SUBJECT: Board Audit Committee
Washburn University Board of Regents has required an annual independent audit of the financial statement for decades. The Board and the administration have worked closely together to ensure the highest standards of accounting and financial reporting are followed.
Sarbanes-Oxley Act of 2002 was intended to strengthen corporate governance and require tougher standards of corporate responsibility and accountability by improving the accuracy and reliability of corporate financial reporting. The act officially applies only to securities and exchange commission registrants. The act does not apply to institutions of higher education or other not-for-profit entities. Many of the concepts embodied in the act have long been a part of good practices in higher education. There may be some aspects of institutional practices which could be strengthened by adopting the emerging best practice guidance embodied in the Act. The following policies are proposed for adoption.
1. The Board shall establish an Audit Committee.
2. The Board shall appoint a board member to the Audit Committee who meets the requirements of a "financial expert" as defined by Sarbanes-Oxley.
3. Responsibilities of the Audit Committee shall include selection of independent auditors:
a. In coordination with University administration, solicit and evaluate proposals for audit services.
b. Determine terms and condition of appointment of external auditors.
c. Review the audit fee proposal based upon scope, audit hours, experience and capability.
d. Review and approve the engagement letter.
e. Establish term of independent auditor appointment.
4. The Audit Committee shall meet with independent auditors prior to beginning of the audit:
a. Review audit plan and time line.
b. Determine areas of special interest, if any.
5. The Audit Committee shall meet with independent auditors at the completion of the audit:
a. Review financial statements including all footnotes and management discussion and analysis.
b. Discuss auditors' opinion.
c. Review management representation letter.
d. Review auditors' management letter.
e. Review implementation of prior auditor recommendations.
6. The Audit Committee must approve, in advance, all non-audit services to be provided by the independent auditor, and will do so only if extenuating circumstances exist.
7. The Audit Committee shall review University procedures for the confidential receipt and treatment of correspondence received regarding accounting, internal controls and auditing matters.
8. The Audit Committee shall periodically review and approve a code of ethics for senior financial officers.
9. The Board of Regents shall adopt a conflict of interest policy applicable to university administration and the Board of Regents.
a. Disclosure of outside interest and relationships.
b. Definition of inappropriate transactions or activities.
10. The Board of Regents shall require the Chief Executive Officer, the Chief Financial Officer, the Chief Accounting Officer, and as appropriate in a decentralized organization, the individual responsible for financial results of each department and school to sign the external auditor's management representation letter as it applies to those respective units.
RECOMMENDATION: The Chair of the Board and the President recommend adoption of the above policies.