Larry Mandel Vice Chancellor and Chief Audit Officer Office of Audit and Advisory Services 401 Golden Shore, 4th Floor Long Beach, CA 90802-4210 562-951-4430 562-951-4955 (Fax) lmandel@calstate.edu February 5, 2018 Dr. Lisa A. Rossbacher, President Humboldt State University 1 Harpst Street Arcata, CA 95521 Dear Dr. Rossbacher: Subject: Audit Report 17-59, Extended Education, Humboldt State University We have completed an audit of Extended Education as part of our 2017 Audit Plan, and the final report is attached for your reference. The audit was conducted in accordance with the Institute of Internal Auditors International Standards for the Professional Practice of Internal Auditing. I have reviewed the management response and have concluded that it appropriately addresses our recommendations. The management response has been incorporated into the final audit report, which has been posted to the Office of Audit and Advisory Services website. We will follow-up on the implementation of corrective actions outlined in the response and determine whether additional action is required. Any observations not included in this report were discussed with your staff at the informal exit conference and may be subject to follow-up. I wish to express my appreciation for the cooperation extended by the campus personnel over the course of this review. Sincerely, Larry Mandel Vice Chancellor and Chief Audit Officer c: Timothy P. White, Chancellor CSU Campuses Bakersfield Channel Islands Chico Dominguez Hills East Bay Fresno Fullerton Humboldt Long Beach Los Angeles Maritime Academy Monterey Bay Northridge Pomona Sacramento San Bernardino San Diego San Francisco San José San Luis Obispo San Marcos Sonoma Stanislaus
CSU The California State University Office of Audit and Advisory Services EXTENDED EDUCATION Humboldt State University Audit Report 17-59 December 5, 2017
EXECUTIVE SUMMARY OBJECTIVE The objectives of the audit were to ascertain the effectiveness of operational, administrative, and financial controls related to extended education (EE) and to evaluate adherence to relevant governmental regulations, Trustee policy, Office of the Chancellor directives, and campus procedures. CONCLUSION We found the control environment for some of the areas reviewed to be in need of improvement. Based upon the results of the work performed within the scope of the audit, except for the weaknesses described below, the operational, administrative, and financial controls for EE as of September 22, 2017, taken as a whole, provided reasonable assurance that risks were being managed and objectives were met. In our review, we found that the administration of EE programs and activities at Humboldt State University (HSU) did not always comply with California State University (CSU) policies. For instance, we found that EE expenditures were not properly documented to establish a nexus to self-support programs and activities; the campus did not fully recover costs incurred by EE; and special session offerings were not always properly classified. Additionally, we found that EE did not have documented policies and procedures for revenue-sharing agreements and for the planning and development of non-credit certificate programs. Specific observations, recommendations, and management responses are detailed in the remainder of this report. Audit Report 17-59 Office of Audit and Advisory Services Page 1
OBSERVATIONS, RECOMMENDATIONS, AND RESPONSES 1. FISCAL ADMINISTRATION OBSERVATION The campus did not document the nexus between expenditures made from the campus revenue-share trust accounts and the specific EE self-supported program functions that benefited from the expenditures. We reviewed 30 expenditures totaling $176,605 made from various EE local trust funds and academic partnership funds, and we found 16 expenditures totaling $49,922 for which the campus could not provide documentation to support the nexus to self-supported programs: Department of English $577 for conference travel $464 for copier maintenance Department of World Languages and Cultures $1,000 for conference travel $180 for retreat catering Department of Social Work $7,500 for a digital advertisement $920 for conference travel $800 for a job advertisement Department of Forestry and Wildland Resources $2,336 for a steel herbarium cabinet Geology Department $1,984 for a projector College of Professional Studies $15,523 for a departmental copier $8,150 for faculty profile videos $5,000 for conference sponsorship $1,435 for a computer for a faculty member $1,260 for measurement tools $1,188 for an intern reception Environment and Community $1,605 for two van rentals Complete documentation of EE expenditures decreases the risk of inappropriate use of EE funds and ensures compliance with Education Code requirements. Audit Report 17-59 Office of Audit and Advisory Services Page 2
RECOMMENDATION We recommend that the campus develop a process to document the nexus between expenditures made from campus revenue-share trust accounts and the specific EE selfsupported program functions that benefit from the expenditures. MANAGEMENT RESPONSE We concur. The College of Extended Education and Global Engagement will work with appropriate campus personnel to develop a process to ensure that a nexus is documented for self-support expenditures from campus partner accounts. The process will be communicated to relevant personnel, particularly those with signature authority, to ensure that the expenditures are appropriate and documented accordingly. Anticipated completion date: June 30, 2018 2. REVENUE-SHARING AGREEMENTS OBSERVATION The campus revenue-sharing agreement process needed improvement. Specifically, we found that CEEGE did not have documented policies and procedures for revenue-sharing agreements with academic departments that were collaborating with CEEGE to develop and execute EE programs and offerings. In our review, we found five EE revenuesharing transfers in the amount of $280,098 that were not supported by executed partnership agreements; as such, we were unable to verify the appropriateness of these transfers. Proper administration of revenue-sharing partnerships, including defined policies and properly executed revenue-sharing agreements, decreases the risk of misunderstanding of business terms and responsibilities and decreases the risk that EE revenues will be used improperly. RECOMMENDATION We recommend that the campus: a. Document policies and procedures for the development and execution of revenue-sharing agreements with academic departments collaborating with CEEGE to develop and execute EE programs and offerings. b. Review existing campus revenue-sharing partnerships and execute agreements as necessary. MANAGEMENT RESPONSE We concur. We will finish developing policies and procedures for executing revenue-sharing agreements with campus academic partners and will ensure that revenue-sharing Audit Report 17-59 Office of Audit and Advisory Services Page 3
partnerships are documented accordingly. We will also review existing agreements to ensure that they comply with the policies. Anticipated completion date: June 30, 2018 3. COST RECOVERY OBSERVATION The campus had not fully recovered or documented an exchange of value for services provided to CEEGE that were incurred by the CSU Operating Fund. We reviewed the campus cost allocation plan methodology for fiscal years 2015/16 and 2016/17, and we found that the campus had not recovered or documented an exchange of value for: Library usage Police services Office and classroom space Utilities Information technology services Recovering costs or documenting an exchange of value for services the campus provides to EE helps ensure that the campus operating fund is fully compensated and that the campus is in compliance with systemwide policies. RECOMMENDATION We recommend that the campus perform a review of the cost-recovery methodology used to recover costs from EE and develop a plan to recover or document an exchange of value for the services identified above. MANAGEMENT RESPONSE We concur. The campus has implemented a preliminary process for cost recovery (including exchange of value) for the current year. A team is reviewing the current methodology and working on enhancements, including greater analysis of exchange of value. The working group will make recommendations for these enhancements to the university resources and planning committee for adoption. The recommendations will ensure that the campus recovers full costs, net of any exchange of value. Anticipated completion date: June 30, 2018 Audit Report 17-59 Office of Audit and Advisory Services Page 4
4. NON-ACADEMIC CREDIT PROGRAMS OBSERVATION Administration of non-academic credit programs needed improvement. Our review found that: CEEGE did not have documented policies and procedures related to the planning and development of non-credit certificate programs. Non-academic credit programs were not always approved in accordance with CEEGE documented procedures. Specifically, we reviewed six non-academic programs and found that in three instances, a course proposal form was not completed. Proper administration of non-academic credit programs ensures that course details and requirements will be clearly established and all necessary reviews and pre-approvals will be properly obtained. RECOMMENDATION We recommend that the campus: a. Document policies and procedures related to the planning and development of non-credit certificates as required by CSU policy. b. Remind key personnel involved in the development of non-academic credit programs of the review and approval requirements, including the use of course proposal forms. MANAGEMENT RESPONSE We concur. A policy regarding the planning and development of non-credit certificate programs will be developed and executed. Additionally, the associate vice president for the College of Extended Education and Global Engagement will issue a memo to key personnel regarding the process and documentation required for the review and approval of non-credit courses and programs. Anticipated completion date: June 30, 2018 5. SPECIAL SESSIONS OBSERVATION The campus misclassified two special-session course offerings as regular academic offerings. Special sessions are a means whereby instructional programs of the CSU can be provided to enrolled (matriculated) CSU students and non-matriculated students on a self-support basis at times and in locations not supported by state general fund appropriations. We found that Audit Report 17-59 Office of Audit and Advisory Services Page 5
enrollment in one state-supported class offered in the fall of 2015 and spring of 2016 was composed exclusively of non-matriculated students. We were unable to determine whether CEEGE fully reimbursed the university for the costs associated with these classes, as they should have been self-supported. Proper classification of EE offerings reduces the risk that state funding will be improperly used. RECOMMENDATION We recommend that CEEGE: a. Develop documented procedures to ensure proper classification of special session courses. b. Evaluate the costs associated with the special session offerings noted above and reimburse the university accordingly. MANAGEMENT RESPONSE We concur. A procedure will be developed regarding the proper classification of special session courses. The associate vice president for the College of Extended Education and Global Engagement will issue a memo to key personnel regarding the process for classifying various courses accordingly. The College of Extended Education and Global Engagement will initiate a review leading to an appropriate reimbursement to the general fund for the course(s) that was/were incorrectly classified. Anticipated completion date: March 30, 2018 Audit Report 17-59 Office of Audit and Advisory Services Page 6
GENERAL INFORMATION BACKGROUND SCOPE In 1971, the California legislature passed the Continuing Education Revenue Fund (CERF) Act, which required each CSU campus to create EE units. On average, the 23 campuses process 300,000 EE enrollments each year. EE units provide a way for the CSU to meet the education and training needs of individuals and groups who might not otherwise be served by the CSU and allow campuses to operate on a self-support basis at times and locations not supported by the CSU Operating Fund. EE provides a broad spectrum of services, including professional development and job training courses; certificate and degree programs; courses delivered online, off-campus, or at nontraditional times; courses for personal enrichment; and courses delivered between academic terms. Courses may provide academic credit or continuing education units, or may be offered on a non-credit basis. There are certain limitations on EE offerings, including the requirement that offerings not supplant regular state-supported course offerings, and that state-supported matriculated students not be required to enroll in self-support courses in order to fulfill graduation requirements. Additionally, basic teacher credential programs are generally not allowed to be offered through EE. The assistant vice chancellor and dean of EE at the Office of the Chancellor (CO) provides overall oversight and administration for EE at the systemwide level. In addition, the Commission on the Extended University, established in 2002, advises the chancellor regarding the issues and opportunities facing EE units at each of the campuses. The California State Auditor (CSA) conducted an audit of EE in the CSU system in 2012/13 and issued the final report in December 2013. As a result, the CO revised systemwide policy related to EE and issued Executive Order (EO) 1099, Extended Education: Self-Supporting Instructional Courses and Programs, in June 2014. Additionally, the CO worked with the legislature to clarify the definition of supplanting, which resulted in Assembly Bill 716 being passed in September 2015. The bill amended Education Code 89708 and defined supplanting as reducing the number of state-supported course offerings while increasing the number of self-supporting versions of that course. At Humboldt State University (HSU), EE is housed in CEEGE and is headed by an associate vice president who reports to the provost in academic affairs. The college oversees OU; the Osher Lifelong Learning Institute, which provides non-credit classes for those ages 50 and older and an Over 60 Program, which allows people over 60 years old to take regular HSU classes for a low fee; the summer session; and degree and certificate courses. Other offerings include a variety of professional development courses, music workshops and festivals, children s programs, and travel programs. Several of the EE programs are offered online. We visited the HSU campus from August 22, 2017, through September 22, 2017. Our audit and evaluation included the audit tests we considered necessary in determining whether Audit Report 17-59 Office of Audit and Advisory Services Page 7
CRITERIA administrative, financial, and operational controls are in place and operative. The audit focused on procedures in effect from July 1, 2015, through September 22, 2017. Specifically, we reviewed and tested: EE administration and organization, including clear lines of organizational authority and responsibility, defined mission and goals, and current and comprehensive policies and procedures. Processes for the development and approval of EE course offerings, including compliance with state regulations relating to supplanting of state-supported courses. Processes for enrollment of non-matriculated students in state-supported courses. Establishment and modification of EE fees. Administration of EE revenues and expenditures for the support and development of selfsupported instructional programs. Appropriate review and execution of contracts with internal and external providers. Reimbursement to the CSU Operating Fund for EE costs. Maintenance and approval of EE reserves. Controls limiting access to stand-alone EE systems to appropriate personnel. Appropriate risk management processes for higher risk programs, including those involving minors. As a result of changing conditions and the degree of compliance with procedures, the effectiveness of controls changes over time. Specific limitations that may hinder the effectiveness of an otherwise adequate system of controls include, but are not limited to, resource constraints, faulty judgments, unintentional errors, circumvention by collusion, and management overrides. Establishing controls that would prevent all these limitations would not be cost-effective; moreover, an audit may not always detect these limitations. Our testing and methodology, which was designed to provide a review of key administrative, financial, and operational controls, included interviews, walkthroughs, and detailed testing on certain aspects of the campus EE program. Our review was limited to gaining reasonable assurance that essential elements of the EE program were in place and did not examine all aspects of the program. Our audit was based upon standards as set forth in federal and state regulations and guidance; CSU Board of Trustee policies; CO policies, letters, and directives; campus procedures; and other sound administrative practices. This audit was conducted in conformance with the Institute of Internal Auditors International Standards for the Professional Practice of Internal Auditing. This review emphasized, but was not limited to, compliance with: Audit Report 17-59 Office of Audit and Advisory Services Page 8
AUDIT TEAM EO 341, Use of Surpluses in CERF EO 805, Policy Governing the Enrollment of Non-Matriculated Students in CSU State- Supported Courses and in CSU Self-Support Special Session Courses EO 806, Certificates and Certificate Programs EO 1000, Delegation of Fiscal Authority EO 1099, Extended Education: Self-Supporting Instructional Courses and Programs EO 1102, CSU Fee Policy Integrated California State University Administrative Manual (ICSUAM) 2001.00, Campus Reserves ICSUAM 3552.01, Cost Allocation/Reimbursement Plans for the CSU Operating Fund ICSUAM 8000, Information Security Coded memorandum Human Resources 2016-08, Background Check Policy Education Code (EC) 89700 to 89712, Fees, Rents and Charges EC 89720 to 89726, Revenues Government Code 13402 and 13403 HSU Procedures for Non-Credit Extension Courses Assistant Vice Chancellor: Michelle Schlack Senior Audit Manager: Wendee Shinsato Audit Manager: Cindy Merida Senior Auditor: Samer Harb Audit Report 17-59 Office of Audit and Advisory Services Page 9