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KENTUCKY STATE UNIVERSITY BOARD OF REGENTS

Finance and Business Committee

October 26, 2012

Regent Lavaughn Henry, Chairperson Regent Ron Banks Regent David Guarnieri Regent Syamala Reddy Regent Chuck Whitehead

KENTUCKY STATE UNIVERSITY BOARD OF REGENTS October 26, 2012 IANCE AND BUSINESS MEETING INDEX

B1 Minutes of July 27, 2012 meeting

B2 Executive Summary Report

B3 Fiscal 2012 Budget vs Actual

B4 Fiscal 2012 Financials (unaudited)

B5 Human Resource Services Report

B6 Fiscal 2012 Audit Report

KENTUCKY STATE UNIVERSITY Regular Meeting of the Finance and Business Committee Board of Regents 10 am, October 26, 2012 Board Room, Academic Service Building Frankfort, Kentucky

Regent Henry, Presiding

AGENDA

1. Call to Order
2. Chairperson
3. II.Roll Call
4. Mrs. Lillian Graham
5. III.Opening Remarks
6. Chairperson
7. IV.Approval of July 27, 2012 Minutes Chairperson
8. V.Executive Summary Report
9. Mrs. Alice Johnson
10. VI.Action Items

- 2012 Audit Report

VII. Informational Items

• 2012 Budget vs Actual
• 2012 Financial Statements (unaudited)
• Human Resources Services Report
• VIII.Discussion
• Chairperson

KENTUCKY STATE UNIVERSITY BOARD OF REGENTS AGENDA ITEM BACKGROUND

B1

To: Board of Regents Finance and Business Committee Date: October 26, 2012

From: Alice B. Johnson Vice President for Finance and Business Affairs

Subject: Finance and Business Committee Meeting Minutes July 27, 2012

Reason for Consideration: Action Item Enclosures: Yes

Background:

The minutes of the July 27, 2012 meeting must be approved.

Recommendation:

Approval of the minutes of the meeting on July 27, 2012

MINUTES

Kentucky State University Board of Regents Finance and Business Committee 9:45a.m., July 27, 2012 Frankfort, Kentucky

I. Call to Order

Regent Henry called the meeting to order at 9:50 a.m. on July 27, 2012.

II. Roll Call

Regent Henry asked for the roll call, which was recorded as follows:

Regent Lavaughn Henry, present

Regent Ron Banks, present

Regent David Guarnieri, absent

Regent Syamala Reddy, present

Regent Chuck Whitehead, present

Mrs. Johnson, present

A quorum was declared.

III. Approval of Minutes

Action: Motion to approve the minutes from the June 4, 2012 Finance and Business Committee meeting was made by Regent Reddy and seconded by Regent Whitehead. The minutes stand as approved.

Motion to approve the minutes from the June 4, 2012 Finance and Business Committee meeting was made by Regent Reddy and seconded by Regent Whitehead. The minutes stand as approved.

Regent Henry recognized Mrs. Johnson to carry the discussion forward.

IV. Vice President's Report

Personnel Changes

Vice President Johnson informed the committee that there have been several personnel changes in Finance and Business with the resignation of Claudine Gee, Director of Budget Policy & Planning on April 27, 2012 and Douglas Allen, Director of Accounting on June 1, 2012. Mr. Delandual Conwell was introduced as the new Compliance Coordinator & Operations Database Specialist. Mrs. Johnson stated that Yolanda Spooney, Director of Accounting will start September 4, 2012.

Fiscal 2012 Audit

Vice President Johnson stated that the FY2012 audit activities began in May and the auditors will return for field work in August. A draft of the audit report will be submitted in September and will be available by the October Board meeting.

Executive Summary Narrative

Vice President Johnson gave an overview of the Executive Summary Narrative. She stated that the FY2012 Budget vs Actual results were achieved meeting targeted spending goals. She also stated that the unaudited financial statements indicate a reduction in net assets of $2.5 million which reflects unaudited changes in net assets after accruals are recorded.

Perkins Loan

Mrs. Napier, Associate Vice President Business Operations informed the committee that the Perkins Loan default rate has been reduced significantly. She stated that a Strategic Plan was developed to work with the students before they get into default. She stated that the default rate last year was 38% and this year the default rate is 10.5%.

V. Adjournment

Motion for adjournment of the Finance and Business meeting was made by Regent Henry. The meeting adjourned at 10:37am.

Submitted by: Approved by:

Alice B. Johnson Vice President for Finance and Business Kentucky State University Lavaughn Henry, Chair Finance and Business Committee Board of Regents Kentucky State University

Lavaughn Henry, Chair Finance and Business Committee Board of Regents Kentucky State University

___ Approved with no corrections

___ Approved with corrections

B2

KENTUCKY STATE UNIVERSITY BOARD OF REGENTS AGENDA ITEM BACKGROUND

To: Board of Regents Finance and Business Committee Date: October 26, 2012

From: Alice B. Johnson Vice President for Finance and Business Affairs

Subject: Executive Summary

Reason for Consideration: Informational Item Enclosures: Yes

Background:

Recommendation:

Kentucky State University Finance and Business Committee Meeting October 26, 2012

Fiscal 2012 Audit

The audit report is being finalized. The initial timeline called for completion by October 5, 2012. However, the KSU Foundation Audit extended the timeline by one week. Final copies will be distributed.

Fiscal 2013 Budget vs Actual

For fiscal 2013, planned budget results are presented for July, August and September along with departmental budget changes by organization for each month.

Fiscal 2013 Financial Statements (unaudited) For fiscal 2013, unaudited comparative financials are presented in item B4 for September 30, 2012.

Staffing Changes

The following professional staff changes have occurred in the Division of Finance and Business

Hired: Director, Accounting Services, Yolanda Spooney, September 4, 2012

Planning & Support Specialist, Budget, Johnny Stevenson October 1, 2012

B3

KENTUCKY STATE UNIVERSITY BOARD OF REGENTS AGENDA ITEM BACKGROUND

To: Board of Regents Finance and Business Committee Date: October 26, 2012

From: Alice B. Johnson Vice President for Finance and Business Affairs

Subject: Budget vs. Actual July, August and September 2012

Reason for Consideration: Informational Item Enclosures: Yes

Background: For September 2012, revenues and expenses are presented for the Educational and General Fund (E&G), Auxiliary Fund, Land Grant and Action Agenda Funds. Budget vs. Actual does not include restricted grants and contracts.

The summary of operations presented below is to assist in understanding the results reflected in the budget vs. actual report as of September 2012.

The state appropriates funds for Land Grant as required by the U.S. Department of Agriculture. Land Grant, Action Agenda and Auxiliary Funds are not available to the University for discretionary spending.

Revenue

• State appropriations are received in installments of 30% (July), 25% (October), 25% (January) and 20% (April) of each year. At September 2012, $7.1 million of state appropriations and $550,000 of Agriculture Grant have been received.
• Student Tuition and Fees will be posted for Fall 2012 and Spring 2013 enrollment. Auxiliary revenues represent housing and board for resident students enrolled for Fall 2012 and Spring 2013.
• Other revenue includes athletic income, indirect cost recovery, facility rentals, interest income, state funding for Regional Stewardship and fund balance revenue offset. As of September 2012, $61,300 has been received for Regional Stewardship.

Expense

• Salaries and benefits expenses are at 14.39% of budget. This variance is considered normal.
• Supplies, Travel, Communications and Services were expended at a level appropriate for the percent of fiscal year expired. These expenses are incurred more heavily during the academic year. Services include utilities and other services used for fall semester preparation. This variance is considered normal.
• Interdepartmental Costs may reflect reductions in expenses which are due to timing in recording journal entries. Fixed Costs include maintenance agreements that require payment in full at the beginning of the service agreement; therefore, these expenses are not incurred evenly over the fiscal year. This variance is considered normal.
• Student Aid should be recorded consistent with Tuition and Fees. Student Aid is typically recorded as students complete the registration process and accepts aid awards. This variance is considered normal.
• Transfers include debt service obligations and internal reallocations. Transfers are typically recorded at the beginning of the fiscal year. This variance is considered normal.

Recommendation:

KENTUCKY STATE UNIVERSITY BOARD OF REGENTS AGENDA ITEM BACKGROUND

B4

To: Board of Regents Finance and Business Committee Date: October 26, 2012

From: Alice B. Johnson Vice President for Finance and Business Affairs

Subject: Unaudited Comparative Financial Statements-August 31, 2012 and 2011

Reason for Consideration: Informational Item Enclosures: Yes

Background:

The comparative Interim Financial Statements are included as of August 31, 2012 and August 31, 2011. A brief summary explanation of certain current assets and plant items follows:

1. Cash and cash equivalents total $27.1 million and $32.0 million for August 2012 and 2011 respectively. This amount for August 31, 2012 includes $19.4 million that is restricted for Land Grant and Action Agenda programs and $3.6 million that is restricted for plant purposes. The remainder is current operating cash that will be disbursed for current operations during the year.
2. Accounts receivable totaling $14.9 million and $20.9 million for August 2012 and 2011, respectively, includes the receivables from students, grants and loans. As of August 31, 2012, this amount includes $11.9 million in student accounts receivables, and $3.0 million that is grants and other accounts receivables. There is a variance of $5.8 million from 2012 to 2011, which represents receipt of $3.4 million in aid applied to student's accounts in 2012 which was applied in subsequent months during 2011.
3. Current liabilities for August 31, 2012 and August 31, 2011 amounts to $3.9 million and $7.6 million consisting of accounts payable and accrued payroll liabilities. Accrued compensated absences total $1.7 million and Deferred Revenue totals $367 thousand as of August 31, 2012. There is a variance of $2.1 million in deferred revenue due to applying earned tuition from the summer semester August of 2012, clean-up that occurred at fiscal year-end, and posting of earned revenue.
4. As of August 2012, net assets reflect a $9.4 million increase.
5. Tuition and fee revenue comparison for August 2012 and 2011 represents a $3.2 million variance resulting from tuition assessment in 2012 of $6.8 million and 2011 of $9.8 million.
6. The comparison of expenditures for August 2012 and 2011 consist of Instruction variance of $500k due to additional adjunct salaries; public service expense of

$600k due to an increase in program expenses; a variance in operations and maintenance of $600k due to expenses related to the Aquaculture Production Lab; a variance in student aid of $1.6 million due primarily to an increase in Pell grants.

7. The Statement of Cash Flows reflects a net increase of $3.3 million at August 31, 2012. Operations consumed $4.0 million in August 2012 (FY13) and $2.4 million in August 2011 (FY12).

Kentucky State University Statement of Net Assets August 31, 2012 and 2011 (Unaudited)

Kentucky State University Addendum to Statement of Net Assets Components of Fund Balances - Disaggregated (Unaudited)

Kentucky State University Statement of Revenues, Expenses and Changes in Net Assets (By Function) Period Ending August 31, 2012 and 2011 (Unaudited)

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Kentucky State University Statement of Revenues, Expenses and Changes in Net Assets (By Function) Period Ending August 31, 2012 and 2011 (Unaudited)

Kentucky State University Statement of Cash Flows Period Ending August 31, 2012 and 2011 (Unaudited)

Kentucky State University Statement of Cash Flows Period Ending August 31, 2012 and 2011 (Unaudited)

KENTUCKY STATE UNIVERSITY BOARD OF REGENTS AGENDA ITEM BACKGROUND

B5

To: Board of Regents Finance and Business Committee Date: October 26, 2012

From: Alice B. Johnson Vice President for Finance and Business Affairs

Subject: Human Resources Update

Reason for Consideration: Informational Item Enclosures: Yes

Background: Human Resource Services has initiated and implemented several significant projects for the University as described below:

1. Met with faculty to explain the transition from nine month pay to twelve month pay.
2. Collection of annual staff performance evaluations underway.
3. Draft affirmative action plan received and under review.
4. Requests for Proposal for employee benefit broker services have been received and are under review by the selection committee.
5. KSU Learning Center is live with a “soft” roll out. Campus wide roll out is planned for late October.
6. The Human Resources newsletter continues publication. A copy of the September 2012 edition is enclosed.
7. Implementation of Benesolv continued with an early October targeted effective date. The following services will be among those available with the implementation:
8. Call center to provide employee assistance;
9. New hire enrollment:
10. Data export report for upload to ERP;
11. Monthly premium and contributions reconciliations.

KENTUCKY STATE UNIVERSITY BOARD OF REGENTS AGENDA ITEM BACKGROUND

B6

To: Board of Regents Finance and Business Committee Date: October 26, 2012

From: Alice B. Johnson Vice President for Finance and Business Affairs

Subject: Fiscal 2012 Audit

Reason for Consideration: Action Item Enclosures: Yes

Background:

The final audit report for 2012 will be presented at the meeting.