Audit Committee Mtg - Sept 15, 2006

[Guest sullinss]

Proceedings of the Audit Committee

School District No. 2, Yellowstone County

High School District No. 2, Yellowstone County

Billings, Montana

 

September 15, 2006

 

Call to Order

 

Chair Jane McCracken called the Audit Committee to order at 12:05 p.m. on Friday, September 15, 2006 in Room 216 of the Lincoln Center. Committee members in attendance were Jan McCracken, Dale Getz, and Joel Guthals. Committee members Marcy Mutch and Malcolm Goodrich were absent. Also attending were Chief Financial Officer Thomas Harper and Auditors John Jacobsen and Sara Collins of Eide Bailly LLP.

 

Committee Membership

 

Member Stan Moser submitted his resignation due to employment relocation. Additional community members with strong accounting and financial backgrounds are needed for the Committee. The Charter states the Audit Committee shall consist of three trustees and at least two members of the public. Applications have been sent to several potential community committee members, and other considerations are encouraged.

 

Audit Scope

 

John Jacobsen related there is little change in the audit scope since last year under the Generally Accepted Auditing Standards (GAAS) or SAS 99. SAS 99 is a statement used to address the risk of fraud in every entity they audit. The audit FY2004-05 was very clean other than the finding due to inappropriate credit card spending. The implementation of the Procurement Card was not in effect for last fiscal year 2005-06; therefore, testing will focus on credit card expenditures. Thomas said they did not find any additional abuse, and they also implemented a new policy/procedure to clarify responsibilities.

 

Sara reported some enrollment testing is complete and questions were forwarded to staff for resolution. John said OPI has not sent out the revised Compliance Testing Supplement. The auditors need to use the new checklist to avoid any duplication of effort. Field work begins September 18th with an estimated timeline of a December Board presentation. The Audit Committee will review a draft in mid-November and it will be presented to the Budgeting for Results Committee before it goes to the Board. Ernie Olness generates the Trial Balance for our District. The District has the software but due to timing this process works well for us.

 

Jane asked if there were any State law issues associated with major gifts the District has received for Wendy’s Field. Donations were paid direct to the District and deposited into Building Fund 260, rather than being funneled through the non-profit Billings Public Education Foundation. Thomas will research the laws for potential issues.

 

John presented information on the new standards GASB 43 and 45 related to other post employment benefits (OPEB). This refers to items other than pension benefits, i.e. health insurance, vision, dental, etc. If an employee of the District is able to benefit from that type of benefit post employment, they are actually earning those benefits while they are employed. Currently financial statements track dollars paid for health, vision, dental, etc. coverage for people and book them as a cost. Now there will be some other cost associated with that payable in the future period for someone rendering services earning a benefit they’re going to earn post employment. Retirees get the benefit of a pooled rate that they wouldn’t get if they were paying as an individual going into an open market to get those benefits. Services of an actuary familiar with these concepts will be necessary to calculate this information and determine if there is any subsidization. We will be required to implement this process beginning July 01, 2008; and, our financial statements FY2008-09 will need to recognize any liability regarding this issue. Thomas said Gallagher Inc. has agreed to perform this service for us.

 

Joel asked the auditors how they test to see if the District is spending from the correct funds. John explained most testing is based on compliance testing. The auditor’s opinion is based on the financial statements and how they’re reported. Their testing does not encounter issues of sub-funds. If the auditors are presented with a criticism during the course of the audit, they will investigate it. Because someone disagrees with how the District has accounted for something, doesn’t necessarily make it illegal. If there is some detailed procedure the District or Audit Committee would like them to perform outside the normal scope of the audit procedure not included in the bid, there would be an additional charge.

 

Joel asked the Audit Committee’s opinion on expanding the audit scope so the Board can have assurance there is compliance with the State’s financial laws with respect to allocation of expenditures from various funds. Thomas does not see any big spending issues that would affect year 2005-06 financials. John explained that even after extended testing, auditors would not issue a legal opinion; but, they would state what the statute says, show what occurred and let the Audit Committee or Board draw their own conclusions from the report. Following discussion the Committee agreed not to pursue additional audit testing; however, they asked Thomas to e-mail Committee members with specific complaints, recommendations, and actions taken.

 

Review Charter for Changes

 

Jane asked Committee members to review the Charter for potential changes at the next meeting. Jane requested discussion regarding liability insurance coverage for the Audit Committee Chair.

 

John asked if Leo Hudetz’ role as Internal Auditor has been formalized. Joel advised the Board decided that Leo’s position is not associated with the term Internal Auditor. Projects beyond Clerk assignments would be covered with additional compensation.

 

Adjournment

 

There being no further business, the meeting was adjourned at 1:00 p.m.

 

 

 

 

 

Jane McCracken, Chair

 

 

 

Sherrill Sullins, Recorder