PERALTA COMMUNITY COLLEGE DISTRICT
AUDIT AND FINANCE COMMITTEE MEETING
MINUTES
Date:
Location:
Start time:
End time:
September 30, 2008
Chancellor’s Conference Room, District Office
4:50 p.m.
5:44 p.m.
PRESENT:
Bill Withrow, Chair
William Riley, Trustee
Cy Gulassa, Trustee
Thomas Smith, Vice Chancellor Finance and Administration
Joseph Bielanski, President, District Academic Senate
Inger Stark, Department Chair, Laney
Mark Harris, The Pineapple Group
AGENDA:
1. Review and approve the agenda.
2. Review and approve the minutes for the June 12, 2008 meeting.
3. Recognize for the record that Trustee Guillén is no longer a member
of the Audit and Finance Committee and that he has been replaced
by committee alternate member Board President Gulassa.
4. Review status of California State Budget and prognosis for impact
upon The Peralta Colleges.
5. Review the Budget for The Peralta Colleges that was submitted to the
State in July 2008.
6. Discuss current status of all significant and material weaknesses
that were documented in the External Audit Report for the fiscal
years 2005-06 and 2006-07.
7. Discuss status of the External Audit for 2007-08.
8. Discuss the progress to date in developing and implementing
Program Based Budgeting techniques for the FY 2008-09.
9. Review the status of the Retiree Healthcare Trust Investments and
modification of Asset Allocation to ensure that we are adequately
positioned for the future economy and market.
Chair Withrow opened meeting at 4:50 p.m. with a few cleanup items for
documentation.
Item 3 – Audit and Finance Committee members
Trustee Guillén will no longer be a member of the Audit and Finance committee.
President Gulassa will replace him and Chair Withrow will look for a new alternate.
Item 4 – California State Budget (VC Smith)
“Blue” books are distributed in Sacramento – budget meeting is scheduled for October
9, 2008. Allocation for EOPS has been done. Expect about $2Min growth. Finance will
be budgeting for a significant mid-year cut. VC Smith believes there will be $2M cut
mid-year.
September 30, 2008
Page 1 of 3
COLA is .68% (less than one percent); will probably get comments from union.
Governor has ability to take COLA back mid-year. VC Smith told unions not funding
COLA until mid-year. No COLA for categoricals which is unacceptable for PFT.
Item 5 – Tentative Budget for FY 2008-09 (VC Smith)
Tentative budgets are not sent to state or state chancellor’s office. The District is just
required to file. District’s tentative budget will be similar to the adopted budget. The
main issue will be covering the mid-year cut and covering for the loss there.
Item 9 – Review of status of the Retiree Healthcare Trust Investments
Resolution prepared for Board’s October 14, 2008 meeting. Resolution allows for
refunding on the fifth traunch of the OPEBs August 2010. With the collapse of Lehman
Brothers no market for market rate securities will default to 17% interest rate.
Goldman Sachs has done significant review and will take first traunch and fix with
taxable first rate bonds. VC Smith provided the timetable for the bonds. Same thing as
what District did with GO bonds. Don’t know if markets going to be liquid enough in
time.
VC Smith wanted Audit committee to make recommendation to full Board. It has been
reviewed by District’s bond counsel thoroughly and they believe this is the best option.
Chair Withrow asked how they will be invested. VC Smith was not sure but it would be
something very safe. Mark Harris stated it has to be short term investment until
August 2010, will buy safe short-term government. Goldman Sachs declined to
participate; we are using Stone and Youngberg. Need permission from committee to
finalize the deal. Mark Harris will check agency market.
MOTION: Motion by Trustee Riley to accept Resolution 08-09/10 and present to the
full Board of Trustees. Trustee Gulassa seconded. Motion passed.
VC Smith distributed the Lehman Brothers investment report for August 2008. Still in
good shape, decided not to bring the additional strategic allocation. They will probably
bring back at some future date. Neuberger has been sold and will be headquartered in
Los Angeles. Mark Harris mentioned District owns $23M plus or minus in mortgage
backed securities in the income portfolio.
Item #7 – Discuss status of the External Audit for 2007-08
Interim work done; in process of closing the books looks like we will record a loss in
unrestricted fund of $600k, part of reason extremely aggressive in going after growth
$1.3M put in base budget for last year carries over for this year, offset the mid-year cut.
Aggressive on the 1351 spending and covering the mid-year cut. Auditors will be back
in November; will have audit completed for Board meeting in December. VC Smith will
attempt to get finished up in November, to Board in December, filed with state by
December 31st.
Chair Withrow questioned how the District stood with past year weaknesses in terms of
new audit. VC Smith stated the District receives comments and tries to fix them even
though we are halfway through the new fiscal year. A lot of budgeting problems have
been alleviated; we are having less budgeting errors on the salaries.
VC Smith indicated that fringe benefits went up $2.3M – increased 13% a little
disconcerting when COLA is small and growth is going to 1351 fund – we have no
discretionary funds to continually absorb these costs. Chair Withrow mentioned the
September 30, 2008
Page 2 of 3
national average was 6%, expecting 2008 to be 4%. VC Smith stated the District is
being very aggressive, did reenrollment where 30 to 40 dead people were eliminated,
what is covered and not covered; apply for reimbursement through Medicare program
(on district wide basis). The District covers things that typical plans do not cover. A
new actuarial study on the unfunded will be available in November. We have better
data than we did then. VC Smith wants information to be part of the audit report.
CoreSource and Kaiser are very different – Kaiser negotiated. Prescription drugs have a
lot to do with this. Peter Wantuch will present to the full Board.
Some concern on campuses that part of the audit is qualified. Some areas, if not
corrected through audit, the Board will be of mindset to call for additional resources
and to correct each individual item on a project management basis which is a major
concern for us on accreditation. Interest is there, the solutions are in process. Chair
Withrow’s intent is to meet with the auditor in October. Ms. Stark mentioned that
Laney has their accreditation visit in March, the qualified concerns if most of them are
in process, is no big deal but important to have in hand. VC Smith mentioned that
qualifications don’t have much to do with education; need to find out what qualification
is for and what it relates to. Our financial review overall is not qualified as a whole but
Finance is an important part of the accreditation process.
Meeting adjourned: 5:44 p.m.
September 30, 2008
Page 3 of 3