PERALTA COMMUNITY COLLEGE DISTRICT
AUDIT AND FINANCE COMMITTEE MEETING
MINUTES
Date:
Location:
Start time:
End time:
April 12, 2007
Chancellor’s Conference Room, District Office
3:07 p.m.
4:35 p.m.
PRESENT:
Bill Withrow, Chair
Abel Guillén, Trustee
Cy Gulassa, Trustee
Gail Waiters, Inspector General
Tom Smith, Vice Chancellor for Finance and Administration
Yvonne Dorrough, Associate Vice Chancellor, Budget and Finance
Joseph Bielanski, President, District Academic Senate
Bill Rauch, Vavrinek Trine Day & Co.
Heidi White, Vavrinek Trine Day & Co. (via conference call)
ABSENT:
William Riley, Trustee
AGENDA:
1. Review and approve the agenda.
2. Review and approve the minutes of the March 22, 2007 meeting
3. Presentation by Heidi White on the final external audit report for FY
2005-06.
4. Discussion of engagement letter from Mark Harris, The Pineapple
Group
5. OPEB Investment Report
Chair Withrow opened the meeting at 3:07 p.m. with a discussion of what should Board
members be most concerned about when reviewing the findings of the external audit,
i.e., FTEs, internal counting controls, financial aid audit and audit comments, General
fund reserve.
Committee reviewed the MD&A on page 4 of the external audit. Chair Withrow
questioned if there was any significant areas that the Board should be aware of
(anything that could get caught up in with the press). VC Smith indicated the material
weakness about PeopleSoft is noted in the report.
Heidi White joined meeting at 3:20 p.m. via conference call.
External Audit
VC Smith gave briefing on certain sections of the report for some direction. Ms. White
indicated the good news was the report was sent to all appropriate agencies on time by
April 2nd since March 31st fell on weekend.
The opinion is on page 2, third paragraph, financial statements. It is unqualified
opinion, as we go through the recommendations, we were able to satisfy the numbers,
April 12, 2007
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and go forward with an unqualified opinion. The opinion will be highlighted for the
Board, the Audit and Finance Committee will go over more detailed sections.
Chair Withrow asked if there was anything in the audit of significance that the Board
needs to know about. Ms. White stated that it is fairly standard and there is nothing of
great significance that would be a red flag highlighting any issues. Everything is in
book value. Where you will see the most impact is on page 59, the start of discussion of
findings and recommendations.
Significant areas of concerns are really discussed beginning with the transition of legacy
over to PeopleSoft. Some issues have been resolved, would like to see if more progress
has been made.
Chair Withrow asked when the SAS 70 review will take place. VC Smith stated we will
begin immediately. We are using CIBER in demonstrating the physical capital asset
system. He is unimpressed with benefits package.
The audit findings in the report are only the findings that are required by the State/
Federal compliance. We do have other findings in a management letter that focused
more on effectiveness and efficiency, plus recommendations to get processes resolved.
VC Smith questioned if it is acceptable not to give that part in open session to Board,
but in closed instead. Ms. White said yes, that the Finance and Audit Committee would
be considered to be communication route to take to full Board. State information is
solely for use by the Board.
VC Smith stated that he knew there was one comment that is quite controversial to the
District. Ms. White followed up that it is segregation of duties (page 61), that is part of
a reportable condition. What we found is a lack of segregation of duties between
Purchasing and Facilities, and who should oversee the other. It is really possible for
one individual to have the ability to initiate Requisition, a Purchase Order and approve
payment without going through proper channels and after the fact. This is Finding
2006-5. We feel in District’s best interest to incorporate another layer between
purchasing and facilities. Background of vendors/contractors checked, but handled in
facilities department.
Chair Withrow stated you don’t want person purchasing to be person receiving. He was
unclear about A/P and whether that is sufficient for validation.
Ms. White mentioned that what they found in A/P was they were looking to make sure
documentation is there and ready for payment. If supporting documentation not
approved until after the services have been rendered, A/P does not have any other
choice but to pay the bill. They are not a line of authority to make that decision if it
happened after the fact. This goes back and forth between facilities and purchasing,
who is actually looking to make sure qualified vendor, insurance, etc. Follow up on this
finding is in the management letter.
VC Smith stated for the record the Chancellor is struggling with this comment. I believe
his position is that there is a level of accountability and that finance is the line of
defense to the inappropriateness. VC Smith would ask that IG take a look at this to
make recommendation to the Audit and Finance committee.
Ms. White said that internal control question is more of a preventative risk; other area
of segregation of duties, transfer of funds and journal entries. Need to talk about level
of control over programming and processing, and making changes to the General Ledger
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system. A lot had to be done as a “work around”. IT service department does not have
access to general ledger that they are providing programming for. Would be like a SAS
70 report. Recommendation is that you look for firm to provide a SAS 70 type audit.
Ms. White will recommend some firms that can do these types of audit. VC Smith will
contact and then bring back to the Audit and Finance committee for approval; for
trustees benefit this is the latest that this audit report has come out. The comments we
are supposed to be implementing this fiscal year; we now have two months.
Trustee Guillén arrived at 4:00 p.m.
Regarding the Financial Aid at BCC, COA and Laney did not have same problems or
issues as BCC. VC Smith mentioned that the District didn’t change personnel at BCC,
are they doing something different this year or were they just lucky in previous years.
AVC Dorrough stated that BCC went into direct mail disbursement, Robert [Vergas]
disburses early. Chair Withrow thought BCC is in serious trouble. Audit committee
may want to request that VC Haig have Howard [Perdue, AVC] look into this. Ms. White
recommends they look at BCC financial aid end of May to see if findings have changed.
Trustee Gulassa, mentioned Finding 2006-7, he has concern of paying of contracts at
$25,000. Ms. White indicated that two or three were specifically at that amount; within
sample there were three or four. VC Smith stated that part of the problem is they
[managers] will do a $25K contract knowing that it will be much larger and they don’t
want to wait and go through the Board. Trustee Gulassa mentioned it seemed the same
contractor was getting the same contracts, per vendor, per year, especially in
construction.
Ms. White discussed the 50% law calculation; the auditors were not able to finish the
50% law requirements. Mr. Rauch says they are still in compliance with 50% law [he
met with AVC Dorrough today to review].
Chair Withrow asked if audit Finding 2006-11 was due to PeoepleSoft? Both Ms. White
and Mr. Rauch said yes, interim reporting was very affected. Chair Withrow was
concerned that BCC off by 40%. AVC Dorrough indicated that the money $48,000 has
been spent by now.
Trustee Guillén asked how does this overall picture compare us to other Bay 10
districts. Ms. White indicated we need to remember that 05/06 year was very unique
since District converted the financial statements. Other Bay 10’s did not convert to
PeopleSoft. Findings here are really due to the PeopleSoft conversion. It takes two to
three years to resolve the bugs in the system. Wasn’t an easy year but it wasn’t the
worst either.
Trustee Gulassa asked about Finding 2006-13, we collecting FTEs for the K-12,
enrollment forms could not be located. Ms. White indicated this time it is a
recordkeeping type process. Form is required to be maintained, have parents
permission, did not exceed certain percentage enrollment at that high school. Related
to concurrently enrolled students high school and college. It is a course by course
basis.
Conference Call ended at 4:15 p.m.
Back of document has to do with prior fiscal year, or whether we fixed the problem.
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Mr. Rauch indicated that since only two months to implement, you will see a lot of
rollover into the next fiscal year.
Mark Harris (The Pineapple Group)
Contract for Mark Harris is five (5) basis points for payment and three (3) basis points
for reimbursements. Trustee Guillén has problem with 10 years and basis points
payments. He believes we should only reimburse for expenses. We are paying for
dedicated staff person at Pineapple Group overseeing the underwriters. VC Smith
stated they will monitor the transactions themselves on a month to month basis;
running through their software, providing reports to audit committee.
Chair Withrow talked about shifting risk profile is one of the big values coming to
District; to what degree did the risk profile change from the guidelines we gave them.
Trustee Guillén stated we asked Lehman to follow the CalPERS model; what is rationale
to shift away from CalPERS model?
VC Smith indicated we need to watch what CalPERS is doing, we are talking about risk.
Chair Withrow followed up that CalPERS underperformed, in small cap. We also risk
being overexposed in certain area, i.e. oil. We are now hearing they may invest in
commodities which is a conservative mode.
Trustee Guillén mentioned that five (5) basis points translates to $162 million, about
$108,000 per year. $5 million is owed to general fund so only about $80,000 per year
(basis points). Certain variations from the CalPERS record that we are not comfortable
with.
VC Smith’s suggestion is to take this committee and Chancellor to New York to see
trading floor and operations, meet with managers who know their stuff; would like to try
and go during May.
Next meeting May 10th beginning at 4:00 p.m.
Meeting adjourned at 4:35 p.m.
April 12, 2007
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