A meeting of the Audit and Enterprise Risk Committee of the Board of Trustees convened at 10:16 a.m. on Friday, December 3, 2021, in Room 326 of Stewart Center on the campus of Purdue University in West Lafayette, Indiana. Everyone in the room was wearing a mask amid the ongoing COVID-19 pandemic.

All members of the Committee were present: Vanessa Castagna, chair; JoAnn Brouillette; and Theresa Carter. All other trustees were present: Sonny Beck; Michael Berghoff; Malcolm DeKryger; Mark Gee; Michael Klipsch; Gary Lehman; and Don Thompson.

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

I. APPROVAL OF MINUTES

Upon proper motion duly made and seconded, the Committee voted unanimously to approve the minutes of its last meeting convened on October 1, 2021.

II. REVIEW OF FY21 AUDITED FINANCIAL STATEMENTS

Treasurer Ruhl invited Ms. Kathy Thomason, comptroller, to provide an overview of the FY21 audited financial report. Ms. Thomason was pleased to report that the university’s net position was at an all-time high, which she attributed to investment income and enrollment growth. She explained that the external auditing process had transitioned from the State Board of Accounts to an external auditor at the request of the State Board of Accounts, and the university had received an unmodified opinion by the new external auditor.

Ms. Thomason illustrated a summary statement of revenues, expenses, and change in net position. She informed the Committee that the change in net position had amounted to $1 billion. She said that, for FY21, the non-operating revenues included federal grants from the COVID-19 pandemic CARES Act, and she highlighted that investment income had grown from $58 million to $817 million. Ms. Thomason referred to the former trustees whose photos were on the wall and expressed her belief that they would be very pleased with the university’s financial statement. Treasurer Ruhl interjected to note that the growth in investment income was a trend across the entire sector because it had been a great year in the equity markets, and President Daniels cautioned that it could be much less next year. Ms. Thomason then discussed the summary statement of net position, which included assets and liabilities, and she illustrated that the university’s net position had increased by 59% since 2013. To conclude, Ms. Thomason briefly discussed the GASB (Governmental Accounting Standards Board) 87 statement, which would require the university to capitalize any leases with a term longer than one year.

Copies of the 2021 Financial Report and Ms. Thomason’s presentation were included with the minutes. No Committee action was required.

III. OFFICE OF RISK MANAGEMENT ANNUAL REPORT

Treasurer Ruhl invited Mr. Mark Kebert, director of domestic and global risk, to update the Committee on the university’s overall risk management plan and trends in the industry. Mr. Kebert began by saying it was an extremely challenging market, and he explained why the market was in turmoil. He informed the Committee that cyber insurance had been the most challenging renewal and he discussed the drivers affecting it, including a 40% increase in cyberattacks. Trustee Castagna asked Treasurer Ruhl to elaborate on the university’s cybersecurity efforts, and Treasurer Ruhl expressed his belief that the university was fortunate to have cyber coverage, which he attributed to the internal processes and structure the university had put in place to protect itself from cyberattacks.

Mr. Kebert outlined the results of the renewal process, which, he said, ended on September 30. He noted that property insurance rates had increased by 11%, liability premiums had increased by 60%, and cyber premiums increased by 136%. Trustee Thompson lamented that experience should work in the university’s favor. Mr. Kebert responded that, though experience counted, underwriters were under pressure for profitability. In response to a question from Trustee Beck, Mr. Kebert said the Office of Risk Management would explore self-insurance models and capital insurance, along with their different levels of risk to the university. To conclude, Treasurer Ruhl noted that the Office of Risk Management was now managing Purdue Global’s risk as well.

Copies of the 2021 Office of Risk Management Annual Report and Mr. Kebert’s presentation were filed with the minutes. No Committee action was required.

IV. ADJOURNMENT

By consent, the meeting adjourned at 10:36 a.m.