Lax oversight and outdated procedures are to blame for several financial and operational deficiencies at the University of Hawaii at Manoa’s student housing branch, an internal audit has found.
The report by the university’s Office of Internal Audit raises concerns about high unpaid rental balances, vendor contracts that have been extended without being rebid, and an inability to monitor utility consumption at individual residence halls and dining facilities, among other issues.
The review of Manoa’s Student Housing Services is the latest in a series of audits called for by the Board of Regents Internal Audit Committee, which has focused attention on the university’s revenue-generating enterprises.
Glenn Shizumura, UH’s internal auditor, said in his report that the branch has some safeguards in place, but improvements are needed.
“Although Housing Serv-ices has certain processes and controls to manage and monitor their financial operating results,” Shizumura said, “Internal Audit believes the preparation and analysis of periodic budget-to-actual reports will provide Housing Services with the ability to timely adopt strategies to maximize revenues and control expenses.”
He added that the report’s recommendations — a total of 14 — should help the branch “improve their oversight and mitigate risks with respect to financial, operational and compliance matters.”
The Student Housing Services department oversees on-campus housing in 10 residence halls and two apartment complexes which can accommodate 3,800 students. During the 2014-15 academic year, the individual dorms were at least 94 percent full in the fall semester and at least 86 percent occupied in spring.
The housing program is self-funded, meaning revenues generated are used to cover expenses. Revenue from room rentals — which makes up 80 to 85 percent
of the budget — totaled $22.2 million last fiscal year, up from $21.5 million the year before. Expenses totaled $26.4 million last year.
Rental rates vary among the properties. For the 2016-17 academic year, rates for both semesters in the residence halls range from $4,585 for triple occupancy with a community bath to $12,879 for single occupancy with a private bath.
The audit noted that although the regents in 2012 approved annual rental increases of up to 5 percent through 2017, the student housing branch has not complied with a requirement to provide the board with annual reports documenting implemented rate increases and reasons supporting the increases.
The audit also found the department does not prepare financial reports to analyze its budget-to-actual operating results by property on a monthly, quarterly or semester basis. Doing so, the audit said, would “(provide) a mechanism to timely detect revenue or expense accounts that are running higher or lower than expected, thereby allowing Housing Services to take corrective action to mitigate potential problems in a more timely fashion.”
The audit also found unpaid rental balances have increased in recent years. The amount owed to the housing branch had grown to
$1.2 million as of June 30, 2015, from $821,000 two years earlier. The amount considered uncollectible also increased to $870,000 from $652,000 over the same period.
The auditor was unable to evaluate collectibility “issues,” however, because the department does not prepare reports breaking down total accounts receivable by revenue type, debtor or number of days outstanding.
In a written response included in the audit, Michael Kaptik, director of Student Housing Services, said unpaid balances are part of a bigger issue at the campus and system level.
“Student Housing Services and the Office of the Vice Chancellor for Students believe the issue of nonpaying students is a campus/system issue related to students being able to take classes while having a payment balance and not being enrolled on a payment plan,” he wrote.
At a regents meeting Thursday where the audit was presented and discussed, Kaptik explained that when students make payments toward their campus expenses or receive financial aid, housing is the last service paid.
“I think that the accounts receivable is something that’s part of a bigger question with the university because of the way the system works,” he said.
This fall, he said, 683 students living on campus who were not enrolled in a payment plan owed the university $5.3 million, including $2.8 million for student housing. (The numbers reflect students who owe more than $1,000.)
“We go out, and we blitz them with information in housing — we send them emails, we send them letters directly in physical form and then we continue to follow up with them,” Kaptik said.
As of Oct. 3 the amount owed to student housing for rent and dining plans dropped to $822,000.
“So we think our process works to a certain extent in terms of what Housing does. But in the end this goes to the cashier’s office, and … one of the difficulties for Housing is, Housing is the last one paid,” he said.
The audit also found lax oversight of rentals provided to conference groups.
“Housing Services does not enforce its policy requiring full payment prior to check-in or require credit card information from conference groups or its participants to mitigate the risk of uncollectible conference housing charges,” the report said. The practice has resulted in $79,000 in outstanding accounts as of June 30, 2015.
The audit also raised concerns about contracted
services, including for student dining programs, laundry, disposal services and custodial maintenance.
“Internal Audit is uncertain whether contracts with third parties are complying with the university’s procurement policies as certain contracts were extended for more than 10 years,” the audit said. “As Housing Services did not re-bid these services, the lowest and most advantageous price may not have been received.”
Several regents expressed disappointment with Kaptik’s written responses in the audit, which said the department will work to implement most of the recommendations.
“A number of your responses were, ‘We’ll work on it,’” said regent Randy Moore, chairman of the Internal Audit Committee. “I would be happier if it said, ‘We’ll fix it.’”
The committee told Kaptik to prioritize several of the audit’s recommendations to tackle first and asked him to report any progress at the group’s February meeting.
“It’s clear that this report has identified several matters that need attention and some improvement,” said regent Benjamin Kudo. “This is part of the overall effort on the part of regents to assure that all of our revenue-generating functions at the university, whether it’s parking or culinary programs, are operated in a responsible and efficient manner.”