The Board shall appoint its own system internal audit director with the appropriate support staff. The Budget, Finance and Audit Committee may designate one or more members of the committee to serve as a channel of communication with the internal auditors and to have other duties as designated. The Board’s system internal audit director shall report to the Budget, Finance and Budget, Finance and Audit Committee and ultimately to the Board, but will report administratively to the Commissioner and be independent of any other IHL division, section, branch or officer. The Board’s system internal audit director and his/her staff shall perform duties as directed by the Board’s Budget, Finance and Audit Committee and as set out in the Board’s System Internal Audit Charter. The Board approved System Internal Audit Charter shall be in supplementation to this Internal Audit Policy and shall apply to all Board and university internal auditors, whether located at the Board’s executive office or on one of the university campuses. The Commissioner may at any time direct the Board’s system internal audit director to perform an audit or inquiry of any special program, activity, function or organizational unit of the system.

The Board directs each Institutional Executive Officer (IEO) to appoint a university internal audit director. Employment of each university internal audit director shall be contingent upon the approval of both the IEO and the Board’s system internal audit director. In addition, each IEO shall employ a sufficient number of professional and support staff to assist the university internal audit director in implementing an effective program of internal auditing. The university internal audit staff shall have organizational status outside of the university’s staff, management, functions or units subject to audit, and shall be free of operational and management responsibilities that would impair the ability to make independent audits of any aspects of the university’s operations. The university audit directors shall be functionally responsible to the Budget, Finance and Audit Committee and ultimately the Board of Trustees through the Board’s system internal audit director, but will administratively report to the IEO. University internal audit employees may only be terminated following university compliance with any applicable state laws, and following notification of the Budget, Finance and Audit Committee upon recommendation of the IEO and the Board’s system internal audit director. If there is disagreement between the IEO and the Board’s system internal audit director regarding a recommendation of termination of a university internal audit employee, the dispute shall be brought to the Board, which shall make the decision regarding termination.

The Board’s System and University internal audit directors shall have the following duties:

1. To conduct financial, compliance, electronic data processing and operational and efficiency audits of system and university programs, activities and functions and prepare audit reports of findings;
2. To review and evaluate internal controls over system and university programs, accounting systems, administrative systems, electronic data processing systems and all other major systems necessary to ensure accountability of the system and universities;
3. To develop annual and three year strategic audit plans to be based on the findings of periodic documented risk assessments. The plan shall show the individual audits to be conducted during each year and the related resources to be devoted to each of the respective audits. The audit plan shall ensure that internal controls are reviewed on a periodic basis. The plan shall address concerns of the Board of Trustees, Commissioner and IEOs. The Board ‘s system internal audit director shall submit the plan to the Budget, Finance and Audit Committee for approval after consultation with the Commissioner and IEOs; and,
4. To determine the scope and assignment of the audits. However, the IEO may at any time direct the university internal audit director to perform an audit or inquiry of any special program, activity, function or organizational unit of their institution.

Audits shall be conducted in accordance with the Standards for the Professional Practice of Internal Auditors, Inc. and, when required by law, regulation, agreement, contract or policy, in accordance with Government Auditing Standards issued by the Comptroller General of the United States. All audit reports issued by internal audit staff shall include a statement that the audit was conducted pursuant to the appropriate standards.

University audit reports shall be confidential, but shall be provided to the Board upon completion. The Board hereby delegates to the Board’s system internal audit director the responsibility of collecting and reviewing the confidential university audit reports on behalf of the Board. The Board’s system internal audit director shall then brief the Budget, Finance and Audit Committee regarding the confidential university audit reports. The Budget, Finance and Audit Committee will forward such reports to the full Board with appropriate recommendations for action when warranted.

The IEO and the Board’s system internal audit director shall review and approve the annual university internal audit plan and budget, internal and external audit reports, and follow-up reports and quality assurance reviews. The IEO shall periodically meet with the Board’s system and university’s internal audit directors to discuss pertinent matters, including whether there are any restrictions on the scope of audits. Any perceived limitation must be reported to the Budget, Finance and Audit Committee through the Board’s system internal audit director.

The Commissioner and IEOs shall require that the Board’s system internal audit staff and the university’s internal audit staff liaise with all auditors from the State Auditor’s Office, with all auditors from the Legislative PEER Committee, with all externally funded contracts and grants auditors, and with all external investigators/auditors regarding audits, investigations or inquiries in order to:

• Coordinate all review, evaluation and/or investigation activities;
• Ensure that the audit programs are complementary;
• Foster a cooperative working relationship;
• Reduce the incidence of duplication of efforts; and
• Promote appropriate sharing of information.

The Commissioner, IEOs and university internal audit directors shall make known to the Board’s system internal audit director any determined fraud, waste or abuse or reasonably substantiated fraud, waste or abuse as a result of audits, inquiries, investigations or complaints, so such cases can be communicated to the Commissioner and the Budget, Finance and Audit Committee and in order that efforts can be made to ensure internal controls are sufficient to deter such actions in the future.

The Board, the Budget, Finance and Audit Committee and/or the Commissioner, may direct the Board’s or university’s internal audit staff to investigate any system issues, allegations, or audit matters, in order to carry out the fiduciary duties of the Board. The IEOs and all system employees must cooperate fully with the Board’s system and/or the university’s internal audit staff on any system issues, allegations, or audit matters directed to be performed on behalf of the Board, the Budget, Finance and Audit Committee and/or the Commissioner.