Follow-up Review of Selected Areas of Financial and Property Administration of Federal City College, District of Columbia Government

Published by the Government Accountability Office on 1971-03-15.

Below is a raw (and likely hideous) rendition of the original report. (PDF)


    Dear Senator Spong:
          Reference    is made to your letter of September 9, 1970,   requesting
    that we review     the progress made by Federal City College in   correcting
    the deficiencies     discussed in our August 12, 1969, report.    The status
    of the matters     covered by our prior mpo~t are discussed in    detail in
    the, subsequent    sections of this report,
           In our prior report, we stated that three bank accounts had been
    opened in commercial banks in the name of the Federal City College.      We
    took the position that the enabling legislation   for the college required
    the funds that were deposited in two of the accounts to be deposited in
    the U.S. tieasury and the funds deposited in the other account to be con-
    trolled and accounted for in the same manner as other obligations     and
    disbursements of the District   of Columbia. During our current review,
    we found that the college has not changed its administration    of these
    accounts as discussed below.

          In our prior report, we stated that the Board of Higher Education
    authorized the establishment of an account Tn a comnercial bank (The
    Federal City College:    Urban Higher Education Fund) into which gifts
    were deposited.    We concluded that the Board of Higher Education did not
    have the legal authority to authorize the deposit of gifts to the college
    in a private commercial bank account.
          The Chairman of the Board of Higher Education initially       agreed with
    our conclusion, but has subsequently changed his position.        In commenting
    on our prior report, by letter to you dated September 26, 1969, he
    stated that this fund is a wholly separate and independent corporation
    chartered in the District   of Columbia on December 30, 1968. He stated
    also that the Board of Righer Education did not aut!orize the creation
    of the corporation,  but it did welcome it, and permitted the corporation
    to use the name of the college in its corporate name and members of the
    Board to serve on the corporation's   Board of Directors.     Further, he
    stated that this corporation is similar in purpose and structure to foun-
    dations associated with many major universities    and colleges and that

monies deposited into the fund were not the college’s,              but monies
given to the corporation.

       Our review of the corporationfs       charter   showed that the President
of Federal City College is also the corporation’s              President   and that
the former Chairman of the Board of Higher Education is the SecretElry
of the corporation.      The purposes of the corporation           are to (1) seek
gifts and grants of money, (2) make gifts and grants to the college,
( 3) sponsor, pronote, and carry out educationaL functions               of the
college,   and (4.) establish   fellowships,     scholarships,      axd grants at
the college.

        The President of Federal City College informed us that when an
individual    desires to contribute     to the college,  the individual    is
told that he can have his gift deposited in either the corporation’s
fund account 01” tie college’s      Treasury trust account.     We noted that
the college has TV active Treasury trust accounts--one            for specific
purposes and one for unspecified        purposes--into  which gifts are
       Also, the presfdent   informed us that to date no formal solicita-
tion program has been initiated      by the college or the corporation.   He
indicated    that in the near future the corporation   is planning    an
organized solicita%i.on    campaign but that no such plans ere now being
made by the college.

     Section 103a (9) of the District of Columbia Public Education Act,
as amended, approved November 7, 1966, 31 D,C. Code 1603a (91, states:

      The    Board is vested    with    the following   powers   and duties:
                            *      %-       #       Q     3%

     WToaccept services and moneys, including gifts or endow-
     ments, from any source whatsoever,       for use in cxrqing    out
     the purposes of this title.        Such moneys shall be deposited
     in the Treasury of the United States to the credit of a
     trust fund account which is hereby authorized        and may be
     invested   and reinvested    as trust funds of the District    of
     Colmbia,      The disbursement    of the moneys from such trust
     funds shell be Zn such amounts, to such etient,        and in such
     manner as the Board, in its judgment, may determine neces-
      saruy to car~“y out the pwyposes of tkis title.”


        It is readily    admitted by the Board that one of the purposes of
the corporation       is to attract   prospective    donors who desire to assist
the college but who wish to contribute            to a fund that is not super-
vised by the District        or Federal Goverrxnent,      In enacting Section 103a (91,
the Congress prescribed        the method by which gifts might be received,
deposited,     and expended by the Board of Higher Education to help meet
the financial      needs of the Federal City College which, under the same
 statute,    was placed under the control of the Board.           Thus, the Congress
has restricted      by statute the manner in which gifts may be accepted by
the college.      The acceptance of such gifts in the name of the corpora-
tion is at cross purpose with the statute and, therefore,              should not be

Student     Government   Association    Fund

     Section 103a (7) of the District              of Columbia   Public   Education   Act,
as amended, states:

      Vhe     Board is vested    with   the following     powers and duties:

      WTo fix, from time to time, fees to be paid by students
      attending     the Federal City College.      Receipts from such fees
      shall be depos2ted int;a a revolting       fund in a private   deposi-
      tory in the DMxict,         which fund shall be available,    without
      flscd     yesr limitation,    for such purposes as the Board shall
      approve o        e Board is authorized   to make necessary rules
      respecting      deposits into and withdrawals    from such fund.“I

      Sect&on 105 of the act states:

     n&XL obligations   and disbursements    for the purpose of this
     title  shall be incurred,   made, and accounted for in the same
     manner as other obligations     and disbursements     for the District
     of Columbia and, except as provided       in paragraph    (9) of see-
     tion 103 of this titPe, under th.e direction        and control  of the

       In our p&or report,     we stated that the Board of Higher Education
au~orized     the Student Government Association       to charge a student aetiv-
ity fee no higher than $7.50 per student per quarter.            The Board authorf-
 zation concerning    the &a~ging of student actitity       fees made no reference
4x1 procedures   for the eollelction   or disbursement    of the fees.


We stated that It appears that obligations    and disbursements  of student
activity  fees were not incurred,   made, and accounted for by the Student
Government Association   in the same manner as other obligations   and dis-
bursements for the District    of Columbia and under the control of the
       Although the Chairman of the Board of Higher Education originally
agreed with our finding     and indicated that ayl accounting system to con-
trpl the fees and a resolution      to regulate the proper expenditure of
such monie& was needed, he subsequently reversed this position in his
letter    to you dated September 26, 196?,     !I'he chairman stated that he
has serious doubt that the Congress intended section 105 to be applica-
ble to the f?.xnds in question.,    He stated that neither the Board of
Higher Education nor the administration       has deemed it necessary or
appropriate     to specify   or regulate   the purposes   for   which the funds   are
spent e

      During  our c-e&       review,  we examined the accounting records of
the Student Gove       ent Association   and found that the records consisted
of oheok books, canoeled checks, b&          statements, and pajd and unpaid
invoices.    A formal, set of books was not maintained.      We were informed
by the Student Government Association        accountant that there was no
record of obUgalions      incurred   and that disbursements  were made on the
basis of invoices     end were not supported by purchase orders or receiv-
ing reports.

      We discussed these matters with the college president   who indi-
cated a willingness   to help the students establish adequate accounting
records but did not agree that the funds should be under the control of
the Commissioner.   He stated that he has requested the District’s     Office
of Municipal Audits to perform an audit of -I&e Student Government
Association     fund,
     Subsequent to our discussion   with the president, we were informed
by the District~s Associate Directors for MunicLpal Audits that before
his office could start its audit, most of the existing records were
stolen and, therefore,  the audit was not made. On January 14, 1971, we
were informed by a college official  that all financial   activities of the
Student Government Assooiation have been temporarily    assumed by the
college~s finance offEce pending a policy decision of the Chairman of
the Board of Higher Education as to their disposition.
     ,We found nothing in the legislative history of the act that shows
that an exception was intended for funds accumulated under subsection
103a (7) . Moreover, section 105 imposes this requirement for all funds

with me exception--gifts      made to the college under subsection 103a
(91  --and it must b’e  assumed that in making one specific    exception the
Congress intended to limit exceptions     to the one specificaLLy      provided

      Thus, under the 1        e of section 105 of the act, the Student
Government Association   Fund must be accounted for in the same manner
as other obligations   and disbursements    of the District of Columbia
and must be under the direction     and control   of the Commissioner.

        In our prior report,     we stated that on February 20, 1969, the Board
of Higher Education approved a fee to be chazrged for exI;ension copses
based on the n-bar        of hours that the class meets,        We found that e&en-
sion eoslrse fee receipts      have been deposited in a private        bank account
snd disbursements      have been made for the purpose of paying the salaries
of extension course instructors          ayld claesroom expenses.     We took the
position     that fees charged-for     attending     extension courses were in fact
$tition     and should have been deposited in the General Fund of the Dis-
triet     of Columbia in the U.S. Treasury,        as Qrotided by subsection 103a (6)
of the DistrLct      of Columbta Public Education Act, as amended,

       The Chairman of the Board of Higher Education initially               agreed with
cmr posit3.on.       However, in his September 26, 1969, letter           to you he
 (1) stated that these eowses are a setice                to the commtity    which the
college administers        but ,the participants      bear the costs and (2) concluded
that the payments would be more properly              considered  fees than tuition.
He indicated      that, if the payments were ,requ.ired to be deposited in the
Trsaszry,     they would be unavailable         to pay the expense of the courses
since the conjec          sl nature  of the courses would make requests for
appropriations       for them very difficult,       thus, making it tirtually      impos-
sible to provide this community service.

       On April 28, 1970, the DisLrict        Corporation Counsel     issued   an
opinion on this matter which stated         that these extension      course   payments
ape tuition    and should be deposited      In the U,S. Treasury.

       During our review ~9 discussed this matter with the President        of
Federal City College who stated.that       the college does not agree with
the position   of the District  Corporation    Counsel*    He stated that the
fmds in questioa.aJPe be%ng kept in the private         bank accounts pending
the outcome of a recent request for another decision from the District
corporation   Colmsel.

B-167006                                                                                  ,!

        We are in agreement with the position        taken by the District
Corporation      Counsel that the charges imposed in these programs are
tuition    rather than fees and are, therefore,         for deposit into the
Treasury.       The term %tition"      is defined as a fee charged a student
at a college or university        for (1) the privilege     of attendance at
the institution       and (2) the price of or payment for instruction.           If
there is no express intent to the contrary, words used in a statute
are intended to be given their commonmeaning. Accordingly,                5-t is
our view that payments made to the college for instruction              in exten-
sion courses are tuition        payments and as such are for deposit to the
General Fund of the District         of Columbia pursuant to subsection       103a (6)
of the act,

TUITION COLLECTION                                                                       !)I!

      In our prior   report,   we stated   that   the college   did not exercise
the control necessary to provide reasonable assurance that the correct
smounlt of tuition was paid. tJe found that the amount of tuition due
from each student    was de?ermined    at the time of registration      and was
based on the number of hours applied for.    Generally,         this amount was
paid by the student.   At the time of payment a tuition          paynent record
and receipt card was prepared.
       After registration,     a summary listing     was prepsped showing courses
and credit houm for each student,           This listing,    however, was not later
adjusted to show the credit hours added and dropped nor was the amount
of tuiLion paid reconciled to the listing.             ALSO, the ttition     payment
record and receipt      cards were not prenumbered and tuition           deposits did
not list either the individual        payers or the mounts paid. Fu.%her, we
found that the tuition       was waived in at least 24 instances,

       Subsequent to our prior report, Federal City College has made some
progress   in improving the control over tuition  collection      and further
corrective   actions are planned. For the fall 1970 quarter,        the tuitiour
payment record and receipt cards were prenmbered and the tuition            de-
posit tickets showed the payer and the amount paid.        College officials
informed us that tuition    is no longer waived and during our review,        we
found no evidence that waivers had been granted,
     Also, for the fall       quarter,  the college prepared a consolidated
computer listing    showing coursesJI credit hours, and total payment for
each student.     This listing     showed cases where the total tuition   had
been deferred,     However, the listing     did got show a comparison of the
amount of tuition     owed with the amount paid.     Also, at the time of OUT

review, we were informed by a college official  that the listing        had not
been revised to show courses added and dropped.
      Our exaxLnati.on of 100 randomly selected student tuition    payment
record and receipt cards showed that the computer listing     contained
numerous errors.     FOP e   le, some students for which there were
record and receipt cards were not shown in this listing     and other stu-
dents were shown in the listing   as having paid no tuition   when in fact
they had.
      Since the listing      contained many errors and included only a total
for fees collected--tuition,        student activity  fee, and health insur-
ance payments-4.t was not practicable        for the college or for us to
ascertain whether aI1 tuition        due was actually collected.
       We were informed by college officials   that many changes in tuition
collection   procedures are planned for the Pegislcration for the next
quarter.    They stated that the students will be required to preregister
after which the college till    bill the student.   The offkxkls     indicated
that the amount billed till    have to be paid regardless of cow"se changes.
They indicated also that the method of handling course changes has not
been determined,     Also, we were informed that the computer listing       pre-
pared for t3Bis qucrhes will compare the amount of tuition       owed and the
amount paid.


      In ous prior report, we stated that the college did not maintain
adequate accounting control over its supplies and equipment. We pointed
out that (1) equipment asset control accounts had not been established,
(2) reliable   inventories   of supplie s and equipment had not been taken,
and (3) a listing    of persons authorized to reqtisition   supplies had not
been prepared.
      0~s current review showed that a listing      of persons authorized    to
requisition    supplies had been made. Copies of th%s listing       were on
hand at the two storage locations,       Our examination of all requisitions
for supplies for the period August 21, 1970, through September 28, S97C9
showed that out of a totd of 29 reqtisitions        2.0, or about 69 percent,
were signed by persons not on the authorized list,         All of the unauthor-
ised individuals     were employees of the college.
      In December 1970, a contract was awarded to a private      firm   to take
an inventory  of the supp3Les and equipment.  The officials      indicated


that af’ter the inventory   is estab2lshed,        they till   be able to m&&tin
adequate control   over inventories.

      Based on our current revtew, we conokude that the college has not,
at this time, established   adequate control  over its supplies and equip-
ment    ve fi?awther corm  e that until  such control   has been established,
the     unt of futwe 1 es9 if any, coot        be identified.

      In ow prior report,     we stated that the DistrSct           of Columbia Office
of Mwraioipd Auidilts made a retiew of the status of the eollege!s                 appro-
                       e procedures   for controlling        such funds,       Their re-
                        eolkegefs   control    of allotted      funds are inadequate
                              lity for controlling        obligations     against allotm
merits ~81s not cl            d, (2) obligations       were incurred      without
                              ty of funds, (3) monthly financial             plan and
                 were not maintained,       and (4) established       procedures     for
                ds were nc& followed,

      We we233 f     ed by 8~1 official   of the Office of Mticipal         Audits
that h&3 offfc        not determined whether my actions have been taken
by the college on these deficiencies.        Our ctxrrent review showed that,
as reeomended      the internal     audit repox%, the college had established
budgetary            eontxwls to correct the deficiencies        noted.    Although
we did not e     ne into the application      of these controls,     we believe
that the system established     is adequate to control    appropriated     funds@

       The practice,   as noted in our prior repox%, of providing   financial
assistance    to students attending  neighboring  colleges has been

      We did not req,st      DJ.strict cements on      this report.    Since the
administration   of certain    funds by the college       is not in accordame with
the enabling legislation,      we suggest that the      report be furnished    to the
CoIvamissfoner, Mstrict     of Columbia Government       and the Chairman, Board of
Wigher Edmation,     for appropriate    corrective     action.

          We plan to make no further distribution of this report unless
    copies me spe&Y.cally    requested, exd then only' after your agreement
    has been obtained or public announcement has been made by you concern-
    ing its contents.
                                            Sincerely   yoUrs,

                                            Comptroller General
                                            of the United States

    The Honorable W$uia    B. Spoq,   Jr.
    Utited States Senate