Finance Committee Minutes -- Jan. 9, 2003 -- Board of Trustees -- University of Louisville
MINUTES OF THE FINANCE COMMITTEE
UNIVERSITY OF LOUISVILLE BOARD OF TRUSTEES
January 9, 2003
The Finance Committee of the University of Louisville Board of Trustees met on Thursday, January 9, 2003 in the Jefferson Room of Grawemeyer Hall with members present and absent as follows:
|Finance Committee Present:||
Mr. J. Chester Porter, Chair
Mr. Ulysses L. Bridgeman, Jr.
Mr. Kevin D. Cogan
Mr. David Ensign
Mr. Owsley B. Frazier
|Finance Committee Absent:||
Mr. Nathaniel E. Green
Ms. Joyce Hagen-Schifano
|Other Trustees Attending:||
Ms. Jessica S. Loving
Mrs. Marie K. Abrams
Ms. Virginia C. Brown
Mr. Tommie Burns
Mr. Grant Helman
Mr. Milton M. Livingston
Mr. Christopher Marlin
Mrs. Sandra Metts Snowden
|From the University:||
Dr. James R. Ramsey, President
Dr. Shirley Willihnganz, Acting Provost
Ms. Angela Koshewa, University Counsel
Dr. Ron Moore, Vice President for Information Technology
Dr. Denise D. Gifford, Vice President for Student Affairs
Mr. Daniel Hall, Vice President for University Relations
Dr. Joel A. Kaplan, Vice President for Health Affairs
Dr. Nancy C. Martin, Vice President for Research
Mr. Larry L. Owsley, Vice President for Finance & Administration
Dr. Gene Gilchrist, Vice President for New Ventures
Mr. David Barker, Director, Audit Services
Mr. Mike Curtin, Director, Office of Planning & Budget
Dr. Dale Billingsley, Associate Provost
Ms. Terri Rutledge, Assistant Vice President of Administration
Mr. Larry Zink, Controller
Ms. Susan Magness, Associate Controller
Ms. Susan Wilhelm, Controller’s Office
Ms. Cheri Jones, Assistant Director, Audit Services
Ms. Trisha Wolf, Board Liaison, President’s Office
Ms. Debbie Dougherty, Board Liaison, President’s Office
Ms. Rae Goldsmith, Associate V. P. for University Relations
Mrs. Kathleen M. Smith, Assistant Secretary, Board of Trustees
Mr. Bernie Backert, Deloitte & Touche
Ms. Mary McKinley, Deloitte & Touche
Mr. Stan Kramer, President of First Kentucky Securities Corp
I. Call to Order
Having determined a quorum present, Chair Porter called the meeting to order at 1:30 p.m.
- Approval of Minutes, October 28, 2002
Mr. Bridgeman made a motion, which Mr. Ensign seconded, to approve the minutes of October 28, 2002. The motion passed unanimously.
II. Action Item: Approval of Board Resolution for Issuance of Consolidated
Educational Buildings Refunding Revenue Bonds, Series M
VP Owsley reported that three of the University’s Consolidated Educational Buildings Revenue Bonds – Series H, I and J – are callable in May, 2003. The resolution authorizes the issuance Series M to refund the three prior bond issues with an estimated savings of approximately $5.7 million. The bond sale is tentatively scheduled for February 27, 2003. Vice President Owsley noted this opportunity allows the University to achieve financial savings. Mr. Frazier made a motion, which Mr. Ensign seconded, to approve the
President’s recommendation that the Board authorize: (1) “Series Resolution Relating to University of Louisville Consolidated Education Buildings Refunding Revenue Bonds, Series M” in substantially the form as attached and (2) the President or his designee to make any technical changes that might be required to execute the proposed bond sale.
The motion passed unanimously.
III. Action Item: Approval of Board Resolution for Issuance of Housing Refunding
Revenue Bonds, Series E, Series F, and Series G
VP Owsley reported three of the University’s Housing Revenue Bonds – Series A, C and D – are callable or are eligible for advance refunding in 2003. The resolution authorizes the issuance of Series E, F, and G to refund the three prior bond issues with an estimated savings of approximately $1.1 million.
The bond sale will be scheduled in consultation with the State’s Office of Financial Management. Mr. Bridgeman made a motion, which Mr. Cogan seconded, to approve the
President’s recommendation that the Board authorize: (1) “Series Resolutions of Board of Trustees of University of Louisville Authorizing University of Louisville Housing System Refunding Revenue Bonds, Series E, Series F and Series G” in substantially the form as attached and (2) the President or his designee to make any technical changes that might be required to execute the proposed bond sale.
The motion passed unanimously.
IV. Action Item: Approval of Professional Practice Plan of the School of Public
Health/Health Information Sciences
Chairman Porter reported this recommendation was withdrawn due to technical changes in the language
V. Action Item: Approval of Phased Retirement of Faculty
Acting Provost Willihnganz reviewed the recommended proposal for Phased Retirement of Faculty, noting it is based upon a two year trial implementation period. The deans and Faculty Senate have worked together to develop this proposal. She acknowledged Dr. Carol Garrison initially constituted an ad hoc committee on phased retirement options. The ad hoc committee, representing diverse administrative and faculty interests, was charged with evaluating phased retirement plans offered by other universities and recommending a phased retirement option consistent with the University’s practices regarding retirement. The Provost shared the following with the Board:
Phased Retirement Options for University of Louisville Faculty
I. Objectives: This policy is established for the mutual benefit of the university and of individual faculty members:
1. To provide full-time tenured faculty with an attractive option for gradual reduction in university responsibilities as they near retirement. The plan must provide the same full health insurance and other benefits available to full-time faculty and a continuing University contribution to retirement funds.
2. To permit units and departments to plan over several years for the integrated management and replacement of senior faculty while also utilizing that expertise.
3. To allow the departments, units, and the University to phase in replacements of full-time faculty in a manner which benefits the future academic efforts of the University.
II. Phased Retirement Plan
A single unified plan will be available to each full-time tenured faculty member who has at least 10 years of service at the University of Louisville and whose age plus years of service equals at least 70. After an initial two-year trial period during which faculty members may elect to participate, the President shall evaluate the plan for extension.
Participants will officially retire effective at the beginning of their phased retirement period to enable them to have access to their retirement benefits. They will be re-employed for no less than 33% or no more than 50% effort yet receive the same health insurance benefits provided to full-time faculty and a retirement fund contribution proportional to the percentage of work effort. Tuition remission benefits available to full-time faculty would remain as well.
Once this plan is fully implemented, faculty may participate in the plan for no less than one (1) year nor more than three (3) years.
4. In order to meet department and unit needs, the proposal for participation must be developed as a no less than 33% or no more than 50% annual work plan by the department chair in consultation with the other department faculty.
5. Upon recommendation from the department chair, the Dean shall evaluate each request for phased retirement for its consistency with the program’s objectives and its benefits to the faculty member and the university. The Dean shall then provide the unit recommendation to the Provost. Final approval and decisions on appeals will rest with the Provost.
6. During the phased retirement period, most released CAR or general funds will remain with the unit but may be distributed to the department, following consultation with the Dean. At the end of the phased retirement period, the usual process for retention of the faculty line shall be followed.
7. Term faculty paid from general funds who meet the eligibility requirements may request a phased retirement as a final term contract. The unit has discretion to allow the phased retirement as well as to offer full-time health and tuition benefits under this plan.
8. Schools may develop alternatives for faculty paid from restricted funds, which may include grant funding and/or clinical revenues to permit a phased retirement option while retaining full health and tuition benefits.
To be attractive to faculty and manageable within the University’s benefits plan, Dr. Willihnganz noted the proposal would need to allow the same health insurance coverage and other benefits available to full-time faculty. In response to Ms. Abrams inquiry about the evaluation process, Dr. Billingsley stated the deans raised concern about the effect this policy may have on their particular units. With a two-year trial period, he said the University can determine how frequently the policy is exercised. Mr. Ensign observed that this proposal should not be confused with the buyout a few years ago; it does not buy out faculty contracts in order to bring in younger faculty at lower salaries. It is a plan for faculty who are ready to retire that allows them to reduce their professional responsibilities to the University and at the same time allows the department/unit to plan for the retirement and replacement. Mr. Cogan believed it was a good program and asked that the ad hoc committee provide its evaluation sooner than the two year period, if possible. In response to Mr. Cogan’s inquiry about the discretion used to determine the granting of this allowance, University Counsel didn’t foresee a legal problem with this process and assured the Board she would be involved in advising in those kinds of assessments. Dr. Willihnganz noted the ad hoc committee reviewed approximately 60-100 policies before developing this proposal. Mr. Ensign made a motion, which Mr. Cogan seconded, to approve the
President’s recommendation that the Board of Trustees approve for a two-year trial implementation a proposal (Exhibit A) to allow faculty members who meet certain criteria to enter retirement through a phased reduction in their university workload assignments; and
That the Board of Trustees direct the Vice President for Finance and Administration to prepare for the Board’s review and approval such temporary changes in the schedule of benefits as are necessary to accommodate the trial implementation of the phased retirement plan.
The motion passed unanimously.
VI. Information Item: Presentation on Consolidated Financial Statements for Year Ending June 30, 2002
Vice President Owsley commended the university staff and external auditors for their excellent work in generating this report. He recognized Mr. Larry Zink, Controller, Ms. Susan Magness, Associate Controller, and Ms. Susan Wilhelm, Controller’s Office, for the extraordinary efforts in implementing the changes required by GASB 35 using the new Peoplesoft financial reporting system. This financial statement is the first generated under GASB 35. He observed that the changes in financial reporting software from FRS to Peoplesoft also involved a massive effort.
Vice President Owsley reported that the consolidated statement does not include financial statements for UofL Foundation, Inc. Those financial statements will be reviewed by the Foundation board.
Mr. Backert, Deloitte & Touche, noted that effective July 1, 2001, the University adopted GASB Statement No. 35, “Basic Financial Statements – and Management’s Discussion and Analysis – for Public Colleges and Universities.” This statement establishes accounting and financial reporting standards for public colleges and universities within the financial reporting guidelines of GASB Statement No. 34, as amended by GASB No. 37. The adoption of Statement No. 35 had a material effect on the University’s financial statements. Among other things, net assets (formerly referred to as fund balances) were reduced because of the recognition of depreciation on all capital assets. Mr. Backert acknowledged the inclusion of this information is very comparable to normal business practice. In response to Ms. Snowden’s inquiry concerning the schedule for depreciation, Mr. Backert reported that the schedule used is actually longer than standard business practice. Mr. Backert also reported a new practice of including student financial aid, scholarships, and fellowships as an expense. Vice President Owsley reminded the Committee that the statements provide an accounting for depreciation, not budgeting for depreciation.
Mr. Backert noted the other significant changes to the financial statements:
Revenues and expenses are now categorized as either operating or nonoperating. Previously, a measure of operations was not presented. Significant recurring sources of the University’s revenues, including state appropriations, gifts and investment income (loss) are considered nonoperating, as defined by GASB Statement No. 35
Scholarships and fellowships applied to student accounts are now shown as a reduction of student tuition, while stipends and other payments made directly to students continue to be presented as scholarship and fellowship expenses. Previously, all scholarships and fellowships were presented as expenses.
Capital assets are restated for the effects of accumulated depreciation in accordance with their useful lives. Depreciation is now recognized as an operating expense.
In response to Vice President Owsley’s inquiry comparing the University’s depreciation to that of other universities, Mr. Backert noted that the percentage depreciated is what his company has been seeing at other universities the firm has audited.
Ms. McKinley expressed appreciation for the full cooperation provided by the University management and staff during the course of the audit. She further reported that University management did not engage Deloitte & Touche to perform any management advisory services. Additionally, she reported the auditors’ report on the FY 02 financial statements is a clean, unqualified report.
Vice President Owsley briefed the Committee regarding expected changes with GASB 39, noting he will bring to the Committee in June a recommendation concerning those changes.
Mr. Ensign made a motion, which Mr. Bridgeman seconded, to adjourn the meeting at 2:08 p.m. The motion passed.