Board Audit and Finance Committee Minutes: March 18, 2008
The Peralta Colleges Governing Board
Audit and Finance Committee
Minutes
Chancellor’s Conference Room
333 East 8th St., Oakland, California
March 18, 2008
Present: Trustees Bill Withrow, Cy Gulassa, Tom Smith, Sadiq Ikharo, Gary Perkins, Joseph
Bielanski, Helena Lengel, and Roxanne Epstein.
The meeting was called to order at 5:08 pm
1.
Review and approve the agenda.
The agenda was approved as presented.
2.
Review and approve the minutes of 7 February 2008 meeting.
The minutes were approved as submitted. They are terrific!
3.
Report by the Inspector General, to include status of the audit of the Procurement
function. (Gail Waiters)
No report.
4.
Review the status of the Retiree Healthcare Trust Investments. (Tom Smith, Mark
Harris, Lehman Bros)
The investment market has been a wild ride for everybody. Through January 31, 2008, we had
made 8.2%. This will probably go down as of February, but will probably recover by end of the
Fiscal or calendar year. The committee, Tom Smith, and Mark Harris will travel to New York to
speak to Goldman Sachs, JP Morgan, and Lehman Brothers to discuss asset allocation, and where
they think the economy and the dollar are going. When we initially set up the OPED trust, we
were aware of the possibility of a bear market, and we’ve been diligently putting money away
into a reserve preparing for that. We’re prepared for at least 2 years to make principle payments
out of this reserve if necessary.
5.
Review IT Strategic Financial Plan and current financial status. (Gary Perkins/Tom
Smith)
We’re in the process of taking a complete look at what systems we have purchased. We hope to
bring a potential control module that HR needs to install, to integrate HR and Finance to be able
to post payroll and have control by the “job code”. Currently, this is done by the “person”. This
will allow us to control the budget better, and to better be able to post the payroll to the budgets.
Ciber says this will cost $600,000 for this critical piece of software. We are conducting a study to
see if there may be other things out there that we may not be aware of that we need. This system
will save time to input people into the system, as well as paying people. This will also address
the problem that the colleges have to view the salaries left in their budgets. This won’t be
finished until January 2009 once it’s installed. This will help with privacy issues by providing
information in numbers and not in names.
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Board Audit and Finance Committee Minutes: March 18, 2008
We’ll keep the CEO position vacant once it becomes vacant, and Robert Half is doing a search
for us in addition to our hiring pool. We want a specialist in the “front” and “back” ends of the
system. Data must be pulled from the right queries, and that has been a problem for the auditors.
This should be the biggest expense, and Tom doesn’t anticipate any other problems that would
require a large investment. We need someone else who understands the software other than Minh
Lam. The business trend is to hire a non-IT CIO, which we’ve done, in order to integrate things
into the system. CTO is the “new” senior technological person in most organizations, but we
don’t have one; the function is carried out by a contractor here. It was suggested that Tom read
up on these distinctions. The strategic plan for IT should be factored in with these issues. We
require expertise in process control systems, rather than information control systems.
How does the IT strategic plan fit in with the overall strategic plan? They should be driven
together with the overall educational master plan. Committees have been focused on problem
solving, rather than looking at the big picture. Two test classrooms with IT advances at Laney
decreased the number of students in the classroom, decreasing productivity, and if done Districtwide, that would be a problem. McIntyre’s report may be doing an environmental scan, but we
need to think out how IT fits into the strategic plan, also. The committee hopes that a CIO would
have strategic planning background. A new CIO would probably not be hired for one year.
Could there be exemptions to the 50% law for major start-up projects? It involves a tremendous
amount of paper work to do this. There is no penalty if a District is not in compliance, except
negotiate publicity. We could be able to present what we’re doing to the interested parties, and it
could be discussed and negotiated in the short-term. There’d have to be a lot of communications
on this, as there’s a perception that large amounts of monies are spent on IT and facilities. It all
depends upon what funds these monies are taken from. Almost all of our big IT and facilities
expenditures comes from bond money. We could invite all of the interested parties, explain the
temporary issue, and the reasons it is necessary. The goal is to stay in compliance.
6.
Review the Governor’s Budget proposal and discuss impact upon The Peralta
Colleges. (Tom Smith)
The State announced an $84 million dollar short-fall in property taxes. This translates to a $1.5
million mid-year deficit for us. Tom is talking to the Colleges about less “1351” money going to
them next year. Targets are being changed for next year: COA from 3737 to 3420; Merritt from
4500 to 3990; Laney from 7900 to 8170 next year; BCC from 2810 to 3420 for next year. 19000
FTES is still our base. Many of our classes have 30 students or less, so this is a big productivity
issue. Intersession and summer classes could be cancelled, but that would affect Financial Aid
that students have already received. COA won’t hit its targets, and is spending more per student
than budgeted. COA has a $16.6 million budget, and BCC has a $11.2 million budget. COA
needs to increase its productivity. Financial Services has to approve classroom growth before it’s
spent, consulted with Admissions and Records. COA is over budget by $270,000, spending more
“1351” money than was budgeted to earn less FTES than expected. Are there management
control systems in place to prevent this? This is controlled at the colleges. They should have
cancelled in the spring all of the low-productivity classes, and moved them to intercession and
summer. This has never happened before. COA put intercession and spring semester together,
which seems to be the fundamental difference. There’s no way they could know that they were
not overspending.
Full-time faculty pick-up a part-time faculty class when one’s full-time class load is too low.
Students are called to tell them that a class being cancelled, and are told of other classes at other
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Board Audit and Finance Committee Minutes: March 18, 2008
colleges. The new system will help with this process to tell what other classes are being offered
and can plug in a student to another campus’ class right away. We want to get away from
cancelling classes, and read the trends to consolidate classes. A&R also calls the student with an
alternative class. Presidents and VPs have to keep track of the classes they are offering, and have
to match the budget for adjuncts, which can’t be controlled or viewed at the District. What
percentage of classes over time gets cancelled? The cost per class to cancel is $5,000. Are there
any comps from other colleges on our productivity numbers?
Spring sections are up 13%. FTES is up 4%, and there are 54 additional sections. On census day:
BCC had 1632, and COA had 1477. Merritt is supposed to lose money from unrestricted general
funds going to the nursing program. 35 students is the break-even target number per class. Here
are productivity figures comparing Fiscal year 2002-2003 to last fall 2007: COA from 17.7 to
14.8; BCC from 19.9 to 18.7; Laney from 20 to 16.65; Merritt from 16.1 to 14.6. There are
probably improvements in these numbers, with intersession and summer, which are not added to
these statistics. Weekend courses are popular. They need to run less numbers of classes in the
fall and the spring, and we will still make our targets, spend less money, and increase productivity
with a 2-3% cut. There are budget advisory committee meetings on April 7th and April 14th for
the college Presidents and business managers to present their 2-4% budget cut ideas. What other
cutbacks could be generated at the State level? $44 million dollars of community college cuts
were projected, but then $37 million was found from funding that was never allocated, so that
was given back, and that issue went away. Now, it’s just the property tax shortfall of $1.5
million. We hope it’s not worse than that. We run a negative balance until December, and we
borrow cash from the county, paying interest with the $150 million we hold in their bank, plus
our reserves. We get funded in December and February from ERAF grants that are huge. We
can’t carry a deficit at June 30th into a new fiscal year. We would borrow from the bond fund to
the general fund to have a positive balance if needed. The State has no idea of what they are
doing, and they don’t know how much money they have or not. With a 2% cut from the colleges
and dipping into 2% from the reserve, we can run a deficit to carry the District for 2 years, as a
possible suggestion. The Board may be asked for equitable funding. Strategic planning should
look at possible size shifts at the colleges, but we also need to hear what the community wants
and get out and advertise our programs. We need to work with businesses in contract education
to better utilize the resources we already have. We’ve cut back on the number of catalog copies
that are distributed, and the catalog is also on line. Maybe we could have a shorter mail enticer
and get away from printing the entire, big catalog, not knowing the actual courses we’ll have.
There is resistance to become computer literate among faculty and maybe in the community, too.
We need a uniform procedure of when to cancel classes or not. Some faculty have low
professional productivity, and department chairs will help faculty to better regulate their classes.
6.
Discuss the status of the FY 2006-2007 external audit. (Tom Smith, Heidi White)
The Audit will be presented to the Board in the second meeting of the April, after going through
this committee first. The People Soft system hasn’t been able to run efficiently, and it will take a
few years to get our procedures in sync with how it works. There are no areas where there are
concerns about checks and balances. If there were problems, they would have contacted Tom and
the audit committee.
7.
Discussion on Proposed Parking Fees Increases. (Tom Smith)
A handout was distributed to the committee by Vice Chancellor Ikharo, which is attached. The
costs to maintain our parking lots are increasing annually. Revenues have been static for 15 years
with no fee increases. Lot monies help to pay for some of our law enforcement services. There
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Board Audit and Finance Committee Minutes: March 18, 2008
are future capitol projects to increase parking lot lighting and fencing. At Merritt, we are
improving security with extra parking lights and more lighting between buildings. Surveillance
cameras may occur in the future. It cost $1.7 million to pave the last parking lot. In looking at
the ability of students to pay increased parking fees, EOPS doesn’t give students parking money,
but there is some limited CalWorks money if our students have children. The Board facility
committee reviewed this and liked this, and recommended we talk to students. Associated
student government meeting are scheduled. It is illegal to share revenues with the student
association. Page three of the handout shows the poll from other colleges. We also need to get
new meters. This issue will be presented to the board in April after meeting with students. Laney
(929 spaces) and COA spaces fill up quickly. BCC doesn’t have a parking structure. Merritt has
a surplus. We may lose 170 parking spaces at Laney to CalTrans in May for 5 years to give them
a fence perimeter for their retrofit work. The committee asks for a copy of this document, and a
presentation at a Board meeting. We are also looking at solar panels to light the lots. We are
investigating if we can use the parking lot at the Kaiser Auditorium. Spaces could be gained in
the next year at the Laney athletic structure parking lot. Our current fees are extremely low. We
may want to build a parking structure at Laney for students and the public, and maybe retain the
airspace for added revenue. To what extent is Laney enrollment constrained by parking? Most of
our classes are offered at a peak time when parking is at a premium. We get a lot of people
enrolling in a class to be able just to park at Laney, paying our daily rate, and then they walk over
to use BART, because it’s less than BART’s $4.00/day fee. Retail parking in this area is valued
at $150-$200/month.
The next committee meeting will be held on April 10th from 5-7 pm, upon confirming this date
with our auditor.
The meeting was adjourned at 7 p.m.
Respectfully submitted,
Roxanne Epstein
Assistant to the Chancellor
repstein@peralta.edu
466-7203
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