Internal Audit Department

I. Audit Committee Purpose

The Audit Committee of the Board of Trustees is responsible for oversight of the quality and integrity of the University’s accounting, auditing, external financial reporting, and legal and regulatory compliance practices.


II. Audit Committee Responsibilities

Internal Controls

• Oversee the University’s internal controls through discussions with and reports by management, internal audit and the external auditors.

Financial Statements/External Auditors

• Oversee timing and procedures related to the selection of the external auditors for the financial statements and Circular A-133 audits and instruct them that they are accountable to the Audit Committee. Performance and qualifications of the external auditor will be evaluated annually.
As a general rule, external audits of the financial statements and of federal activity governed by federal Circular A-133 will be competitively bid every five years. The lead engagement partner for these audits should be changed every seven years. Departures from this general rule will be considered on an exception basis.

• Review the planned scope of the external financial statements and Circular A-133 audits and any subsequent significant changes. The engagement letter will be addressed to, reviewed, and signed by the Audit Committee Chair annually.

• Oversee independence of the external audit firm that performs the annual financial statements audit, including review of any significant relationships with the University. Approve in advance any significant services to be provided by that firm other than the annual financial statements and Circular A-133 audits, in order to determine the external auditor’s objectivity in conducting these audits. Advance approval is not required if the cumulative cost of such services in a given fiscal year is less than 5% of the cost of the financial statements and A-133 audits combined.

• Review with management and the external auditors the consistency and quality of the University’s external financial statements and disclosures; significant accruals; accounting principles employed; significant changes in the selection or application of accounting principles; unusual transactions or highly judgmental areas; alternative accounting treatments within GAAP, ramifications of such use, and the treatment preferred by the public accounting firm.

• Ensure the Chancellor, CFO, and Controller certify along with the annual audit report that:
a) they have approved the financial statements;
b) based on their knowledge, the financial statements do not contain any  material untrue statements or omissions;
c) based on their knowledge, the financial statements materially presents the financial condition and result of operations;
d) they are responsible for establishing and maintaining internal controls;
e) they have disclosed to the auditors and the Audit Committee all significant internal control deficiencies and changes that could materially affect financial data.

• Review the results of the annual external audit, including the external auditor’s opinion on the financial statements, observations regarding the adequacy of internal controls, and management letter comments and recommendations.

• Review the timeliness and appropriateness of management’s corrective actions in response to significant recommendations made by the external auditors.

• Meet separately with the external auditors, University management, and management of the Internal Audit and University Compliance functions at least annually.

• Consult with management before any external audit firm employee who significantly participates in the University’s annual audits is hired in a senior financial position at the University.

Internal Audit

• Review and approve the Internal Audit and University Compliance charter, audit plans, and activities, including any work performed by third parties under their direction.

• Review the Internal Audit Department’s staffing and organizational structure.

• Review metrics and significant findings and recommendations by Internal Audit at least annually, as well as the adequacy of management’s corrective actions.

• Review and approve the hiring, discipline, demotion, or termination of the head of the Office of University Compliance and Internal Audit.

University Compliance

• Review the University’s overall level of compliance with government regulations.

• Review the University Compliance Office’s monitoring of area-specific compliance offices.

• Review and approve the University Compliance Office’s audit plans and activities.

• Review the University Compliance Office’s staffing and organizational structure.

• Review significant results of compliance or regulatory audits conducted by the University Compliance Office or by third parties, as well as the adequacy of management’s corrective actions.

• Review the University Compliance Office’s procedures for the receipt, retention, and treatment of complaints received regarding accounting, internal controls, and auditing matters. Employees are notified in the University’s Code of Conduct about their ability to confidentially and anonymously report concerns about questionable accounting or auditing matters, or any other compliance matter, by calling the University Compliance Office’s hotline.

• Receive at least annually a summary of calls to the hotline and the related disposition of such matters.

• Periodically review the Code of Conduct for adequacy and approve any significant amendments or revisions to the Code of Conduct. Periodically review the processes for and results of Code of Conduct communications and certifications.

Affiliated Organizations

• Review the adequacy of audit coverage of the University’s affiliated organizations.

Legal Matters

• Receive reports from the University’s Office of the Executive Vice Chancellor & General Counsel concerning any legal or regulatory matters that may have a material impact on the financial statements, thereby confirming that appropriate senior management (Chancellor and CFO) receive timely, complete reports on legal or regulatory matters that may have a material impact on the financial statements or disclosures for which they are responsible.

Form 990

• Review the University’s Form 990 annually, along with significant changes in reporting from the prior year.

Other

• Request special reports on any topic at the Audit Committee’s discretion. This responsibility includes the authority to engage outside legal counsel or other advisors at the University’s expense.

• Request management to address specific issues within the scope of the Audit Committee’s responsibilities.

• Provide advice to management as deemed necessary or appropriate.

• Review the Audit Committee charter biennially and approve any changes.

• Communicate to the University’s Board of Trustees. Communication will typically occur at every Board meeting.

• Ensure that the University is following the approved conflict of interest policies as adopted by the Board of Trustees.

• Receive periodic reports from the University’s Executive Enterprise Risk Council (EERC), management, Internal Audit, the University Compliance Office, and area-specific compliance offices regarding University risk assessments and risk mitigation activities undertaken by management.


III. Audit Committee Meetings and Composition

• The Audit Committee meets four times annually. Currently these meetings occur on the morning of the day of each regular Board meeting in October, December, March, and May. The Audit Committee Chairman may also call additional meetings as deemed necessary.

• Voting members of the Audit Committee must be independent and members of the University’s Board of Trustees.

• Audit Committee members should be financially knowledgeable. At least one Audit Committee member should have accounting or financial management expertise.