June 22, 2009 Minutes of Audit/Finance Committee Meeting
The Audit/Finance Committee of the Board of Trustees of Illinois Valley Community College District No. 513 met at 6:30 p.m. on Monday, June 22, 2009 in the Board Room (C307) at Illinois Valley Community College.
Committee Members Physically Present:
Thomas C. Setchell, Chair
Michael C. Driscoll
Melissa M. Olivero
Others Physically Present:
David Mallery, Board Member
Jerry Corcoran, President
Cheryl Roelfsema, Vice President for Business Services and Finance
Patrick Berry, Controller
Rick Pearce, Vice President for Learning and Student Development
Steve Alvin, Faculty Union President
Kevin Caufield, News Tribune
Melissa Garzanelli, The Times
The meeting was called to order at 6:30 p.m. by Mr. Setchell.
FY2010 TENTATIVE BUDGET
Dr. Driscoll had questions regarding the FY2010 tentative budget. He noticed the budget was balanced except for tort liability and a $400,000 transfer from the Education Fund to the Building Fund for the local match. Cheryl Roelfsema explained the tax levy for tort liability was discontinued in tax year 2007. Tort-related expenditures are paid from the fund balance of the Liability, Protection, and Settlement Fund. In another year or two the tax levy for tort-related expenditures could be reinstated. Dr. Driscoll was concerned with the health insurance premiums increasing by ten percent. IVCC belongs to a cooperative of seven community colleges. This is the first year that it has increased by this percentage. The last few years the increase has been very minimal. Dr. Corcoran stated that moving to the cooperative was the best decision the College has made. Mr. Setchell stated that during negotiations, insurance premiums were discussed but not changed. It was agreed that a committee would be formed to review and discuss ways to minimize the insurance premiums. Dr. Corcoran will address this issue.
Mr. Mallery entered the meeting at 6:50 p.m.
The budget included a tax levy for Protection, Health and Safety projects of $1,445,000 for science lab renovations. The administration will be asking the Board for permission to upgrade electrical work if there are excess PHS funds after the science labs are renovated. Mr. Setchell noted the College is projecting approximately the same tax rate but the levy will increase due to the increase in equalized assessed valuation. The tax rate has dropped each year for the last six to seven years. In comparing budgeted expenditures from this year to next, the column listed as preliminary 2008-09 skewed the comparison. It was decided that a column for the 2008-2009 budget will be added. C. Roelfsema highlighted items in the tentative budget. The equalized assessed valuation increased by 5.7 percent. This probably will not continue as property decreases in value. The budget projects an increase in the equalized assessed valuation of the Exelon LaSalle Generating Plant but this will not be known for awhile. There is a proposed 2.5 percent increase in state funding but the budget does not reflect this as it has been flat for the past few years. The tuition rate has increased by $2 a year for the last three or four years, but IVCC remains the second lowest combined tuition and universal fee rate in the state. Credit hours continue to grow. Summer hours have increased and projections for fall look good. The Dislocated Workers Center has received extra funds from the Department of Labor and funding for Pell Grants has increased. The state funding becomes a less significant amount each year. Because state funding does not grow, the College has learned to find other ways to balance the budget. The state has held back 2.5 percent of the state funding for this year and IVCC has not received its March payment from the state. Dr. Driscoll asked if the budget calendar could be moved up to approve the budget before the end of FY2009. It was noted that there are too many unknowns and the law states the budget must be approved in the first quarter of the fiscal year. The current budget does not include the Community Technology Center. If the building is approved, the Board may need to amend the budget to reflect the matching funds. The audit/finance committee was in consensus to recommend approval of the tentative budget at the July board meeting.
FUNDING OPTIONS FOR THE COMMUNITY TECHNOLOGY CENTER
The RAMP document which has been on the capital building fund list at #12 under the name of the Community Instructional Center has state appropriations in the amount of $16,323,100 with a local match of $5,441,000 for a total of $21,764,100. There is an additional line item for IVCC listed in the tentative capital state budget as temporary building replacement with state funding in the amount of $6,521,700 and a local match of $2,173,900 for a total of $8,695,600. Combining the two appropriations state funding is $22,844,800, local match - $7,614.900 for a total of $30,459,700. Options for providing the local match for the Community Technology Center without raising taxes are $3,134,900 from the Operations and Maintenance Restricted Funds (Certificate of Deposit - $1,500,000 and Illinois Funds - $1,634,900), $1,533,100 from the Information Technology Funds (Student Technology Fees - $333,100 and Internal Service Fund & Proprietary - $1,200,000), and $2,946,900 from the unrestricted Education Fund balance. Other alternatives include permanently reducing the Working Cash Fund (If the whole amount [$4,500,000] were abolished the College would need to go back to the voters to reestablish the fund. A portion of it could be used, but $100,000 of interest from the working cash fund is used to balance the budget each year), issuing bonds (The current bond will end with tax year 2010. A bond issue could be structured so the tax rate would not change.), a capital campaign conducted by the IVCC Foundation with naming rights, apply tax abatements from the TIFs, and sell some of the College’s acreage (the College has approximately 400 acres, with ten acres of riverfront property that is currently in a conservation plan for 15 years, 120 acres of tillable farm land which produces revenue, and the remaining acres which produce no revenue.) There is a lot of flexibility in obtaining the local match without raising taxes. The dollar amounts for the Community Technology Center are based on 74,000 square feet. The Board facilities committee and the full Board need to make the decision on the size of the building. If they choose to increase the size to 78,000 square feet, existing reserves or fund balances could be used for the additional local match and not disturb any cash flow.
AUDIT ENGAGEMENT LETTER
The committee members had a chance to review the audit management letter. Mr. Setchell emphasized the most important part is the internal control system which is the first line of defense. Auditors will test the assets in the bank and test expenditures, but not every rock is overturned. The Board relies heavily on Ms. Roelfsema and her staff on checks and balances. The audit is an extra level legal requirement and Mr. Setchell puts more reliance on the internal control system. Gordon, Stockman & Waugh P.C. have been the auditors for the College and just recently the contract was extended for another three years. The audit firm was selected on experience and cost. The firm knows the community college system well. Community colleges conduct a survey on the cost of auditors and Ms. Roelfsema uses this as a benchmark. The committee was in consensus for Ms. Roelfsema to sign the audit engagement letter.
IDENTITY THEFT LOSS PREVENTION REPORT
The audit/finance committee had given the administration approval to move forward with Identity Theft LOSS Prevention, LLC (ITLP) to conduct a security audit. The audit/finance committee was given a summary of the report. A two-member team met with individual departments and the information security committee to review procedures and concerns regarding information security. One ITLP team member conducted audits of various departments throughout the campus, noting any potential information security issues. Each department was aware of the audit and received a copy of the findings from their particular area. They have been asked to review any shortcomings and take appropriate action. The second ITLP team member conducted a “third-eye walkthrough.” This person was dressed as a student and unknown to the departments. The person tested to see if he could get into the computers and offices and looked for unlocked file cabinets. This person found desks that were unoccupied and paper in recycling bins that should have been shredded, or piles of papers lying around waiting to be shredded. The information security committee is working on procedures for each department to follow. IVCC is required by the U.S. Department of Justice to have a “Red Flag” policy in place by August 1, 2009. This policy will be presented to the Board of Trustees for approval.
THIRD PARTY ADMINISTRATORS FOR 403(b) PLANS
The College has had a 403(b) plan in place for a number of years. Federal regulations have changed and have become more stringent. IVCC was unable to find a suitable option for a third party administrator when the regulations went into affect the first of the year. So the administration took on the responsibility of administering it. The administration found it hard to track the balances on the accounts and it is a huge administrative nightmare. The administration would like to enter into a contract with Great American Plan Administrators, Inc. as a third part administrator for the IVCC 403(b) Plan. Great American will act as a third-party remitter to all of the vendors which were reduced from ten to four as of January 1, 2009. IVCC currently has 65 employees participating in the 403(b) plan and no fees will be charged by Great American to IVCC. The administration reviewed other companies, the fees were high, and there were restrictions on the vendors. The audit/finance committee authorized Ms. Roelfsema to sign the contract with Great American.
Dr. Driscoll made the motion to adjourn, seconded by Melissa Olivero and passed unanimously. The meeting adjourned at 7:45 p.m.