April 3, 2012 Audit/Finance Committee Meeting Minutes

REQUEST FOR PROPOSAL – AUDIT SERVICES

A summary of the proposals received for audit services was provided to the committee members prior to the meeting.  McGladrey & Pullen, LLP submitted the lowest cost proposal.  The firm is the sixth largest accounting and consulting firm in the United States and conducts the second highest number of Federal Single Audits.  In 2011, McGladrey & Pullen, LLP also performed audits for five (5) other Illinois community colleges:  Illinois Central, Kaskaskia, Sauk Valley, Joliet, and Heartland.  The reference check on McGladrey & Pullen was positive.  There was consensus to support the recommendation of McGladrey & Pullen, LLP by the Audit/Finance Committee members.

REQUEST FOR PROPOSAL – BANK DEPOSITORY AND SERVICES FOR OPERATING FUNDS

A summary of the proposals received for banking services was provided to the committee members prior to the meeting.  Centrue Bank of Princeton offered the best interest rate and the lowest fees.  They have locations in Peru and Ottawa.  There was consensus to support the recommendation of Centrue Bank by the Audit/Finance Committee members.

BUDGET UPDATE

Cheryl Roelfsema had disappointing news for the current fiscal year on the revenue side.  Property taxes will be $100,000 under budget.  LaSalle County had 25 property tax appeals resulting in a decrease in equalized assessed valuation of $27 million.  This includes the reduction in the Exelon plant of $21 million.  This results in a $67,500 decrease in the operating funds.  Property tax revenues are spread over two fiscal years - $37,500 less in operating funds for FY12, with the full reduction in FY13.  Corporate Personal Property Replacement Tax (CPPRT) will be under budget by $400,000.  The budget amount was based on FY11 receipts.  It was discovered the FY11 receipts were inflated due to one-time events.  The College is now aware of a report published by the State that will help with projecting the CPPRT revenues going forward.  Tuition and fees will be $600,000 below budget.  Credit hours are 6.5 percent less than FY11 and 4.5 percent below budget.  Truck driver training and mini-course tuition will be $200,000 below budget.  Public service revenues will be $200,000 below budget due to decreases in truck driver training with Sauk Valley and Waubonsee, continuing education, and the IBEW contract for instruction.  This information was communicated across the campus.  Open meetings were well attended and resulted in great dialogue among the staff and administration.  In trying to avoid a deficit for the year, the following actions have been taken:  1) implemented a hiring freeze; 2) focus on increasing course utilization.  Increasing the average student count per section from 17.7 to 18.7 would save approximately $200,000; 3) necessity-only expenditures; and 4) effectively stopped non-extension site travel; effectively stopped capital spending.  On the expenditure side, legal fees will be at least $130,000 over budget.  The additional legal fees are being spent to protect future revenues of the College.  It will be difficult to eliminate the deficit, but the College continues to monitor purchases and is doing everything to cut costs.   Credit hours are projected by past history and institutional research.  Other factors that may affect enrollments include availability of financial aid and the economy.  The number of students has not decreased as much as the number of credit hours.  This may be due to students receiving the Pell Grant receive the maximum amount at 12 credit hours.  A number of students could take 15 or 18 hours, but at 12 hours they could get the full grant and use the remaining amount for gas and rent.  It was suggested to consider giving a reduced tuition rate if the student takes additional hours beyond 12.  Dr. Corcoran will explore if this is a best practice at any other community colleges.  Currently, there is a $1.4 million shortfall for FY12.  Pat Berry presented an update on the FY2013 budget.  Revenues for FY13 are projected to be $1.1 million less than the FY12 budget but $300,000 more than the FY12 actual projections.  The College is budgeting a five percent decrease in credit hours which equates to $400,000 less in revenue. The $8.25 tuition increase will add $700,000 in revenue.  Given the revenue decline, the College must look at all positions and programs against the core mission.  Contract services, materials, and travel will be cut.  Other areas to be discussed for reduction include:  1) Personnel costs account for 77 percent of the operating fund expenditures.  Some of the reductions must come from full- and part-time staff; 2) Institutional waivers totaled $235,000 in FY12.  These include athletics, art, journalism, music, theater, Student Government, Honors program, etc; 3) E²College waivers totaled $215,000 in FY12.  This represents a 50 percent reduction in tuition in high school students; and 4) bad debt write-offs accounted for $77,000 in FY11.  More aggressive collection efforts will be considered.  Dr. Corcoran reported there has been a change in the money-purchase pension formula and the College is seeing a wave of retirements across the community college system.  Three outstanding IVCC faculty at the higher end of the salary schedule have submitted their retirement notices and plan to come back to teach part-time which would help the financial situation.  Mission-critical services must be looked at and this means some positions could be reduced.  Dr. Corcoran commended the work of the budget council and administration working together to prepare a balanced budget.  If the College needs to reduce some of its services, the administration needs to prepare for it.  It was noted by Dr. Driscoll that the administration must keep in mind during these discussions that the students and quality instruction need to come first.  It was suggested the administration needs to look at the number of tuition waivers.  Another update for the audit/finance committee could be presented in early June before the tentative budget is presented in July and the final adoption in August.