June 19, 2008 Audit/Finance Committee Meeting
Committee Members Physically Present:
Thomas C. Setchell
Committee Members Absent:
Deborah L. Sweeden
Others Physically Present:
David O. Mallery, Board Member
Jerry Corcoran, President
Cheryl Roelfsema, Interim Vice President for Business Services and Finance; Controller
Sue Isermann, Interim Vice President for Academic Affairs
Sue Caley-Opsal, Instructor
Kirk Lockwood, Instructor
Melissa Garzanelli, The Times Reporter
The meeting was called to order at 9 a.m. by Mr. Setchell.
AMEND THE AGENDA
It was moved by Ms. Fuller and seconded by Mr. Setchell to remove agenda item 5. – Closed Session. Motion passed by voice vote.
Under new auditing standards, the auditing firm of Gordon, Stockman, Waugh, P.C. prepared a letter to the audit/finance committee outlining the processes and attached an engagement letter. The engagement letter indicated the fee for the services for FY08 would not exceed $30,500. The auditing firm’s proposal for FY08 was $28,000 and is now requesting an increase of $2,500 for a total of $30,500. Mr. Dave Spiller of Gordon, Stockman, Waugh, P.C. explained the requested increase in fees for the 2008 fiscal year audit was based on the new auditing standards, SAS 104 to 111, referred to as the risk-based standards. These standards are first effective for the FY08 audit. The bid was not subject to changes in auditing standards; therefore, Mr. Setchell requested that Mr. Spiller rewrite the engagement letter to coincide with the original bid of $28,000 for FY08 auditing services. Mr. Setchell asked Dr. Corcoran to convey these thoughts to Mr. Spiller.
It was unclear in the engagement letter if materiality was based on the entity level or fund level. Mr. Setchell would like it based on the fund level. Mr. Setchell was also concerned with the compliance report and if it was supported on a test basis to ensure there is not a compliance issue that the College is missing. He would like the auditors to have a proactive approach to compliance issues.
Cheryl Roelfsema reviewed the budget highlights. The local property tax base increased from tax year 2006 to tax year 2007 by $154,730,882 or 6.0 percent for an equalized assessed valuation (EAV) of $2,725,314,516. This is a non-TIF increase. Historically, it has been a 3.2 percent increase. For planning purposes, future EAV growth is projected to be at a more conservative rate of three percent. The three percent is not inclusive of the potential reassessment of the Exelon LaSalle Generating Plant. State funding is relatively flat and has been for a few years. IVCC’s share depends on the number of credit hours compared to the other community colleges. Credit hours increased by approximately one percent from last year. Demographic projections prepared by Economic Modeling Specialist, Inc. (EMSI) indicate the overall population of the district will increase by two percent from 2008 to 2013. Mr. Setchell was concerned regarding the numbers by EMSI and asked if anyone has done back testing to see how close this company’s projections have been. Ms. Roelfsema will go back and look at previous projections. Mr. Setchell was of the opinion with higher gas prices, less students from the outer edges of the district would attend IVCC. It was suggested that this might be an opportunity for a satellite campus. Targeting certain age groups is an option or following models from other community colleges could help increase enrollment. IVCC serves approximately eight percent of the district’s population. The overall budget projects a deficit of approximately 8.5 percent and the budget calls for the use of reserves in the amount of $2,025,100 for key capital improvements. Without the capital improvements, the deficit is at 0.6 percent. The appropriation of all funds is an increase of 5.6 percent over the fiscal year 2008 budget. There was concern that the 5.6 percent increase may require a truth and taxation hearing. Assumptions for preparing the budget included: 1) total property tax revenue decrease – 5.8 percent; 2) combined tuition and universal fee increase – 3.8 percent (tuition increased by $2 per credit hour); 3) average salary increases of 3 percent; employee benefit (health insurance premiums) increases of 2.5 percent. Four full-time positions that are currently part-time positions were added in the budget. Before these positions will be considered, they will be brought to the board individually for discussion. Employees who are involved in the risk management process were identified. A portion of their salaries will be charged to the Liability, Protection, and Settlement Fund. A list of tuition waivers offered in FY 2009 was provided. Dr. Corcoran is preparing a recommendation to redistribute the number of tuition waivers between Athletics and Student Leadership programs and will be discussed with the Board at a later date. The FY 2009 budget includes approximately $4 million for capital improvements and equipment. The two largest projects are the new parking lot and the truck driver training facility. The facilities committee met to discuss the PHS projects and the following three projects rose to the top of the list: 1) music room accessibility improvements; 2) restroom modifications for accessibility – phase I; 3) building security improvements – buildings A through G. Mr. Mallery was of the opinion that the first two projects totaled the entire levy. It was noted the restroom modifications will be done in phases in order to prevent a major disruption throughout the buildings. Mr. Setchell suggested looking into risk management to cover the building security improvements which included re-keying and additional proximity readers. Mr. Mallery was not sure that the committee confirmed these projects. Another meeting of the facilities committee will be scheduled to confirm the projects. Two large projects under technology improvements are the IP phone system and the network hardware upgrade. The RAMP projects were outlined with no money placed in the budget for these, only in reserves. Only one fund balance will have an increase or decrease greater than 10 percent from the previous year. The Operations and
Maintenance Restricted Fund Balance will decrease by 25 percent due to the new parking lot and truck driver training facility. The committee then reviewed the revenues, expenditures, and changes in fund balances for the FY 2009 budget. From the Auxiliary Fund, $550,000 will be transferred to Fund 1 for the IP phone system and the network hardware upgrade. The athletic budget ($270,000) will be supported by student fees ($60,000) and bookstore operations ($210,000). There will be a transfer from the Working Cash Fund ($200,000) to the Education Fund from interest earned. Restricted Purposes Fund includes the Pell, TRIO, Carl Perkins, Tech Prep, Small Business Development Center, Department of Labor, and Dislocated Workers Center grants. The fund balance generated by the Illinois Manufacturing Extension Center (IMEC) will be used to subsidize the Small Business Development Center. There is a deficit in the Operations and Maintenance Fund (Restricted) due to the new parking lot, truck driver training facility, and the building match. The Operations and Maintenance Fund includes a contingency of $200,000, which must be approved by the Board before using for emergency purposes. Mr. Setchell would like to increase accountability at the department level. He would like to see information on a monthly basis. This is a line item control process which provides the Board with a high level of spending control and accountability. This could be presented as a summary sheet. Cheryl Roelfsema noted that the operating funds (Education and Operations & Maintenance) for salaries and benefits make up 70 percent of the total budget. Mr. Setchell inquired about the rental of the baseball fields. Dr. Corcoran will look into this matter. Mr. Mallery questioned the decrease in the excess revenues over expenditures in the Auxiliary Enterprises Fund. This was attributed to the change in student technology fees from Fund 5 to Fund 1 in 2006. Dr. Corcoran complimented Cheryl Roelfsema and the Budget Council for the fine job in preparing the tentative budget. The purpose of this meeting is to run through the detail of the budget for comments and then finalize the tentative budget for the July Board meeting.
The meeting adjourned at 10:18 a.m.