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III.H. Auditing

III.H.1. External Audits

III.H.1.01 Independent Auditor

An independent auditor shall be approved and retained by the Board. Following retention, the independent auditor shall function in cooperation with, but independent of, the Chief Financial Officer and staff.

III.H.1.02 Scope of Services

The independent auditor is engaged to conduct an examination of the financial statements of the System in accordance with generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General, and to express an opinion as to the fairness of the financial statements in conformity with generally accepted accounting principles.

In accordance with Government Auditing Standards, the independent auditor shall also issue a report on his/her consideration of the Systemís internal control over financial reporting, and his/her tests of its compliance with certain provisions of law, regulations, contracts and grants.

The independent auditor may meet with the Board Audit Committee to discuss the audit plan, results and other related matters.

The independent auditor may not be engaged to perform the non-audit services listed below:

  1. Bookkeeping;
  2. Financial information systems design, implementation or operation;
  3. Appraisal or valuation services;
  4. Actuarial services;
  5. Internal audit outsourcing services;
  6. Management functions or human resources services;
  7. Investment banking services; and
  8. Legal services

III.H.1.03 Term of Service

The Board shall periodically competitively procure independent audit services.

The Board shall engage independent auditors for a maximum period of five years. However, the Board shall retain the right to terminate the engagement at any time, upon due notice.

An independent auditor engaged in a current term is eligible to respond to a request for proposal for a subsequent term.

The Board, in consultation with the Chief Financial Officer and staff, shall evaluate the independent auditor annually.

III.H.1.04 Annual Audit Report Filing

An annual audit report for the fiscal year ending August 31 shall be filed with the Coordinating Board on or before January 1 following the close of the fiscal year for which the audit was made. A minimum of three copies of the audit shall be submitted to the Coordinating Board. Copies of the audit shall be submitted to any other agency or individual requesting such report.

 

LSCS Policy Manual Section adopted by the Board of Trustees on August 7, 2008

III.H.2. Internal Audits

III.H.2.01 Internal Auditor

A director of internal audit shall be retained by the System to manage the internal audit function.

III.H.2.02 Mission

The mission of the Internal Audit Department is to provide independent, objective assurances and consulting services designed to add value and improve the Systemís operations. Internal audit should assist the System in accomplishing its objectives by bringing a systematic, disciplined approach to evaluating and improving the effectiveness of risk management, control, operational and governance processes.

III.H.2.03 Purpose, Authority and Responsibility

The internal auditors shall perform their work in accordance with the International Standards for the Professional Practice of Internal Auditing (Standards).

The purpose, authority, and responsibility of the internal audit function shall be formally defined in a charter, consistent with the Standards and approved by the Board.

Periodic internal and external quality assessments and ongoing internal monitoring should be part of a quality assurance and improvement program designed to help the internal auditing activity add value, and improve the Systemís operations.

Final communication of engagement results should be issued, and where appropriate, include the internal auditorís overall opinion and/or conclusions.

 

LSCS Policy Manual Section adopted by the Board of Trustees on August 7, 2008

III.H.3. Fraud

III.H.3.01 Fraud Prevention

LSCS managers with supervisory or review authority have the following responsibilities:

  1. Each supervisor shall become aware of what can go wrong in their area of authority.
  2. Each supervisor shall put into place and maintain effective monitoring, review, and control procedures that will prevent acts of wrongdoing.
  3. Each supervisor shall put into place and maintain effective monitoring, review, and control procedures that will promptly detect acts of wrongdoing, should prevention efforts fail.

Accountability for the effectiveness of these responsibilities cannot be delegated, and shall remain with the supervisors and managers.

III.H.3.02 Fraud Definition

The System prohibits fraud and financial impropriety, as defined below, in the actions of its trustees, employees, vendors, contractors, consultants, volunteers, and others seeking or maintaining a business relationship with the System.

Fraud and financial impropriety shall include, but not be limited to:

  1. Forgery or alteration of a check, bank draft or other financial document or account belonging to the college System;
  2. Falsifying time sheets, expense reports or other report documents;
  3. Misappropriation of funds, securities, supplies, or other assets;
  4. Impropriety in handling or reporting of money or financial transactions;
  5. Profiting as a result of insider knowledge of System activities;
  6. Disclosing confidential or proprietary information to outside parties;
  7. Accepting or seeking anything of material value from vendors or persons providing services/material to LSCS, with the exception of a perishable gift less than $50 in value intended for a group of employees;
  8. Destruction or disappearance of records, furniture, fixtures, or equipment; and
  9. Any similar or related irregularity.

III.H.3.03 Investigation Responsibilities

The internal audit department is responsible for the initial investigation and shall promptly notify the Location Executive Officer (LEO), General Counsel, and the Vice Chancellor for Business Affairs/Chief Financial Officer of the initiation of the review. If any person who would otherwise be notified is a fact witness in the investigation, he or she shall not be involved in the administrative oversight or reporting of the investigation. Once a factual investigation establishes fraud, the Systemís General Counsel and Chief Financial Officer shall communicate it to the Chancellor, and the Chancellor, in turn, shall communicate the findings to the Audit Committee of the Board.

Decisions to prosecute or to turn the matter over to law enforcement authorities and/or regulatory agencies for independent investigation, and all final decisions regarding the disposition of the case, shall be made by the Chancellor, in consultation with the Board of Trustees.

Decisions regarding the continuing employment of persons who are involved in, or who failed to take appropriate action to protect against dishonest or fraudulent conduct, shall be made in accordance with Board Policies regarding discipline and discharge.

III.H.3.04 Non-Retaliation

Any employee or student who reports suspected fraudulent activity, in good faith, shall be protected against any retaliation for making such a report. The reporting member of the campus community shall refrain from confrontation with the suspect, further examination of the incident, or further discussion of the incident with anyone other than the employeeís or studentís supervisor or others involved in the resulting review or investigation. Persons found to be making frivolous claims under this Policy will be disciplined, up to and including discharge of employment for an employee, or expulsion from the System for a student.

III.H.3.05 Confidentiality

The Director of Internal Audit may accept and initiate an investigation, on a confidential basis, from an LSCS employee or student who suspects dishonest or fraudulent activity. Results of investigations conducted by the internal audit department shall be disclosed to and discussed with only those persons associated with LSCS who have a legitimate need to know in the performance of their job duties and responsibilities.

 

LSCS Policy Manual Section adopted by the Board of Trustees on August 7, 2008

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