K. Finance, Technology, and Human Resources Committee *3:00 p.m. (ET), March 14, 2013 Conference Room 102B KCTCS System Office Versailles, Kentucky

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1 K. Finance, Technology, and Human Resources Committee *3:00 p.m. (ET), March 14, 2013 Conference Room 102B KCTCS System Office Versailles, Kentucky Call to Order Page Roll Call Approval Minutes Approval of December 6, 2012, Meeting Minutes **Action: Ratification of Personnel Actions Update: Technology Solutions Update: Office for Audit Services Report Information: KCTCS Budget Development Scenarios Update: KCTCS Quarterly Financial Report Update: Supplier Diversity Report Update: Other Postemployment Benefit (OPEB) Trust Next Meeting June 13, 2013 Adjournment *Start time will be upon conclusion of the preceding event. ** All items listed with two asterisks (**) are considered to be routine by the Board and will be approved by one motion. An item may be removed from the consent agenda at the request of a regent. Agenda items removed from the consent agenda will be discussed in their normal sequence at the full Board of Regents meeting. Consent agenda items will be discussed separately during committee meetings of the Board of Regents. 127

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3 MINUTES KCTCS Board of Regents Finance, Technology, and Human Resources Committee December 6, 2012 Committee Members Present: Ms. Doris C. Thomas, Committee Chair Ms. Betsy E. Flynn, Committee Vice-Chair Mr. Elijah Buell, Jr. Mr. Robert G. Cooper Ms. Amber Lee Douglas Mr. John P. Dove Mr. Porter G. Peeples, Sr. Ms. Marcia L. Roth DRAFT 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 1:22 p.m. (ET) on December 6, 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 November 28, 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 September 20, 2012, meeting of the Finance, Technology, and Human Resources Committee. MOTION: Ms. Roth moved and Mr. Peeples seconded that the minutes of the September 20, 2012, 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. Flynn 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 distributed at the meeting. VOTE: The motion was approved unanimously. 129

4 DRAFT ACTION: ANNUAL AUDIT REPORT RECOMMENDATION: That the KCTCS Board of Regents receive the financial audit results for the fiscal year. Chair Thomas called on KCTCS President Michael B. McCall to present the item. KCTCS Vice President Walker assisted with the presentation. President McCall introduced the following Dean Dorton Allen Ford, PSC representatives to present the audit findings to the committee: Crissy Fiscus, Director of Assurance Services; Lance Mann, Associate Director on Assurance Services; and Hunter Stout, Manager of Assurance Services. The independent opinion issued by Dean Dorton Allen Ford, PSC is an unqualified opinion. This opinion means that the KCTCS financial statements present fairly, in all material respects, the KCTCS financial position on June 30, The KCTCS financial statements and the audit firm s opinion letter are included in the document titled Annual Financial Report. The audit firm has reported that there are no weaknesses in the KCTCS internal controls considered to be material weaknesses. The audit firm s management comment letter, KCTCS responses, and other related correspondence from the audit firm are included in the document titled Audit Correspondence. The audit firm has audited the KCTCS major federal programs in compliance with the requirements of the U.S. Office of Management and Budget Circular A-133. The report is in the document titled Report on Audit of Institution of Higher Education in Accordance with OMB Circular A-133, June 30, The auditors met with the KCTCS Board Chair and the Finance, Technology, and Human Resources Committee Chair at the beginning and end of the audit. Chair Thomas called for a motion. MOTION: Ms. Douglas moved and Ms. Flynn seconded that the Finance, Technology, and Human Resources Committee recommend that the KCTCS Board of Regents receive the financial audit results for the fiscal year. VOTE: The motion was approved unanimously. ACTION: OTHER POSTEMPLOYMENT BENEFIT (OPEB)TRUST RECOMMENDATION: That the KCTCS Board of Regents approve the resolution presented to establish an Other Postemployment Benefit Trust (OPEB) for eligible employees in KCTCS 403(b) retirement plans. Chair Thomas called on KCTCS President Michael B. McCall to present the item. KCTCS Vice President Walker assisted with the presentation. Based on Governmental Accounting Standards Board (GASB) Statement 130

5 DRAFT 45, public employers, including public postsecondary education institutions, must account for other postemployment benefits offered to its employees. The postemployment benefit pertaining to KCTCS is heath care insurance provided to employees hired before July 1, 2009, in KCTCS 403 (b) retirement plans. Prior to implementation of GASB Statement 45 in fiscal year 2008, public employers used a pay-as-you-go method of accounting for other postemployment benefits. Under this pay-as-you-go approach, the cost for these benefits was recognized only when premiums or benefit claims for the retirees were paid. GASB issued Statement 45 requiring more complete and reliable financial reporting regarding the costs and future financial obligations that public organizations incur when they provide other postemployment benefits. GASB Statement 45 requires that public employers annually expense other postemployment benefits that are earned today but will be paid at a future date when eligible employees retire. GASB Statement 45 provides options to public organizations in addressing its future postemployment benefits obligation. If the public organization does not fund its other postemployment benefits obligation, the organization must record a liability on its balance sheet and disclose the financial liability in the footnotes of its financial statements. If the public organization chooses to fund the liability, GASB accounting requirements stipulate that the funding must occur through a trust. Choosing to fund the liability allows the public organization to use a higher discount rate (i.e., interest rate) in calculating its unfunded liability; assets are legally protected; and assets are dedicated to providing committed benefits. The financial advantage for KCTCS to establish a postemployment benefit trust is actuarially calculated at up to approximately $157 million in cost savings over a 10-year period. With the establishment and full funding of the OPEB Trust, the actuarial liability to KCTCS would be fundamentally capped. The trust would be an irrevocable trust dedicated to provide the other postemployment benefit to retirees. Any funds remaining in the trust after all the obligations are paid would be returned to KCTCS. The plan structure and manner in which the trust assets are held, invested, and disbursed must be compatible with the holding and managing of the plan s assets for the exclusive benefit of the retirees. KCTCS is in consultation with expert legal counsel at Bingham Greenebaun Doll to develop a trust agreement and issue a request for proposals (RFP) for a trustee to administer the trust. KCTCS has also worked with the external auditor, Dean Dorton Allen Ford, regarding the financial advantages of establishing a trust. KCTCS received two responses to the RFP. Both respondents were invited to make presentations on their proposals. The members of the Board of Regents Finance, Technology, and Human Resources Committee were invited to hear these presentations and ask questions of the presenters. Based on the written proposals and presentations, KCTCS staff recommends the establishment of the OPEB Trust with the financial 131

6 DRAFT institution selected in accordance with Kentucky law to serve as the trustee of the trust resulting from a request for proposals issued for this service. Chair Thomas called for a motion. MOTION: Ms. Flynn moved and Mr. Buell seconded that the Finance, Technology, and Human Resources Committee recommend that the KCTCS Board of Regents approve the resolution presented to establish an Other Postemployment Benefit Trust for eligible employees in KCTCS 403(b) retirement plans. VOTE: The motion was approved unanimously. UPDATE: KCTCS QUARTERLY FINANCIAL REPORT Chair Thomas called on President McCall to present the Quarterly Financial Report. He was assisted in the presentation by KCTCS Vice President Walker. Information for the first quarter of fiscal year , which ended September 30, 2012, 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 15, Total revenues of $334 million reflect 36 percent of the budgeted revenue and appropriated funds. Current fund expenditures and budget reserve through the fiscal year total $266 million, 29 percent of the expenditures budgeted for the year. As of the end of the first quarter, KCTCS has received 46 percent of budgeted tuition revenue; and 43 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 September 30, UPDATE: FACILITIES MANAGEMENT AND SUSTAINABILITY STATUS REPORT Chair Thomas called on President McCall to present an update on the Facilities Management and Sustainability Report. KCTCS Vice President Walker assisted with the presentation. The current report includes updates on KCTCS capital construction projects, property management, sustainability initiatives, energy management, and facilities utilization. Information on property management activities includes property acquisitions and leases, insurance settlements, asset audits, and surplus property disposition. The report also contains information on the KCTCS sustainability initiative, including academic programs and other activities being conducted by the colleges and the System Office. Information on facilities utilization in fall 2012 is also included. 132

7 DRAFT UPDATE: RESOURCE DEVELOMENT REPORT Chair Thomas called on President McCall to present the Resource Development Update. KCTCS Vice President Timothy Burcham assisted with the presentation. The report covers private giving and sponsored projects, grants, and contracts. Private gift income by donor purpose and source for the system and the donor source by college for each KCTCS college is presented in this report. The largest private gifts received during the reporting period are also featured. Sponsored Projects, Grants, and Contract funds are stated by source and purpose for the System Office in total; and total awards to each KCTCS college are included in the report. The top five grants and contracts received during the reporting period are highlighted. This report covers the time period July 1, 2012, through October 31, NEXT MEETING ADJOURNMENT The next regularly scheduled Finance, Technology, and Human Resources Committee meeting is March 14, 2013, at the KCTCS System Office, Versailles, Kentucky. Mr. Buell moved and Mr. Cooper 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 2:48 p.m. (ET). 03/14/2013 Date Approved by the Finance, Technology, and Human Resources Committee Doris C. Thomas Committee Chair 133

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9 ACTION RATIFICATION OF Agenda Item K-1 PERSONNEL ACTIONS March 15, 2013 Recommendation That the KCTCS Board of Regents ratify the personnel actions listed in the agenda materials. Rationale On March 19, 1998, the Board of Regents delegated to the KCTCS President the authority to administer personnel actions, with such actions to be presented to the Board for review and ratification at each regularly scheduled Board meeting. Background Kentucky Revised Statute gives governing boards exclusive control of employment, tenure, and official relations of employees. 135

10 Personnel Actions Presented to the KCTCS Board of Regents March 15, 2013 I. Individual Personnel Actions A. Administrative Appointments B. Retirements C. Promotions Promotions with Tenure Promotions without Tenure D. Special Leaves with pay longer than 90 days E. Deaths Hazard Community and Technical College Fulton, Lou V, Professor, 01/01/2013. Southeast Kentucky Community and Technical College Morris, Brenda, Associate Professor, 01/02/2013 II. Summary Personnel Actions A. Academic Appointments Anatomy and Physiology, 1 Associate Degree Nursing, 1 Automotive Technology, 1 Clinical Laboratory Technician, 1 Communications, 2 Criminal Justice, 1 Electricity, 1 Health Sciences, 2 History, 1 Industrial Maintenance Tech, 1 Mathematics, 1 Medical Information Technology, 1 Nursing-Medical Surgical, 2 Paralegal, 1 Practical Nursing, 1 Plumbing Technology, 1 Veterinary Technology, 1 136

11 B. Administrative Appointments Chief Academic Affairs Officer, 1 Director of Public Relations, 1 Workforce Transitions Coordinator, 1 C. Reappointments D. Terminal Reappointments E. Leaves of Absence Educational, 1 Leave without Pay, 1 Medical Leave, 2 Sabbatical Leave, 8 F. Retirements Faculty, 9 Staff, 5 G. Resignations Faculty, 14 H. Non-Renewal of Appointment 137

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13 Agenda Item K-2 UPDATE: TECHNOLOGY SOLUTIONS March 15, Technology Annual Report Calendar year 2012 was very productive for System Office Technology Solutions. The 2012 Technology Accomplishments Report will be presented at the March meeting to highlight personnel, services provided, projects delivered, and 2013 major projects being planned or under way. Highlights include the following completed projects: Student Mobile Application Phase I of the KCTCS Mobile app for students was released and made available for Apple, Android, and Blackberry devices. Features include access to class schedules, homework assignments, discussion boards, a college directory, YouTube videos, maps of the college, and social media (Facebook & Twitter) as well as helpful links to the bookstore and digital library services. Phase II planning is currently in process. Systemwide PeopleSoft Business Process Analysis (BPA) In March 2012, KCTCS Technology Solutions initiated a systemwide effort to analyze key system and college-level business processes that utilize PeopleSoft Campus Solutions. The goal of this analysis was to identify, understand, and document critical business processes and redesign these processes for increased efficiency and effectiveness. A comprehensive set of recommendations, both short and long-term, have been provided as a result of the BPA activities. Technology Solutions staff has already begun to implement recommendations from the analysis and will solicit input from college faculty and staff to prioritize the remaining recommendations. All KCTCS.edu Sites Streamlined for Mobile Devices Visits to the KCTCS college web sites from mobile devices account for over 10 percent of all traffic. Collectively, the college sites receive over 240,000 visits per day. With nearly 25,000 visits per day coming from mobile devices, the audience is huge and will only continue to grow. To meet this demand, mobile versions of the college web sites were developed and deployed in late May and early June. Web pages automatically determine whether the user is on a full size computer or a handheld device and render the pages in a way that is optimal for viewing. Unified Help Desk for All Technology Solutions Services System Office Technology Solutions now has one place to go when help is needed. A help desk system was implemented combining systems used by web services, administrative systems (PeopleSoft), infrastructure, and desktop support in one web site. As of January 31, 2013, there have been over 95,000 tickets submitted by KCTCS faculty and staff. 139

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15 UPDATE: Agenda Item K-3 OFFICE OF AUDIT SERVICES March 15, 2013 The purpose of this report is to provide the Board of Regents with an introduction and overview of the Audit Services risk assessment methodology and audit plan. Background As part of its 2012 audit, Dean Dorton Allen Ford formally recommended that the KCTCS Office of Audit Services reconsider its methodology for selecting audits from a systematic basis to a comprehensive risk-based strategy. Adopting this strategy will enable Audit Services to provide a more balanced, risk-sensitive audit approach among college-level and system-level operations, processes, and programs. This approach will initially focus more emphasis on system-level units. Risk For purposes of this discussion, risk is defined as the probability that an event or action could adversely affect KCTCS. Specific examples of risk that could impact KCTCS include: Failure to safeguard financial assets. Erroneous record keeping, financial loss, or inappropriate accounting. Noncompliance with applicable laws, regulations, and other required standards. Goals and objectives set by KCTCS that are not being met. Events which could negatively affect KCTCS public image and reputation. KCTCS has measures in place whose purpose is to minimize and mitigate risk. These include, but are not limited to: An effective system of internal controls and procedures in place throughout the organization that are functioning as intended. Appropriate segregation of duties, reconcilement procedures, and management monitoring. An expectation of compliance with KCTCS policies and procedures as articulated by the KCTCS President and his leadership team. An independent internal audit function. An annual external audit that reports to the Board of Regents. Risk Assessment The goal of risk assessment is to identify those areas exposed to higher risk and to allocate audit resources appropriate to that level of risk. As the colleges have been audited on a regular basis from the beginning, they will initially rate as lower risk and less emphasis will be placed upon them until more balance has been achieved between the colleges and the System Office units. However, as has been the customary practice, Audit Services will continue to conduct audits of 141

16 colleges who have leadership changes. At this time, we expect to schedule audits for Southcentral Kentucky Community and Technical College and Southeast Kentucky Community and Technical College in due to presidential leadership changes. In order to develop a risk-based audit plan, a list of auditable units KCTCS colleges and system-level offices has been established. Rating categories were then formed to assign a level of relative risk for each auditable unit based on the following risks: Control Risk Quality and stability of control environment (40% weighting) Operational Risk - Complexity/diversity of operations (20% weighting) Financial Risk Impact of errors, omissions, and losses (20% weighting) Regulatory Risk Level of regulatory concerns (20% weighting) Each auditable unit was assigned a risk rating from between 1 and 5, with 1 representing the lowest risk and 5 the highest risk. 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. The weighted scores were then totaled and ranked from highest risk to lowest Audit Plan Using results from the risk assessment, as well as other necessary activities, the audit plan for fiscal year is as follows: 1. Student Financial Aid (focusing on System Office operations) 2. Human Resources (focusing on System Office operations) 3. Grant Accounting and Management (selected segments) 4. Property and Facilities Management (selected segments) 5. Southcentral Kentucky Community and Technical College 6. Southeast Kentucky Community and Technical College 7. Review the KCTCS President s travel and procurement card expenses 8. Special Reviews/Investigations (as events arise) 9. External Audit Assistance 142

17 INFORMATION: KCTCS BUDGET Agenda Item K-4 DEVELOPMENT SCENARIOS March 15, 2013 The KCTCS budget will direct the use of financial resources available to help achieve its mission and vision. The KCTCS Board of Regents discussion of the following factors is necessary at the March 15, 2013, meeting to provide guidance to the KCTCS President in the development of a proposed budget for consideration at the June 14, 2013, Board meeting Biennial State Appropriation The following table shows the and state appropriations to KCTCS enacted during the 2012 Regular Session of the Kentucky General Assembly. State Appropriation Budget Year Original* Revised* Enacted $204,546,700 $200,584, $191,455, $191,455,700 * Reflects recurring base transfer of $80,000 to Eastern Kentucky University and $80,000 to the University of Kentucky for Physical Therapy programs at these universities. All postsecondary education institutions, including KCTCS, received a 6.4 percent cut from the original base state appropriation (approximately $13.1 million). The state appropriation is the same as the state appropriation (i.e., no further reduction and no increase). The state appropriation is the first appropriation since that was not a decrease from the previous year. Tuition Revenue Increases In addition to state appropriation for KCTCS provided through the biennial budget, the second primary source of funds to support the KCTCS operating budget is tuition revenue. In spring 2013 CPE will establish a tuition rate increase ceiling for each of the universities and KCTCS for Last year CPE approved an increase ceiling of $5 per credit hour (a four percent increase) for KCTCS at its April 20, 2012, meeting. Each $1 increase in the KCTCS tuition per credit hour rate in for Kentucky residents (with corresponding rate increases for students from out-of-state) will generate approximately $1.5 million in new tuition revenue. Internal Base Reallocation Reallocation of the existing funding base is a third possible source of funds to support Board priorities for expenditure. Fixed Cost Increases in Employee Benefits and Utilities The cost of certain employee benefits, utilities, and property insurance will increase in 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. Current estimates indicate that these employee benefit costs, including the impact of the Affordable Care Act, could increase by $3.9 million in , an

18 percent increase. Current estimates indicate that utilities and property insurance costs will increase by approximately $0.9 million in , a 6.0 percent increase. Thus, the forecast for fixed cost increases in employee benefits, utilities, and property insurance is estimated at $4.8 million in , a 7.7 percent increase. The Kentucky Employee Retirement System (KERS) employer contribution rate increases from percent in to percent in KCTCS will have an additional cost of $0.9 million in retirement contributions in for its current employees even with no change in salary. The Kentucky Teacher Retirement System (KTRS) employer contribution rate increases from percent to percent in KCTCS will have an additional cost of $0.3 million in retirement contributions in for its current employees even with no change in salary. These costs would increase further with an increase in KCTCS salaries in Therefore, the forecast for fixed cost increases in employee benefits, utilities, property insurance, and KERS and KTRS rate changes is estimated at $6.0 million in Employee Compensation Increases As in the past, the Board of Regents is responsible for determining compensation increases (salary, benefits, and performance bonuses) for KCTCS faculty and staff. Systemwide, in each 1.0 percent salary increase for full-time faculty and staff would cost $2.2 million. Each year since the Board of Regents has funded the cost of faculty promotion in rank. In the cost of faculty promotions will be approximately $1.0 million. The Board of Regents may consider also providing funds for nonrecurring merit bonuses for high performing faculty and staff in all personnel systems, as it has done in the past several KCTCS budgets. Funding for nonrecurring merit bonuses is not included in the recurring budget, the funds that were used for this in the past were used to support recurring salary increases in In 2003, KCTCS contracted with Mercer Human Resource Consultants to complete a systemwide Classification and Compensation study. In fall 2012 KCTCS engaged Hanna Resource Group to conduct a systemwide Compensation and Classification study as a comprehensive update to the 2003 study. The study is expected to be completed sometime later in calendar year The Board of Regents is responsible for determining when the results of the updated Classification and Compensation study will be implemented. Discussion This information will be discussed at the March 14 and 15, 2013, KCTCS Board of Regents Finance, Technology, and Human Resources Committee and full Board meetings as opportunities to discuss Board of Regents funding priorities for Historic Information Cost of Fixed Cost and Employee Compensation Increases The following table provides the history since of the annual cost of fixed cost increases in employee benefits and utilities and employee compensation increases. 144

19 Budgeted Increases for Fixed Costs and Employee Compensation Fixed Cost Increases Utilities and Insurance KERS/KTRS Rate Increases Employee Compensation Increases Year Employee Benefits Salary Increase*** Faculty Promotions Merit Bonuses**** ,886,000 ** 0 5,400, ,000 2,000, ,000,000 ** 0 7,200, ,000 2,000, ,500,000 2,500, ,650, ,000 2,000, ,364,000 1,384, ,190, ,000 2,000, ,800,000 1,300, ,100,000 2,000, ,900, , ,000 2,000, ,900,000 1,100, ,000 2,000, ,000,000 1,000, ,500,000 1,000,000 2,000, ,100, , ,100 6,500,000 1,000, * 3,900, ,000 1,200,000 2,200,000 per 1% increase 1,000,000 ***** * Estimated ** No budgeted increase *** Salary increase of 3% in Salary increase of 4% in Salary increase of 3.5% in Salary increase of 3% in No salary increase in No salary increase in No salary increase in Salary increase of 3% in Salary increase of 2.5% in **** $2,000,000 recurring fund in the budget allocated annually for nonrecurring bonuses ***** Recurring fund no longer available; it was reallocated to partially pay for the salary increase in

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21 UPDATE: Agenda Item K-5 KCTCS QUARTERLY FINANCIAL REPORT March 15, 2013 The financial statements depict activity through the second quarter of fiscal year ; the quarter ended December 31, Information for these statements was derived from the KCTCS Administrative Financial System. The Statement of Revenues and Expenditures (Attachment A) reflects actual program and operational expenditures compared to the budget approved by the KCTCS Board of Regents June 15, This report reflects total revenues of $515 million, 56 percent of the budgeted revenue and appropriated funds. The Statement of Revenues and Expenditures also reflects current fund expenditures and budget reserve of $413 million, 45 percent of the expenditures budgeted for the year. The Statement of Net Assets (Attachment B) reflects the overall financial position of the System and includes assets, liabilities, and net assets. 147

22 Attachment A Kentucky Community and Technical College System Statement of Revenues and Expenditures December 31, 2012 (in thousands) APPROVED BUDGET REVENUES General Fund State Appropriations 191,456 REALIZED TO DATE PERCENT $ $ 105,300 55% Tuition and Charges 257, ,452 83% Investment Income 5,150 7, % Governmental Grants and Contracts 38,170 14,496 38% Sales/Services of Educational Activities 17,416 8,577 49% Other 96,206 21,151 22% Total General Fund 605, ,706 61% Restricted Funds 315, ,824 46% Total Revenues and Appropriated Fund Balances $ 921,256 $ 514,530 56% EXPENDITURES BY PROGRAM Instruction $ 283,860 $ 118,338 42% Public Service 49,108 19,696 40% Academic Support 44,107 20,777 47% Student Services 59,669 26,603 45% Institutional Support 108,904 42,548 39% Student Financial Aid 266, ,239 48% Operations & Maintenance 88,094 35,697 41% Total Expenditures by Program 900, ,898 44% Budget Reserve (Nonrecurring) 21,151 21, % Total Expenditures and Budget Reserve $ 921,256 $ 413,049 45% Current Year Revenues More Than Expenditures $ 101,

23 Attachment B Kentucky Community and Technical College System Statement of Net Assets December 31, 2012 and 2011 (in thousands) ASSETS Current Assets Cash and cash equivalents $ 241,751 $ 275,712 Short-term investments Loans, accounts and gifts receivable, net of bad debt 120, ,564 Other current assets Total current assets 362, ,684 Noncurrent Assets Restricted cash and cash equivalents 16,178 33,068 Loans and other receivables 5,274 5,859 Endowment investments 38,295 32,958 Other long-term investments 158, ,610 Capital assets, net 593, ,934 Total noncurrent assets 811, ,429 Total assets 1,174,608 1,154,113 LIABILITIES Current Liabilities Accounts payable and accrued expenses 2,170 2,422 Employee withholdings and deposits 14,308 14,293 Compensated absences 12,992 12,051 Deferred revenue 27,843 26,435 Leases payable - current portion 2,510 2,272 Total current liabilities 59,823 57,473 Noncurrent Liabilities Leases payable - noncurrent portion 17,523 20,571 Other long-term obligations 137, ,323 Total noncurrent liabilities 155, ,894 Total liabilities 215, ,367 NET ASSETS Invested in capital assets, net of related debt 573, ,090 Restricted for: Nonexpendable Scholarships, instruction, and other 30,197 25,258 Expendable Scholarships, instruction, and other 17,638 12,260 Loans 17,405 17,136 Capital projects 27,961 37,800 Unrestricted 292, ,202 Total net assets $ 959,406 $ 967,

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25 UPDATE: Agenda Item K-6 SUPPLIER DIVERSITY REPORT March 15, 2013 The Finance, Technology, and Human Resources Committee has asked to be updated periodically regarding data being collected and compiled on the KCTCS Supplier Diversity Initiative. KCTCS defines diverse suppliers as those businesses owned by ethnic minorities, women, veterans, or the physically challenged. The most recent report was made at the September 21, 2012, Board of Regents meeting at which time the Board received an update on the activities of Fiscal Year (July 1, 2011, through June 30, 2012). The update also indicated that data were being collected and compiled to show the results of efforts to increase the number of diverse suppliers with which KCTCS does business. Data are being compiled on a quarterly basis. Data for the first and second quarters of (July 1 through September 30, 2012, and October 1 through December 31, 2012) are included as Attachment A. Highlights from the first and second quarters of as compared to include an increase in the dollar amount spent with diverse suppliers (an increase of $506,344 or 22.1 percent). Within this total, the dollar amount spent with Physically Challenged Owned businesses increased percent, Women Owned businesses increased 43.7 percent, Minority Owned businesses increased 0.5 percent, and Veteran Owned businesses decreased 72.0 percent. In keeping with the KCTCS strong interest in working with the Kentucky Finance and Administration Cabinet to support and enhance the solicitation of diverse suppliers and contractors for all KCTCS capital projects, a diverse supplier outreach workshop was held at West Kentucky Community and Technical College in November. The outreach workshop was to encourage participation by diverse suppliers in the competitive procurement process for the capital construction work scheduled for the college, the Paducah School of Art Sculpture Building. Another capital construction supplier diversity outreach workshop is being planned for Bluegrass Community and Technical College regarding construction and furnishings for the Newtown Campus. As a follow up to KCTCS Board Chair Peeples November 2011 letter to Kentucky Finance and Administration Cabinet Secretary Flanery regarding KCTCS supplier diversity efforts and a subsequent meeting of Chair Peeples and President McCall with Secretary Flanery in August 2012, the Kentucky Finance and Administration Cabinet has recently expanded its supplier diversity program with guidelines to allow executive branch agencies to use their small purchase authority to expand business with ethnic minority businesses. KCTCS had already extended to its colleges this small purchase authority as part of its supplier diversity initiative. KCTCS staff continues to actively participate in events and trade shows, including local chamber of commerce and professional trade organization outings to promote interest in growing our diverse spend. Since the September 2012 report to the Board of Regents, college, System Office, and National Diversity Solutions (NDS) staff have participated in numerous supplier related forums, e.g., Commerce Lexington s Opportunity Exchange sessions and the Awards Program for the inaugural participants in the Commerce Lexington Minority Business Accelerator. 151

26 KCTCS is conducting a presentation (Vendor Diversity Reporting) about supplier diversity at the Alliance Conference in Indianapolis in March. Alliance represents the largest meeting of higher education, public sector, and federal users of Oracle applications in the world. KCTCS also will be participating in the Kentucky Supplier Diversity Collaborative to share best practices. Members of the Collaborative include the University of Kentucky, Fayette County Public Schools, Lexington-Fayette Urban County Government, Commerce Lexington, the Governor s Office on Minority Empowerment, and the Bluegrass Airport. KCTCS has signed on with the Tri-State Minority Supplier Development Council (TSMSDC) as a Bronze Corporate Sponsor for This sponsorship will include KCTCS receiving significant recognition at all TSMSDC events and opportunity fairs throughout Kentucky, Southern Indiana, and West Virginia. In order to obtain more robust data regarding its procurement card program, KCTCS is changing the provider of its procurement card service from JP Morgan to PNC Bank in late March. The software application provided by JP Morgan Chase was not able to provide the reporting functionality needed to report diverse supplier spend by business unit. The software application offered by PNC Bank provides better reporting functionality that will enable KCTCS to determine the amount spent with diversity suppliers via the KCTCS ProCard program. A key element of the KCTCS Supplier Diversity Initiative has been NDS staff visiting the colleges to discuss how best to enhance supplier diversity within the college s service area. The total number of diverse suppliers within the KCTCS master supplier list has been increased, enabling proactive notification to diverse suppliers of new opportunities as they occur. KCTCS also maintains a Diverse Supplier Collaboration Portal, an online tool used to register, qualify, and communicate opportunities with current and potential diverse suppliers of KCTCS needs for various goods and services. In the coming months a Diverse Supplier Outreach Workshop is being planned and will be held at the System Office. The quarterly Supplier Diversity Initiative newsletters continue to be published (see Attachment B) featuring details of future opportunities with KCTCS, upcoming outreach workshops, diverse supplier success stories, and Supplier Spotlight features. A written assessment of the current status of the KCTCS Supplier Diversity Initiative by NDS is included as Attachment C. 152

27 Diverse Supplier Summary FY 2013 Compared to FY 2012 Purchase Orders and Check Requests Expenditures Supplier Diversity - July 1 - September 30 First Quarter FY 2012 First Quarter FY 2013 Dollar Percent Expenses Expenses Change Change July 1 - September 30 Amount % of Total Amount % of Total FY 2012 to FY 2013 FY 2012 to FY 2013 All Suppliers $ 12,569, % $ 20,583, % $ 8,013, % Diverse Suppliers* Minority Owned $ 156, % $ 356, % $ 200, % Woman Owned $ 590, % $ 1,010, % $ 420, % Physically Challenged Owned $ 25, % $ 340, % $ 315, % Veteran Owned $ 226, % $ 87, % $ (139,388) -61.5% Total $ 999, % $ 1,795, % $ 796, % 153 Supplier Diversity - October 1 - December 31 Second Quarter FY 2012 Second Quarter FY 2013 Dollar Percent Expenses Expenses Change Change October 1 - December 31 Amount % of Total Amount % of Total FY 2012 to FY 2013 FY 2012 to FY 2013 All Suppliers $ 11,930, % $ 13,675, % $ 1,745, % Diverse Suppliers* Minority Owned $ 332, % $ 134, % $ (197,960) -59.6% Woman Owned $ 361, % $ 357, % $ (4,250) -1.2% Physically Challenged Owned $ 232, % $ 434, % $ 202, % Veteran Owned $ 370, % $ 80, % $ (290,327) -78.4% Total $ 1,297, % $ 1,006, % $ (290,376) -22.4% Supplier Diversity - July 1 - December 31 First Half of FY 2012 First Half of FY 2013 Dollar Percent Summary Expenses Summary Expenses Change Change July 1 - December 31 Amount % of Total Amount % of Total FY 2012 to FY 2013 FY 2012 to FY 2013 All Suppliers $ 24,500, % $ 34,259, % $ 9,758, % Diverse Suppliers* Minority Owned Business $ 488, % $ 491, % $ 2, % Woman Owned Business $ 952, % $ 1,368, % $ 415, % Physically Challenged Owned $ 258, % $ 775, % $ 517, % Veteran Owned $ 597, % $ 167, % $ (429,715) -72.0% Total $ 2,296, % $ 2,802, % $ 506, % *Diverse Supplier Categories are self-reported. Suppliers may be reported in more than one category. Detail may not sum to total due to rounding. Attachment A

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35 UPDATE: Agenda Item K-7 OTHER POSTEMPLOYMENT BENEFIT (OPEB) TRUST March 15, 2013 At the December 7, 2012, KCTCS Board of Regents meeting, the Finance, Technology, and Human Resources Committee recommended and the Board of Regents approved by resolution to establish an Other Postemployment Benefit (OPEB) Trust for the benefit of eligible employees in KCTCS 403(b) retirement plans. The Finance, Technology and Human Resources Committee has asked to be periodically updated regarding progress of the establishment and implementation of the trust. KCTCS staff issued a request for proposals (RFP) for the purpose of identifying and selecting a financial institution to serve as trustee. The RFP process resulted in the selection of First Financial Bank to serve as trustee for the OPEB Trust. KCTCS staff, working with legal counsel from Bingham Greenebaum Doll and with staff of First Financial Bank, have developed and executed customized trust and custodial agreements. Staff are now working with First Financial Bank and with the Commonfund, as the investment manager, to execute all aspects of the Trust. KCTCS has annually set aside monies to fund the accrued liability for this postemployment benefit and will use these accumulated funds, approximately $163 million (principal and interest), as the initial funding of the trust. Staff are currently working with Dean Dorton Allen Ford (DDAF) and Clarity in Numbers (the actuary hired to conduct the update of the actuarial valuation) to calculate the remaining unfunded liability. The liability is actuarially calculated based on factors such as current and projected levels of trust funding, changes and projected changes in the number of participants expected to draw against the trust, current and future projected health care rates, and the trust s current value and projected earnings from investments. Based on the remaining unfunded liability as calculated from the new actuarial valuation (expected to be completed in August), KCTCS intends to transfer as soon as possible an amount sufficient to fully fund the trust in order to take full advantage of the projected savings from establishing and funding the trust. Bingham Greenebaum Doll Counsel Frank Bitzer; First Financial Bank Senior Vice President Kevin Woodard; Commonfund Director Lewis Wallace, Jr. and Managing Director Stuart Ames; and KCTCS staff will be available at the Finance, Technology, and Human Resources Committee and Board of Regents meetings to discuss this agenda item. 161

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