School Board Audit Committee Training Module 7 Evaluation of the Audit Committee

Session objectives After completing this session you will: Have a refresher on the highlights of the audit committee regulation Understand why evaluation of the audit committee is important Understand how self evaluation works

Understand the Highlights of Regulation 361/10 There are 15 main sections of Ontario Regulation 361/10: Interpretation Who it applies to Definitions – external auditor, internal auditor, reporting entity, senior business official Establishment of audit committee No later than January 31, 2011 First meeting no later than March 31, 2011 Provisions where boards are created after regulation is enacted Composition of audit committee Less than 8 board members = 2 trustees, 2 non-trustees 8 or more, but less than 15 board members = 3 trustees, 2 non-trustees 15 or more board members = 4 trustees, 3 non-trustees

Understand the Highlights of Regulation 361/10 Eligibility for non-trustees Accounting, financial management or other relevant business experience Not an employee of the school board at the time of appointment No conflicts of interest at time of appointment Identified by selection committee To identify external members Composed of Director of Education, Senior Business Official and Chair of the Board or member designated by the Chair Selection committee Elected chair at the first meeting of the audit committee each year Members may elect a chair for a meeting where the chair is not present Chair of the audit committee

Understand the Highlights of Regulation 361/10 Trustee  not to exceed 4 years Non-trustee  not to exceed 3 years Non-trustees may not be appointed to the audit committee more than twice unless: The position was advertised for > 30 days; and After 30 days, the selection committee didn’t identify any potential candidates Term of appointment Vacancies All committee members if: Convicted of an indictable offence Unauthorized absences from 2 consecutive regular meetings Non-trustees only if: Becomes an employee of the school board Discovery of conflict of interest at time of appointment

Understand the Highlights of Regulation 361/10 Duties Financial reporting process Internal controls Internal audit External audit Compliance and ethics Risk management Powers With prior board of trustees approval, retain counsel, accountants or other professionals Meet with any person necessary to carry out duties Meet with external and internal audit in private Require internal and external auditors to provide reports to the committee Have access to all records of the board reviewed by internal or external audit

Understand the Highlights of Regulation 361/10 Meetings Minimum 3 meetings per year, or more at call of Chair First meeting must be before March 31, 2011 In subsequent years, first meeting must be before June 30th Code of conduct Any code of conduct of the school board that applies to trustees, also applies to audit committee members who are not trustees Remuneration and compensation No remuneration for participation on audit committee Excludes provision for attendance at meetings and reimbursement of out of pocket expenses to attend

Declaration of conflicts Understand the Highlights of Regulation 361/10 Declaration of conflicts Written declaration upon appointment and at the first meeting each year Potential benefits  declare and withdraw from the meeting during the discussion and shall not vote on the matter 1st report (annual report) Annual and multi-year internal audit plan Description of changes made to plans Summary of internal audit work performed Summary of risks identified and findings of Internal auditor 2nd report Summary of work performed since last report Assessment of the school board’s progress in addressing audit findings Summary of matters addressed by the committee Attendance record of members Reporting

Why Evaluation is Important Audit Committees are accountable for their own governance and, as such, they need mechanisms to assess their performance Audit Committee evaluations help ensure that the governance structure and processes remain strategically aligned with the realities of the School Board The activities of the audit committee should be assessed in relation to its mandate The primary role of the Audit Committee is to assist the Board of Trustees in fulfilling its duties related to governance and oversight Ontario Regulation 361/10 requires the audit committee to report annually on the committee’s performance of its duties

Why Evaluation is Important A well crafted performance assessment process can provide a number of benefits to the Audit Committee: Prioritizing the Audit Committee agendas and meeting structure to focus on the most critical issues Shifting compliance oversight into the time between live meetings Revisiting the timing, level of detail, and quality of materials provided by management Identifying topics for continuing education Self evaluation should aid the audit committee in assessing its strengths and weaknesses and lay a foundation for future improvement An evaluation performed in a routine manner, without a plan to act upon the results, does not lead to continuous improvement Source: Deloitte: Audit Committee Resource Guide

How Does Self Evaluation Work The Ministry has provided an Audit Committee Self-Assessment questionnaire on its website. (See also copy in toolkit) The audit committee self-assessment covers the following topics: Composition and quality Understanding the business, including risks Policies and procedures Oversight of the financial reporting process Oversight of the audit function Ethics and compliance Monitoring activities

How Does Self Evaluation Work Each Audit Committee member to complete a self assessment questionnaire When completing the evaluation, consider the following process: Select a coordinator (i.e. Chair of the audit committee) Establish a timeline for the process Consider asking the Regional Internal Audit Manager, Chair of the Board of Trustees, Director of Education, Superintendent of Business, etc. to also provide feedback Consolidate the results into a summarized document for discussion and review by the committee, and ultimately report to the Board of Trustees

Exercise Refer to the sample audit committee self-assessment in your toolkit, and perform a self assessment of your current audit committee. Discuss the areas of strength and areas for improvement amongst your table group.