Presentation on theme: "Roles, Responsibilities and Relationships"— Presentation transcript:
1 Roles, Responsibilities and Relationships School Board Audit Committee TrainingModule 1Roles, Responsibilities and Relationships
2 Session objectives After completing this session you will: Understand the duties of the audit committee as defined in the Education Act – 0.Reg 361/10, Section 9Understand the role and accountabilities of the audit committeeBe able to apply best practices in effective audit committee governance
3 (Source: Deloitte-The Effective Not-for Profit Board) What is Governance?A definition:Governance refers to the processes and structures usedto direct and manage an organization’s operations andactivities. It defines the division of power, and establishes mechanisms to achieve accountability among stakeholders,the board of directors/trusteesand management.(Source: Deloitte-The Effective Not-for Profit Board)The developing role of the audit committee in the school board environment is very much connected to the idea of promoting sound governance.
4 Importance of Governance Benefits of good governance systems:Helps organizations focus on the activities which contribute most to their overall objectives.Helps organizations utilize resources for maximum effectiveness.Helps ensure the organization is managed in the best interests of its principal stakeholders.
5 The Traditional Model of Governance BoardAuditCommitteeManagementAuditors(Source: Integrity in the Spotlight – Opportunities for Audit Committees)
6 Keep them informed. But not TOO informed. GovernanceBoardMeetingKeep them informed. But not TOO informed.
7 The New Model of Governance BoardAudit CommitteeAuditorsManagement(Source: Integrity in the Spotlight – Opportunities for Audit Committees)
8 GovernanceExerciseAt your tables discuss the benefits and challenges relating to the new governance model.
9 Elements of Audit Committee Effectiveness MandateMandateMandateMandateand CharterAnd CharterAnd CharterAnd CharterAccountability,Accountability,ManagingManagingAccountability,Accountability,ManagingManagingThe Right PeopleThe Right PeopleRelationshipsRelationshipsThe Right PeopleThe Right PeopleReporting andReporting andReporting andReporting andRelationshipsRelationshipsEvaluationEvaluationEvaluationEvaluationInformationInformationInformationInformationand ProcessesAnd ProcessesAnd ProcessesAnd Processes(Source: Integrity in the Spotlight – Opportunities for Audit Committees)
10 Audit Committee of the Board has duties related to Role and Accountabilities of the Audit Committee Duties of the Audit Committee [ON Regulation 361/10]Financial Reporting ProcessRisk ManagementInternal ControlsAudit Committee of the Board has duties related toCompliance MattersInternal AuditorExternal AuditorMany duties are completed by the Audit Committee with updates from Management and the external and/or internal auditors
11 Role and Accountabilities of the Audit Committee Duties related to the Financial Reporting Process [ON Regulation 361/10 9(1)]To review the School Board’s financial statementsTo review the results of the external auditTo recommend, to the Board of Trustees, the approval of the annual audited financial statementsTo review matters that the external auditor is required to communicate to the Audit Committee under generally accepted auditing standardsTo review with the external auditor material written communications
12 Role and Accountabilities of the Audit Committee Duties related to internal controls [ON Regulation 361/10 9(2)]To review the overall effectiveness of internal controlsTo review the scope of the internal and external auditor’s reviews of internal controls, as well as the findings, recommendations and management’s responsesTo discuss with the School Board officials the significant financial risks and the measures the officials have taken to monitor and manage these risks
13 Role and Accountabilities of the Audit Committee Duties related to the internal auditor [ON Regulation 361/10 9(3)]To review the internal auditor’s mandate, activities, staffing and organizational structureTo make recommendations on the content of the internal audit plan and on all proposed major changes to the planTo ensure there are no unjustified restrictions or limitations on the scope of the annual internal auditTo review at least once in each fiscal year the performance of the internal auditor and provide comments regarding his or her performanceTo review the effectiveness of the internal auditor, including the internal auditor’s compliance with standards for internal auditingTo meet on a regular basis with the internal auditorTo review findings, recommendations and any difficulties encountered in the course of the internal auditor’s work
14 Role and Accountabilities of the Audit Committee Duties related to the external auditor [ON Regulation 361/10 9(4)]To review the performance of the external auditor and make recommendations to the Board on the appointment, replacement or dismissal of the external auditor and on the fee and fee adjustment for the external auditorTo review the external auditor’s audit planTo review and confirm the independence of the external auditorTo meet on a regular basis with the external auditor and discuss important mattersTo resolve any disagreements between management and the external auditor about financial reportingTo recommend to the Board a policy designating services that the external auditor may perform for the School Board and, if the Board adopts the policy, to oversee its implementation
15 Role and Accountabilities of the Audit Committee Duties related to compliance matters [ON Regulation 361/10 9(5)]To review the effectiveness of the School Board’s system for monitoring compliance with legislative requirements and with the School Board’s policies and procedures and follow up on any non-complianceTo review any significant findings of regulatory entities, and any observations of the internal or external auditor related to those findingsTo review the School Board’s processes for communicating any applicable codes of conduct and for administering those codes of conductTo obtain regular updates from management and legal counsel regarding compliance mattersTo obtain confirmation from the Director of Education and supervisory officers that all statutory requirements have been met
16 Role and Accountabilities of the Audit Committee Duties related to risk management [ON Regulation 361/10 9(6)]To inquire about significant risksTo review the School Board’s policies for risk assessment and risk management and to assess the steps taken to manage such risks (i.e. internal controls, the adequacy of insurance)To perform other activities related to the oversight of the School Board’s risk management issues or financial matters, as requested by the BoardTo initiate and oversee investigations, as appropriate
17 Role and Accountabilities of the Audit Committee Other Duties [ON Regulation 361/10 9(7) and 9 (8)] To report to the Board of Trustees annually, and at any other time the Board of Trustees may require, on the committee’s performance of its dutiesTo make a reasonable effort to post ON Regulation 361/10 on the Board’s website
18 Role and Accountabilities of the Audit Committee Doing the right things right: Key components Clear ExpectationsClear Expectations(Charter andWork Plan)Feedback(Role of Chair)What Information(Priorities andLevel of Detail)High QualityAccurate, CompleteReportingTimely•Minutes•Council/BoardInformation•ExternalPreparation•Who (management,Auditors)•When (advance ofActionMeeting; at meeting)•DecisionsMeetings•Follow-up•Agenda•Time•Presentations•In-camera(Source: Integrity in the Spotlight – Opportunities for Audit Committees)
19 Role and Accountabilities of the Audit Committee The role of the Audit Committee Chair Reporting to the Board. This is chairperson’s key responsibilityManage meetingsSetting meeting agendas and prioritize the issues contained under each topicForging and enhancing relationship with managementEnhancing the relationship with internal and external auditorsEnhancing the relationship with Board of TrusteesProvide feedback to management and external and internal auditorsCreating an appropriate Audit Committee charter and work planEnsuring the continuing education of the members of the Audit CommitteeDealing with the tough issuesAwareness of developments in internal and external environmentConsider special topics ( e.g. new developments in accounting standards)(Source: Integrity in the Spotlight – Opportunities for Audit Committees)
20 Engaged and Collaborative Role and Accountabilities of the Audit Committee Attributes of an effective Audit Committee ChairInformedDecisiveEffective ChairFinanciallyLiterateEngaged and Collaborative20
21 Role and Accountabilities of the Audit Committee Audit Committee Member Requirements Audit Committee member is a volunteer position, no remuneration to be receivedConflicts of interest must be declared to the Chair of the Audit CommitteeAudit Committee members are required to complete periodic self assessment of performanceConfidentiality agreement must be signed at the beginning of the appointmentA minimum of two months notice should be given before resignationSource:
22 Audit Committee Meeting Scheduling An Audit Committee of a Board shall meet at least three times in each fiscal year at the call of the chair of the committee, and at such other times as the chair considers advisable but only twice during fiscal yearRefer to toolkit for proposed Audit Committee meeting schedule and agenda topicsSource: ON regulation and Ministry of Education website
23 Audit Committee Meeting Management Fundamentals of a good meeting Strong agenda – focus, achievable, results orientedAttendanceLogisticsFacilitationSource: Deloitte
24 Audit Committee Meeting Management Setting the agenda Meeting Agenda ChallengesDate and timeInadequate preparation of agenda by the Committee ChairLevel of agenda detailComprehensiveness of agendaTiming of distribution of agenda itemsRelation of agenda items to information packetDegree of flexibility or rigidness in adherence during the meetingPreparing presenters for the appropriate tone and timingHaving all presentation aids pre-testedEach meeting agenda should tie back to the Committee’s work plan and terms of reference (Regulation 361/10)Agendas should be set by the Committee Chair with input from management and Committee membersSource: Deloitte
25 Audit Committee Meeting Management Managing Participants attendance and attention Part 1: Welcome (quorum, approval of agenda, declaration of conflicts)Part 2: Minutes (approval of minutes of previous meeting)Part 3: Announcements (non-controversial, short)Part 4: Information Items (non-controversial, not requiring decisions)Part 5: Decision Items (potentially controversial, requiring decision or action)Part 6: Discussion Items (often presented for vote/decision during Part 5 of subsequent meeting)Part 7: Information Items (non-controversial, positive, often the starting place of next meeting)Source: Deloitte
26 Audit Committee Meeting Management Logistics IssuesLocation neutralitySeating arrangementClimate controlTime of dayFormat (in-person, video conference, teleconference)FrequencyDurationSpecial guestsSeveral key principles for meeting logistics are constant:Members should be able to easily see one anotherRoom should be at comfortable temperatureAdequate space for planners, notebooks or laptops is essentialPeople should be able to easily hear the discussionSource: Deloitte
27 Audit Committee Meeting Management Facilitation Ask QuestionsMonitor DynamicsManageTimeEncourage ParticipationAssign AccountabilityA focus on the process of arriving at conclusions must be balanced with discussing the conclusions themselvesAsk questions that draw out process-based explanationDiversity brings new ways of thinking about the issue but may introduce dissent, conflict or reduced moraleFocus conflict on innovative solutionsEnsure all views are tabled in the meeting, not afterManage discussion to follow the flow and timing set by the agendaMonitor the need for increased rigidness or flexibility depending on the criticality of the discussionDifferent alternatives ensure that full information is shared and increases the likelihood of discovering a superior solutionEnsure airtime is shared equallyEncourage debate and expression of viewsDiscussion without follow-up or action results in generally ineffective implementation of Committee recommendationsAssign accountability for implementation during meetingsSource: Deloitte
28 Conflict Resolution What lies behind most conflicts? Lack of communicationLack of information or interpretations of available informationDifferent needs or interestsStruggle over power or authorityDifferent ways of understanding the worldSource: 2006 Non-Profit Sector leadership program, Dalhousie University
29 Conflict Resolution A strategy for confronting conflict Confronting a conflict situation almost always can benefit from face-to-face communication amongst the parties involved, either a series of meetings with individuals and/or a group meeting involving all of the partiesRely on the involvement of an individual who has the respect of everyone to facilitate the process Arrange a special meeting or a series of private meetings, not a Board meeting.Avoid secret meetings; the process needs to be transparent.Ensure that everyone understands that the process is not one that will result in organizational decisions or commitments although recommendations, if an agreement is reached, may be made by the parties to the Board.No formal minutes or notes of conflict resolution .The outcome, if the parties agree, can be reportedSource: 2006 Non-Profit Sector leadership program, Dalhousie University
30 Reporting to the Board of Trustees Regulation requires that the Audit Committee report to the Board of TrusteesWhere the Audit Committee is bringing forward a recommendation for the Board to adopt, the recommendation should be in writing.Every year, no later than November 30, the Audit Committee will present an annual reportThe Toolkit for this training and the Ministry of Education website has samples for required reporting.Source: Ministry of Education website – Guideline on Audit Committee reporting
31 Reporting to the Board of Trustees The annual report is to include:summary of work performed by the committeeattendance recordinternal audit resultsassessment of Board’s progress in addressing findingsrecommendations made by internal and external auditorother relevant mattersSource: Ministry of Education website – Guideline on Audit Committee reporting
32 Due diligence considerations Duties and Obligations of Individual MembersStandard of CareFiduciary CareBusiness JudgmentBoard Code of ConductConflict of InterestConfidentiality
33 Governance vs. Management Where is the right side of the line? Board (through its various committees)Governs the activities of the school boardSets strategic direction for the school boardMonitors management and organizational performanceReports to various stakeholdersSelects, supervises, assesses performance of Director of EducationManagementManages day to day operations of the school boardCharged with implementing the strategic planResponsible for internal and external relationshipsIdentifies and manages enterprise-wide risksSource: Deloitte
34 Governance vs. Management Discussion Question Based on your experience what are the greatest challenges in maintaining the line between the role of an audit committee member and the role of management?
35 Powers of the Committee [ON Regulation 361/10 ] In carrying out its functions and duties, an Audit Committee of the Board has the power to:With Board’s approval, retain counsel, accountants or other professionals to advise or assist the committeeMeet with or require the attendance of Board members, school board staff, internal or external auditor or legal counsel or other representatives, and require such persons or entities to provide any information and explanation that may be requestedMeet with the Board’s external or internal auditor or any staff of the School Board, without the presence of other School Board staff or Board members, other than Board members who are members of the committeeRequire the internal or external auditor to provide reports to the committeeHave access to all records that were examined by the internal or external auditor