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 on Wednesday, April 21, 2004, at 10:00 a.m. in the Carolina Plaza Board Room.

Members present were: Mr. M. Wayne Staton, Chairman; Mr. Robert N. McLellan; Mr. Michael J. Mungo; Mr. James Shuford, III; Mr. John C. von Lehe, Jr.; Mr. Eugene P. Warr, Jr.; Mr. Othniel H. Wienges, Jr.; Mr. Mack I. Whittle, Jr., Board Chairman; and Mr. Herbert C. Adams, Board Vice Chairman. Ms. Darla D. Moore was absent. Other Trustees present were: Mr. Samuel R. Foster, II; Mr. Toney J. Lister; and Mr. Miles Loadholt.

Others present were: President Andrew A. Sorensen; Secretary Thomas L. Stepp; Executive Vice President for Academic Affairs and Provost Jerome D. Odom; Vice President and Chief Financial Officer Richard W. Kelly; Vice President for Advancement T.W. Hudson Akin; Vice President for Information Technology and Chief Information Officer William F. Hogue; Vice President for Student Affairs Dennis A. Pruitt; Vice President for Human Resources Jane M. Jameson; General Counsel Walter (Terry) H. Parham; Chancellor of USC Aiken Thomas L. Hallman; Chancellor of USC Beaufort Jane T. Upshaw; Vice Chancellor of Finance, USC Beaufort, John Campbell; Director of the Department of Athletics Michael B. McGee; Director of the Office of Budget, Division of Business and Finance, William P. Bragdon; Director of the Internal Audit Department Alton McCoy; Assistant Treasurer Susan D. Hanna; Director of Salary Administration and Human Resource Systems, Division of Human Resources, Judith Owens; Assistant to the Vice President, Office of Business and Finance, Ken Corbett; Interim Comptroller Furman L. Edmonds; Associate Professor and Chair of the Department of Communication Sciences and Disorders, Arnold School of Public Health, Elaine M. Frank; Clinical Director of the Department of Communication Sciences and Disorders, Arnold School of Public Health, Danielle R. Varnedoe; Director of International Support for Faculty and Staff, Division of Human Resources, Lorraine A. Aun; and Director of University Communications, Division of University Advancement, Russ McKinney, Jr.

Chairman Staton called the meeting to order. He welcomed everyone present and invited them to introduce themselves. Mr. McKinney indicated that no members of the press 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. McCoy.

1. Audit Tracking Report: Chairman Staton called on Mr. McCoy who stated that five audits with outstanding findings remained on the tracking report after six months; however, on schedule were the projected implementation dates for these findings.
   
   
2. Internal Audits:
   
   
   1. USC Aiken: Mr. McCoy explained that the previous audit of USC Aiken had been conducted approximately three years ago; only a few findings had been noted in select areas. Specifically, in the dining services area it had been discovered that one of the employees who worked for the contractor was embezzling funds; the individual had been arrested and the food vendor was making restitution.
      
      A problem in the athletics area had also been revealed; accountability issues had been raised when it was learned that the baseball team was involved in rodeo fundraisers with two particular organizations. Lacking was an adequate explanation of the intended usage of the profits.
      
      Responding to Chairman Staton's question about dealing with this matter in the future, Chancellor Hallman indicated that he had spoken with the athletics director. One of the problems concerned the fact that "a mixture of folks" was handling the money; various individuals were handling ticket sales while others were involved in sponsorship. He believed that the solution would require that USC Aiken establish a fixed price contract with the particular organizations rather than a percentage of the money collected at the event; therefore, USC Aiken would not be responsible for accounting and recordkeeping.
      
      In the finance office a small matter involving the processing of tuition deferred payments had been corrected.
      
      And, finally, Mr. McCoy noted that a review of the wellness center had revealed that the contract did not totally agree with the insurance coverage; it had been amended to mirror the coverage that the state provided employees.
      
      
   2. Speech and Hearing Center: Four findings were recorded in this area, three of which had involved receivables. Improvement was needed in the monitoring, billing and collection processes to ensure a proper standard of professionalism. Concern had been expressed regarding the cost of purchasing the software needed to perform these functions in a more professional manner.
      
      The clinic director, Danielle Varnedoe, offered various comments about the audit and particularly about insurance claims and write offs; the process of insurance collection was difficult and lengthy and required extensive documentation.
      
      The other finding involved compliance with HIPA; the center was on track to meet compliance standards by the required deadline date of April 20, 2005.
      
      
   3. International Support for Faculty and Staff: Mr. McCoy commented that three particular findings were reported in this audit. The first one involved the initial registration process for individuals who traveled to this country in order to work at the University; at that time, a tracking file was created as well as another one when Human Resources processed their information into the payroll system.
      
      The second finding concerned assignment of Social Security numbers to these individuals. Mr. McCoy hoped to move toward a system which would assign pseudo numbers so that these individuals would begin to receive their salaries in a more timely manner as required by the Department of Labor. An end of the year problem could occur when it was necessary to report the University's wages and earnings to the IRS; it would not be possible to report non Social Security numbers at that time. However, Mr. McCoy believed that this situation could be handled through an appropriate reverse journal entry system. Director Lorraine Aun commented that no more than 5 - 10 individuals would potentially fall within this circumstance.
      
      And, the third finding addressed insurance requirements. Mr. McCoy explained that currently it was the responsibility of each foreigner to provide this information. Taking this process one step further, it had been suggested that the University should verify the coverage. The department will comply with this request immediately.
      
      
   4. Division of Law Enforcement and Safety: Mr. McCoy stated that the overall audit review of this particular unit had been excellent. The one area of concern to elicit a comment involved confiscated property; approximately $1500 cash had been seized during the past several years following the arrest of individuals for various offenses. The University's Legal Counsel had recently informed Mr. McCoy that the money belonged to the state. The director of this department was in the process of preparing a proposal to request that the state return the cash to the University in order to use it for a specific cause (i.e., purchase additional equipment for the department); many municipalities and counties followed this procedure.
      
      Mr. Mungo asked if a policy existed which indicated the maximum amount of time allowed before confiscated property, and particularly drugs, must be disposed of by the University. He was concerned about a potential University "public relations nightmare" if any of the drugs or money disappeared; Chairman Staton asked the General Counsel to explore this matter.
      
      Chairman Staton thanked the Internal Audit Department for the manner in which these audits had been conducted.
      
      
3. SEC/ACC Endowment Report 1998-2003: Mr. McCoy stated that the SEC/ACC Endowment Report was published annually in the National Association of College and University Business Officers.
   
   Mr. Whittle inquired about the method used to report gifts and contributions. In response, Mr. McCoy advised that these endowment figures had been taken from audited financial statements of foundation offices as reported on a survey form to the magazine.
   
   Mr. Whittle specifically cited a $30 million gift which the University had received from Dupont; because of the nature and timing of the gift, it had not been added to the total amount of University endowment. He asked whether that practice was also followed by other institutions. "Are we counting our numbers the same way they are counting their numbers?"
   
   Mr. McCoy further clarified that audited financial statements did not reveal the endowment value at any point in time. He had asked the fiscal officer of the University Foundations to prepare a schedule of endowment values at year end when the accounts were audited "so that you could take those audited statements and come up with a concise figure to verify. It would be a simple process for the auditor when compiling schedules to prepare the audit report to extract numbers in order to put together a 'pure endowment,' 'temporary endowment,' 'quasi endowment' or whatever." The CASE system governed the annual fundraising reporting of gifts; however, this system did not track the annual compilation of an endowment.
   
   Mr. Whittle noted that this Committee and the Board had specifically asked that in the future the CASE (Council for Advancement and Support of Education) standards be used for "counting what we are actually receiving and how we receive it." He further suggested that it may be prudent for the University's internal auditors to also review these funds as other institutions were doing.
   
   Mr. McLellan moved approval that endowments of USC support foundations be audited during the course of annual audits so that the Board will always have as a reference point an audited endowment balance reviewed annually by external auditors. Mr. Shuford seconded the motion. The vote was taken, and the motion carried.
   
   
4. Questions or Comments on Audits and Financial Reports Separately Distributed to Full Board:
   
   
   1. KPMG Audit of USC Beaufort
      
      
   2. KPMG Audit of the University of South Carolina for FY Ended
      June 30, 2003
      
      
   3. Athletics Department Audit for Year Ended June 30, 2003
      
      
   4. University Financial Report 2003 and Bond Indebtedness Report
      
      

   Chairman Staton explained that the above listed audits and financial reports had been previously mailed to Board members; no questions were raised concerning them.

Since there were no other matters to come before the Committee, Chairman Staton declared the meeting adjourned at 10:45 a.m.

Respectfully submitted,
Thomas L. Stepp
Secretary