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 Friday, October 5, 2001, at 1:50 p.m., in the Carolina Plaza Board Room.

Members present were: Mr. M. Wayne Staton, Chairman; Mr. A. C. Fennell, III; Mr. Robert N. McLellan; Ms. Darla D. Moore; Mr. Michael J. Mungo; Mr. John C. von Lehe, Jr.; and Mr. Herbert C. Adams, Board Vice Chairman. Members absent were: Mr. Alexander English; Mr. Samuel R. Foster, II; and Mr. Mack I. Whittle, Jr., Board Chairman. Other Board members present were: Mr. James Bradley; Dr. C. Edward Floyd; Mrs. Helen C. Harvey; Mr. William C. Hubbard; Mr. Toney J. Lister; Mr. Miles Loadholt; and Mr. J. DuPre Miller.

Others present were: President John M. Palms; Secretary Thomas L. Stepp; Vice President for Academic Affairs and Provost Jerome D. Odom; Vice President and Chief Operating Officer J. Lyles Glenn; Vice President and Chief Financial Officer Richard W. Kelly; Vice President for Student and Alumni Services Dennis A. Pruitt; Vice President for Human Resources Jane M. Jameson; General Counsel Walter (Terry) H. Parham; Dean of The Norman J. Arnold School of Public Health Harris Pastides; Dean of The Darla Moore School of Business Joel Smith; Associate Provost and Dean of the Graduate School Gordon B. Smith; Dean of USC Sumter C. Leslie Carpenter; Associate Dean of Academic Affairs, The Darla Moore School of Business, Rodney L. Roenfeldt; Director of the Department of Student Life, Division of Student and Alumni Services, Jerry T. Brewer; Assistant Treasurer Susan Hanna; Director of Financial Services and University Bursar Joseph Taylor; Director of Business Affairs Helen Zeigler; Director of Facilities Planning and Construction and University Architect Charles G. Jeffcoat; Associate Dean of Administration and Finance, School of Medicine, Brian J. Jowers; Assistant to the Vice President, Office of Budget and Finance, Ken Corbett; Director of the Department of Internal Audit Alton McCoy; Director of Periodicals, University Publications, Chris Horn; wife of Trustee Robert N. McLellan, Doris McLellan; and Director of the Office of Public Affairs Russ McKinney, Jr.

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

Chairman Staton stated that there were personnel matters which were appropriate for discussion in Executive Session. Mr. Mungo moved to enter Executive Session and Mr. Adams seconded the motion. The vote was taken, and the motion carried.

The following persons were invited to remain: Dr. Palms, Mr. Stepp, Dr. Odom, Mr. Glenn, Mr. Kelly, Mr. McCoy, Ms. Zeigler, Ms. Jameson, Mr. Parham, Ms. Warren, and Ms. Tweedy.

Return to Open Session

1. Audit Tracking Report: Chairman Staton asked Mr. McCoy to review the Audit Tracking Report. Mr. McCoy stated that only one minor audit problem in the Housing area, which had been successfully addressed, was listed on the tracking report.

2. Internal Audits--Business Affairs: Mr. McCoy stated that six audits within the Division of Finance dealing with various University auxiliary activities had been conducted and presented to the Committee for review--Trademarks and Licensing; Carolina Mall; Gameroom; Vending; Class Rings; and Bookstore. He explained that profits generated from these areas were used to finance the designated fund account which was initially approved by this Committee as part of the University budget process and subsequently recommended to the Board of Trustees for final approval in June.

   Chairman Staton asked Mr. McCoy to comment about the corrective measures which had been incorporated as a result of the findings in these six audits. Mr. McCoy explained that a new leadership team was in place which, he believed, would prudently and judiciously manage the contract compliance procedures. In addition, various initiatives were being considered. He cited, for example, the possibility of students automatically ordering all textbooks from the campus bookstore as part of the on-line registration process which would immediately capture the profits for the University.

   Chairman Staton asked Mr. McCoy if he was "comfortable with all of the things that we have put in place to take care of all of these findings at this point?" Mr. McCoy replied that he had "complete confidence in Mr. Kelly."

   Chairman Staton noted that these six audits were received for information.

3. Internal Audit--Cash Receipts: Mr. McCoy stated that an audit of the Columbia campus cash receipts had been conducted. He indicated that the bursar had sent a warning letter to those department heads and respective deans who had not followed correct cash receipting procedures. In addition, a training program had been developed for all business personnel to address this problem. Approximately 25 individuals from various University offices had attended a workshop two weeks ago; another 18 employees were scheduled to attend a workshop in early November.

   In conjunction with Computer Services, a new system was being designed to provide on-line cash receipting procedures throughout the University System which should effectively eliminate or reduce compliance problems in this area. Mr. McCoy hoped this system would be available within a year.

   In addition, Mr. McCoy indicated that the part-time auditor hired to conduct the workshops may be retained on a part-time basis to provide immediate individual training for those newly-hired University business and finance employees.

   Chairman Staton indicated that this audit was received for information.

4. Internal Audit--USC Sumter: Mr. McCoy stated that there had been exceptions in the cash receipting area at USC Sumter; however, he explained that those individuals in the USC Sumter business office had attended the training session described above and would participate in the next one also.

   Mr. McCoy expressed concern regarding the bookstore which, he stated, had not been able to generate a profit. Mr. McCoy believed that major improvements were needed in the USC Sumter bookstore operation.

   Chairman Staton noted that Dean Carpenter and his staff had incorporated processes which should improve record keeping from an accounting standpoint. He asked the dean to consider the possibility of an outside vendor operating the bookstore.

   Dean Carpenter reassured Committee members that he had asked the auditors to review the bookstore operation carefully. He had suspected the presence of various issues and problems in that area prior to the review. Dean Carpenter explained that management problems had been identified and a plan had been formed to "turn this situation around." He anticipated that this situation would cease to exist in the very near future. In conclusion, Dean Carpenter commented that USC Sumter would consider Chairman Staton's recommendation of outsourcing the bookstore operation.

   Mr. Stepp noted that Mr. McCoy would maintain this item on the audit tracking report.

   Chairman Staton indicated that this audit was received for information.

5. Audited Financial Statements--USC School of Medicine Trust and Clinical Faculty Practice Plan: Mr. Stepp stated that the Committee had received information regarding an external audit of the USC School of Medicine Trust and Clinical Faculty Practice Plan. He further stated that the audit was essentially clean and that Mr. Jowers of the School of Medicine had presented it to him as University Treasurer, and that he had reviewed it with Ms. Hanna, Mr. McCoy, and Mr. Jowers.

   At this point, Mr. Jowers briefly reviewed the status of the Medical School's bond capacity. In the summer of 2000, Mr. Bradley and Mr. Mungo had assisted the Medical School in the purchase of a $10.6 million variable-rate bond which had been secured in September of 2000. He explained that the bond information had been reviewed in this audit. The bond funds were used to purchase various medical buildings as well as the renovation of one of the structures; a December 15th renovation completion date had been projected. During a Board meeting in the summer of 2001, Board members had approved the Medical School's purchase of a 10-year fixed rate bond with a 4.5 percent, or lower, interest rate. Mr. Jowers indicated that on the day following that meeting, the transaction had been conducted with the bank.

   Chairman Staton asked Mr. Jowers to address the 1999 $920,000 excess revenue which had diminished to a $34,000 deficit in 2000. Mr. Jowers explained that, because of required bond payment procedures, a temporary escrow account in the amount of $800,000 had been established to cover previous bond payments until the money had been recuperated following the purchase of the current bond.

   Chairman Staton indicated that the audited financial statements of the USC School of Medicine Trust and Clinical Faculty Practice Plan were received for information.

6. Receipt of University Quarterly Financial Report: Chairman Staton explained that the University Quarterly Financial Report had been mailed to Board members at the end of the quarter. In the future, this report would be sent in the same manner so that trustees would receive this information as soon as possible. "We want you to have it in your hands on a timely basis so that we will not be waiting on a committee meeting to start looking at these numbers or to be asking questions."

When there were no other matters to come before the Committee, Chairman Staton declared the meeting adjourned at 3:10 p.m.

Respectfully submitted,
Thomas L. Stepp
Secretary