1. Internal Audit White Paper
Council of the Great City Schools
November 2016

2. Introduction Objectives
Demonstrate the value of an internal audit function to a school district.
Identify some best practices for a school district internal audit function.

3. Auditing Standards Professional Auditing Standards
Comptroller General – Yellow Book
Institute of Internal Auditors – Red Book
Generally Accepted Government Auditing Standards
Independence
Peer Reviews – Similar to Accreditation
Compliance

4. Reporting Structure
Where should the internal audit function be placed within a school district hierarchy?
Independence and objectivity

5. Audit Committee Structure
Objective
To provide effective internal controls and lead to responsible financial reporting
How?
Competent financial managers
Organizational structure that provides appropriate division of responsibilities
Policies and procedures
Effective and competent internal auditors
Implementation of audit recommendations
Benefits should always > costs

6. Audit Committee Structure
Composition of Audit Committee
Racial, ethnic, and professional balance
Voluntary, advisory
Regular meetings, Roberts Rules, Sunshine Law, Public Records Laws

7. Audit Committee Structure
Governance
Ensures objectivity and independence
Advisory for School Board
Provides input to School Board for internal auditor evaluation
Ensures free access to records and staff
Peer review
Corrective Actions

8. Risk Assessment & Audit Plan
$$$
Assessment of current controls
Input from School Board and senior management
Annual Audit Plan
Based on results of risk assessment
Describes audit and non-audit work to be performed

9. Rethinking School Audits
Traditionally school activity fund audits are a significant use of resources (i.e., financial statement and compliance audits)
Paradigm shift to include individual schools as entities within the organization's audit universe for risk assessment purposes
Broaden the evaluation of risks related to individual schools to include consideration for safety, grants, attendance, fraud, FTE allocation, inventory, payroll, etc.
Include high risked weighted schools on the annual audit plan

10. Data Analytics Data Analytics is a science
Fraud, waste, abuse relating to school districts can be catastrophic
Proactive detection = data analytics
Fraud prevention requires communication
Risk Assessment and Annual Plan
Beneficial
Do more with less

11. Non-Audit Services Advice and Counsel Examining District's Performance
Aiding in Delivery of Training or Guidance

12. Follow-Up Activities Best Practice
Monitor and evaluate whether management has effectively implemented corrective actions to identified issues or that management has accepted the risk of not taking actions.
Benefits
Provide assurance to senior management and the Board that recommendations are taken seriously and are being implemented.
Provide a measure of accountability to the community that any noted weaknesses are being addressed and the District is committed to operating and using public funds in an efficient and effective manner.

13. Key Performance Indicators
Background/Overview
IA is Value-Added Proposition in Collaboration with Management, Bd, Aud Cmte, Taxpayers
Alignment with Individual Mission of the District
Demonstrating Value can be Difficult – Quantitative and Qualitative Issues

14. Key Performance Indicators
3 Perspectives – Demonstrating Value
Sub-set of KPIs for IA Function
Analytical with Respect to District-wide Measures and/or
Proactive Quality Checker when Engineering Programs

15. Key Performance Indicators
Balance Scorecard Approach
Recognizes Varied Multiple Stakeholders
Aligns with What Matters Most to Stakeholders
Enables an Innovative and Collaborative Approach

16. Key Performance Indicators
Performance & Benchmarking Project
Started in 2002 to Improve District Operations – does not include IA function
Agreed Upon 4 KPIs for Benchmarking Purposes in 2015 – possible future inclusion
% of Audit Plan Completed
% of Recommendations Accepted by Mgt.
Ave. # of Prof. Dev. Hrs./Auditor
Investment as a % of District Gen. Fund Budget

17. Internal Audit White Paper
Questions or Comments?