PERALTA COMMUNITY COLLEGE DISTRICT
AUDIT AND FINANCE COMMITTEE MEETING
MINUTES
Date:
Location:
Start time:
End time:
March 18, 2009
Chancellor’s Conference Room, District Office
5:15 p.m.
6:30 p.m.
PRESENT:
Bill Withrow, Chair
Cy Gulassa, Trustee
William Riley, Trustee
Thomas Smith, Vice Chancellor Finance and Administration
Gail Waiters, Inspector General
Joseph Bielanski, President, District Academic Senate
Yvonne Dorrough, Associate Vice Chancellor, Budget and Finance
Elihu Harris, Chancellor
Mary Beth Benvenutti, Business Services Manager, Laney
Connie Willis, Business Services Manager, COA
Shirley Slaughter, Business Services Manager, BCC
Jacque Bell, Business Services Manager, Merritt
Shirley Coaston, Laney
Heidi White, VTD
Bill Rauch, VTD
Steve Haigler, VTD
AGENDA:
1.
2.
3.
4.
5.
6.
Review and approve the agenda.
Review and approve the minutes from December 11, 2008, January 23, 2009 and
February 11, 2009 meetings.
Discuss the status of the external audit for FY 2007-08 and discuss issues involved and
strategies and timeline to address deficiencies and recommendations.
Review a written report from the CFO on the current status of all significant and
material weaknesses that were document in the External Audit Report for FY 2005-06,
2006-07 and 2007-08.
Report by the Inspector General
Review current status of the California State Budget
Chair Withrow opened the meeting at 5:15 p.m.
Item 1 – Review and approve the agenda.
IG Waiters requested an additional item under the Inspector General report.
ACTION:
Trustee Gulassa moved to approve agenda. Chair Withrow seconded. Motion passed.
Item 2 – Review and approve the minutes from December 11, 2008, January 23, 2009 and February
11, 2009 meetings.
ACTION:
Chair Withrow moved to approve the minutes from the December 11, 2008, January 23, 2009
and February 11, 2009 meetings. Trustee Gulassa seconded. Motion passed.
March 18, 2009
Page 1
Item 3 – Discuss status of the External Audit for FY 2007-08 (Heidi White, Bill Rauch and Steve Haigler
from Vavrinek, Trine, Day & Co. LLP)
Ms. White stated the June 30, 2008 audit was provided to outside agencies, including the Federal Audit
Clearing House and was issued six weeks ahead of last year. A generic overview will be presented to the
Board. Starting on page 2, opinion on financial statements as a whole.
There are three areas of concerns – Capital Assets, Student Enrollment and items related to campus trust.
Except for those three areas, it is a qualified opinion. All other areas are materially correct in accordance with
generally accepted accounting principles.
The District initiated a GASB 45 which is provided contractually once employees have retired. The new
pronouncement is you accrue over 30 year time. Everyone complied for Districts VTD audits, accounting has
taken place, but funding is probably not being done right now. Most Districts’ will implement this year,
Peralta is ahead on this area.
The financial statements of District itself are completed by comparisons on page 11 – compared to last year.
Income statement page 12 – also a comparison to other years. Amount that comes from the state shows up
as non-operating revenues. The notes to financial statement are on page 15 and each note explains
accounting principles, what makes up A/R, deferred revenue, et al. statement of assets footnotes are on page
27 – note #4.
Question of what happens on A/R when we don’t receive funds on apportionment. The auditors are awaiting
an advisory from the State – if they “un” apportion money for FY 2008/09, it will move into 2009/10. GASB
33 says if not apportioned you can not recognize as accounts receivable. But we will have an advisory saying
you can; GAP says no, state says can.
Next area to call attention to is page 52; this is the schedule of expenditures of federal awards. These are all
the federal program dollars spent through the District. Of the $22.4 million, $19.2 million is federal student
financial aid. There are also BOGG fee waivers that are also included; it is about $23 million that flows
through to students.
Similar to federal page, there is a state page on page 53, matriculation, EOPS, et al. Page 54 is the schedule of
FTES, again not by college total 19,414 for FY 2007-08, no audit adjustments, what is reported is here. We
did have adjustments on page 55, CCFS-311, schedule of various adjustments posted there. We do have more
opinions that we offer, internal controls and financial reporting, was an unqualified opinion on page 60, we
do have comments there, page 62, several comments recorded in back so it is qualified opinion in accordance
with standards. Page 65 did have comments that were qualifications of this opinion as well.
Trustee Gulassa asked about page 53, under program entitlements what does prior year mean? Monies you
receive in FY 2006-07 that were still available for spending.
Within findings and recommendations, there are three areas that we determine, first is control deficiency – if
we come in and your internal control process is to reconcile bank statements on a monthly basis and we do
testing and we find two not reconciled in timely manner we may say you have a control deficiency. Next is
significant deficiency – did not reconcile all year long, but just before auditors came, no errors, but doesn’t
allow you to find errors. Next is material weakness – did not do within the year. We have both significant
deficiencies and material weaknesses in three areas of reporting – financial statement issues, federal
compliance and state compliance. Again rather than go through individually, we’ll make comments.
Item 4 – Review of written report from the CFO on current status of all significant and material
weaknesses that were documented in the External Audit Report for FYs 2005-60, 2006-07, 2007-08
March 18, 2009
Page 2
Ms. White indicated that management responses are the key points going forward. Some comments have
been there for two to three years. We have 19 comments on financial status, 8 on federal compliance, and 5
on state compliance. Auditors are going to have staff come up and work with Peralta staff. We can do an
independent review and make sure in place, or make sure action plan is in place.
Chair Withrow asked about federal and state compliance and addressing some of the complexities and why
we end up non-compliant. Ms. White said on page 52, for each of these awards that come through the federal
government they are very particular and hold agency accountable to make sure compliant. They have taken
stance that if anything wrong on schedule, it is a lie, not a typo, if you put in wrong CFDA number, or dollars
are not right, it is considered fraudulent. State gets a lot of federal dollars and flow out to various agencies,
but they don’t always give you all the information you need to know that it is federal dollars. It is your
responsibility to know that; even if it comes from another community college district. It goes both ways –
even if Peralta is giving out the money to other Districts you need to ensure that you both are doing it
correctly. Trustee Gulassa asked if there are any penalties involved. Ms. White said usually it will be fix the
problem, if perpetuated and you are not administrating appropriately – they will take the money back.
The state has been written up very harshly by federal agencies, even if the state is wrong in their reporting,
the District can take the hit for the error. To the objective observer, what would the reaction be the number
of deficiencies Peralta has. Ms. White says it is more about the root causes, we know PeopleSoft has been
going on for several years – Legacy had their issues, but yes PeopleSoft is a contributing factor, procedural
issues, I don’t think any District goes through an audit with no issues.
The auditors recommended strongly that Peralta have an internal auditor, Ms. White indicated we have an IG
with a responsibility, but an Internal Auditor is someone who is here on a regular basis and can be a liaison
with the colleges, put in policies and procedures, and can resolve issues rather than waiting until a full audit
takes place after the books already close. VC Smith said that since the college business managers do not
report to Finance, we use the internal auditor to make sure the business office, bursar’s office, et al, are in
compliance. Some of these issues would have been solved before audit took place.
VC Smith went on to say it is obvious, especially to the four college business mangers, that we have significant
problems with PeopleSoft; when we went live, we did not have planning, we had no customization, no
training which is a recipe for failure. What is happening is we struggled through the implementation of
PeopleSoft with most of the Finance staff not able to finish their jobs and I want to put that in context.
Chair Withrow asked how much is directly related to the enterprise system and how much to people issues?
Ms. White said if you analyzed it, it would be 50% to accounting system and implementation, you have people
to make sure things are taken care of but do not have transparency to see up front, some things that are
people issues may have something to do with the software.
Trustee Gulassa expressed his appreciation for the audit as well as the audit findings summary. Ms. White
will work VC Smith and AVC Dorrough to update the summary findings.
Ms. White said the Peralta Colleges Foundation Audit will be completed and mailed by Friday, March 20,
2009. The Measure A Bond Audit is on schedule to be done. It is currently scheduled to begin April 14 th –
with a draft report by May 1st.
Item 5 – Report by the Inspector General
There are two things before the committee 1) the audit and finance responsibility checklist and 2) self
assessment questionnaire. IG Waiters would like to review and have the committee determine which areas to
focus on. She requested feedback on the documents.
Chair Withrow questioned which feedback she would like - on content or process? IG Waiters thought
content should be settled first and then process.
March 18, 2009
Page 3
At the last committee meeting, Ms. Waiters had hoped this would be on the agenda so she could get some
feedback. Trustee Gulassa suggested that to streamline the meeting, he recommends this be put on the
agenda for the next committee meeting with a note for the Trustees to fill out the questionnaire prior to the
meeting. There were no additional comments.
The other item was the Board requested IG Waiters draft a Fraud Prevention Policy. The policy will be
distributed to this committee for initial discussion, then to the Board Policy committee. She requested this be
on agenda for next meeting. IG Waiters will have a PowerPoint presentation on what fraud prevention is.
Item 6 – Review current status of California State Budget and prognosis for impact upon the Peralta
Colleges
VC Smith said that the District is receiving money; it just isn’t apportionment money. One half is being held
February through July, with a $12 million deferral until July – should effect us around April-June, we are also
watching what tax funds are coming in now. This is a significant cash flow item for Peralta. For our general
funds and other funds, we are watching cash on financial aid. District is okay right now and has not borrowed
any money.
For the May revise, they (Eric Skinner) are predicting $8 billion hole in budget for 09/10 above the $42B
billion and it will probably get worse. The state is raising sales tax which will probably bring in less revenue.
VC Smith believes there will be cuts in May revise. No one sees votes for tax increases. VC Smith is preparing
for possible cuts for 09/10 with a property tax shortfall. There is a law where community colleges will get
backfill like K-12 does. Currently there is $165 million unfunded FTEs this year. Peralta will not get growth
money for this year; state has run out of money for stabilization. Money used for that is gone. They are going
to take off growth and there will be another deficit. The District did not budget growth this year, whatever
we get is good news. VC Smith requested that Presidents bring in 2% and 4% cuts to budget at each college.
He has started working on reduction plan that will be discussed with Chancellor next week. There will be a
presentation to Board in closed session. VC Smith said he can not promise no layoffs or furloughs, should be
4% increase in PERS in 2010, which is an extra $1.4 million in employer paid PERS for District. Peter
Wantuch (Benefits broker) will talk to Board about 15% increase in medical benefits, includes everybody.
Other issues are increased costs, no COLA this year or next year. There is no cushion this year. Peralta lost
$1.5 million last year. There needs to be a restructuring in IT to get our audit in place. VC Smith is developing
a plan and will discuss with Chancellor. District is okay this year, but next year will be a very difficult year
and how much of reserve do we want to use; whether it will be just 09/10 or will it go into future years.
The principal payment in OPEB debt has to come out of general fund in 2010. Plus increase in cost of living,
no data on that yet. Some reports saying expenses going down for cost of living.
President Adams at Merritt College is looking at class size - instead of five classes with 20 students, Merritt
will have three classes with 40 students. They are looking at programs across the board and have already
started turning away students. The question of how do we provide for the students that need the help as well
as the students who don’t need the help. There is some change in demographics, as tuition rates rise at
CSU/UC’s, community colleges will be getting students who are better prepared student for college which
changes the type of student Peralta was serving. President Adams said we need to be more progressive
toward our students who need additional services. Need to apply earlier so they can be a priority. The top
10% will not get into UC system.
Meeting adjourned at 6:30 p.m.
Recorded by Jennifer Lenahan
March 18, 2009
Page 4