Guest sullinss Posted October 12, 2009 Report Share Posted October 12, 2009 Proceedings of the Audit Committee School District No. 2, Yellowstone County High School District No. 2, Yellowstone County Billings, Montana September 23, 2009 Call to Order Chair Marcy Mutch called the Audit Committee to order at 11:35 a.m. on Wednesday, September 23, 2009 in Room 213 of the Lincoln Center. Committee members in attendance were Marcy Mutch, Peter Gesuale, Jack Eagle, Laura Bailey, and Joyce Weber. Member Malcolm Goodrich was absent. Also attending were Chief Financial Officer Thomas Harper, Auditors Edie Hanson and John Jacobsen of EideBailly LLP, and District Clerk/Internal Auditor Leo Hudetz. Elect Committee Chair Jack Eagle moved to reaffirm Marcy Mutch as Committee Chair for audit year 2008-09. Peter Gesuale seconded the motion. The motion carried unanimously. Approval of Minutes of December 01, 2008 Peter Gesuale moved to approve the minutes of December 01, 2008. Jack Eagle seconded the motion. The motion carried unanimously. Approval of Minutes of December 10, 2008 Peter Gesuale moved to approve the minutes of December 10, 2008. Joyce Weber seconded the motion. The motion carried unanimously. Audit Scope FY2008-09 John Jacobsen of EideBailly LLP reported that the scope of the audit will be similar to last year. Last year the School District was designated as a low-risk auditee which impacts audit testing under the requirements of A-133. There does not appear to be any significant event last year that would impact that, and no real change in how the District operated last year from a financial accounting standpoint. Marcy asked about the comments and suggestions for improvement we received on the prior year’s CAFR. Thomas confirmed that the required changes would be addressed this year; but, a few items were not cost effective to implement. Peter stated the Budgeting For Results Committee has discussed the financial liability of retirement and service credit, and he asked if there is any expanding obligation on the part of the Audit Committee related to that. John replied SD#2 is compliant with GASB requirements. It is a very large liability and one-thirtieth will be recognized each year on the financial statements over a 30-year period. Thomas said our audit schedule is similar to last year. We will deliver the trial balance to the auditors on Monday, September 28th. Auditors will be in-house for two weeks starting October 5th. We will deliver a draft CAFR to Audit Committee members in the second week of November for review prior to an Audit Committee meeting at the end of November. The CAFR will be presented to the Board at their December 21st meeting for approval in order to submit it to GFOA by the end of December. The Budgeting For Results Committee will not preview it; they will follow-up on corrective action with any audit findings. Joyce Weber requested the Audit Committee meet evenings rather than during the noon hour, if possible. The Committee will try to comply with this request. GASB 45 Actuary Report – Conference Call GASB 45 requires the District to perform an actuarial evaluation every two years of our postemployment benefit plan. Gallagher Benefit Services, Inc. is a consultant to our health insurance plan, and they have an actuarial firm, APEX, that performs a lot of GASB 45 work. The District has contracted with them to determine our fiscal year 2009 Annual Required Contribution (ARC) and annual OPEB cost under Government Accounting Standards Board Statement No. 45 (GASB 45). A conference call was established with Mike Rohr, Senior Technical Consultant at Gallagher Benefit Services, Inc., and Don Henson, Consulting Actuary at APEX, to review and answer questions on the report that was prepared for fiscal year 2009. Don Henson explained the sole purpose of GASB 45 is to account for postemployment benefits the District provides on an accrual basis rather than on a pay-as-you-go basis. Don reviewed some of the highlights of the report as follows: Accrued liability is a crucial measurement of the present value of all future benefit payments that the District has related to those current and future retirees and participants. Participants meet the District’s eligibility requirements of age 50 and 5 years service, or the other requirement of 25 years service. Benefits they receive include medical, dental, and life insurance. Retirees make a contribution of 100% of the premiums. Accrued liability as of 07/01/07 was $34.7M. Accrued liability as of 07/01/08 is $36M which is very close to what they expected. Don reviewed the assumptions used in his calculations and the adjustments in those assumptions from the prior year. The District is not required to prefund based on the ARC. For fiscal year 2009 the Annual Required Contribution (ARC), which is a measurement of the annual expense of the Post Employment Benefit Plan (OPEB) is $3.8M. Net OPEB FY2008 was $3M, and an estimate of FY2009 net OPEB obligation is $5.4M. Don said to keep in mind this is an estimate and the claims experience can change. The calculations for the report were made on a basis consistent with their understanding of GASB 45 and the employee data, plan information and claims and premium data provided by Billings Public Schools and Gallagher Benefit Services. GASB 27 Actuary Report – Conference Call Thomas reported the representative from Milliman was not available for the conference call, but they did prepare and submit a GASB 27 Valuation report FY2009 related to service credit and termination pay benefits. We will schedule a conference call for a future meeting. The report focuses on an analysis of the actuarial present value of all future benefits (PVFB) for active employees and an analysis of the accrued liability. Thomas noted changes between the FY2007 Valuation and the FY2009 Valuation reports to show an increase in the number of total employees by 5.5%; total annual salaries increased by 6.2%; the present value of future benefits increased 17.8%; accrued liability increased 7.4%; net pension obligation increased 73.3% (due to fewer retirements in FY08 and FY09 and higher salaries resulting in increased accrued but not paid out benefits). The Annual Required Contribution (ARC) booked FY2009 is $3.2M, which is one-thirtieth recognized each year on the financial statements over a thirty year period. Chair Mutch suggested Committee members review the report and e-mail any questions to Thomas that we want addressed at the next meeting. Review Charter The Audit Committee is responsible for reviewing their charter on an annual basis and updating it accordingly. Chair Mutch secured a checklist for audit committee charters and looked at the First Interstate Bank system charter and incorporated some draft changes in our charter for members to review. All changes were reviewed at the meeting. Members agreed to add to the Charter the requirement that all members of the Audit Committee affirm annually that they meet the standards for independence as set forth by the District and have the appropriate background in finances and accounting procedures. An item for member affirmation will be on the agenda for the next meeting. Leo Hudetz explained how an internal complaint report is handled. Comments go direct to Leo and can be anonymous. He refers them to the procedures and then they can determine if they wish to pursue further. Leo would report these to the Board and the Audit Committee and the Superintendent. The policy and procedures will be on a future agenda for the Audit Committee to review and recommend appropriate changes to the Policy Review Committee. Laura Bailey moved to accept the changes to the Audit Committee Charter. Peter Gesuale seconded the motion. The motion carried unanimously. The revised Charter will be submitted to the Board for approval. CAFR Certificate of Excellence FY2008 Thomas reported this is the third year in a row we have received the Certificate of Excellence in Financial Reporting for our Comprehensive Annual Financial Report (CAFR) from the Association of School Business Officials International. We will address all of the comments received in the FY2009 submission of the CAFR. Those items not implemented last year were a result of a conscious decision based on the work involved and their impact. Jack asked about ASBO’s concerns as relates to required supplementary information. Thomas said supplementary information is used to clarify what is in the basic financial statements; they want additional information. Chair Mutch asked if there were any new pronouncements that imply any new obligations. Thomas and John don’t believe there are any that apply. Thomas advised we have Qualified Zone Academy Bonds (QZAB) that are new this year, but there is no imputed interest. Next year our compliance reporting will increase dramatically due to the TARP, ARRA money. Thomas advised the CARE Program is officially closed with a zero balance. United Way has taken over the program. John advised there is a Montana law that says a non-budgeted fund can’t run a deficit and it was disclosed on the financials as having a deficit, which were actually accrued liabilities with no dispersements. It was disclosed and the opinion was fine as rendered. Review Correspondence and Proposed Response A letter from Jerry Hansen was received third-hand by the Chair regarding the District’s financials. The letter is not addressed to the Audit Committee, and the Committee discussed if a response was necessary. Upon further review the Committee does not believe it pertains to the Audit Committee, so they will pass it on to the District Clerk for the Board of Trustees. Adjournment There being no further business the meeting was adjourned at 1:00 p.m. Marcy Mutch, Chair Sherrill Sullins, Recorder Link to comment Share on other sites More sharing options...
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