Boston Public Library
Trustees' Finance and Audit Committee

Board of Trustees
February 21, 2013



Agenda for Trustees Finance and Audit Committee Meeting
February 21, 2013 Johnson Trustees Room 8 am to 9 am
Commonwealth Salon, Central Library at Copley Square

Chairman Evelyn Arana-Ortiz

  • Welcome/Introductions
    Chairman Evelyn Arana-Ortiz
     
  • Review and Approval of Minutes from December 17, 2012 (Attachment 1)
    Chairman Evelyn Arana-Ortiz
     
  • Update on Investment Portfolio and New Manager Search (Attachment 2)
    Mr. Michael Black, New England Pension Consultants
     
  • Discussion of Draft FY2012 Management Letter (Attachment 3)
    Matthew Hunt, Sullivan, Rogers & Company
    Sean Monahan, Supervisor of Accounting
     
  • Approval of Contract for Final Phase of Norwood Collection Relocation to the City of Boston Archive Center (Attachment 4)
    Ed Maheigan, Manager of Budget and Procurement
     
  • Request for Delegation of Authority from the Trustees to approve the Copley Wayfinding Signage Contract
    Ed Maheigan, Manager of Budget and Procurement
     
  • Approve Schedule for Upcoming Meetings
    Chairman Evelyn Arana-Ortiz
     
  • Other Business
    Chairman Evelyn Arana-Ortiz
     
  • Adjournment
    Chairman Evelyn Arana-Ortiz
     

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Minutes for Trustees Finance and Audit Committee Meeting
February 21, 2013 Johnson Trustees Room 8 am to 9 am
Chairman Evelyn Arana-Ortiz

A meeting of the Trustees Finance and Audit Committee was held at the Boston Public Library, Central Library, Commonwealth Salon, 700 Boylston Street, Boston, MA 02116.

Present at the meeting were Chair Evelyn Arana-Ortiz and Committee members Zamawa Arenas and Byron Rushing.

Absent from the meeting were Mr. Ray Sullivan and Mr. Anthony Jordan.

Boston Public Library Staff: President Amy Ryan, Director of Administration and Technology David Leonard, Procurement Manager Ed Maheigan, Chief of Public Services Mary Frances O’Brien, Supervisor of Accounting Sean Monahan, and Clerk of the Board Nancy Grilk. Assistant Corporation Counsel for the City of Boston Caroline Driscoll.

New England Pension Consultants: Michael Black; Sullivan, Rogers and Company, LLC: Matthew Hunt and Christian Rogers.

Ms. Arana-Ortiz, Chair of the Trustees Finance and Audit Committee (Committee) presiding.

Chair Arana-Ortiz reviewed the meeting agenda.

Ms. Arana-Ortiz reviewed the minutes of the December 17, 2012 meeting of the Trustees Finance and Audit Committee. On a motion made, and duly seconded, it was:
VOTED to approve the minutes of the meeting of the Trustees Finance and Audit Committee meeting held on December 17, 2012.

Ms. Arana-Ortiz called on Mr. Michael Black of New England Pension Consultants (NEPC) for an update on the Boston Public Library investments and new manager search. Mr. Black reviewed the Boston Public Library Portfolio Update distributed to the Committee members. Mr. Black reviewed the BPL’s Investment Performance Summary as of December 31, 2012 and reported very strong returns as all managers outperformed their respective benchmarks.

Mr. Black reported that the next step in the strategic asset allocation transition plan approved last year by the Committee was to shift ten percent from Large Cap U.S. Equities into International Equities in order to diversify. As a result of the shift, the expected return of the portfolio increases, and the expected risk (as measured by standard deviation) decreases based on NEPC’s five to seven year asset class assumptions.

NEPC’s recommendation is to move five percent from The Boston Company fund and five percent from SSgA fund into a newly established international fund. Committee discussion followed on manager fees and preference to maintain index funds. Mr. Black suggested alternatively taking the full ten percent from The Boston Company. He will contact them to confirm that this does not bring the account below a minimum threshold. Discussion on international equities followed. Mr. Black assessed the proposed manager, Earnest – International, a minority owned company based in Atlanta Georgia. Mr. Black provided a review of their process, philosophy, team, fees, liquidity, and performance, net of fees, from 2002 through 2011. During this time period they beat the market (MSCI ACWI ex-US) in eight out of ten years net of fees. The return stream shows that the company consistently beat the benchmark, net of fees. They outperformed in both 2008 and 2009, which were extreme markets. Mr. Black then walked the Committee through the risk/return charts, and noted that Earnest – International achieved a higher return with slightly less risk vs. the MSCI AWWI x US benchmark over the past three years. Discussion followed on reallocation of funds while protecting investments.

Based on the delegation of authority by the Trustees of the Public Library of the City of Boston to the Trustees Finance and Audit Committee, on a motion made and duly seconded, it was:

VOTED: that, the Trustees Finance and Audit Committee chose Earnest- International as the international equity fund manager, and fund with $5.2 million.

Based on the delegation of authority by the Trustees of the Public Library of the City of Boston to the Trustees Finance and Audit Committee, on a motion made and duly seconded, it was:

VOTED: that, the Trustees Finance and Audit Committee move $5.2 million from The Boston Company, contingent on their approval of the withdrawal based on the maximum withdrawal allowed by The Boston Company, and move to the selected international equity fund manager, Earnest – International, however, if The Boston Company determines $5.2 million exceeds their maximum allowable withdrawal, the maximum allowable by The Boston Company will be withdrawn and the balance of funds to reach $5.2 million will be withdrawn from SSgA and moved to Earnest -International.

The Committee will report on these decisions at the March 12, 2013 Trustees meeting.

Ms. Arana-Ortiz addressed the next agenda item for a discussion on the Draft FY2012 Management Letter. Mr. Matthew Hunt and Mr. Christian Rogers of Sullivan, Rogers & Company, LLC addressed the Draft – February 20, 2013 Independent Auditors’ Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards. This report is required under government auditing standards and reports on internal controls on financial reporting, and compliance with laws and regulations. Mr. Hunt reported they found no significant deficiencies or material weaknesses in internal controls of financial reporting, nor were there any instances of material non compliance with laws and regulations.

Mr. Hunt reported on the Draft Management Letter, June 30, 2012. He noted there were eleven comments with recommendations and summarized each. Discussion followed. The Committee recommended that the Management Letter include additional details. The revised Management Letter will be circulated to the Committee, and finalized at the April Committee meeting.

Ms. Arana-Ortiz called on Mr. Ed Maheigan to report on the publicly advertised Request for Proposal for the final phase of the Norwood Collection Relocation to the City of Boston Archive Center. Four companies expressed interest; the single submission was from W. B. Meyer and Company with a bid total of $361,000, and is within the BPL’s budget for this project. Discussion followed.

Based on the delegation of authority by the Trustees of the Public Library of the City of Boston to the Trustees Finance and Audit Committee, on a motion made and duly seconded, it was:
VOTED: that the Trustees Finance and Audit Committee approve the award of the contract for the Final Phase of the Norwood Collection Relocation to the City of Boston Archive Center to W. B. Meyer and Company.

Ms. Arana-Ortiz called on Mr. Maheigan to report on the Request for Delegation of Authority from the Trustees to approve the Copley Wayfinding Signage Contract. Delegation is sought due to the timing of the bid process deadline, which falls after the March 12, 2013 Trustees meeting. Mary Frances O’Brien outlined the bid components that include the timeline for implementation, fabrication and installation of various types of signage. Ms. O’Brien reviewed color schemes and naming concepts, and advised that Arrowstreet, the design vendor presently working with the BPL will assist in reviewing the bid and overseeing implementation; they will not be a bidder. The Trustees Finance and Audit Committee agreed to the Request for Delegation of Authority from the Trustees to approve the Copley Wayfinding Signage Contract at the Trustees next meeting on March 12, 2013.

The Committee scheduled the next meeting for April 30, 2013 at 8 AM. in the Central Library, Commonwealth Salon, 700 Boylston Street, Boston, MA.

President Ryan provided an update on filling the Chief Financial Officer position, a multistep process that the Trustees are invited to participate. The interview schedule will be circulated to the Trustees. President Ryan invites Trustees to direct questions to her.

The meeting of the Trustees Finance and Audit Committee adjourned at 9:25 AM.

Respectfully submitted,



Nancy Grilk
Clerk of the Board