Arizona's Universities Fee-Setting Processes ABOR and the universities have established some fee-setting processes consistent with best practices but should further enhance their processes Performance Audit January 2018 Report 18-101 A Report to the Arizona Legislature Debra K. Davenport Auditor General The Auditor General is appointed by the Joint Legislative Audit Committee, a bipartisan committee composed of five senators and five representatives. Her mission is to provide independent and impartial information and specific recommendations to improve the operations of state and local government entities. To this end, she provides financial audits and accounting services to the State and political subdivisions, investigates possible misuse of public monies, and conducts performance audits and special reviews of school districts, state agencies, and the programs they administer. The Joint Legislative Audit Committee Representative Anthony Kern, Chair Senator Bob Worsley, Vice Chair Representative John Allen Senator Sean Bowie Representative Rusty Bowers Senator Judy Burges Representative Rebecca Rios Senator Lupe Contreras Representative Athena Salman Senator John Kavanagh Representative J.D. Mesnard (ex officio) Senator Steve Yarbrough (ex officio) Audit Staff Dale Chapman, Director Rosa Ellis, Team Leader Jeff Gove, Manager and Contact Person Katherine Grzybowski, Team Leader Cathy Clark, Manager Erica C. Nickerson Contact Information Arizona Office of the Auditor General 2910 N. 44th St. Ste. 410 Phoenix, AZ 85018 (602) 553-0333 www.azauditor.gov Michael Squire January 19, 2018 Members of the Arizona Legislature The Honorable Doug Ducey, Governor Ms. Eileen I. Klein, President Arizona Board of Regents Dr. Michael M. Crow, President Arizona State University Dr. Rita Hartung Cheng, President Northern Arizona University Dr. Robert C. Robbins, President University of Arizona Transmitted herewith is a report of the Auditor General, A Performance Audit of Arizona’s Universities—Fee-Setting Processes. This report is in response to Arizona Revised Statutes (A.R.S.) §41-2958 and was conducted under the authority vested in the Auditor General by A.R.S. §41-1279.03. I am also transmitting within this report a copy of the Report Highlights for this audit to provide a quick summary for your convenience. As outlined in their responses, the Arizona Board of Regents, Arizona State University, Northern Arizona University, and the University of Arizona agree with all of the findings and plan to implement or implement in a different manner all of the recommendations. My staff and I will be pleased to discuss or clarify items in the report. Sincerely, Debbie Davenport Auditor General cc: Arizona Board of Regents members Attachment 2910 NORTH 44 th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553-0333 • FAX (602) 553-0051 ARIZONA AuditorGeneraI Making a Positive Difference REPORT HIGHLIGHTS Performance Audit January 2018 Arizona's Universities Fee-Setting Processes CONCLUSION: Although the Arizona Board of Regents (ABOR) and the State’s universities—Arizona State University (ASU), Northern Arizona University (NAU), and the University of Arizona (UA)—have established some fee-setting processes that generally align with best practices that help to promote transparency and accountability, they should further enhance these processes. ABOR has statutory authority to set tuition and fees and has established policies and guidance that the universities must follow when setting fees. ASU, NAU, and UA have also developed some fee-setting policies and processes that are consistent with fee-setting standards and guidelines to guide their implementation of ABOR fee-setting policies and guidance and additional internal review and approval processes for establishing class fees that are $100 or less. However, ASU, NAU, and UA should further ensure that class fee revenues are used for approved purposes and address instances of noncompliance with existing fee-setting policies and procedures we identified. In addition, ABOR, ASU, NAU, and UA should enhance their fee-setting processes to further align them with fee-setting standards and guidelines. ABOR and universities have established some fee-setting processes consistent with best practices, but should enhance their processes ABOR has established categories of student fees the universities may charge and the universities collected $310 million from student fees in fiscal year 2016—ASU, NAU, and UA charge hundreds of student fees annually in addition to tuition to pay for various services that are intended to benefit students. ABOR has statutory authority to set university tuition and fees and has established four categories of fees the universities may charge to students: mandatory fees, which are charged to all students unless specifically excluded; differential tuition/program fees, which are charged to students based on their degree program; and class fees, which are charged to students in specific classes. ABOR requires the universities to obtain its approval before charging students any mandatory fees, differential tuition/program fees, and class fees over $100. ABOR policy permits the universities to establish class fees that are $100 or less without ABOR approval. In fiscal year 2016, ASU, NAU, and UA collected approximately $310.4 million from 5,655 student fees. ABOR has established some policies and guidance for university fee-setting consistent with feesetting best practices and universities have developed some additional processes—Best practices recommend a fee-setting approach that promotes transparency and accountability. ABOR’s fee-setting policies and guidance, which the universities must follow when establishing or increasing student fees, are generally consistent with the best practices outlined in fee-setting standards and guidelines. For example, consistent with best practices, which recommend that entities involve stakeholders in the fee-setting process and consider costs when setting fee rates, ABOR policies and guidelines require the universities to involve students in the process of setting mandatory fees and differential tuition/program fees, and specify that class fees may only be charged to cover the cost of specific items or services. Further, ASU, NAU, and UA have also developed some fee-setting polices and processes to guide their implementation of ABOR fee-setting policies and guidance. For example, all three universities require academic departments to submit an online form to establish class fees, and have established processes to review some existing fees. ASU, NAU, and UA should further ensure that class fee revenues are used for approved purposes— We reviewed spending and university fee proposals for a sample of 56 student fees that the universities charged during fiscal year 2016, including 44 class fees, and found that all three universities deposited revenues from multiple class fees into combined accounts without otherwise separately accounting for individual fees’ revenues or spending in some cases. As a result, we could not determine if fee revenues were spent for approved purposes for 38 of the 44 class fees that we reviewed. Combining fee revenues into single accounts may help fee-setting entities manage the administrative burden of accounting for multiple class fee revenues and expenses. Best practices indicate that entities should retain sufficient records to demonstrate how fee revenues were used while balancing the administrative burden of doing so. UA reported that as of fiscal year 2017, it had implemented a new process that should help it to better account for and review class fee spending. Additionally, ASU has implemented a procedure that allows academic departments to deposit class fee revenues into combined accounts when these revenues are intended to be spent for shared resources. If properly implemented, this procedure should allow ASU to track revenues for class fees deposited into combined accounts. We were informed of this procedure after completing our test work and will review the procedure during this report’s 6-month followup. NAU has not established written procedures to help ensure that class fee revenues deposited into combined accounts are spent for approved purposes, and it should do so. ASU, NAU, and UA should address instances of noncompliance with fee-setting policies and procedures—The universities have not consistently followed fee-setting policies, procedures, and guidance established by ABOR or their own internal policies and procedures. Specifically, contrary to ABOR policy and inconsistent with the fees’ approved use, UA requires its departments to remit a 1 percent service charge on all purchases made with class fee revenues to pay for a portion of institutional support or administrative costs, and ASU incorrectly spent approximately $5,000 in class fee revenues to pay student workers whose duties were not consistent with the fees’ approved purpose. In addition, in fiscal year 2016, ASU spent approximately $445,000 of Student Athletics fee revenues for recruiting-related expenses that, although consistent with the ABOR-approved purpose of the fee, appear to be inconsistent with the fee uses agreed upon by ASU student government, university administration, and the athletics program. Further, contrary to ABOR policy, NAU did not obtain student input for one of the program fees we reviewed. ABOR and the universities should enhance their fee-setting processes to further align them with fee-setting standards and guidelines—Although portions of their fee-setting policies and guidance are consistent with best practices, ABOR and the universities should further enhance these processes. For example, contrary to best practices, ABOR approved overly broad purposes for mandatory and differential tuition/program fees, and as a result, the universities spent fee revenues on items that appeared unusual or may not have been consistent with the approved use. In addition, although NAU and UA developed processes for identifying fees that may no longer be necessary or have rates that are set too high, as recommended by best practices, ASU has not developed such a process. Further, with the exception of a procedure UA developed for class fees, ABOR and the universities have not established policies for considering the cumulative impact of the multiple fees that students must pay to attend the universities, or may not have had the information necessary to do so, because the inventories of existing fees the universities provide to ABOR do not include class fees, which are the majority of the fees that the universities charge, and are not always accurate. Recommendations ABOR should: • Determine if administrative costs are an allowable use of class fee revenues, and revise its policies accordingly; • Revise its fee-setting policies and guidance for mandatory fees and differential tuition/program fees to require the universities to develop clearly defined purposes for proposed fees, consider the appropriateness and costs of the items or services for which each fee is intended to pay, and include administrative costs in fee proposals; and • Require the universities to include in differential tuition, program fee, and class fee proposals information about all existing fees students must pay for a particular degree program. ASU should: • Develop and implement written policies, procedures, or other guidance to direct academic departments’ reviews of class fee revenue spending to help ensure that fee revenues are used for approved purposes, and consider all required fees students may potentially pay when proposing new fees or increases to existing fees; and • Ensure that it conducts a planned review of its Student Athletics fee charter and revise its Student Athletics fee procedures and guidance to reflect any changes made to the charter. NAU should develop and implement written policies, procedures, or other guidance to help ensure that class fee revenues deposited into combined accounts are spent for approved purposes; ensure that it complies with ABOR’s requirement to obtain student input for mandatory fees and program fees; and consider all required fees students may potentially pay when proposing new fees or increases to existing fees. UA should continue to implement its process to better account for and review class fee revenues and expenses, continue to implement its new procedure for considering cumulative impact when establishing class fees, and develop and implement additional fee-setting procedures for considering cumulative impact when establishing all fees. Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 A copy of the full report is available at: www.azauditor.gov Contact person: Jeff Gove (602) 553-0333 TABLE OF CONTENTS Introduction 1 Finding 1: ABOR and universities have established some fee-setting processes consistent with best practices, but should further enhance their processes 9 Universities charge hundreds of fees to pay for various student services 9 ABOR and the universities have established some fee-setting processes consistent with best practices 10 ASU, NAU, and UA should further ensure class fee revenues are used for approved purposes and address noncompliance with fee-setting policies and procedures 13 ABOR and the universities should enhance their fee-setting processes to further align them with fee-setting standards and guidelines 16 Recommendations 23 Other Pertinent Information 27 ASU charges a Resident Surcharge fee that substitutes for a tuition increase 27 Appendix A: Universities’ fees reviewed by auditors a-1 Appendix B: Universities’ mandatory and other nonacademic fees b-1 Appendix C: ASU, NAU, and UA specific financial tables and revenue composition figures c-1 Appendix D: Tuition and fees at peer institutions d-1 Appendix E: Methodology e-1 Responses Tables In fiscal year 2016, each university charged a combination of mandatory fees, differential tuition/program fees, class fees, and other nonacademic fees that generated approximately $310 million in fee revenues (Unaudited) 3 In fiscal year 2016, class fees ranged from $2 to $5,000, but the most common fee amount was $50 and the majority of fees were $100 or less (Unaudited) 3 5 6 Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE i TABLE OF CONTENTS 5 6 Changes in ASU’s fall and spring tuition and Resident Surcharge fee for undergraduate resident students Fiscal years 2015 through 2018 28 Mandatory fees, differential tuition/program fees, and other nonacademic fees reviewed by a-1 7 Class fees reviewed by auditors, including the amount of fee revenues collected, expenses, a-6 8 Universities’ descriptions of mandatory and other nonacademic fees and their annual rates for b-1 9 Schedule of revenue sources and expenses for ASU c-2 10 Schedule of revenue sources and expenses for NAU c-4 11 Schedule of revenue sources and expenses for UA c-6 12 Incoming full-time resident undergraduate freshman base tuition, mandatory fees, and other d-1 Figures 8 c-3 c-5 c-7 Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE ii INTRODUCTION Scope and objectives The Office of the Auditor General has conducted a performance audit of fee-setting processes at Arizona State University (ASU), Northern Arizona University (NAU), and the University of Arizona (UA) pursuant to Arizona Revised Statutes (A.R.S.) §41-2958. This audit was conducted under the authority vested in the Auditor General by A.R.S. §41-1279.03 and is the first in a series of three performance audits of the State’s universities. The second audit will review the universities’ processes and strategies for improving undergraduate retention and graduation rates, and the third audit will address the universities’ information technology security. Arizona Board of Regents governs State’s universities The Arizona Board of Regents (ABOR) is the governing body of the State’s three universities: ASU, NAU, and UA. Article XI, §5, of the Arizona Constitution created ABOR, and statutes provide it with the general authority to supervise and perform various activities related to the universities. Specifically, A.R.S. §15-1626 establishes ABOR’s general powers and duties, including setting tuition rates and admission requirements, approving the universities’ annual operating budgets, and adopting personnel policies for all ABOR and university employees. ABOR consists of 12 members, including the Governor, the Superintendent of Public Instruction, and 10 members the Governor appoints.1 A.R.S. §15-1601(A) requires ABOR to maintain the following three state universities: • ASU—ASU has several campuses, including those located in the City of Tempe, ASU Polytechnic in the City of Mesa, ASU West in the City of Phoenix, bordering the City of Glendale, and ASU Downtown Phoenix in the City of Phoenix. In fiscal year 2017, ASU’s full-time equivalent student enrollment (FTSE), a statutorily mandated measure of student enrollment, was 92,238, and the total faculty and staff for the fall semester was 14,703. • NAU—NAU has several campuses, including those located in the City of Flagstaff, the City of Yuma, the City of Phoenix, and the Town of Prescott Valley. In fiscal year 2017, NAU’s FTSE was 27,479 and the total faculty and staff for the fall semester was 4,352. • UA—UA has several campuses, including those located in the City of Tucson, UA South, which has a location in the City of Sierra Vista, and the biomedical campus that is located in the City of Phoenix. In fiscal year 2017, UA’s FTSE was 41,565 and the total faculty and staff for the fall semester was 15,056. Universities charge fees for student services A.R.S. §15-1626 (A)(5)(6) gives ABOR the authority to set tuition and fees for the universities. Consistent with this statutory authority, ABOR developed a policy manual that includes fee-setting policies and guidance that the universities must follow when establishing or increasing student fees. For example, ABOR’s policies establish four fee categories within which the universities may charge fees to students. Further, ABOR’s policies require the universities to submit a proposal to ABOR and obtain ABOR approval before charging fees in most of these fee categories. Specifically, ABOR has established the following fee categories: 1 Two of the ten ABOR members are student members. Each year, the Governor designates a university on a rotating basis to submit a list of nominees for student members. The designated university’s associated student organization selects three nominees through a majority vote of its governing body. The Governor considers the three nominees when appointing the student members. Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE 1 • Mandatory fees—These are fees charged to all students at one of the universities. A university may exclude specific students from paying mandatory fees, such as students who do not attend the university’s main campus. The universities must obtain ABOR approval before charging any mandatory fee. The universities have established several mandatory fees, including fees to support their information technology infrastructures, such as their wireless networks, health and recreation facilities and services, and athletics programs (see Appendix B, Table 8, pages b-1 through b-4, for the descriptions and annual dollar amounts of these mandatory fees).2 Collectively, in fiscal year 2016, ASU, NAU, and UA charged 23 mandatory fees and collected approximately $115 million in mandatory fee revenues (see Table 1, page 3, for the total number of mandatory fees each university charged and the revenue each university collected from these fees in fiscal year 2016). • Differential tuition and program fees—These are fees charged to students based on their degree program, such as for students enrolled in a business degree or honors program. These fees are intended to benefit students in these programs and may be used to pay for faculty, facilities, technology, or other services the college, school, or degree program deems necessary. The universities must obtain ABOR approval before charging any differential tuition or program fee. The universities have each determined the circumstances in which they establish differential tuition versus those in which they establish program fees, but in practice, the two fee categories function similarly. ASU and UA charge both differential tuition and program fees. NAU charges only program fees. Collectively, in fiscal year 2016, ASU, NAU, and UA charged 183 differential tuition/program fees and collected approximately $148 million in differential tuition/program fee revenues (see Table 1 for the total number of differential tuition/program fees each university charged and the revenue each university collected from these fees in fiscal year 2016). • Class fees—These are fees charged to students who enroll in specific classes that have a need for or use special equipment, supplies, technology, personnel, or field trips. ABOR has defined the acceptable items, materials, and services for which the universities may charge class fees, and ABOR approval is required for class fees that are more than $100. However, consistent with its statutory authority, ABOR has delegated the authority to set class fees of $100 or less to the universities. The majority of the universities’ class fee amounts are $100 or less (see Table 2, page 3) and are internally approved by each university. In fiscal year 2016, class fee amounts ranged from $2 for field trips for the Water Science and the Environment class at UA, to $5,000 for the Regional Jet Operations Capstone class at ASU.3 Collectively, in fiscal year 2016, ASU, NAU, and UA charged fees for 5,446 classes and collected approximately $32.6 million in revenues from class fees (see Table 1 for the total number of class fees each university charged and the revenue each university collected from these fees in fiscal year 2016). In addition, ASU, NAU, and UA charge students other nonacademic fees that they have determined are not mandatory fees, differential tuition/program fees, or class fees, as defined by ABOR (see Finding 1, page 19, for more information about NAU’s Transportation fee and UA’s Student Support fee, and Other Pertinent Information, pages 27 through 28, for more information about ASU’s Resident Surcharge fee). See Table 1 for the revenue each university collected from these fees in fiscal year 2016.4 During the audit, in September 2017, the Arizona Attorney General’s Office filed a lawsuit against ABOR challenging its tuition-setting policies, including ABOR’s approval of the universities’ practices of requiring students to pay mandatory fees for items or services other than instruction, such as athletics, health and recreation, and technology services. The Arizona Constitution states that the universities shall be open to students of both sexes and the instruction furnished shall be as nearly free as possible. According to the lawsuit, ABOR has adopted 2 3 4 Although the universities charge student tuition and fees on a per-semester basis, the annual dollar amounts presented in Appendix B represent the total fee amounts charged for the fall 2017 and spring 2018 semesters. According to ASU’s website, students in the professional flight program have access to flight training, including the use of flight simulators and other facilities, as part of their degree programs. ABOR’s policies do not prohibit the universities from charging other administrative service fees and charges, such as service fees for credit card payments and late registration charges. ABOR does not require approval for these categories of fees, and they were not included in the scope of this audit. Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE 2 Table 1 In fiscal year 2016, each university charged a combination of mandatory fees, differential tuition/program fees, class fees, and other nonacademic fees that generated approximately $310 million in fee revenues (Unaudited) Mandatory fees Differential tuition/ program fees1 Class fees Other nonacademic fees2 Total fees and revenues 1 2 State’s universities Fee Number revenue of fees collected 23 $114.8M ASU Number of fees 8 Fee revenue collected $ 53.8M NAU Number of fees 7 Fee revenue collected $19.3M UA Number of fees 8 183 147.7 92 104.1 22 5.8 69 5,446 32.6 3,111 21.2 1,154 5.4 1,181 3 15.3 1 13.7 1 1.4 1 5,655 $310.4M 3,212 $192.8M 1,184 $31.9M Fee revenue collected $41.7M 37.8 6 0.2 1,259 $85.7M NAU charges only program fees. Other nonacademic fees do not include administrative service fees and charges, such as service fees for credit card payments and late registration charges. Source: Auditor General staff analysis of ASU’s, NAU’s, and UA’s fiscal year 2016 lists of fees charged to students and general ledgers. tuition-setting policies that allow the universities to base tuition on factors other than the cost of furnishing instruction. As of December 2017, ABOR had filed three motions seeking to dismiss the lawsuit. Specifically, the first motion argues that the Arizona Attorney General does not have the statutory authority to bring the lawsuit, the second motion argues that the Arizona Supreme Court has already decided that the constitutional requirement that instruction furnished shall be as nearly as free as possible is a political question and is therefore not subject to trial in a court of law, and the third motion argues that ABOR is entitled to legislative immunity from suit regarding its tuition and fee-setting decisions. See State of Arizona, ex rel. Mark Brnovich, Attorney General, v. Arizona Board of Regents, CV2017-012115 (Arizona Superior Court, Maricopa County). Table 2 In fiscal year 2016, class fees ranged from $2 to $5,000, but the most common fee amount was $50 and the majority of fees were $100 or less (Unaudited) ASU Most common class fee amount $50 Range of class fee amounts $3 - $5,000 Percentage of class fees $100 or less4 1 2 3 4 NAU 97% UA $50 1 $5 - $1,100 $50 2 $2 - $4,8003 95% 81% ASU charged the $3 class fee for its Hike, Walk, Jog for Health and Fun Physical Activity class and the $5,000 fee for its Regional Jet Operations Capstone class. NAU charged $5 class fees for several classes. The $1,100 class fee was charged for its Advanced Geologic Field Methods class. UA charged the $2 class fee for field trips for its Water Science and the Environment class and the $4,800 fee for international travel for its Global Business Experience class. ABOR approval is not required for class fees that are $100 or less. Source: Auditor General staff analysis of ASU’s, NAU’s, and UA’s fiscal year 2016 lists of fees charged to students. Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE 3 Revenues and expenses ASU, NAU, and UA receive revenue from the student tuition and fees they charge. The universities also receive revenue from other sources, such as State General Fund appropriations, government grants and contracts, and private gifts, grants, and contracts. The total revenue that the universities receive has increased since fiscal year 2007, and the composition of that revenue has changed. For fiscal year 2017, the majority of the universities’ expenses were for education and general purposes. Universities receive revenue from student tuition and fees—As shown in Table 3 on page 5, in fiscal years 2016 and 2017, the universities received approximately $2 billion in revenue from student tuition and fees. As shown previously in Table 1 (see page 3), ASU, NAU, and UA collected approximately $310.4 million from 5,655 mandatory fees, differential tuition, program fees, class fees, and other nonacademic fees charged to students in fiscal year 2016. The number of fees a student must pay depends on his/her program of study. Specifically, while all students must pay mandatory fees, not every student will pay differential tuition/program fees or class fees. As previously mentioned, differential tuition/program fees are charged only to students in certain degree programs. For example, for the fall 2017 semester, business students at ASU, NAU, and UA were charged $344, $511, and $513, respectively, for mandatory fees and were also charged differential tuition and/or program fees (see Table 4, page 6, for an example of the tuition and fees business students at each university were charged in the fall 2017 semester).5 In addition, because not all classes have fees, whether a student will be charged a class fee depends on the class the student is taking. Fees are covered by a student’s financial aid in some cases. Specifically, although students are charged tuition and fees, a 2011 Office of the Auditor General report found that the average amount of tuition and mandatory fees that resident undergraduate students actually pay is reduced substantially by financial aid.6,7 All three universities reported that they consider mandatory fees as part of a student’s education costs when determining the amount of financial aid to award a student. ASU and NAU reported that they also consider the differential tuition and/or program fees a student will have to pay, and UA reported that it may consider such fees if a student documents that their educational expenses exceed UA’s estimated standard cost of attendance.8 Finally, ASU, NAU, and UA reported that class fees may be taken into account when awarding financial aid under certain circumstances, such as upon the request of the student. Universities also receive revenue from other sources—In addition to the revenue received from student tuition and fees, ASU, NAU, and UA also receive revenue from other sources, such as State General Fund appropriations, government grants and contracts, and private gifts, grants, and contracts. As shown in Table 3 on page 5, during fiscal year 2017, the universities received approximately $5.1 billion in total revenue; approximately $875 million was received from government grants and contracts and approximately $688 million was received from State General Fund appropriations. However, some of these revenues are not available for educational use, such as certain revenues from government grants and contracts. Universities’ revenue has been increasing and revenue composition has changed—The total revenue the universities have received, student enrollment, and tuition and fees charged have increased since fiscal year 2007. Specifically, between fiscal years 2007 and 2017, the universities’ total revenues from all sources 5 6 7 8 The fee amounts presented in Table 4 do not match the total mandatory fee amounts presented in Table 8 (see page b-3) because Table 8 presents the annual fee amounts charged to students as opposed to the fall 2017 semester mandatory fee amounts. In addition, UA has implemented a tuition guarantee program whereby mandatory fee increases are not applicable to continuing students. See Office of the Auditor General Report No. 11-11, A Questions-and-Answers document on the Arizona Board of Regents—Tuition Setting for Arizona Universities. A.R.S. §15-1642 authorizes ABOR to establish an Arizona Financial Aid Trust Fund that provides need-based financial aid to students. Statute permits ABOR to charge a student fee to deposit into the Arizona Financial Aid Trust Fund and each university charges all students a mandatory Arizona Financial Aid Trust fee. In addition, ABOR requires that 14 percent of the revenue collected for all differential tuition/program fees be set aside to provide need-based financial aid to students. Cost of attendance is the estimated total costs a student will incur each year including tuition, fees, room and board, and other expenses. Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE 4 Table 3 Schedule of revenue sources and expenses for the State’s universities Fiscal years 2015 through 2017 (In thousands) Revenue sources Student tuition and fees1 Government grants and contracts State General Fund appropriations2 Private gifts, grants, and contracts Sales and services3 State share of sales taxes4 Other5 Total revenue sources Expenses Education and general: Instruction Research Academic support Institutional support Scholarships and fellowships Operation and maintenance of plant Student services Public service Total educational and general Auxiliary enterprises3 Depreciation Interest on debt Other Total expenses Excess of revenues over expenses 1 2 3 4 5 2015 2016 2017 $1,791,173 828,390 761,274 501,863 522,459 64,757 213,170 4,683,086 $1,994,141 846,928 652,388 626,526 535,787 69,927 134,527 4,860,224 $2,154,408 874,626 688,239 573,222 566,036 72,696 200,483 5,129,710 1,270,777 692,197 548,218 345,101 222,901 215,025 196,013 141,441 3,631,673 348,040 274,610 122,444 9,814 4,386,581 $ 296,505 1,379,112 682,319 650,426 337,120 236,095 222,662 217,885 143,574 3,869,193 349,820 279,800 136,907 16,039 4,651,759 $ 208,465 1,446,347 700,883 650,260 357,649 277,298 235,384 233,645 153,465 4,054,931 360,400 297,969 148,532 7,610 4,869,442 $ 260,268 Reported student tuition and fee amounts as revenue sources were reduced for scholarship allowances. This means the tuition and fees the universities charged to students for the full cost of services provided were reduced by certain student grants or scholarships awarded to some of those students and used to pay for some or all of their tuition and fees. The deducted grants or scholarships include federal financial aid awarded to students. State General Fund appropriations includes appropriations the universities received for the Arizona Financial Aid Trust Fund and capital debt service on research infrastructure projects. The Arizona Financial Aid Trust Fund and research infrastructure revenues are not available for general education use. Sales and services revenue includes charges for goods or services provided to students, faculty, staff, or the public. The revenues collected were for self-supporting activities and should therefore pay for all the costs of providing the goods or services. For example, amounts collected for food services and residence halls are accounted for as sales and services revenue. The auxiliary enterprises expenses generally include the costs for providing these goods and services. According to ABOR’s website, the state share of sales tax revenue is the universities’ portion of Education 2000 (Proposition 301) sales tax monies that help pay for technology and research initiatives. ABOR administers these monies and awards them to the universities based on each university’s funding requests for specific initiatives. Other revenue includes commitments, conveyances, grants, and private gifts restricted for capital purposes, and additions to permanent endowments. Source: Auditor General staff analysis of ASU’s, NAU’s, and UA’s Comprehensive Annual Financial Report for the years ended June 30, 2015 through 2017, and other information provided by ASU and UA. Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE 5 Table 4 Example full-time resident undergraduate business students’ tuition bills Fall 2017 ASU Tuition Resident Surcharge fee Mandatory fees Financial Aid Trust fee Health and Wellness fee Recreation fee Student Athletics fee Student Program fee Student Services Facility fee Technology fee Differential tuition/program fees Business differential tuition Business program facility fee Class fees Total NAU Tuition Mandatory fees Green fee ASNAU fee Student Activity fee Financial Aid Trust fee Information Technology fee Health and Recreation fee Differential tuition/program fees Business program fee Class fees Other fee—Transportation fee1 Total UA Tuition Mandatory fees2 Financial Aid Trust fee Health and Recreation fee Information Technology/Library fee Recreation Center Bond fee Recreation Center Program fee Student Media fee Student Services fee Wildcat Events Board fee Differential tuition/program fees Business differential tuition Class fees Total 1 2 $4,917 135 49 40 25 75 30 75 50 400 125 100 $6,021 $4,731 5 23 25 40 168 250 290 75 75 $5,682 $4,976 48 150 240 25 4 3 40 3 525 50 $6,064 Fee charged to Flagstaff campus students who do not purchase a parking pass. These rates do not reflect current charges for incoming students because UA has implemented a tuition guarantee program. This student was also not charged the Freshman fee or the Student Support fee because those fees are charged only to freshmen and incoming students. Source: Auditor General staff analysis of one student bill from each university. Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE 6 increased from approximately $3.1 billion to approximately $5.1 billion (see Figure 1, page 8). In addition, during this period, the universities’ total FTSE increased from approximately 110,000 in fiscal year 2007 to approximately 165,000 in fiscal year 2017, an increase of nearly 50 percent. Further, the universities increased charges for tuition and mandatory fees during this time period. For example, between fiscal years 2007 and 2017, the universities increased charges for tuition and mandatory fees for incoming main campus resident undergraduate students, as follows: • ASU—$4,688 in fiscal year 2007 to $10,640 in fiscal year 2017; • NAU—$4,546 in fiscal year 2007 to $10,764 in fiscal year 2017;9 and • UA—$4,754 in fiscal year 2007 to $11,769 in fiscal year 2017.10 In addition, between fiscal years 2007 and 2017, the composition of the universities’ revenues changed. For example, as shown in Figure 1 (see page 8), student tuition and fees comprised nearly twice as much of the universities’ total revenues in fiscal year 2017, as compared to fiscal year 2007. In contrast, State General Fund appropriations comprised approximately 31 percent of the universities’ total revenues in fiscal year 2007, as compared to approximately 13 percent of their total revenues in fiscal year 2017. For information about how each university’s composition of revenues changed between fiscal years 2007 and 2017, see Appendix C, pages c-3 through c-7. Majority of universities’ expenses for education and general expenses—In fiscal year 2017, the universities had total expenses of approximately $4.9 billion, with education and general expenses, including instruction and research activities, accounting for approximately $4 billion of that total. Approximately 66 percent of the universities’ education and general expenses were for payroll and related benefits. For information about each university’s revenues and expenses, see Appendix C, pages c-2 through c-6. 9 In fiscal year 2009, NAU implemented a pledge program, which guarantees incoming students a constant tuition rate for four years. The fiscal year 2017 amount represents the 2017 pledge rate for incoming students. 10 In fiscal year 2015, UA implemented a tuition guarantee program, which guarantees incoming students a constant tuition and mandatory fee rate for four years. The fiscal year 2017 amount represents the 2017 tuition guarantee rate for incoming students. Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE 7 Figure 1 State’s universities’ revenues by source Fiscal years 2007 and 2017 (In millions) Fiscal year 2007 State share of sales tax $79.2M 2.5% Other $180.8M 5.8% Student tuition and fees $702.4M 22.6% Sales and services $370.8M 11.9% Private gifts, grants, and contracts $197.6M 6.4% Total revenue: $3,110.3M Government grants and contracts $603.7M 19.4% Fiscal year 20171 State General Fund appropriations $975.8M 31.4% State share of sales tax Other $72.7M $200.5M 1.4% 3.9% Sales and services $566.0M 11.0% Total revenue: $5,129.7M Student tuition and fees $2,154.4M 42.0% Private gifts, grants, and contracts $573.2M 11.2% State General Fund appropriations $688.2M 13.4% Government grants and contracts $874.7M 17.1% 1 See footnotes from Table 3 on page 5. Source: Auditor General staff analysis of ASU’s, NAU’s, and UA’s Comprehensive Annual Financial Report for the years ended June 30, 2016 and 2017, ASU’s Comprehensive Annual Financial Report for the year ended June 30, 2007, and other information provided by ASU and UA. Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE 8 FINDING 1 ABOR and universities have established some feesetting processes consistent with best practices, but should further enhance their processes The Arizona Board of Regents (ABOR) and the State’s universities—Arizona State University (ASU), Northern Arizona University (NAU), and the University of Arizona (UA)—have established some fee-setting processes that are consistent with best practices but should enhance their processes. ASU, NAU, and UA charge hundreds of student fees annually to pay for various services intended to benefit students (see textbox for the ABORestablished categories of student fees). ABOR and the universities have established some fee-setting processes that generally align with best practices recommended ABOR-established student fee categories by fee-setting standards and guidelines to help promote transparency and accountability for fees. • Mandatory fees—Charged to all students at the Additionally, UA has established a process to help university, unless specifically excluded. These fees ensure class fee revenues are spent for approved pay for general services and benefits available to purposes and should continue to use this process, all students who pay the fees, such as information ASU has implemented a procedure that should technology, health and recreation, and athletics. allow it to track revenues for class fees deposited • Differential tuition/program fees—Charged to into combined accounts, and NAU should establish students based on their degree program, such as similar written processes. Further, all three universities students enrolled in business or honors programs. should address instances of noncompliance with These fees are intended to benefit students in ABOR policies and guidance or their own fee-setting these programs and may be used to pay for faculty, policies and procedures in the cases auditors facilities, technology, or other services the college, identified. Finally, ABOR and the universities should school, or degree program deems necessary. enhance their fee-setting policies, procedures, • Class fees—Charged to students for specific and guidance to further align them with fee-setting classes that use special equipment, supplies, or standards and guidelines. technology, and/or require additional personnel or field trips. Universities charge hundreds of fees to pay for various student services Source: Auditor General staff analysis of ABOR’s fee-setting policies, guidance, and meeting materials. ASU, NAU, and UA charge hundreds of student fees annually in addition to tuition to pay for various services that are intended to benefit students.11 According to fee-setting standards and guidelines, when government entities provide services that benefit the general public collectively, these entities may choose to charge taxes or other charges to all members of the general public to pay for these services.12 As such, and similar to other 11 Although the universities charge student tuition and fees on a per-semester basis, the annual dollar amounts presented in this finding represent the total fee amounts charged for the fall and spring semesters in the applicable fiscal year. 12 Auditors reviewed fee-setting standards and guidelines from the Arizona State Agency Fee Commission, the Government Finance Officers Association, the Mississippi Joint Legislative Committee on Performance Evaluation and Expenditure Review, the U.S. Government Accountability Office, and the U.S. Office of Management and Budget. Auditors also reviewed information about public colleges’ and universities’ tuition and fee-setting policies from the State Higher Education Executive Officers Association. See Appendix E, page e-1, for specific citations. Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE 9 universities, ASU, NAU, and UA charge tuition and mandatory fees to all students that are intended to pay for university operations and for services available to all students (see Appendix D, page d-1, for information about the State’s universities and select other universities’ tuition and mandatory fees). For example, all three universities have established a mandatory fee to pay for their information technology infrastructures, such as their wireless networks. Conversely, fee-setting standards and guidelines indicate that if a service benefits particular individuals or groups, or if some individuals or groups use specific services above and beyond what is normally provided to the general public, government entities may choose to charge fees to these individuals and groups to pay for these services. As such, and similar to other universities, ASU, NAU, and UA have established differential tuition/program fees and class fees for students enrolled in specific degree programs and classes that are intended to pay for specific services and/or benefits provided by those programs and classes. For example, all three universities have established a differential tuition and/or program fee for business students. In addition, as mentioned in the Introduction (see page 2), in fiscal year 2016, class fee amounts ranged from $2 for field trips for the Water Science and the Environment class at UA, to $5,000 for the Regional Jet Operations Capstone class at ASU. ABOR and the universities have established some fee-setting processes consistent with best practices ABOR and the universities have established some fee-setting processes that generally align with fee-setting standards and guidelines. Specifically, as mentioned in the Introduction (see page 1), ABOR has statutory authority to set university tuition and fees and has established some fee-setting policies and guidance that the universities must follow when establishing new student fees or increasing existing fees, and ABOR’s policies and guidance align with fee-setting standards and guidelines in several areas. In addition, each of the universities has established fee-setting processes, including developing some written policies, procedures, and other guidance for those processes, consistent with fee-setting standards and guidelines. ABOR has established some policies and guidance for university fee-setting consistent with fee-setting standards and guidelines—ABOR has established fee-setting policies and guidance that the universities must follow when establishing new student fees or increasing existing fees. These policies and guidance outline who must approve the fee before the universities can charge the fee to students and what steps the universities must take before a fee can be approved. For example, ABOR requires the universities to obtain its approval for all mandatory fees, differential tuition/program fees, and all class fees that are more than $100 before the universities may charge these fees to students. Further, ABOR requires the universities to submit fee proposals that include specific information for its review when proposing to establish any of these fees. For differential tuition/program fees and class fees that are more than $100, ABOR policies and guidance require these proposals to include several items, such as the university’s rationale for a new fee and how it plans to use the revenues the fee generates. ABOR policy permits the universities to establish class fees that are $100 or less without ABOR approval (see pages 11 through 13 for more information on the universities’ processes for setting class fees). ABOR has established fee-setting policies and guidance that are generally consistent with fee-setting standards and guidelines. These standards and guidelines recommend a fee-setting approach that includes several best practices entities should follow when setting fees to promote transparency and accountability, such as defining a clear purpose for the fee, involving stakeholders in the fee-setting process, and regularly reviewing fees once they are established (see textbox, page 11, for more information on these fee-setting practices). Additionally, fee-setting standards and guidelines recommend that entities adopt formal fee-setting policies that include elements such as what factors the entity will take into account when setting the fee rate. Finally, other large public universities in other states that auditors contacted—Colorado State University; the University of California, Los Angeles; the University of Texas at Austin; and the University of Utah—have established fee-setting policies and guidelines that incorporate some of these fee-setting best practices and staff at three of these universities reported that their fee-setting policies and guidelines are intended to promote transparency and accountability. ABOR fee-setting policies and guidance align with best practices outlined in fee-setting standards and guidelines in the following areas: Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE 10 • Mandatory fees—ABOR policies and guidance identify the beneficiaries of the services these fees will provide—all students. In addition, ABOR policies and guidance require the universities to involve stakeholders—students, in the case of the universities—in the process of setting mandatory fees by requiring the universities to notify and consult with elected student representatives and consider a general vote or other organized opinion-gathering from students likely to be charged the fee. Fee-setting practices—Fee-setting standards and guidelines recommend that decision makers should establish written policies, procedures, or other guidance for: • Establishing a clearly defined purpose for each fee; • Considering the costs of the services that will be provided when setting the fee rate; • Identifying who will benefit from the services the fee will provide; • Ensuring that those who pay the fee will receive the benefits of the services the fee will provide; • Assessing the potential impact of the fee on those individuals paying the fee, including low- and middle-income individuals; • Involving stakeholders—the beneficiaries or users of the fee—in the fee-setting process; and • Regularly reviewing revenues and costs, and determining if the fee is still necessary, the rate still appropriate, and if the revenue has been spent for approved purposes. Review processes should include communicating results to stakeholders and providing opportunities for stakeholder input. • Differential tuition/program fees—ABOR policies and guidance identify the beneficiaries of the services these fees will provide—all students in a particular degree program—and require the universities to notify and consult with elected student representatives and consider a general vote or other organized opinion-gathering from students likely to be charged the fee when setting differential tuition/program fees. ABOR also requires the universities to consider whether the cost of instruction for the degree program is markedly higher than the university’s average Source: Auditor General staff analysis of fee-setting standards and expenses for other programs or whether market guidelines from the Arizona State Agency Fee Commission, the conditions warrant the additional fee. Further, Government Finance Officers Association, the Mississippi Joint ABOR policies and guidance require the Legislative Committee on Performance Evaluation and Expenditure Review, the United States Government Accountability Office, and the universities to address the potential impact of United States Office of Management and Budget. the fee on low-income individuals by setting aside 14 percent of the revenue from each differential tuition/program fee for need-based financial aid. Finally, ABOR requires the universities to audit program fee expenses to ensure that fee revenues are used for ABOR-approved purposes.13 • Class fees—ABOR policies and guidance identify the beneficiaries of the services these fees will provide, all students in a particular class, require that class fees be established for a clearly defined purpose, and specify that class fees may only be charged to cover the cost of specific items or services outlined in ABOR’s class fee guidance. Universities have developed some additional fee-setting processes—The universities have also developed some fee-setting policies and processes that align with fee-setting standards and guidelines to guide their implementation of ABOR fee-setting policies and guidance. For example, all three universities have developed internal review and approval processes for establishing class fees that are $100 or less, which do not require ABOR approval, including requirements for developing fee proposals that specify the class fee’s purpose and/or how the universities will use the fee revenues. Additionally, the universities have developed other policies and procedures to guide their implementation of ABOR policies and guidance that incorporate additional feesetting best practices. Specifically: 13 ASU and UA last conducted internal audits of a sample of program fees in fiscal year 2013, and NAU last conducted an internal audit of all program fees in fiscal year 2013. In addition, although not specifically required by ABOR policy, NAU and UA conducted internal audits of a sample of class fees in fiscal year 2013 and fiscal year 2015, respectively. Further, according to ABOR Audit Committee meeting materials, ASU and NAU plan to conduct internal audits of class fees in fiscal year 2018, and UA plans to conduct an internal audit of class fees in fiscal year 2022. Additionally, in fiscal year 2012, UA conducted an internal audit of all mandatory fees, except for the Arizona Financial Aid Trust fee. Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE 11 • ASU—ASU has developed some written procedures for establishing mandatory fees, differential tuition/ program fees, and class fees. Specifically, for class fees that are $100 or less, ASU has developed policies and procedures that require staff in academic departments to submit an online class fee request form and budget that provides a clear purpose for the proposed class fee and that requires class fee rates to be based on the costs of the items or services the fee is intended to provide. As part of this process, ASU requires class fee proposals for fees with revenues that will be deposited into combined accounts with other fee revenues to indicate how the departments will provide assurance that the revenues will benefit the students who paid the fee (see pages 13 through 14 for more information on the universities depositing class fee revenues into combined accounts). ASU’s Office of the University Provost is responsible for reviewing and approving these requests. ASU requires the use of a similar online fee request form for academic departments to propose differential tuition/program fees. This form requires the review and consideration of information and/or several elements recommended by fee-setting standards and guidelines, such as information about the fee’s purpose and beneficiaries, as well as consultation with students regarding the proposed differential tuition/program fee. ASU has also implemented a review process for differential tuition/program fees that requires college deans to annually certify that fee revenues were used for approved purposes. Finally, ASU has developed a procedure for establishing mandatory fees that requires student consultation. For at least one mandatory fee, its Student Athletics fee, ASU worked with student government to develop a charter that outlines acceptable uses of this fee’s revenues and to establish an advisory board consisting of students, alumni, and ASU staff who conduct a review of this fee every 2 years to determine if the agreedupon criteria have been implemented (see page 16 for more information on ASU’s Student Athletics fee). • NAU—NAU has developed a guidelines document that outlines the permitted and prohibited uses of class fee revenues and defines the circumstances under which these fee revenues may be intentionally accrued for future use. NAU has also developed and implemented procedures for establishing class fees that are $100 or less, including requiring staff to submit an online form that includes the fee’s purpose. In addition, NAU has developed a sunset review process for reviewing and renewing class fees at least once every 3 years from the time they were established, modified, or last renewed. As part of this review process, NAU academic departments must determine if any information needs to be updated, such as the fee’s purpose or dollar amount, or if the fee should be discontinued. As of December 2017, NAU reported that it was in the process of completing its first sunset review of a portion of its class fees. Finally, NAU has made efforts to eliminate class fees that support resources shared by multiple classes, such as classroom computers and other technology, and instead has begun using mandatory fees to better ensure that only those who pay a fee receive the benefits from the fee. Specifically, in fall 2016, NAU increased its mandatory Information Technology fee from $216 to $336 annually for students taking 12 credit hours and began eliminating and/or reducing more than 387 individual class fees that were supporting information technology.14 • UA—UA reported implementing several changes to its fee-setting and review processes in response to internal audits of student fees conducted in 2013 and 2014, and it has established written policies and procedures that generally align with best practices for setting class fees and differential tuition/program fees. For example, UA has established a policy for its class fee review and approval process that requires staff to submit an online class fee proposal form that includes a budget that outlines itemized costs and per-student costs for the items or services to be provided. In addition, UA solicits student input as part of its class fee review and approval process through a University Fees Committee that includes student representatives and is responsible for reviewing all class fee proposals and making recommendations to UA administration on whether to approve the proposed fees. Further, UA has developed several other review processes for class fees and differential tuition/program fees. Specifically, UA has developed a process to review class fee accounts with year-end balances higher than 15 percent of annual fee revenues to help ensure that the fee is still necessary and set at an appropriate 14 Students enrolled in 12 credit hours pay the full annual rate of $336, whereas students enrolled in fewer than 12 credits pay a reduced rate depending on the number of credit hours in which they are enrolled. Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE 12 rate, and requires UA departments to annually provide information to central university administration on differential tuition/program fee revenue use. Finally, UA has processes for establishing mandatory fees that include practices recommended by fee-setting standards and guidelines, such as consulting with students when setting mandatory fees and establishing student advisory committees to provide input on how mandatory fee revenues should be spent. ASU, NAU, and UA should further ensure class fee revenues are used for approved purposes and address noncompliance with feesetting policies and procedures ASU, NAU, and UA should each take steps to further ensure that class fee revenues are used for approved purposes and address instances of noncompliance with ABOR policies and guidance or their own fee-setting policies and procedures. Auditors reviewed spending and university fee proposals for a sample of 56 student fees that the universities charged during fiscal year 2016—6 judgmentally selected mandatory fees, 6 judgmentally selected differential tuition/program fees, 14 randomly selected classes with fees from ASU, 14 randomly and judgmentally selected classes with fees from NAU, and 16 randomly selected classes with fees from UA—and found that all three universities deposited revenues from multiple class fees into combined accounts without otherwise separately accounting for individual fees’ revenues or spending in some cases.15 As a result, auditors could not determine if the fee revenues for 38 of the 44 sampled class fees reviewed were spent for approved purposes.16 However, UA reported that as of fiscal year 2017, it had established a process to help ensure class fee revenues are spent for approved purposes and should continue to implement this process; ASU has implemented a procedure that should allow it to track revenues for class fees deposited into combined accounts, which auditors will test during the 6-month followup; and NAU should establish written policies, procedures, or other guidance to help ensure that class fee revenues deposited into combined accounts are spent for approved purposes. In addition, although ABOR and the universities followed their established fee-setting processes in many cases auditors reviewed, ASU, NAU, and UA should take steps to address instances of noncompliance with ABOR policies and guidance or their own fee-setting policies and procedures that auditors identified. Appropriate spending of class fee revenues could not be determined for most class fees reviewed—For 6 of the 44 sampled class fees reviewed, auditors were able to determine if fee revenues were spent for approved purposes (for auditors’ findings related to the review of these fees, see page 22 for the 3 ASU fees and pages 14 through 15 for the 3 UA fees). However, auditors could not determine if revenues were spent for approved purposes for 38 of the class fees reviewed.17 Specifically, as of fiscal year 2016, all three universities deposited revenues from multiple class fees into combined accounts without otherwise separately accounting for individual fees’ revenues or spending in some cases, such as for fees with relatively small revenues or when revenues from multiple fees were intended to be spent for shared resources. The universities deposited the class fee revenues for 38 of the 44 sampled class fees auditors reviewed into combined accounts with other class fee revenues but did not separately track the revenues collected or the spending for the 38 sampled class fees. As a result, although auditors reviewed the expenses for the accounts, they could not determine whether revenues from a specific class fee were spent for approved purposes. For example, all three universities deposited 15 The total student fees population for all three universities was 5,655 in fiscal year 2016. For ASU, auditors sampled 2 of the 8 mandatory fees, 1 of the 10 differential tuitions, 1 of the 82 program fees, and 14 of the 3,123 classes with fees. For NAU, auditors sampled 2 of the 7 mandatory fees, 2 of the 22 program fees, and 14 of the 928 classes with fees. NAU does not charge differential tuition. For UA, auditors sampled 2 of the 8 mandatory fees, 1 of the 7 differential tuitions, 1 of the 62 program fees, and 16 of the 1,096 classes with fees. See Appendix A, pages a-1 through a-12, for a list of the fees auditors reviewed, these fees’ approved purposes, their year-end account balances, and how fee revenues for combined class fee accounts were spent and Appendix E, pages e-1 through e-2, for auditors’ methodology in selecting the sample of fees, including information about the differences in the class fee sample size between the universities and information about the differences between the total classes with fees reported in the Introduction and the total classes with fees from which the sample was drawn. 16 The 38 class fees include 11 of the 14 randomly selected ASU class fees. ASU informed auditors after test work was completed that it has implemented a procedure that allows academic departments to deposit class fee revenues intended to be spent for shared resources into combined accounts and that it is able to account for spending from these combined accounts. Auditors will test ASU’s procedure during the 6-month followup for this report to determine whether this procedure is working as intended. See page 14 for additional information about this procedure. 17 See footnote 16. Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE 13 revenues from more than 130 class fees into a single account, but did not separately track the individual class fees’ revenues and expenses. Combining fee revenues into single accounts may be an appropriate way for entities to manage the administrative burden of accounting for multiple class fee revenues and expenses, and UA and ASU have established procedures that allow class fee revenues to be deposited into combined accounts under certain circumstances. Specifically, fee-setting standards and guidelines indicate that entities should retain sufficient records to demonstrate how fee revenues were used while balancing the need for retaining sufficient records with the administrative burden of doing so. Subsequent to the fiscal year auditors reviewed, UA reported that as of fiscal year 2017, it had implemented a new process to better account for and review class fee expenses. According to UA, this process involves creating separate accounts for all class fees with annual revenues over $5,000, and using combined accounts with sub-accounts and project codes for class fees that generate less than $5,000 annually. These changes should help UA to track revenues and expenses for individual classes regardless of whether the revenues are deposited into individual accounts or combined accounts. Therefore, UA should continue to implement its process to better account for and review class fee revenues and expenses by creating separate accounts for all class fees with annual revenues over $5,000, and using combined accounts with sub-accounts and project codes for class fees that generate less than $5,000 annually. Although ASU has implemented a procedure that allows academic departments to deposit class fee revenues into combined accounts, auditors did not test whether ASU had implemented the procedure as designed because ASU informed auditors about this procedure after test work was completed. Specifically, ASU requires class fee proposals for fees with revenues that will be deposited into combined accounts to provide a justification for doing so and to explain how students in the classes with fee revenues deposited into combined accounts will benefit from the combined revenues. According to ASU, this procedure was designed specifically for instances when class fee revenues are intended to be spent for shared resources, and therefore, it has determined that it does not need to separately track or account for individual fees’ revenues and expenses. If properly implemented, this procedure should allow ASU to track revenues for class fees deposited into combined accounts. Auditors will review ASU’s procedure during this report’s 6-month followup to determine whether it is working as intended to help ensure that class fee revenues deposited into combined accounts are spent for approved purposes. Finally, NAU has not established written policies, procedures, or other guidance to help ensure that class fee revenues deposited into combined accounts are spent for approved purposes and provide the expected benefits to the students who paid the fees. Therefore, NAU should develop and implement written policies, procedures, or other guidance to help ensure that class fee revenues deposited into combined accounts are spent for approved purposes. For example, similar to UA, NAU could consider creating separate accounts or using sub-accounts and project codes to track fee revenues and expenses for class fees. Alternatively, similar to ASU, NAU could consider implementing other procedures for revenues deposited into combined accounts to help ensure that these revenues are spent for approved purposes. ASU, NAU, and UA have not consistently followed established fee-setting policies, procedures, and guidance—Although the universities have followed established fee-setting policies and procedures in many cases, auditors identified some examples where the universities did not follow ABOR policies and guidance or their own internal policies and procedures. Specifically: • UA remitted a portion of class fee revenues to pay for central university administration, contrary to ABOR policy—Although UA requires its departments to remit a 1 percent service charge on all purchases made with class fee revenues to pay for a portion of institutional support or administrative costs, ABOR’s class fees policies and guidance do not include administrative costs as an approved use of class fee revenues. Fee-setting standards and guidelines indicate that administrative costs can be considered when setting fee rates, but that such costs should be included as part of the fee-setting process to provide a basis for determining the fee amount. However, for all 16 UA class fees auditors reviewed, the use of a percentage of class fee revenues for university administration was not included in these fees’ original proposals as approved by UA’s University Fees Committee and/or by ABOR. Instead, UA reported that it implemented the practice of remitting 1 percent of the purchases made using class fee revenues to central administration in response to budget cuts. Therefore, ABOR should determine if administrative costs are an allowable use of Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE 14 class fee revenues, and if it does so, it should revise its policies and guidance to authorize this use, including providing guidance on how the universities should calculate the portion of class fee revenues that will be used for administration. Further, if ABOR determines administrative costs are an allowable use of class fee revenues, UA should revise its class fee policies and procedures to indicate that class fee revenues will be spent on administrative costs to help ensure its process of setting class fees is transparent. • NAU did not obtain student input for one of the two program fees auditors reviewed—As previously mentioned, ABOR policy requires the universities to obtain student input for mandatory fees and differential tuition/program fees by notifying and consulting with elected student representatives and considering a general vote or other organized opinion-gathering from students likely to be charged the fee (see page 11). NAU reported that it has a process for obtaining student input for mandatory fees and program fees, but for one of the two NAU program fees auditors reviewed, NAU reported in its fee proposal to ABOR that it did not consult with students when establishing the fee because “the program does not yet exist,” and “it is not possible to consult students about the fee.” Although the program had yet to be established, NAU could have consulted with existing student government representatives at the time it established this fee, as ABOR policy requires. In addition, NAU has not documented its process for obtaining student input for mandatory fees and program fees.18 Written procedures or other guidance could help NAU better ensure that it obtains student input as required. Therefore, to help ensure it complies with ABOR’s requirement to obtain student input, NAU should develop and implement written procedures or other written guidance outlining its process for obtaining student input for mandatory fees and program fees. • ASU spent class fee revenues to support faculty research, which was not part of the fees’ approved purpose—In one instance, 3 of the 14 ASU class fees auditors reviewed were deposited into a combined account and ASU used fee revenues to pay for items or services that were not consistent with the fee’s approved use. Specifically, although ASU approved these fees for online criminal justice classes to pay online course assistants to build and maintain online courses, of the approximately $209,000 in online criminal justice class fee revenues spent in fiscal year 2016, ASU spent approximately $5,000 of this amount to pay for the salaries of at least 2 student workers, including one whose job duties included assisting with faculty research and another whose job duties included supporting in-person classes for which students did not pay fees.19 According to ASU, in November 2017, it corrected this error. ASU reported that academic departments, not ASU’s central university administration, are responsible for determining if class fee revenues were used for approved purposes. However, ASU has not developed written procedures or other guidance outlining how and when these reviews should be conducted. Written procedures or other guidance could help ASU better ensure that errors such as the error previously mentioned are discovered and corrected in a timely manner and that revenues are used for approved purposes. Therefore, ASU should develop and implement written procedures to direct academic departments’ reviews of class fee revenue spending to help ensure that fee revenues are used for approved purposes, including specifying the frequency of these reviews, defining central university administration’s oversight role and responsibilities for these reviews, and providing guidance on reviewing spending for all class fees to determine if expenses were for approved purposes, including reviewing class fees with revenues that are deposited into combined accounts to determine whether the justification for combining the accounts is consistent with the approved purposes of the individual fees and that fee revenues were spent for shared resources as outlined in the justification to combine fee revenues. For example, similar to its procedure for differential tuition/program fees, ASU’s Office of the University Provost could require academic departments to submit information to it on class fee spending, such as annual spending reports or the results of their internal reviews. Additionally, it could develop a process for Office of the University Provost or other central university administration staff to periodically audit or spot check academic departments’ reviews of class fee revenue spending. 18 NAU does not charge differential tuition. 19 Online ASU criminal justice classes charge a class fee between $25 and $100, with most fees being $25 (see Appendix A, page a-7, for more information). This fee is in addition to the $50 iCourse fee that ASU charges for most online classes taken by students who otherwise take classes on campus (see pages 19 through 20 for more information about iCourse fees). ASU charges a different tuition rate and different fees for classes taken by students enrolled in online-only programs. Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE 15 • ASU spent Student Athletics fee revenues for recruitment, which appears inconsistent with agreedupon fee use restrictions—In fiscal year 2016, ASU spent approximately $445,000 of Student Athletics fee revenues for recruiting-related expenses that, although consistent with the ABOR-approved purpose of the fee, appears inconsistent with fee uses agreed upon by ASU student government, university administration, and the athletics program. Specifically, ASU administrators and student government representatives collaborated to propose a mandatory Student Athletics fee, approved by ABOR in 2014, to enhance student support for athletics and reallocate tuition dollars away from athletics to provide additional services and resources for students. Although ABOR approved the fee for the broad purpose of “athletics,” consistent with ABOR’s fee-setting standards and guidelines, ASU’s student government, university administration, and athletics program agreed on a charter that defined the Student Athletics fee’s objective and outlined how fee revenues may be used. According to this charter, Student Athletics fee revenues may not be used for any salary or recruitment purposes. However, in fiscal year 2016, ASU spent approximately $445,000 of Student Athletics fee revenues for recruitment-related expenses, including car rentals, lodging, and airfare. According to an ASU official, these expenses were for student-athlete recruitment, and the university believes that these expenses were appropriate because the prohibition on using Student Athletics fee revenues for recruitment was intended to apply only to employee recruitment. Specifically, ASU reported that when the fee was established, university staff and student government held discussions and determined that student fee revenues could be used for recruiting student athletes. Yet, the charter does not explicitly state that expenses for recruiting student athletes are allowable. Further, ASU could not provide any documentation to support that these discussions occurred. According to the charter, an advisory board consisting of students, alumni, and ASU staff will conduct a review every 2 years to determine if the agreed-upon criteria have been implemented. ASU reported that the next such review is scheduled for spring 2018, and at that time the advisory board will review fee priorities and, if necessary, revise the charter. According to ASU, it will then update its procedures to reflect the agreement reached with the students, including revising any guidance on how fee revenues may be used. Therefore, ASU should take steps to ensure that this review process is completed, revise its Student Athletics fee procedures and guidance to reflect any changes to the charter, and implement these procedures and guidance consistent with the revised charter. ABOR and the universities should enhance their fee-setting processes to further align them with fee-setting standards and guidelines ABOR and the universities should enhance their fee-setting processes to further align them with fee-setting standards and guidelines and to help increase transparency and accountability for setting fees and using the associated revenues. Specifically, ABOR should enhance its fee-setting policies and guidance by including all best practices recommended by fee-setting standards and guidelines in its policies and guidance for mandatory fees, differential tuition/program fees, and class fees. Additionally, ABOR should determine whether all student fees charged by the universities require its review and approval. Further, ABOR and the universities should improve their processes for considering the cumulative impact of fees on students. Finally, ASU, NAU, and UA should each take specific steps to enhance their class fee-setting processes to further align them with fee-setting standards and guidelines. ABOR should enhance its fee-setting policies and guidance to further align with best practices—Although portions of ABOR’s fee-setting policies and guidance are consistent with fee-setting best practices in some areas, ABOR should further enhance its policies and guidance for all fee categories. As discussed previously, fee-setting standards and guidelines recommend a fee-setting approach that includes several practices entities should follow when setting fees to promote transparency and accountability (see textbox, page 11, for the practices decision makers should consider when setting fees). ABOR should enhance its fee-setting policies and guidance to further align them with best practices, as follows: Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE 16 • Require a clear purpose and consideration of costs when setting fees for all fee categories— ABOR policies and guidelines do not require the universities to clearly define a purpose for mandatory fees or differential tuition/program fees. Additionally, although ABOR’s fee-setting policies and guidance require that class fee rates be based on the costs of the specific equipment, supplies, technology, personnel, or field trips needed for the class, its policies and guidance do not similarly specify how mandatory fee rates should be calculated, such as whether fee rates should be based on the costs of the items or services to be provided. Further, although ABOR’s policies and guidelines for differential tuition/program fees require ABOR to review whether the instruction for the program requesting the fee requires markedly higher than university average expenses as compared to other programs, ABOR’s standard request forms for differential tuition/program fees require only broad, high-level information about proposed fees and do not require the universities to provide specific information about the costs of instruction or the items fee revenues would pay for to help ABOR members determine if these costs are markedly higher than average university expenses for other programs. Finally, although ABOR policy does not specifically prohibit the universities from spending mandatory fee and differential tuition/program fee revenues for administrative costs, they do not provide guidance on how these costs should be determined and under what circumstances spending fee revenues for administrative costs requires ABOR approval. As a result, auditors identified the following: ○○ ABOR approved broad fee purposes and proposed uses of differential tuition/program fee revenues, which has allowed universities broad discretion for spending these fees’ revenues— ABOR approved broad purposes and/or proposed uses of fee revenues for all six of the differential tuition/program fees auditors reviewed. Specifically, these fees’ approved purposes included “increasing initiatives related to students’ communication skills,” providing additional engagement activities, and funding existing “highly successful initiatives.” In addition, although the universities outlined their proposed uses of fee revenues in budgets submitted to ABOR, these budgets included broad categories, such as “strengthening student experiences,” “institutional and advising personnel,” and operating expenses. Because these fees have broad purposes and/or proposed uses, the universities have broad discretion for spending these fees’ revenues, even if the items may not have been consistent with ABOR’s understanding of the approved use. For example, although the universities spent more than half of the revenues from three of the six differential tuition/program fees auditors reviewed on faculty, staff, and student workers’ salaries and benefits, the universities also spent approximately $32,000, or less than 1 percent of total revenues, from these three fees on food, clothing, conference registrations, and travel. The universities reported that these expenses were appropriate and were consistent with at least one of the budget categories listed in the ABOR proposals, such as operating expenses. ○○ NAU spent approximately $26,500 of Green fee revenues on items that appeared unusual but may have been consistent with the broad, ABOR-approved purpose—ABOR approved NAU’s mandatory Green fee to “fund sustainable projects on campus.” However, absent further clarification or explanation of the ABOR-approved purpose, it is not clear whether all fiscal year 2016 expenses were consistent with this purpose. Specifically, of the approximately $147,300 in Green fee revenues spent in fiscal year 2016, approximately $26,500 was spent on items that appeared unusual, but may have been consistent with ABOR’s approved purpose. For example, the NAU Green Fund Committee, which is responsible for determining how Green fee revenues are spent and includes students, faculty, and staff, spent Green fee revenues on tablet computers for facility inspectors to “decrease the amount of paper used for their jobs,” manual treadmills for the campus recreation center, hats recognizing the grounds department for effective campus forest management, and an educational outreach campaign that included a boxed wine competition to “reduce the stigma that boxed wine is not as good as bottled wine and eventually reduce the amount of glass Flagstaff consumes.” ○○ ASU and UA remit a portion of mandatory fee and differential tuition/program fee revenues to support central university administration but ABOR did not consistently approve this spending— ASU and UA require university departments to remit a portion of some mandatory fee and differential tuition/program fee revenues to central university administration. Specifically, ASU policy requires university departments to remit 8.5 percent of expenses paid from all university accounts—including mandatory and differential tuition/program fee accounts—to pay for a portion of central administration Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE 17 costs, unless otherwise exempted. UA requires university departments to remit 15.13 percent of all differential tuition/program fee revenues to pay for a portion of the costs of central administration. Although ABOR policies and guidance do not specifically prohibit spending mandatory fee or differential tuition/ program fee revenues on central university administration, fee-setting standards and guidelines indicate that administrative costs should be calculated as part of the fee-setting process to provide a basis for determining the fee amount. However, in fiscal year 2016, ASU remitted revenues from one of the two differential tuition/program fees auditors reviewed to pay for a portion of central university administration, even though it did not include this use of fee revenues as part of the fee proposal it submitted to ABOR for review and approval. Conversely, for both UA differential tuition/program fees auditors reviewed, UA received ABOR approval for using these fees’ revenues to support university administration in fiscal year 2016. Therefore, to help ensure that all the fees it approves are set consistently and fairly and that revenues are spent on approved items and services, ABOR should make the following revisions to its fee-setting policies and guidance for mandatory fees and differential tuition/program fees by requiring the universities to: ○○ Develop clearly defined purposes for proposed fees, such as by outlining the benefits that those who pay the fee should expect to obtain, or providing information about the specific items for which the fee is intended to pay; ○○ Consider the appropriateness and costs of the items or services for which each fee is intended to pay, including whether the proposed fee rate will cover all or a portion of these costs, and specifying the cost information that should be provided to ABOR for review and approval; and ○○ Include administrative costs in fee proposals, including outlining under what circumstances spending fee revenues for administrative costs will require ABOR approval and specifying the administrative cost information that should be submitted to ABOR for review and approval. • Clarify expectations for obtaining and reporting student input for all fee categories—As previously mentioned, ABOR policies and guidelines require the universities to consult with students when setting mandatory fees and differential tuition/program fees. However, for mandatory fees, ABOR’s policies do not require the universities to include information about the student input that was obtained in the fee proposals submitted for ABOR’s review and approval. Further, ABOR does not require the universities to obtain student input for class fees. Finally, although ABOR holds at least one public hearing as an opportunity for students and members of the public to comment on any proposed increase in tuition and fees, the tuition and fee proposals prepared by each university each spring for ABOR do not include information about new or increases to class fees that are $100 or less. As a result, students and members of the public may not have an opportunity to provide input on class fees that are $100 or less. As reported in Table 2 (see page 3), between 81 and 97 percent of the class fees charged by the universities are $100 or less. In fiscal year 2016, the revenue generated from all class fees from all three universities was approximately 11 percent of the universities’ total revenue generated from student fees. Therefore, to increase transparency and help ensure that stakeholders—primarily students—have an opportunity to comment on new fees and increases to existing fees, ABOR should revise its fee-setting policies and guidance to clarify its expectations for what information should be submitted to ABOR about student input that has been obtained for fees, and determine if there are additional opportunities that can be provided for obtaining student input on all student fees charged by the universities, including class fees. • Require a regular review of universities’ fee-setting processes—Although ABOR’s fee-setting policies and guidance require each university to audit program fee spending to ensure that program fee revenues were used for ABOR-approved purposes, its policies and guidance do not specify the information that should be audited or how often the universities should conduct these audits and do not include similar requirements for mandatory fees, differential tuition, or class fees. Additionally, although ABOR policy requires the universities to set aside 14 percent of differential tuition/program fee revenue to provide financial aid for students in these programs, ABOR’s policies and guidance do not specifically require the universities to audit this financial aid Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE 18 set-aside. Further, ABOR policy does not require the universities to provide it with information to demonstrate that the differential tuition/program fee financial aid set-aside was awarded only to students in the program for which the fee was charged. Finally, ABOR policy does not require the universities to review any of their student fees to determine if the fee is still necessary and the rate is still appropriate. According to ABOR meeting agendas and minutes, in February and September 2014, board members discussed conducting a review of university fee-setting practices that would include streamlining fees, regularly reviewing fees to determine if they are still necessary, and ensuring temporary fees are eliminated as planned. However, ABOR did not complete this review of the universities’ fee-setting practices and ABOR does not regularly review existing student fees unless a university proposes a change to the fee, such as an increase to the fee rate. As of November 2017, ABOR reported that it plans to establish a fee subcommittee and university workgroup to review ABOR and the universities’ fee-setting policies and processes. Possible fee reforms discussed include establishing a fee sunset review process, increasing transparency of the universities’ fee-setting processes, and developing a summary-guide for students detailing the fee-setting process. As part of its review of existing fee-setting processes, ABOR should revise its fee-setting policies and guidance to require a periodic review of the universities’ fee-setting processes to help ensure revenues are spent for approved purposes and that the fees are still necessary and set at appropriate rates. For example, similar to its requirement for program fees, ABOR could require each university to regularly audit spending for all ABOR-defined fee categories. These audits or reviews could include reviewing spending for a portion of class fees, identifying fees with large amounts of unspent revenues, which could indicate the fee is no longer necessary or set too high, and reviewing university records to determine if the universities have complied with ABOR and university fee-setting policies and guidance. ABOR should determine whether all student fees charged by the universities require its review and approval—Some of the universities have charged student fees that are similar to mandatory fees without obtaining ABOR approval. Specifically, NAU and UA did not request ABOR review and approval for two student fees auditors reviewed because they determined that these fees did not fall within one of the fee categories requiring ABOR review (see textbox for a description of these fees). However, these two fees are similar to mandatory fees charged by NAU and UA and appear to meet ABOR’s definition of a mandatory fee—a fee charged to all students unless specifically excluded by the universities. Further, although these fees appear on students’ bills and students may be able to find some information about these fees from NAU’s and UA’s websites, these fees are not included in the universities’ lists of mandatory fees or the breakdown of tuition and fees that students and parents can use to estimate the costs of attending NAU or UA. As a result, students and parents may not know about these fees until they appear on students’ bills. In addition, both ASU and UA have established a standard $50 iCourse fee for all online classes taken by on-campus students. Although ASU and UA approved their iCourse fees through their internal class fee approval processes, these fees are not Arizona Auditor General Other required fees ABOR did not approve NAU Transportation fee—NAU charges a $150 annual transportation fee to Flagstaff campus students to support a portion of the operating costs to provide shuttle services and pay for other transportationrelated expenses on the Flagstaff campus.1 NAU reported that it did not request ABOR approval for this fee because the fee is charged only to students who attend the Flagstaff campus and who do not purchase a parking permit. However, all students are required to pay this fee unless they are specifically excluded. UA Student Support fee—UA charges a $100 one-time fee to all incoming domestic Main Campus students to support career services and other student support programs. UA reported that it did not request ABOR approval for this fee because it is a one-time fee rather than an ongoing fee charged during every semester of a student’s enrollment and is not more than $100.2 However, UA has submitted other fees for ABOR approval that also fit those criteria, such as its $10 per semester Freshman fee. 1 2 This amount represents the transportation fee rate for fiscal year 2018. UA reported that it approved this fee using its internal process for setting class fees. Source: Auditor General staff analysis of ABOR and university records and interviews with university staff. Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE 19 consistent with ABOR’s definition of class fees. Specifically, ABOR defines class fees as additional charges for specific classes that have demonstrably higher costs of delivering instruction overall because of the need for special equipment, supplies, technology, personnel, or field trips. However, both ASU’s and UA’s iCourse fees are not intended to provide materials or services to students enrolled in specific classes. Rather, ASU reported that iCourse fee revenues are intended to provide for the additional technology and support required to deliver the course in an online manner. In addition, budget documents for UA’s iCourse fee indicate that UA set the fee rate to support the future expansion of its online degree programs, even though ABOR policy requires the universities to base class fees on the costs of the items or services to be purchased for a specific class. Because UA set the iCourse fee rate higher than needed to pay for its costs, in fiscal year 2016, UA spent only $1.2 million of the $2.3 million in revenues generated by its iCourse fees. Therefore, to help ensure that all student fees the universities charge are established in line with ABOR’s policies and guidance, ABOR should determine whether all student fees charged by the universities require its review and approval, and revise its fee-setting policies and guidance accordingly. This would include determining how ABOR would be informed of the universities’ existing student fees, such as NAU’s Transportation fee, UA’s Student Support fee, and ASU’s and UA’s iCourse fees. ABOR and the universities should improve processes for considering the cumulative impact of fees on students—Fee-setting standards and guidelines suggest that decision makers should consider a fee’s potential impact on those who will pay it, especially low- or middle-income individuals. However, ABOR and the universities have not established policies for considering the cumulative impact of fees on students or have not had the information necessary to do so. Specifically, because students must pay multiple fees to attend the universities, including mandatory fees, differential tuition/program fees, and/or class fees, each fee’s impact should be assessed within the context of all the tuition and fees that students must pay. For example, undergraduate business students at all three universities must pay mandatory fees and a differential tuition/ program fee, and may also pay specific class fees, in addition to tuition (see Table 4, page 6, for examples of business students’ tuition and fee bills). In some cases, the universities have considered other fees that a student must pay when establishing or increasing some fees. For example, as previously mentioned, in fall 2016, NAU increased its mandatory Information Technology fee from $216 to $336 annually and began eliminating and/or reducing more than 387 individual class fees that were in some way meant to pay for information technology. NAU reported that it decided to increase its mandatory Information Technology fee and reduce or eliminate class fees for several reasons, including to ensure it provides consistent technology in classrooms, to distribute the cost of information technology to all students who benefited from information technology in classrooms rather than only charging fees to certain students, and because class fees are not considered when NAU determines a student’s financial aid.20 Additionally, ASU reported that its Walter Cronkite School of Journalism and Mass Communication eliminated several class fees when it established differential tuition. As of October 2017, UA developed policies and procedures for considering whether class fee requests overlap in purpose with existing differential tuition/ program fees, and in November 2017 it developed a report of the class fees students enrolled in programs with differential tuition/program fees must pay for its University Fees committee to review when approving class fees. However, UA has not developed and implemented formal procedures or other written guidance for considering all other fees a student must pay when establishing differential tuition/program fees and mandatory fees. In addition, although ASU and NAU reported that they have processes for considering cumulative impact, they have not developed and implemented formal procedures or other written guidance for considering all other fees a student must pay when establishing new fees or increasing the rate of an existing fee for any fee categories. Therefore, to help ensure that the cumulative impact of students’ fees is consistently considered when establishing new fees or increasing fee rates, ASU and NAU should develop and implement policies, procedures, or other written guidance for considering all required fees students may potentially pay when proposing new fees or increases to existing fee rates and to provide this information to those responsible for reviewing and approving the 20 All three universities reported that they consider mandatory fees as part of a student’s costs when determining the amount of financial aid to award a student. ASU and NAU reported that they consider the differential tuition and/or program fees a student will have to pay, and UA reported that it may consider such fees if students can document that their educational expenses will exceed UA’s standard cost of attendance, which includes tuition, fees, and other expenses. Finally, ASU, NAU, and UA reported that class fees may be taken into account when awarding financial aid under certain circumstances, such as upon the request of the student. Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE 20 fees. Additionally, UA should continue to implement its new procedures for considering cumulative impact when establishing class fees, and it should develop and implement written policies, procedures, or other guidance for considering cumulative impact when establishing differential tuition/program fees and mandatory fees. In addition, ABOR’s policies do not require the universities to include information regarding the cumulative impact of fees in their fee proposals. For example, when a university proposes a new differential tuition/program fee, ABOR does not require the university to submit information about the class fees that students in the degree program or college are already paying. Further, although the universities must provide ABOR with an inventory of existing fees annually, these inventories do not include class fees, which are the majority of fees the universities charge, and are not always accurate. Specifically, ABOR requests that the universities annually provide it with an inventory of differential tuition/program fees each spring when they submit their fee proposals. However, ABOR does not require the universities to provide an inventory of classes with fees. Instead, it requests that the universities report the total number of classes with fees and the estimated revenue from these fees. As a result, ABOR may not have the information it needs to determine the cumulative impact of any new fees or increased fees on a student in a specific degree program. Finally, auditors identified several cases where the universities’ fee inventories were not complete or accurate. For example, the March 2017 fee inventory that ASU provided to ABOR did not include a $750 per semester program fee for ASU’s honors college, but the inventories NAU and UA provided included their respective honors program fees. In addition, the March 2017 fee inventory that NAU provided to ABOR incorrectly listed that the program fee for a dental hygienist student is $1,600 per year instead of $800 per year. Although these errors may not be persistent, there are instances where ABOR had inaccurate information upon which to base its decisions about tuition and fees. Therefore, ABOR should revise its fee-setting policies and guidance to require the universities to include in differential tuition, program fee, and class fee proposals information about all existing fees students must pay for a particular degree program. ASU, NAU, and UA should enhance their class fee-setting processes to further align with feesetting standards and guidelines—As previously mentioned, the universities have established some feesetting policies and procedures that are consistent with fee-setting standards and guidelines. However, auditors identified several improvements the universities should take to further align their fee-setting process with feesetting standards and guidelines. Specifically: • NAU should establish formal processes for reviewing and approving cost information when setting class fees—According to NAU, central university administration relies on academic departments’ staff expertise for the development of fee rate proposals. As a result, although NAU reported that reviews of detailed cost information occur at the academic department level during the fee proposal process, central university administration does not review and approve cost information for the items and services the fee is intended to support. Further, the expectation that academic departments review detailed cost information is not outlined in NAU’s written class fee guidelines document and the guidelines do not specify a requirement for central university administration to review the cost information for class fees that are $100 or less. Therefore, to help ensure class fees are set at appropriate rates, NAU should develop and implement written policies, procedures, or other guidance outlining a method for determining the costs of the equipment, supplies, items, or services needed for the class, including any administrative or other costs that are shared between multiple fees, and, similar to ASU and UA, require this information to be submitted with class fee proposals. NAU should also require central university administration staff responsible for approving class fees to review the cost information submitted with class fee proposals. • ASU and NAU should identify and make available opportunities for students to provide input on class fees—ASU and NAU reported that they regularly solicit student input on mandatory fees and differential tuition/program fees during their annual tuition and fee-setting processes. In addition, students provide input on fees during ABOR’s public hearings on tuition and fees. However, the universities’ annual fee proposals presented to ABOR, which are subject to a public hearing, do not include class fees that are $100 or less. As permitted by ABOR policy, the universities are authorized to set these fees without ABOR approval. As reported in Table 2 (see page 3), class fees that are $100 or less make up 97 and 95 percent of the student fees charged by ASU and NAU, respectively. Therefore, ASU and NAU should take steps to identify and make available opportunities for students to provide input on class fees and/or the process for Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE 21 setting class fees. For example, as previously mentioned (see page 12), UA has formed a committee that includes student members to review all class fee proposals. This committee reviewed and approved all 16 UA class fee proposals auditors reviewed. Other universities, such as Colorado State University; the University of California, Los Angeles; and the University of Utah, have established similar committees. Alternatively, ASU and NAU could solicit student input about class fees and/or the process for setting class fees as part of their annual tuition and fee-setting processes or provide other methods for students to provide input on class fees. • ASU should develop a process for identifying fees that may no longer be necessary or with rates set too high and for discontinuing fees that are no longer necessary—As of June 30, 2016, at least 41 of the 56 fees auditors reviewed at all three universities had account balances or were included in combined accounts with balances that exceeded 10 percent of the revenue the fee generated during fiscal year 2016.21 ABOR’s policies and guidelines do not prohibit the universities from accruing and maintaining fee account balances and in some instances, the universities may accrue account balances over several years to purchase equipment or other large items. However, the account balances may also result from fee revenues not being spent as originally planned, which may indicate that the fees may be unnecessary or have rates that are set too high. As previously discussed (see pages 12 through 13), UA has developed a process to review class fee accounts with year-end balances higher than 15 percent of annual fee revenues to ensure the fee is still necessary and set at an appropriate rate. In addition, NAU has developed a sunset review process to review and renew class fees that provides academic departments with the opportunity to update fee information, such as the fee’s purpose or dollar amount, or determine whether the fee should be discontinued. ASU does not have a formal procedure for identifying fees that may no longer be necessary or with rates set too high and for discontinuing fees that are no longer necessary. Specifically, although ASU reported that its staff conduct reviews of account balances, this process is not outlined in a formal procedure or other written guidance. In addition, for the three ASU class fees auditors reviewed for which ASU separately tracked revenues and expenses, auditors identified account balances that exceeded 10 percent of the revenue the fee generated during fiscal year 2016. Further, the proposals for 2 of the 3 ASU class fees that had account balances of $441 and $5,442, which exceeded 10 percent of the revenue the fee generated during fiscal year 2016, did not indicate that the class would be intentionally maintaining an account balance. ASU staff reported that these two classes should not have had year-end account balances and that staff would look into refunding fee revenues to students and adjusting the fee amount. Finally, for the third ASU class fee that had an account balance that exceeded 10 percent of the fiscal year 2016 revenues, ASU collected $1,060 in revenues from the fee in fiscal year 2016, but did not spend any of these revenues, and prior to fiscal year 2016, the fee’s account had accrued a balance of $2,850 because ASU had not spent all of the revenues it had collected from previous years. In fiscal year 2017, ASU determined this fee was no longer necessary, but continued to charge the fee to students for an additional semester. During the audit, ASU reported that continuing to charge the fee was a mistake and that it planned to refund fee revenues to students who paid the fee during the spring 2017 semester. Written policies, procedures, or other guidance for identifying fees that may no longer be necessary or with rates set too high and for discontinuing fees that are no longer necessary could help reduce the risk of similar errors occurring in the future. Therefore, to help ensure that its fees are set at appropriate rates and that unnecessary fees are discontinued, ASU should develop and implement written policies, procedures, or other guidance for conducting regular reviews of fees to determine if they are still necessary and set at appropriate rates. For example, similar to NAU and UA, it could develop a process for identifying and reviewing fees with relatively large account balances, or it could implement a sunset review process or require regular renewals of class fees. • NAU should develop processes for reviewing class fee spending to ensure fee revenues are used for approved purposes and that fees are still necessary and set at an appropriate rate—Although NAU reported that it has developed processes to review class fees, it has not developed comprehensive policies and procedures to guide these processes. Specifically, NAU reported that during its annual budgeting 21 The 41 fees that had account balances or were included in combined accounts with balances that exceeded 10 percent of fee revenue generated during fiscal year 2016 were as follows: 28 had balances exceeding between 10 and 49 percent of fee revenue, 8 had balances exceeding between 50 and 100 percent of fee revenue, and 5 had balances in excess of 100 percent of fiscal year 2016 fee revenues. Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE 22 process, it reviews the revenues and expenses for all fee accounts to develop a budget for the following year. Additionally, according to NAU, academic departments are responsible for reviewing class fee revenues and expenses, and determining whether fee revenues were used for approved purposes. However, NAU has not developed written policies, procedures, or other guidance outlining how these reviews should be conducted. Further, as previously mentioned, NAU has developed a sunset review process that requires academic departments to review and renew class fees at least once every 3 years; however, NAU’s sunset review policy does not specify what information should be reviewed and considered to determine whether the fee is necessary and the rate is appropriate. For example, as of June 30, 2016, at least 41 of the 56 fees auditors reviewed, including several NAU fees, had account balances or were included in accounts with balances that exceeded 10 percent of the revenue the fee generated during fiscal year 2016. Although the universities may accrue account balances over several years in order to purchase equipment or other large items, account balances may also result from fee revenues not being spent as originally planned, which may indicate that the fees may be unnecessary or have rates that are set too high. Finally, NAU’s sunset review policy does not indicate what information central university administration should review to determine whether the fee is still necessary and if the rate is still appropriate. Comprehensive written procedures or other guidance for reviewing class fee spending and conducting sunset reviews of fees could help ensure that fee revenues are used for approved purposes and that fees are still necessary and have appropriate rates. NAU reported that it plans to incorporate reviews of class fee spending into its existing annual budgeting and sunset review processes. Therefore, NAU should develop and implement written policies, procedures, and other guidance to direct academic departments’ review of class fee spending to help ensure that fee revenues are used for approved purposes. These written policies, procedures, or other guidance should include how class fee spending reviews will be incorporated into NAU’s existing annual budgeting and sunset review processes, and should specify the information that should be reviewed and considered as part of the sunset review process to determine if the fee is still necessary and if the rate is still appropriate, and central university administration’s oversight role and responsibilities for these reviews. For example, NAU could develop a process for central university administration staff to periodically audit or spot check academic departments’ reviews of class fee revenue spending. Additionally, it could direct academic departments to review account balances to determine if the fee is still necessary and if the rate is still appropriate. Recommendations 1.1. ABOR should determine if administrative costs are an allowable use of class fee revenues, and if it does so, ABOR should revise its policies and guidance to authorize this use, including providing guidance on how the universities should calculate the portion of class fee revenues that will be used for administration. 1.2. ABOR should revise its fee-setting policies and guidance for mandatory fees and differential tuition/program fees to require the universities to: a. Develop clearly defined purposes for proposed fees, such as by outlining the benefits that those who pay the fee should expect to obtain or providing information about the specific items for which the fee is intended to pay; b. Consider the appropriateness and costs of the items or services for which each fee is intended to pay, including whether the proposed fee rate will cover all or a portion of these costs, and specifying the cost information that should be provided to ABOR for review and approval; and c. Include administrative costs in fee proposals, including outlining under what circumstances spending fee revenues for administrative costs will require ABOR approval and specifying the administrative cost information that should be submitted to ABOR for review and approval. 1.3. ABOR should revise its fee-setting policies and guidance to clarify its expectations for what information should be submitted to ABOR about student input that has been obtained for fees and determine if there Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE 23 are additional opportunities that can be provided for obtaining student input on all student fees charged by the universities, including class fees. 1.4. As part of its review of existing fee-setting processes, ABOR should revise its fee-setting policies and guidance to require a periodic review of the universities’ fee-setting processes to help ensure revenues are spent for approved purposes and that the fees are still necessary and set at appropriate rates. 1.5. ABOR should determine whether all student fees charged by the universities require its review and approval, and revise its fee-setting policies and guidance accordingly. 1.6. ABOR should revise its fee-setting policies and guidance to require the universities to include in differential tuition, program fee, and class fee proposals information about all existing fees students must pay for a particular degree program. 1.7. ASU should develop and implement written policies, procedures, or other guidance to: a. Direct academic departments’ reviews of class fee revenue spending to help ensure that fee revenues are used for approved purposes, including specifying the frequency of these reviews, defining central university administration’s oversight role and responsibilities for these reviews, and providing guidance on reviewing spending for all class fees to determine if expenses were for approved purposes, including reviewing class fees with revenues that are deposited into combined accounts to determine whether the justification for combining the accounts is consistent with the approved purposes of the individual fees and that fee revenues were spent for shared resources as outlined in the justification to combine fee revenues; b. Consider all required fees students may potentially pay when proposing new fees or increases to existing fee rates and to provide this information to those responsible for reviewing and approving the fees; and c. Conduct regular reviews of all student fees to determine if they are still necessary and set at appropriate rates. 1.8. ASU should take steps to ensure that its review of the Student Athletics fee charter is completed as planned, revise its Student Athletics fee procedures and guidance to reflect any changes made to the charter, and implement any new procedures and/or guidance consistent with the revised charter. 1.9. ASU should take steps to identify and make available opportunities for students to provide input on class fees and/or the process for setting class fees. 1.10. NAU should develop and implement written policies, procedures, or other guidance to: a. Help ensure that class fee revenues deposited into combined accounts are spent for approved purposes and provide the expected benefits to the students who paid the fees; b. Outline its process for obtaining student input for mandatory fees and program fees, and identify and make available opportunities for students to provide input on class fees and/or the process for setting class fees; c. Consider all required fees students may potentially pay when proposing new fees or increases to existing fee rates and to provide this information to those responsible for reviewing and approving the fees; d. Outline a method for determining the costs of the equipment, supplies, items, or services needed for the class, including any administrative or other costs that are shared between multiple fees, and require this information to be submitted with class fee proposals. NAU should also require central university administration staff responsible for approving class fees to review the cost information submitted with class fee proposals; and Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE 24 e. Direct academic departments’ review of class fee spending to help ensure that fee revenues are used for approved purposes, including how class fee spending reviews will be incorporated into NAU’s existing annual budgeting and sunset review processes, and should specify the information that should be reviewed and considered as part of the sunset review process to determine if the fee is still necessary and if the rate is still appropriate, and central university administration’s oversight role and responsibilities for these reviews. 1.11. UA should continue to implement its process to better account for and review class fee revenues and expenses. 1.12. If ABOR determines administrative costs are an allowable use of class fee revenues, UA should revise its class fee policies and procedures to indicate that class fee revenues will be spent on administrative costs. 1.13. UA should continue to implement its fee-setting procedures for considering cumulative impact when establishing class fees, and it should develop and implement written policies, procedures, or other guidance for considering cumulative impact when establishing differential tuition/program fees and mandatory fees. Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE 25 Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE 26 OTHER PERTINENT INFORMATION ASU charges a Resident Surcharge fee that substitutes for a tuition increase Arizona State University (ASU) charges a mandatory Resident Surcharge fee to Arizona-resident undergraduate and graduate students each semester in addition to tuition and fees. Although the Arizona Board of Regents (ABOR) initially approved ASU’s proposal to implement a one-time, temporary Resident Surcharge fee instead of raising tuition for resident students for fiscal year 2016, ABOR has continued to approve the Resident Surcharge fee at a reduced rate, as well as additional tuition increases. ASU reported that it considers the Resident Surcharge fee a source of revenue to supplement tuition revenues, and it has used surcharge revenues similar to tuition revenues. Resident Surcharge fee approved as one-time fee to offset decreased state appropriations, but has been renewed in subsequent years—In its fiscal year 2016 tuition proposal, ASU proposed implementing a one-time, one-year temporary Resident Surcharge fee at an annual rate of $320 per resident student to offset decreased State General Fund appropriations instead of increasing its resident tuition rate for fiscal year 2016.22 Specifically, in fiscal year 2016, ASU anticipated receiving approximately $53.3 million less in State General Fund appropriations than it received in fiscal year 2015, which the university determined was a decrease in funding of approximately $1,100 per resident student.23 According to ABOR meeting minutes, ASU calculated the per student Resident Surcharge fee amount to offset approximately 25 percent of this per student reduction and generate approximately $12.9 million of revenue. In its fiscal year 2017 tuition proposal, ASU proposed extending the one-year Resident Surcharge fee and making the termination of the Resident Surcharge fee conditional on the restoration of at least half of the fiscal year 2016 reduction in State General Fund appropriations. ASU also reported to ABOR that it planned to reduce the Resident Surcharge fee as state appropriations increased. ABOR approved ASU’s proposals to continue to charge the Resident Surcharge fee at a reduced annual rate of $270 per student in fiscal years 2017 and 2018. According to ASU, this reduction was made in recognition of an increase in State General Fund appropriations. ASU uses Resident Surcharge fee revenues similar to tuition revenues—In its fiscal year 2016 tuition proposal, ASU reported that despite ASU’s base tuition remaining the same, instituting the surcharge resulted in an “effective tuition increase” equivalent to 3.4 percent for resident undergraduate students and 3 percent for resident graduate students. In contrast, for the same fiscal year, the State’s two other universities— Northern Arizona University (NAU) and the University of Arizona (UA)—did not implement a surcharge and instead elected to increase tuition by 3.8 percent and 4.4 percent, respectively, for incoming resident undergraduate students.24 As shown in Table 5 (see page 28), in subsequent years, ASU has increased resident tuition in addition to continuing to charge the surcharge, albeit at a slightly reduced rate from the initial rate charged in fiscal year 2016. 22 Although the universities charge student tuition and fees on a per-semester basis, the annual rate represents the total fee amount charged for the fall 2015 and spring 2016 semesters. 23 According to ASU’s fiscal year 2016 Comprehensive Annual Financial Report, State General Fund appropriations in fiscal year 2016 were approximately $56.7 million less than fiscal year 2015. 24 NAU and UA instituted tuition guarantee programs in fiscal year 2009 and fiscal year 2015, respectively, whereby tuition increases are not applicable to continuing students. Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE 27 Table 5 Changes in ASU’s fall and spring tuition and Resident Surcharge fee for undergraduate resident students Fiscal years 2015 through 2018 Resident Surcharge fee 2015 Tuition Total $9,484 $ 9,484 Percent change from prior year 2016 $320 9,484 9,804 3.4% 2017 270 9,684 9,954 1.5 2018 270 9,834 10,104 1.5 Source: Auditor General staff analysis of ASU’s undergraduate resident tuition and Resident Surcharge fee rates for fiscal years 2015 through 2018 published on ASU’s website. Although all of ASU’s Arizona-resident undergraduate and graduate students must pay the surcharge, ASU reported that it does not consider the surcharge to be a mandatory fee but rather a source of revenue to supplement tuition revenues. As such, ASU has used surcharge revenues similar to tuition revenues. Specifically, in fiscal year 2016, ASU collected approximately $13.7 million from the surcharge and combined these revenues with other unrestricted State General Fund appropriations, tuition and fees, and other revenues, and used them to pay for educational and general expenses, such as instructional expenses. Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE 28 APPENDIX A Universities’ fees reviewed by auditors As permitted by the Arizona Board of Regents’ (ABOR) fee-setting policies and guidance, the State’s universities— Arizona State University (ASU), Northern Arizona University (NAU), and the University of Arizona (UA)—have established several mandatory fees, differential tuition/program fees, and class fees. Auditors selected a sample of 56 fees charged to students in fiscal year 2016 to determine how fee revenues were spent, including whether revenues were spent for approved purposes (see Appendix E, pages e-1 through e-2 for additional information on how this sample was selected). Additionally, during the course of the audit, auditors identified three other nonacademic fees that the universities charge students. Table 6 (pages a-1 through a-5) provides additional information about the amount of fee revenues collected, expenses, unspent account balances, and fee purposes for the six mandatory fees, six differential tuition/program fees, and three other nonacademic fees auditors reviewed. Table 7 (pages a-6 through a-12) provides additional information about the amount of fee revenues collected, expenses, unspent account balances, and fee purposes for the 44 classes with fees auditors reviewed. The universities deposited the class fee revenues for 38 of the 44 sampled class fees auditors reviewed into combined accounts with other class fee revenues. Table 7 provides information about these combined fee accounts, including the number of classes with fee revenues potentially deposited into combined accounts, the range of fee amounts, and information about the specific class fee auditors sampled. Table 6 Mandatory fees, differential tuition/program fees, and other nonacademic fees reviewed by auditors, including the amount of fee revenues collected, expenses, unspent account balances, and fee purposes Fiscal year 2016 (In thousands) Annual fee amount Revenues Expenses Unspent account balance Fee purpose and examples of expenses ASU Mandatory fees Student Athletics fee $150 Arizona Auditor General $10,577 $10,750 $0 Purpose: Provide cost-free unlimited access to all regular season ASU sports, ensures students have access to 25 percent of the seating in all athletic venues, and ensures that tuition revenue will only support core academic programs and services. Expenses: Grants, scholarships, and stipends; travel costs, including recruiting costs; outside services; administrative costs; advertising; food; room and board; materials and supplies; books/reference materials; and outside services.1 Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE a-1 Table 6 continued Annual fee amount Technology fee $100 Revenues Expenses 10,226 Unspent account balance 10,225 12 Fee purpose and examples of expenses Purpose: Pays for technology initiatives, including implementation of ASU’s wireless network, delivering university-licensed software to all students, increasing the number of technology-enabled classrooms, reducing dependence on computing labs, and expanding and improving online self-service environment. Expenses: Software; communication costs; student salaries and related benefits; financial aid set-aside funding; furniture and equipment, including microcomputers; and outside services. Differential tuition/program fees Undergraduate business differential tuition $800 Speech and Hearing Science program fee $800 9,947 9,561 584 319 327 02 Purpose: Efforts to retain, tutor, and support business students. Expenses: Employee and student salaries and related benefits and administrative costs related to business career center, academy, student engagement, advising, and recruiting activities; and financial aid set-aside funding. Purpose: Maintain and enhance the learning environment for students in the Natural Sciences, including the use of equipment. Expenses: Employee salaries and related benefits; financial aid set-aside funding; and networking fees. Other fees Resident Surcharge fee $270 13,7023 Purpose: Offsets state budget reductions. Not Not Expenses: Educational and general expenses, applicable3 applicable3 such as instructional expenses.3 NAU Mandatory fees Information Technology fee $216 Green fee $10 Arizona Auditor General 5,458 2,774 2,534 208 147 211 Purpose: Pays for the IT security enhancements project, software updates, and improvements in the campus network design. Expenses: Software licensing and maintenance; and employee and student salaries and related benefits. Purpose: Pays for sustainable projects on campus. Expenses: Employee and student salaries and related benefits; furniture and equipment, including manual treadmills, computer servers, and computer tablets; materials and supplies, including hats; travel costs; registration and conference fees; and external services, including speakers. Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE a-2 Table 6 continued Annual fee amount Program fees Revenues Expenses Unspent account balance Undergraduate business program fee $580 629 478 148 Graduate athletic training program fee $1,000 15 5 17 Fee purpose and examples of expenses Purpose: Pays for student services, such as academic and career advisors, studentorientated information technology, student success initiatives, and scholarships. Expenses: Employee and student salaries and related benefits; computers; financial aid setaside funding; travel costs; and food. Purpose: Set up a graduate program in athletic training and pay for staffing and technical resources. Expenses: Employee and student salaries and related benefits; financial aid set-aside funding; and external services. Other fees Transportation fee $100 1,398 2,6574 (713) Purpose: Support a portion of the operating costs to provide shuttle services and other transportation-related expenses. Students that purchase a parking permit do not pay this fee. Expenses: Employee and student salaries and related benefits; vehicles; maintenance and repair; administrative overhead; external services, primarily consulting services; and fleet vehicle fuel.4 4,4955 Purpose: Enhance the university’s student learning environment and increase UA’s capacities to meet digital environment expectations by directing the fee to upgrade and expand the university’s capacity to provide this essential operating environment. Expenses: Employee and student salaries and related benefits; administrative costs; networking costs; library materials; software licenses and royalties; furniture and equipment; and technical consultants.5 UA Mandatory fees Information Technology and Library fee $480 Arizona Auditor General 19,777 20,6315 Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE a-3 Table 6 continued Annual fee amount Health and Recreation fee $300 Revenues Expenses 11,775 11,151 Unspent account balance 2,104 Fee purpose and examples of expenses Purpose: Sustain student health services (both medical and counseling/psychological services) as well as support operational, maintenance, and service costs for the recreation facilities and programs. Expenses: Employee and student salaries and related benefits; transfers to other accounts primarily supporting employee and student salaries and related benefits and administrative costs of other accounts, such as the Dean of Students and Disability Resource Center; repair and maintenance; communications; medical and hospital services; supplies; administrative costs; and architectural and engineering fees. Differential tuition/program fees Undergraduate upper division management differential tuition $1,800 Undergraduate criminal justice, political science, or public management and public policy program fee $900 3,694 3,680 110 824 798 1 None6 None6 None6 Purpose: Investments in the Eller College of Management’s undergraduate programs’ quality through hiring more full-time faculty, expanding technology, improving internships and career services, improving extracurricular activities, and providing support for existing services. Expenses: Employee salaries and related benefits; financial aid set-aside funding; and administrative costs. Purpose: Pay for scholarships, support services, and professional development for students in the program. Expenses: Employee salaries and related benefits; financial aid set-aside funding; administrative costs; scholarships; and travel. Other fees Student Support fee $06 Arizona Auditor General Purpose: Supports career services and other student support programs. Expenses: None.6 Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE a-4 Table 6 continued 1 2 3 4 5 6 According to an ASU official, the recruiting expenses were for student-athlete recruitment. ASU’s practice for certain fee revenues is to combine them in central accounts and establish expense budgets for the appropriate departments based on estimated revenues. According to ASU, budgetary controls within the accounting system ensure that departments’ expenses cannot exceed those established in the expense budgets; however, fee revenues are reconciled during the year and ASU’s budget office authorizes adjustments to expense budgets to reflect actual revenue collections during the fiscal year. Consequently, ASU does not maintain unspent balances for the specific fees that are combined and instead uses its budgeting process to ensure revenue collections do not exceed expenses. Because auditors could not determine if the Technology fee had an accumulated unspent balance, the excess of the fiscal year 2016 fee revenue over its expenses was reported. Similarly, the Speech and Hearing Program fee’s unspent balance is reported as zero because the fiscal year 2016 reported fee expenses exceeded the revenues and, according to ASU, the excess expenses were allowable and were paid for with other monies. Revenues from ASU’s Resident Surcharge fee were combined with other unrestricted State General Fund appropriations, tuition and fees, and other revenues during fiscal year 2016, and used to pay for educational and general expenses, such as instructional expenses; therefore, the expenses and unspent balance are not separately tracked. NAU’s Transportation fee revenues were combined with approximately $84,000 of other revenues during fiscal year 2016. UA’s Information Technology and Library Fee accounts were combined with a $1.5 million transfer from another account that was established for a wireless network refresh. UA’s Student Support Fee was not charged to students until fiscal year 2017. Source: Auditor General staff analysis of ASU’s, NAU’s, and UA’s lists of fees charged to students, general ledgers, other information provided by the universities for fiscal year 2016, and fee documentation. Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE a-5 Table 7 Class fees reviewed by auditors, including the amount of fee revenues collected, expenses, unspent account balances, and fee purposes Fiscal year 2016 Class and fee amount Revenues Expenses Unspent account balance Fee purpose and examples of expenses ASU ASU ART 479: 3D Fibers Fee: $50 $ 550 ERG 313: Mechanical Systems Project II Fee: $50 4,850 GIT 333: Printing Technology Fee: $50 1,060 $ 447 2,303 $ 4411 Fee purpose: Expendable materials. Expenses: Supplies; books and reference materials; and outside services. 5,4421 Fee purpose: Course project and classroom assistant. Expenses: Supplies, including chemicals. 3,9101,2 Fee purpose: Expendable materials. Expenses: None.2 Combined fee accounts3 iCourses4 Fee: $50 Sampled classes ACC 382: Accounting and Financial Analysis EDT 503: Instructional Media Design MCO 550: Issues in Coverage of Business and Economics PSY 598: Quantitative Research III TWC 514: Visualizing Data and Information Sampled classes fee purpose: Technology expenses. Combined expenses: Employee (370) salaries and related benefits; outside services; software; and communications equipment. 9,493,080 9,493,450 Ceramic classes—includes potentially 11 classes Fees: $50 to $100 16,110 18,234 Sampled class ART 261: Ceramic Survey Fee: $85 4,335 Unknown New College of Interdisciplinary Arts and Sciences communication classes—includes potentially 7 classes Fees: $50 to $65 65,945 58,542 201 Sampled class COM 453: Communication Training/Development Fee: $655 9,100 Unknown Unknown Arizona Auditor General (755) Sampled class fee purpose: Expendable materials. Combined expenses: Furniture; supplies; and books and reference Unknown materials. Sampled class fee purpose: Instructional assistants; computer hardware; and software. Combined expenses: Employee and student salaries and related benefits; outside services; and networking costs. Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE a-6 Table 7 continued Class and fee amount Criminal Justice additional online fees—includes potentially 65 classes Fees: $25 to $100 (most $25)6 Revenues Expenses 262,840 209,208 Unspent account balance 64,3806 Sampled classes CRJ 306: Race, Ethnicity, Crime Fee: $25 8,560 Unknown Unknown CRJ 350: Law and Social Control Fee: $25 4,685 Unknown Unknown CRJ 461: Domestic Violence Fee: $25 7,510 Unknown Unknown School of International Letters and Cultures Course (SILC) lower division classes— includes potentially 134 classes Fees: $25 to $30 (most $30) Sampled class IDN 102: Elementary Indonesian II Fee: $30 NAU NAU Combined fee accounts3 Biology classes—includes potentially 46 classes Fees: $6 to $175 Sampled class BIO 338L: Exercise Physiology Lab Fee: $70 College of Arts and Letters classroom mediated technology classes—includes potentially 246 classes Fees: $10 or $20 (most $10) Sampled classes CCS 350WH: Words at Work – Honors Fee: $10 REL 201: Indigenous Religions Fee: $10 Arizona Auditor General 244,752 282,009 45,413 60 Unknown Unknown 70,072 90,105 39,610 11,480 Fee purpose and examples of expenses 9,1807,8 Unknown 122,568 187,929 38,173 10 Unknown Unknown 200 Unknown Unknown Sampled classes fee purposes: Personnel expenses associated with online course delivery. Combined expenses: Student salaries and related benefits, networking costs, risk-management insurance. Sampled class fee purpose: SILC facilities and services, personnel and capital equipment technology expenses. Combined expenses: Employee and student salaries and related benefits; outside services; networking costs; data storage and servers; risk management insurance; books and reference materials; and supplies. Sampled class fee purpose: Lab equipment such as stethoscopes. Combined expenses: Supplies; furniture and equipment; travel costs; and food.8 Sampled classes fee purposes: Acquisition and upkeep of the projector, computer, server, related media required, and underlying structural support for technology. Combined expenses: Furniture and equipment, including computers, printers, and scanners; audio/visual and other supplies. Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE a-7 Table 7 continued Class and fee amount Various construction management classes—includes potentially 26 classes Fees: $35 to $175 Sampled class CM 225: Concrete and Masonry Systems Fee: $50 Various engineering and computer science classes— includes potentially 135 classes Fees: $10 to $50 Sampled classes CS 200: Introduction to Computer Organization Fee: $20 CS 486C: Capstone Experience Fee: $20 Revenues Expenses Unspent account balance 63,925 29,886 27,226 2,450 Unknown Unknown 151,853 157,742 24,096 1,7809 Unknown Unknown 8809 Unknown Unknown Composition Computer Lab English classes—primarily ENG 105 but 1 other class included Fees: $25 to $95 314,287 340,132 56,097 Sampled class ENG 105: Critical Reading/ Writing in University Fee: $95 313,458 Unknown Unknown Classes with student teachers—includes potentially 22 classes Fees: $85 to $400 (most $400) 228,276 156,863 92,510 Sampled classes ESE 591: Special Education S.T. – High Incidence Fee: $400 2,8007 Unknown Unknown TSM 595: Internship Secondary Fee: $400 1,600 Unknown Unknown Arizona Auditor General Fee purpose and examples of expenses Sampled class fee purpose: Expendable materials, special instructional support (i.e., student workers to assist primary instructor in various duties such as lab/class preparation), computers, software, other technology needs. Combined expenses: Student salaries and related benefits; registration and conference fees; supplies; equipment; vehicle and office rental costs; and outside services. Sampled classes fee purposes: Hardware and software maintenance, and information technology infrastructure, including computer lab hardware, software, and audio/visual equipment. Combined expenses: Computers, printers, and scanners; audio/video and other supplies; software licensing and maintenance; and maintenance and repair. Sampled class fee purpose: E-learning to enhance student learning and to purchase access codes for an online writing guide. Combined expenses: Professional dues, fees, and subscriptions; computers, printers, and scanners; employee and student salaries and related benefits, including for the English Composition Program Coordinator; print and copy services, including copy machine charges; and supplies. Sampled classes fee purposes: Student-teaching placements, including offsetting professional teachers for contextual training they provide and travel costs. Combined expenses: Teacher stipends and travel costs. Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE a-8 Table 7 continued Class and fee amount Revenues Expenses Unspent account balance Lumberjack Mathematics Center classes—includes potentially 4 classes Fees: $25 to $155 536,384 693,740 77,532 Sampled class MAT 108: Algebra for Precalculus Fee: $125 150,495 Unknown Unknown Various business classes with technology needs—includes potentially 8 classes Fees: $30 to $79 Sampled class MGT 490CH: Strategic Management--Honors Fee: $30 Music lesson fees—includes potentially 86 classes Fees: $30 to $150 Sampled class MUS 507: Suzuki Pedagogy Violin Fee: $30 Photography classes—includes potentially 21 classes Fees: $25 to $100 (most $100) Sampled class PHO 100: Introduction to Photography Fee: $100 Parks and Recreation management classes—includes potentially 21 classes Fees: $5 to $400 Sampled class PRM 360: Interpretation for Parks & Recreation Fee: $20 Arizona Auditor General 51,738 101,918 16,296 210 Unknown Unknown 136,964 349,5918 Sampled class fee purpose: Support e-resources and required adaptive instructional software; and replace computing equipment in the math center. Combined expenses: Professional dues, fees, and subscriptions; and computers, printers, and scanners. Sampled class fee purpose: Support advanced technology that would not otherwise be available to students, including remote access and handson laboratories. Combined expenses: Testing-center program director salary and related benefits; and software licensing and maintenance. Sampled class fee purpose: (13,059) Purchase, maintain, and upgrade classroom equipment, including, but not limited to, pianos, piano tuning and upkeep, music stands, and rehearsal chairs. Combined expenses: Furniture Unknown and equipment; outside services, such as consultants, speakers, and performers; employee and student salaries and related benefits; and supplies.8 120 Unknown 57,971 49,411 9,033 17,000 Unknown Unknown 45,864 41,245 44,346 1,9407 2407 2,1807 Fee purpose and examples of expenses Sampled class fee purpose: Expendable materials; off-campus field trip, specialized equipment, or facilities rental; special instructional support, such as guest speakers; and maintenance of the campus photography studio. Combined expenses: Supplies; student wages and related benefits; and software license and maintenance fees. Sampled class fee purpose: Computer lab costs and audio/visual upgrades for visual presentation. Combined expenses: Supplies; outside services, including speakers; travel costs; computer, printers, and scanners; food; and lease/rental costs. Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE a-9 Table 7 continued Class and fee amount UA UA AME 487: Guided Self-Study in Mechatronics Fee: $50 ECOL 582: Ichthyology Fee: $25 SAS 100AX: Math Success Strategies Fee: $91 Revenues 1,050 65011 53,417 Expenses 83910 Unspent account balance Fee purpose and examples of expenses Fee purpose: Expendable materials. 22010 Expenses: Operating supplies and administrative costs. Fee purpose: Field trips. 68111 Unknown11 Expenses: Travel costs; educational supplies; and administrative costs. 52,542 Fee purpose: Tutor salaries, materials and handouts, and a computer. 5,878 Expenses: Employee and student salaries and related benefits and administrative costs. Sampled classes fee purpose: Full-scale build-out of the UA’s online degree programs. Combined expenses: Cloud services; outside services, such as technical consultants; software licensing; employee and student salaries and related benefits; and administrative costs. Combined fee accounts3 iCourses4 Fee: $50 Sampled classes ESOC 314: Theories of New Media FCSC 301: Applying Critical Thinking to Discourse in Family and Consumer Sciences Organizations 2,268,801 1,178,211 1,856,441 Art classes—includes potentially 76 classes Fees: $10 to $100 134,893 116,443 17,156 Sampled classes ART 273: Beginning Art Practices in Ceramics Fee: $99 3,267 2,8157 5997 ART 496A: Career Development for Visual Artists Fee: $75 2,175 1,9677 2087 ART 496B: Digital Illustration/ Painting Fee: $100 1,600 8977 7037 137,538 106,685 60,167 Sampled classes CSC 127A: Introduction to Computer Science (1st semester) Fee: $35 25,841 19,7607 Unknown CSC 127B: Introduction to Computer Science (2nd semester) Fee: $35 13,790 10,5457 Unknown Computer Science classes— includes potentially 32 classes Fees: $35 Arizona Auditor General Sampled classes fee purposes: ART 273 and ART 496B—expendable materials; ART 496A—guest lecturer fees. Combined expenses: Educational and other supplies; furniture and equipment; student salaries and related benefits; printing and lithography; outside services, including lecturers’ fees and stipends; and administrative costs. Sampled classes fee purposes: Supports computer labs in the Computer Science Department and School of Information: Science, Technology, and Arts. Combined expenses: Equipment; employee salaries and related benefits; data-processing services; and administrative costs. Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE a-10 Table 7 continued Revenues Expenses Unspent account balance 88,601 78,932 6,277 Sampled class MUSI 285: Music Individual Studies Fee: $125 8,625 7,6597 6567 School of Natural Resources & the Environment (SNRE) classes with field trips— includes potentially 16 classes Fees: $10 to $75 7,720 3,824 3,896 Sampled class RAM 382: Rangeland Plant Communities of the West Fee: $40 8409 Unknown Unknown 18,957 44,808 12,877 4,4509 Unknown Unknown 13,002 6,390 22,721 1,3887 1,0777 8,362 2,500 336 2807 567 1,520 1,5207 07 Class and fee amount Music individual studies class fees—includes potentially 163 classes Fees: $105 or $125 SNRE classes utilizing the teaching computer laboratory—includes potentially 13 classes Fees: $50 to $100 (most $50) Sampled class RNR 403: Applications of Geographic Information Systems Fee: $50 Various special education, rehabilitation, and school psychology classes—includes potentially 12 classes Fees: $10 to $90 Sampled class SERP 602: Early Childhood Assessment and Intervention Fee: $85 Theatre Arts classes—includes potentially 17 classes Fees: $10 to $40 Sampled classes TAR 416: Advanced Rendering Fee: $12 TAR 497V: Musical Theatre Private Voice Fee: $40 Arizona Auditor General 680 9,797 Fee purpose and examples of expenses Sampled class fee purpose: Private instruction faculty, piano service, and expendable materials. Combined expenses: Employee salaries and related benefits, and administrative costs. Sampled class fee purpose: Field trip transportation. Combined expenses: Travel costs and administrative costs. Sampled class fee purpose: Computer refreshing and a portion of a lab assistant’s salary. Combined expenses: Equipment; employee salaries and related benefits; and administrative costs. Sampled class fee purpose: Testing instruments. Combined expenses: Travel costs; educational supplies; and administrative costs. Sampled classes fee purposes: TAR 416—models; TAR 497V—piano accompanist. Combined expenses: Employee and student salaries and related benefits; supplies; and administrative costs. Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE a-11 Table 7 continued 1 2 3 4 5 6 7 8 9 ASU staff reported that the university was in the process of reviewing and processing refunds to students enrolled in ART 479, ERG 313, and GIT 333 as of November 2017. ASU’s GIT 333 class fee account had no expenses for fiscal year 2016 and had an ending balance of $3,910. ASU staff reported that they had identified that the class fee was no longer needed in December 2016. However, due to an administrative oversight, the fee was still charged to students in the spring 2017 semester. ASU staff reported that they refunded revenues to students who paid this fee in the spring 2017 semester. As discussed in Finding 1 (see pages 13 through 14), the universities’ practice is to combine revenues from multiple class fees in single accounts without otherwise separately accounting for individual fees’ revenues or spending in some cases, such as for fees with relatively small revenues or when revenues from multiple fees were used for shared resources. The universities deposited most class fees auditors reviewed with other class fees into combined accounts during fiscal year 2016. As such, auditors reviewed the expense detail for the combined class fees revenues, but could not always determine how the class fee revenues for the specific sampled classes were spent apart from the other fee revenue. Auditors reviewed and requested additional information to determine the reasonableness of the amounts presented or, if not provided, attempted to estimate the fee revenues using enrollment records. ASU and UA charge a standard $50 fee for most online classes taken by on-campus students. According to ASU, the $65 fee for COM 453 was approved originally for students that took the class online through the New College of Interdisciplinary Arts and Sciences. When ASU established its iCourse fee, the fee amount remained $65 for students in ASU’s online program but was changed to $50 for on-campus students who took the class online. In fiscal year 2016, no students were charged the $65 fee because the class was not offered to ASU online students during this fiscal year. The amounts reported for the fee are related to the $50 COM 453 fee. ASU charged a class fee for its criminal justice online classes during fiscal year 2016 ranging from $25 to $100 with most fees charged at $25. The fees were in addition to a $50 iCourse fee (see footnote 4). According to ASU staff, the unspent balance is being used for refreshing and rebuilding online courses. As discussed in Finding 1 (see pages 13 through 14), the universities’ practice is to deposit revenues from multiple class fees into combined accounts without otherwise separately accounting for individual fees’ revenues or spending in some cases, such as for lower-revenue fees or when revenues from multiple fees will be used for shared resources. As a result, these amounts were provided by the applicable university, and auditors were unable to reconcile the information to the universities’ accounting records or otherwise determine the reasonableness of the amounts presented. UA reported that as of fiscal year 2017, it had implemented a new process to better account for class fee expenses that involves creating separate accounts for all class fees with annual revenues over $5,000, and using combined accounts with sub-accounts and project codes for class fees that generate less than $5,000 annually (see Finding 1, page 14). Biology class fees at NAU were also combined with $6,000 of NAU Foundation reimbursements. Similarly, music lessons fees were combined with a $175,000 NAU Foundation reimbursement. Class fee revenues were estimated by auditors using enrollment information; however, NAU and UA did not provide an estimate and auditors could not otherwise determine if the revenue was reasonable. 10 UA’s AME 487 fee revenues and expenses were accounted for separately in a sub-account; however, administrative costs were not included in the sub-account and were instead included in a combined fee account. The expenses presented by auditors include a calculation for the administrative costs. In addition, the unspent balance was provided by UA; however, auditors were unable to reconcile the information with the accounting records or otherwise determine the accuracy of the amounts presented. 11 According to UA, ECOL 582 revenues and expenses include ECOL 482 because the classes are the same except one is offered to undergraduates and the other to graduate students. In addition, although UA separately accounted for the ECOL 482/582 expenses in a subaccount, it did not account for the revenues or administrative costs separately during fiscal year 2016, and instead it accounted for them in a combined account. UA provided the revenue amounts presented and expense amounts include the related administrative costs; however, the unspent balance was not available for fiscal year 2016. Source: Auditor General staff analysis of ASU’s, NAU’s, and UA’s lists of fees charged to students, general ledgers, other information provided by the universities for fiscal year 2016, and class fee documentation for reviewed class fees. Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE a-12 APPENDIX B Universities’ mandatory and other nonacademic fees As permitted by the Arizona Board of Regents’ (ABOR) fee-setting policies and guidance, the State’s universities— Arizona State University (ASU), Northern Arizona University (NAU), and the University of Arizona (UA)—charge mandatory fees that all students at the university must pay, unless specifically excluded. As discussed in Finding 1 (see pages 19 through 20) and Other Pertinent Information (see pages 27 through 28), the universities charge other nonacademic fees to students. These fees pay for general services and benefits available to all students who pay the fees, such as information technology services, use of health and recreation facilities and services, and access to athletics programs and events. Table 8 (pages b-1 through b-4) presents the universities’ descriptions of each of the mandatory fees and select other fees that the universities charge, along with their annual rates for incoming full-time resident undergraduate freshman students attending the relevant university’s main campus in the fall 2017 and spring 2018 semesters.25 Table 8 Universities’ descriptions of mandatory and other nonacademic fees and their annual rates for incoming full-time resident undergraduate freshman students1 Fall 2017 and spring 2018 semesters ASU NAU UA Mandatory fees Athletics mandatory fees Student Athletics fee No athletics fee charged. $150.00 Provides cost-free, unlimited access to all regular season ASU sports, ensures students have access to 25 percent of the seating in all athletic venues, and ensures that tuition revenue will support only core academic programs and services. Student Athletic fee $100.00 Supports athletics programs, facilities, and improvement of the student and fan experience. Arizona Financial Aid Trust mandatory fees Arizona Financial Aid Trust fee Arizona Financial Aid Trust fee $98.00 $80.00 Arizona Revised Statutes §15-1642 See description under ASU. authorizes ABOR to establish an Arizona Financial Aid Trust Fund that provides need-based financial aid to students. Statute permits ABOR to charge a student fee of 1 percent of the full-time resident undergraduate tuition rate at each university. Arizona Financial Aid Trust fee $108.00 See description under ASU. 25 Although the universities charge student tuition and fees on a per semester basis, the annual dollar amounts presented in Table 8 represent the total fee amounts charged for the fall 2017 and spring 2018 semesters. Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE b-1 Table 8 continued ASU NAU UA Health and Recreation mandatory fees Recreation fee $50.00 Supports programs and services at the ASU fitness centers. Monies are used to provide intramural activities, student employment opportunities, fitness classes, workshops, events, and programs. Health and Recreation fee $500.00 Supports NAU’s provision of low-cost health and mental health services, public health efforts, and promotion of healthy lifestyles and choices. The fee also supports free access to a myriad of recreational opportunities and facilities, including cardio and Health and Wellness fee weight equipment, group fitness $80.00 classes, an Olympic-size swimming Supports the operation of ASU health pool, basketball courts, volleyball services. Monies support health edu- courts, and a climbing wall. cation and promotion, primary care, acute emergency care services, travel medicine services, nutritional counseling, and high-demand specialty care. Recreation Center Program fee $8.10 Helps pay for Campus Recreation programs. Revenues primarily support sport clubs, special events to promote health and wellness, staff salaries for team building and leadership programming, and activity classes. Recreation Bond fee $50.00 Pays bonds issued for the construction and expansion of a Student Recreation Center. Although this fee is mandatory, it will cease once the bonds that paid for facility construction and expansion have been retired. Health and Recreation fee $425.00 Provides funding to sustain student health services (both medical and counseling/psychological services) and to support operational, maintenance, and staff costs for recreation facilities and programs. The fee allocation is: Campus Health 53 percent, Campus Recreation 47 percent. Information Technology mandatory fees Technology fee $100.00 Pays for technology initiatives, including implementation of ASU’s wireless network, delivering university-licensed software to all students, increasing the number of technology-enabled classrooms, reducing dependence on computing labs, and expanding and improving the online self-service environment. Arizona Auditor General Information Technology fee $336.002 Enhances the university’s student learning environment and increases NAU’s capacities to meet digital environment expectations. Supports a wide array of technologies that are increasingly critical to university students’ higher education experience. Information Technology and Library fee $535.00 Pays for enhancements to UA’s digital environment, including wireless access in high-traffic, public locations and in all campus outdoor areas, library materials that are digitally available, and appropriately equipped classrooms. Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE b-2 Table 8 continued ASU NAU UA Student Program mandatory fees Student Programs fee $60.00 Provides value-added programming that supports ASU student needs and interests, including routine appropriations to clubs and organizations, sports clubs, and travel funding to support research and conference attendance. The fee is managed by student government at each ASU campus. Student Activity fee $50.00 Supports on-campus programs and activities that enhance campus life, including providing students free admission to the Wall Aquatic Center and free fitness classes at the Recreation Center, and supporting the Safe Ride program. Student Service fee $150.00 Provides support for student programs such as campus safety, student health and counseling services, increased student employment opportunities, and enhanced food options with lower prices. Initial funding priorities were established from a survey administered to all students Associated Students of Northern in the fall 2007 semester. A student Arizona University fee advisory committee oversees its use $46.00 and recommends expenditures to Supports NAU student government’s UA’s Vice President for Student Afoperational budget and various fairs. programs and services, including extended library hours, student legal aid, study abroad scholarships, and increased funding for student organizations, campus activities, speakers, and performers. Miscellaneous mandatory fees Student Service Facility fee $150.00 Supports enhancements to existing student centers and fitness facilities and planning and development of new student service facilities to meet the needs of a growing student population. Green fee $10.00 Supports student sustainability projects, renewable energy installation, improvements in the efficiency of water and energy use, and waste reduction on NAU’s Flagstaff campus. Emphasis is placed on carrying out projects that reflect student body preferences and provide cost savings to the university. Media fee $6.00 Supports the student-run campus media organizations KAMP Radio, UATV, and the Daily Wildcat. Total mandatory fees: Total mandatory fees: Total mandatory fees: $688.00 $1,022.00 Wildcat fee $6.00 Assists with funding programming organized by the student-led Wildcat Events Board, such as concerts, speakers, and social events. $1,388.10 Other nonacademic fees Resident Surcharge fee $270.00 Offsets state budget reductions. Transportation fee $150.00 Supports a portion of the operating costs to provide shuttle services and other transportation-related expenses. Students that purchase a parking permit do not pay this fee. Freshman fee $20.00 Supports programs for freshman students. Total nonacademic fees: $270.00 Total nonacademic fees: $150.00 Total nonacademic fees: $120.00 Total ASU fees: Total NAU fees: Total UA fees: Arizona Auditor General $958.00 $1,172.00 Student Support fee3 $100.00 Supports career services and other student support programs. Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE b-3 $1,508.10 Table 8 continued 1 2 3 This does not include differential tuition, program fees, class fees, and administrative service fees and charges, such as service fees for credit card payments and late registration charges. Although NAU considers resident undergraduate students who enroll in seven credit hours as full-time students, the mandatory Information Technology fee rate presented here is for students enrolled in 12 credit hours. Students enrolled in fewer than 12 credit hours pay a reduced rate depending on the number of credit hours in which they are enrolled. This is a one-time fee charged to incoming students only. Source: Auditor General staff review of ABOR materials and each university’s website for the fall 2017 and spring 2018 semester fee amounts for incoming freshman students. Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE b-4 APPENDIX C ASU, NAU, and UA specific financial tables and revenue composition figures Arizona State University (ASU), Northern Arizona University (NAU), and the University of Arizona (UA) receive revenue from the tuition and fees they charge to students and from other sources, such as State General Fund appropriations, government grants and contracts, and private gifts, grants, and contracts. In fiscal year 2017, the universities collectively received approximately $5.1 billion in total revenue, with ASU, NAU, and UA receiving approximately $2.4 billion, $578 million, and $2.1 billion in revenue, respectively (see Tables 9, 10, and 11, pages c-2 through c-6, for each university’s financial table). Total university revenue has increased since fiscal year 2007 and the composition of that revenue has changed (see Figures 2, 3, and 4, pages c-3 through c-7, for how each university’s revenue and the composition of that revenue has changed between fiscal year 2007 and fiscal year 2017). Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE c-1 Table 9 Schedule of revenue sources and expenses for ASU Fiscal years 2015 through 2017 (In thousands) Revenue sources Student tuition and fees1 Government grants and contracts State General Fund appropriations2 Sales and services3 Private gifts, grants, and contracts State share of sales taxes4 Other5 Total revenue sources Expenses Education and general: Instruction Academic support Research Scholarships and fellowships Institutional support Student services Operation and maintenance of plant Public service Total educational and general Auxiliary enterprises3 Depreciation Interest on debt Other Total expenses Excess of revenues over expenses 1 2 3 4 5 2015 2016 2017 $1,029,146 352,148 358,525 212,238 107,099 26,526 31,608 2,117,290 $1,166,644 376,175 298,531 219,257 157,526 31,075 39,820 2,289,028 $1,260,948 379,749 314,002 243,340 150,970 31,326 61,508 2,441,843 686,397 247,700 244,763 136,675 151,613 98,491 102,167 36,201 1,704,007 143,184 114,617 53,428 9,814 2,025,050 $ 92,240 749,722 265,540 261,055 152,802 155,172 111,018 108,454 36,807 1,840,570 147,562 116,381 59,972 16,039 2,180,524 $ 108,504 810,656 294,706 267,303 187,124 152,226 123,377 116,456 35,378 1,987,226 154,794 123,705 69,135 7,610 2,342,470 $ 99,373 Reported student tuition and fee amounts were reduced for scholarship allowances. This means the tuition and fees ASU charged to students for the full cost of services provided were reduced by certain student grants or scholarships awarded to some of those students and used to pay for some or all of their tuition and fees. The deducted grants or scholarships include federal financial aid awarded to students. State General Fund appropriations includes appropriations ASU received for the Arizona Financial Aid Trust Fund and capital debt service on research infrastructure projects. The Arizona Financial Aid Trust Fund and research infrastructure revenues are not available for general education use. Sales and services revenue includes charges for goods or services provided to students, faculty, staff, or the public. The revenues collected were for self-supporting activities and should therefore pay for all the costs of providing the goods or services. For example, amounts collected for food services and residence halls are accounted for as sales and services revenue. The auxiliary enterprises expenses generally include the costs for providing these goods and services. According to ABOR’s website, the state share of sales tax revenue is ASU’s portion of Education 2000 (Proposition 301) sales tax monies that help pay for technology and research initiatives. The Board administers these monies and awards them to ASU based on ASU’s funding requests for specific initiatives. Other revenue includes commitments, grants, and private gifts restricted for capital purposes and additions to permanent endowments. Source: Auditor General staff analysis of ASU’s Comprehensive Annual Financial Report for the years ended June 30, 2015 through 2017, and other information provided by ASU. Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE c-2 Figure 2 ASU revenues by source Fiscal years 2007 and 2017 (In millions) Fiscal year 2007 State share of sales tax Other $31.6M $70.5M 2.3% 5.2% Student tuition and fees $402.8M 29.7% Sales and services $163.8M 12.0% Total revenue: $1,357.9M Government grants and contracts $189.6M 14.0% Fiscal year 20171 Total revenue: $2,441.8M Private gifts, grants, and contracts $66.3M 4.9% State General Fund appropriations $433.3M 31.9% State share of sales tax Other Private gifts, grants, $31.3M $61.5M and contracts 1.3% $151.0M 2.5% 6.2% Sales and services $243.4M 10.0% Student tuition and fees $1,260.9M 51.6% State General Fund appropriations $314.0M 12.9% Government grants and contracts $379.7M 15.5% 1 See footnotes from Table 9 on page c-2. Source: Auditor General staff analysis of ASU’s Comprehensive Annual Financial Report for the years ended June 30, 2007, 2016, and 2017, and other information provided by ASU. Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE c-3 Table 10 Schedule of revenue sources and expenses for NAU Fiscal years 2015 through 2017 (In thousands) Revenue sources Student tuition and fees1 State General Fund appropriations2 Government grants and contracts Sales and services3 Private gifts, grants, and contracts State share of sales taxes4 Other5 Total revenue sources Expenses Education and general: Instruction Institutional support Student services Academic support Research Scholarships and fellowships Operation and maintenance of plant Public service Total educational and general Auxiliary enterprises3 Depreciation Interest on debt Total expenses Excess (deficit) of revenues over expenses 1 2 3 4 5 2015 2016 2017 $205,550 117,853 81,946 55,045 15,825 13,267 34,175 523,661 $217,047 100,126 88,914 56,886 16,531 13,827 36,987 530,318 $237,930 104,352 94,335 60,447 18,423 13,752 48,841 578,080 167,080 57,141 50,335 36,182 25,461 29,068 25,779 27,009 418,055 37,706 35,123 22,723 513,607 $ 10,054 169,385 52,447 53,834 40,506 30,142 31,485 29,790 28,163 435,752 38,071 37,964 27,187 538,974 ($ 8,656) 176,334 59,238 54,246 41,074 36,068 35,290 31,003 28,866 462,119 41,067 41,538 28,144 572,868 $ 5,212 Reported student tuition and fee amounts were reduced for scholarship allowances. This means the tuition and fees NAU charged to students for the full cost of services provided were reduced by certain student grants or scholarships awarded to some of those students and used to pay for some or all of their tuition and fees. The deducted grants or scholarships include federal financial aid awarded to students. State General Fund appropriations includes appropriations NAU received for the Arizona Financial Aid Trust Fund and capital debt service on research infrastructure projects. The Arizona Financial Aid Trust Fund and research infrastructure revenues are not available for general education use. Sales and services revenue includes charges for goods or services provided to students, faculty, staff, or the public. The revenues collected were for self-supporting activities and should therefore pay for all the costs of providing the goods or services. For example, amounts collected for food services and residence halls are accounted for as sales and services revenue. The auxiliary enterprises expenses generally include the costs for providing these goods and services. According to ABOR’s website, the state share of sales tax revenue is NAU’s portion of Education 2000 (Proposition 301) sales tax monies that help pay for technology and research initiatives. The Board administers these monies and awards them to NAU based on NAU’s funding requests for specific initiatives. Other revenue includes commitments, grants, and private gifts restricted for capital purposes and additions to permanent endowments. Source: Auditor General staff analysis of NAU’s Comprehensive Annual Financial Report for the years ended June 30, 2015 through 2017. Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE c-4 Figure 3 NAU revenues by source Fiscal years 2007 and 2017  (In millions) State share of sales tax $16.9M 4.6% Fiscal year 2007 Student tuition and fees $89.2M 24.3% Sales and services $38.6M 10.5% Total revenue: $367.0M Government grants and contracts $55.7M 15.2% State General Fund appropriations $139.5M 38.0% State share of sales tax $13.8M 2.4% Fiscal year 20171 Private gifts, grants, and contracts $9.4M 2.6% Other $17.7M 4.8% Private gifts, grants, and contracts $18.4M 3.2% Other $48.8M 8.4% Sales and services $60.5M 10.5% Total revenue: $578.1M Student tuition and fees $237.9M 41.1% Government grants and contracts $94.3M 16.3% State General Fund appropriations $104.4M 18.1% 1 See footnotes from Table 10 on page c-4. Source: Auditor General staff analysis of NAU’s Comprehensive Annual Financial Report for the years ended June 30, 2016 and 2017. Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE c-5 Table 11 Schedule of revenue sources and expenses for UA Fiscal years 2015 through 2017 (In thousands) Revenue sources Student tuition and fees1 Private gifts, grants, and contracts Government grants and contracts State General Fund appropriations2 Sales and services3 State share of sales taxes4 Other5 Total revenue sources Expenses Education and general: Instruction Research Academic support Institutional support Public service Operation and maintenance of plant Student services Scholarships and fellowships Total educational and general Auxiliary enterprises3 Depreciation Interest on debt Total expenses Excess of revenues over expenses 1 2 3 4 5 2015 2016 2017 $ 556,477 378,939 394,296 284,896 255,176 24,964 147,387 2,042,135 $ 610,450 452,469 381,839 253,731 259,644 25,025 57,720 2,040,878 $ 655,530 403,829 400,542 269,885 262,249 27,618 90,134 2,109,787 417,300 421,973 264,336 136,347 78,231 87,079 47,187 57,158 1,509,611 167,150 124,870 46,293 1,847,924 $ 194,211 460,005 391,122 344,380 129,501 78,604 84,418 53,033 51,808 1,592,871 164,187 125,455 49,748 1,932,261 $ 108,617 459,357 397,512 314,480 146,185 89,221 87,925 56,022 54,884 1,605,586 164,539 132,726 51,253 1,954,104 $ 155,683 Reported student tuition and fee amounts were reduced for scholarship allowances. This means the tuition and fees UA charged to students for the full cost of services provided were reduced by certain student grants or scholarships awarded to some of those students and used to pay for some or all of their tuition and fees. The deducted grants or scholarships include federal financial aid awarded to students. State General Fund appropriations includes appropriations UA received for the Arizona Financial Aid Trust Fund and capital debt service on research infrastructure projects. The Arizona Financial Aid Trust Fund and research infrastructure revenues are not available for general education use. Sales and services revenue includes charges for goods or services provided to students, faculty, staff, or the public. The revenues collected were for self-supporting activities and should therefore pay for all the costs of providing the goods or services. For example, amounts collected for food services and residence halls are accounted for as sales and services revenue. The auxiliary enterprises expenses generally include the costs for providing these goods and services. According to ABOR’s website, the state share of sales tax revenue is UA’s portion of Education 2000 (Proposition 301) sales tax monies that help pay for technology and research initiatives. The Board administers these monies and awards them to UA based on UA’s funding requests for specific initiatives. Other revenue includes commitments, conveyances, grants, and private gifts restricted for capital purposes and additions to permanent endowments. Source: Auditor General staff analysis of UA’s Comprehensive Annual Financial Report for the years ended June 30, 2015 through 2017, and other information provided by UA. Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE c-6 Figure 4 UA revenues by source Fiscal years 2007 and 2017 (In millions) State share of sales tax $30.7M 2.2% Fiscal year 2007 Private gifts, grants, and contracts $121.8M 8.8% Student tuition and fees $210.5M 15.2% Other $92.6M 6.6% Sales and services $168.4M 12.2% Total revenue: $1,385.4M Government grants and contracts $358.4M 25.9% State General Fund appropriations $403.0M 29.1% State share of sales tax $27.6M 1.3% Fiscal year 20171 Other $90.1M 4.3% Sales and services $262.2M 12.4% Student tuition and fees $655.6M 31.1% State General Fund appropriations $269.9M 12.8% Total revenue: $2,109.8M Private gifts, grants, and contracts $403.8M 19.1% 1 Government grants and contracts $400.6M 19.0% See footnotes from Table 11 on page c-6. Source: Auditor General staff analysis of UA’s Comprehensive Annual Financial Report for the years ended June 30, 2016 and 2017 and other information provided by UA. Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE c-7 Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE c-8 APPENDIX D Tuition and fees at peer institutions In 2009, the Arizona Board of Regents (ABOR) approved a list of 15 peer institutions of higher education for each of the State’s universities—Arizona State University (ASU), Northern Arizona University (NAU), and the University of Arizona (UA)—to use for comparative purposes when preparing various analyses and proposals for ABOR’s approval. Specifically, ABOR and the universities collaborated to establish lists of peer institutions based on characteristics such as student and faculty characteristics, research capability, and academic programs. ABOR’s fee-setting policies require the universities to include information about their peer institutions when proposing certain fees to ABOR for approval. For example, ABOR’s fee-setting policies require that any proposal to charge differential tuition/program fees include information on similar fees at peer institutions. Table 12 presents information about base tuition, mandatory fees, and other nonacademic fees at the State’s universities and a randomly selected sample of three peer institutions each for ASU, NAU, and UA (see Appendix E, page e-2, for information about the methods auditors used to select the sample of peer institutions). Table 12 Incoming full-time resident undergraduate freshman base tuition, mandatory fees, and other nonacademic fees charged by the State’s universities and selected peer institutions1,2 Fall 2017 and spring 2018 semesters Arizona State University University of Maryland, College Park3 University of Washington, Seattle The Ohio State University Northern Arizona University4 Northern Illinois University3 Ohio University3 Kent State University University of Arizona1 University of California, Los Angeles3 University of Illinois at Urbana-Champaign3 University of North Carolina at Chapel Hill 1 2 3 4 Base tuition Mandatory and other fees $9,834 8,481 9,909 9,717 10,038 9,465 10,536 8,393 10,860 11,502 12,036 7,019 $ 958 3,854 1,065 874 1,172 4,886 3,360 1,769 1,508 4,425 3,832 1,986 Total $10,792 12,335 10,974 10,591 11,210 14,351 13,896 10,162 12,368 15,927 15,868 9,005 Number of mandatory and other fees 8 11 5 5 7 4 3 2 11 13 8 25 The tuition and mandatory fee rates included in this table are for incoming full-time freshmen at the indicated university’s main campus, unless the campus is otherwise specified. Depending on the peer university, “full-time” status ranges from 12 to 15 credit hours. Additionally, some fees included in this table are one-time fees charged to incoming students only. This does not include differential tuition, program fees, class fees, and administrative service fees and charges, such as service fees for credit card payments and late registration charges. Student fees include mandatory student health insurance for which some students may request a waiver if they meet their university’s specific requirements for private health insurance. Includes a $150 transportation fee that is charged to students who do not purchase a parking pass. Source: Auditor General staff analysis of tuition and fees information obtained from ASU’s, NAU’s, UA’s, and peer institutions’ websites. Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE d-1 Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE d-2 APPENDIX E Methodology Auditors used various methods to study the issues addressed in this report. These methods included reviewing applicable state laws; fee-setting policies, procedures, forms, and other documents from the Arizona Board of Regents (ABOR) and the State’s universities—Arizona State University (ASU), Northern Arizona University (NAU), and the University of Arizona (UA); ABOR meeting materials and minutes; emails from ABOR and university staff and information obtained from ABOR and the universities’ websites; and interviewing ABOR and university staff. In addition, auditors used the following specific methods to address the audit objectives: • To determine the fees’ revenues, expenses, unspent balances, and examples of expenses for a sample of student fees the universities charged in fiscal year 2016 included in appendix A, auditors reviewed ASU’s, NAU’s, and UA’s fiscal year 2016 general ledger downloads and obtained additional information from each university. For revenue and unspent balance information auditors obtained from each university, auditors determined reasonableness of the amounts provided using enrollment information and financial information in each university’s general ledger. In addition, auditors reviewed university fee proposals for the selected fees. • To assess whether the universities set student fees in line with university processes, ABOR requirements, and fee-setting standards and guidelines, auditors reviewed ASU’s, NAU’s, and UA’s fee proposals and other documentation for a sample of student fees the universities charged in fiscal year 2016. In addition, auditors reviewed information about public colleges and universities’ tuition and fee-setting policies from the State Higher Education Executive Officers Association, as well as guidelines and best practices for government fee-setting from the Arizona State Agency Fee Commission, the Government Finance Officers Association, the Mississippi Joint Legislative Committee on Performance Evaluation and Expenditure Review, the U.S. Government Accountability Office, and the U.S. Office of Management and Budget.26 Further, to obtain information about other public universities’ fee-setting processes, auditors interviewed officials and reviewed documents and websites from four judgmentally selected large public universities in other states—Colorado State University, the University of California, Los Angeles, the University of Texas at Austin, and the University of Utah. • Auditors selected the sample of student fees the universities charged in fiscal year 2016 as follows: ○○ Mandatory fees—Auditors judgmentally selected two mandatory fees from each university, based on unaudited lists of mandatory fees obtained from each university. Auditors selected one mandatory fee that all three universities charged—the Information Technology fee—and one fee unique to each university. Specifically, auditors selected two of the eight ASU mandatory fees, two of the seven NAU mandatory fees, and two of the eight UA mandatory fees. 26 Arizona State Agency Fee Commission. (2012). Arizona State Agency Fee Commission report. Phoenix, AZ; Government Finance Officers Association. (2014). Best practice: Establishing government charges and fees. Chicago, IL; Michel, R.G. (2004). Cost analysis and activitybased costing for government. Chicago, IL: Government Finance Officers Association; Mississippi Joint Legislative Committee on Performance Evaluation and Expenditure Review. (2002). State agency fees: FY 2001 collections and potential new fee revenues. Jackson, MS; Carlson, A. (2013). Survey of state tuition, fees, and financial assistance policies for public colleges and universities. Boulder, CO: State Higher Education Executive Officers; Armstrong, J., Carlson, A., & Laderman, S. (2017). The state imperative: Aligning tuition policies with strategies for affordability. State tuition, fees, and financial assistance policies 2017. Boulder, CO: State Higher Education Executive Officers; U.S. Government Accountability Office. (2008). Federal user fees: A design guide. Washington, DC; and U.S. Office of Management and Budget. (1993). OMB Circular No. A 25, revised. Washington, DC. Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE e-1 ○○ Differential tuition/program fees—Auditors judgmentally selected two differential tuition and/or program fees, based on unaudited lists of differential tuition/program fees provided by each university. Auditors selected one differential tuition or program fee that all three universities charged—undergraduate business—and one fee unique to each university. Specifically, auditors selected 1 of the 10 ASU differential tuitions and 1 of the 82 ASU program fees, 2 of the 22 NAU program fees, and 1 of the 7 UA differential tuitions and 1 of the 62 UA program fees. ○○ Classes with fees—Auditors randomly selected a stop and go sample of 30 class prefixes at each of the universities, based on unaudited lists of classes with fees provided by the universities. Specifically, in the lists of classes with fees the universities provided, each class was designated with a six-character prefix, such as AME 394. However, some classes shared a six-character prefix. For example, at NAU, 62 different physical education classes shared the same prefix. To ensure that each prefix had an equal probability of selection, auditors counted each prefix once when determining the total population of classes with fees for selecting the sample. This resulted in total populations of unique class prefixes as follows: 3,123 at ASU, 928 at NAU, and 1,096 at UA. Auditors randomly selected 30 class prefixes from each of these populations. Auditors tested 12 of the selected class prefixes at each university. In cases where selected class prefixes designated multiple classes with different subject matter and fee amounts, such as ART 496 and CSC 127 at UA, auditors reviewed these as separate classes with fees.27 In addition, auditors selected additional class prefixes from the sample for test work based on concerns auditors identified during the audit. Consequently, auditors tested a total of 14 ASU classes with fees,13 NAU classes with fees, and 16 UA classes with fees. In addition, auditors also reviewed one additional judgmentally selected NAU class fee based on concerns that auditors identified. The sampled fees included classes from 8 of 17 colleges at ASU, 5 of 8 colleges at NAU, and 7 of 21 colleges at UA. ○○ Other fees and charges—During the course of the audit, auditors determined that NAU and UA had established an additional fee for which they had not received ABOR approval. Although these fees appeared to be similar to mandatory fees, NAU and UA had determined that they did not fall within ABOR’s defined fee categories. Auditors included these two additional fees in their sample; however, because UA’s Student Support fee was not charged until fiscal year 2017, auditors did not review the revenues and expenses for this fee. In addition, ASU charges the Resident Surcharge fee in addition to tuition and fees. Auditors reviewed this Resident Surcharge fee because NAU and UA do not charge a similar surcharge fee. • To determine the total number of fees charged by each university in fiscal year 2016, auditors analyzed unaudited lists of mandatory fees, differential tuition, program fees, and classes with fees provided by the universities. • To obtain information for the Introduction and Appendix C, auditors analyzed ASU’s, NAU’s, and UA’s fiscal years 2015 through 2017 Comprehensive Annual Financial Report; ASU’s fiscal year 2007 Comprehensive Annual Financial Report; Office of the Auditor General’s Arizona University System: Full-Time Equivalent Student Enrollment Report for fiscal years 2007 and 2017; and ASU, NAU, and UA’s fiscal year 2016 general ledger downloads. Auditors also obtained tuition bills from students and examples of tuition bills from the universities. Further, auditors reviewed a 2011 Office of the Auditor General report on ABOR’s Tuition-setting practices.28 Finally, auditors reviewed a September 2017 lawsuit filed by the Arizona Attorney General’s Office against ABOR. • To obtain information for Appendix D, auditors randomly selected a sample of three peer institutions each for ASU, NAU, and UA from a list of peers approved by ABOR and reviewed tuition and fees information from the websites of these peer institutions. 27 One prefix auditors selected from UA was MUSI 285, an individual music studies class that charged a flat rate of $125 per semester for private musical instruction specific to the enrolled student’s musical instrument. Because the fee amount was the same and the class was for private instruction, auditors counted this as one class with a fee. 28 Office of the Auditor General Report No. 11-11, A Questions-and-Answers document on the Arizona Board of Regents—Tuition Setting for Arizona Universities. Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE e-2 • Auditors’ work on internal controls included reviewing and assessing the universities’ processes for accounting for student fee revenue collections and spending through review of each university’s fiscal year 2016 general ledger download and other information obtained from each university. Auditors also reviewed the universities’ policies and procedures for ensuring compliance with ABOR policies and guidance, and where applicable, testing the universities’ compliance with these policies and procedures. The results of auditors’ work are reported in Finding 1. Auditors conducted this performance audit of the universities’ fee-setting processes in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The Auditor General and staff express appreciation to ABOR’s chair, members, president, and staff and ASU’s, NAU’s, and UA’s presidents and staff for their cooperation and assistance throughout the audit. Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE e-3 Arizona Auditor General Arizona's Universities—Fee-Setting Processes January 2018 Report 18-101 PAGE e-4 January 18, 2018        Debra K. Davenport  Auditor General  2910 N. 44th Street  Phoenix, AZ 85018    RE: Arizona Board of Regent’s Response to the Arizona Auditor General’s Report on Arizona’s  Universities Fee Setting Practices    Dear Ms. Davenport,    On behalf of the Arizona Board of Regents, I am pleased to respond to the audit report,  Arizona’s Universities – Fee‐Setting Processes.   We appreciate this opportunity to outline steps the Arizona Board of Regents (ABOR) has taken  in recent years and discuss future reforms that are underway to ensure fee setting is as  transparent as possible.   ABOR Advances Reforms for Student Success, Increased Transparency   Without a doubt, public higher education is an investment that pays dividends throughout an  individual's lifetime, from increased wages to a better quality of life. In fact, Arizonans with an  undergraduate degree earn a median wage that is approximately $20,000 more each year than  their peers with a high‐school diploma, underscoring the value of our public universities ‐ not  only to our graduates, but to Arizona's overall workforce and economy.   Arizona's students and families know full well that state financial support of public higher  education in Arizona has been dramatically reduced over the past decade, and that, in turn,  prompted tuition increases. The board has worked hard to significantly slow tuition increases in  the past several years while enhancing tuition predictability for students and families through  tuition pledge and guarantee programs at our universities.  In keeping with the mandate of the Arizona Constitution ‐and knowing our students have their  choice of universities we are keeping a sharp eye on our costs. It is paying off — today,   REGENTS Chair Bill Ridenour, Paradise Valley • Ron Shoopman, Tucson • Ram Krishna, Yuma • Jay Heiler, Paradise Valley Rick Myers, Tucson • Larry Penley, Phoenix • Lyndel Manson, Flagstaff • Karrin Taylor Robson, Phoenix STUDENT REGENTS: Vianney Careaga, UA • Aundrea DeGravina, ASU EX-OFFICIO: Governor Doug Ducey • Superintendent of Public Instruction Diane Douglas ENTERPRISE EXECUTIVE COMMITTEE Board President Eileen I. Klein • ASU President Michael M. Crow • NAU President Rita Cheng • UA President Robert C. Robbins our universities are ranked among the most affordable, efficient and cost‐effective in the  country with the cost to attend lower than peer institutions in other states.   Tuition and fee reforms are priorities for the board and have been for the past several years. As  noted in the report, this pattern of reform and incorporating best practices also applies to fee  setting. During recent years, ABOR took several steps to ensure the appropriateness of  university fees and to provide students transparency into the fee setting process and fee  amounts. Steps included:           Including fee amounts in course catalogues;  Developing and providing online price calculators;  Reviewing the information required in fee setting applications;  Clarifying policy expectations on which fees need ABOR approval;   Clarifying fee use requirements;  Improving fee revenue tracking mechanisms;  Strengthening the internal audit function;   Providing web streaming of public hearings on tuition and fee reform; and  Developing student boards to review fee proposals.    In addition, ABOR restructured the process it uses to review tuition and fee proposals. As part of  this new process, ABOR receives and reviews detailed explanations of fee proposals including  budget information and holds a public‐tuition and fee workshop during which tuition and fee  proposals are carefully presented and reviewed.   As a result of these efforts and as noted by the Auditor General, ABOR employs many fee setting  and management best practices.  ABOR is Continuously Implementing Additional Reforms   The board is currently reviewing new reforms to improve transparency around the tuition and  fee‐setting process, and to ensure even more cost predictability for students and families.  Additional policy reforms may include establishment of a fee sunset‐review process; increasing  transparency of the universities’ fee development process; development of a summary/guide  for students detailing the fee setting process and identifying key contact personnel. In 2014, the  board rejected proposed policy changes that would have delegated more fee‐setting authority  to the presidents.  The recommendations from the Auditor General fit well within our continued efforts to  continuously work to improve fee and tuition setting processes.   Response to Recommendations  ABOR appreciates the recommendations made regarding fee setting at our universities. We  recognize the exhaustive efforts made by the Auditor General to identify best practices in fee  setting, including university and higher education organizations. As you have discovered, there is  no set of industry standards particular to public universities. In every instance, we want to  adhere to available best practices as we set our policies.       However, some best practices identified from other sources or sectors may not always be  applicable. We have numerous legal and other obligations to consider in fee setting. Therefore,  it is ultimately our policies that are the standard against which we expect our universities to  operate.   In the report are six specific recommendations for ABOR. As noted in the body of the report, we  agree with and will work to implement these recommendations. Each year the tuition and fee  setting process begins in late January and concludes with the adoption of tuition and fees at the  April board meeting. As a number of the audit’s recommendations impact that process, ABOR  will move as quickly as possible to incorporate those recommendations into this year’s tuition  and fee setting process as follows:   Recommendation 1.1 asks ABOR to determine if the use of class fee revenues for central  administrative purposes is appropriate. ABOR will address this question at the February  2018 board meeting.   Recommendation 1.2 asks ABOR to clarify and expand the information collected and  analyzed as part of a new fee proposal. This additional information will immediately be  incorporated into the fee approval process.   Recommendation 1.3 asks ABOR to clarify expectations for student input on fee  proposals. ABOR will thoroughly review student input policies and adopt appropriate  changes in the upcoming months.    Recommendation 1.4 asks ABOR to establish a periodic review of university fee setting  processes. While ABOR currently uses the internal audit process to review fee processes  and practices, the board will consider expansions of its reviews including the potential  establishment of a fee sunset process over the next several months.   Recommendation 1.5 asks ABOR to clarify which fees need to be reviewed and  approved by the board prior to implementation. ABOR will begin this process at the  February 2018 board meeting.   Recommendation 1.6 asks ABOR to consider other existing fees students must pay when  establishing new fees. ABOR will immediately adjust its fee setting process to  incorporate this information.     Four of the six recommendations will be implemented prior to setting tuition and fees for the  2018 – 2019 academic year. All of the recommendations will be in place before the 2019 – 2020  cycle. As we work through this process, if for some reason the precise implementation of the  recommendation is not feasible or optimal, ABOR will work with your office to implement  solutions that meet the spirit of the audit recommendation. The audit also provides a number of  university specific recommendations, and ABOR will work with the universities to appropriately  address these recommendations.  Finally, with the public higher education landscape nationally undergoing significant changes  since the Great Recession, it is worth noting that the Auditor General last conducted university  performance audits one decade ago. During this time the relationship between the state and  ABOR has notably changed.   The recession forced the state to make major changes in its financing models, including a  general divestment from the public universities. Ten years ago, the state funded more than 70  percent of the cost of education, today the state provides 34 percent. Overall, state support  represents approximately 13 percent of total university revenue.  This change in relationship suggests the information and outcomes the state seeks through the  performance audit process have also changed. After this performance audit cycle has concluded,  we recommend a meeting with ABOR, your office and members of the Joint Legislative Audit  Committee to discuss future audit goals and the best approaches to identify and obtain these  goals to the satisfaction of all parties involved.  Conclusion  We appreciate your office’s review of our fee setting practices and look forward to ABOR’s  continual review of the tuition and fee setting process to ensure Arizona’s public universities  remain efficient and affordable for students.   We thank you for the professionalism of the audit team during the audit process and appreciate  the team’s  insights and efforts to understand university financial structures, the role of fees  within those financial structures, and the protocols used to ensure appropriate use of fee  revenue.   We believe the report both reflects the depth and efficacy of our existing protocols and makes  appropriate recommendations for improvement. On behalf of Arizona’s students and families,  the board will continue to strongly advocate for the State of Arizona to be an equal partner in  the funding of public higher education for residents of our state.  Sincerely,  Eileen I. Klein   President  m' Arizona State University January 17, 2018 Debbie Davenport Auditor General Office of the Auditor General 2910 North 44th Street, Suite 410 Phoenix, AZ 85018 Dear Ms. Davenport: On behalf of Arizona State University (ASU), I am pleased to respond to the performance audit of Fee-Setting Processes at ASU. We are in agreement with all of your findings and our responses to your recommendations are enclosed. The report represents a thoughtful analysis of Fee-Setting processes. My staff and I wish to thank you and your staff for the professional manner in which this audit was performed. We are continually looking for ways to improve our program and operations. Sincerely, Michael M. Crow President Enclosure cc: Mark Searle, Executive Vice President and University Provost Morgan R. Olsen, Executive Vice President and CFO Office of the President Fulton Center 410, 300 University Drive, PO Box 877705, Tempe, AZ 85287-7705 p: 480-965-8972 f: 480-965-0865 president.asu.edu ARIZONA STATE UNIVERSITY Response to Auditor General?s Report on Fee-Setting Processes Finding 1: ASU has established some fee-setting processes consistent with best practices, but should further enhance its processes Recommendation 1.1 1.6: Not applicable to ASU. Recommendation 1.7: ASU should develop and implement written policies, procedures, or other guidance to: Recommendation 1.7a: Direct academic departments? reviews of class fee revenue spending to help ensure that fee revenues are used for approved purposes, including specifying the frequency of these reviews, defining central university administration?s oversight role and responsibilities for theSe reviews, and providing guidance on reviewing spending for all class fees to determine if expenses were for approved purposes, including reviewing class fees with revenues that are deposited into combined accounts to determine whether the justification for combining the accounts is consistent with the approved purposes of the individual fees and that fee revenues were spent for shared resources as outlined in the justification to combine fee revenues; ASU Response: The finding of the Auditor General is agreed to and the audit recommendation will be implemented. Response explanation: Existing processes facilitate the tracking of expenditures against approved purposes, including instances where class fee revenue is combined. Accountability for the monitoring of class fee uses is decentralized to the departments and colleges at ASU with periodic central review of balances. While accountability will remain at the department or college level, the Provost Office will develop and implement minimum review procedures that must be performed and submitted to the Provost Office on a defined periodic basis. In addition, similar review procedures will be developed and implemented by the Provost Office to provide a secondary review and formalized governance at an enterprise level. Recommendation 1.7b: Consider all required fees students may potentially pay when proposing new fees or increases to existing fee rates and to provide this information to those responsible for reviewing and approving the fees; and ASU Response: The finding of the Auditor General is agreed to and the audit recommendation will be implemented. Resnonse explanation: ASU considers the full impact of tuition and fees at multiple points during our internal processes. Departments consider the impacts of class fees and program fees as a part of covering the costs of instruction and academic support services. For example, as a part of proposing a program fee or differential tuition, multiple schools have eliminated class fees in parallel with the implementation of the program fee or differential tuition. ASU leadership considers the impacts of tuition and fees in total as a part of the process to determine the full set of proposals that will be submitted to ABOR each year, including tuition, mandatory fees, program fees and class fees. We agree that existing reporting could be further enhanced to provide improved systematic information to ASU leadership on all the costs each year and will do so. ARIZONA STATE UNIVERSITY Response to Auditor General?s Report on Fee-Setting Processes Recommendation 1.7c: Conduct regular reviews of all student fees to determine if they are still necessary and set at appropriate rates. ASU Response: The finding of the Auditor General is agreed to and the audit recommendation will be implemented. Response explanation: Accountability for the monitoring of class fee uses is decentralized to the departments and colleges at ASU with periodic central review of balances. While accountability will remain at the department or college level, the Provost Office will develop and implement minimum review procedures that must be performed and submitted to the Provost Office on a defined periodic basis. Similar review procedures will also be developed and implemented by the Provost Office to provide a secondary review and formalized governance at an enterprise level. In addition, the ASU Audit and Advisory department is currently performing an internal audit over the use of class fees. This audit was requested by the ABOR Audit Committee as part of the FY 2018 Internal Audit Plan. Ongoing periodic assurance audits over fee-setting processes will also be performed. Recommendation 1.8: ASU should take steps to ensure that its review of the Student Athletics fee charter is completed as planned, revise its Student Athletics fee procedures and guidance to reflect any changes made to the charter, and implement any new procedures and/or guidance consistent with the revised charter. ASU Response: The finding of the Auditor General is agreed to and the audit recommendation will be implemented. Response explanation: As the report indicates, we believe that the use of funds for student-athlete recruitment was an allowable expense under the charter, based on discussions between student leadership and university administrators at the time the charter was developed. In addition, the 2015-2016 Council of Presidents, leaders of the ASU student government, reported that they conducted the required review of the Athletics Fee which resulted in no concerns noted related to the use of the fee revenue. We do agree that the charter could be clearer with respect to the use of funds for recruitment, and as part of the governance structure established by the charter; university administration will meet with student leadership in 2018 for the biennial review. We will update procedures to reflect the agreement reached with the students. Recommendation 1.9: ASU should take steps to identify and make available opportunities for students to provide input on class fees and/or the process for setting class fees. ASU Response: The finding of the Auditor General is agreed to and a different method of dealing with the finding will be implemented. Response explanation: Class fees are established to offset costs that are necessary for the successful completion of the course objectives as defined by the academic unit offering the course and as approved by the Provost. On a per-class-fee basis, student input is not routinely solicited in setting these fees, as the fees are in support of the defined course objectives, which are not subject to student input. ASU does, of course, solicit and facilitate student input through elected student leadership on a wide range of topics, including among other things the annual setting of stated tuition and mandatory fees, the model for financing the university, and the financial aid model and process. As part of ARIZONA STATE UNIVERSITY Response to Auditor General?s Report on Fee-Setting Processes existing consultation processes with student leadership, we will review the overall purpose for and process of setting class fees. This process will not include soliciting student input on individual class fees, because as stated, class fees are in support of the defined course objective which is not subject to student input. Recommendation 1.10 1.13: Not applicable to ASU. RE: Response to Auditor General’s Report, Page 1 January 17, 2018 Debra K. Davenport Auditor General 2910 N. 44th Street Phoenix, AZ 85018 RE: Response to Auditor General’s Report on Arizona’s public universities’ fee setting process Dear Ms. Davenport: This letter provides Northern Arizona University’s response to the Audit Report on the universities’ fee setting process. NAU will work closely with the ABOR Office and Board of Regents to ensure that our policies and practices related to fees continue to be aligned with ABOR policies. NAU will review existing policies with a focus on continuing to enhance our practices to ensure transparency and accountability and further strengthen oversight. While NAU’s practices have followed current ABOR policies, efforts to identify areas for process improvements are not new. NAU has most recently worked to streamline the collection of data associated with fee requests using an electronic routing system and eliminated and reduced several hundred class fees over the past two years. NAU’s practices already incorporate mechanisms as part of the overall tuition and fee setting process to review fee proposals to project and identify expected costs, incorporate student input and review the ongoing need of existing fees. NAU’s Internal Audit department is currently completing a class fee audit this fiscal year per ABOR’s Audit Committee request that forms part of the overall review framework of class fees. NAU will continue to engage in efforts such as these to drive process improvements and we appreciate the OAG feedback as another source of information in that regard. Finding 1: NAU has established some fee-setting processes consistent with best practices, but should further enhance its processes Recommendation 1.1 – 1.9: Not applicable to NAU. RE: Response to Auditor General’s Report, Page 2 Recommendation 1.10: NAU should develop and implement written policies, procedures, or other guidance to: Recommendation 1.10a: Help ensure that class fee revenues deposited into combined accounts are spent for approved purposes and provide the expected benefits to the students who paid the fees; NAU Response: The finding of the Auditor General is agreed to and the audit recommendation will be implemented. Response explanation: NAU’s processes have followed ABOR policies and procedures and NAU will continue to align its policies and procedures with any changes that ABOR implements. To ensure this ongoing alignment, NAU will further enhance and document existing policy and procedures or develop new policies and procedures that are reasonable, practical and enforceable. Recommendation 1.10b: Outline its process for obtaining student input for mandatory fees and program fees, and identify and make available opportunities for students to provide input on class fees and/or the process for setting class fees; NAU Response: The finding of the Auditor General is agreed to and the audit recommendation will be implemented. Response explanation: NAU’s processes have followed ABOR policies and procedures and NAU will continue to align its policies and procedures with any changes that ABOR implements. To ensure this ongoing alignment, NAU will further enhance and document existing policy and procedures or develop new policies and procedures that are reasonable, practical and enforceable. Recommendation 1.10c: Consider all required fees students may potentially pay when proposing new fees or increases to existing fee rates and to provide this information to those responsible for reviewing and approving the fees; NAU Response: The finding of the Auditor General is agreed to and the audit recommendation will be implemented. Response explanation: NAU’s processes have followed ABOR policies and procedures and NAU will continue to align its policies and procedures with any changes that ABOR implements. To ensure this ongoing alignment, NAU will further enhance and document existing policy and procedures or develop new policies and procedures that are reasonable, practical and enforceable. Recommendation 1.10d: Outline a method for determining the costs of the equipment, supplies, items, or services needed for the class, including any administrative or other costs that are shared between multiple fees, and require this information to be submitted with class fee proposals. NAU should also require central university administration staff responsible for approving class fees to review the cost information submitted with class fee proposals; and NAU Response: The finding of the Auditor General is agreed to and the audit recommendation will be implemented. RE: Response to Auditor General’s Report, Page 3 Response explanation: NAU’s processes have followed ABOR policies and procedures and NAU will continue to align its policies and procedures with any changes that ABOR implements. To ensure this ongoing alignment, NAU will further enhance and document existing policy and procedures or develop new policies and procedures that are reasonable, practical and enforceable. Recommendation 1.10e: Direct academic departments’ review of class fee spending to help ensure that fee revenues are used for approved purposes, including how class fee spending reviews will be incorporated into NAU’s existing annual budgeting and sunset review processes, and should specify the information that should be reviewed and considered as part of the sunset review process to determine if the fee is still necessary and if the rate is still appropriate and central university administration’s oversight role and responsibilities for these reviews. NAU Response: The finding of the Auditor General is agreed to and the audit recommendation will be implemented. Response explanation: NAU’s processes have followed ABOR policies and procedures and NAU will continue to align its policies and procedures with any changes that ABOR implements. To ensure this ongoing alignment, NAU will further enhance and document existing policy and procedures or develop new policies and procedures that are reasonable, practical and enforceable. Recommendation 1.11 – 1.13: Not applicable to NAU. Sincerely, Rita Hartung Cheng President THE UNIVERSITY OF ARIZONA 1200 E. University Blvd. Rm. 200 Executive Of?ce Po. Box 210021 of the President Tucson, AZ 85721-0021 A Off: 520-621-5511 Fax: 520-621-9323 president.arizona.edu January 17, 2018 Debra K. Davenport, CPA Auditor General State of Arizona Of?ce of the Auditor General 2910 44th Street Suite #410 Phoenix, Arizona 86018 Dear Ms. Davenport, I have reviewed the preliminary report of the Arizona?s Universities ee-Setting Processes performance audit and appreciate the effort put in by your auditing team to not only conduct the audit, but to respond to the comments and suggestions provided by the University of Arizona (UA) throughout. This report validates the excellent work already being done by the UA to: 0 Establish student fees only in cases where the cost of program delivery, service provision, or in?class instruction has been analyzed and dictates an additional fee amount to ensure the high degree of quality expected by UA students 0 Follow a documented, transparent fee-setting process - Engage student leadership and the broader UA community in the review and approval of student fees 0 Consider the cumulative effect of fees of all types on the total cost of attendance for students 0 Ensure that fee revenues are accountable to the period in which they are collected and for the purposes they are intended The few exceptions to this, as identi?ed by the auditors in the report, represent an opportunity for the UA to improve upon its policies and procedures, and continue to lead the way in meeting best practices and standards where fee-setting is concerned. As such, the UA agrees with each relevant UA ?nding and will implement the recommendations provided. I would like to speci?cally thank the UA staff that worked diligently throughout this performance audit to provide data, documentation, and materials to the audit team, participated in interviews with audit staff, addressed follow-up requests within speci?ed timelines, and helped to shape the ?nal report: 0 Dr. Allison Vaillancourt, Vice President for Business Affairs and Human Resources, and Audit Coordinator 0 Dr. Gail Burd, Senior Vice Provost for Academic Affairs 0 Martha Sesteaga, Program Manager, Academic Affairs A Debra K. Davenport January 17, 2018 Page2 • • • • Dr. Melissa Vito, Senior Vice President for Student Affairs, Enrollment Management, and Strategic Initiatives Joel Hauff, Associate Vice President, Student Affairs and Enrollment Management Gregg Goldman, Senior Vice President for Business Affairs and Chief Financial Officer Kathy Whisman, Associate Vice President and Chief Budget Officer This team is largely responsible for achieving the positive results reviewed by the auditors, and will be the team responsible for ensuring compliance with the recommendations by six months from the published date of the report. Again, thank you for the thorough review of the fee-setting processes at the UA and the opportunity to respond. Sincerely, Robert C. Robbins, M.D. President Finding 1: UA has established some fee-setting processes consistent with best practices, but should further enhance its processes Recommendation 1.1 – 1.10: Not applicable to UA. Recommendation 1.11: UA should continue to implement its process to better account for and review class fee revenues and expenses. UA Response: The finding of the Auditor General is agreed to and the audit recommendation will be implemented. Response explanation: The UA has continued to implement its process to better account for and review class fee revenues and expenses, and will see this project to completion during fiscal year 2018. Recommendation 1.12: If ABOR determines administrative costs are an allowable use of class fee revenues, UA should revise its class fee policies and procedures to indicate that class fee revenues will be spent on administrative costs. UA Response: The finding of the Auditor General is agreed to and the audit recommendation will be implemented. Response explanation: The UA will follow guidance from ABOR in this area and make policy and procedure revisions as necessary. Recommendation 1.13: UA should continue to implement its fee-setting procedures for considering cumulative impact when establishing class fees, and it should develop and implement written policies, procedures, or other guidance for considering cumulative impact when establishing differential tuition/program fees and mandatory fees. UA Response: The finding of the Auditor General is agreed to and the audit recommendation will be implemented. Response explanation: The UA will continue to implement its documented fee-setting procedures for class fees that consider cumulative impact on a student’s cost of attendance. While the UA has routinely considered cumulative impact when establishing mandatory fees, program fees, and differential tuition, it will develop and implement written policies and procedures for those fee types that explicitly document the need to do so and provide guidance on how best to consider cumulative impact. ARIZONA AuditorGeneraI Making a Positive Difference