MEETING OF THE
AUDIT COMMITTEE
OF THE BOARD OF TRUSTEES
HOUSTON COMMUNITY COLLEGE
April 12, 2012
Minutes
The Audit Committee of the Board of Trustees of Houston Community College held a
meeting on Thursday, April 12, 2012, at the HCC Administration Building, 3100 Main, 2nd
Floor, Seminar Room A, Houston, Texas.
COMMITTEE MEMBERS PRESENT
Neeta Sane, Committee Chair
Sandie Mullins, Committee Member
Carroll G. Robinson, Committee Member
Richard Schechter, Alternate Committee Member
Bruce Austin
Mary Ann Perez
ADMINISTRATION
Mary S. Spangler, Chancellor
Renee Byas, General Counsel
Shantay Grays, Interim Executive Officer to the Chancellor
Charles Cook, Vice Chancellor, Instruction
William Carter, Vice Chancellor, Information Technology
Diana Pino, Vice Chancellor, Student Success
Daniel Seymour, Vice Chancellor, Planning and Institutional Effectiveness
Margaret Ford Fisher, President, Northeast College
Fena Garza, President, Southwest College
William Harmon, President, Central College
Zachary Hodges, President, Northwest College
Irene Porcarello, President, Southeast College
Betty Young, President, Coleman College of Health Sciences
Willie Williams, Jr., Chief Human Resources Officer
OTHERS PRESENT
Jarvis Hollingsworth, Board Counsel, Bracewell & Giuliani
Alyssa Hill, Gainer, Donnelly & Desroches LLP
Other administrators, citizens and representatives from the news media
CALL TO ORDER
Mrs. Sane called the meeting to order at 2:05 p.m. and declared the Committee convened
to consider matters pertaining to Houston Community College as listed on the duly posted
Meeting Notice.
Houston Community College
Audit Committee – April 12, 2012 - Page 2
FISCAL AND COMPLIANCE REVIEW OF QATAR CONTRACT
Motion – Ms. Mullins moved and Mrs. Sane seconded.
Mrs. Sane provided a summary of the expenses for Qatar based on the audited end-of-year
statements and the financial statements reviewed monthly by the Board. She noted that all
of the information is posted on the website and informed that the financial statements are
recorded on an accrual accounting basis. She apprised that the summary provided gives
an overview of the Qatar profits and financials reported information.
Mr. Robinson inquired as to who prepared the document presented. Mrs. Sane noted that it
is a summary of all the financial information provided on Qatar and that she prepared the
document based on the information pulled from the website.
Mrs. Sane apprised that in 2010, there was a loss of $154,287 and a profit of $176,530 in
year two.
Mr. Schechter requested that the meeting recessed to allow a chance for copies to be
made and distributed.
Mr. Robinson inquired if there was an official audited number. Mrs. Sane noted that based
on the audited financials, there was not a profit for the first year; however, there was a profit
in the first year according to the monthly financials.
Mr. Schechter informed that there may be a timing issue because some things may have
been expensed for reimbursement at a later time. He noted that under the contract salaries
are advanced and accrued receivables should be counted.
Mr. Robinson inquired as to when the remaining revenues will be received and the
anticipated profit. Dr. Spangler informed that administrative fees are received from the
contract as consultant fees. She noted that the fees are ten percent of the contract and
varies from one year to the next.
Mrs. Sane requested an opportunity to complete her presentation of the information. She
noted that the numbers in the audited statements do no match the numbers in the financial
statements.
Mrs. Sane referenced the sheet that was presented during the budget presentations that
shows a $125,000 profit regarding the Qatar contract and noted that there are three
numbers for 2011. She noted that the audited statements show cumulative profit for 2010
and 2011 as $22,000 and the financial statements showed a profit of $250,000. She stated
that the question would be how much money is made from the Qatar contract. She noted
that the external auditors have done an excellent job in presenting the information as well
as the administration; however, her purpose for the discussion was not to determine why
the numbers do not match, but how much profit has actually been made under the contract.
Mr. Schechter informed that he would like to discuss why the numbers are off.
Houston Community College
Audit Committee – April 12, 2012 - Page 3
Ms. Mullins inquired who would provide an explanation of the difference in the numbers.
Alyssa Hill, Gainer, External Auditor with Donnelly & Desroches LLP informed that she
cannot advise why because she was not aware that they are off.
Mrs. Sane noted that the Audit Committee could instruct the external auditor to verify the
data provided and apprised that clarification would be to provide the actual profit made.
Motion – Mrs. Sane moved that external auditors provide details of Qatar financials and
transactions to verify profit made for fiscal years 2010 and 2011 and Ms. Mullins seconded.
Mr. Hollingsworth inquired if the motion is for the external auditors to conduct an audit of
the Qatar contract.
Mrs. Sane noted that the request is for the auditors to provide the details.
Ms. Alyssa Hill of Gainer, Donnelly & Desroches, LLP inquired if it is from an agreed upon
procedure engagement.
Dr. Spangler informed that the person who directly handles the financials for Qatar should
be involved.
Mrs. Sane inquired if the external auditor could have access to any individual who may be
involved or would need to provide necessary information.
Dr. Spangler noted that the numbers provided at the Board Retreat are what appeared in
the monthly financial statements.
Mr. Schechter inquired rather there really is a difference or if it is a timing issue.
Mr. Robinson informed that he would have liked for all of these matters to have been taken
care of behind the scenes and clarified that his inquiry was regarding the net revenue
received, amount due, and anticipated timeline for receipt of future funds.
Ms. Mullins informed that the Committee had to give the external auditor direction to move
forward.
Mr. Robinson stated that he thought that direction had been given to the auditor and asked
if the Committee needs to vote before the auditor does something.
Mrs. Byas noted that she has to make certain that the request is not outside the scope of
the contract.
Mr. Robinson informed that he wanted to make certain that everyone arrives at the same
number and inquired if a vote is necessary to request that the internal auditor review the
matter. Mrs. Byas informed that the internal auditor is capable of carrying out the request.
Houston Community College
Audit Committee – April 12, 2012 - Page 4
Mr. Hollingsworth informed that General Counsel must verify that the request is within the
scope of services under the contract for the external audit services.
Mr. Schechter clarified that Counsel is unclear if the Board is able to direct the external
auditor to complete the request, or if they need to be hired to specifically perform this task.
Mr. Robinson inquired would there be a need to spend taxpayer’s funds for an External
Auditor when the internal auditor can complete the request.
Mr. Schechter associated with Mr. Robinson and requested that the internal auditor review
the issue and once the data is received a determination can be made regarding the next
step.
Mrs. Sane withdrew her motion to have external auditor verify the numbers on the Qatar
contract. The second was not withdrawn
Vote - Motion failed with a vote of 1-2 with Mrs. Sane and Mr. Robinson opposed.
Motion - Mr. Robinson moved that internal auditor review the numbers and provide a report
on the fees collected and the timeline for collecting the remaining fees on the Qatar
contract. Mrs. Sane seconded.
Mr. Schechter requested to add to clarify what are the actual numbers. Ms. Mullins noted
that the request is to compare the monthly financial statements and audited statements.
Mr. Robinson recommended reviewing all numbers available to the Board on Qatar
contract and in line with proper accounting.
Vote - Motion carried with a vote of 3-0.
Mrs. Sane noted that the other issue regarding the Qatar contract is compliance with the
District’s policies and procedures. She inquired of the guidelines utilized for personnel
contracts and auxiliary fund expenditures.
Mrs. Sane inquired Board approval is required on expenditures made from the auxiliary
fund.
Mr. Hollingsworth informed that the Chancellor has signature authority up to $100,000 and
noted that once authority is given through approval on a contract, it gives administration the
authority to execute all aspects of the contract.
Mrs. Sane inquired where the Chancellor has authority for contracts over $100,000. Mr.
Hollingsworth informed that in giving the Chancellor authority to execute a contract, the
Board has approved the college’s obligations to satisfy the contract.
Mr. Robinson inquired if the basic signature authority applies to all funds regardless of the
fund account. He asked if the contract is $101,000 it must come before the Board and once
Houston Community College
Audit Committee – April 12, 2012 - Page 5
approved administration negotiates the contract, what else will be obligated in the contract
that would need Board action.
Mr. Hollingsworth noted that if the terms change or if the amount is more than what the
Board agreed, it needs to come back to the Board. He noted that if the Chancellor has
approval to purchase land for $6 million, then she has the authority to spend that amount of
money.
Mr. Schechter noted that his inquiry would be with change orders. Mr. Hollingsworth noted
that the change order is 10%.
Mr. Austin informed that the Board does not do day-to-day operations. He noted that the
signature authority given to the Chancellor was set at $100,000 and noted that the approval
included that a ledger should be developed to show the expenses that were approved for
less than the signature authority amount.
Mrs. Sane noted that the policy does not state that the auxiliary funds expense needs
Board authority. She requested the personnel contracts to be reviewed.
Mr. Austin noted that the Board did not designate authority according to funding source.
Mr. Hollingsworth informed that the Board’s approval is across the Board regardless of the
fund.
Mr. Robinson requested that Counsel provide a statement that all expenditures over
$100,000 or change orders over 10% regardless of the funding source must go before the
Board. He noted that the internal auditor should review and note if there is a pattern or
practice to circumvent the process.
Dr. Spangler clarified that the Task Force document was an estimate of possible
revenue/expense measures; she noted that the process was to identify what revenue
generation could contribute to the bottom line, therefore, the numbers are only estimate as
the numbers in the financial statements are actual.
Mrs. Sane requested that a review of the personnel contracts regarding Qatar to make
certain all the procedures are followed according to policy.
(Ms. Mullins left at 2:40 p.m.)
(Mr. Robinson stepped out at 2:56 p.m.)
INTERNAL AUIDT PLAN
Motion – Mr. Schechter moved to approve and Mrs. Sane seconded.
Mrs. Belinda Brockman presented the internal audit plan is for the remainder of the current
fiscal year and apprised that the audit plan is linked to the internal auditor’s budget.
Houston Community College
Audit Committee – April 12, 2012 - Page 6
Mrs. Brockman provided an overview of the plan to include the following:
• Property Management Fixed Asset System
• Contract Administration
• Inventory Process
• Grants and Contracts
• Consultant Contract Compliance
• Identity and Access Management
• Implementation and Consulting
The audit plan also includes follow-ups to previous audits to include:
• Payroll Operations
• Student Financial Aid
• Response to SAO Hotline Request
• Various Administrative Functions
(Mr. Robinson returned at 3:06 p.m.)
Mrs. Brockman informed that there are high risk items that she will not be able to perform at
this time due to budget, staffing capabilities, and time availability.
(Ms. Perez and Mr. Robinson stepped out at 3:08 p.m.)
Mrs. Brockman noted that the following will be for the future:
• Greater use of Objective factors
• Administrative Oversight
• Audit Universe Refinement
• Greater Integrated Effort
• Audits Selected by Risk
(Mr. Robinson returned at 3:11 p.m.)
Mr. Schechter referenced the high risk items not covered and inquired with respect to the
Foundation, does the internal auditor have authority to audit the Foundation books. Mrs.
Brockman noted that the Foundation is separate and apprised that she does not have
authority to audit the Foundation financials.
Mr. Schechter referenced contract administration and inquired if this will be audited. Mrs.
Brockman informed that of the high risk items, the contract administration is part of the
internal audit plan. Mrs. Brockman informed that given the current resources at this time an
audit of procurement operations could not be done unless time is given for staff to gain the
capabilities.
Mr. Schechter suggested that if a high risk area is not being done this year, a request for
additional resources should be made to administration and the Board so it can be
completed next year. Mrs. Brockman informed that a budget request will be submitted.
Houston Community College
Audit Committee – April 12, 2012 - Page 7
Mr. Robinson inquired of the requested items and the amount. Mrs. Brockman informed
that budget request should be approximately $200,000. Mr. Robinson noted that there
should be an effort to reprogram some budget items to provide the funding needed for the
internal audit of high risk items.
Mr. Austin noted that corrective actions need to be in place to minimize fraud, waste and
abuse. He noted that recommendations from an audit firm were previously implemented
under Bruce Leslie and that one of the historical procurement problems is a lack of
independence. He noted that independence and objectivity should be present and agreed
that spot checks should be completed on procurement procedures and processes.
(Ms. Perez returned at 3:23 p.m.)
Mr. Robinson informed that as a Board Member, he wants to make certain a stem-to-stern
audit is conducted and inquired as to what could be done to make certain this is possible
Mrs. Brockman noted that the plan was developed based on the stakeholder expectations
and administration concerns. Mrs. Byas noted that procurement welcomes the spot audits.
Mr. Schechter apprised that there was an presentation last year regarding the procurement
process and noted that internal audit could meet with General Counsel and Executive
Director of Procurement to review if the process is sufficient or if there is a need for
additional funding for the internal audit area to carry out the review of the areas based on
independent judgment.
Mr. Robinson noted that his discussion regarding procurement was not referencing the
procurement department but an effort to provide the necessary funding for the Internal
Audit area.
Vote – The motion passed with vote of 3-0.
PRIOR YEAR(S) EXPENDITURE FOR HCC FOUNDATION
Item postponed for future discussion.
ADJOURNMENT
With no further business, the meeting adjourned at 3:40 p.m.
Recorded, transcribed and submitted by:
Sharon R. Wright, Manager, Board Services
Minutes Approved: