Henry Ford Community College Student Refund Process

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HENRY FORD COMMUNITY COLLEGE

STUDENT REFUND PROCESS Process Improvement Plan Fall 2013

Table of Contents

Process Improvement Team 3

Background 4

Project Statement 5

Glossary 6

Current Student Refund Process 8

Cause-and-Effect Diagram 9

Cost of Paper Check Student Refunds 10

MCCBOA Survey 11

From the Old Process to the New 12

New Student Refund Process 13

Cost Savings 14

Force Field 15

Project Time Line – Gantt Chart 16

Key People 17

Steering Committee Feedback 18

Ideas for Future Process Improvement Teams 19

Acknowledgments 20

Process Improvement Team

Team Sponsor

John Satkowski – Vice President for Financial and Auxiliary Services

Team Members

Kevin Culler – Financial Aid Director (Team Leader)

Scott Barnett – Mathematics Instructor (Team Scribe)

Thomas Anderson – Adjunct History Instructor

Barb Eisterhold – General Accounting Manager

Sandro Silvestri – Director, Information Technology Services

Mary Szymanski – Accounting Associate, Accounts Payable

Background

The Process Improvement Team for Budgeting determined that the problems encountered by students and staff due to the current student-refund process, and the significant costs to the College for the current process, should be addressed.

Project Statement

To improve the process for issuing refunds to students who have credit balances on their accounts, as measured by the reduction in the number of paper refund checks, reduction in costs (e.g. supplies, postage, bank fees), reduction in reported refund-related cases of fraud, and reallocation of staff time.

Glossary of Terms

Account with a Bank or Credit Union: Arranged transactions with a bank or credit union which could be a checking account, savings account or a deposit account.

Affidavit: An affidavit is a legal document that contains sworn facts and statements.

Bank Reconciliation: A bank reconciliation is a process that explains the difference between the bank balance shown in an organization’s bank statement, as supplied by the bank, and the corresponding amount shown in the organization's own accounting records at a particular point in time.

Check fraud: This refers to a category of criminal acts that involve making the unlawful use of checks in order to illegally acquire or borrow funds that do not exist within the account balance or account-holder's legal ownership.

Counterfeit Check: An imitation check intended to be passed off fraudulently or deceptively as genuine.

Debit Card: A plastic card that resembles a credit card but functions like a check. Debit Cards can be used to access cash via ATM’s or can be used for paying purchases or services. Payment is made available electronically to the bank accounts of participating retailing establishments directly from the Debit Card.

EFT/E-Check/Direct Deposit: Electronic funds transfer (EFT) is the electronic exchange, transfer of money from one account to another, either within a single financial institution or across multiple institutions, through computer-based systems.

Emergency Checks: Checks that are issued by the Cashier’s Office to process a check outside of the normal weekly check run.

Escheat: The College is required to make annual reports to the State of Michigan for all checks that remain un-cashed over a period of one year. The College sends a check to the State along with specific check information. After a check is escheated, the payee on the check (who the check is written to) works directly with the State to retrieve funds owed.

6 Escheatment: Escheatment is a procedure in which property, in this case checks issued by the College, which appears to be abandoned reverts to the ownership of the government. The government enters the property into its bookkeeping, and may dispose of it as it pleases. If a claimant to the property later appears and the claim is legitimate, the government provides compensation in accordance with the amount entered at the time of the escheatment.

Financial Aid Awards: This is an aid package to help alleviate or defray out of pocket costs to attend college. Awards can be based on merit or need. Some awards, such as loans, must be eventually paid back, other awards, such as scholarships and grants do not.

Paper Check: A written order, usually on a standard printed form, directing a bank to pay money to a particular person for a certain amount.

Positive Pay: This is a treasury service that banks provide to businesses that forms a partnership between the two parties to prevent check fraud. Positive Pay involves the bank matching checks presented for payment with those issued by the company.

Pressure Sealed form Check Stock: Pressure seal forms include adhesive around the edges. When pressure is applied with a pressure seal machine, tiny glue capsules burst and create a secure bond. The form is folded, sealed and ready to mail! Pressure seal is perfect for processing a high volume of forms. Pressure Sealed forms replaces the need for an envelope.

Request for Proposal (RFP): A solicitation document used to obtain offers of price and proposed method of execution of a specific project. We use a bid or request for quotation when we can specifically define the item that needs to be procured

Stop Payment: An order by the issuer of a check to the bank that the check is drawn on, not to pay a specified check. Possible reasons include a lost check or a stolen check. HFCC is charged a fee by the bank for this service.

Student Refund: A refund is a reimbursement issued to a student if account payments, loans, grants (financial aid) were more than what they owed for classes owing after the add/drop period.

Third Party Vendor: An outside company that provides services, on behalf of the College, to our employees or vendors.

7 Current Student Refund Check Run Process

EPBR: Vouchers Web Focus report ARTM: Saved list Student RFVR: Use created for payment: captures student used to create report SLED: Create RFVC: Money Financial Aid list to create report signed balances, pulls IDs, refunds to be offsetting current & Saved list for now pulled from and forwarded to saves list. voucher register; issued past term credit batch refunding student accounts DFS no money pulled. balances

CKSE: both paper & CKPR: Print screen CKRS: accept CKPO: Posts electonic requests dates for screen for checks to general refunds authorized checks, then printed in properly printed ledger cashiers vault checks, marks Y/N

SCKR: Creates a ECHP: Processes ECPP: Pre-notes SLCR: Creates a file for general electonic checks, bank account saved list for pre- accounting; run posts to general information to noting checks twice, for paper ledger verify correctness and electonic

Run RERG: Create file Copy file and charge to captures Fin. Ser. ties data Fin. Ser. verifies Run SNDACRCN Verify file acceptance Email completed to process Paper Checks Notify Financial approp. area to allow Notify Cashiers that Financial check data to to Cashiers # of checks, $ process to transmit and that file processed transmitted form refunds services via email file to be recognized by checks can be mailed Services process information amount of run file to Comerica was complete to Comerica system

Cashier's Review for Fin. Ser. Daily Review for Save returned file Office Print Checks Fold Checks Canadian banking: prior day bad addresses Mail Checks Addresses runs banking reporting

Copy file & charge EFTs ext. to approp. area Process Pre- Notify Financial Transmit file to Verify file by Notify Cashier's office that Clear checks in Hank & tie (process is so file can be note file services via email Comerica phone file has been verified totals to banking report run twice) recognized by Comerica

Copy file & charge Process ext. to approp. area Notify Financial Transmit file to Verify file by Notify Cashier's office that Regular echeck so file can be services via email Comerica phone file has been verified file recognized by Comerica

8 Cause-and-Effect Diagram

Environment Process Issues Materials

Fraud Escheat Regulations Cost Lack of Financial Literacy Fraud/counterfeiting - Check stock - Lack of Bank Accounts Stop-payment requests - Postage - Understanding banking fees Emergency checks - Toner Check reissuement

Problem Statement

Problems encountered issuing refunds to HFCC students

Potential cost to students Labor Cost - Check-cashing services Paper check vs. - Cashier's office - Debit card/ATM fees - Own debit card - Accounting - 3rd party debit card - Responding to - Bank acct calls about - EFT checks

Measurement Methods People

9 Refund Cost by Academic Year Cost of Paper Check Student Refunds Year Total cost 2005/2006 $ 73,833.87 $160,000.00 2006/2007 $ 80,013.32 2007/2008 $ 97,566.37 $150,000.00 2008/2009 $ 122,797.12 $140,000.00 2009/2010 $ 153,656.22 $130,000.00 2010/2011 $ 134,929.56 $120,000.00 2011/2012 $ 130,776.86 2012/2013 $ 109,614.49 $110,000.00 $100,000.00 Cashier hours $90,000.00 Acct hours $80,000.00 $70,000.00 Stop payments $60,000.00 Postage $50,000.00 Paper & toner $40,000.00 $30,000.00 $20,000.00 $10,000.00 $- 2005/2006 2006/2007 2007/2008 2008/2009 2009/2010 2010/2011 2011/2012 2012/2013

10 MCCBOA (Michigan Community College Business Officers Association) SURVEY Issuing Student Refunds

Requested by: Barb Eisterhold Henry Ford Community College – Emailed 9/19/13 – Updated 11/8/13

Community College Provide options offered to students to If funds placed on Cost to College for issuing Debit Card Comments receive refunds Debit Card, please provide vendor Alpena Community College Paper Checks Bay De Noc Community College

Delta College Paper Checks Glen Oaks Community College Paper Checks Gogebic Community College Grand Rapids Community College Paper Check, Direct Deposit, Debit Card Higher One .40 Per transaction Higher One does all options. If they fail to log in and make a choice, default is check. Henry Ford Community College Paper Checks, Direct Deposit

Jackson Community College Kalamazoo Valley Community College Debit Card, Dir Dep Higher One Check if requested Kellogg Community College Paper Checks, Direct Deposit Kirtland Community College Paper Checks, Direct Deposit Direct Deposit is issued one week prior to Paper checks to encourage use. Lake Michigan College Paper Check, Direct Deposit Sallie Mae- Moving to Probably Nelnet Lansing Community College Paper Check, Direct Deposit, Debit Card Higher One .40 Per transaction regardless of distribution method. Macomb Community College Paper Check, Direct Deposit, Debit Card Higher One for all No cost to issue original card. Replacement card is passed on to Higher one does all options. A paper check is Options student issued by higher one after 21 days if a student does not choice a refund option Mid Michigan Community College Paper Check, Direct Deposit, Debit Card PNC University 2.95 Banking Monroe County Community College Paper Checks Montcalm Community College Mott Community College Paper Checks

Muskegon Community College Primarily Debit Card, If money is Higher One .40 for each refund sent to Higher One. No cost for Card, Student returned, Paper Check pays replacement fee. North Central Michigan College Paper Check, Direct Deposit, Debit Card Higher One for all No Just started with Higher One. They bought out options Sallie Mae(previous vendor) Northwestern Michigan College Paper Check, Direct Deposit Direct Deposits processed via Touch Net Oakland Community College Paper Check, Direct Deposit, Credit US Bank WWW.Oakloandcc.edu/RaiderOneCard Cards, College One Card Schoolcraft College Paper Checks, Direct Deposit Southwestern Michigan College Paper Checks – Going to Direct Deposit Direct Deposit processed via TouchNet Just moved to TouchNet Oct 2013 St. Clair County Community College Direct Deposit/Paper Check Higher One Only for Replacement Card- Student Pays Paper Check is Default Washtenaw Community College Wayne County Community College Paper Check Only Working on another method West Shore Community College Paper Check

11 From the Old Process to the New

Run RERG: Create file Copy file and charge to captures Fin. Ser. ties data Fin. Ser. verifies Run SNDACRCN Verify file acceptance Email completed to process Paper Checks Notify Financial approp. area to allow Notify Cashiers that Financial check data to to Cashiers # of checks, $ process to transmit and that file processed transmitted form to refunds services via email file to be recognized by checks can be mailed Services process information amount of run file to Comerica was complete Comerica system

Cashier's Review for Fin. Ser. Daily Review for Save returned file Office Print Checks Fold Checks Canadian banking: prior day bad addresses Mail Checks Addresses runs banking reporting

Send file to Outside vendor

All of the highlighted steps would be virtually eliminated. The exception would be to print emergency refund checks, perhaps 1-3% of the total number of currently issued checks.

12 New Student Refund Process

SCKR: Creates a SLCR: Creates a ECPP: Pre-notes ECHP: Processes file for general Send file to saved list for pre- bank account electonic checks, accounting; run Outside vendor noting checks information to twice, for paper

13 Cost Savings

Total paper Outsourced Estimated annual Estimated annual New Paper Check Current Paper & 90% of Paper Year & EFT transaction total cost savings total cost savings estimated cost EFT annual cost check cost transactions cost ($) (%) annual cost 2010/2011 42541 $ 17,016 $ 134,929.56 $ 136,369.43 $ 121,436.60 $ 105,860.07 77.6% $ 30,509.36 2011/2012 42347 $ 16,939 $ 130,776.86 $ 132,406.81 $ 117,699.18 $ 102,390.33 77.3% $ 30,016.49 2012/2013 36029 $ 14,412 $ 109,614.49 $ 111,202.05 $ 98,653.04 $ 85,829.00 77.2% $ 25,373.05

Current Cost Compared to "Historic" Outsourced Cost

$150,000.00

$136,369.43 $135,000.00 $132,406.81

$120,000.00 $111,202.05

$105,000.00

$90,000.00 Current total cost $75,000.00 Historic estimated cost if in place

$60,000.00

$45,000.00

$30,509.36 $30,016.49 $30,000.00 $25,373.05

$15,000.00

$- 2010/2011 2011/2012 2012/2013

14 Force Field

Desired Change: Outsource Majority of Student Refund Payments to Third Party Vendor

Driving Forces Restraining Forces

1. Best Practices Model 1. Resistance to Change 2. Cost Savings - Cashiers - Labor 2. Perception of Students 3. Cost Savings - Accounting - Labor 3. Refunding Limitations- Immediate Checks 4. Cost Savings - Bank Charges 4. Refunding Limitations - Third Party Checks 5. Cost Savings - Postage 5. Cannot Pick Up Outside Vendor Checks 6. Understanding Fee Structure and How to 6. Cost Savings - Materials Avoid Them 7. Increased Staff Efficiency 7. Lack of Student Financial Literacy 8. Chance to Help Student Improve Financial 8. Timeliness of Refund Process using Third -Party Literacy Systems-Lead-time needed by College

9. Customer Service to Students .. What is Role of 9. Improvement in Local Vendor Relations Cashiers Office with Outside Process? PR/Complaints/Questions 10. Ensure Regulations Compliance 11. Reduction in Fraud/Counterfeit Occurrences 12. Reduction in Annual Escheatment Process

15 Henry Ford Community College Fall 2013 - Continuous Process Improvement (CPI) Initiative Business Services Team - Reducing Paper Checks in Student Refund Process

Project Time Line - Gantt Chart

Sept Oct Nov Dec Jan Feb March April May June July Aug Sept Oct - Feb March Apr - Aug Sept Item Activity Responsible Party 2013 2013 2013 2013 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 - 2015 2015 2015 - 2015 2015

Continuous Process Improvement (CPI) Team Reviews 01 CPI Team Student Refund Process

02 CPI Team Presents Report and Recommendation CPI Team

Financial Services Staff Review Report and 03 Recommendation and Work with Purchasing Financial Services Department to Develop Request For Proposal (RFP) RFP is Issued and Financial Services Staff/Purchasing 04 Staff meet with Possible Vendors to Discuss RFP Financial Services Objectives

RFP Submissions are Received and Reviewed and a 05 Financial Services Vendor is Selected

Optional: Informational Presentation to Board of 06 Financial Services Trustees

07 Contract is Signed with Vendor John Satkowski

Implementation Plan is Developed and Financial 08 Services Staff work with Vendor to Implement and Test Financial Services the New Student Refund Process CPI Team Meets with Financial Services Staff for an CPI Team 09 Interim Six-Month (After Report and Financial Services Recommendation) Status Report

New Student Refund Process is Gradually Rolled-Out to 10 Financial Services a Selected "Pilot" Group of Students 3rd-Party Vendor Large Scale Communication Plan is Rolled-Out as Part Financial Services 11 of Implementation Plan to Educate HFCC Student Ofc of Communications About New Student Refund Process Student Services New Student Refund Process is Fully Implmented for 3rd-Party Vendor 12 All HFCC Students Financial Services

CPI Team Meets with Financial Services Staff for an CPI Team 13 Interim Six-Month (After Implementation) Status Financial Services Report

CPI Team Meets with Financial Services Staff for a Final CPI Team 14 Twelve-Month (After Implementation) Status Report Financial Services

Key People

Continuous Process Improvement Team members Barb Eisterhold, Kevin Culler, and John Satkowski, along with other Financial Services staff, the Communications Department, and Student Services, will each be involved in the work required to adjust the student-refund process.

Steering Committee Feedback

Team Name: Financial Services CPI Team

Date: November 19. 2013

Sponsor: John Satkowski

Ideas for Improvement # Idea Support 1 Significantly reduce time and cost associated with in-house student refunds. 2 Pursue option to outsource majority of student-refund process. 3 Develop and then release an RFP in December 2013. 4 Outsource the student refund process with a soft implementation during Spring/Summer 2014 and a full implementation Fall 2014. 5 Improve student financial literacy in conjunction with the 3rd-party vendor or through an expanded HFCC-developed program. 6 Reallocate resources assigned to student refund check creation. 7 Review the effectiveness of the new process.

Team Feedback Meeting Date: Sponsor: John Satkowski Leader: Kevin Culler

Ideas for Future Process Improvement Teams

1. Create efficiencies in the refund-selection process. (Identify easily students who had refunds in prior terms, students with stale-dated checks, students with credit balances, etc.) 2. Automatically apply prior-semester credit balances to current charges. 3. Implement a comprehensive financial-literacy program at the College. 4. How to gain financial stability 5. Bad-debt deterrence 6. Dealing with pending financial aid 7. Institutional process for contract approval 8. Determine why we have the number of check requests (as opposed to requisitions) that we do. 9. How do we get the whole campus involved in the budget process, and how might a particular department know what its budget is? 10. The de-registration process

Acknowledgments

The Process Improvement Team would like to thank the following contributors for their work with the team in developing a strategy to improve the handling of student financial-aid refunds at the College:

David Cunningham – Financial Services Director Dr. Stanley Jensen – President Rhonda Johnson – Bursar Tim Seguin – Accountant Fred Steiner – Purchasing Supervisor

The Process Improvement Team would also like to thank its sponsor, John Satkowski.