MINUTES KCTCS Board of Regents Finance, Technology, and Human Resources Committee March 13, 2014 Committee Members Present:

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1 MINUTES KCTCS Board of Regents Finance, Technology, and Human Resources Committee March 13, 2014 Committee Members Present: Ms. Doris C. Thomas, Committee Chair Mr. Robert G. Cooper, Committee Vice-Chair Mr. John P. Dove Ms. Betsy E. Flynn Mr. Porter G. Peeples, Sr. Ms. Marcia L. Roth Ms. Suzanne Tasayco CALL TO ORDER Committee Chair Thomas called to order the meeting of the Kentucky Community and Technical College System Board of Regents Finance, Technology, and Human Resources Committee at 3:25 p.m. (ET) on March 13, The meeting was held in Regency Ball Room 2 of the Hyatt Regency Hotel in Lexington, Kentucky. The press was notified of the meeting on March 5, Hon. J. Campbell Cantrill, KCTCS General Counsel, served as parliamentarian. There being a quorum present, the meeting began with the approval of minutes. APPROVAL OF MINUTES Chair Thomas called for a motion to approve the minutes of the December 5, 2013, meeting of the Finance, Technology, and Human Resources Committee. MOTION: Ms. Flynn moved and Mr. Dove seconded that the minutes of the December 5, 2013, KCTCS Board of Regents Finance, Technology, and Human Resources Committee be approved. VOTE: The motion was approved unanimously. ADDITIONS OR CHANGES TO THE AGENDA ACTION: RATIFICATION OF PERSONNEL ACTIONS There were no additions or changes to the agenda. RECOMMENDATION: That the KCTCS Board of Regents ratify the personnel actions listed in the agenda materials. Chair Thomas called on KCTCS President Michael B. McCall to present the item. KCTCS Vice President Ken Walker assisted with the presentation. It was noted that the personnel actions presented were in accordance with reporting guidelines and policies adopted by the KCTCS Board of Regents. Chair Thomas called for a motion. MOTION: Ms. Roth moved and Mr. Cooper seconded that the Finance, Technology, and Human Resources Committee recommend that the KCTCS Board of Regents ratify the personnel actions listed in the agenda materials. VOTE: The motion was approved unanimously. 33

2 UPDATE: TECHNOLOGY SOLUTIONS REPORT Chair Thomas called on President McCall to present the Technology Solutions Report with the assistance of KCTCS Vice President Paul Czarapata. Currently, Technology Solutions updates are being provided two times per year at the March and September Board meetings. The last report was made at the September 19, 2013, Board of Regents meeting. The committee was informed that the KCTCS Technology Solutions 2013 Accomplishments Report now utilizes a new web-based format. It was noted that the first phase of the KCTCS Intranet was rolled out in October 2013 as a one-stop shop for all KCTCS employees. The portal pulls together and links up many of the various information systems that an employee works with every day. As of December 2013, all currently enrolled KCTCS students have access to free copies (up to five) of the Microsoft Office suite of applications. This includes Word, Excel, and PowerPoint. It was reported that Blackboard Learn is used for all online classes. Accommodating the growth of the online educational needs, KCTCS changed hosted providers in August 2013 to Blackboard Managed Services in Reston, Virginia, in order to give KCTCS the ability to meet everincreasing student and faculty needs as well as those of seasonally cyclical times, such as registration and finals week. Blackboard has employees who can oversee the system in the United States, Europe, and India. This type of service allows KCTCS to have 24/7/365 system support and failover services. INFORMATION: KCTCS BUDGET DEVELOPMENT SCENARIOS Chair Thomas called on President McCall to present the item. KCTCS Vice President Ken Walker assisted with the presentation. It was noted that the fiscal year budget would direct the use of financial resources available to KCTCS to help achieve its mission and vision. The KCTCS Board of Regents discussion of the following factors was needed in order to provide guidance in the development of a proposed budget for consideration at the June 13, 2014, Board meeting. President McCall provided an overview of the and state appropriations to KCTCS as proposed by Governor Beshear during the 2014 Regular Session of the Kentucky General Assembly: State Appropriation Base $191,455, State Appropriation $191,455,700 Appropriation for KERS* 1,602,500 Subtotal $193,058, Percent Budget Cut** (4,826,500) Total State Appropriation $188,231, State Appropriation $188,231,700 34

3 * Appropriation of $1,602,500 to fund the Kentucky Employee Retirement System (KERS) pension. ** All postsecondary education institutions, including KCTCS, received a 2.5 percent cut from the adjusted base state appropriation (approximately $4.8 million). The state appropriation is the same as the state appropriation (i.e., no further reduction and no increase). In addition to the biennial budget state appropriation for KCTCS, the second primary source of funds to support the KCTCS operating budget is tuition revenue. The Council on Postsecondary Education (CPE) is to establish parameters for tuition rates for at a future meeting. Last year CPE approved a $4.00 per credit hour increase for KCTCS at its spring 2013 meeting. Each $1.00 increase in the KCTCS tuition per credit hour rate in for Kentucky residents (with corresponding rate increases for out-of-state students) will generate approximately $1.57 million in new tuition revenue. A third funding source used to support Board priorities for expenditure is the reallocation of the existing funding base. Fixed costs in certain employee benefits are estimated to increase in Current estimates indicate that utilities and property insurance costs will increase by approximately $1.0 million in , a 6.3 percent increase. Employee benefits include the increased cost of health insurance coverage for continued participation in the state and University of Kentucky health insurance plans, workers compensation, long-term disability, and unemployment insurance. The Kentucky Employee Retirement System (KERS) employer contribution rate increases from percent in to 38.4 percent in KCTCS will have an additional cost of $3.2 million in retirement contributions for current employees even with no change in salary for The Governor s budget proposal includes funding for half of this increase. Current estimates indicate that the unfunded employee benefit costs could increase by $4.3 million in , a 9.3 percent increase. The fixed costs in employee benefits, utilities, and property insurance, estimated at $5.3 million in , is an 8.5 percent increase. As in the past, the Board must determine compensation increases for KCTCS faculty and staff for Systemwide, each 1.0 percent salary increase for full-time faculty and staff would cost $2.2 million in and $0.3 million in additional retirement benefits for a total of $2.5 million per 1.0 percent increase. Additionally, each year since the Board of Regents has funded the cost of faculty promotion in rank. In fiscal year , the cost of faculty promotions will be approximately $0.8 million. 35

4 Chair Thomas called for questions and discussion. During the discussion of the budget scenarios, a question was raised about Merit Bonus funding. President McCall indicated that funding had been reallocated to the recurring salary increase. The committee indicated that a raise for full-time faculty and staff would be important to include in the budget. UPDATE: KCTCS QUARTERLY FINANCIAL REPORT Chair Thomas called on President McCall to present the KCTCS Quarterly Financial Report. KCTCS Vice President Ken Walker assisted him with the presentation. It was reported that information for the second quarter of fiscal year , which ended December 31, 2013, was derived from the KCTCS Administrative Financial System. The Statement of Revenues and Expenditures reflects the actual program and operational expenditures compared to the fiscal year budget approved by the KCTCS Board of Regents on June 14, Total revenues of $507 million reflect 55 percent of the budgeted revenue and appropriated funds. Current fund expenditures and budget reserve through the fiscal year total $410 million, 44 percent of the expenditures budgeted for the year. As of the end of the second quarter, KCTCS has received 86 percent of budgeted tuition revenue; and 47 percent of the total budgeted financial aid has been received and expended. A total of 100 percent of the nonrecurring budget reserve from prior year funds is in place. The Statement of Net Assets presented reflects the overall financial position of the System and includes assets, liabilities, and net assets as of December 31, UPDATE: SUPPLIER DIVERSITY REPORT Chair Thomas called on President McCall to present the Supplier Diversity Report. KCTCS Vice President Ken Walker assisted with the presentation. KCTCS defines diverse suppliers as those businesses owned by ethnic minorities, women, veterans, or the physically challenged. Fiscal Year (FY) 2014 data (July through December) were reported in the agenda materials. The data indicated for FY 2014 that KCTCS spent (July 1 through December 31, 2013) almost $2.9 million (9.9 percent) of a total $28.9 million in impactable discretionary spend with diverse suppliers. In terms of the number of suppliers, FY 2014 compared to FY 2013, the percentage of diverse vendors was approximately the same, 12 percent. In terms of dollars spent with diverse suppliers, FY 2014 increased by 1.7 percentage points (9.9 percent as compared to 8.2 percent) or $52,740 more than in FY KCTCS held its first Supplier Diversity Fair at the KCTCS System Office on October 30, More than 300 guests and 75 exhibitors attended this event. Buyers and officials from other organizations such as the University of Kentucky, Commerce-Lexington, Kentucky Finance and Administration Cabinet, Lexington-Fayette Urban County Government, and the U.S. Small 36

5 Business Administration (SBA), and more attended to discuss business opportunities. KCTCS staff continues to work with National Diversity Solutions (NDS) on supplier matching assistance. A letter and a report on the current status of the KCTCS Supplier Diversity Initiative are presented in the agenda materials. Since the September 2013 report, KCTCS representatives have participated in numerous supplier diversity events/forums, including the Commerce Lexington s Opportunity Exchange, the Women s Business Center of Kentucky-2013 Women in Business Expo, and the Tri-State Minority Supplier Development Council s Business Opportunity Fair. UPDATE: OFFICE OF AUDIT SERVICES REPORT Chair Thomas called on Mr. Glenn Paige, Office of Audit Services Director, to provide a semi-annual report on the activities of the Office of Audit Services. The committee was provided a summary of audits conducted during the fiscal year along with a plan of scheduled audits for the fiscal year. Audits that were scheduled to be completed in consist of the following System Office Units: Student Financial Aid, Human Resources, Grant Accounting and Management, Facilities Management, Automotive Manufacturing Technical Education Collaborative (AMTEC), Marketing and Communications, and External Audit Assistance-Dean Dorton Allen Ford (DDAF). Audits of colleges with leadership changes occurred for Southcentral Kentucky Community and Technical College and Southeast Kentucky Community and Technical College. A Hopkinsville Community College audit will take place in due to a presidential leadership change. The following audits were conducted in : Bluegrass Community and Technical College, Gateway Community and Technical College, Maysville Community and Technical College, and West Kentucky Community and Technical College. A risk assessment has been conducted of auditable units KCTCS colleges and system-level offices by assigning a risk rating of one (1) representing the lowest risk and five (5) the highest risk to each one on the list. Other factors such as management concerns, prior audit coverage, number of audit findings, changes in management, and relative materiality were also taken into account when assigning the ratings. Using results from the risk assessment, as well as other necessary activities, the audit plan for fiscal year will consist of Accounts Payable 37

6 (focusing on System Office operations), Veterans Affairs (focusing on System Office operations), Cash Handling (focusing on System Office operations), Special Reviews and Investigations (focusing on System Office operations), and External Audit Assistance-Dean Dorton Allen Ford. The following colleges are in the audit plan for : Big Sandy Community and Technical College, Maysville Community and Technical College, and Owensboro Community and Technical College. Additional projects will be added if circumstances dictate. NEXT MEETING ADJOURNMENT The next regularly scheduled Finance, Technology, and Human Resources Committee meeting is June 12, 2014, at Somerset Community College, Somerset, Kentucky. Ms. Flynn moved and Ms. Tasayco seconded that the Finance, Technology, and Human Resources Committee adjourn. VOTE: The motion was approved unanimously. The Finance, Technology, and Human Resources Committee meeting adjourned at 4:12 p.m. (ET). 06/12/14 Date Approved by the Finance, Technology, and Human Resources Committee Doris C. Thomas Committee Chair 38