Audit Committee Meeting

October 21, 2005,

Regents Present: Nancy Paul, Chair, Blanche Parks, Mayor Bill Bunten, Maggie Warren

Regents joining the meeting in progress: Karen Lee, Ben Blair, Jim Roth (by teleconference), Bob Storey

Staff Present: Jerry Farley, Wanda Hill, Al Dickes, Tom Ellis, David Monical, Ron Wasserstein, Chris Leach, Rhonda Thornburgh

BKD Staff Present: Abe Cole and Angela Ricke

Minutes of the April 21, 2005 meeting -

Mayor Bunten asked why the preliminary testing was to start on June 6th. Mr. Cole said BKD was able to do staff interviews and Student Financial Aid testing prior to the end of the fiscal year.

Regent Paul asked about the Conflict of Interest for staff. Vice President Hill said the policy, procedures, and disclosure statements will go out no later than next Monday and the completed disclosure statements are due by December 1st.

Regent Paul asked that the section of Sarbanes-Oxley which applies to the Regents be sent to them along with an acknowledgement for them to sign showing it was received.

The minutes were approved as distributed.

Fiscal Year 2004-05 Annual Audit Report -

Abe Cole and Angela Ricke of BKD, LLP distributed the document entitled Report to the Audit Committee - Audit Results 2005, the preliminary draft audit, and a draft management letter. Mr. Cole expressed their appreciation for the assistance of Vice President Hill and Mr. Leach and staff in providing the necessary information for the audit.

The principal areas of audit emphasis were valuation of receivables, valuation of cash, investments, and split-interest agreements, testing of capitalization of fixed assets, search for unrecorded liabilities, restrictions on fund balances, and compliance on federal student financial aid programs.

An unqualified opinion was expressed on the University's financial statements and compliance and internal control over financial reporting. No errors or irregularities were noted.

Two findings, which were timing issues, were noted regarding student financial aid.

Student refunds were not made within the required 30 days after determination of the students' last day of attendance.

The University is required to notify students of the right to cancel all or part of Perkins and Stafford loans within 30 days after crediting the students account.

These requirements had not been implemented in the new software system for 2005. Procedures will be implemented to ensure the required notifications are being done. Management is preparing a response to the findings.

No material weaknesses, disagreements with management, or difficulties were encountered in performing the audit.

Mayor Bunten asked if the auditors verify what the expense was used for when verifying expenditures such as maintenance and repairs. Mr. Cole indicated it is not a specific audit responsibility to verify such expenditures. President Farley added any Debt Retirement & Construction Fund expenditures would have been reviewed by the auditors and approved by the Board.

In response to Mayor Bunten's question about the Regents' Contingency Fund, President Farley said it is a budgeting device. We don't intend to spend from this fund, but have budget authority to use it if necessary. Any spending would require Board approval.

Regent Warren asked about restricted net assets with respect to WEA. President Farley indicated the University had endowed funds long before the endowment association was created. WEA manages these University funds, as well as those in WEA's name. These funds are assets to the University but also have to be reported by WEA. Regent Paul noted the FASB and GASB reporting model requirements make the audit a little confusing. Washburn net assets do include the Washburn assets and WEA shows this in the equity section.

Mayor Bunten asked why tuition and sales tax are considered non-operating revenue. President Farley indicated this is a specific GASB requirement.

As part of the audit, BKD reviewed the internal control structure of the University in which they offered two suggestions for improvement. The suggestions were to develop a formal ethics policy and to use a collection agency for delinquent student accounts.

Vice President Hill noted her area already had adopted an ethics policy over a year ago. Regent Paul said a formal University policy is necessary and all employees need to be made aware of it.

Regent Lee asked why a collection agency isn't used. Mr. Ellis noted the University does not issue transcripts to anyone who has outstanding debt which takes care of much of the collection problems.

Regent Warren asked BKD to return for the November board meeting. Board members were asked to review the draft and submit any questions to Vice President Hill prior to the November meeting.

The next Committee meeting will be scheduled at a later date.

Meeting was adjourned.

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