The Role of the Internal Audit Department

Definition of Internal Auditing “Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.” The Institute of Internal Auditors Research Administrators Network

Research Administrators Network We’re Here to Help! Identify Risks Find Better Ways and Best Practices Partner With You to Find Solutions Prevent Problems Research Administrators Network

We Report to the Board of Regents’ Audit and Compliance Committee Ensures independence Elevates issues to a level where they can be corrected Keeps Regents informed Meets quarterly Independence is the foundation of auditing The Regents can provide resources needed to correct some issues The President and Regents can adopt policy changes Research Administrators Network

What is Risk Based Auditing? Focus on risk of occurrences that could prevent the University from achieving its goals There are many types of risk – fraud, noncompliance, improper reporting, ineffective or inefficient use of resources, reputation loss, etc. Focus on areas with high risk and high probability that controls are not in place or are weak Research Administrators Network

Research Administrators Network We have a plan! Risk based audit plan developed with input from across the University Risk factors: Impact Likelihood Impact - What would be the impact on the University if this item failed to function? such as a major fraud, or a disruption in business, what would be the impact to the University?   §       High Impact - it could create serious problems for the University that could result in the loss or use of resources, a significant loss of revenues/funding, or unfavorable publicity and possible harm to the University’s reputation §       Medium Impact – the University would recognize the impact, but would be able to manage the problem §       Low Impact ·- it would not have a significant impact on the University or its reputation Likelihood – Considering existing process controls that may exist, what is the probability that this breakdown could occur? Every area should have certain checks and balances that help prevent things from going wrong, such as review processes, issuing receipts for money received, and approvals (auditors refer to these processes as “controls”). If the controls were not effectively in place, what is the possibility that something could go wrong? Items that might increase the probability include lack of training, complexity or high volumes of transactions, highly regulated areas, high employee turnover, and involvement of management. §       High Probability – it is very likely that something could go wrong §       Medium Probability – it is possible that something could go wrong §       Low Probability – it is not likely that anything will go wrong Research Administrators Network

Research Administrators Network What Is the Plan? List of audits for fiscal year Based on risk assessment and available man hours Approved by Audit and Compliance Committee Leave some room for the unexpected Requests and unforeseen issues are presented to Audit and Compliance Committee for approval Research Administrators Network

Research Administrators Network Auditable Entities WE DO NOT AUDIT Specific individuals Human Resources issues Sexual harassment or other civil rights issues WE DO AUDIT Operations and Compliance Departments/Schools/ Colleges/Branches Programs, Grants, Contracts Information Technology Systems/Applications University-wide Processes Research Administrators Network

Investigations of Fraud and Impropriety in financial matters University policy requires Internal Audit to investigate allegations concerning the handling of University financial matters Internal Audit coordinates and reports to the State Auditor If we conduct an audit and find inappropriate use of University assets or misappropriation of funds we request an opinion from University Counsel on whether the matter constitutes fraud and if so it is reported to the State Auditor and University Police. Research Administrators Network

Research Administrators Network Who Are We? We are University employees We are certified public accountants, internal auditors, fraud examiners and information system auditors We are a staff of 7 auditors Most auditors have more than 10 years audit experience in public accounting, financial auditing, internal audit and performance audit Research Administrators Network

It’s the “little” things that get you! Misreporting hours Forgetting to obtain prior approval when needed Using estimates that are not supported Any violation of University policy Employees claimed to be at one place and were not there. Not reviewing P-card transactions Not approving purchases prior to placing orders Unfamiliarity with University policy or misunderstandings Research Administrators Network

Research Administrators Network Preventive Measures Make sure your controls are working Review and reconcile Check the work of your subordinates Don’t give in to the temptation to skip controls because you are busy! It is time consuming to develop proper controls, to review and scrutinize documentation, and to ensure controls are working However, it is even more time consuming to undergo an audit or investigation Research Administrators Network

What is included in the audit report? What was found What was required Why it happened What effect it has Recommendation for improvement Response – who, when, and how Audits have six elements Condition Criteria Cause Effect Recommendation Response Reports have an executive summary with a conclusion answering the objective Background relating to the area under audit Observations and Recommendations Research Administrators Network

What happens after the audit? Follow-up Review corrective action Report to Audit and Compliance Committee Report to Audit and Compliance Committee, Implemented or Pending Based on timeframes provided in the response, we conduct a follow-up to verify that corrective action occurred. Audit and Compliance committee is concerned with past due Pending items and pay close attention to this report Research Administrators Network

Who Audits the Auditors? We must have a peer review at least once every five years Our Standards are set by the Institute of Internal Auditors, and the American Institute of Certified Public Accountants Research Administrators Network

We Want to Know How We Are Doing At the completion of each audit we will send an after-audit survey We want you to rate our performance Were we professional, helpful, timely and did we add value? Please take the time to give us your feedback. This is one of our measures to determine if our work is adding value to the University Research Administrators Network

Research Administrators Network We are here to help We provide training Respond to Internal Audit policy Offer suggestions for improvement Advisory role PI training Cash Management Grants Management Will conduct consulting services to prevent problems or discontinue inappropriate processes Research Administrators Network

Manu Patel Director of Internal Audit 277-5016 1801 Roma NE