MEETING OF THE
AUDIT COMMITTEE
OF THE BOARD OF TRUSTEES
HOUSTON COMMUNITY COLLEGE SYSTEM
April 17, 2008
Minutes
The Audit Committee of the Board of Trustees of the Houston Community College
System held a meeting on Thursday, April 17, 2008, at the System Administration
Building, 3100 Main, 2nd Floor Seminar Room A, Houston, Texas.
COMMITTEE MEMBERS PRESENT
Richard Schechter, Committee Chair
Neeta Sane, Committee Vice Chair
Bruce Austin
Diane Olmos Guzman
ADMINISTRATION
Mary S. Spangler, Chancellor
Art Tyler, Deputy Chancellor/COO
Doretha Eason, Executive Assistant to the Chancellor
Bill Carter, Vice Chancellor, Information Technology
Charles Cook, Vice Chancellor for Instruction
Irene Porcarello, Vice Chancellor for Student Success
Winston Dahse, Interim President, Southwest College
Margaret Ford, President, Northeast College
Fena Garza, President, Southeast College
William Harmon, President, Central College
Daniel Arguijo, Associate Vice Chancellor, Communications
Willie Williams, Associate Vice Chancellor, Human Resources
Mike Kyme, Executive Director, Procurement
OTHERS PRESENT
Maureen Singleton, Counsel, Bracewell & Giuliani
Linda Koffel, President, Faculty Senate
Other administrators, citizens, and representatives of the news media
CALL TO ORDER
Mr. Schechter called the meeting to order at 2:30 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.
Mr. Schechter expressed appreciation to Mr. Austin for referring the Board to the
National Association of College and University Business Officers (NACUBO) Advisory
Report issued in 2003 and the 2004 Association of Community College Trustees
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Audit Committee – April 17, 2008 - Page 2
(ACCT) Advisory Report regarding higher educational institutions in response to
Sarbanes-Oxley Act.
Mr. Schechter apprised that the Committee should review the following issues:
•
Potential Board Structural Changes
Consider possible Board structural changes that would align the Board with best
practices established by NACUBO and ACCT
•
External Auditors
Discuss efforts that should be considered to bring the relationship with external
auditors in compliance with NACUBO and ACCT.
•
Internal Structural Changes
Discuss possible internal structural changes to bring the college in compliance
with best practices identified by NACUBO and ACCT.
•
Internal Audit and Performance Audit
Discuss the internal audit and the performance audit approved at the last Regular
Board meeting.
POTENTIAL BOARD STRUCTURAL CHANGES
Mr. Schechter informed that that the Audit Committee is not in the Board bylaws. He
noted that NACUBO recommends having an Audit Committee and ACCT states that the
Audit Committee could consist of the entire Board as a subcomponent of the Finance
Committee. Mr. Schechter recommended that the Audit Committee should be included
in the Board bylaws.
Motion – Mr. Schechter moved to recommend a separate Audit Committee be included
in the in the Board bylaws with duties as established in the NACUBO and ACCT
Advisory Reports. Mr. Austin seconded the motion. Motion carried with vote of 3-0.
Mr. Schechter recommended that the Audit Committee term be set for two years to
allow for specific financial training.
Dr. Spangler asked if the Audit Committee could consist of external individuals not
serving on the Board. Mr. Austin noted that NACUBO’s recommendation is referring to
those individuals who have the fiduciary responsibility for the institution.
Mr. Schechter apprised that Association of Governing Boards (AGB) has a financial
workshop for Audit Committees that they will conduct on-site.
The Committee concluded to schedule the workshop with AGB as a part of Board
development and recommended that the entire Board attend the workshop.
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Audit Committee – April 17, 2008 - Page 3
Motion – Mrs. Guzman motioned to recommend that the term for the Audit Committee
term be two years staggered. Mr. Schechter seconded the motion. Motion passed with
vote of 3-0.
Mr. Schechter also recommended obtaining the book from AGB on “Strategic Finance
for Trustees” for the Board.
EXTERNAL AUDITORS
Mr. Schechter apprised that Sarbanes Oxley recommends rotating the auditor every five
years; however, NACUBO recommends rotating audit partners every five years.
Motion – Mr. Austin moved to rotate auditors every five years. Mrs. Guzman seconded.
The motion passed 3-0.
Mr. Schechter recommended adopting a policy prohibiting the auditors from providing
non-audit services to the college.
Mrs. Guzman recommended that policy review be conducted annually. Mr. Austin
noted that the policy previously adopted stated that the auditors were to be rotated
every five years. He also noted that the policies adopted by the Board should be
maintained in a database system.
Mr. Carter informed that an Imaging Now System is available, which could be utilized for
archiving actions of the Board.
Motion – Mr. Schechter moved that the external auditors be prohibited from providing
non-audit services to the college. Mrs. Guzman seconded. The motion passed with a
vote of 3-0.
Mrs. Sane apprised that Mr. Austin provided information on different types of audits and
asked if the discussion reference conducting a financial audit or comprehensive audit of
the institution. Mr. Schechter informed that the current efforts of the Audit Committee
involved reconstituting the audit committee with a two-year term and noted that there is
currently a financial audit conducted for the college. He apprised that the current
recommendations deal strictly with external auditors.
Mr. Schechter recommended that the engagement letter from the auditor should be
signed by the Board.
Motion – Mr. Schechter moved that all engagement letters with auditors in the future be
signed the Board of Trustees. Mrs. Guzman seconded. Motion passed 3-0.
INTERNAL STRUCTURE
Confidential Complaint System
Mr. Schechter recommended the creation of a confidential complaint system where an
individual can register a confidential complaint regarding accounting, auditing, or
internal controls.
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Audit Committee – April 17, 2008 - Page 4
Motion - Mr. Austin moved to implement a confidential complaint system in accordance
with the documentation previously submitted. Mr. Schechter seconded the motion.
Motion passed 3-0.
Mr. Schechter requested that administration provide a timeline on presenting a proposal
for implementation of the confidential compliant system.
Mr. Austin recommended that legal counsel review the process to address an unverified
claim. Dr. Tyler noted that the Chancellor would present the procedures with the
proposal.
Code of Ethics
Mr. Schechter noted that both NACUBO and ACCT Advisory reports discuss code of
ethics. Mr. Austin noted that a code of ethics was adopted by the Board during Trustee
Aiyer’s administration. Mr. Schechter noted that the code of ethics was pending
revisions prior to adoption. He noted that NACUBO and ACCT reports reference a code
of ethics that prohibits any action to fraudulent influence, coerce, manipulate or mislead
an auditor in the performance of an audit, which is not included in the current code of
ethics.
Mrs. Guzman noted that the ethics that are applicable to the Board should also apply to
upper level management, which is not included in the current code of ethics.
Mr. Austin recommended that Trustees receive a certificate of completion for in-service
training such as the one that was held January 4, 2008 where some of the issues were
discussed.
Motion – Mr. Schechter moved that the Board adopt as a part of the Code of Ethics with
respect to any audit the prohibition of any action to fraudulent influence, coerce,
manipulate or mislead an auditor in the performance of the audit. Mr. Austin seconded
the motion. The motion passed with a vote of 3-0.
The Committee recommended that Dr. Spangler review the establishment of a
certificate program on ethics as board development opportunities.
Mrs. Guzman recommended amending the current code of ethics policy to include
upper management and employees who are responsible for making decisions. Mr.
Schechter recommended that an organization chart be provided at the next meeting so
that upper level management can be reviewed.
Internal Audit
Mr. Schechter recommended that the Audit Committee meet with the internal auditor
and administration to take a broad overview of the internal audit such as what will it
cover, five-year timeline, what should be reviewed periodically, etc. He mentioned that
the Board should have direct interaction with the internal auditor.
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Audit Committee – April 17, 2008 - Page 5
Mr. Schechter recommended determining if the discussion should be in open or closed
session. Counsel noted that if discussing policy, it would have to be in open session.
Mr. Austin recommended using the categorical description utilized by the State
Comptroller.
External Audit (Performance Audit)
Dr. Tyler informed that the Board asked for various ways to begin a process of
reviewing the entire institution. He noted that the Board approved to have an external
firm to conduct a performance audit and informed that the initial phase will focus on the
performance review that was conducted by the State.
Mr. Schechter asked if there is an external audit conducted on internal controls. Mr.
Austin noted that the external audit reviews the internal controls. Dr. Tyler noted that if
there were deficiencies, they would be included in the management letter.
ADJOURNMENT
With no further business, the meeting adjourned at 3:16 p.m.
Recorded by:
Sharon R. Wright, Executive Administrative Assistant, Board Services
Transcribed and submitted by:
Sharon Wright, Executive Administrative Assistant, Board Services
Minutes Approved: