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.


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FISCAL NOTE ACT MAY APPLY
STATE MANDATES ACT MAY REQUIRE REIMBURSEMENT

 

 

A BILL FOR

 

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1    AN ACT concerning education.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Public Community College Act is amended by
5adding Section 3-29.11 as follows:
 
6    (110 ILCS 805/3-29.11 new)
7    Sec. 3-29.11. Audit committee.
8    (a) Each board shall establish an audit committee. The
9audit committee shall have a fiduciary duty that includes, but
10is not limited to, assessing risk and addressing matters such
11as financial statement reporting, internal controls, and
12compliance with applicable laws, rules, and board policies.
13    Committee members shall be appointed by the chairperson of
14the board for a term of 2 years and may be reappointed. The
15committee shall consist of at least 3 board members, and at
16least one member of the committee shall qualify as a financial
17expert. The chairperson of the board shall appoint one of the
18members of the committee as chairperson of the committee.
19    To be considered a financial expert, such person appointed
20to the committee must have the following:
21        (1) an understanding of generally accepted accounting
22    principles and financial statements;
23        (2) the ability to assess the general application of

 

 

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1    such principles in connection with accounting for
2    estimates, accruals, and reserves;
3        (3) experience preparing, auditing, analyzing, or
4    evaluating financial statements;
5        (4) an understanding of internal controls; and
6        (5) an understanding of audit committee functions.
7    If a member of the committee is not a financial expert,
8then the committee shall hire an independent financial expert
9to operate as a consultant to the committee to ensure that the
10committee is fulfilling its fiduciary duty.
11    (b) The committee has the authority to conduct or authorize
12investigations district-wide through the establishment and
13operation of an internal audit department. To allow for
14independent analysis and investigation, the committee shall
15have unrestricted access to members of management and relevant
16information, such as books, records, facilities, property, and
17personnel, in any format, electronic or other, in which the
18information may exist. Audits or investigations may occur
19without notice. If circumstances require, district property or
20information relevant to the investigation may be removed from
21use during the investigation. The committee may retain
22independent counsel, accountants, or others to assist it in the
23conduct of any audit or investigation.
24    The board shall delegate to the committee chairperson the
25following:
26        (1) The authority to approve all human resources

 

 

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1    actions related to the director of the internal audit
2    department. All actions taken by the director of internal
3    audit shall include input from the committee, the
4    chairperson of the board, and the community college
5    president. All human resources actions shall follow the
6    policies and procedures of the district.
7        (2) With the approval of the committee, the ability to
8    establish procedures and delegate duties as necessary to
9    conduct the effective and efficient operation of his or her
10    functions.
11    (c) The committee chairperson shall lead the committee in
12the fulfillment of its mission. The committee chairperson
13shall:
14        (1) provide the board with reports on the activities of
15    the internal audit department at least quarterly;
16        (2) ensure the committee is provided adequate training
17    to fulfill its role;
18        (3) present the budget for the internal audit
19    department to the board for approval annually, as well as
20    any budget overages;
21        (4) periodically cause the committee to review the
22    committee and internal audit department charters;
23        (5) call committee meetings and approve agendas;
24        (6) be apprised of significant details of audits and
25    investigations in progress;
26        (7) report whistleblower complaints as necessary to

 

 

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1    the chairperson of the board, in compliance with board
2    policy;
3        (8) approve personnel actions related to the director
4    of internal audit; including appointment, performance
5    evaluations, pay increases, and any disciplinary action
6    taken, including termination; and
7        (9) review monthly progress toward an annual audit
8    plan.
9With the approval of the committee, the committee chairperson
10may establish procedures necessary to perform these duties, as
11well as delegate duties as necessary for the efficient
12operation of the internal audit department.
13    (d) While the committee has the responsibilities and powers
14set forth in this Section, it is not the committee's duty to
15plan or conduct audits or to determine that the district's
16financial statements are complete, accurate, and in accordance
17with generally accepted accounting principles. District
18management is responsible for the preparation, presentation,
19and integrity of the district's financial statements and for
20the appropriateness of the accounting principles and reporting
21policies used. The district's independent auditors are
22responsible for auditing the district's financial statements.
23    (e) In meeting its responsibilities, the committee shall
24have the following powers and duties:
25        (1) The committee shall meet 5 times per year or more
26    frequently as circumstances require.

 

 

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1        (2) The committee may include in its meetings members
2    of management, representatives of the external auditors,
3    members of the internal audit department, and any other
4    personnel employed or retained by the State Board.
5        (3) The committee shall periodically meet with members
6    of management in separate executive sessions, as allowed by
7    law, to discuss any matters that the committee believes
8    should be addressed privately, without the presence of
9    other members of management.
10    (f) The committee shall have the following additional
11duties:
12        (1) To report committee actions to the board with
13    recommendations, as the committee may deem appropriate.
14        (2) To receive advance notice of all audits, reviews,
15    and audit investigations, whether internal or external.
16    This notice may occur via verbal or written report as
17    accepted by the committee.
18        (3) To review the results of all audits, reviews, and
19    investigations, whether internal or external, for the
20    district, regardless of the source of funding for the
21    activity reviewed. This review may occur via verbal or
22    written report as accepted by the committee.
23        (4) To approve procedures for the receipt, retention,
24    and treatment of complaints received by the district,
25    through any means, regarding accounting, internal
26    accounting controls, or auditing matters, including

 

 

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1    procedures for the confidential, anonymous submission by
2    district employees of concerns regarding questionable
3    accounting or auditing matters and matters related to
4    misuse, abuse, or misappropriation of resources and
5    alleged financial fraud and supervisory misconduct.
6        (5) To review, on a periodic basis, summary information
7    documenting complaints submitted relating to accounting,
8    internal controls, or misuse, abuse, or misappropriation
9    of resources.
10        (6) To review and evaluate the effectiveness of the
11    district's process for assessing significant risks or
12    exposures and the steps management has taken to monitor and
13    control such risks.
14        (7) To inquire of management, internal auditors, and
15    external auditors about risks facing the district.
16        (8) To review significant findings related to any
17    audit, including management's response, and the timetable
18    for implementation of corrections.
19        (9) To review summary findings from all completed
20    audits and the status of implementing related
21    recommendations until implementation is complete.
22        (10) To review periodically and update the committee's
23    formal charter.
24        (11) To periodically review the internal audit
25    department charter and evaluate the audit scope and role of
26    internal audits.

 

 

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1        (12) To provide oversight of the director of internal
2    audit and the activities of the internal audit department.
3        (13) To review and appraise the organization structure
4    of the internal audit department, as well as the adequacy
5    of resources, qualifications, and independence of staff
6    members.
7        (14) To approve all internal audit department reports
8    related to audits or investigations, as well as related
9    information, prior to release.
10        (15) To ensure the adequacy of procedures to protect
11    confidentiality of information obtained through the
12    activities of the internal audit department.
13        (16) To review annual audit plans.
14        (17) To review any changes required in the planned
15    scope of an audit plan.
16        (18) To periodically review committee effectiveness.
17        (19) To periodically evaluate with legal counsel the
18    process for determining risks and exposure from asserted
19    and unasserted litigation and claims for noncompliance
20    with laws and rules to determine its effectiveness and to
21    periodically review the status of open litigation or risks
22    and known claims that have not yet been asserted.
23        (20) To review with management and the independent
24    auditor at the completion of an annual audit:
25            (A) the annual financial statements, management's
26        discussion and analysis, related footnotes, the

 

 

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1        compliance report, findings, and the auditor's report;
2            (B) all alternative treatments of financial
3        information that have been discussed with management;
4            (C) critical accounting policies and practices in
5        place;
6            (D) all significant written communications between
7        the auditor and management, such as management letter
8        comments and the schedule of unadjusted differences;
9            (E) any significant changes required in an audit
10        plan; and
11            (F) other matters related to conduct, which should
12        be communicated to the committee under generally
13        accepted auditing standards.
14        (21) To review the scope and approach of the annual
15    audit with the independent auditors.
16        (22) To assess an external auditor's process for
17    identifying and responding to key audit and internal
18    control risks. The external auditor shall have direct
19    access to the committee and shall meet privately without
20    members of management present at least once during the
21    course of an audit.
22        (23) To receive communications directly from the
23    external auditor regarding any matters that arose during
24    the course of his or her audit.
25        (24) To report regularly to the full board any issues
26    that arise with respect to:

 

 

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1            (A) the quality or integrity of the district's
2        financial statements, not to duplicate communications
3        and activities reported through the external audit;
4            (B) the performance and independence of the
5        district's external auditors;
6            (C) the performance of the internal audit
7        function; and
8            (D) any other matters in the committee's
9        performance of its duties that the committee views
10        important to present to the full board.
 
11    Section 99. Effective date. This Act takes effect upon
12becoming law.