Minutes of the Archives Partnership Trust Board
Audit Committee Meeting
10:00am , July 11, 2013
The Cultural Education Center, Room 11G, Albany, NY
Audit Committee Members Present
Tom Birdsey, Committee Chair.
By telephone: Bronwyn Hannon and Stephen Pagano
Christine W. Ward, Executive Officer and Jill Rydberg, Assistant Treasurer and Administrative Officer/Director of Prospect Research
UHY LLP representatives: Alex Zhang, CPA, Partner and Brian Kearns, CPA, Manager
Call to Order
Committee Chair, Mr. Birdsey, opened the meeting at 10:05am, noting the presence of a quorum. On the agenda was the review and discussion of UHY’s draft audit of the Trust for the fiscal year ending March 31, 2013. He welcomed all in attendance and invited the UHY representatives to proceed with their report on the audit.
Mr. Zhang thanked everyone for the opportunity to present the results of their audit to the Audit Committee and Trust Management. He noted that the audit work being completed in time for the Audit Committee to meet a month earlier than in the previous year was a positive change. He said two documents had been provided to Committee members:
- the draft auditedfinancial statements, and
- UHY's presentation document “Review of Audit Results and Reports March 31, 2013”, which would be today’s main focus.
He noted that the audit work having been completed in time for the Audit Committee to meet a month earlier than the previous year was a positive change.
Mr. Zhang referenced the “Review of Audit Results and Reports March 31, 2013” noting the agenda included briefly discussing the audit objectives and strategy, areas of audit focus (which can change every year based on the transactions and significant risk assessment of the Trust), financial highlights, reports to be issued, required communications with those charged with governance (mandatory based on generally accepted auditing standards), and other considerations:
Audit Objectives and Strategy:
- To conduct an independent audit based on generally accepted auditing standards. He said that communication with Trust management throughout the year enables any transaction questions to be resolved as they occur eliminating surprises at the during the audit field work.
- To provide reasonable assurance that the financial statements are presented fairly and in conformity with U.S. Generally Accepted Accounting Principles.
- To meet with the Trust’s Audit Committee to review the audit.
- To provide feedback on related issues.
- UHY uses a risk-based audit approach adopted by all audit firms, but also adds a proactive audit approach which involves constant communication with management during the year. This allows UHY to be aware of Trust processes, transactions and changes, and to bring to the Trust’s attention any new accounting policies and pronouncements that need to be implemented in the financial statements.
Mr. Kearns then addressed:
Areas of Audit Focus:
- He highlighted the significant areas of the financial statements that they focus on when they do their testing such as:
- cash and investments – making sure the assets are properly reported and testing the market valuation of the investments;
- accounts payable and accrued expenses – focus on liabilities so that any potential unreported liability is properly reported, and any accruals are properly calculated and estimated;
- unearned revenue – was called “deferred” revenue last year, a title change due to the implementation of GASB 63 which will be discussed later;
- revenue recognition - making sure amounts are properly recognized as earned or if they should be deferred; and
- net assets classifications (e.g., making sure revenue and any restrictions thereon are properly classified).
- Referencing the top level, comparative overview of the Trust’s financial condition on 3/31/2013 to that on 3/31/2012, he noted:
- the positive results were directly related to the investment return causing the increase in total assets;
- the liabilities going down reflected not only the timing of payments but also, as liabilities include accrued payroll, accrued leave and compensated absences, since state policies resulted in a departing staff member’s accrued leave and payroll being transferred to the employee’s new state agency they were no longer liabilities to the Trust and added to the increase in net assets;
- in terms of operations the revenue increase is primarily due to an increase in both grants and in contributed goods and services, and the increase in operating expenses is due to the timing of public outreach expenditures.
Reports to be Issued:
- Mr. Zhang noted the AICPA (American Institute of CPAs) changed the format and now requires specific paragraph headings be used in the Independent Auditors Report so you can clearly see management’s responsibility, the auditor’s responsibility, the opinion, other matters, and other reporting required by government auditing standards.
- UHY issued an “unqualified clean” opinion.
- UHY did not identify any material weaknesses in their consideration of internal control over financial reporting, and found no instance of non-compliance with certain provisions of laws, regulations, contracts, grant agreements, and other matters including investment guidelines. He said that in spite of the Trust’s small staff, it has implemented compensating controls to mitigate risk.
- He said other changes were the result of the implementation of a new accounting policy – GASB 63. Mr. Kearns said the changes were more form over substance but included: a) changing the terminology “net assets” to be “net position” and b) the Statement of Net Position (the balance sheet), which use to be three categories (assets = liabilities + net assets) is now five categories (assets + deferred outflows + liabilities + deferred inflows = net position). He said the deferred outflows and deferred inflows currently reflect only two situations (derivative accounting and service concession arrangements) which do not affect the Trust; however, next year, GASB 65 will introduce some additional classifications that could potentially be accounted for under these new categories. The line item “unearned revenue” is primarily membership revenue received in advance for one or two year subscriptions and is therefore deferred, but as a result of the two new categories of deferred outflows and deferred inflows, using the word “deferred” what used to be called “deferred revenue” is now “unearned revenue.”
Mr. Zhang said the presentation’s “Required Communications with Those Charged with Governance” section (on pages 9-18) section was consistent with last year, so did not go through it in detail. He said the key pieces were the AICPA changes and as the new accounting policy GASB 63, which they had shared earlier.
Mr. Zhang thanked Trust staff for their assistance and cooperation during the audit process, and said upon the Audit Committee’s approval of the financial statements, UHY will be immediately move on to completing the tax returns.
Mr. Kearns, reporting on “Other Considerations” said the good news that there were no material weaknesses or significant deficiencies noted and that was a testament to the Trust staff. He said that after initially deferring membership revenue last year the membership activity is now cyclical; they recorded in the ordinary course of business, ten to fifteen routine, recurring journal entries that they do not consider material weaknesses as they based on underlying data prepared by Trust staff.
Mr. Birdsey asked Committee members if they had any questions. No questions were raised. Committee members concurred it was a good audit. Ms. Ward and the Committee thanked Ms. Rydberg for her work.
Resolution to Recommend Acceptance by the Board
Mr. Birdsey said it was a “clean” audit, well received by the Committee. The Audit Committee, having examined and discussed in detail the Trust audit for the year ended March 31, 2013, agreed unanimously to recommend that the Audited Financial Statements be accepted by the Trust Board.
Resolved, That the Archives Partnership Trust Board’s Audit Committee, having examined and discussed in detail the Trust audit for the year ended March 31, 2013, hereby recommends that the Archives Partnership Trust Board accept the Audited Financial Statements.
A motion to adjourn the meeting was made by Ms. Hannon, seconded by Mr. Pagano, and unanimously passed. Mr. Birdsey adjourned the meeting at 10:45am and thanked all for their participation.
Jill A. Rydberg
July 30, 2013