A meeting of the Audit and Risk Management Committee of the Board of Trustees convened at 10:02 a.m. on Friday, December 6, 2019, in Room 326 of Stewart Center on the campus of Purdue University in West Lafayette, Indiana.

All members of the Committee were present: Thomas Spurgeon, chair; JoAnn Brouillette; Vanessa Castagna; and Malcolm DeKryger. All other trustees were present: Sonny Beck; Michael Berghoff; Michael Klipsch; Gary Lehman; Noah Scott; and Don Thompson.

Officers and administrators in attendance were: Mitch Daniels, president; Jay Akridge, provost and executive vice president for academic affairs and diversity; Bill Sullivan, treasurer and chief financial officer; Jim Almond, senior vice president, assistant treasurer, and assistant secretary; Steve Schultz, general counsel; Trent Klingerman, deputy general counsel; Janice Indrutz, corporate secretary and senior executive assistant to the Board; Ron Elsenbaumer, chancellor of Purdue University Fort Wayne; and Tom Keon, chancellor of Purdue University Northwest.

I. APPROVAL OF MINUTES

Upon proper motion duly made and seconded, the Committee voted unanimously to approve the minutes of its August 2, 2019, meeting.

II. REVIEW OF FY19 AUDITED FINANCIAL STATEMENTS

Ms. Kathy Thomason, comptroller, provided a review of the fiscal year 2019 audited financial statements. She illustrated a summary statement of revenues, expenses, and changes in net position and informed the Committee that the State Board of Accounts had provided an unmodified opinion, which, she said, was the highest level of assurance it could provide. She reminded the Committee that this was the first audit conducted since new Business Process Reeengineering processes were implemented on July 1, 2018, and she was pleased to report it had gone smoothly. Ms. Thomason highlighted that the university’s net position had increased by $218,852,000 over the previous year, for a total net position of $4,931,154,000. She explained that fluctuations in net position since 2015 were the result of changes mandated by the Governmental Accounting Standards Board (GASB). Ms. Thomason concluded that the university’s strong, stable net position enabled it to continue making investments.

Chairman Berghoff pointed out that net position had increased despite the tuition freeze, and

Treasurer Sullivan congratulated Ms. Thomason and recognized her team for their good work. A copy of Ms. Thomason’s presentation was filed with the minutes, along with a copy of the FY19 Financial Report.

III. OVERVIEW OF RISK MANAGEMENT REPORT

Mr. Mark Kebert, director of domestic and global risk, made a presentation to the Board to review the Office of Risk Management annual report, which had been shared with the Committee for its review prior to the meeting. Mr. Kebert began by reviewing the responsibilities of the Office of Risk Management and the primary coverage areas for which commercial insurance was purchased and said the Office conferred with consultants when necessary. He was pleased to report that the risk management fund was in a satisfactory financial position to meet its anticipated obligations and said the program was in line with the university’s peer institutions. Mr. Kebert informed the Committee that a deep dive analysis of the program had been conducted during the year to identify the most efficient blend of risk financing tools that would minimize total cost of risk while maximizing the university’s ability to protect its assets. He said the assessment concluded that the current risk program was very efficient but the university’s affiliate entities could benefit from a larger program which mimics the university’s program. Mr. Kebert also illustrated benchmarking data, financial activity, and the history of premiums paid. He said Purdue enjoyed a great risk culture, which, he observed, started at the top, and he shared that Purdue was often lauded in the insurance industry and among brokers. Mr. Kebert also discussed what should be expected in the coming year, which, he said, was challenging news that included a forced increase minimum in deductibles for property insurance, doubling at a minimum. It would also include a forced reduction in coverage limits with which he was comfortable. Mr. Kebert concluded the review of the Risk Management report by saying the university had a good reputation with regard to loss control and was in good standing with insurers and brokers in the industry. Trustee Castagna remarked that Mr. Kebert had provided a great overview and asked him about the university’s cybersecurity coverage. A copy of Mr. Kebert’s presentation was filed with the minutes, along with a copy of the report.

IV. ADJOURNMENT

By consent, the meeting adjourned at 10:29 a.m.