PERALTA COMMUNITY COLLEGE DISTRICT
AUDIT AND FINANCE COMMITTEE MEETING
MINUTES
Date:
Location:
Start time:
End time:
May 8, 2008
Chancellor’s Conference Room, District Office
2:10 p.m.
3:35 p.m.
PRESENT:
Bill Withrow, Chair
Gail Waiters, Inspector General
Tom Smith, Vice Chancellor for Finance and Administration
Joseph Bielanski, President, District Academic Senate
Gary Perkins, Director, Information Technology
Wise Allen, Acting Director Strategic Development
Yvonne Dorrough, Associate VC Budget and Finance
Heidi White, Partner, Vavrinek Trine Day Co. LLC (external auditors)
Bill Rauch, Partner, Vavrinek Trine Day Co. LLC (external auditors)
ABSENT:
William Riley, Trustee
Abel Guillén, Trustee
Cy Gulassa, Trustee
AGENDA:
1.
2.
3.
4.
Review and approve the agenda.
Review and approve the minutes of the April 10, 2008 meeting
Discuss the status of the FY 2006-07 external audit (TS, HW)
Discuss the progress to date in developing and implementing
Program Based Budgeting techniques for FY 2008-09 (TS, GY and JB)
5. Review the status of the Retiree Healthcare Trust Investments (TS,
MH, Lehman)
6. Review the status of the State Budget and discuss potential impact
upon the Peralta Colleges (TS)
Chair Withrow opened the meeting at 2:10 p.m. No quorum. Postponed agenda and
approval of minutes until next meeting.
Item #3 – Discuss the status of the FY 2006-07 external audit (Tom Smith, Heidi White)
Ms. White stated VTD was close to finalizing the audit. She distributed a draft. She is
still waiting for some responses to comments listed in back. All documentation is in.
On page 2 – Independent auditors over district as whole, paragraph 3 exception in
opinion, why is there an issue as far as qualifying capital assets. VTD has no opinion.
Chair Withrow asked why, Ms. White indicated there are no adequate records. Chair
Withrow queried whether it is systemic issue. VC Smith said that it is a legacy system
issue. IT is current testing PeopleSoft asset management to launch June 1, 2008.
Ms. Dorrough stated the information will be more adequate by July 1, 2008. Chair
Withrow asked if we could do a 90 day audit to September 1. Ms. White said if all
records reconciled in September, where we can test, we can take out of qualification
May 8, 2008
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and show as comments in back. Reconciliation happened after end of year and we
could express opinion.
Ms. White reviewed the MDA – written by management. Not audited, we do make sure
numbers match the financial statements though. On page 12, the financial statements
on page 11, 12, 13 are on an entity wide basis. This is PCCD as a whole all financial
transactions, all consolidated. Ms. White is giving Peralta an opinion that they are
materially correct. At June 30, 2007 they are included on page 11, $239M dollars –
can’t say is materially correct can’t express an opinion there.
Operating loss, page 12, shows $110M loss, very consistent throughout the system and
other community colleges. On an operational basis $110M, this does include the OPEB
bond, unrealized and realized gains, on investments and non-operating investments as
well.
More information is in the cash flow statement – cash in and out, all information if
looking for budgetary purpose will not be there, but it is required by State. From
operational standpoint, page 90, will provide more of what you are looking for.
Supplementary information – not required, but from management prospective this is
what we reconcile back to the 311.
Page 92 provides information on each of the funds activities within the year; Chair
Withrow asked what “student loans receivable” is. Ms. White said that students are
able to borrow and have a delayed pay down.
Ms. White stated we did have adjustments on the 311 in general fund, page 92
$16,658,000 – audited number. Reported on 311 $16,406,824 – we had some
variances that increased the ending balance. There is cash in amount but not 100%.
Each of the funds has been subjected to the audit.
Ms. White stated the other area we need to review is the comments and
recommendations beginning on page 58. There will not be a separate management
letter as far as what comments need to be addressed. Everything has been addressed
from both the FY 2005/06 year and the 2006/07 year in this section. Page 60 is
narrative of all comments.
In FY 2005/06 comment on financial accounting system – it is rolling forward with
additional comments, it is a material weakness. Significant deficiency, material
weakness, this is a key component that you get adequate information during year to
make good budgetary decisions.
Information systems – role they play in integration of PeopleSoft and what is run
through the system. Security levels and access may not be at the proper level. IT has
ability to go in and make transactions through the “back door”. Access is not in proper
place – people who should have access don’t and people who shouldn’t do. This is
where you need a SAS 70 internal audit. An SAS 70 can not be completed for another
year; the system is not in place that it can happen. System needs to be up and
running.
VC Smith stated the documentation for this is the monthly reports that he receives from
Deutsche Bank and Neuberger Berman, we only enter the journal entry once per year.
Ms. White commented that the financial statement says it should include all
transactions. This was an exceptional year, when bonds sold they were sold incorrectly
to investors. VC Smith said they were supposed to be interest only, they actually sold
them as interest and principal – we prepared on principal and interest so we couldn’t be
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in default. It took Lehman three to four months to find these bonds, that was the
problem. We were not close to default, because we prepaid.
Capital assets – have not been able to express an opinion. Ms. White said they need to
reconcile our inventory but of $200M of capital assets, equipment is about $20M and it
does need to be reconciled. Once system is up and running you will have significant
adjustments to that balance. Equipment can leave District, need to have inventory
taken on a rotating basis. Laptops are not capitalized. You could order 1,000 chairs at
$5 a piece and you would not capitalize it since it is at $5,000.
Ms. White moved on to balance sheet ledger accounts, this again goes back to
PeopleSoft issues and not adequately or timely enough to reconcile cash and
investments. They were not reconciled to March of 2008, system captures revenues
and expenses – but its effect on other cash and balances can not be done monthly or
quarterly. Debt was not reconciled timely but it was by end of the year reporting.
Those areas are considered material weaknesses or errors that need to be corrected to
ensure future reporting is correct
A/P and Purchasing functions – A/P clerks can approve transactions they can pay.
They process but do not approve. We have some packets of data there. If we can
resolve that would be great. It should be segregation of duties.
Transfers between funds – not documenting review process and approvals do not
happen on consistent basis. Process is not there, no documentation to say this is how
journal entries are to be approved.
With IT having a recovery plan, it is essential that system would be up and running very
quickly – we did receive an in process plan and it does show that it is being addressed.
Financial statement area – internal audit function –review reconciliations and comment
on control structure, District should consider implementing.
Financial aid – federal student financial aid and vocational technology with in student
financial aid relates to BCC. We found that there ability to have clear file maintenance
is not there. This report will be filed with the feds and the state. This statement alone
will cause a full audit by the feds at BCC. Ms. White said there were no exceptions at
the other three colleges, only at BCC. Ms. Dorrough said that management will now be
involved at each site.
VTEA program – equipment needs to be monitored and controlled at lower level, no
inventory taken for last couple of years. Needs to be asset managed. This is regulated
by the US Department of Education. You comply in all other areas, but this one.
Everything is received through the audit report. All community college district’s have
comments in the CalWorks area. Student says they qualify, college requests, but does
not get reply from the social service agency. This is a statewide program. New student
administration system will produce all rosters electronically and see in real time.
Recordkeeping issue from State Chancellor’s office and expenditure of lottery funds.
Designated in various areas, Ed Code says you need to track expenditures of these
funds separately. No consequence to this. Balance report goes over items from
previous years, carryover, completed etc.
May 8, 2008
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Timeline – as soon as we have all of the responses back, we will be set to issue the
report and be at Board meeting on May 20th. Need copies one week prior to Board
meeting for Trustees.
Item #4 – Discuss the progress to date in developing and implementing Program Based
Budgeting techniques for FY 2008-09 (Tom Smith, Gary Yee and Joseph Bielanski)
VC Yee is out of country, they are working on it. The Vice Presidents of Instruction
have been meeting and handled in DWEMPC,
Item #5 – Review of the status of the Retiree Healthcare Trust Investments (Tom Smith)
VC Smith distributed the April Lehman report.
Item #6 – Review the status of the State Budget and discuss potential impact upon the
Peralta Colleges (Tom Smith)
VC Smith stated Eric Skinner issued an e-mail to CBO’s requesting feedback on midyear cut and what they were doing. Basically Peralta was $1.5M, saw half of districts
respond. There is some panic in other Districts, they are having hiring freezes. Peralta
on the other hand is going to hire the 21 full time faculty and 5 full time counselors.
Discussion is that we are not going to destroy the future of the District and we have the
reserves to cover this. This may all change after May revise. Some notes I gave to
Debbie Weintraub for PFT’s general membership – proceeding with hires, set more
realistic targets to save 1351 money. We need to leverage productivity or we will be in
trouble. If Proposition 98 is not suspended then we will be okay in terms of our
revenue. If budget not passed until September we will borrow from bond funds.
Chair Withrow said some districts dropping to 3% reserves. VC Smith said Peralta is at
15% - we have $15M, they took the $1.5M which is 10% of our reserves. Unions have
been cooperative and know that a 5% reserve is not enough.
At present a 2% reduction for colleges and district, 4% overall – 2% will come from
reserves. We need to increase productivity. We will hire fewer adjuncts and replace
with 21 full time faculty. No COLA, hopefully will change in May revise. Our current
growth this year will not be fully funded. Will have unfunded FTES, will have 1.5%
growth this year. Big issue for next year is property taxes – met with Mark Harris, no
one is talking about state budgets across the country 1/3 of California’s budget is
property taxes, Goldman Sachs reduction in property taxes is estimated at 32%.
Faculty salary increase will be loaded this month including retro to July 1 st 2007.
The meeting adjourned at 3:35 p.m. Next meeting will be Thursday, June 12th from
5:00 p.m. to 7:00 p.m.
Memorandum for the Record:
__________________________________________
Bill Withrow, Chair
Audit and Finance Committee
Board of Trustees
Peralta Community College District
May 8, 2008
_____________________
Date Signed
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