Mr. Kevin C. Melcher, Vice Chair Mr. Robert Blakely Mr. Ron Knecht Mr. James Dean Leavitt Mr. Michael B. Wixom

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1 Minutes are intended to note (a) the date, time and place of the meeting; (b) those members of the public body who were present and those who were absent; and (c) the substance of all matters proposed, discussed and/or action was taken on. Minutes are not intended to be a verbatim report of a meeting. An audiotape recording of the meeting is available for inspection by any member of the public interested in a verbatim report of the meeting. These minutes are not final until approved by the Board of Regents at the September 2012 meeting. BOARD OF REGENTS* and its AUDIT COMMITTEE NEVADA SYSTEM OF HIGHER EDUCATION Ballrooms B & C Joe Crowley Student Union University of Nevada, Reno 87 West Stadium Way, Reno Thursday, May 31, 2012 Video Conference Connection to: System Administration, Las Vegas 5550 West Flamingo, Conference Room and Great Basin College, Elko 1500 College Parkway, Berg Hall Conference Room Members Present: Others Present: Mr. Mark Alden, Chair Mr. Kevin C. Melcher, Vice Chair Mr. Robert Blakely Mr. Ron Knecht Mr. James Dean Leavitt Mr. Michael B. Wixom Mr. Dan Klaich, Chancellor Mr. Mark Stevens, Vice Chancellor, Finance Mr. Henry Stone, System Counsel Ms. Sandi Cardinal, Assistant Vice Chancellor Mr. Larry Eardley, Assistant Vice Chancellor Mr. Scott G. Wasserman, Chief of Staff and Special Counsel Dr. Michael Richards, President, CSN Mr. Bart Patterson, President, NSC Dr. Maria Sheehan, President, TMCC Dr. Marc Johnson, President UNR Ms. Patty Charlton, CSN Ms. Sarah Bousman, DRI Dr. Ellie Oppenheim, DRI Mr. Steven Salaber, DRI Ms. Lisa Heise, GBC (Elko) Ms. Sonja Sibert, GBC Mr. Buster Neel, NSC Ms. Ruby Camposano, NSHE Mr. Vic Redding, NSHE Mr. Gerry Bomotti, UNLV Dr. Lori Temple, UNLV Mr. Tom Judy, UNR Mr. Bruce Shively, UNR (AUDIT COMMITTEE 09/06/12) Ref. A-2a, Page 1 of 8

2 Audit Committee Minutes Page 2 Others Present: (Continued) Mr. Ron Zurek, UNR Dr. Jean Regan, UNSOM Dr. Thomas Schwenk, UNSOM Ms. Connie Capurro, WNC Ms. Coral Lopez, WNC Also present was faculty senate chair Ms. Dani Chandler, NSHE. Student government leaders present included Mr. Travis Brown, ASCSN President, CSN; and Mr. Steve Gronstal, GRAD President, DRI. Chair Alden called the meeting to order at 10:18 a.m. with all members present. 1. Information Only Public Comment (Agenda Item #1) None. 2. Approved Consent Agenda (Agenda Item #2) The committee recommended approval of the Consent Agenda. 2b. Approved Follow-Up: Wolf Pack Meats, UNR (Agenda Item #2b) The Committee recommended acceptance of the follow-up response to the audit report of UNR Wolf Pack Meats for the period July 1, 2009, through February 28, (Ref. A-2b on file in the Board Office.) 2f. Approved Follow-Up: Network Security Audit, DRI (Agenda Item #2f) The Committee recommended approval of the acceptance of the follow-up response to the audit report of DRI Network Security for the period September 1, 2010, through December 30, (Ref. A-2f on file in the Board Office.) Regent Knecht moved approval of the Consent Agenda. Regent Wixom seconded. Motion carried. 2a. Approved Minutes (Agenda Item #2a) The Committee recommended approval of the March 1, 2012, meeting minutes. (Ref. A-2a on file in the Board Office.) Regent Knecht pointed out on page eight, item nine, that he had asked for what the total bill was for outside audits and he did not recall receiving that information. Ms. Cardinal stated she was instructed that this item would be heard in December. She has collected the information and it will be a part of the December Audit Committee. Regent Knecht moved approval of the March 1, 2012, meeting minutes. Regent Melcher seconded. Motion carried. 2c. Approved Follow-Up: Lawlor Events Center, UNR (Agenda Item #2c) The Committee recommended acceptance of the follow-up response to the audit report of UNR Lawlor Events Center for the period July 1, 2009, through December 31, (Ref. A-2c on file in the Board Office.) Regent Knecht stated the audit committee notes state that three recommendations were open, two have been implemented and the procedures manual is in the (AUDIT COMMITTEE 09/06/12) Ref. A-2a, Page 2 of 8

3 Audit Committee Minutes Page 3 2c. Approved Follow-Up: Lawlor Events Center, UNR (Agenda Item #2c) (Continued) process of being implemented. Mr. Judy stated the manual has now been completed. Regent Knecht moved acceptance of the follow-up response to the audit report of UNR Lawlor Events Center for the period July 1, 2009, through December 31, Regent Melcher seconded. Motion carried. 2d. Approved Follow-Up: Intercollegiate Athletics, UNLV (Agenda Item #2d) The Committee recommended approval of the acceptance of the follow-up response to the audit report of UNLV Intercollegiate Athletics for the period July 1, 2009, through June 30, (Ref. A-2d on file in the Board Office.) Regent Knecht noted a recommendation was for the department to conduct a review of the policies and procedures and update any outdated information. He asked the status. Mr. Bomotti stated it was slated to be complete by the end of June. Regent Knecht moved acceptance of the follow-up response to the audit report of UNLV Intercollegiate Athletics for the period July 1, 2009, through June 30, Regent Leavitt seconded. Motion carried. 2e. Approved Follow-Up: Network Security Audit, UNLV (Agenda Item #2e) The Committee recommended acceptance of the follow-up response to the audit report of UNLV Network Security for the period March 1, 2011, through July 1, (Ref. A-2e on file in the Board Office.) Regent Knecht stated there were 17 recommendations, three implemented and all the rest are in the process and asked for an update. Mr. Bomotti stated that many of the outstanding recommendations relate to creating an infrastructure master plan for information technology. The consultant should be hired by the end of June. Regent Alden asked that this item be removed from the follow-up until they came closer to completion. Ms. Cardinal stated that the follow-up responses have historically not been approved by the Committee, just accepted. But because of the new consent agenda they are now approved. Regent Melcher felt that it was good to accept the report because it shows on the record that it has been reviewed by the Board. Regent Melcher moved acceptance of the follow-up response to the audit report of UNLV Network Security for the period March 1, 2011, through July 1, Regent Leavitt seconded. Motion carried. (AUDIT COMMITTEE 09/06/12) Ref. A-2a, Page 3 of 8

4 Audit Committee Minutes Page 4 2g. Approved Follow-Up: Library, TMCC (Agenda Item #2g) The Committee approved acceptance of the follow-up response to the audit report of the TMCC Library for the period July 1, 2009, through April 30, (Ref. A-2g on file in the Board Office.) Regent Knecht asked if there was anything to report on the recommendation relating to the process of organizing and updating the archive and the catalog. President Sheehan stated there is a plan in the response. One full-time individual has been assigned to this process to make sure that it is adhered to. (Audit Summary on file in the Board Office.) Regent Alden requested items 3 6 be taken as one item. Regent Knecht moved acceptance of the follow-up response to the audit report of UNLV Network Security for the period March 1, 2011, through July 1, Regent Leavitt seconded. Motion carried. 3. Approved Associated Students of the University of Nevada School of Medicine, UNR (Agenda Item #3) The Committee recommended approval of the report and institutional response to the UNR Associated Students of the University of Nevada School of Medicine audit for the period July 1, 2010, through August 31, (Ref. A-3 on file in the Board Office.) Ms. Cardinal reported each class has established a bank account that is used for money that they raise. It was recommended that they close those accounts and that the money be deposited through the UNR Cashier s Office into accounts within the university s financial accounting system. 4. Approved Campus Recreational Services, UNR (Agenda Item #4) The Committee recommended approval of the report and institutional response to the UNLV Campus Recreational Services audit for the period July 1, 2010, through October 31, (Ref. A-4 on file in the Board Office.) Ms. Cardinal reported the auditor noted some issues with contracts not being signed prior to the work being completed and missing signatures. Compliance with the contract policy was recommended. It was also noted that payments were not always being made on facility rental agreements. It was recommended they monitor payments more closely. It was noted that the safe s combination had not been changed in a number of years and it was recommended they change it periodically, especially after a personnel change. During the review of refunds, it was noted they were not being properly approved. It was recommended they follow the approval process. Lastly, volunteer forms were not being completed and forwarded to Human Resources. It was recommended they complete the forms and forward to Human Resources. Regent Knecht asked what percentile this report falls into as being the most problematic. Ms. Cardinal stated it fell in the middle percentile. There are issues, not all significant, but they have not been audited in a while. (AUDIT COMMITTEE 09/06/12) Ref. A-2a, Page 4 of 8

5 Audit Committee Minutes Page 5 5. Approved Thomas & Mack Food and Beverage Department Operations, UNLV (Agenda Item #5) The Committee recommended approval of the report and institutional response to the UNLV Thomas & Mack Center Food and Beverage Department Operations for the period July 1, 2010, through August 31, (Ref. A-5 on file in the Board Office.) Ms. Cardinal stated this was a limited audit requested by UNLV. It was noted that two vendors were being processed on payment vouchers, rather than purchase orders. It was recommended they work with the Purchasing Department to come up with a process that will work for both departments. The combination had also not been changed and it was recommended that it be changed periodically and always with a change in personnel. 6. Approved Hosting, CSN (Agenda Item #6) The Committee recommended approval of the report and institutional response to the CSN Hosting audit for the period July 1, 2010, through October 31, (Ref. A-6 on file in the Board Office.) Ms. Cardinal noted two agreements that did not contain all the required contract language and it was recommended they follow the contract guidelines. Regent Melcher moved approval of the UNR Associated Students of the University of Nevada School of Medicine report and institutional response, the UNR Campus Recreational Services report and institutional response, the UNLV Thomas and Mack Food and Beverage Department Operations report and institutional response, and the CSN Hosting report and institutional response. Regent Knecht seconded. Motion carried. 7. Information Only Bank Reconciliations (Agenda Item #7) Assistant Vice Chancellor Sandi Cardinal reported all institution bank reconciliations were up-to-date. 8. Approved Foundation Audit Exemptions (Agenda Item #8) The Committee first considered exemptions from the audit requirements for: a. UNLV Alumni Association. (Ref. A-8a) b. UNLV Football Foundation. (Ref. A-8b) c. UNLV Golf Foundation. (Ref. A-8c) The Committee recommended approval of an audit exemption for the year ended June, 30, 2012, but to require a review for the GBC Foundation and the UNLV Research Foundation. Regent Alden stated he was not an audit fan because they were expensive, they proved nothing and they did not ensure against fraud. He suggested that all the various foundations come under one umbrella to keep the costs down. Regent Wixom noted that if there is going to be an organization there needs to be an audit. Personally he saw great value in an audit. If the process can be restructured to be more cost effective he felt that was appropriate. He felt they would be remiss as a Board to not require regular audits. The Board is accountable and audits provide that means of accountability. (AUDIT COMMITTEE 09/06/12) Ref. A-2a, Page 5 of 8

6 Audit Committee Minutes Page 6 8. Approved Foundation Audit Exemptions (Agenda Item #8) (Continued) Regent Alden asked if there were any discussion for these foundations to come under the umbrella of the UNLV Foundation. Mr. Bomotti stated they have had numerous discussions with all of these entities about moving their funds under the UNLV Foundation and still having the same level of control over the use of the funds. In general, they have never accepted it as a reasonable option. But it is one that has been discussed. There seems to be a level of fear relating to their independence. Regent Leavitt asked Ms. Cardinal if she had a counter proposal that would address the concerns. Ms. Cardinal stated there are two things to consider. The first is that the external auditors put a threshold on the number of exemptions that the System can have and still be able to receive a clean opinion. By granting these waivers the System will be close to that threshold. From a financial standpoint the least costly would be to bring them under the UNLV Foundation, because it would become a part of the bigger picture and there would be less audit work involved. Regent Leavitt asked what the downsides were to have these entities participate under the UNLV Foundation. Ms. Cardinal stated from a financial aspect it would make sense because it will save on audit costs. Chancellor Klaich believed it would be helpful if the Committee expressed their desire that these foundations come together and present an integrated plan for consideration. He thought this would be helpful for UNLV also. Regents Knecht and Blakely agreed with Chancellor Klaich s suggestion. Regent Blakely asked if financial statements from these foundations would be a sound option. Regent Alden did not believe that it would show good internal controls and oversight. Regent Melcher stated he thought it was important to approve these as submitted, but that it is also prudent that each institution with multiple foundations to look at the feasibility of pulling the entities under the main foundation. Ms. Cardinal stated that these were very time sensitive. There are very strict deadlines to complete the consolidated financial statements. Mr. Bomotti reported part of the issue is that these foundations each have their own board and approved structure. In particular, if they were brought under the UNLV Foundation they would be treated like any other restricted asset. That board would not have the same authority as it did before. It could have a role in the allocation of those restricted resources, but that board would cease to exist and that is part of the control issues they have. Regent Melcher suggested that they look at other states and see if there is a good model out there that would work in Nevada. Regent Alden felt there needed to be a decision that day. Regent Blakely stated that according to Ms. Cardinal there has to be a decision as to whether they can have an audit waiver or they have to do an audit. Chancellor Klaich asked Mr. Stone if it was within the noticed provisions of this item as agendized if the Committee were to grant an exemption that they could also attach conditions to it with respect to any further exemptions. Mr. Stone stated the agenda item specifically permits exemptions and did not think that it preclude those exemptions having conditions on them. Regent Knecht stated that he was going to vote against the exemptions. (AUDIT COMMITTEE 09/06/12) Ref. A-2a, Page 6 of 8

7 Audit Committee Minutes Page 7 8. Approved Foundation Audit Exemptions (Agenda Item #8) (Continued) Regent Wixom stated that Mr. Bomotti s point was that the foundations lose their autonomy if they agree to go under the UNLV Foundation s umbrella. If they want autonomy there are going to be costs to that such as having to perform a full audit. Regent Knecht moved to deny the Foundation Audit Exemptions as listed in a, b and c. Regent Blakely seconded. The motion was withdrawn. d. UNLV Research Foundation. (Ref. A-8d) Regent Alden asked Mr. Bomotti for a little more information on the Research Foundation. Mr. Bomotti stated the Research Foundation was set up to manage the research park. They were able to get to the point of construction before the economy collapsed. There are some old federal grants that will run out by June 30 th. They did receive an exemption from the federal government from doing an A-133 audit because of the lower level threshold of the federal expenditure. The foundation was hoping to not do an audit at all. Unless there are some contracts in the future the foundation will consist of the value of the land. Regent Alden asked who the oversight was for the Research Foundation. Mr. Bomotti stated there is a Board for the foundation. Regent Alden was inclined to allow an exemption for the Research Foundation. Regent Blakely clarified that the federal government has given them an audit exemption for the A-133. If the federal government has given them an audit exemption he did not see a problem with the Board also allowing an exemption. e. GBC Foundation. (Ref. A-8e) Regent Blakely moved to allow an audit exemption for the year ended June, 30, 2012, for the UNLV Research Foundation. Regent Knecht seconded. Motion failed via a roll call vote (Regents Melcher, Knecht, Leavitt and Wixom voted no. Regents Alden and Blakely voted yes). Ms. Lisa Heise stating they were asking for an exemption as just a cost savings measure. This is an attempt to provide as much of the donor resources to those mission appropriate programs and scholarships. Ms. Heise stated they have alternated between a review and an audit in the past. Ms. Sonja Sibert stated they were asking for a reduction is scope from an audit to a review. An audit would cost $20,000 and a review would cost $10,000. Regent Alden asked what their assets totaled. Ms. Heise stated they were looking at just under $7 million. Regent Melcher stated they were sending a pretty strong message that they were not approving waivers anymore, and he did not want to send mixed messages to the institutions. Chancellor Klaich stated there is no basis to differentiate between foundations. He did see a difference between items a, b, and c compared to d and e. With a, b, and c the Committee has tried to send the idea but it has not been heard. (AUDIT COMMITTEE 09/06/12) Ref. A-2a, Page 7 of 8

8 Audit Committee Minutes Page 8 8. Approved Foundation Audit Exemptions (Agenda Item #8) (Continued) He could see a different result with respect to d and e, but he did not see a basis for yes on one, but a no on the other. Chancellor Klaich clarified that if they were given an exemption from the audit requirement, that it not be an exemption from a review. Ms. Cardinal stated that they are asked to have a minimum of a compilation and some have had reviews in the past. Chancellor Klaich stated that there would be some kind of follow-up, even if granted an audit exemption. Chancellor Klaich did not see a problem with granting a waiver for d and e as long as reviews were required. Regent Melcher believed that granting an audit exemption for one or two was sending a mixed message to the institutions. Regent Alden was inclined to allow an audit exemption for GBC but require a review. Regent Knecht move to allow an audit exemption for the year ended June, 30, 2012, for the GBC Foundation, but require a review. Regent Wixom seconded. Motion carried. d. UNLV Research Foundation. (Ref. A-8d) Regent Wixom moved for reconsideration of the motion on the UNLV Research Foundation. Regent Knecht seconded. Motion carried. Regent Wixom moved to allow an audit exemption for the year ended June, 30, 2012, for the UNLV Research Foundation, but require a review. Regent Melcher seconded. Motion carried. 9. Information Only New Business (Agenda Item #9) None. 10. Information Only - Public Comment (Agenda Item #10) None. The meeting adjourned at 11:10 a.m. Prepared by: Submitted for approval by: Angela R. Palmer Special Assistant and Coordinator to the Board of Regents Scott G. Wasserman Chief of Staff and Special Counsel to the Board of Regents (AUDIT COMMITTEE 09/06/12) Ref. A-2a, Page 8 of 8