A Review of the Funds Allocation Process for Mississippi’s Community and Junior Colleges
Executive Summary
Introduction
In response to legislative concerns, the PEER Committee examined the relationship between enrollment and funding at the state’s community and junior colleges, including the role of the Board for Community and Junior Colleges in the process.
Background
Mississippi has fifteen community and junior colleges that operate thirty-three centers, including thirty comprehensive campuses, two vocational-technical centers, and one academic extension center. These facilities provide educational services through academic courses and degrees for transfer to universities and senior colleges; academic, technical, and vocational programs for career goals; and continuing education opportunities. As of June 30, 2005, 92,097 students were enrolled in Mississippi’s community and junior college system according to a non-duplicated head count.
The Board for Community and Junior Colleges serves as the state-level coordinating agency for the system. The Legislature created the board in 1986 to receive and distribute funds from the state, federal government, and other sources to the community and junior colleges. Among other powers and duties state law gives to the board, MISS. CODE ANN. Section 37-4-3 (1972) authorizes the board to:
Also, each year since the board’s creation, the appropriations bills for the community and junior colleges have required the board to audit the colleges’ enrollment statistics. The FY 2006 appropriations bill for the community and junior colleges states:
The Director of the State Board for Community and Junior Colleges, or his designee, shall audit each public community and junior college and shall determine who shall be counted in each college and shall certify the number to the State Board for Community and Junior Colleges.
Description of the Budget Request and Funds Allocation Process for Community and Junior Colleges
Budget Request Process for Community and Junior Colleges
The budget request process for the community and junior colleges’ state funds involves the following steps:
The total legislative appropriation for community and junior colleges for FY 2005 was $155,113,312. The board itself receives a separate appropriation.
Recent Changes in the Board’s Formula for Allocating Funds
After the Legislature completes its annual appropriations process, the board distributes the funds to the individual colleges based on enrollment data. The individual colleges submit enrollment data to the board, the board audits the data, and the board allocates funds to the individual colleges based on a funding formula.
The formula for the allocation of funds has recently changed based on results of a statutorily required consultant’s study of the formula. Until FY 2004, the board allocated funds to community and junior colleges based on an enrollment figure consisting of a head count of students at each individual college. (For purposes of this report, a “head count” is an enrollment figure determined by the individual college and the board at a specified point in the semester.) In 2002, the Legislature passed MISS. CODE ANN. Section 37-4-15 (1972), requiring that the board contract with a consultant to study the state’s funding formula for community and junior colleges and report the findings to the Legislature. The consultant recommended that the board utilize a student enrollment ratio based on full-time equivalent students,1 rather than on head count of enrollment.2
To implement the consultant’s recommendation, over a five-year period the board is phasing out use of the enrollment head count as the basis for allocation of funds and phasing in use of the student FTEs as the basis for such. By FY 2008, funding allocation will have totally converted to the use of FTEs.
FY 2005 Funds Distributed by the Board to Community and Junior Colleges
In addition to funds appropriated by the Legislature, the Board for Community and Junior Colleges is also responsible for distributing some federal funds, other state funds, and local funds to the community and junior colleges or on behalf of the colleges. During FY 2005, the board distributed $206,066,904 to or on behalf of the colleges. This Exhibit provides a breakdown of these funds.
Efficiency and Accuracy of the Board’s Budget Request and Funds Allocation Process
The Board for Community and Junior Colleges does not work with individual colleges to manage class size for maximum efficiency. Also, because state law requires the board to count enrollment at a point early in the semester and 25% of students drop classes after that point, the board has continued to allocate funds for instruction of students who do not complete the semester.
As noted previously, the annual appropriations bills for the community and junior colleges require the Board for Community and Junior Colleges to assure that the colleges’ enrollment data upon which the funding allocation will be based is accurate. Because the appropriations bill specifically requires the director of the board’s staff to “determine who shall be counted” and to certify that number to the board, the board’s staff has the implied authority to do whatever is necessary to ensure that the count used to allocate funds to the individual colleges will be accurate and appropriate.
Efficiency Issues Related to Class Sizes
The Board for Community and Junior Colleges does not monitor individual colleges’ management of class size nor has it taken the initiative to work with the staff of individual colleges to reduce possible inefficiencies related to class size.
As a steward of taxpayers’ funds by virtue of its duty to distribute funds and provide general coordination of the colleges, the board has the fiduciary responsibility to monitor the efficiency with which the community and junior colleges spend those funds.
One area that the board should monitor for efficiency is class size at the individual colleges. Although classes should never reach the point that they are so large that they impact a student’s ability to learn, classes should not be so small as to be financially impractical. The FY 2006 appropriations bill for community and junior colleges included a performance goal of 22 students as an average class size.
PEER reviewed records reflecting class sizes at nine of the fifteen colleges. These records applied to classes from which students select courses to meet their core requirements for an associate’s degree. At these nine colleges, for FY 2005, the average size of the classes from which students select courses to meet their core requirements was 18. However, 25% of these classes had fewer than ten students and 10% of these classes had fewer than five students.
Class size affects overall efficiency because as class size decreases, cost per student increases significantly. Based on a target class size of 22 and the average full-time equivalent instructor’s salary of $43,926 (including fringe benefits), the average cost per student per class at the community and junior colleges would be $200. In a class of 18 students, the cost per student per class would be $244. In a class with nine students, the cost per student would be $488 and in a class with four students, the cost per student would increase to $1,098.
Because the board does not exercise its authority to work with individual colleges to improve efficiency related to class size, it has not maximized its opportunity to help the colleges make the best use of their resources.
Impact of the Student Drop Rate on the Allocation of Funds
The Board for Community and Junior Colleges has complied with requirements of the community and junior colleges’ appropriations bills to make enrollment counts at a specified point early in the semester. However, because approximately 25% of students drop classes after the date of the board’s enrollment count but before the end of the semester, the board continues to allocate funds to instruct students who are not enrolled in classes for the entire semester.
The community and junior colleges’ recent appropriations bills have required that the board capture enrollment data for the individual colleges early in the semester. The board determines the number of students at the six-week point of the fall and spring semesters and at the one-third point in the summer semesters. (Mississippi Gulf Coast Community College also adds the number of FTEs during an additional semester conducted at Keesler Air Force Base.)
The timing of when students drop classes has an impact on a college’s funding. If a student drops a class prior to the board’s student head count and student FTE calculation, that student is not included in that college’s enrollment number. However, if the student drops a class after the board makes its student head count and student FTE calculation, the student is included in the enrollment number used in calculating the college’s allocation of funds.
Twenty-five percent of the students enrolled in a public community college class in Mississippi drop that class after the date of the board’s enrollment count but before the end of the semester. Thus the board’s enrollment count, upon which it bases the allocation of funds to the individual colleges, is significantly higher than the actual number of students that complete classes. Based on historical trends and the colleges’ cost of instruction, the board allocated approximately $24.6 million in funding in FY 2005 for community and junior college students who dropped classes after the enrollment count but before the end of the semester.
If the language of the appropriations bills were changed to require the board to capture the enrollment count at a more appropriate time (e.g., at the end of the semester), the funding allocations should more closely approximate the actual cost to the state of educating students at each individual college.
The Board’s Auditing of Enrollment Data of the Community and Junior Colleges
Although state law requires the Board for Community and Junior Colleges to audit each college for the purpose of determining a student count to be used in the allocation of appropriated funds, the board does not obtain sufficient, competent evidence to arrive at conclusions regarding the records reviewed.
The provision requiring the board to audit enrollment has been used in the board’s appropriation bill each year since its creation in 1986. An audit of this type should involve examination of records whose accuracy should be maintained and ensured by the individual institution. The institution’s recordkeeping process should be consistent with common practice, which requires that the method of recordkeeping have a reasonable basis that may be replicated in a uniform and broadly defensible way. While many forms of disciplined inquiry could be used to evaluate the board’s auditing process, the most relevant method of disciplined inquiry for auditing record evidence would be the Generally Accepted Auditing Standards (GAAS).
PEER evaluated the board’s methods of auditing individual colleges’ student enrollment and attendance by using GAAS and found weaknesses related to:
Because the board’s review of enrollment data does not meet these audit standards, it does not technically qualify as an audit, which the community and junior colleges’ appropriations bills require.
Also, the board’s current methods of reviewing the colleges’ enrollment data do not assure an accurate, appropriate count to serve as the basis for the allocation of funds and the number of students used in the board’s formula for allocating funds has most likely been overstated.
Lack of Sufficient, Competent Evidential Matter
By not adhering to standard statistical sampling methodology, the Board for Community and Junior Colleges fails to obtain sufficient, competent evidential matter.
The board uses several samples in its review of college enrollment and attendance records. If the board selected statistically valid samples and determined true error rates for enrollment and attendance figures, the board could use the error rate to estimate more accurately the number of students to remove from the population before allocating funds. However, because of the selection methods of these samples, PEER does not believe the samples represent sufficient, competent evidential matter. PEER does not believe the samples are representative of the populations.
Failure to Determine a True Error Rate
In calculating the student enrollment counts of individual colleges, the Board for Community and Junior Colleges does not establish an error rate for samples taken and thus does not provide the most accurate estimate of the student population.
One of the advantages of statistical sampling is that if done properly, an auditor can determine an error rate that may be projected to the population of the sample. Because the board does not properly choose statistical samples, the board cannot determine an error rate to project to the population. By not applying a statistically sound error rate, the board cannot determine the number of students that should be subtracted from the enrollment count upon which funds allocation is based. If a proper error rate is not applied to individual colleges’ enrollment counts, total enrollment is inflated. Over a period of years, this results in an artificially increasing growth pattern.
Lack of Independence and Due Professional Care
By allowing college personnel to perform certain components of the audit, the Board for Community and Junior Colleges has not complied with independence and due professional care standards.
In performing its audit of an individual college’s enrollment data, the board chooses random samples to test for enrollment errors and attendance errors. This sampling is an important step in the audit because student records with enrollment or attendance errors are removed from the student database for the purposes of calculating the enrollment number that will be used in the formula for allocating funds. A smaller number of students will result in a smaller share of allocated funds.
PEER found the following conditions in the board’s conduct of audits:
PEER does not intend to imply that college personnel are not performing the audits properly. However, under Generally Accepted Auditing Standards, work not deemed independent cannot be relied upon when drawing conclusions about audited records. Therefore, the records reviewed by the college personnel should not be considered by the board in calculating the student enrollment figure used in allocating funds.
Lack of Workpapers and Failure to Issue a Final Audit Report
The Board for Community and Junior Colleges does not prepare workpapers documenting work performed nor does it produce a report detailing the results of its audit work pertaining to enrollment and attendance. As a result, the Legislature does not have evidence that the audit has been certified by the board.
Auditors should prepare and maintain audit documentation as the principal record of auditing procedures applied, evidence obtained, and conclusions reached. The workpapers should serve as evidence of the work performed and provide supporting evidence should that work be questioned. While the board maintains documentation in many areas related to its audit, it does not document weaknesses in individual institutions’ internal controls, such as problems with maintenance of and access to records. The board also does not document its sampling methods to ensure reasonable accuracy. Also, while the board maintains records of exceptions found in the audit, it does not differentiate as to which sample had exceptions. Because of this, a sample error rate for each college cannot be recreated. Thus the board has incomplete documentation of the audit if needed for review by a third party.
Applicable standards also require that auditors produce a report containing comprehensive, relevant information detailing the results of an audit. However, the board does not produce a comprehensive final report detailing results of its work. Thus the Legislature has no official evidence of the board’s certification of its audit of enrollment.
Recommendations
1 A full-time equivalent student is considered to be one who takes twenty-four credit hours in an academic year. Therefore, a student taking thirty credit hours is considered to be 1.25 FTEs.
2 A head count of enrollment is a count of individual students, regardless of the number of semester hours each student takes, counted at a specific point in the semester.