KCTCS Foundation Board of Trustees Meeting Minutes

Guest Attendees

Guests	Attended
Bill Curtis, Advancement	Yes
Taylor Elliott, External Auditor	Via Teams
Mary McKinley, External Auditor	Via Teams
Shannon Rickett, Special Assistant for KCTCS Institutional Planning and Strategy	Yes
Melissa Rowe, Advancement	Yes
Katie Vogel, Advancement	Yes

Welcome and Introductions

Chair Stephanie Bell called the meeting to order at 2:06pm

• Welcome and introduction of new members: Stephanie Bell
  • Chair Bell welcomed Nick Phelps to his first meeting.

Action Items

Approval of minutes from August 13, 2024 meeting: Stephanie Bell

• Motion: Chris Perry
• Second: Linda Rumpke
• Motion to approve the minutes as presented passed unanimously without further discussion.

Board Membership: Stephanie Bell

• Chair Bell introduced the nomination of Linda Rumpke to serve as Treasurer in 2025. Linda has accepted the nomination.
• Motion: Dr. Laura McCullough
• Second: Lourdes Baez
• Abstaining: Linda Rumpke
• Motion to approve Linda Rumpke to serve as Treasurer for 2025 passed unanimously without further discussion.

Acceptance of FY24 Audit Report and Financial Statements: Chris Perry

• Chris Perry reported that the finance committee had a meeting on Tuesday of last week and was appreciative of all Megan and the team have been doing. Mr. Perry turned it over to Megan to introduce the auditors and the FY24 audit report.
• Dr. Megan Stith shared that there was a change to the report since printing, the final report was emailed out earlier in the day. Called on Mary McKinley from external auditing firm to report.
  • Mary McKinley reporting: Mary was the partner on engagement, her colleague Taylor Elliott was the in charge on the engagement. They worked closely with Megan and Tricia on the audit process.
  • There has been no change to opinion. It is clean, unmodified and presents fairly in all material respects.
  • Changes to the report include: ▪ Addition of emphasis of matter in opinion.
    • Presentational change to outline in assets the contributions receivable and cash held for others, including items like pledges to Elizabethtown Community & Technical College (ECTC).
    • Expenses of ECTC removed as they are not KCTCS Foundation holdings.
    • After looking back at prior year for net assets, determined to make a cumulative change due to removing net assets that were included last year but shouldn’t have been. Those net assets have been removed this year.
    • Removed cash held for ECTC from cash lines.
    • Addition to wording (bottom of page 8) explains these changes to present only the financial assets of the KCTCS Foundation.
    • Composition of net assets includes $3m+ in investments within Commonfund.
    • Liquidity footnote explains position.
    • Allocation of space and personnel from system office outlined as donation.
    • CDs consistent with prior year.
    • Multi-strategy bond and equity funds invested. Will make correction to typo in final copy.
    • Contributions – 97% from one donor (Evolve502)
  • Will issue report later today or first thing tomorrow.
  • Ms. McKinley asked if anyone had questions.
  • Mr. Perry asked (and Linda Rumpke was also interested to know)—more information about the changes made with removing ECTC pledges, revenue, and expenses.
    • Ms. McKinley responded:
      • • The activities of ECTC are not activities of the KCTCS Foundation
        • Certain activities were being recorded as activities of the of the KCTCS Foundation, but it is a purely administrative relationship.
        • Any contributions made on behalf of ECTC Foundation or expenses on behalf of ECTC Foundation were removed
        • Dr. Stith also responded: The KCTCS Foundation is not responsible for the use of the funds. In other words, KCTCS Foundation does not have variance power to redirect those funds elsewhere if they are designated to ECTC Foundation.
  • Mr. Perry asked to clarify that these assets would be accounted for elsewhere.
    • Dr. Stith responded: Looking at potentially a separate bank account, pass-through expenses being potentially accounted for separately in QuickBooks, and other options for ways to distinguish between KCTCS Foundation and ECTC Foundation.
    • Mr. Perry followed up to ask if it is similar to the relationship with Evolve502.
      • Ms. McKinley responded: It is different because Evolve502 is giving directly to the KCTCS Foundation. Contributions receivable were also removed as they belonged to ECTC Foundation.
  • Ms. McKinley moved to the management report.
    • Page 1 did not change from the draft presented to the Finance Committee.
    • Page 2 did not change, no significant or alternative accounting treatments to evaluate.
    • Page 3 – added language regarding audit adjustments required based on discussion around ECTC Foundation.
      • Adjust ~$1m in funds held by others, removal of contribution revenues and expenses related to ECTC of ~$2.7m and $2.4m respectively and restatement of net asset balances as of July 1, 2023 of ~$695,000.
      • Added language regarding internal controls which is standard boilerplate language.
      • Added a deficiency classified as material weakness because of the changes required with removing ECTC funds.
      • Mr. Perry commented: The Finance Committee met with auditors independently and Mary evaluated the compliance and records provided by Dr. Stith and Tricia Brewer and was satisfied with what they received.
      • Ms. Rumpke commented: Pleased we are making this separation, especially if we were called to speak to the legislature and answer to these numbers, we need to understand and clear things up.
      • Dr. Ryan Quarles commented: We are here to learn, improve and move on; auditors are our friends, appreciate the work that’s been put in and we can use this to improve.
  • Motion: Chris Perry
  • Second: Linda Rumpke
  • Motion to accept the draft of audited financial statements as presented passed unanimously without further discussion.

Information

Review Commonfund Statements and FY25 Q1 Financial Statements: Chris Perry

• Mr. Perry asked Dr. Stith to present these items.
• Dr. Stith reporting: Current funds held are typical for what we would expect at this point in the year.
  • Note any negative net income on the Profit and Loss (P&L) Statement reflects a gap between receiving and spending funds.
  • Dr. McCullough asked if ECTC was included or not in the P&L.
    • Dr. Stith responded: The P&L still includes ECTC and Evolve502, but ECTC is broken out into a separate line item.
  • The goal for 2025 is to present everything more clearly so it is easier to understand.
  • Marty Keith asked if Herff Jones and Toyota, $17,500, are the only income for KCTCS.
    • Dr. Stith responded: Yes, those are funds for KCTCS scholarships. Toyota was awarded and Herff Jones we are currently working to award so that will show up as expense in future statements.

Action Items

FY25 Budget Report and Revision: Chris Perry

• Mr. Perry introduced the FY25 budget report, noting that changes are in order with that too.
  • Dr. Stith reporting: Reconciliation of past P&L’s demonstrated one of the more complex pieces of the foundation as each fund might receive income/expense at different times. Compiling this over time helped to better understand the full picture of funds and balances.
  • This process helped identify several funds that need to be awarded such as the National Racing Academy and Kings Daughters & Sons Endowment.
  • Recommended changes to the operating budget: 
    • Budget for audit projected for $18k, reclassifications took additional time.
      • Additional fees of $8,500
      • Have adjusted budget to increase by $9,000
      • Want to ensure the audit is presented fairly, accurately, clearly
      • Dr. Stith requested authorization and approval of updated budget
    • Dr. Stith noted assets/funds the KCTC Foundation does not have jurisdiction over, but rather pass-through requirements.
    • It is a deficit budget, asking to make those investments knowing that we have a strong liquidity position.
    • Revision also includes a $10,000 line item for legal services.
    • Mr. Keith asked where the audit fees are, Dr. Stith responded that it is the $27,000 line item for accounting services.
    • Going through all endowments and scholarships to assess where we are with them and what needs to be awarded including wrapping up some this current academic year. This includes an assessment of funds available, reviewing original scholarship/gift agreements, and aligning for the future.
    • The goal is to line up with the timeline of the colleges, want the colleges to be able to make recommendations for KCTCS Foundation/system-wide scholarships in the context of the student financial aid packages they are putting together.
    • Mr. Perry asked for clarification in the budget that $54,000 is expenses and $100,000 is personnel/space donated services. Dr. Stith confirmed the personnel donation shows up on the financials as a related party transaction, but is also listed on the operating budget so if the KCTCS Foundation had to write a paycheck for payroll or space, leadership can see the value of services provided by KCTCS employees.
• Motion: Chris Perry
• Second: Linda Rumpke
• Motion to accept Dr. Stith’s requested revisions to the FY25 budget passed unanimously without further discussion.

Legal Services RFP Response

• Mr. Perry asked Dr. Stith to expand on the need for legal services.
• Dr. Stith reporting: Need for guidance in accepting atypical types of gifts. Example given of potentially receiving gift of an oil well share.
• Along with Chair Bell, reviewed a previous RFP similar in nature, updated and sent it out to any respondent interested previously. Received responses from two firms: DBL Law and Stites & Harbison.
• One primary question in the RFP was an estimation of cost of services.
• Upon reviewing with the finance committee, the recommendation was to move forward with Stites & Harbison as they responded to the cost matter clearly and directly.
• Motion: Chris Perry
• Second: Marty Keith
• Motion to accept the recommendation to move forward with engaging Stites & Harbison passed unanimously without further discussion.

Other Business

KCTCS Board of Regents Chair Report: Barry Martin

• Everything is well, things are getting better and better all the time. Went over the forensic and state audits, results were really good, only minor tweaks to policies and processes are in order.
• Look forward to being more involved with foundation as things move forward.
• Dr. Quarles is a great addition for the colleges and the Foundation given his fundraising background

KCTCS President’s Report: Dr. Ryan Quarles

• Thanked the board members for their service, thanked Dr. Stith for her work and her team’s work—they have focused on alignment and compliance.
• Enrollment is up, close to 9%, second year in a row it has increased. We recently celebrated awarding 4400 GEDs to incarcerated Kentuckians.
• New general counsel coming from Morehead State (Jessica Stigall) and new Chief External Affairs Officer coming from UK (Chris Crumrine).
  • Chair Martin mentioned other audits—three others:
    • State Audit (cured all findings with Auditor Ball, started that audit with Mike Harmon)
    • Forensic Audit – looked back 21 years, carryover fund of $75m, funds that needed to go back to the colleges, no criminal activity, primarily includes improving internal policies and processes.
    • Kentucky Fire Commission – recommended state audit to address financial/human resources/procedural issues.
  • We will be running legislation this year. Estimate 8000 hours spent responding to SJR 179 all done internally, no outside consultant.
    • Recommendations on 11 topics – board governance, college boards are advisory boards going forward, outcomes-based/performance-based funding, getting rid of outdated laws and regulations in 17 areas, personnel systems- currently working from 4 different systems, presented to CPE last week, next week Board of Regents meeting, testifying following that.
    • Once we put this in bill form, we would like all the businesses you are part of to back us in this effort.
      • Work ready scholarship funded by lottery—asking for expansion
• Upcoming Events – 2/6 fundraiser for our food pantries, partnering with feeding Kentucky, legislators serving food; May – conference that used to happen every year, system-wide conference, a moment to say thank you to the donors who want to be publicly recognized as well as community & legislative leaders
• Nick Phelps asked about who we work with on lobbying. Dr. Quarles responded - work with Patrick Jennings at State level and Chris Lamonne in DC.
• Ms. Rumpke commented – great hire on Chris Crumrine. Ms. Rumpke asked - are there other legislative priorities and talking points to support what you are bringing forward? Dr. Quarles responded – focused on our reform package, could be a question on the future of dual-credit, we would get involved in that, there are 22 separate tuition waivers in KY—cost us a lot to give free tuition, might ask for partial appropriation on that
• Lourdes Baez asked about dual credit as the general assembly is saying that is for all four years, are all schools adhering to it? Dr. Quarles responded– 70% of all dual-credit comes from our colleges (in some states their community colleges are the only provider for dual-credit), our recommendation is to be the primary provider (CPE/UK/Morehead may disagree). Dr. McCullough responded–would like to get ahold of that and help manage as a pathway, K-12 system is to advise on the best options and the students don’t know, we exhaust dual-credit scholarship every year, at some point it affects our bottom-line.

KCTCS Foundation Chair’s Report: Stephanie Bell

• Frank Jemley emailed today resigning his board seat
• Would like to recruit additions to the board from industries that are not currently represented (ex. distilling/bourbon/thoroughbred that are users of comm college).

ECTC Foundation Report: Dr. Megan Stith on behalf of Brandon Fogle

• ECTC celebrated 60th anniversary as well as partnership with KSU—baccalaureate in Nursing program.
• Complete renovation of Robbins University Center ($2m fundraising initiative) and opened and celebrated completion.
• Working toward completing Family Scholar House (FSH) campaign.
• Future goals – making philanthropy inclusive, participatory, problem-solving, and creating a culture of philanthropy/gratitude.
• Progress toward goals – ambassador program, Cares Committee of faculty/staff identify unmet needs and work on projects, looking at where the funds are going, Thanksgiving meal drive last week—asking how are we reporting out the impact of those gifts?, building momentum
• FSH campaign opened community’s eyes to the challenges our students face, sharing the data and stories. These are challenges that the college and foundation are uniquely positioned to address. Created Unstoppable Fund/Student Success Circle, launched with UnGala event. The intention is to pool funds and then groups will write and present proposals to the donors. Student Success Circle members will come together to vote. It gives a chance to educate our donors and lets them choose. Also facilitates larger endowment conversations.

KCTCS Foundation Executive Director’s Report: Dr. Megan Stith

• Your packet shows an annual comparison of giving over the last several years.
• Our role at the foundation is to help elevate the impact of philanthropy and giving across the system and facilitate gifts to the foundation.
• Fall 2024:
  • Still investigating the oil well gift for acceptance,
  • Receive a call a few weeks ago that would likely go to System Office, not Foundation, but it was for a $300,000 scholarship. Noted that unsolicited major gifts such as this are not possible without public trust in the direction of KCTCS.
• Refreshed our branding, modernized our KCTCS Foundation logo.
• Working with the colleges to determine how we share the impact of the fundraising. Reporting varies from college to college and program to program so it can be challenging to speak with a unified voice, but shared impact metrics are being investigated. For example, over $4m in scholarships were awarded across the system last year.
• Focusing on upholding donor intent by spending funds as they were intended, before we ask for new support on a bigger scale, we are ensuring there is a plan in place to steward gifts that have alreayd been made.
• For 2025 – just signed an agreement with a platform to take Giving Day to the next level by providing real-time updates and challenges and matches on the site. Giving Day will be on April 16. Would love for the foundation to be thinking about a challenge or a match. For example, ECTC students raised over $1000 because they wanted the match for a certain fund, it was a goal focused on participation. Requested the board brainstorm ideas for system-wide ways to drive behavior from particular groups.
• Looking at possible focuses for future cases for support, including with a review of data by the Office of Research and Policy Analysis. Have not been focused on fundraising, but on operations and aligning with donor intent and learning about needs. Dr. Stith thanked the board for their support and patience through these changes.

Next Steps

• Chair Bell asked for any other business
• Dr. Quarles asked if his weekly updates are helpful, Ms. Rumpke said they are very helpful and other board members concurred.
• Late February date for next meeting, exact date TBD

Meeting adjourned at 3:29pm