Audit Committee Minutes - June 9, 2011

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Proceedings of the Audit Committee

School District No. 2, Yellowstone County

High School District No. 2, Yellowstone County

Billings, Montana

 

June 9, 2011

Call to Order

 

Chair Marcy Mutch called the Audit Committee to order at 5:33 p.m. on Thursday, June 9, 2011 in Room 213 of the Lincoln Center. Committee members in attendance included Laura Bailey, Lindy Graves and Joyce Weber. Also attending were Chief Financial Officer Thomas Harper, District Clerk Leo Hudetz, and District Controller Sheri Weidinger.

 

Communication From the Public

 

There was no public comment.

 

Approve Minutes of May 27, 2011

 

Laura Bailey motioned and Lindy Graves seconded to approve the May 27, 2011 minutes. All voted in favor. Motion passed unanimously.

 

Continue May 27, 2011 Discussion: Review & Approve the Hiring of the External Auditor

 

Based on the direction provided in the May 27 Audit Committee meeting, Thomas Harper has contacted Eide Bailly staff. Harper reported that Eide Bailly is not able to shift the staffing team from the Bismark-based team to the Denver-based team that conducted the FY2010 external audit of Billings Public Schools as was the recommendation of the Audit Committee, due to resource issues. Overloaded audit manager time on the part of the Bismarck-based team prompted the switch in FY2010 to the Denver-based team. The Denver-based team is now facing similar issues and as such is relying on additional staffing out of the Fargo, ND office to relieve pressure on the Bismarck-based team in order to facilitate the external audit of Billings Public Schools.

 

Harper pointed out that the Audit Committee has a couple of options:

- Because of the staffing changes internal to the school district, offer Eide Bailly a one-year contract and go out for bid again next year

- Alternatively, offer Eide Bailly a three-year contract

 

Chair Mutch referenced a chance conversation she’d had with John Jacobson of Eide Bailly. Some discussion followed whereby it was acknowledged that the hesitation to go back to the Bismark-based audit team may be more tied to the differing personalities of the audit managers and the confidence that they instill or do not instill more than the actual knowledge of the individuals. Mutch mentioned that Jacobson referenced the above staffing issues in their inability to fill the request of the Audit Committee; noting though, that should the Audit Committee insist that the Denver-based team be assigned to the Billings Public Schools FY2011 audit, Eide Bailly will need to produce a new proposal to factor in the requested staffing changes, travel costs, etc.

 

Discussion continued in reference to the benefits of continuing with Eide Bailly for external audit services on a one-year contract versus a three-year contract to provide some continuity through current District management transitions and enabling the bid process to begin anew for the FY2012 audit.

 

Joyce Weber motioned to hire Eide Bailly for one year, for the FY2011 audit, with the team Eide Bailly put forward in their proposal. Laura Bailey seconded. All voted in favor and the motion passed unanimously.

 

Prior to adjournment, Thomas Harper mentioned that the Billings Public Schools received recognition from the Government Finance Officers Association (GFOA) for the FY2010 CAFR in the form of a Certificate of Acheivement for Excellence in Financial Reporting. It was noted that this is the fourth consecutive year the District has received similar commendations from GFOA.

 

Also prior to adjournment, Lindy Graves mentioned that Trustee Kathy Aragon intended to be at the Audit Committee meeting today as she has serious concerns about the candidate expected to be hired into the CFO position. She would have liked to see a detailed list of what the Audit Committee considers to be essential qualifications of CFO and Business Manager. Chair Mutch reported that Dr. Beeman returned her call, and left her a voicemail inquiring as to whether she knew anyone in the community that might be a good candidate. She returned the call but hadn’t yet heard back from Dr. Beeman at the time of the meeting. A question that she has asked on multiple occasions, and has yet to receive an answer to is whether likely candidate Josh Middleton has an accounting background? Group discussion continued for some time, centering on the accounting department’s need for an individual with an extensive governmental accounting background in the CFO position. Short of that, though, the person under the CFO, in the Director of Business Services role, has to have an accounting background, governmental accounting specifically rather than ‘business administration, accounting, public administration, management, or related field’ as is listed in the vacancy announcement. ‘Master’s degree in a related field’ is also mentioned in the vacancy announcement as a ‘preferred’ qualification as is experience working with a school district. There was much discussion focusing on whether the requirement for having a master’s degree is essential; it was noted that for approximately the last 10-15 years, students coming out of college with an accounting degree have a Master’s degree. An organization is either going to get someone who is very young with a CPA and Master’s degree or a candidate that has been in the field longer as a CPA that may not have the Master’s degree. It was generally decided that an individual’s experience with governmental accounting was significantly more important than the possession of a Master’s degree. If the District is unable to attract suitable applicants with governmental accounting experience, the next highest priority should be to find a CPA or someone with financial reporting experience. A Director of Business Services that does not have financial reporting experience could potentially do their job to a satisfactory level if the individual in the CFO position has the financial reporting or governmental accounting experience. Serious concern was raised about the potential of having two individuals in the CFO- and Director of Business Services-level positions, neither of which possess financial reporting or governmental accounting experience. In this scenario, far too much responsibility falls on individuals such as those in Controller-level positions and on the members of the Audit Committee. Chair Mutch acknowledged that while the Audit Committee cannot involve itself in the staffing and personnel decisions of the District, what the Audit Committee and its members can do is talk about concerns they have relating to the impacts that particular personnel decisions may have on the business of the Audit Committee. Chair Mutch said “Truly, if someone doesn’t come in here with experience, I will resign from the committee. I don’t think it should fall on this committee to have to figure out if the CAFR is right or not. We have to have somebody that we can rely on to do that. It would be an overwhelming task to, I feel like, to do it. I don’t know enough about governmental accounting to feel comfortable with that. That’s why I brought it up, because I really think we’re putting the district at risk by not having good financial, accounting people to do the job; because it’s complicated.” Trustee Graves added that the committee is trying to avoid a situation in which we jeopardize the commendations the District has received the past four years for high quality of work. Chair Mutch continued briefly to reiterate that the only reason this topic was brought up in the committee setting was due to the concerns she mentioned. She acknowledged that the Committee has nothing to do with hiring and can’t stipulate what goes into a job description – that’s management’s job. From her point of view, though, service on the Audit Committee is a volunteer commitment and shouldn’t be made into a job.

 

Discussion returned briefly to the question about the incoming CFO’s governmental accounting experience. Trustee Graves mentioned that he would be contacting Superintendent Beeman to request access to this information.

 

There being no further business, the meeting adjourned at 5:57 pm.

 

 

 

__________________________

Marcy Mutch, Chair

 

 

_________________________

Holly Rensvold, Recorder