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 Friday, October 4, 2002, at 3:10 p.m. in the Carolina Plaza Board Room.
Members present were: Mr. M. Wayne Staton, Chairman; Mr. Alexander English; Mr. Samuel R. Foster, II; Mr. Robert N. McLellan; Mr. Michael J. Mungo; Mr. James A. Shuford, III; Mr. John C. von Lehe, 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: Dr. C. Edward Floyd; Mrs. Helen C. Harvey; Mr. Miles Loadholt; Mr. John S. Long; and Mr. Othniel H. Wienges, Jr.
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 Human Resources Jane M. Jameson; Vice President for Student and Alumni Services and Interim Vice President for Development Dennis A. Pruitt; Vice Provost and Executive Dean for Regional Campuses and Continuing Education Chris P. Plyler; Assistant Treasurer Susan D. Hanna; Legal Counsel Walter (Terry) H. Parham; Dean Emeritus and Distinguished Professor Emeritus, College of Social Work, Frank B. Raymond; Business Manager, College of Social Work, Beverly L. Simmons; Assistant Athletics Director for Development, Department of Athletics, Brad Edwards; Director of the Department of Internal Audit Alton McCoy; 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 recognized Mr. McCoy who indicated that four audits with outstanding findings were currently listed on the
Audit Tracking Report. Three of the findings were more than six months old; they
were the Koger Center, Rental Property, and Institute of Public Affairs. Mr. McCoy stated that extensive progress to resolve the various findings had been made to date. Most of the recommendations had been implemented and no problems were anticipated in completing the remaining ones in the near future.
Mr. McLellan requested information about the Koger Center. Specifically, he addressed the Koger Presents Series recommendation listed on the Audit Tracking Report. Mr. McCoy explained that during the previous season, most of the 35 scheduled programs had not generated significant revenue; for the current year, only 8 events had been planned and it was too early in the season to determine profitability figures. In response to Mr. McLellan's question about the use of the Koger Center, Mr. Kelly, who was responsible for the Center's operation, explained that University students frequently used the facility for various activities including graduation ceremonies, School of Music as well as Student Affairs events, performing arts programs, dance and choral companies' events. "Many hours during the day when there is not a public show going on, there is a lot of activity going on inside of our Koger Center." Mr. Kelly stated that the Koger Center was also a community facility when considering the performing arts in Columbia.
During the previous season, the University had experienced financial difficulty because other projected revenue resources had diminished while attempting to support the community activities in the Koger Center. Mr. Kelly hoped that the eight programs which had been scheduled for this year would realize a profit for the University; the numbers would rebuild as the University re-established a financial footing. In addition, he indicated that Coliseum subsidies had not been factored into the current Koger Center budget as previously; that financial resource had evaporated and was no longer available.
Mr. Mungo also explained that originally the County and the City together had contributed $7 million toward the construction of this facility. Their representatives were seated on the Board of Patrons which governed Koger Center. However, neither of these two entities had been required to assume responsibility for possible operational losses. In addition, during his term as Chairman of the Board of Trustees, the University had owed $5 million toward the Koger Center project. Reducing the amount of this indebtedness had necessitated the University's sale of Senate Plaza.
Dr. Sorensen commented that the relationship between Koger Center expenditures and revenues for non-University functions had been recently reviewed. He stated that rental charges had not been increased for 13 years; as a result, a substantial increase had been incorporated beginning this year which, he believed, would help to balance the books.
Responding to Mr. Adams' concern about a possible loss of revenue during the current programming season, Mr. Kelly explained that the University would consider various internal reserves; however, he did not believe that this option would be necessary. He stressed the importance of operating on a "break even or make money" basis before addressing the past Koger Center shortfalls. He hoped that the eight scheduled events would begin this process. Other considerations included possible Williams-Brice Stadium events' subsidies and requesting Board approval for a limited use of the Koger Endowment Funds.
Mr. Adams requested a written report following each event as well as a cumulative summary at the conclusion of the season; Chairman Staton noted that he had discussed this possibility with Mr. Kelly and that information would be provided to Committee members.
Mr. Mungo suggested that the income from the Koger Endowment Fund be used to service this outstanding debt. In response, Mr. Kelly commented that President Sorensen had also suggested this course of action.
Mr. von Lehe requested a brief written summary about Koger Center income resources as well as the composition of the governing board; Secretary Stepp indicated that this information could be easily provided.
Responding to Mr. McLellan's earlier inquiry about the use of the Koger Center, Secretary Stepp noted that at least 70 percent of scheduled events including the use of the stage, the rehearsal halls, and meeting rooms, were University- or student-related; 28-30 percent were community-related.
Mr. Adams commented that several years ago the Fiscal Policy Committee had recommended for Board approval a policy to subsidize the entertainment portion only of the Koger Center operation. Funding for utilities and student usage had always been available; the cost overrun had occurred in the area of ticket sales and local rental charge usage. This policy had established that: (1) the University would identify and capture up to $250,000 of income a year from the Coliseum and the Williams-Brice Stadium to offset a shortfall; and, (2) the University would utilize income from the stadium and Koger Presents contributions to build an endowment of $5 million.
Mr. McCoy reiterated that, at this point, adequate fiscal information was not available to respond to the Koger Center recommendations. These recommendations would be reviewed again during the next Fiscal Policy Committee.
Progress had been made toward implementing the three Rental Property recommendations. Further discussion would be required to resolve contractual agreement conflicts with the Development and Educational Foundations regarding the payment of rent to the University.
The Institute of Public Affairs audit had generated in excess of 20 findings; 3 findings remained on the Audit Tracking Report, one of which would require additional time to resolve.
Mr. McCoy explained that because the College of Journalism and Mass Communications' audit report was less than six months old, it was too early to perform a followup.
Mr. McCoy remarked that he was most concerned about the Korean Program indirect cost finding. When the Commission on Higher Education had initially approved the program, the College of Social Work had agreed to establish a self-supporting program which would require the payment of all costs. Mr. McCoy stated that the College of Social Work should not be exempted from indirect cost charges even though building usage in Korea was the largest component of this figure. Chairman Staton further explained that a decision had been made to waive that cost for this program; to date, this program had been very successful and was financially secure. He stressed the importance of consistency throughout all departments particularly when federal scrutiny could be involved. Chairman Staton strongly recommended the reinstatement of the indirect cost charge for this program.
Mr. Kelly asked for additional time to fully consider the most appropriate course of action. He believed that further discussion with Provost Odom regarding this matter was needed.
Provost Odom also explained that former Vice President Finan had instituted this particular fee several years ago; at that time, Mr. Finan had clearly stated that the indirect cost charge would not be levied against academic programs.
Mr. Adams asked the dollar amount of such a cost for the Korean Program; Mr. McCoy indicated that the figure was most probably between $35,000 - $40,000. Provost Odom noted that the University 101 academic program was exempt from the indirect cost fee.
President Sorensen expressed concern about the number of comments in the College of Social Work audit report. He suggested that the administration present a complete response to the audit report during the next meeting of the Fiscal Policy Committee. This report would include an analysis of the Korean Program revenues and expenditures; at that time, he would be prepared to discuss an appropriate course of action.
Mr. Foster expressed concern regarding the seeming lack of established standardized departmental criteria to follow regarding the various financial processes. Mr. McCoy commented that he had discussed the possibility of contracting a former employee to assist with procedural retraining of business office staff; this option was still being considered. "Occasionally, some of the business offices are not as familiar with cash handling processes as they should be and they make judgments in error and it is our job to get them to do it right." Mr. Kelly also noted that audit findings were often violations of established policies. It was a matter of maintaining an atmosphere of diligence to continually raise the standards of performance within the University.
Chairman Staton asked that the Committee follow up on President Sorensen's recommendation during the next meeting.
Chairman Staton asked if all of the requests for financial aid and scholarships were reviewed; Dr. Pruitt responded that all 30,000 applications were scrutinized "by hand." He indicated that less than 5 percent of the applications received annually required professional judgment because the information as presented was questionable. "Any time we run across an application that has an anomaly like zero income, that should require professional judgment." If an individual illegally received a sum of money and the error was not discovered, that much less amount of funding was available for other students who needed financial assistance.
Mr. Mungo asked if the University had instituted a program which assisted students who encountered unforeseen financial hardships during the semester. Dr. Pruitt responded that the University had not been able to generate a system to address these situations. Chairman Staton commented that President Sorensen was noting this request for further discussion and consideration.
Mr. Shuford questioned the time frame of two of the findings noting that one finding had been reported in 1994-1999 and the other one in 1995-1997. He asked whether these exceptions had been addressed before the current audit. Mr. McCoy responded that an external auditing firm scrutinized these particular accounts on an annual basis. Chairman Staton commented that Mr. McCoy and Mr. Kelly had discussed the possibility of enlarging the Internal Audit staff to decrease the time span (approximately seven years) between departmental audits. Mr. Shuford stated that "if something is out there for that many years, perhaps we need some extra help internally."
Since there were no other matters to come before the Committee, Chairman Staton declared the meeting adjourned at 4:10 p.m.
Respectfully submitted,
Thomas L. Stepp
Secretary