Board of Governors - APPENDIX III - October 29, 1998
Recommended: That the Board of Governors approve the audited financial statements for the University for the fiscal year ended April 30, 1997 (Annex 1). [Annex 1 is unavailable on the Web.]
Attached as Annex 2 are responses from management to the Ernst & Young audit results.
1.Supplementary Financial Statements: The University of Western Ontario
The supplementary financial statements for the University for the year ended April 30, 1998, are available on request.
2.Related Companies and Other Organizations
The financial statements for related companies and other organizations of The University of Western Ontario for the fiscal year ended April 30, 1998, are provided for the information of the Board:
Platt's Lane Estates Inc., as presented by the company's auditors, Ernst and Young, and as approved by the Board of Directors of the Company on September 9, 1998
Spencer Hall Foundation for the period ending November 30, 1997, as presented by the Foundation's auditors, Ernst and Young, and as approved by the Operating Committee of the Board of Trustees on January 20, 1998.
London Museum of Archaeology, as presented by the Museum's auditors, Ernst and Young, and as approved by the Board of Directors of the Company on June 24, 1998.
London and Middlesex Heritage Museum, as presented by the Museum's auditors, Ernst and Young, and as approved by the members of the Museum on June 24, 1998.
Lawson-Jury Heritage Foundation, as presented by the Foundation's auditors, Ernst and Young, and as approved by the Foundation's Board of Directors on June 24, 1998.
Foundation Western, as presented by the Foundation's auditors, Ernst and Young, and as approved by the Directors of Foundation Western on October 26, 1998.
The University of Western Ontario Foundation Inc.,as presented by the Foundation's auditors, Ernst and Young, and as subject to approval by the members of the UWO Foundation Inc., at their annual meeting in March 1999.
The University of Western Ontario Research and Development Park, as presented by the Research Park's auditors, Ernst and Young, subject to approval by the Directors of the Company on a date to be determined in 1998.
Combined Pension Fund for Members of the Academic and Administrative Staff - for the fiscal year ended December 31, 1997, as presented by the Pension Funds auditors, Ernst and Young, and as approved by the Joint Pension Board on September 9, 1998.
The University of Western Ontario Foundation for the fiscal year ended March 31, 1998, as presented by the company's auditors, Ernst and Young, and as approved by the Directors of the company on June 25, 1998.
The Siebens-Drake Research Institute, as presented by the Institute's auditors, Ernst and Young, and as approved by the Institute's Board of Directors on August 26, 1998.
Ivey Management Services Inc., as presented by the Ivey Management Service's auditors, Price Waterhouse, and as approved by the Board of Directors of the company in October 1998.
THE UNIVERSITY OF WESTERN ONTARIO
ERNST & YOUNG AUDIT RESULTS
FOR THE YEAR ENDED APRIL 30, 1998
a) Richard Ivey School of Business
The University currently is funding certain operations of the Ivey Companies and the School of Business through an internally restricted fund, which as at April 30, 1998, was in a deficit position of $8.4 million. It is our understanding that this deficit accumulated over the year and that the University has been charging interest at prime rate on the balance. It is further our understanding that the University intends to recover these amounts through proceeds on the Government of Canada bonds donated by the Ivey family (the "Ivey bonds"), which are also held by the University and require the consent of the Dean of the Business School as to use. The market value of Ivey bonds as at April 30, 1998 was $8.7 million. However, we would note that the University may wish to consider ensuring appropriate supporting agreements and documentation are in place with respect to the Ivey bonds to enable recovery of the deficit if necessary. In addition, the University has guaranteed $7.8 million of indebtedness of the Richard Ivey School of Business, for a total potential commitment of $16.2 million.
Management Comments: We have raised the question of cashing the Ivey bonds with the Dean of Ivey School of Business and we will be discussing this item further at a meeting with the Dean, as soon as possible. We are working closely with the Dean of the Ivey School of Business and with the Director of Financial Resource for the School to monitor the financial position and plans for all of their operations.
b) The University of Western Ontario Research and Development Park
The University has provided comfort letters to the bank as part of the current financing of the Research Park and the Manor. Any discussions with the bank which related to renegotiation or settlement of this debt should take into consideration the University's ongoing position with its lenders, and should ensure that the University's ability to raise financing on favourable terms is protected, and/or the potential costs of a review of its overall credit position are a priority consideration in any approach.
It should be further noted that the successful implementation of any plan will be dependent upon a strong individual to champion the initiative.
Management Comments: We will take into account the University's ongoing position with the Bank of Montreal and with other lenders as we discuss options for the Research Park and Windermere Manor.
c) Lawson-Jury Heritage Foundation/London Museum of Archaeology/London Middlesex Heritage Museum
We would also note for the information of the Committee that the LJHF released endowed monies to the LMHM to enable it to discharge its indebtedness to LJHF. We understand that permission was received from the original donor to permit this release. This is reflected in note 12 of the combined financial statements of the University.
Management Comments: We agree with the revision to the financial statements related to the presentation of the endowed funds and we feel that note 12 related to endowments clearly discloses the original capital of endowed gifts as well as the amounts of deferred endowment income.
a) Project Management Issues
PeopleSoft HRMS/Payroll is an established, market-proven product. This contributed to the smooth and successful implementation. The same cannot be said as readily for the public sector version of PeopleSoft Financials and even less so for the Student Administration System. The University should not base its expectations for success entirely on the HRMS/Payroll experience. In particular, the highest risk resides with Student Administration, both from the standpoint that the system is not proven and mature, and because the timelines allow for minimal flexibility to deal with implementation issues. We continue to encourage the development of contingency plans, including manual contingency plans, in sufficient detail that any unexpected problems which delay implementation do not cause a business failure for the University.
Management Comments: In November 1998, the first phase of the Higher Education module will go live and will include admissions for all students and include records, student financials and financial aid for graduate students. All main business processes associated with those functions are being reviewed. The processes will be categorized for inclusion in the November roll-out, inclusion in the spring roll-out, exclusion or one with potential difficulties. This last group of processes may require contingency plans. It is expected that if graduate students go live in November, that this will entail a conversion of 70%-80% of the processes required for undergraduate students.
The University should develop a strategy for safeguarding the "intellectual capital" developed through the training and experience of project team members and users in the implementation of PeopleSoft. Such skills and knowledge are currently very marketable commodities in the external marketplace, as demonstrated by recent departures. The loss of these resources to the University during the post-implementation phase may impede the University's ability to maximize its investment in PeopleSoft, and to maintain controls during a period of high transition.
Management Comments: The turnover of people is always a concern. We recognize there is a high demand in the marketplace for people with computing and PeopleSoft skills. Working within our existing Staff Association and Professional and Managerial Association (PMA) policies we have done the following to remain competitive with other organizations:
b) Business/control Risks
Reliance on management review of various monthly reports is a key feature of the University's existing control environment. The importance of this control will increase with PeopleSoft, which enhances the openness and automation of the system, thus also increasing the potential for error. The potential for error is also increased due to the changes in process and behavior required of users by the new system. At the same time, the timeliness and level of detail of management reports will be significantly impacted by PeopleSoft, and in the immediate term the quality of management reports may decline. Consequently, this key control may be compromised until such time as improved management reporting is available. The University should take steps to alleviate this concern, including, as examples:
Management Comments: Agree that reporting, whether it is a management report or a system log, is an important control.
Management Comments: The audit work completed to-date has focussed on processes with a financial impact. However, there are plans to review processes that have a non-financial impact. This will include student record processing in the Higher Education module.
c) HRMS/Payroll Specific Issues
Management Comments: A review of these departments needs to be done to determine if this can be done efficiently and effectively. Part-time employees have a higher risk of non-existence than full-time employees because of the approval process required for full-time appointments is more extensive than for part-time appointments. In addition, the budget process also provides a strong control over the existence of employees.
Management Comments: Currently the only people entering "effective dates" are employees in the Payroll/Benefits area. These employees are knowledgeable about effective dated information and the importance of accurately entering the information. Anomalies are checked with the originating department as data is entered. As a compensating control, if data is entered incorrectly, people are not paid correctly (which is detected in departmental reconciliation reports) or the system stops the pay process.
Management Comments: Exception reports of this nature will be considered. A review will be completed by Internal Audit.
Management Comments: We have done full recoveries of the HR data base, this is standard procedure for all of our databases. Two full backups, one before and one after batch processes, are run are done daily. These copies are maintained for four months.
A role forward on the existing HR production system (roll forward is a recovery from a full backup and applying all online transactions from the transaction log) has been done. We have also done a roll forward on other databases.
Management Comments: This review will be considered for all PeopleSoft applications.