Guest sullinss Posted October 9, 2007 Report Share Posted October 9, 2007 Proceedings of the Audit Committee School District No. 2, Yellowstone County High School District No. 2, Yellowstone County Billings, Montana September 13, 2007 Call to Order Chair Jane McCracken called the Audit Committee to order at 12:08 p.m. on Thursday, September 13, 2007 in Room 213 of the Lincoln Center. Committee members in attendance were Jane McCracken, Marcy Mutch, Tim Trafford, Joel Guthals, and Jack Eagle. Committee member Peter Gesuale was absent. Also attending were Chief Financial Officer Thomas Harper, Auditors John Jacobsen and Edie Hanson of EideBailly LLP, and District Clerk Leo Hudetz. Audit Scope FY2006-07 John Jacobsen of EideBailly LLP said the audit scope FY2006-07 is substantially the same as last year. The District is still identified as a “low-risk” auditee which allows the auditors to avoid certain testing that would occur if it was a “high-risk” auditee. The precise scope of the audit is yet to be determined. Field work will begin September 24th for two weeks. Thomas reported he is on schedule to deliver the Trial Balance and Financials. They are 96% complete including information for the CAFR. Edie Hanson reported the compliance work went well this summer. Timeline for Audit FY2006-07 John Jacobsen said we are on schedule for a November or December Committee discussion of the audit. Thomas related it has been customary to present audit findings to the Budgeting For Results Committee for follow-up on corrections. Follow-up Comments & Findings in Audit FY2005-06 Thomas reported that in May a follow-up was presented to the Budgeting For Results Committee on the status of findings from the Audit FY2005-06. All corrections and recommended improvements have been implemented. Thomas reported the Procurement Card purchasing system has been operational for one year and transactions involving grants are scrutinized in detail. There are about 225 total active Procurement Cards and we randomly audit 10 card holders each month. We heavily sample the Title Program card users. Thomas is satisfied with the program which allows immediate examination of transactions, and has reduced the number of purchase orders significantly. Leo reported every P-card holder is held accountable for their purchases and signs an agreement with strict usage guidelines. Approval of Minutes of November 27, 2006 & December 04, 2006 The spelling of Jane McCracken’s name was corrected. Jack Eagle moved to recommend Board approval of the minutes of December 04, 2006 as corrected. Marcy Mutch seconded the motion. The motion carried unanimously. Marcy Mutch moved to recommend Board approval of the minutes of November 27, 2006 as corrected. Jack Eagle seconded the motion. The motion carried unanimously. (CAFR) Comprehensive Annual Financial Report Starting with audit year 2006-07 the District will move from the minimum standard of reporting and begin producing a Comprehensive Annual Financial report (CAFR), which is the highest level of financial statement reporting for governmental units that will evidence the spirit of transparency and full disclosure. The additional statistical reports and separation of General Funds required in the CAFR report will be helpful in the near future when the District may issue bonds or apply for loans through the Montana Board of Investments. Thomas reported that we are 96% complete with the CAFR FY2006-07. It took about 3 weeks of one in-house person’s time to compile. John asked if a GASB 44 statistical requirement of 10 years of data was considered. Thomas assured him the information was readily available and it was considered. John will check if there will be additional audit costs since the increased statistical information may cause some obligation to review it. John estimates it may be less than a 10% cost increase. John stated the CAFR is more comprehensive and better received in the bond markets when the public entity wants to go out for public funds. Many entities use the CAFR to submit to agencies for awards and recognition. Joel stated we have Board contingency funds available for additional costs, and the Board supports this process. Joel confirmed with Thomas that in addition to the CAFR the District would produce summary reports for the average person to understand. GASB 45 – Early Adoption The new reporting standards for GASB 45 relate to Other Post Employment Benefits (OPEB). These are items other than pension benefits, i.e. health insurance, vision, dental, etc. John reported that school districts and other government entities up to this point have accounted for post employment benefits on a “pay-as-you-go” basis. As we incur the cost in a particular year of supplying health benefits to someone who no longer works in the District, we expense it as we pay it. In the interest of full disclosure and having a set of financial statements that recognizes the obligations of a particular governmental entity, the accounting standard for governmental entities has decided there is a huge liability which is not reported on financial statements at this point. We will need to recognize that liability on the Statement of Net Assets, which is a balance sheet. The actuary has established the District’s liability at about $2.5M. Consideration is given to what is paid in a given year; and also recognizing the obligation that existing employees are earning future benefits for when they retire. An actuary is involved to determine the obligation and today’s present value. Recognizing this liability is required in FY2007-08, but can be implemented earlier. The actuary figures present value plus incremental change plus interest. The Actuarial Valuation of Retiree Health Plans as of January 1, 2007 determined the Actuarial Accrued Liability, which is the present value of all future expected postretirement medical payments and administrative costs attributable to past service, to be: $33,481,000 unfunded, and $24,073,000 funded. The Annual Required Contribution, which is the annual expense recognition of the postretirement benefit plan cost for the fiscal year, for the year ending December 31, 2007 is projected as: Unfunded Funded Normal Cost $1,134,000 $687,000 Interest on Normal Cost $57,000 $55,000 Amortization $1,278,000 $1,316,000 Interest on Amortization $64,000 $105,000 Total ARC $2,533,000 $2,163,000 There is an implicit subsidy of retirees and an assumption it will continue in the future. It was questioned why we have a policy to allow this unfunded liability. State law allows an employee that works so many years for a public entity to participate in their health insurance plan. Thomas recommends early adoption of this standard with the FY2007 Audit, to begin to recognize this liability. Joel Guthals moved that the Audit Committee recommend early adoption of GASB 45 to be included in this year’s financial statements FY2006-07. Jack Eagle seconded the motion. The motion carried unanimously. Joel Guthals moved that the Audit Committee recommend to the Board that the School District shall adopt the CAFR procedures for the 2006-07 Financial Statements. Marcy Mutch seconded the motion. The motion carried unanimously. Review Audit Committee Charter for Changes Committee members reviewed the Charter and the suggested items by the AICPA, which is the governing body for Certified Public Accountants, as to what the responsibilities and duties of an Audit Committee are. Jane is satisfied with the existing charter. Thomas does not see a need to change the scope of the Committee. John believes the current charter is comprehensive. Jane questioned if we need to add items 23 and 24 from the AICPA document regarding the review of procedures for treatment of complaints from the general public and the anonymous confidential submission by the government’s organizations own employees as regarding financial complaints. Leo reported we have an existing process for anonymous complaints from employees and the general public on the website. We have a Policy 1700 whereby anyone can file a complaint. Leo screens the complaints and routes them to the appropriate department head, and then it may go through a whole appeal process. Joel suggested we recommend to the Board that 1) there is not a need presently to change the Charter of the Audit Committee; and, 2) we refer to the Policy and Review Committee the Board’s Policies and the School District’s procedures on complaints with reference to the AICPA standards for review. John clarified the AICPA document is referring to a process allowing an employee to report fraud to the Audit Committee outside the management of the organization and that the District has a Policy to follow-up on those allegations. Joel Guthals moved that the Audit Committee report to the Board upon review of the Audit Committee Charter and the AICPA standards and recommendations that the Charter is adequate at the present time and does not have to be amended. Jack Eagle seconded the motion. Marcy asked that we have a “whistle blower” provision in our Charter which includes the AICPA recommendations, and somehow amend the motion to address this. John said the obligation of an Audit Committee is to review procedures in place to see if they’re adequate. He asked under existing Policies and Procedures is there a mechanism to report fraud and have it addressed? It does not mean the Committee has to take responsibility to address the problem. Joel said there’s no need to amend our Charter at the present time. Jane believes the “whistle blower” complaint procedure is covered as a “key internal control process” in the Audit Charter item #9: “Review with management and the independent auditors the adequacy of the District’s internal controls and management’s responses with respect to recommendations for internal control improvements.” Marcy agrees as long as an in-house process covers it and allows for it. Jane reviewed the motion on the floor that we advise the Board we have reviewed our Charter and it does not need to be amended at this time. The motion carried unanimously. Joel Guthals moved that the Audit Committee report to the Board that the School District’s Policies and Procedures for complaints should be reviewed by the Policy Review Committee in compliance with applicable AICPA standards, specifically with “whistle-blower” provisions. Marcy Mutch seconded the motion. Jack Eagle asked that the motion be amended to add reference to the specific AICPA document and the points in question which are items 23 and 24 of this AICPA document with generic “whistle blower” provisions. Joel agreed to the amendment. The amended motion carried unanimously. New Audit Contract The District’s three-year contract for audit services ends with the FY2006-07 audit. John reminded the Committee there typically is the ability to extend the contract for one more year. Tim Trafford moved to table this item until after this year’s audit has been completed. Joel Guthals seconded the motion. The motion carried unanimously. Footnotes to Audit FY2006-07 Thomas reviewed several transactions that may be footnoted in the financials since they occurred or started in FY2006-07 but may not be complete: • Sale of Crossroad property - $2.1M • High School property at the Career Center - $300,000 • Transfer of Funds from H.S. Adult Education to H. S. Flexibility – $296,000 • Garfield Schools – potential issue Adjournment There being no further business, Tim Trafford moved to adjourn the meeting at 1:25 p.m. Marcy Mutch seconded the motion. The motion carried unanimously. Jane McCracken, Chair Sherrill Sullins, Recorder Link to comment Share on other sites More sharing options...
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