An Audit Report on the Reasonableness and Results of Tuition Increases Implemented by Four Higher Education Institutions in the 2004-2005 Biennium
September 2005
Report Number 06-001
Overall Conclusion
Higher education institutions' unique accounting methods restrict fiscal audit analysis of tuition increases at four of the State's largest higher education institutions. However, when assessed by other types of criteria such as peer group comparisons, tuition increases at these four institutions appear reasonable.
Institutions' unique accounting methods also restricted the State Auditor's Office's ability to draw a conclusion, based on fiscal audit analysis alone, regarding the need for tuition increases or for the amount of the increases implemented during the 2004-2005 biennium at the four institutions we audited: The University of Texas at Austin, Texas A&M University, Texas Tech University, and the University of Houston.
Only one audited institution--Texas Tech University--established separate budget, revenue, and expenditure accounts that enabled us to identify the specific expenditures that were made with the revenue from increased tuition. Although the University of Houston did not establish separate accounts, it maintained records that allowed us to verify that the increased tuition revenue was spent as planned. The two other audited institutions budgeted and, in most cases, spent the amount of funds they intended to spend in the areas for which they stated that tuition increases were necessary.
Texas Tech University was the only audited institution that performed the statutorily required calculation to identify students to whom priority must be given in awarding student financial aid from the funds set aside from increased tuition revenue. A statewide survey of four-year institutions of higher education that raised tuition above $46 per semester credit hour indicated that no other institution in the state performed this calculation. It is important to note that the audited institutions appear to have acted in good faith in attempting to meet their understanding of student need in awarding financial aid. In addition, some institutions set aside significantly more than they were required to set aside.
Because institutions have the flexibility to combine and make transfers within and among funds, we could not identify accounts with surplus funds that could be used to mitigate tuition increases. However, our analysis identified certain account balances that the institutions agreed had surplus funds that would be used to support future operating budgets, thus potentially mitigating future tuition increases in the short term. It is important to note, however, that any funds that might have been used to defer or mitigate tuition increases would be available only for a limited time (for example, for one or two semesters) and would not necessarily mitigate tuition increases in the long term.
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