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 Thursday, October 5, 2000, at 11:00 a.m. in Room 107-C of the Osborne Administration Building.

Members present were: Mr. Robert N. McLellan, Chairman; Mr. Herbert C. Adams; Mr. A. C. (Bubba) Fennell, III; Mr. Toney J. Lister; Mr. Michael J. Mungo; Mr. John C. von Lehe, Jr., via telephone; Mr. Othniel H. Wienges, Jr.; Mr. William C. Hubbard, Board Chairman. Members absent were: Mr. Alexander English and Mr. Mack I. Whittle, Jr., Board Vice Chairman. Other Board members present were: Mr. Samuel R. Foster, II, and Mrs. Helen C. Harvey.

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 Business and Finance John L. Finan; Vice President for Student and Alumni Services Dennis A. Pruitt; Vice President for Human Resources Jane M. Jameson; Vice Provost and Executive Dean for Regional Campuses and Continuing Education Chris P. Plyler; Dean of the College of Hospitality, Retail, and Sport Management Patricia G. Moody; Vice President for Medical Affairs and Dean of the School of Medicine Larry R. Faulkner; Dean of the College of Education Les Sternberg; Dean of the College of Science and Mathematics Gerard M. Crawley; Dean of USC Union James W. Edwards; Associate Dean for Administration and Finance, School of Medicine Brian J. Jowers; Associate Dean of the College of Hospitality, Retail, and Sport Management Thomas J. Davis; College of Education Business Manager Steve Madison; Director of Financial Services and Bursar Joseph Taylor; Director of the Department of Internal Audit Alton McCoy; Controller John H. Campbell; Director of Business Affairs Richard D. Wertz; Assistant Vice President of Business and Finance Ken Corbett; and representative from Media Relations Jason Snyder.

Chairman McLellan called the meeting to order. He welcomed everyone present, inviting them to introduce themselves. Mr. Snyder stated that one member of the media was present. Chairman McLellan 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.

I. Internal Audits: At the request of Mr. Stepp, Mr. McLellan changed the order of the agenda.

A. Accounts Receivable: Mr. Taylor stated that the University was proud of the clean audit report and Mr. McLellan extended congratulations to the department. Mr. McCoy joined the meeting. Mr. McCoy stated that the University was ahead of other universities in the country in automation of student regi stration and payment of fees.

B. Tracking Report: Mr. McCoy reported that some of the audits had unresolved items.

1. The College of Education: The audit had one outstanding finding that dealt with the Policies and Procedures Manual. The College of Education had indicated that the Policies and Procedures Manual would be completed with the new Dean's approval by December 31, 2000.

Dr. Odom introduced the new Dean of the College of Education, Dr. Les Sternberg.

2. Regional Campuses and Continuing Education: Mr. McCoy reported that the audit had two findings. Due to the finding on "questionable business practices over conferences," the former business manager at USC Beaufort had developed new policies and procedures which were in the process of being implemented.

The other finding involved a direct charge from Columbia to the regional campuses for the support they received in services such as finance, purchasing, and payroll. The finance division would develop a new rate since it had not been adjusted for some time. Regional campuses representatives as well as representatives from senior campuses, would meet with the finance department to discuss items to be included in the direct charge system. Mr. Finan reported that the Office of Business and Finance would continue to work with the Regional Campuses and Continuing Education to resolve the two findings.

Mr. Adams asked how often the charges were updated and Mr. Finan replied that there was no established policy. He would recommend that once the study was completed, it would be tied to inflation, to the cost of living rate, or to set a time frame of every five years to readjust the cost. Mr. Finan reported that the charge back to the regional campuses has been studied and a meeting with the campuses will be held to discuss the validity of the findings. Mr. McCoy stated that the campuses have taken on responsibilities that formerly were centered in Columbia, purchasing for example. Mr. Adams stated that change of services and elimination of those services at the campuses needed to be taken into consideration when updating the cost. Mr. Mungo asked what would be a reasonable revisitation time. Mr. McCoy stated that a rate charge review should be ongoing if there was significant financial change and that the Associate Chancellor for Regional Campuses and the Vice President for Finance should decide when the revisitation should occur. Mr. McLellan asked whether each institution was assessed on the basis of enrollment or their budget. Mr. Finan stated that there has to be agreement about the determining factors for assessment. The assessment could be determined by budget size, FTE basis, credit hours. Dr. Odom had appointed a task force to review the area of assessment charges. The task force had given Dr. Odom recommendations on these concerns. Dr. Odom stated that they need to set into place some fairly strict guidelines.

3. College of Science and Mathematics: Mr. McCoy reported that the College of Science and Mathematics had resolved their findings. There had been a problem with credit cards and splitting purchases to stay within the credit card limits. This audit finding would be revisited again to confirm that the college was in compliance with the recommendation.

Mr. Mungo asked the definition of "unauthorized purchases." Mr. McCoy said that personal purchases were charged to the University credit card. Mr. Mungo expressed his concern that the use of the USC credit card for private purchases should be a serious offense. Mr. McCoy reported that a police investigation did occur. The Administration will resolve the problem. The credit card limits have been set at $1,500. All receipts for the credit card charges must be given to the business office as a legitimate expense and will be charged to an account. Ms. Jameson added that the sanction after appropriate investigation is termination. Mr. Finan stated that USC has an extensive training program for individuals who are issued a credit card. The department head will determine who will receive a credit card. Mr. McLellan noted that the University needed to monitor closely the use of University credit card purchases.

4. Development Office: Mr. McCoy reported that the findings with respect to certain in-kind gifts and the expenses of raising funds had not been handled in accordance with the regulations of CASE, the nationwide organization that coordinated these activities. Cantey Heath would compile the June 30, 2000, state-ments in accordance with CASE; the findings from those statements would affect the cost of fund raising. The Development Office would implement the recommendations of the audit's findings.

5. College of Hospitality, Retail and Sport Management: Departmental scholarships had been awarded without going through the University scholarship committee and the departmental scholarships in turn permitted out-of-state students to pay a reduced in-state tuition according to the Board approved tuition schedule. Mr. McCoy stated that Dr. Pruitt had developed new policies that would be implemented to control the departmental scholarships.

Mr. Mungo inquired about the source of money for the scholarships. Mr. McCoy replied that the department raised the funds internally through college entrepreneurial programs or unused excess fees. The non-tuition program and participants were charged fees that were ultimately used for scholarships. If the student was awarded a minimum $250 scholarship a semester, the student would pay reduced tuition. Dr. Moody stated that a sports club raised the money and awarded the scholarships. The students in the sports club had excellent SAT's, GPA's, and would meet the University's criteria for scholarships. Dr. Pruitt's recommended policy, if approved, would be implemented with the scholarships from the sports club as well as the procedures and policies for University granted scholarships.

Of the thirty-eight scholarships given, thirty-seven were awarded to out-of-state students; ten percent of the students remained in the state. Mr. Mungo voiced his concern about the number of out-of-state student scholarships given and the number of students who would continue to stay in South Carolina after graduation.

Dr. Pruitt reported that the deans and individuals who award scholarships were sent information packets to reinforce the University's scholarship policy. There had been a common standard for all scholarship programs. If consideration was given to an exception to the standard policy (with a justifiable reason), it must be approved by the Scholarship and Financial Aid Committee. To honor the wishes of the benefactor of the scholarship, some of the scholarships have to be given to students with certain qualifications. An exception to the standard policy would be submitted to the Financial Aid Scholarship Committee. An academic decision would be made to determine if the student should receive a scholarship. If the scholarship was approved, the department would be responsible for insuring that University criteria was met.

Dr. Pruitt reported that the number of scholarships awarded to nonresidents compared to residents was approximately equal to the out-of-state/in-state student population. Of the 3,800 USC scholarship students, approximately 1,070 students were nonresident students. Colleges and departments giving scholarships had criteria, were adhering to those criteria, and had administered the scholarships based upon those criteria.

6. Union Campus: The six month old Union Campus audit recommended the continual process of monitoring the qualifications of participants to ensure that the proper individual and program requirements were maintained in the TRIO program. Mr. McCoy stated that most probably this item had been corrected and would be verified by a November visit to the Union Campus.

Mr. McLellan inquired whether the Union Campus student had refunded the money from a loan he had received and for which he was later deemed ineligible. Mr. McCoy felt that the loan would have to be written off.

7. Division of Human Resources: The salary supplements payments' policy would be drafted. Once approved it would be incorporated into the University's Policies and Procedures Manual.

Mr. McLellan inquired about the status of the list of those individuals who received salary supplements other than through the foundations. Ms. Jameson responded that the document would be ready the following week. The audit was in the process of being corrected and not yet overdue.

8. Payroll: The recommendations in this audit were in process.

9. Aiken: The recommendations in this audit were in process.

10. The Darla Moore School of Business: Mr. McCoy reported that the Provost would work with the new Dean to determine funding sources to handle the financial situation. The recommendation in the audit was in the process.

II. Report on Audits of the Financial Statements of the School of Medicine Educational Trust and Clinical Faculty Practice Plan: Mr. McCoy reported that the Associate Dean of the Medical School and the Treasurer met with the External Auditors and reviewed the financial statements.

Dr. Faulkner made the presentation on the structure and function of the School of Medicine's Educational Trust and the Clinical Faculty Practice Plan. The mission of the school had been education and research and providing clinical services to the people of the State of South Carolina. The Educational Trust, a 501-C-3 non-profit organization, had been operated by the Educational Trust Board of Directors. The Educational Trust offered the Clinical Faculty Practice Plan. The Trust managed the property it owned and other activities the Trust pursued to support the education, research and service missions of the Medical School.

The Trust Board included the Dean of the Medical School, an individual appointed by the Dean of the Medical School, the Chair of each of the departments in the Trust, and an elected faculty member of the Trust. All actions of the Educational Trust Board of Directors had been approved by the Dean of the USC School of Medicine and, therefore, were accountable to the USC Administration and USC Board of Trustees. One of the aspects of the Educational Trust had been to operate a Clinical Faculty Practice Plan. This Plan would be the administrative mechanism to provide oversight of the Clinical Faculty Practice Plan.

Structurally, the Board of Trustees contracted with the 501(C)(3) to operate the plan on which Dr. Faulkner reported. All full-time clinical faculty members in the Medical School whose salaries were paid by the Medical School or an affiliated institution must report all of their clinical practice activities to the practice plan. If they had the approval of the Dean, part-time and volunteer clinical faculty members would be allowed to participate. All professional fees and professional services fees must be reported to the Clinical Faculty Practice Plan. Dr. Faulkner reported that the amount of allowable professional income for individual faculty members of the Plan would be determined annually by the Department Chair, the Dean, and the President of the University.

A percentage of the revenues generated from the Plan supported the central operation of the Dean's office and the operation of the clinical departments. A larger amount of the revenue would support the general administrative activities of the plan and faculty positions. Mr. McLellan asked whether the base salaries were from the appropriated funds. Dr. Faulkner stated that base salaries for clinical faculty came from appropriated funds and the Practice Plan. Many faculty members generated their entire earnings through the Practice Plan.

Since 1993, participating faculty members have increased by 36 percent with a corresponding increase in revenue of 86 percent. Mr. Mungo inquired about the amount of pro bono work. Dr. Faulkner replied that the amount of pro bono work a year (with categories such as no payment, discounted rates, or individuals who would not pay the full charge) would be valued at millions of dollars per year. Increased revenue was accompanied by a significant decrease in the rates of reimbursement for medicare and private insurance. The faculty had increased their rate of productivity during the last six or seven years.

Dr. Faulkner continued his report by stating that the Plan was under the supervision of the USC School of Medicine Educational Trust Board of Directors, the Dean of USC School of Medicine, the President of USC, and the USC Board of Trustees. The authority to determine the allocation of Plan funds ultimately rested with the USC Board of Trustees. Total professional income for individual faculty members of the Plan was reported annually to the President of USC. Total income (base salary, Plan income, etc.) for the Dean, Department Chairs, and the 50 faculty physicians in the USC School of Medicine with the highest earnings were reported annually to the S.C. State Legislature. The Plan must be audited annually by an independent firm, and an audit report must be sent to the USC Board of Trustees.

The 1999 audit of the Educational Trust Clinical Faculty Practice Plan had no major problems. Dr. Faulkner reported that the bank notes on Medical Park 2 had been refinanced at a lower interest rate. The savings from the lower interest rate would be used to renovate the buildings that were almost 25 years old. Also, departments would be discouraged from entering into capital leases of certain office and medical equipment. The USC attorneys would like for certain additional modifications of Educational Trust documents to clarify legal requirements and procedures; these documents would be modified to clarify legal requirements and procedures and returned to the Board for approval.

Mr. Lister asked about the type of equipment that had been leased in the past. Dr. Jowers responded that answering machines had been leased for the new primary care building and items for the new ultra sound area of the OB-GYN area and the REI program had also been leased. Dr. Faulkner stated that the leased equipment had very significant up-front costs that departments could not afford to purchase.

Mr. Mungo inquired about the large amount of assets the Educational Trust and Clinical Faculty Practice Plan held in the bank. Dr. Faulkner stated that the assets were in CDs and in other investments because potential audits (medicare audit, etc.) that could cost millions of dollars required a certain degree of liquidity. The $5 million in accumulated depreciation of medical equipment and buildings was discussed. Mr. Mungo congratulated the Dean for an excellent audit.

Mr. Hubbard asked the source of funds for advertising. Dean Faulkner stated that the source of funds for all operations of the Practice Plan must come from revenue generated by the Practice Plan; no state monies could be spent to operate any of the Practice Plan operations. Any state monies spent in the operation of the clinical practice plan must, by policy, be reimbursed to the University. All of the monies to operate the Practice Plan must come from the Practice Plan. The clinical departments in the School of Medicine rent their own space.

Mr. McLellan thanked Dr. Faulkner for his report on the School of Medicine.

III. Designated Fund Activity Report: Mr. Finan reported on the Designated Fund Report for the period ending June 30, 2000. The expenditures were below budget and the balance forward funds totaled $723,261.

IV. The Bookstore Quasi-Endowment Fund Report: Mr. Finan reported that the ending fund balance for the Bookstore was $510,682; the increase of $128,000 was a result of operations during the year 2000. The Bookstore Quasi-Endowment fund had a balance of $3,647,445. The interest would be used for scholarship purposes when the balance reaches $5 million.

V. Koger Quasi-Endowment Fund Report: Mr. Finan reported that the Koger Quasi-Endowment Fund account had $1,705,746 as of June 30, 2000, with the breakdown for the fund as follows: Koger Quasi-Endowment held by the University - $951,671 and Koger Presents Endowment held by the Educational Foundation - $754,075. Positive results for the Koger Center were being seen as a result of fund raising efforts.

There being no further matters to come before the Board, Chairman McLellan declared the meeting adjourned at 12:05 p.m.

Respectfully submitted,
Thomas L. Stepp
Secretary