MEETING OF THE
AUDIT COMMITTEE
OF THE BOARD OF TRUSTEES
HOUSTON COMMUNITY COLLEGE
May 10, 2012
Minutes
The Audit Committee of the Board of Trustees of Houston Community College held a
meeting on Thursday, May 10, 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
Bruce Austin
Mary Ann Perez
ADMINISTRATION
Mary S. Spangler, Chancellor
Art Tyler, Deputy Chancellor/COO
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
Remmele Young, Executive Director, Government Relations and Sustainability
Willie Williams, Jr., Chief Human Resources Officer
OTHERS PRESENT
Jarvis Hollingsworth, Board Counsel, Bracewell & Giuliani
Thomas Urban, President, Faculty Senate
Other administrators, citizens and representatives from the news media
CALL TO ORDER
Mrs. Sane called the meeting to order at 12:35 p.m. and declared the Committee convened
to consider matters pertaining to Houston Community College as listed on the duly posted
Meeting Notice.
UPDATE FISCAL AND COMPLIANCE REVIEW OF QATAR CONTRACT
Mrs. Brockman provided an update regarding the fiscal and compliance review of the Qatar
contract. She noted that each monthly financial statement was compared with the general
ledger report. She apprised that if an unusual transaction was identified then a detailed
review was conducted. She presented a comparison of the auxiliary budget report and
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Audit Committee – May 10, 2012 - Page 2
informed that they are almost identical. Mrs. Brockman provided an auxiliary budget by
fund for each month beginning September 2010 through February 29, 2012. She noted that
the indirect cost is recognized and informed that there may have been some
misclassifications. She noted that accounting literally allows immaterial amounts to be
booked in the spending account rather than reduction in fund balance. She apprised that
after examination of the elements and presentations of the data, the auxiliary budget by
fund page of the monthly financials reasonably reflects the general ledger.
Mrs. Brockman informed that a discussion was held with Ron Defalco and it was noted that
Qatar line items were broken out for the financial year 2011. Mrs. Brockman apprised that
they were actually reclassifications. She informed that the account balances are the same
in Schedule B of the fiscal year end statement as of August 31, 2010. She noted that when
tested the difference was explained and the account balance is the same.
Mrs. Sane inquired if the clarification was that there was an accounting error. Mrs.
Brockman responded that there was not so much as an accounting error as it was a
presentation error. She noted that the financial statements reasonably reflect the general
ledger.
Mr. Robinson referenced the slide with the review of the monthly financial statements and
inquired as to how much should be received over the term of the contract. Dr. Tyler
informed that the fees are included in the total revenue, which would begin to accumulate.
Mr. Robinson inquired how much of the $4.5 million has come in hand. Dr. Tyler informed
that approximately $900,000. He noted that approximately $750,000 to $800,000 should be
anticipated annually over the next three years.
AMENDMENT TO INTERNAL AUDIT PLAN
Motion – Mr. Robinson moved and Mrs. Sane seconded.
Mr. Robinson apprised that his amendment emerged from the internal auditor stating that
she did not have the proper staff to conduct the operational audit of purchasing and that he
wanted to provide funding to do so. He was later informed that there is a contract in place
to conduct an external audit of procurement. Mrs. Byas noted that there was an external
audit completed in 2010, any subsequent follow-up would require a new RFQ.
Mr. Robinson informed that the representation at the Board table was that he was wasting
tax payer’s money because the audit was already done. He noted that his desire was to
have the Internal Auditor conduct the operational audit of the procurement department.
Mr. Austin apprised that he was over the Audit Committee in 2010 and was informed that
many of the recommendations from a previous review were not developed. He noted that
when the report was provided to the General Counsel, she immediately began making
progress to implement procedures as recommended in the report. He apprised that there
should be a review to see if the recommendations have been implemented and that he
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Audit Committee – May 10, 2012 - Page 3
supports an operational audit; however, it should be reviewed if appropriate actions have
been implemented regarding the report provided to General Counsel in 2010.
Mrs. Byas noted that there was a discussion with Mrs. Brockman and it was requested that
assistance be provided to make certain the recommendations have been implemented.
She informed that the National Institute of Governmental Purchasing (NIGP) would be the
type of firm to come in and review the procurement department. She noted that discussions
are underway to engage NIGP or another to complete the procurement audit in October.
Dr. Tyler apprised that the audit would be a part of the upcoming fiscal budget. He
recommended having someone outside the organization validate then the internal audit
could conduct follow-up to the audit.
Mr. Robinson informed that he does not mind following the administration’s
recommendation. He noted that he is fine with administration identifying the best means to
accomplish the task. He informed that as a Trustee, he felt that it was imperative that the
internal auditor have the infrastructure to complete the operational audit. He noted that he
was accused of wasting tax payer’s funds because there was a contract in place to conduct
the operational audit; however, there was not a contract in place. He apprised that he is
happy to withdraw the first item regarding the operational audit of the procurement
department. He noted that he requested an audit be conducted with construction because
of the presentations that were scheduled to the community regarding the facilities. He
informed that the auxiliary audit was requested because of the Qatar contract, which has
now been cleared.
Mr. Robinson acknowledged that the requested funding amount of $100,000 was an
arbitrary number based on discussion with Trustee Schechter. He noted that this number
may not be enough or may be too much and noted that he would yield to the recommended
amount from the Internal Auditor.
Mr. Austin informed that an audit is not always necessary to identify discrepancies. He
noted that digital best practices need to be installed so that there is a better tracking
mechanism. Dr. Tyler informed that if the Audit Committee agrees that these items should
be added, there is a contingency fund which would assist the internal audit to gain needed
assistance.
Dr. Spangler noted that the request for staff should come forward from Mrs. Brockman
during the budget development process. She apprised that this is how the additional staff
will be recognized through the administration supporting the initiative.
Ms. Perez informed that a budget workshop will be held in June 2012 so that there is a
review of the current budget as well as the proposed budgets for the next biennium.
Mr. Austin noted that Mr. Robinson is looking for quality and compliance with rules. He
noted that there needs to be compliance with Statement of Accounting Standards (SAS)
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Audit Committee – May 10, 2012 - Page 4
section 112 dealing for financial reporting to tighten up things to provide proper tracks for
internal control mechanism.
Mr. Robinson informed that he would amend his amendment to include two high risks areas
and allow administration to identify the funding for the items. He noted that amendment was
to have the construction accounting and auxiliary contracts administration audits added to
the Internal Audit Plan.
Mr. Austin inquired as to what are the best practices regarding construction audit and
recommended a review of what other institutions are doing.
Mrs. Brockman requested the opportunity to review the scope of the construction audit
because they are often rigorous audits.
Mr. Robinson noted that the internal auditor reported that she was not able to cover these
high risk areas and he was merely supporting the items that were mentioned in the report.
He apprised that administration has informed that they will identify how to deal with the
funding but thought these two items should be added to the Internal Audit Plan; however, if
the internal auditor feels that they could wait, then he is okay with postponing.
Mrs. Brockman noted that she would prefer to wait on these items.
Mr. Austin inquired with the internal auditor if there has been a review with National
Association of College and University Business officers (NACUBO) as best practices.
Mr. Robinson informed that he merely took the items from the Internal Audit report and
does not have a recommendation as to how detailed the audit should be since he is
supporting whatever is needed based on the presentation.
Mrs. Brockman apprised that she reviewed what other universities were doing as well as
management and Board concerns. She noted that based on capability and staff, those
items recommended were presented.
Mrs. Sane inquired if there needs to be a dollar amount based on the scope. Mr. Robinson
informed that the funding amount was clarified. He noted that the internal auditor provided
a document that stated there are additional high risk areas that were not included because
capabilities and funding. He apprised that his recommendation to amend was because
items were considered high risk and he was viewing the issue from a fiduciary point of
view.
Mrs. Sane noted that there are some high risk areas that are part of the Internal Audit Plan
and asked the internal auditor to identify which high risk areas should be included.
Mrs. Brockman informed that she is noting that areas were listed as high risk areas by
management and the Board. She noted that every high risk area will never be covered in
an internal audit plan and recommended that the budget process is followed.
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Audit Committee – May 10, 2012 - Page 5
Mr. Austin noted that there is a bifurcated process and that there needs to be some kind of
Total Quality Management (TQM) on the accounting process. He noted that at some point
the auditor should comment on whether these processes are in place. He apprised that the
other issue is to see how we are doing in procurement before making the final decision. He
noted that there needs to be quality regarding CIP accounting.
Mr. Robinson informed that he will follow the recommendation of the internal auditor. He
noted that the simple booking items as noted in the Qatar contract review needs to be
cleared and that we should be the first to audit ourselves.
Mrs. Sane noted that based on the discussion, there is no action needed at this time.
Mr. Robinson apprised that he has been contacted regarding if an Information Technology
(IT) audit has been conducted. Dr. Tyler informed that the external auditor includes IT
systems as a part of the external audit conducted.
ADJOURNMENT
With no further business, the meeting adjourned at 1:34 p.m.
Recorded, transcribed and submitted by:
Sharon R. Wright, Manager, Board Services
Minutes Approved:
June 21, 2012