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Minutes of the Archives Partnership Trust Board
Audit Committee Meeting
10:00am, August 25, 2011


The Cultural Education Center, Room 11G, Albany, NY

Audit Committee Members Present

Tom Birdsey, Committee Chair.

By telephone:  Bronwyn Hannon and Stephen Pagano

Staff Present

Christine W. Ward, Assistant Commissioner for the State Archives and Trust Executive Officer, and Jill Rydberg, Assistant Treasurer and Administrative Officer/Director of Prospect Research

Others Present

Wojeski & Company, CPAs, P.C. representatives:  Angela Colvin, Partner, and Christopher Stephens, CPA

Call to Order

Committee Chair, Mr. Birdsey, opened the meeting at 10:32am, noting the presence of a quorum.  On the agenda was the review and discussion of Wojeski & Company’s draft audit of the Trust for the fiscal year ending March 31, 2011.  He welcomed all in attendance and invited the Wojeski & Company representatives to proceed with their review of the draft audit documents.

Audit Review

Report to the Board

Mr. Stephens reviewed the audit’s required “Report to the Board” which explains the audit firm’s responsibility – under Generally Accepted Auditing Standards and Government Auditing Standards – to obtain reasonable, but not absolute, assurance that the financial statements are materially correct and to test internal controls, but that they do not look at every transaction.   He said that they consider the internal controls solely for the purpose of determining their audit procedures and not to provide any assurance concerning such internal control.  He noted that:  no new accounting policies had been adopted; there were no transactions lacking in authoritative guidance or consensus; management’s accounting estimates were reasonable; no difficulties with management were encountered in performing the audit; misstatements (dealing with accrued fringe benefits, indirect costs, payroll, and beneficial interest) were corrected; management had not consulted other accountants for second opinions on audit/accounting matters; and there were no disagreements with Trust management.  Ms. Colvin said that the Report to the Board is basically where they would make the Board aware if they had encountered any issues, and they had not.

Mr. Birdsey, recalling last year’s discussion about the convergence of international audit standards and its incorporation of reporting on subsequent events, inquired as to subsequent events.  Ms. Colvin said they are required to report on subsequent events (events and/or transactions that occur after the balance sheet date but before the audit report is signed and dated; where evidence provided by these events may have a material effect on the financial statements, particularly on accounting estimates), but are not aware of any to report.

Management Letter

Mr. Stephens said the management letter is the vehicle used for communicating areas of material weakness or that are opportunities for improvement.  The letter notes that the Trust had had no comments in the prior audit year to address and that there was one comment for the current year which was to be aware of the New York Prudent Management of Institutional Funds (NYPMIF) Act which went into effect September 2010.  NYPMIF governs the spending of endowment funds.  The Management Letter recommends that the Trust be aware of and review the NYS Attorney General’s NYPMIF guide and make sure it was in compliance with NYPMIF.  One of the primary features of NYPMIF is that is allows for expending endowment funds beyond their historical value (tap into the principle), but that for donations received prior to the implementation of NYPMIF, the Trust would need to obtain donor permission to do so.

Financial Statements and Compliance Report

Mr. Stephens noted that due to the Trust’s unique status as both a state agency and non-profit organization, the presentation of the financial statements has been changed to be more in line with a non-profit’s presentation which will in turn help streamline completing the Trust’s IRS Form 990 and the new Cultural Data Project Profile [an online management tool designed to strengthen arts and cultural organizations required by many grantor organizations]. 

He reviewed the audit’s “Financial Statements and Compliance Report” reporting on:

  • Management’s Discussion and Analysis
    The “Management’s Discussion and Analysis” section is prepared by management and is therefore the Trust’s part of the audit, providing a narrative discussion and analysis of the Trust’s financial activities for the year (in comparison to the prior year) and includes an overview of the financial statements and a financial analysis of the Trust. 
  • Independent Auditor’s Report
    The “Independent Auditor’s Report” (pages 4-5) along with the “Compliance Report” (pages 18-19) are the only sections that belong to Wojeski & Co., the rest belongs to the Trust and is the Trust’s responsibility.  The “Independent Auditor’s Report” section is the auditor’s opinion, which for the Trust’s audit year is a “clean” opinion – the best opinion an audit can report – that the financial statements are materially correct.  It further explains that the Compliance Report was issued as part of the audit due to the Trust being a governmental entity. 
  • Statement of Net Assets
    The “Statement of Net Assets” is the equivalent of a balance sheet for a non-profit and simply reports the Trust’s assets and liabilities at fiscal year end, on a full accrual basis in a classified format. With assets of $3,817,217 and liabilities of $246,511, the total net assets (what would be left if all the Trust’s assets were liquefied and the Trust paid off its debt) are $3,570,706.  The investments of $3,405,709 are primarily endowment funds.  Beneficial interest of $70,717 is the Trust’s interest in a charitable remainder trust.  Mr. Stephens noted that the approximate $300,000 increase from the prior year was largely due to unrealized gains in investments.
  • Statement of Revenues, Expenses and Changes in Net Assets
    The “Statement of Revenues, Expenses and Changes in Net Assets” shows operating revenues (how the Trust is funded) and expenses (how the Trust is run), non-operating revenues (where unrealized gains made up most of the increase), permanent endowment contributions ($25,000) and the change in net assets ($174,957).  Operating revenues are mostly comparable to the prior year.  Operating expenses show a new breakout for Fundraising expenses as this cost now needs to be reported in both the IRS Form 990 and the Cultural Data Project Profile.
  • Statement of Cash Flows
    The “Statement of Cash Flows” section –new this year– demonstrates income and expenses on a cash basis.  While not required of governmental entities, this statement is included as the Trust is being treated as a proprietary fund.  It ultimately reconciles operating losses to net cash used in operating activities.
  • Notes to Financial Statements
    He said the “Notes to Financial Statements” section explains the basis for the presentation of the financial statements and describes the organization and its policies, use of estimates, cash and cash equivalents, investments, capital assets, related party transactions, pension plan, contributed services, other post-employment benefits, supplemental disclosure of cash flow, and subsequent events (events and/or transactions that occur after the financial statements date but before the audit report is signed and dated; where evidence provided by these events may have a material effect on the financial statements, particularly on accounting estimates).
  • Compliance Report
    The “Compliance Report” section, required by Government Auditing Standards (GAS), is where any reportable conditions and material weaknesses would appear, although the auditor is not required to express an opinion on internal controls.  Again, it is a clean report as no internal control deficiencies or material weaknesses were disclosed by the audit compliance tests.
  • Supplementary Information
    The “Supplementary Information” reports on the Trust’s investments as required by New York State.  Schedules I, II, and III are provided for the purpose of additional analysis and are not a required part of the financial statements. Schedules I and II show assets and revenue/expenses broken down by each of the Trust’s three accounts (operations, projects, and endowment).  Schedule III shows what was expended by function and ties back to the Statement of Activity

Discussion

Mrs. Hannon asked how the NYPMIF might impact how the audit would be conducted.  Ms. Colvin said it doesn’t affect the audit, that it is up to management and the Board to decide how to implement NYPMIF, and that the next audit would simply look at what the Trust implements.  Mrs. Ward said that Whiteman Osterman Hanna partner (and Trust counsel), Scott Fein is looking into NYPMIF and will get back to the Investment Committee with his findings and recommendations at the Committee’s October 2011 meeting.  The Investment Committee will make subsequent recommendations to the Board at its February 2012 meeting.

Resolution to Recommend Acceptance by the Board

Mr. Birdsey said that, as it was a clean report and a good year, the audit was well received by the Committee.  The motion that the Audit Committee, having examined and discussed in detail the Trust audit for the year ended March 31, 2011, recommends the audited Financial Statements and Compliance Report, the supplementary Report to the Board, and the Management Letter for Board acceptance was made by Ms. Hannon, seconded by Mr. Pagano, and unanimously passed.

Resolved, That the Archives Partnership Trust Board Audit Committee, having examined and discussed in detail the Trust audit for the year ended March 31, 2011, hereby recommends that the Archives Partnership Trust Board accept the audited Financial Statements and Compliance Report, the supplementary Report to the Board, and the Management Letter.

Conclusion

A motion to adjourn the meeting was made by Ms. Hannon, seconded by Mr. Pagano, and unanimously passed.  Mr. Birdsey adjourned the meeting at 11:06am and thanked all for their participation.

Respectfully submitted,

Jill A. Rydberg

Assistant Treasurer
September 13, 2012