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Archives Partnership Trust Audit Committee Meeting Minutes for September 7, 2010

Audit Committee Members Present

Tom Birdsey, Committee Chair, and Bronwyn Hannon (both by telephone)

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

Audit Committee Members Excused

Stephen Pagano

Call to Order

Committee Chair, Mr. Birdsey, opened the meeting at 10:35am, 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, 2010.  He welcomed all in attendance and invited Ms. Colvin to proceed with her review of the draft audit documents.

Audit Review

Financial Statements and Compliance Report

Ms. Colvin 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” section is the auditor’s opinion, which for the Trust’s audit year is a “clean” opinion – the best opinion an audit can report – and that the financial statements are materially correct.  It further explains that a compliance report was also issued as part of the audit since the Trust is a governmental entity.  Ms. Colvin noted that the Government Auditing Standards are stricter standards.

Statement of Net Assets

The “Statement of Net Assets” simply reports the “Assets” of the Trust at fiscal year end, on a full accrual basis, and is the equivalent of a for-profit’s balance sheet. With assets of $3,585,986 and liabilities of $190,237, the total net assets (what would be left if all the Trust’s assets were converted to cash and the Trust paid off everything it owed) are $3,395,749.  Ms. Colvin noted that the approximate $460,000 increase from the prior year was largely due to gains in the unrealized gains in investments and beneficial assets.

Statement of Activities

The “Statement of Activities” shows expenses and revenue in a functional format; how the organization is run (the “Expenses” section) and how it is funded (the “Program Revenues” section); and where the increase was realized.  The “Change in Net Assets” was $436,158.

Balance Sheet

The “Balance Sheet” breaks out the statements by fund – General (or Operations) Fund, Special Projects Fund, and Permanent (Endowment) Fund – at March 31, 2010, and is presented on a modified accrual basis.

Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds

The “Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds” section shows the revenues and expenses by fund.  The year end balance of $3,381,039 was up from $2,937,158 at the beginning of the year.

Notes to Financial Statements

She said the “Notes to Financial Statements” section, required under U.S. Generally Accepted Auditing Standards (GAAP), are pretty basic and describe the organization and its policies, investments, pension plan, related party transactions, capital assets, contributed services, interfund transfers, other post-employment benefits, and contingencies.  The only new note (Note I) deals with a new requirement 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).  The addition of the Subsequent Event note is a new requirement of U.S. generally accepted accounting standards issued in June 2009 as part of the convergence with international audit standards.

Compliance Report

The “Compliance Report” section, required by Government Auditing Standards (GAS), is where any reportable conditions and material weaknesses would appear.  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.

Report to the Board

Ms. Colvin reviewed the audit’s “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.   She 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.  She 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 (the biggest estimate is investment market value); they encountered no difficulties with management in performing the audit; and they had no disagreements with Trust management.

Management Letter

Ms. Colvin said the management letter is used for making suggestions and typically addresses any material weaknesses or reportable conditions.  The letter notes that the Trust adequately addressed the prior audit year’s two comments (improving its whistle blower policy and better tracking of staff time for purposes of allocating expenses between operations and projects) and that there were no comments for the current audit year.

Discussion

Mr. Birdsey asked what to expect in future audits as result of moving toward international standards and Ms. Hannon asked why the move to international audit standards.  Ms. Colvin explained since business and investing are becoming more global, international standards provide for everyone to account for transactions in the same manner.  The convergence with international standards is scheduled to be completed by December 31, 2011, but the completion date has already been delayed once.  Changes will be implemented as the Financial Accounting Standards Board (FASB) issues pronouncements and it can be expected that there will be major changes over the next two years and is expected to include such things as how leases, revenue recognition, and depreciation are accounted for.

Asked about what might constitute a subsequent event, as defined by the new international standards, for the Trust, Ms. Colvin exampled:  if New York State were to take part of the $300,000 appropriation the Trust receives for its operating expenses or if there were significant staffing additions or reductions.  She said she would provide other examples to Trust staff, so they can be proactive in their recognition of what might constitute a subsequent event.

Mr. Birdsey noting that the prior year’s audit meeting took place earlier in the year, asked when the Audit Committee typically met and whether an earlier meeting might reduce the opportunity for a “subsequent event” to occur and need to be reported in an audit.  Ms. Rydberg said the

Committee had more often than not met in early September and that the prior year’s earlier meeting had been at the request of the then committee chair.  As subsequent events are events and/or transactions that occur after the balance sheet date (March 31st - i.e., the end of the fiscal year being audited) but before the audit report is signed and dated (when theAudit Committee meets) and may have a material effect on the financial statements, all agreed that an earlier meeting – perhaps mid-July – was warranted to reduce the period during which such an event might occur.

Mr. Birdsey expressed his appreciation to Ms. Ward and Ms. Rydberg for their respective efforts that culminated in yet another clean audit report.

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, 2010, 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. Birdsey, 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, 2010, 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. Birdsey, and unanimously passed.  Mr. Birdsey adjourned the meeting at 11:05am and thanked all for their participation.

Respectfully submitted,

Jill A. Rydberg
Assistant Treasurer
September 16, 2010