboarded, verified, and tracked in one place.
Require standardized onboarding procedures across all departments to ensure consistency.
Perform regular vendor database cleanups to eliminate duplicate or outdated records.
Increase collaboration between procurement, finance, and compliance teams to ensure all vendor-related risks are identified and addressed.

Decentralization may work for academic operations, but when it comes to vendor compliance, universities need a unified approach. By centralizing vendor management, institutions can reduce compliance risks, improve efficiency, and ensure every vendor meets regulatory and security standards—no matter which department they work with.

Higher Education Vendor Compliance Risks Require a Proactive Approach

Vendor compliance is not just about reducing paperwork—it’s about protecting your university from financial, legal, and reputational risks.

As fraud and compliance challenges continue to evolve, institutions must take a proactive approach. Manual, paper-based processes are no longer sufficient. As Renee Starns from Sam Houston State University put it:

“Higher ed people talk. We all go to the same conferences. [We were hearing about] all these systems and schools having fraudulent activity hit them […] so yeah, fraudulent activity drove our decision as well as automation.”

At PaymentWorks, we help universities automate vendor onboarding, improve compliance tracking, and mitigate fraud risks. Ready to secure your institution’s vendor relationships?

Get Ready For Vendor Management Appreciation 2025

Wondering if the celebration will continue in 2025? IT WILL! Will you join us?

Here’s why you should: There’s no expiration date on honoring one of the most important, under-recognized roles across industries: vendor management.

Join us in observing Vendor Management Appreciation Day (VMAD)! We’re gearing up for the 2025 celebration, and we want you to be a part of it!

VMAD is a new holiday geared toward unifying vendor management professionals and celebrating innovation in the field.

Moreover, we’ve released gifts each month to help you supercharge your vendor management efforts. Additionally, we’re planning some awesome events so everyone can connect and celebrate the important, strategic role of vendor management.

In the meantime, learn more here, and grab some free vendor management goodies.