PERALTA COMMUNITY COLLEGE DISTRICT
AUDIT AND FINANCE COMMITTEE MEETING
MINUTES
Date:
Location:
Start time:
End time:
December 13, 2007
Chancellor’s Conference Room, District Office
5:00 p.m.
6:17 p.m.
PRESENT:
Bill Withrow, Chair
Cy Gulassa, Trustee
Gail Waiters, Inspector General
Thomas Smith, Vice Chancellor, Finance and Administration
Joseph Bielanski, President, District Academic Senate
Helena Lengel, College of Alameda
ABSENT:
William Riley, Trustee
Abel Guillén, Trustee
AGENDA:
1.
2.
3.
4.
5.
6.
Review and approve the agenda.
Review and approve the minutes of the November 1, 2007 meeting
Discuss the status of the FY 2006-07 external audit
Review the status of the Retiree Healthcare Trust investments
Discuss modification of the $2,500 cap for college level procurements
Report by the Inspector General, to include status of the audit of the
procurement function
7. Discuss the methodology of effecting a 2%/3%/4%/5% cut in
funding by the state. Where would the District make cuts under
each of these potential scenarios?
Chair Withrow opened the meeting at 5:00 p.m.
Item #2 – Review and approve the minutes of the November 1, 2007 meeting
IG Waiters asked about paragraph 3, under Item #5, need to change sentence to read
“Chair Withrow would like to see an assessment from the time a requirement is defined
until it is satisfied.”
ACTION:
Upon a motion by Trustee Gulassa, seconded by Chair Withrow, the
minutes from the November 1, 2007 were approved.
Item #3 – Status of the FY 2006-07 external audit
Chair Withrow met with external auditor, report will not be by end of year but by end of
March 2008. There are continued problems because of enterprise systems. No
alarming things. VC Smith stated there are no audit adjustments, no major problems
as yet. Reconciling will finish within the next few weeks.
Chair Withrow wanted documented if there were any significant issues on the audit per
se. VC Smith indicated that when the draft copy of the audit report is available, there
will either be a conference call or Heidi White will be here to present to Audit committee,
December 13, 2007
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then to the full Board after that. VC Smith suggested we could put in minutes informal
discussion of management letter from last fiscal year. IG Waiters had requested
information for her report from the management letter and will discuss with Chair
Withrow offline.
Item #4 – Status of the Retiree Healthcare Trust Investments
VC Smith distributed the Lehman Brothers November report. Investments are up
$28M. He has asked Mark Harris (from the Pineapple Group) to appear before January
Audit committee where they will discuss whether the District is going to change their
asset allocation based on CalPERS movement of funds. Mark Harris will be there to
discuss Lehman Brothers and performance, plus value mark to market.
Chair Withrow commented that the asset allocation is moving more into International
equity instead of US equity, issue of do we want to have bonds stay the same vis a vis
equity. Bonds should be improving, want established dialogue. Is that fair to say? VC
Smith agreed. Chair Withrow commented that our international equity is by far the
biggest gainer, so we have no complaint with it.
VC Smith said when comparing the one month to the blended benchmark, it is
indicative we are more conservative in the stock picks we have, than the benchmarks, I
am more comfortable with that. The District will lose less because we are more
conservative. VC Smith does not want to replace Lehman at this time. The District has
a well balanced portfolio and there is a lot of volatility in the market. He is pleased with
Lehman, but has heard criticism from other sources.
Chair Withrow asked if the DOW information could be added to the monthly report from
Lehman Brothers so Peralta could see how they are progressing compared to market.
If you look at returns, international markets are far exceeding our national market.
He indicated that international markets are not Zimbabwe; they are from mature
western countries, although you are going to have a smattering of India and China. VC
Smith stated you have Russia, India and China, and that is why he would like to know
where PERS is moving their money. There has to be a bubble.
Item #5 – Discuss modification of the $2,500 cap for college level procurements
Chair Withrow recommended we move the $2,500 cap to $10,000 and VC Ikharo
concurs. Both the Chancellor and VC Smith also agree. No bids required until
$10,000. Chair Withrow indicated that some of the Bay 10 Districts have their cap at
$30,000, which he feels is a little high.
The question of whether the $2,500 was per purchase or per transaction came up. VC
Smith said that it is per transaction. Chair Withrow was not sure what kind of policy
was in place, but he is suggesting $10,000 per transaction.
The definition of a transaction will need to be clarified, as VC Smith stated that all
procurements do not go through VC Ikharo’s office (General Services). Independent
contractor/consultant agreements and service items go through Finance.
VC Smith suggested that VC Ikharo make the recommendation to this committee, then
to the Board and how this will operate, i.e., procedures that need to be followed.
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Item #6 – Report by the Inspector General
IG Waiters is continuing the audit on procurement. She is developing a matrix that
takes information from the independent contractor/consultant (ICC) agreements from
FY 2004-05 to current and putting in matrix that shows the kinds of contracts
awarded, dollar amount, who contract is awarded to by category (college or service
center) and looking at compliance with the purchasing thresholds so that we are not
splitting contracts and approval of contracts as to when work is started, that is, are we
in the correct flow. We may need to shore up the operating procedures. IG Waiters is
sending a survey to Bay 10 to ask them what there procedures are like and how many
requisitions per year, to see how we compare.
Chair Withrow requested an addition to the survey – how they maintain high demand
central inventories, i.e., such as copy paper. Not sure how many items are kept
centrally at this time, some basic supplies.
IG Waiters will be sending out a survey to users to find out their experiences with
purchasing. Survey will be detailed and anecdotal. One other thing she wants to look
at, the District use a lot of different architects for different things, she wants to know
how we are rotating through the certified lists.
Chair Withrow requested IG Waiters to look at the role of the business manager at each
of the colleges in terms of their scope of responsibility in material management
VC Smith would like to see an expert come in and see what we do with procurement
and give some recommendation. We have too many competing things going on. He
thinks one of the problems is the District is not getting fixed internally. Chair Withrow
agreed that we need to have a benchmark internally to have a better understanding of
how we vary.
Trustee Gulassa spoke of the formation of a new group of ex-CEOs and Business
Officers under McCallum umbrella, their function is to work as consultant on these
types of jobs.
IG Waiters thinks some of this stuff is systemic and the function is broken, now you
only have one Buyer for all of what you need to do. Chair Withrow would like to get an
idea of what we really do, logically or illogically, how are we doing something, different
chains of approval, need to validate that this is really happening. VC Smith stated that
the former Legacy system had seven layers of approval built in, but the approval
process was very quick and moved along.
Dr. Bielanski mentioned that there are differences at each colleges and believes it would
be the classified staff who does the procurement. Nothing has come to the attention of
the DAS; he gets some local information at BCC. One problem is with the “live”
materials you may need for science classes, you can’t buy ahead of time because the
items need to be fresh. There should be an open account somewhere so they can buy
things that need to be in the lab. Ms. Lengel added that at COA, in the Biology
Department, they need live items shipped regularly, they can’t be delivered to the
District Office or they will not be alive when they are needed. She does utilize open
purchase order accounts with particular vendors so the money is available when they
need it. Chair Withrow asked if there was a central point at the college. Ms. Lengel said
that all orders funnel through Ava Lee Pang at COA, she reports to the business
manager, Connie Willis. For audio visual that is under instruction, secretaries
maintain supplies for the Faculty.
December 13, 2007
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Chair Withrow asked about weekends and who checks that. Ms. Lengel says that she is
now receiving overtime to work the weekend labs to guarantee they are covered. There
is no administrative coverage on weekends.
Trustee Gulassa asked when a preliminary report would be available. IG Waiters stated
she could provide them with a broad list, which would give them a general
understanding of what is available; then focus on producing a final draft. She could
probably have a draft by the end of January. Trustee Gulassa would like to make this a
top priority due to the seriousness of some of the issues. IG Waiters is requesting
information from the Bay 10 on what their organization is like. The District can then
focus on what works, if other districts have system which is working well, we need to
take a look at that.
Item #7 – Methodology of effecting a 2%/3%/4%/5% cut in funding by the state
Chair Withrow wanted to discuss what the District would do with a potential state
budget cut of $14-15 billion. VC Smith stated that we went through this with Gray
Davis, we have gotten mid-year cuts of 2-3%. Previously, there was more flexibility now
we do not have flexibility. We could cut our hourly, but now we only have $100,000 in
hourly pay. Colleges and District would make 2 to 3 % cuts. I think District will need
to be more involved this time. If percentage high, we need to look at President’s
discretionary $175,000 in student life funds, hopefully BCC bookstore can support
associate students there. Chancellor has $200,000 fund that we would need to look at.
Need to cut travel, non-essential supplies, Independent contracts/consultants, cut
marketing but we don’t want to destroy our enrollment which is hard to get back.
Potentially may need to lay off part-time permanent, then into 1351fund money, that is
what you would do before talking about layoffs.
VC Smith stated the District has some very healthy reserves and doesn’t think he will
have to cut mid-year, they will take money back from Peralta, but he won’t cut college
budgets. VC Smith will be attending a budget meeting in Sacramento tomorrow to
discuss next year’s budget with CFO’s, lobbyists at the State Chancellor’s office.
The District’s reserves are currently 14%, some District’s have more, some less. We will
need to look at enrollment management. Currently we are looking at a software system
to manage enrollments, called C-crit.
Chair Withrow is concerned that the big hits will be in FYs 2008-09 and 2009-10. VC
Smith believes they will raise student fees and there will be no COLA for two years.
The meeting adjourned at 6:17 p.m.
The next Audit and Finance Committee will be Thursday, January 24, 2008, from 5:00
p.m. to 7:00 p.m. in the Chancellor’s Conference Room.
December 13, 2007
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