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 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.

External Auditors

Oversee timing and procedures related to the selection of the external auditors and instruct them that they are accountable to the Audit Committee. 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. If the same firm is rehired, the managing 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 audit and any subsequent significant changes. The engagement letter will be addressed to, reviewed, and signed by the Audit Committee Chair annually.

Oversee external auditor independence, including review of any significant relationships with the University. Approve in advance any significant services to be provided other than the annual financial statement 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 statement and A-133 audits combined.

Review the consistency and quality of the University's external financial reporting with the external auditors, including financial statement assumptions; significant accruals; accounting principles employed; unusual transactions; alternative treatments of financial management within GAAP that have been discussed with management, ramifications of such use, and the treatment preferred by the public accounting firm; and clarity and quality of financial statement disclosures.

Ensure the Chancellor, CFO, and Controller certify along with the annual audit report that: a) they have approved the audit report; b) based on their knowledge, the report does not contain any material untrue statements or omissions; c) based on their knowledge, the financial statements materially present 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 the head of the Internal Audit Department at least annually.

Internal Audit

Review and approve the Internal Audit Department's annual and long-range audit plans and activities.

Review significant findings and recommendations by Internal Audit, as well as the adequacy of management's corrective actions.

University Compliance

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

Review and approve the University Compliance Office's annual and long-range audit plans and activities.

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 and approve 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.

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.

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 annually and approve any changes.

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

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 members of the University's Board of Trustees.

Audit Committee members should be financially knowledgeable. If practical, at least one Audit Committee member should have accounting or financial management expertise.