Audit finds three public colleges rely on mandatory fees

UNION COUNTY, NJ — An audit of three state colleges and universities by the office of the state comptroller found that mandatory fees account for approximately one-third of the cost of attending undergraduate school. Despite the heavy reliance on such fees, none of the three schools had established written policies or procedures to govern how mandatory fees are assessed, the OSC found.

The comptroller’s report, issued on April 27 and entitled, “Controls Over Collection, Allocation and Use of Student Fees at Selected NJ Colleges and Universities,” covered fiscal years 2012 and 2013 and found that three schools — The College of New Jersey, Kean University and William Paterson University —charged its full-time undergraduate students more than $115 million in mandatory fees in fiscal year 2013.

In 2013, the state provided approximately $95 million in appropriations to the three schools.
On average, students at the three schools paid between $3,600 and $4,600 in annual mandatory fees.

Only one school, WPU, was able to provide documentation to OSC justifying its mandatory fee increases. At TCNJ, school officials told the OSC that mandatory fees were not assessed on an individual basis but instead increased at the same percentage as tuition in order to balance the school’s budget.

State Comptroller Philip James Degnan said in a statement that while not currently required by law, written policies would improve oversight of the process used to determine when and how college and university mandatory fees are assessed. “If students are going to be charged thousands of dollars a year on top of their tuition, they deserve to know how their money is going to be spent,” Degnan said. “Establishing public guidelines would allow students to determine whether mandatory fee revenue is being used efficiently and for its intended purpose.”

State colleges and universities in New Jersey have the power to assess mandatory fees as a means to offset expenditures for various student services and activities. Schools are required, however, to provide “comprehensive information” on the costs associated with such fees as well as tuition.

Combined, the three schools audited by OSC collected 25 different fees, under headings such as “student activity,” “technology,” “athletics and recreation” and “student government association.” While each fee includes a description of how the revenue would be used, OSC found that all three schools failed to include “payroll” within those descriptions. Despite this, each school dedicated a portion of its fee revenue toward payroll expenditures and at two of the schools — TCNJ and Kean — payroll represented at least 30 percent of fee revenue.

The audit also found that Kean and TCNJ did not maintain separate funds for each mandatory fee. While not required to maintain such separate accounts, OSC found that the commingling of funds resulted in a lack of transparency about how the funds are spent.

In response to OSC’s findings, both WPU and TCNJ officials said their schools would develop more formal written policies and procedures for mandatory fees assessed in the current fiscal year. All three schools said that they would update the fee descriptions on their websites to indicate that portions of the funds could be used toward personnel costs related to the relevant fees.

Kean University released a statement, saying that the school has been in compliance with the comptroller’s regulations. “Kean University is in compliance with all statutes, regulations and generally accepted accounting principles as put forth by the Governmental Accounting Standards Board, which the Office of the State Comptroller acknowledges on page 13 of
its report,” Kean representatives stated. “The University is audited annually and those audits are public documents, assuring full transparency. Kean University is one of the most affordable comprehensive four-year universities in the State of New Jersey. The OSC has made recommendations to Kean and two other public universities in New Jersey. These recommendations — if considered best practice — should be made standard practice for all public colleges and universities in the state,” Kean maintained.

Michael Klein, CEO of The New Jersey Association of State Colleges and Universities, an advocacy group for eight public institutions in the state, said that it is important to focus on the big picture of college affordability in New Jersey to understand the level of tuition and fees charged by New Jersey’s state colleges and universities. “The state has been cutting appropriations to the senior public colleges and universities for over a decade, despite inflation and rise of costs,” Klein told LocalSource. “If the issue is expense, then I want to focus on the big picture. The level of state funding for these schools has been decreased. State funding per student has gone down 40 percent, yet tuition and fees have not gone up 40 percent.”

Klein, who said that he does not know why these three colleges were selected for a state audit, said that there has been a $76.2 million decrease in funding for the eight schools his group represents, including TCNJ, Kean, WPU, Montclair, Ramapo, Stockton, Thomas Edison, and New Jersey City University, since 2006.

Klein said that it is difficult to delineate what specifically falls under the category of both tuition and fees. “Tuition and fees go together,” said Klein. “Tuition is being used to pay for salaries for faculty, research, facilities. Now you’re trying to delineate what falls under the heading of tuition,” said Klein. “Tuition is supposed to cover costs. Is energy part of educating a student? You need to keep the lights on. Then there are specific needs to augment education, like sports activities. There’s a concern about the description of these fees, rather than the existence of them.”

Assembly Higher Education Committee Chair Mila Jasey issued a statement in response to the audit. “College students in New Jersey are paying some of the highest tuition rates in the country,” said Jasey. “Given the amount of money that students and families are investing in higher education in the state, it is only right that they are made aware of how their hard-earned money is being spent. The audit made clear that this is not happening.”

Jasey called out the schools’ lack of transparency. “The audit found that there is a lack of transparency about how these monies are being used,” said Jasey. “All three schools used these fees to cover payroll expenses without making it clear that the fees were being used for this purpose, and only one out of the three schools audited could justify the increase of its mandatory fees. New Jersey families struggling to put their kids through college deserve to know whether the fees are justified and how the money is actually being spent.”

Jasey has called for a hearing on the matter.
But according to Klein, the state had the 10th largest decrease in the U.S. in higher education between 2005 and 2010 for appropriations per student, according to the most recent State Higher Education Finance report, released in April by the State Higher Education Executive Officers Association. “In addition to the loss of

operating funds, the state colleges and universities had to rely significantly on bond funds backed solely by the institutions until the Building Our Future Bond Act was passed in 2012,” said Klein. “Many student fees are designated specifically to pay the debt service on bonds issued by the institutions.”

Klein said that the state provided no capital funding for higher education between 2003 and 2014, and that New Jersey was one of only five states that provided no capital funding for higher education between 2010 and 2015, according to the National Association of State Budget Officers, State Expenditure Reports.

Klein asserts that despite decreases in appropriations and significant reliance on their own bonding capacity, the leaders of the state’s colleges and universities have mitigated costs for their students.

Klein agrees that although transparency is important, a broader understanding is of equal importance. “Transparency is important and parents and students need to know what they’re paying for,” said Klein. “But equally important is the finance behind these fees. The comptroller has come in with a difference in opinion in how to explain these costs. He’s bringing in what may be a new standard in the way these institutions operate. The institutions have been following all the rules. The issues raised by the comptroller have not been raised by the audits.”

Pam Hersh, also of NJSCU, agrees. “The comptroller is putting out new standards that caught these colleges by surprise,” said Hersh. “He put out new standards of transparency. They were following the letter of the law,” she said of the three schools.

The Assembly’s Higher Education Committee was to meet in Trenton on Thursday, May 12, to receive testimony from invited guests on the comptroller’s report.

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