Purpose

To determine whether the City University of New York’s (CUNY) Central Office (Central) and Lehman College (Lehman) officials adequately assured that all Lehman bank accounts were authorized and used only for appropriate purposes and transactions. The audit covered Lehman’s bank accounts for the period of January 1, 2013 through February 5, 2015.

Background

CUNY is the largest urban university in the United States, consisting of 24 constituent colleges, graduate and professional schools. CUNY provides education for more than 269,000 degree-credit students and 247,000 adult, continuing and professional education students. Lehman, located in the Bronx, New York, is one of CUNY’s 11 senior colleges, and has more than 12,000 students. Lehman maintains bank accounts for various purposes, such as tuition and fees. During the period January 1, 2013 through December 4, 2014, CUNY reported 336 active or closed bank accounts, including 14 at Lehman. In addition, Lehman-affiliated entities also had nine accounts for auxiliary service, child care, and campus activities.

CUNY’s Cash Management and Banking Policy (Policy), effective July 1, 2008, requires the University Controller (UC) and the Vice President of Finance and Administration at each college to ensure that each bank account complies with University policies and procedures. Prior to establishing any new bank account, the Policy requires colleges to notify the UC by completing a “Bank Account Notification Form.” The UC notifies the college within five business days of the receipt of the form as to whether there are any concerns with establishing the new account. If not contacted within this time frame, the college can proceed with the account. 

Key Findings

• CUNY Central provided us a list of 23 bank accounts that they were aware of at Lehman and its affiliated entities. Six of Lehman’s accounts were opened or closed after CUNY’s bank authorization policy was established in 2008. However, CUNY Central did not have the required notification forms for four of these accounts. (In their response to our draft report, Lehman officials indicated that notification forms were not required for two of the four accounts because CUNY Central opened the accounts on behalf of Lehman. However, prior to their response, Lehman officials did not provide such information to us, nor did they identify the two accounts or provide supporting documentation of CUNY Central’s actions.)
• We identified a Certificate of Deposit account (totaling $65,034) that was not on CUNY Central’s list. This account was opened prior to the implementation of the current policy. Further, our findings point to weaknesses in the monitoring and authorization of bank accounts, which increase the risk that Lehman personnel could conduct transactions using unauthorized accounts.
• A review of the source of funds in Lehman’s accounts found that a non-tax-levy account (the “Agency Account”) contained tax-levy funds that Lehman officials should have transferred to the State. As of March 31, 2015, these funds totaled over $1 million. We attributed this problem mostly to inadequate controls to ensure that funds were deposited in the appropriate accounts, which allowed this practice to continue over several years. Lehman officials subsequently advised us that they remitted over $1 million of these funds to the State.
• Of the 72 payments (totaling $1,248,139) paid from five judgmentally selected bank accounts, 25 payments totaling $114,554 were either improper (did not comply with CUNY and/or State and City policies and procedures) and/or unsupported. For example, the required supporting documentation for a cash advance payment of $5,629 was altered, incomplete, and/or dated months after the advance.

Key Recommendations

• Fully comply with prescribed procedures for opening new bank accounts and monitoring existing accounts. Develop and implement additional policies and procedures to administer bank accounts, as warranted.
• Transmit all funds due to the State Treasury on a timely basis.
• Effectively separate the duties related to the administration of bank accounts, so that no one person has control over incompatible functions. Where duties cannot be adequately separated, develop and implement appropriate compensating controls.

Other Related Audit/Report of Interest

City University of New York School of Professional Studies: Procurement Card and Travel Card Purchases (2013-S-39)