# Audit of Educational Institutions

(Schools, Colleges and Universities)

## A. Verification of Income

### 1. Fees from Students

Verification Steps:

Check names entered in Students Fee Register for each month against Class Registers
Test amount of fees charged
Check fees received by comparing receipts with entries in Cash Book and tracing collections in Fee Register
Total up Fees Register for each month to ascertain that fees paid in advance is carried forward
Check admission fees with admission slips and confirm credited to Capital Fund
See that concessions have been granted by person authorised as per rules
Confirm fines for late payment have been collected or remitted under proper authority
Confirm that hostel dues were recovered before student accounts were closed and deposits refunded

### 2. Other Receipts / Grants & Donations

Verify rental income from landed property with rent rolls
Vouch income from endowments and legacies, as well as interest and dividends from investments
Verify government grants with the memo of grant
If any expense has been disallowed, ascertain reasons

## B. Verification of Expenditure

### Specific Items

Verify that Provident Fund money of staff is invested in appropriate securities
Vouch donations with list published with annual report
If donations were for specific purpose, see that money was utilised for that purpose
Vouch all capital expenditure in usual way - verify with sanction from Committee
Vouch all establishment expenses - enquire into any unduly heavy expenditure
See that increase in staff salaries is sanctioned in minutes by Committee

## C. Verification of Assets & Liabilities

Report old/heavy arrears of fees, dormitory rents, etc. to Managing Committee
Confirm that caution money paid by students is shown as liability in Balance Sheet
See that investments in endowment funds for prizes are kept separate, and any income in excess of prizes invested with corpus
Ascertain that ordering/inspection system on receipt and issue of provisions is efficient and all bills duly authorised before payment
Verify inventories of:
Furniture
Stationery
Clothing
Provision
All equipment

Worked example

### Example 1

Example - Caution Money Treatment:

Students pay Rs 5,000 each as caution money on admission, refundable on leaving the institution.

### Example 2

Example - Admission Fee Treatment:

An institution charges Rs 25,000 as admission fee (one-time, non-refundable).

### Example 3

Example - Endowment Fund for Prizes:

Rs 5,00,000 endowment received - interest @ 8% (Rs 40,000) to be paid as annual prize.

Endowment of Rs 5,00,000 shown as separate Endowment Fund (liability)
Prize amount of Rs 40,000 disbursed
Any excess (e.g., interest of Rs 50,000 vs prize of Rs 40,000): excess Rs 10,000 must be added to corpus, not used for general expenses

⚠️ Common exam mistakes

Crediting admission fees to Income & Expenditure A/c instead of Capital Fund
Treating caution money as income instead of liability
Closing student accounts and refunding deposits without first recovering hostel dues
Mixing endowment fund income with general funds, ignoring that excess income from endowment must be added back to corpus
Not investigating why a government grant expense was disallowed - this may indicate non-compliance with grant conditions
Failing to ensure separate investment of PF money of staff

Reference:

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