North Dakota University System
Policies and Procedures

SBHE Policies

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SUBJECT: 300s: Governance and Organization EFFECTIVE: June 17, 2016
Section: 302.2 Audit Committee

    To assist the State Board of Higher Education (Board) in fulfilling its oversight responsibilities for the financial reporting process, the system of internal control, the audit process, and the North Dakota University System's (NDUS) process for monitoring compliance with laws, policies, regulations and the code of conduct.

    The Audit Committee (Committee) has authority to conduct or authorize investigations into any matters within its scope of responsibility. It is empowered to:

    1. Appoint, compensate, and oversee the work of any registered public accounting firm employed by the organization.

    2. Resolve any disagreements between management and the auditor regarding financial reporting.

    3. Pre-approve all auditing and non-audit services.

    4. Retain independent counsel and request appointment of legal counsel by the attorney general as a special assistant attorney general, accountants, or others to advise the committee or assist in the conduct of an investigation.

    5. Seek any information it requires from employees (all of whom are directed to cooperate with the committee's requests) or external parties.

    6. Meet with officers, external auditors, or outside counsel, as necessary.

    7. Non-compliance with any of the following, within a timely manner, will result in the Audit Committee recommending to the Board that the respective institution pay for the services of an audit by an external, independent firm, (selected by the Audit Committee, the Director of Audit Services and the Compliance Officer), or increase the amount that is assessed by the NDUSO to the institution for audit and compliance functions:
      1. Any requests or requirements of any NDUS internal audit staff
      2. Any requests or requirements of the State Auditor's Office
      3. Documented implementation plans

    The committee will consist of three voting members of the Board. The Board president will appoint committee members and the committee chair and may also appoint additional SBHE faculty and staff advisors, as ex-officio non-voting members. Each committee member will be both independent and financially literate.

    The committee will meet at least four times a year, with authority to convene additional meetings, as circumstances require. All committee members are expected to attend each meeting, in person or via teleconference or video-conference. The committee will invite members of management, auditors or others to attend meetings and provide pertinent information, as necessary. It may hold executive sessions in compliance with law. In compliance with law, meeting agendas will be prepared, and provided in advance to members, along with appropriate briefing materials. In compliance with law, minutes will be prepared.

    The committee will carry out the following responsibilities:

    1. Financial Statements:
      1. Review significant accounting and reporting issues, including complex or unusual transactions and highly judgmental areas, and recent professional and regulatory pronouncements, and understand their impact on the financial statements.
      2. Review with management and the external auditors the results of the audit, including any difficulties encountered.
      3. Review the annual financial statements, and consider whether they are complete, consistent with information known to committee members, and reflect appropriate accounting principles.
      4. Review other sections of the annual report and related regulatory filings before release and consider the accuracy and completeness of the information.
      5. Review with management and the external auditors all matters required to be communicated to the committee under generally accepted auditing Standards.
      6. Understand how management develops interim financial information, and the nature and extent of internal and external auditor involvement.
      7. Review interim financial reports with management and the external auditors and consider whether they are complete and consistent with the information known to committee members.

    2. Internal Control:
      1. Consider the effectiveness of the university system's internal control system, including information technology security and control.
      2. Understand the scope of internal and external auditors' review of internal control over financial reporting, and obtain reports on significant findings and recommendations, together with management's responses.

    3. Organization:
      1. The NDUS Director of Audit Services (Director), and the Compliance Officer (Officer), report functionally to the committee and administratively to the NDUS Chief of Staff.
      2. The committee will ensure that there are no unjustified restrictions or limitations and review and concur in the appointment, replacement or dismissal of the Director or the Officer.
      3. Obtain regular updates from the Director and the Officer, management, the Board and the Attorney General regarding relevant matters.
      4. Review with the Director or the Officer the internal audit or compliance; budget, resource plans, activities and organizational structure.
      5. At least once per year, review the performance of the Director and the Officer and recommend the annual compensation and salary adjustment.

    4. Internal Audit:
      1. Approve an internal audit charter.
      2. Approve the annual audit plan and all major changes to the plan. Review the internal audit activity's performance relative to its plan.
      3. Review the effectiveness of the internal audit function, including conformance with The Institute of Internal Auditors' the Definition of Internal Auditing, Code of Ethics and the International Standards for Professional Practice of Internal Auditing.

    5. External Audit:
      1. Review the external auditors' proposed audit scope and approach, including coordination of audit effort with internal audit.
      2. Review the performance of the external auditors.
      3. On an Ďas-needed' basis, meet with the external auditors to discuss relevant matters.

    6. Compliance:
      1. Review the effectiveness of the system for monitoring compliance with laws and regulations and the results of the Officer's or management's investigation and follow-up (including disciplinary action) of any instances of noncompliance.
      2. Review the findings of any examinations by the Officer, regulatory agencies, and any auditor observations.
      3. Review the process for communicating the code of conduct to Board members and university system personnel, and for monitoring compliance therewith.

    7. Reporting Responsibilities:
      1. Regularly report to the Board about committee activities, issues, and related recommendations.
      2. Provide an open avenue of communication between internal audit, the external auditors, and the Board.
      3. Review any other reports the company issues that relate to committee responsibilities.

    8. Other Responsibilities:
      1. Perform other activities related to this policy as requested by the Board.
      2. Institute and oversee special investigations as needed.
      3. Review and assess the adequacy of the committee policy annually, requesting Board approval for proposed changes, and ensure appropriate disclosure as may be required by law, policy or regulation.
      4. Confirm annually that all responsibilities outlined in this policy have been carried out.
      5. Evaluate the committee's and individual members' performance on a regular basis.

New Policy, SBHE Minutes, February 27, 2014.
SBHE Amendment, June 17, 2016.

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