ASSET AND RISK MANAGEMENT
This chapter reviews Houston Community College System (HCCS) asset and risk management functions in the following sections:
- A. Cash Management and Investment Strategies
- B. Bond Issuance and Indebtedness
- C. Fixed Asset Management
- D. Risk Management
- E. Accounts Receivable, Tuition and Fee Collection Process
E. ACCOUNTS RECEIVABLE, TUITION AND FEE COLLECTION PROCESS
Community colleges charge tuition and fees based on the number of semester hours for which the student enrolls. The total tuition and fee rates vary by the residency of the student. Institutions charge higher rates for out-of-district and out-of-state students. Systems are required to waive tuition and/or fees for certain groups of students, which include, for example, the children of prisoners of war, deaf and blind students, disabled peace officers and the highest-ranking graduates from accredited high schools. Some exemptions and waivers are limited to a certain number of semesters, and others have no limits. Tuition and fees are a major source of community college funds. In 2001-02, tuition and fees were 26.2 percent of HCCS' total revenues.
State law establishes the framework for determining tuition for Texas community colleges. Chapter 54.051 (n) of the TEC confers tuition-setting authority on the governing board and establishes minimum tuition rates that community colleges may charge. There are no upper limits on community college tuition. The TEC states:
Tuition for a resident student registered in a public junior college is determined by the governing board of each institution, but the tuition may not be less than $8 for each semester credit hour and may not total less than $25 for a semester. Tuition for a nonresident student is determined by the governing board of each institution, but the tuition may not be less than $200 for each semester.Community colleges have different tuition rates depending on student residency. Typically, a student who lives within the college tax district pays less because that tuition is supplemented by tax dollars. Students, who live outside the tax district, but within the state, pay higher rates than in-district students. Out-of-state students pay the highest rates. The cost per credit hour is determined by the address on file in the student's permanent record and residency status as defined by the TEC.
Exhibit 6-21 shows HCCS tuition and fee rates for 1999-2000 through 2002-03. Since 1999-2000, HCCS tuition and fees have increased by 43.3 percent for in-district students, by 61.1 percent for out-of-district students and by 12.5 percent for out-of-state students.
Exhibit 6-21 Source: HCCS, Business Operations.
HCCS Fall Tuition and Fee Rates per Hour by Student Status
1999-2000 through 2002-03
Type Fee 1999-2000 2000-01 2001-02 2002-03 Student Status ID OD OS ID OD OS ID OD OS ID OD OS Tuition Fee $11 $11 $62 $16 $16 $67 $19 $19 $70 $19 $19 $70 General Fee $17 $17 $40 $17 $17 $40 $18 $18 $41 $20 $20 $43 Out-of-District Fee $0 $24 $0 $0 $24 $0 $0 $29 $0 $0 $44 $0 Technology Fee $2 $2 $2 $2 $2 $2 $2 $2 $2 $4 $4 $4 Total $30 $54 $104 $35 $59 $109 $39 $68 $113 $43 $87 $117
ID: In-district, OD: Out-of-district and OS: Out-of-state.Exhibit 6-22 compares total 2002-03 tuition and fees per semester hour for HCCS and its peers. HCCS charges the second-highest tuition and fees for both in-district and out-of-district students.
Exhibit 6-22 Source: HCCS, Business Operations; Peer College Fact Sheets, 2002-03.
HCCS and Peers Tuition and Fee Rates per Hour by Student Status
2002-03
Type Fee In-District Out-of-District Austin $46 $95 HCCS $43 $87 Alamo $40 $65 North Harris Montgomery $38 $78 Dallas County $26 $46 Peer Average $38 $71 HCCS uses the student accounting module of the financial management system to record student transactions. The Student Financial Services Division processes the student accounting side of student transactions, and the Cash Management Department processes cash-related transactions. Campus cashiers run cashiering reports at the end of each day. Cashiers balance their credit card receipts, cash and checks with what is shown on the cashiering report. Once the cashiering report has been reconciled, the cashiers complete a deposit slip for cash and check receipts. The head cashier verifies the cashiering report and the deposit slip and then forwards a copy to the Cash Management Department.
FINDING
The system has instituted measures to ensure collection of student tuition and fees. In August 2001, HCCS contracted with a collection agency to collect delinquent student accounts. The agency receives 17 percent of all fees collected. HCCS now blocks students from registering for additional courses if they have any outstanding balance on their account.
HCCS allows students to pay their fees on an installment plan if they are unable to pay tuition and fees in a lump sum. In the past, there has been no perceived enforcement of penalties for students who write bad checks for tuition and fees. In the August 31, 2000, external audit report, there was a finding related to a $105,966 increase in the institution's reserve for bad debt due to the slow collection of delinquent accounts. There was no such finding in the subsequent report.
COMMENDATION
HCCS' installment and tuition plan and its use of a collection agency have reduced delinquent tuition and student fees.
FINDING
The Cash Management Department has worked with credit card processors to improve the efficiency of reconciling credit card payments. HCCS accepts MasterCard, Visa and American Express. In the past, credit card processors remitted credit card receipts less the processing fees and provided summary reports of the transactions. This caused problems for the Accounting Department and delays in the reconciliation process. The deposit transmission on the bank statement would not match any of the credit card batch totals tabulated on the cashiering report, and there was no detail to determine what payments were contained in the batch. This occurred because the credit card batch totals were the gross amount of the transactions, while the deposits were the net amount of the transactions because the fees had been taken out. It took several days to reconcile each credit card batch and match it to the actual transaction. MasterCard and Visa processors now invoice the system for processing fees once a month. The fees are automatically debited from the HCCS operating account. Credit card processors also submit detailed daily reports to assist the Accounting Department in reconciling the bank statements.
COMMENDATION
HCCS' credit card reconciliation process has become more efficient by requiring that gross deposits be remitted, service fees be taken out once a month and detailed reports be provided by the processors.
FINDING
The cashiering function at HCCS is decentralized and inefficient. The cashiers report to the college operating officer rather than to the bursar in the Student Financial Services Division or the manager in the Cash Management Department. This has caused problems with communication among the central office and the college satellites. The cashiers are often the only point of contact the administration has with students. Students come to the cashiers with all billing problems. Often cashiers must send students away without answers and direct them to another department. This leaves students with the perception that their problems are not being given adequate attention.
Procedural changes have been made at HCCS that has slowed down the cashiers' work. For example, the college cashiers told TSPR that their lookup access in the financial management system for some functions has been reduced and that the cashiers don't have access to financial aid information to assist them in doing their job. Cashiers do not have access to student transcripts because the financial management system does not provide access, but HCCS is working on obtaining access. Although the cashiering function is essential to the workflow of the Student Financial Services Division and the Cash Management Department, these departments do not have access to information from the other systems. Although there are periodic cashier meetings, interviews with the review team indicated that these meetings do not provide much value.
ACC has centralized its cashiering through the ACC Cashier's Office. The Cashier's Office is the focal point for cash collection, handling, management and safekeeping. There are cashier's offices located at each of the six campuses and at the central office administration building. By centralizing the cashiering function, ACC has been able to develop procedures that are followed in every cashiering office. This has made it easier to reconcile campus transactions recorded in the student system to the general ledger because cash-processing procedures are uniform.
Recommendation 58:
Reorganize the cashiering structure to report directly to the Student Financial Services Division.
It is difficult to maintain consistency when each cashiering office operates under its own guidelines and procedures. Cashiers should stay in close contact with the Student Financial Services Division. Uniform procedures will increase the efficiency of the cashiering function. Communication between the college cashiers and the system will improve under a centralized reporting hierarchy.
IMPLEMENTATION STRATEGIES AND TIMELINE
1. The chancellor and the vice chancellor for Finance and Administration draft a new organization structure for the cashiers. Cashiers will no longer report to the COO but will become part of the Student Financial Services Division. August 2003 2. The bursar develops uniform cash-handling procedures for the entire institution. August 2003
3. The bursar meets with all cashiers to discuss the new department structure and provides training on the new procedures. September 2003 4. The cashiers meet with the bursar at the beginning of every month to discuss issues from the prior month and to attend training sessions to keep up to date on procedures. September 2003 and Monthly Thereafter FISCAL IMPACT
This recommendation can be implemented with existing resources.
FINDING
Although the Student Financial Services Division has hired two accountants since 1999, they are not used effectively. One accountant was reassigned to the Information Technology Department to work with the financial management process for student financing and general ledger. The second accountant was hired in 2001 and has been serving as the interim director of Student Financial Services since the director retired in September 2002. Although the paperwork is in process to replace this person, it has not occurred. This department is responsible for third-party billing, maintaining the billing codes in the financial management system, voiding receipts and waivers, processing payment plans and refunds and researching payments that have not been applied properly. Clerical staff without the supervision of an accountant now completes these activities.
Most student service departments in higher-education settings have an accountant on staff to handle the department's unique accounting needs. Accountants typically cost $35,000 to $40,000 in annual salary for a senior-level accountant with a minimum of three years experience in fund accounting. The Student Financial Services Department must track all information related to every student. Student financial data must be integrated with the college's financial system. The interface between the student financial system and the college's financial system is an integral part of the process. An accountant has the proper training to translate student data into data that can be fed into the college's general ledger.
Recommendation 59:
Hire an accountant for the Student Financial Services Division.
An accountant will provide the Student Financial Services Division with the expertise needed to smooth out the interface between the students and the financial information systems. Clerical staff cannot be expected to understand how the data feed between the two systems, so it is likely that student data are not being reported correctly. Student fees and tuition are a major component of the HCCS revenue base, so it is important that the information be processed and reported properly.
IMPLEMENTATION STRATEGIES AND TIMELINE
1. The bursar develops a job description for the accountant position. July 2003 2. The bursar drafts an action item recommending that the board create an accounting position in the Student Financial Services Division. August 2003 3. The board approves the position. September 2003 4. The Human Resources Department posts the position and screens initial applicants. September - October 2003 5. The bursar interviews candidates and makes a selection. October 2003 6. The accountant is hired and begins work. November 2003 FISCAL IMPACT
The annual cost for this position will be $42,400 ($40,000 salary + 6-percent benefit rate of $2,400). Since the position will not be filled until November 2003, the fiscal impact in the first year will be $35,330 ($42,400/12 months = $3,533 per month x 10 months = $35,330).
Recommendation 2003-04 2004-05 2005-06 2006-07 2007-08 Hire an accountant for the Student Financial Services Division. ($35,330) ($42,400) ($42,400) ($42,400) ($42,400)