The official minutes of the University of South Carolina Board of Trustees are maintained by the Secretary of the Board. Certified copies of minutes may be requested by contacting the Board of Trustees’ Office. Electronic or other copies of original minutes are not official Board of Trustees' documents.

The Fiscal Policy Committee of the University of South Carolina Board of Trustees met Thursday, March 21, 2002, at 2:35 p.m. in the Carolina Plaza Board Room.

Members present were: Mr. M. Wayne Staton, Chairman; Mr. A.C. Fennell, III; Ms. Darla D. Moore; Mr. Michael J. Mungo; Mr. John C. von Lehe, Jr. (via telephone); Mr. Mack I. Whittle, Jr., Board Chairman; and Mr. Herbert C. Adams, Board Vice Chairman. Members absent were: Mr. Alexander English; Mr. Samuel R. Foster, II; and Mr. Robert N. McLellan. Other Trustees present were: Mr. Arthur S. Bahnmuller; Mrs. Helen C. Harvey; Mr. Toney J. Lister; Mr. Miles Loadholt; and Mr. Othniel H. Wienges, Jr.

Others present were: President John M. Palms; Secretary Thomas L. Stepp; Executive Vice President for Academic Affairs and Provost Jerome D. Odom; Vice President and Chief Operating Officer J. Lyles Glenn; Vice President for Information Technology and Chief Information Officer William F. Hogue; Vice President and Chief Financial Officer Richard W. Kelly; Vice President for Human Resources Jane M. Jameson; Vice President for Student and Alumni Services Dennis A. Pruitt; Vice Provost and Executive Dean for Regional Campuses and Continuing Education Chris P. Plyler; Dean of USC Beaufort Jane T. Upshaw; Dean of USC Sumter C. Leslie Carpenter; General Counsel Walter (Terry) H. Parham; Assistant Treasurer Susan D. Hanna; Director of Business Affairs Helen Zeigler; Assistant Dean for Administrative and Financial Services, USC Sumter, Bruce K. Blumberg; Director of the Department of Internal Audit Alton McCoy; Director of the Office of Budget William P. Bragdon; Director of the Business Office, USC Sumter, Leslie Brunelli; Joe Fenneli; and Director of the Office of Public Affairs Russell McKinney.

Chairman Staton called the meeting to order. He welcomed everyone present, inviting them to introduce themselves. Mr. McKinney stated that no members of the media were in attendance. Chairman Staton stated that notice of the meeting had been posted and the press notified as required by the Freedom of Information Act; the agenda and supporting materials had been circulated to the Committee; and a quorum was present to conduct business.

Chairman Staton directed the attention of the Committee to the agenda and called on Mr. Kelly.

1. Designated Fund Activity for the Year Ended June 30, 2001: Mr. Kelly indicated that a year-end closing statement for the activities of the designated fund had been distributed to members of the Committee. He noted that the budgeted figure had been $765,000; of that amount, $726,000 had been spent.

   Chairman Staton stated that this report was received for information.

2. Koger Quasi-Endowment Fund Accounts Through June 30, 2001: Mr. Kelly summarized the Koger Quasi-Endowment Fund Accounts activities through June 30, 2001. He explained that two endowment funds were associated with the Koger Center: one managed by the University and one managed by the foundations.

   Mr. Adams asked whether stadium proceeds had provided a portion of the Koger Center funding; in 1993 and 1997, this resource had contributed an extensive amount of revenue to the Koger endowment. An established agreement, which the Board of Trustees had previously approved, was based on a 2/3 to 1/3 split with the Athletics Department of the non-athletic events' revenue scheduled in the Williams-Brice Stadium managed by the Coliseum/Koger team. Mr. Kelly indicated that no activities associated with the stadium had produced profits recently.

   Mr. Kelly explained that in the near future he would be presenting to President Palms a proposal to move the Koger Center forward. After consulting with various individuals including Dr. McGee and Chairman Whittle, he would recommend a 50-50 split of stadium revenues in the future. In addition, it was anticipated that an increased opportunity for the scheduling of non-athletic events in the stadium would occur when the arena was completed; Global Spectrum, Inc., would manage both the football stadium and arena operations. It was projected that the generated revenues would be used to build the endowment and, hopefully, fund a portion of Koger Presents. The University would need time to strengthen that area.

   Responding to Mr. Adams' question regarding the projected cumulative $800,000 shortfall in the Koger Center account, Mr. Kelly indicated that the deficit was carried in the "C" fund account; an equivalent amount had been reserved in the "A" fund account to protect the debt.

   Chairman Staton noted that this report was received for information.

3. Bookstore Quasi-Endowment Fund for FY 2001: Mr. Kelly noted that the Bookstore Quasi-Endowment fund balance for FY 2001 was $3,868,644.

   Chairman Staton requested information regarding projected bookstore revenue under the new management of Barnes & Noble, Inc. Ms. Zeigler, Director of Business Affairs, anticipated that the previously-committed goal of $496,000 from bookstore revenues would be given to the scholarship fund. She further commented that it had been a challenging year of changes and transitions as the University had moved into the Barnes & Noble environment; two weeks ago a decision had been made to replace the manager. The company hierarchy had recently visited the University bookstore; they were enthusiastic about the potential of growing the business on campus.

   Chairman Staton noted that this report was received for information.

4. Quarterly Report Ending December 2001: Mr. Kelly explained that he had previously discussed the designated fund activity for the year ending June 30, 2001; this report summarized the activity through December 2001. Listed were the finances, approved budget, expenditures of $294,000 to date and remaining balances in the appropriate accounts.

   Chairman Staton noted that this report was received for information.

5. Audit Tracking Report: Mr. McCoy stated that two audit findings more than six months old were listed. Since the report had been prepared two weeks ago, the ring sales audit had been corrected. In addition, a refund from BellSouth would resolve the Carolina Mall audit; therefore, no audit findings over six months old remained on the report.

   Chairman Staton noted that this report was received for information.

6. Internal Audits:
   1. Undergraduate Admissions: Mr. McCoy explained that an audit of Undergraduate Admissions had generated two findings concerning receipts and the timeliness of deposits. He was certain that within six months both findings would be corrected.

      Chairman Staton noted that this report was received for information.

   2. Koger Center: Mr. McCoy initially commented that the Koger Center was available to rent; in addition, the University sponsored a Koger Presents, a series of scheduled cultural performances offered to the community. He explained that the Koger Presents series had experienced difficulty during the past year; during the previous 16 months one event held in the Koger Center had generated a profit.

      Responding to Mr. Adams' question regarding the current amount of the Koger Center shortfall, Secretary Stepp explained that the difference between ticket sales and the cost of the events had virtually never exceeded the yearly anticipated deficit amount of $250,000; over time, other aspects associated with the use of the Center had been added to this account.

      Mr. Glenn further commented that the University would need to set aside funds to cover the Koger Center deficit if it continued at the current amount. He reminded Committee members that during the previous June Fiscal Policy Committee and Executive Committee meetings, discussions had ensued regarding the possibility of privatizing the Koger Center operation. At that time, a company had been contacted and discussions had progressed to the point of generating a contractual negotiation. When the School of Music had requested the opportunity to participate in the discussions, negotiations with the external firm had temporarily ceased; it was decided that the School of Music would not pursue an academic involvement with the Koger Center.

      On April 1, the University's Chief Financial Officer would assume responsibility for the oversight of the Koger Center because the Director was retiring. Secretary Stepp would continue to consult with the Chief Financial Officer regarding Koger Center matters to facilitate the understanding of inherent community circumstances. Mr. Glenn noted that the University was in the process of renegotiation with the external management firm; in addition, the Koger Presents performances had been substantially decreased.

      Mr. Glenn indicated that the Chief Financial Officer was reviewing the fee structure to determine the costs which the various users, including in-house, community, or "for profit" groups, should assume.

      At Ms. Moore's request, Mr. Kelly provided a brief summary of the various financial considerations regarding the Koger Center operation which would be recommended to President Palms in the near future. He initially explained that University officials had met extensively with a private management firm. A pro forma had been generated which had indicated that the Koger Center was experiencing similar financial problems as other cultural centers in the country; additional funding resources other than ticket sales and building rental fees would be required to ensure and maintain the solvency of this operation.

      Following extended conversations with various individuals and groups in the cultural communities of the City of Columbia and Richland and Lexington counties, it had been determined that the following needed access to the Koger Center: (1) the University community which annually set aside $600,000 in A funds to cover institutional usage costs of the building; (2) the Columbia cultural community; (3) private management firms which could schedule additional programming; and (4) Koger Presents.

      It would be recommended to President Palms that Koger Presents acquire funding from three resources: (1) community-generated revenues, ticket sales, and contributions; (2) 50 percent of Williams-Brice Stadium non-athletic events' profits; and (3) requested earnings and interests from University investments for a short period of time. These three methods, therefore, would determine the Koger Presents budget and the subsequent number of programs which could be scheduled. Mr. Kelly believed that Koger Presents was experiencing particular difficulty because of the loss of anticipated Coliseum and Williams-Brice Stadium revenues. He suggested that the University could review, at a later date, whether private management of the facility or facilities (Coliseum and the Koger Center) would be considered a worthwhile venture.

      Responding to Ms. Moore's inquiry about the purpose of Koger Presents, Secretary Stepp noted that the University had hoped that this opportunity would positively influence the cultural life of the Midlands community. He stressed the fact that, historically, only 50 percent of cultural center revenues were generated from ticket sales. Successfully moving forward with Koger Presents would necessitate retrenchment and careful planning.

      Mr. Glenn further explained that a contractual agreement with a private management firm could be presented for Executive Committee approval before the end of this fiscal year unless a determination had been made that the University would be better served both financially and academically by maintaining management of the Koger Center during the upcoming fiscal year. Private company management would be proposed as a viable option if the University's and the community's needs of the Center had been fulfilled and if there was an opportunity to generate revenue from additional programming.

      Mr. Whittle requested that the administration submit a financial plan for review so that an informed decision regarding the University's future role in this cultural activity could be determined.

      In summary, Chairman Staton asked Mr. Kelly to present a plan regarding the Koger Center for Fiscal Policy Committee approval as quickly as possible following the President's review.

      Mrs. Harvey inquired about the possibility of closing the Koger Center for the following year; Chairman Staton asked Mr. Kelly to include that suggestion in his report.

      Other audit findings involved the facility user fee which had not been resolved since the opening of the Koger Center; an incorrect payroll procedure; and contracts which had not been signed before the date of scheduled events. Chairman Staton asked Mr. Kelly to verify that fully executable contracts were completed prior to each event.

      Chairman Staton noted that this audit was received for information.

   3. College of Nursing: Mr. McCoy stated that the College of Nursing internal audit had addressed and corrected minor office procedures.

   4. Beaufort Campus: Mr. McCoy indicated that eight findings had been reported. Although none were of major concern, they would be resolved in the near future.

      Chairman Staton noted that this audit was received for information.

   5. Faculty House: Mr. McCoy noted that an audit of the Faculty House had reported two findings. The procedure for posting the monthly Faculty House rental payment would be corrected. In addition, the Faculty House would conduct an inventory for insurance purposes.

7. SEC and ACC Endowment Report: Mr. McCoy explained that each February the National Association of College and University Business Officers solicited endowment information as of June 30 of the previous year from approximately 700 higher education institutions; the current report listed endowment figures ending June 30, 2001.

   Chairman Staton noted that this report was received for information.

When there were no other matters to come before the Committee, Chairman Staton declared the meeting adjourned at 3:43 p.m.

Respectfully submitted,
Thomas L. Stepp
Secretary