Purpose

To determine whether disbursements to students from the Tuition and Fees Refund bank account were appropriate and authorized. The audit scope period was from January 1, 2013 through January 22, 2016.

Background

The City University of New York (CUNY) is the largest urban university in the United States, consisting of 24 institutions. More than 270,000 degree-credit students and 273,000 continuing and professional education students are enrolled at campuses located in New York City. CUNY’s Central Office provides administrative support and business services to its institutions.

Central Office began centralizing its disbursement process of tuition and fees and financial aid refund checks in 2012. The centralized process is a component of CUNY’s Fully Integrated Resources and Services Tool (CUNYfirst). CUNYfirst is an Enterprise Resource Planning project that replaces legacy computer systems in the areas of Student Administration, Finance, and Human Resources. Refunds issued through CUNYfirst are usually posted to Central Office’s general ledger automatically.

To centralize the refund process, Central Office established a Tuition and Fees Refund bank account to reimburse students when the payments they make exceed their tuition and fees (e.g., due to out-of-pocket payments; withdrawal from classes; or tuition covered by other sources, such as scholarships). The account is also used to issue book advance payments, enabling students to purchase books and supplies before the semester begins. The account is a zero balance account (i.e., a balance of zero is maintained by automatically transferring funds from another account in an amount to cover checks presented) and is linked to CUNY’s Tuition and Fees Collection account.

Refunds may be subject to federal and State regulations, which can also impact the timing of a refund, the amount of a refund, the appropriate bank account for a refund, and the appropriateness of a refund.

CUNY made 440,537 payments totaling $305,754,246 to students from the Tuition and Fees Refund bank account during the period January 4, 2013 to January 22, 2016. Excluding book advances, 256,180 of these payments totaling $218,606,626 ranged in dollar value from $100 and $15,000. We examined 270 refund payments totaling $1,075,874 issued to students attending 20 CUNY colleges. The payments consisted of:

• A random sample of 100 payments selected from all payments between $100 and $15,000 that were not book advance payments and a second random sample of 100 possible book advance payments selected based on dollar value.
• The 40 highest-dollar payments selected from payments between $15,000 and $20,000.
• A judgmental sample of 30 payments that had certain risk indicators, such as out-of-state or out-of-country addresses and/or lengthy time lapses from the date the refund was identified to the date the payment (electronic or check) was issued to the student.

Key Findings

We found that controls over payments from the Tuition and Fees Refund bank account need significant improvement. Thirteen of 100 randomly selected payments with a dollar value between $100 and $15,000 (totaling $125,762) were either miscalculated or not supported. In addition, other exceptions existed, including 17 payments that were paid prematurely and 17 financial aid payments that were incorrectly made from the Tuition and Fees Refund bank account. These exceptions increase the risk of overpayment as well as the risk of fraud, waste, and abuse. Overpayments were also identified for large-dollar refunds (i.e., $15,000–$20,000) that were not always supported by the records provided by the colleges. Similar problems were found with a random sample of book advances. However, the level of exceptions for book advances was significantly lower, at 5 percent.

Key Recommendations

• Strengthen the internal control environment by monitoring compliance with all applicable policies and procedures regarding the refund process and by ensuring all refunds are appropriate.
• Develop procedures to delineate the use of the bank accounts, specifying which accounts are to be used for financial aid payments and which are to be used for tuition and fee refunds.