MEETING OF THE AUDIT COMMITTEE
OF THE BOARD OF TRUSTEES
HOUSTON COMMUNITY COLLEGE SYSTEM
August 30, 2004
Minutes
The Board of Trustees of the Houston Community College System held a Meeting of
the Audit Committee on Monday, August 30, 2004, at the System Administration
Building, Seminar Room A, 2nd Floor, 3100 Main, Houston, Texas.
COMMITTEE MEMBERS PRESENT
Herman Litt, Chair
COMMITTEE MEMBERS ABSENT:
Jay K. Aiyer
Christopher W. Oliver
OTHER BOARD MEMBERS PRESENT
Diane Olmos Guzman
Michael P. Williams, D.Min.
ADMINISTRATION
Bruce H. Leslie, Chancellor
Doretha Eason, Interim Deputy to the Chancellor
Gloria Walker, Vice Chancellor, Finance & Administration
Chet Woodard, Internal Auditor
Michael Kyme, Executive Director, Purchasing
Miles LeBlanc, General Counsel
OTHERS PRESENT
Jarvis Hollingsworth, System Counsel, Bracewell & Patterson
Other administrators, citizens and representatives of the news media
CALL TO ORDER
Mr. Litt called the meeting to order at 12:54 p.m. and declared the committee
convened to consider matters pertaining to the Houston Community College System
as listed on the duly posted Meeting Notice.
Without a quorum present, the meeting was declared a working session.
INTERNAL AUDIT REPORT
Chet Woodard, Internal Auditor, explained that his office primarily serves in a
monitoring capacity to ascertain whether internal control policies and procedures are
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Audit Committee – August 30, 2004 – Page 2
functioning as they should. Internal control consists of five components including
monitoring, control activities, risk assessment and control environment. The auditing
department serves senior management and the Audit Committee. Internal audits are
performed to test compliance with policies and procedures, to participate and assist
in the annual external audit and to periodically assess the effectiveness and
efficiency of operations.
Mr. Woodard reported that one area of investigation during 2003-2004 dealt with
timekeeping and departmental payroll procedures. The irregularities were remedied
by centralizing the time entry function, which was also one of the TSPR
recommendations. Cases involving fraud are referred to the District Attorney’s office
and employees found guilty of criminal intent are terminated from employment. Mr.
Woodard added that internal control training is conducted for managers to reinforce
their effectiveness.
Mr. Woodard recommended that management ensure that employees are informed
of standards of conduct. Mr. Hollingsworth advised having employees sign a code of
conduct at the time of employment. Mr. Woodard added that monitoring is an
important responsibility for managers at all levels and could prevent many of the
problems he has encountered. Dr. Leslie stated that improvement was needed in the
monitoring of vacation schedules to prevent excessive carryover.
EXTERNAL AUDIT REPORT
Ms. Walker explained that an external audit is performed annually. We are now in
the second year of a five-year contract with McConnell Jones. Recent policy
revisions approved by the Board stipulate that external auditors are to be engaged no
more than five years in order to preserve their independent judgment. The governing
board of auditing entities has endorsed the Sarbanes-Oxley act, which effected
changes in accounting and auditing procedures to ensure that financial statements
are correct, accurate and sound. The State of Texas has not yet endorsed
Sorbanes-Oxley, however it is likely that community colleges will be required to
comply in the near future.
McConnell Jones is currently onsite and an audit schedule has been prepared. The
presentation to the Audit Committee is scheduled for November, with presentation of
the final audit report in December. Upon approval, the audit report will be submitted
to the state by the first of the year. Ms. Walker added that the TSPR audit
recommended documenting the time the internal auditing team works with the
external auditing firm in order to obtain a favorable value for the audit. That
recommendation was included in the engagement letter. She also stated that the
Board’s conflict of interest affidavits and documentation of training in the Public
Funds Investment Act are examined by the auditing firm. Dr. Leslie suggested that
workshops on finances and requirements of trusteeship could be conducted during
Board Meetings.
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Audit Committee – August 30, 2004 – Page 3
Mr. Litt asked that the internal and external audit reports be presented at the next
meeting of the Committee of the Whole and that the Board receive the external audit
schedule.
ADJOURNMENT
With no further business, the meeting was adjourned at 1:51 p.m.
Minutes Prepared by:
Linda Gray, Board Services
Reviewed and Submitted by:
Yolanda Navarro Flores, Secretary
Board of Trustees
Minutes Approved as Submitted:
October 28, 2004