HB3722 99TH GENERAL ASSEMBLY

LRB099 10233 NHT 30459 b

99TH GENERAL ASSEMBLY
State of Illinois
2015 and 2016
HB3722

Introduced , by Rep. Jeanne M Ives

SYNOPSIS AS INTRODUCED:

110 ILCS 805/3-29.11 new

Amends the Public Community College Act. Requires the board of trustees of each community college district to establish an audit committee. Provides that the audit committee shall have a fiduciary duty that includes, but is not limited to, assessing risk and addressing matters such as financial statement reporting, internal controls, and compliance with applicable laws, rules, and board policies. Sets forth provisions concerning members of the committee, the authority of the committee and the committee's chairperson, duties of the committee's chairperson, and the powers and duties of the committee. Effective immediately.

FISCAL NOTE ACT MAY APPLY

STATE MANDATES ACT MAY REQUIRE REIMBURSEMENT

A BILL FOR

AN ACT concerning education.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Public Community College Act is amended by adding Section 3-29.11 as follows:

(110 ILCS 805/3-29.11 new)

Sec. 3-29.11. Audit committee.

(a) Each board shall establish an audit committee. The audit committee shall have a fiduciary duty that includes, but is not limited to, assessing risk and addressing matters such as financial statement reporting, internal controls, and compliance with applicable laws, rules, and board policies.

Committee members shall be appointed by the chairperson of the board for a term of 2 years and may be reappointed. The committee shall consist of at least 3 board members, and at least one member of the committee shall qualify as a financial expert. The chairperson of the board shall appoint one of the members of the committee as chairperson of the committee.

To be considered a financial expert, such person appointed to the committee must have the following:

(1) an understanding of generally accepted accounting principles and financial statements;

(2) the ability to assess the general application of such principles in connection with accounting for estimates, accruals, and reserves;

(3) experience preparing, auditing, analyzing, or evaluating financial statements;

(4) an understanding of internal controls; and

(5) an understanding of audit committee functions.

If a member of the committee is not a financial expert, then the committee shall hire an independent financial expert to operate as a consultant to the committee to ensure that the committee is fulfilling its fiduciary duty.

(b) The committee has the authority to conduct or authorize investigations district-wide through the establishment and operation of an internal audit department. To allow for independent analysis and investigation, the committee shall have unrestricted access to members of management and relevant information, such as books, records, facilities, property, and personnel, in any format, electronic or other, in which the information may exist. Audits or investigations may occur without notice. If circumstances require, district property or information relevant to the investigation may be removed from use during the investigation. The committee may retain independent counsel, accountants, or others to assist it in the conduct of any audit or investigation.

The board shall delegate to the committee chairperson the following:

(1) The authority to approve all human resources actions related to the director of the internal audit department. All actions taken by the director of internal audit shall include input from the committee, the chairperson of the board, and the community college president. All human resources actions shall follow the policies and procedures of the district.

(2) With the approval of the committee, the ability to establish procedures and delegate duties as necessary to conduct the effective and efficient operation of his or her functions.

(c) The committee chairperson shall lead the committee in the fulfillment of its mission. The committee chairperson shall:

(1) provide the board with reports on the activities of the internal audit department at least quarterly;

(2) ensure the committee is provided adequate training to fulfill its role;

(3) present the budget for the internal audit department to the board for approval annually, as well as any budget overages;

(4) periodically cause the committee to review the committee and internal audit department charters;

(5) call committee meetings and approve agendas;

(6) be apprised of significant details of audits and investigations in progress;

(7) report whistleblower complaints as necessary to the chairperson of the board, in compliance with board policy;

(8) approve personnel actions related to the director of internal audit; including appointment, performance evaluations, pay increases, and any disciplinary action taken, including termination; and

(9) review monthly progress toward an annual audit plan. With the approval of the committee, the committee chairperson may establish procedures necessary to perform these duties, as well as delegate duties as necessary for the efficient operation of the internal audit department.

(d) While the committee has the responsibilities and powers set forth in this Section, it is not the committee's duty to plan or conduct audits or to determine that the district's financial statements are complete, accurate, and in accordance with generally accepted accounting principles. District management is responsible for the preparation, presentation, and integrity of the district's financial statements and for the appropriateness of the accounting principles and reporting policies used. The district's independent auditors are responsible for auditing the district's financial statements.

(e) In meeting its responsibilities, the committee shall have the following powers and duties:

(1) The committee shall meet 5 times per year or more frequently as circumstances require.

(2) The committee may include in its meetings members of management, representatives of the external auditors, members of the internal audit department, and any other personnel employed or retained by the State Board.

(3) The committee shall periodically meet with members of management in separate executive sessions, as allowed by law, to discuss any matters that the committee believes should be addressed privately, without the presence of other members of management.

(f) The committee shall have the following additional duties:

(1) To report committee actions to the board with recommendations, as the committee may deem appropriate.

(2) To receive advance notice of all audits, reviews, and audit investigations, whether internal or external. This notice may occur via verbal or written report as accepted by the committee.

(3) To review the results of all audits, reviews, and investigations, whether internal or external, for the district, regardless of the source of funding for the activity reviewed. This review may occur via verbal or written report as accepted by the committee.

(4) To approve procedures for the receipt, retention, and treatment of complaints received by the district, through any means, regarding accounting, internal accounting controls, or auditing matters, including procedures for the confidential, anonymous submission by district employees of concerns regarding questionable accounting or auditing matters and matters related to misuse, abuse, or misappropriation of resources and alleged financial fraud and supervisory misconduct.

(5) To review, on a periodic basis, summary information documenting complaints submitted relating to accounting, internal controls, or misuse, abuse, or misappropriation of resources.

(6) To review and evaluate the effectiveness of the district's process for assessing significant risks or exposures and the steps management has taken to monitor and control such risks.

(7) To inquire of management, internal auditors, and external auditors about risks facing the district.

(8) To review significant findings related to any audit, including management's response, and the timetable for implementation of corrections.

(9) To review summary findings from all completed audits and the status of implementing related recommendations until implementation is complete.

(10) To review periodically and update the committee's formal charter.

(11) To periodically review the internal audit department charter and evaluate the audit scope and role of internal audits.

(12) To provide oversight of the director of internal audit and the activities of the internal audit department.

(13) To review and appraise the organization structure of the internal audit department, as well as the adequacy of resources, qualifications, and independence of staff members.

(14) To approve all internal audit department reports related to audits or investigations, as well as related information, prior to release.

(15) To ensure the adequacy of procedures to protect confidentiality of information obtained through the activities of the internal audit department.

(16) To review annual audit plans.

(17) To review any changes required in the planned scope of an audit plan.

(18) To periodically review committee effectiveness.

(19) To periodically evaluate with legal counsel the process for determining risks and exposure from asserted and unasserted litigation and claims for noncompliance with laws and rules to determine its effectiveness and to periodically review the status of open litigation or risks and known claims that have not yet been asserted.

(20) To review with management and the independent auditor at the completion of an annual audit:

(A) the annual financial statements, management's discussion and analysis, related footnotes, the compliance report, findings, and the auditor's report;

(B) all alternative treatments of financial information that have been discussed with management;

(C) critical accounting policies and practices in place;

(D) all significant written communications between the auditor and management, such as management letter comments and the schedule of unadjusted differences;

(E) any significant changes required in an audit plan; and

(F) other matters related to conduct, which should be communicated to the committee under generally accepted auditing standards.

(21) To review the scope and approach of the annual audit with the independent auditors.

(22) To assess an external auditor's process for identifying and responding to key audit and internal control risks. The external auditor shall have direct access to the committee and shall meet privately without members of management present at least once during the course of an audit.

(23) To receive communications directly from the external auditor regarding any matters that arose during the course of his or her audit.

(24) To report regularly to the full board any issues that arise with respect to:

(A) the quality or integrity of the district's financial statements, not to duplicate communications and activities reported through the external audit;

(B) the performance and independence of the district's external auditors;

(C) the performance of the internal audit function; and

(D) any other matters in the committee's performance of its duties that the committee views important to present to the full board.

Section 99. Effective date. This Act takes effect upon becoming law.