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September 17, 2020 at 1:30 PM - Audit Committee

Agenda
Call to Order
Roll Call/Declaration of a Quorum
Action Items
A. Internal Audit Salaries and Budget FY2021
Speaker(s):  Blayne Clements
Background Information: 

In accordance with the Audit Committee Charter, the salaries for staff in the Office of Internal Audit are to be reviewed and approved by the Audit Committee.  Additionally, the International Professional Practices Framework promulgated by the Institute of Internal Auditors, Standard 2020, requires the board to review and approve the resources of the Office of Internal Audit.  For this reason, the budget for the Office of Internal Audit is included in this agenda item.

Attachments:
B. Internal Audit Plan FY2021
Speaker(s):  Blayne Clements
Background Information:  The Office of Internal Audit prepares an annual Audit Plan at the beginning of each fiscal year.  The plan is based on the staffing and time resources available to perform audits and is prepared in conjunction with an annual risk analysis of the university's auditable areas.

During the year, changes in audit priorities may result in alterations to the plan.  The International Standards for the Professional Practice of Internal Auditing, issued by the Institute of Internal Auditors, requires the Audit Committee to approve the audit plan and any significant changes to the plan.

 

Attachments:
Information Items
A. Office of Internal Audit FY2020 Year End Report
Speaker(s):  Blayne Clements
Background Information: 

The Audit Committee Charter requires the committee to provide oversight on internal audit activities, which includes reviewing the results of the year's work.  The Internal Audit Year End Report for Fiscal Year 2020 is included in the meeting materials and contains summary information of internal audit activities for the year.

Attachments:
B. Internal Audit Reports released between May 12, 2020 and August 24, 2020
Speaker(s):  Blayne Clements
Background Information: 

Internal audits completed between May 12, 2020 and August 24, 2020, are listed below and included in the committee materials.

  1. Internal Controls Review - Counseling and Health Services, released June 26, 2020
  2. State Audit Fiscal Year 2019 Follow-Up Report, released June 30, 2020
  3. OVC Student Assistance Fund and Academic Enhancement Fund Review, released July 30, 2020
  4. Select Data Used in the Funding Formula, released July 31, 2020
With all recommendations included in audit reports, management must identify what actions will be taken, who is responsible for that action and provide an expected date of completion.  After the expected completion date has passed, the Office of Internal Audit will perform a follow-up review to determine what action was taken and if that action adequately addresses the issue in the report.  Internal Audit generally does not issue reports for follow-up reviews; however, we do maintain a list of outstanding audit recommendations, which is included in the committee materials.  
C. External Audit Reports released between May 12, 2020 and August 24, 2020
Speaker(s):  Blayne Clements
Background Information:  Staff from the Tennessee Department of Transportation (TDOT), Division of Finance, Fiscal Monitoring Group conducted a desk review of selected contracts between the university and TDOT.  A desk review is substantially less in scope than an audit.  The objectives of the desk review, included but were not limited to the following:
  • Reviewing for contract compliance;
  • Determining if costs charged to the grant were allowable; and
  • Ensuring proper records for equipment and real property purchased with the grant funds are adequate.
The review contained one finding.  The grantor (a specific division of TDOT) mistakenly included an incorrect contract term when drafting the contract for the university.  As a result, the grantor was required to provide a response to the finding, not the university.
D. Internal Audit Governance - Independence and Objectivity
Speaker(s):  Blayne Clements
Background Information:  The Audit Committee's role in overseeing the activities and administration of the Office of Internal Audit is a cornerstone of the committee's governance responsibilities.  This is affirmed in the Audit Committee Charter, which documents the committee's mission, authority and responsibilities.  The current charter is included in the meeting materials. The concepts of organizational independence and objectivity are key elements in overseeing the internal audit function.  

The Office of Internal Audit is required by state law to comply with the internal audit standards issued by the Institute of Internal Auditors.  Several of these standards discuss the importance of organizational independence and objectivity. 

The Audit Committee Charter speaks to the importance of the Office of Internal Audit's need to be organizationally independent.  Organizational independence is effectively achieved when the Chief Audit Officer reports functionally to the board and interacts with the board.

The Internal Audit Charter, the university's internal audit policy and the Office of Internal Audit's Operational Manual, speak to this organizational independence and also address the need for objectivity.  Independence is the freedom to carry out responsibilities in an unbiased manner.  Objectivity is having an impartial, unbiased attitude in carrying out internal audit's responsibilities.  

If independence or objectivity is impaired in fact or appearance, the details of the impairment must be disclosed. Such impairments may include personal conflict of interests, scope limitations, restriction on access to records and resource limitations.  
Attachments:
Adjourn
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