Roles and Responsibilities of the Audit Committee Gema Ptasinski, CPA Partner with Vicenti, Lloyd & Stutzman LLP David Prenovost Sr. Managing Director/Chief Financial Officer with Cal Poly Pomona Foundation Gregory H. Kommel Board Member of Cal Poly Pomona Foundation Board of Directors

Meet the Presenters Greg Kommel is a fourth-year studying applied mathematics and statistics at Cal Poly Pomona. Since 2015, he has served on the Foundation Board of Directors, Foundation audit committee, Associated Students audit committee, and Foundation personnel committee. During his time at Cal Poly Pomona, he has served as the Senator to the College of Science, and has served in other student leadership roles for the Associated Students, multiple student organizations, and several University-wide committees. He plans on graduating in spring 2017 and pursuing a career in industry. Gema Ptasinski, CPA, joined Vicenti, Lloyd & Stutzman in 1996 and was named Partner in 2005. Gema plans, directs and supervises independent financial audits of educational entities, both public and private, and other non-profits. Clients recognize Gema as being very helpful and responsive; she is there to help them resolve their most challenging audit and accounting issues. Gema has extensive experience working with Audit Committees at her retirement community clients as well as other audit clients. Gema serves as a member of the Executive Committee and is the Finance Committee Chair for a non-profit home health and hospice agency. Mr. Prenovost is a graduate from CSU, Long Beach with a BS in Accounting and is a licensed Certified Public Accountant. Having previously worked in public accounting for international and local CPA firms and in the banking/mortgage industry, Mr. Prenovost has worked for two of the CSU auxiliaries since 1994, first at Long Beach Foundation (1994-1999) as Director of Finance and Accounting, and currently at Cal Poly Pomona Foundation as Chief Financial Officer (2000-2006) and now serving as the Senior Managing Director/Chief Financial Officer.

Overview Audit Committee Membership Key Roles and Responsibilities The Auditor’s Report and Auditor Communications Key Questions to Ask the Auditor Highlighted Financial Information

Audit Committee Membership At least three members At least one should be a “financial” expert No officer or employee can sit on the committee Audit chair may not be a member of the finance committee Finance committee members must make up less than 50% of the audit committee Meet at least twice a year

Key Roles and Responsibilities Audit committee charter – outlines key roles and responsibilities Audit committee should annually perform a self-assessment Key oversight functions: Integrity of the financial statements Internal control Sets expectations regarding integrity and ethical values, Transparency, and accountability Understand how management is carrying out its internal and external reporting responsibilities and verify that timely corrective actions are taken as necessary. Compliance Adherence to laws and regulations Authority to hire legal counsel

Key Roles and Responsibilities Key Oversight Functions: Financial Audit, Single Audit and IRS 990: Recommends the selection, retention or termination of the external auditor Assessment of Independent auditor’s qualifications, independence & performance Audit team qualifications/approval by the Chancellor’s office Firm Peer Review – AICPA Do they participate? Any deficiencies and resolution? Was the audit selected for peer review? Firm internal quality procedures Independence -Non-audit services performed Performance - Timeliness, etc. Fees

Key Roles and Responsibilities Key Oversight Functions –Financial Audit, Single Audit and IRS 990: Reviews the scope of the external auditor’s annual financial or/or single audit Audit plan Risk assessment and planned reliance on internal control Status of prior year recommendations and impact to current year audit Note: Single Audit Reports are issued per U.S. Office of Management and Budget (OMB) and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance)

Key Roles and Responsibilities Key Oversight Functions –Financial Audit, Single Audit and IRS 990: Reviews the results of the audit including: Auditor opinion issued Annual financial statements Management letter of control deficiencies Required communication letter (we’ll touch on later) Monitors the implementation of any corrective action to remediate internal control deficiencies. Review of IRS 990 (Could be performed by the Finance Committee)

Key Roles and Responsibilities Key Responsibilities – Other (could overlap with Finance Committee): Assessment of the internal audit function’s qualifications, independence & performance Review of charter Annual plan and risk assessment process Evaluate Chief Internal Auditor Ethics and compliance program Ensure Compliance Officer (or similar) is in place & has direct access to the Board/Audit Committee Ensure there is a system for compliance with legal and regulatory requirements Ensure a code of conduct is in place and employees educated Review process for reporting/whistleblower hotline

Audit Report and Auditor Communications Independent Auditor’s Report Opinion Unmodified – no modifications concerning the financial statements Qualified – auditor not able to satisfy all aspects of the financial status. Adverse – states the financial statements are materially misstated or does not conform to GAAP Disclaimer – lack of independence, scope limitation, substantial doubt about the organizations ability to survive or other uncertainties.

Audit Report and Auditor Communications Significant Audit Findings Adoption of new accounting policies and financial reporting standards Significant estimates and disclosures Difficulties encountered in performing the audit Disagreements with management on financial accounting and reporting Corrected and uncorrected misstatements (proposed adjustments)

Audit Report and Auditor Communications Management representations regarding the fair presentation of the financial statements Management’s consultations with other independent accountants Specific issues discussed with management Prior to engagement During the audit Internal control - significant deficiencies or material weaknesses

Audit Report and Auditor Communications – Key Questions to Ask the Auditor Are there any significant risks and exposure to the auxiliary regarding financial condition, controls and reporting? What are the significant estimates in the financial statements and are there any contingent losses? What are the most significant accounting practices? Is the internal control adequate including IT controls and security? What was the cause of the audit adjustments and unadjusted differences?

Highlighted Financial Information What are some of the highlights your auditors address in their presentation of the financial statements? Open Forum

Resources www.aicpa.org – The AICPA Audit Committee Toolkit Not-For-Profit Entities https://peerreview.aicpa.org/publicfile/DocDefault.aspx - peer review information Thank you…..