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1 ~ ~ M!:t S~ EDUCATION COMMISSION 2009j)156_MHEC_ Report on the Auditing of Community College Enrollments September 2009 MARYLAND HIGHER EDUCATION COMMISSION 839 Bestgate Rd. Suite 400 Annapolis, MD

2 MARYLAND HIGHER EDUCATION COMMISSION Kevin M. O Keefe, Chairman Donald J. Slowinski, Sr., Vice Chairman Joann A. Boughman Eyituoyo Ebigbeyi Mark R. Frazer Anwer Hasan Leronia A. Josey James G. Morgan Nhora Barrera Murphy Chung K. Pak Paul L. Saval James E. Lyons, Sr. Secretary of Higher Education Martin O Malley Governor Anthony G. Brown Lt. Governor

3 2009_p156_MHEC_ Report on the Auditing of Community College Enrollments In April, 2009, the Joint Chairman s Operating Budget Report requested that the Maryland Higher Education Commission (MHEC), in conjunction with the Maryland Association of Community Colleges (MACC), submit a report outlining the procedures used in auditing community college enrollments. In response to this request, the following report describes the process fully. Audited community college enrollments are used in setting the State General Fund appropriation to Baltimore City Community College and the Senator John A. Cade Funding Formula, the main source of State funding to community colleges. State law and regulations governing the reporting and payment of State aid for credit students are contained in the Annotated Code of Maryland, Education Article, Title 16, Community Colleges and the Code of Maryland Regulations, Title 13B, Maryland Higher Education Commission. Critical to the determination of State aid to community colleges is the measurement of full-time equivalent (FTE) students referred to in the Code. As defined by the Code (16-305(b)(7)) full-time equivalent student" is the quotient of the number of student credit hours produced in the fiscal year two years prior to the fiscal year for which the State share is calculated divided by 30, as certified by MHEC. Overview of the Enrollment Reporting Process For purposes of determining State aid, credit full-time equivalent (FTE) enrollment is reported to MHEC using Form CC-2. Enrollment in Continuing Education Courses (equated credit) approved for State aid is reported to MHEC using Form CC-3. To ensure uniformity, detailed instructions for both forms are included in the MHEC State Aid to Community Colleges Manual, which is distributed to all community colleges. MHEC Finance Policy Staff meet regularly with community college business officers and are always available to assist college staff in completing the forms correctly. Certification of the CC-2 and CC-3 forms require original signatures of and must be dated by the preparer and the president of the college. For documentation and audit purposes, the worksheets, computer files, and other data sources from which these reports are derived must be made available for five years. Enrollment data from the CC-2 and CC-3 forms is entered into the MHEC Enrollment Information System. A report is then generated detailing the total credit and noncredit FTE by institution. To ensure the accuracy of the eligible credit and non-credit FTE reported by the colleges on the CC-2 and CC-3 reports, COMAR 13B requires that colleges also submit an audited financial and enrollment report to MHEC, the CC-4, on October 1 of each year. The CC-4 was designed to provide MHEC with information necessary to

4 substantiate State aid payments to the community colleges for the year under examination and to provide information needed for a variety of other purposes. It is a derivative of the formal Financial Statements of the community college. State laws and regulations governing this report are contained in: Title 16 of the Education Article of the Annotated Code of Maryland, Sections , , , , , , , , , , , , , , , , and set forth the State s policies for financing and auditing community colleges. Title 13B.07.03, Sections of the Code of Maryland Regulations sets forth the State s policies for financing community colleges. If any disputes arise between these Procedures and Guidelines and State law, State law takes precedence. The CC-4 report is accompanied by a transmittal letter signed by the college President indicating he or she is aware of the contents of the report. In accordance with the Code, an independent certified public accountant must issue a formal opinion on the fairness of the data included in the CC-4 report. This formal opinion must address the requirements in COMAR 13B : (4) Each board of trustees shall engage an independent certified public accountant to perform an audit on the Annual Financial Report to the Commission (form MHEC-CC-4) which is a special purpose report required by the Commission. The independent certified public accountant shall render a report on the scope of the accountant's examination of the Annual Financial Report (form MHEC-CC-4) and express the accountant's opinion as to the fairness of the Summary Statement of Revenues and Expenditure and the enrollment data. Explicit references are required with regard to enrollment data and whether the principles and procedures governing the interrelationship between the current unrestricted general fund and the auxiliary enterprise fund result in a fair presentation of the current unrestricted general fund revenues and expenditures (5) Full-time equivalent student enrollment shall be audited with the same diligence as applied to the financial statement, that is, the general standards and standards of field work apply to the enrollment audit. The specific tests of the enrollment records and the auditing procedures to be applied to the enrollment records are the responsibility of the independent certified public accountant. (12) Unless otherwise approved by the Commission, full-time equivalent enrollment is to be reported to the Commission within the fiscal year in which the courses are taught. Full-time equivalent enrollment in credit or equated credit courses that are conducted over the fiscal year end shall be reported in the fiscal year in which the courses are predominantly taught.

5 (13) An auditor shall direct particular attention to sections of the Commission general policies regarding contractual agreements with organizations offering instruction, State or federally funded contracts, and maintenance of effort by local subdivisions. (14) When local, State or federally funded contracts or grants, or both, pay for program or course costs, or both, State aid is not paid for that proportion of full-time equivalent students whose total costs are funded by the grant or contract. Upon receipt, MHEC staff evaluate each college s CC-4 report for completeness and content. If any sections are missing or inadequate, the college is immediately notified. Particular attention is paid to the independent audit report: if any material weaknesses are noted by the auditor, MHEC staff follows up with the college and requests a response explaining what the college is doing to correct the problem. MHEC staff also forwards copies of the CC-4 reports to the Legislative Auditor in accordance with the statutes. Verification of Enrollment The final step in determining the FTE used in the Cade funding formula equation requires matching the audited FTE reported on the CC-4 with the computer-generated report issued by MHEC Information Systems. In all cases, enrollment figures from both data sources must match. FTE Calculation According to Code, Full-time equivalent (FTE) enrollment is measured as of the end of the third week of classes each semester and after 20 percent of the time has lapsed for shorter sessions. In credit or equated credit courses which continue for a period of time which is more or less than a semester, is measured at a point in time which is 20 percent of the total course time. The number of Maryland students is determined by the total number of eligible credit hours carried by all Maryland students. The result of this multiplication is then divided by thirty to yield the number of FTE (divisions are carried to at least three decimal places and rounded back to two). State aid is paid on the FTEs per application of COMAR 13B H that have been reported. Dividing the total credit hours generated by 30 eliminates rounding errors, which are inevitable when full-time equivalent students are determined by credit hour category and results in a more accurate measurement of the total full-time equivalent students for the reporting period. Adding the FTEs generated by each credit hour category serves as a verification procedure for the accuracy of the full-time equivalent student computation on total credit hours generated divided by thirty.

6 Eligibility of FTE for State Aid The State does not provide State aid to community colleges for certain students. The following classifications of students are not eligible for State aid, as specified by the Code: College employees Title 16, Section (a); Senior citizens in non-state approved courses - Title 16, Section (b)(2); High school students under 16 years of age in continuing education courses - COMAR 13B (12); Credits awarded to students for satisfactory completion of standardized tests of college-level performance, competency, or aptitude - COMAR 13B (11)(a); Credits awarded to students for work experience or life experience, which does not require direct college instruction or supervision. COMAR 13B (11)(b); Dependents of faculty and staff - COMAR 13C (c); Non-Maryland residents - COMAR 13B D(8) A Maryland resident is defined as a student who has maintained a domicile in Maryland for at least 3 months before the date of enrollment at a college. A student enrolling in a credit course or a non-credit continuing education course at a college indicates in writing, on a form prescribed by the board of trustees of the college, whether the student is a resident of the State and the county or region. In addition, the following students are also considered to be Maryland residents: Military personnel and their dependents who have a domicile in Maryland at the time of entrance into the armed forces and who are stationed outside the State; Military personnel stationed in Maryland and on active duty who did not have a domicile in Maryland at the time of entrance into the armed forces, and their dependents; A student enrolled in a program designated by the Commission as a health manpower shortage program; and

7 A student from outside the State who enrolls as part of a reciprocity agreement negotiated between Maryland and another state. The determination of the eligibility of FTE for State aid is one of the factors that must be audited by the independent auditor for the independent auditor s report accompanying the college s annual CC-4 report. Legislative Audit Each year, MHEC is audited by the Office of Legislative Audits of the Department of Legislative Services. Community college CC-4 reports for the previous year are examined in detail as part of the audit. The reports are reviewed for completeness and content. MHEC s responses to the college s CC-4 reports are also reviewed, particularly if a material weakness was noted by the college s independent audit report.

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