1. Roles, Responsibilities and Relationships
School Board Audit Committee Training
Module 1
Roles, Responsibilities and Relationships

2. Session objectives After completing this session you will:
Understand the duties of the audit committee as defined in the Education Act – 0.Reg 361/10, Section 9
Understand the role and accountabilities of the audit committee
Be able to apply best practices in effective audit committee governance

3. (Source: Deloitte-The Effective Not-for Profit Board)
What is Governance?
A definition:
Governance refers to the processes and structures used
to direct and manage an organization’s operations and
activities. It defines the division of power, and establishes mechanisms to achieve accountability among stakeholders,
the board of directors/trustees
and management.
(Source: Deloitte-The Effective Not-for Profit Board)
The developing role of the audit committee in the school board environment is very much connected to the idea of promoting sound governance.

4. Importance of Governance
Benefits of good governance systems:
Helps organizations focus on the activities which contribute most to their overall objectives.
Helps organizations utilize resources for maximum effectiveness.
Helps ensure the organization is managed in the best interests of its principal stakeholders.

5. The Traditional Model of Governance
Board
Audit
Committee
Management
Auditors
(Source: Integrity in the Spotlight – Opportunities for Audit Committees)

6. Keep them informed. But not TOO informed.
Governance
Board
Meeting
Keep them informed. But not TOO informed.

7. The New Model of Governance
Board
Audit Committee
Auditors
Management
(Source: Integrity in the Spotlight – Opportunities for Audit Committees)

8. Governance
Exercise
At your tables discuss the benefits and challenges relating to the new governance model.

9. Elements of Audit Committee Effectiveness
Mandate
Mandate
Mandate
Mandate
and Charter
And Charter
And Charter
And Charter
Accountability,
Accountability,
Managing
Managing
Accountability,
Accountability,
Managing
Managing
The Right People
The Right People
Relationships
Relationships
The Right People
The Right People
Reporting and
Reporting and
Reporting and
Reporting and
Relationships
Relationships
Evaluation
Evaluation
Evaluation
Evaluation
Information
Information
Information
Information
and Processes
And Processes
And Processes
And Processes
(Source: Integrity in the Spotlight – Opportunities for Audit Committees)

10. Audit Committee of the Board has duties related to
Role and Accountabilities of the Audit Committee Duties of the Audit Committee [ON Regulation 361/10]
Financial Reporting Process
Risk Management
Internal Controls
Audit Committee of the Board has duties related to
Compliance Matters
Internal Auditor
External Auditor
Many duties are completed by the Audit Committee with updates from Management and the external and/or internal auditors

11. Role and Accountabilities of the Audit Committee Duties related to the Financial Reporting Process [ON Regulation 361/10 9(1)]
To review the School Board’s financial statements
To review the results of the external audit
To recommend, to the Board of Trustees, the approval of the annual audited financial statements
To review matters that the external auditor is required to communicate to the Audit Committee under generally accepted auditing standards
To review with the external auditor material written communications

12. Role and Accountabilities of the Audit Committee Duties related to internal controls [ON Regulation 361/10 9(2)]
To review the overall effectiveness of internal controls
To review the scope of the internal and external auditor’s reviews of internal controls, as well as the findings, recommendations and management’s responses
To discuss with the School Board officials the significant financial risks and the measures the officials have taken to monitor and manage these risks

13. Role and Accountabilities of the Audit Committee Duties related to the internal auditor [ON Regulation 361/10 9(3)]
To review the internal auditor’s mandate, activities, staffing and organizational structure
To make recommendations on the content of the internal audit plan and on all proposed major changes to the plan
To ensure there are no unjustified restrictions or limitations on the scope of the annual internal audit
To review at least once in each fiscal year the performance of the internal auditor and provide comments regarding his or her performance
To review the effectiveness of the internal auditor, including the internal auditor’s compliance with standards for internal auditing
To meet on a regular basis with the internal auditor
To review findings, recommendations and any difficulties encountered in the course of the internal auditor’s work

14. Role and Accountabilities of the Audit Committee Duties related to the external auditor [ON Regulation 361/10 9(4)]
To review the performance of the external auditor and make recommendations to the Board on the appointment, replacement or dismissal of the external auditor and on the fee and fee adjustment for the external auditor
To review the external auditor’s audit plan
To review and confirm the independence of the external auditor
To meet on a regular basis with the external auditor and discuss important matters
To resolve any disagreements between management and the external auditor about financial reporting
To recommend to the Board a policy designating services that the external auditor may perform for the School Board and, if the Board adopts the policy, to oversee its implementation

15. Role and Accountabilities of the Audit Committee Duties related to compliance matters [ON Regulation 361/10 9(5)]
To review the effectiveness of the School Board’s system for monitoring compliance with legislative requirements and with the School Board’s policies and procedures and follow up on any non-compliance
To review any significant findings of regulatory entities, and any observations of the internal or external auditor related to those findings
To review the School Board’s processes for communicating any applicable codes of conduct and for administering those codes of conduct
To obtain regular updates from management and legal counsel regarding compliance matters
To obtain confirmation from the Director of Education and supervisory officers that all statutory requirements have been met

16. Role and Accountabilities of the Audit Committee Duties related to risk management [ON Regulation 361/10 9(6)]
To inquire about significant risks
To review the School Board’s policies for risk assessment and risk management and to assess the steps taken to manage such risks (i.e. internal controls, the adequacy of insurance)
To perform other activities related to the oversight of the School Board’s risk management issues or financial matters, as requested by the Board
To initiate and oversee investigations, as appropriate

17. Role and Accountabilities of the Audit Committee Other Duties [ON Regulation 361/10 9(7) and 9 (8)]
To report to the Board of Trustees annually, and at any other time the Board of Trustees may require, on the committee’s performance of its duties
To make a reasonable effort to post ON Regulation 361/10 on the Board’s website

18. Role and Accountabilities of the Audit Committee Doing the right things right: Key components
Clear Expectations
Clear Expectations
(Charter and
Work Plan)
Feedback
(Role of Chair)
What Information
(Priorities and
Level of Detail)
High Quality
Accurate, Complete
Reporting
Timely •
Minutes •
Council/Board
Information •
External
Preparation •
Who (management,
Auditors) •
When (advance of
Action
Meeting; at meeting) •
Decisions
Meetings •
Follow - up •
Agenda •
Time •
Presentations • In -
camera
(Source: Integrity in the Spotlight – Opportunities for Audit Committees)

19. Role and Accountabilities of the Audit Committee The role of the Audit Committee Chair
Reporting to the Board. This is chairperson’s key responsibility
Manage meetings
Setting meeting agendas and prioritize the issues contained under each topic
Forging and enhancing relationship with management
Enhancing the relationship with internal and external auditors
Enhancing the relationship with Board of Trustees
Provide feedback to management and external and internal auditors
Creating an appropriate Audit Committee charter and work plan
Ensuring the continuing education of the members of the Audit Committee
Dealing with the tough issues
Awareness of developments in internal and external environment
Consider special topics ( e.g. new developments in accounting standards)
(Source: Integrity in the Spotlight – Opportunities for Audit Committees)

20. Engaged and Collaborative
Role and Accountabilities of the Audit Committee Attributes of an effective Audit Committee Chair
Informed
Decisive
Effective Chair
Financially
Literate
Engaged and Collaborative 20

21. Role and Accountabilities of the Audit Committee Audit Committee Member Requirements
Audit Committee member is a volunteer position, no remuneration to be received
Conflicts of interest must be declared to the Chair of the Audit Committee
Audit Committee members are required to complete periodic self assessment of performance
Confidentiality agreement must be signed at the beginning of the appointment
A minimum of two months notice should be given before resignation
Source:

22. Audit Committee Meeting Scheduling
An Audit Committee of a Board shall meet at least three times in each fiscal year at the call of the chair of the committee, and at such other times as the chair considers advisable but only twice during fiscal year
Refer to toolkit for proposed Audit Committee meeting schedule and agenda topics
Source: ON regulation and Ministry of Education website

23. Audit Committee Meeting Management Fundamentals of a good meeting
Strong agenda – focus, achievable, results oriented
Attendance
Logistics
Facilitation
Source: Deloitte

24. Audit Committee Meeting Management Setting the agenda
Meeting Agenda Challenges
Date and time
Inadequate preparation of agenda by the Committee Chair
Level of agenda detail
Comprehensiveness of agenda
Timing of distribution of agenda items
Relation of agenda items to information packet
Degree of flexibility or rigidness in adherence during the meeting
Preparing presenters for the appropriate tone and timing
Having all presentation aids pre-tested
Each meeting agenda should tie back to the Committee’s work plan and terms of reference (Regulation 361/10)
Agendas should be set by the Committee Chair with input from management and Committee members
Source: Deloitte

25. Audit Committee Meeting Management Managing Participants attendance and attention
Part 1: Welcome (quorum, approval of agenda, declaration of conflicts)
Part 2: Minutes (approval of minutes of previous meeting)
Part 3: Announcements (non-controversial, short)
Part 4: Information Items (non-controversial, not requiring decisions)
Part 5: Decision Items (potentially controversial, requiring decision or action)
Part 6: Discussion Items (often presented for vote/decision during Part 5 of subsequent meeting)
Part 7: Information Items (non-controversial, positive, often the starting place of next meeting)
Source: Deloitte

26. Audit Committee Meeting Management Logistics
Issues
Location neutrality
Seating arrangement
Climate control
Time of day
Format (in-person, video conference, teleconference)
Frequency
Duration
Special guests
Several key principles for meeting logistics are constant:
Members should be able to easily see one another
Room should be at comfortable temperature
Adequate space for planners, notebooks or laptops is essential
People should be able to easily hear the discussion
Source: Deloitte

27. Audit Committee Meeting Management Facilitation
Ask Questions
Monitor Dynamics
Manage
Time
Encourage Participation
Assign Accountability 
A focus on the process of arriving at conclusions must be balanced with discussing the conclusions themselves
Ask questions that draw out process-based explanation
Diversity brings new ways of thinking about the issue but may introduce dissent, conflict or reduced morale
Focus conflict on innovative solutions
Ensure all views are tabled in the meeting, not after
Manage discussion to follow the flow and timing set by the agenda
Monitor the need for increased rigidness or flexibility depending on the criticality of the discussion
Different alternatives ensure that full information is shared and increases the likelihood of discovering a superior solution
Ensure airtime is shared equally
Encourage debate and expression of views
Discussion without follow-up or action results in generally ineffective implementation of Committee recommendations
Assign accountability for implementation during meetings
Source: Deloitte

28. Conflict Resolution What lies behind most conflicts?
Lack of communication
Lack of information or interpretations of available information
Different needs or interests
Struggle over power or authority
Different ways of understanding the world
Source: 2006 Non-Profit Sector leadership program, Dalhousie University

29. Conflict Resolution A strategy for confronting conflict
Confronting a conflict situation almost always can benefit from face-to-face communication amongst the parties involved, either a series of meetings with individuals and/or a group meeting involving all of the parties
Rely on the involvement of an individual who has the respect of everyone to facilitate the process
 Arrange a special meeting or a series of private meetings, not a Board meeting.
Avoid secret meetings; the process needs to be transparent.
Ensure that everyone understands that the process is not one that will result in organizational decisions or commitments although recommendations, if an agreement is reached, may be made by the parties to the Board.
No formal minutes or notes of conflict resolution .The outcome, if the parties agree, can be reported
Source: 2006 Non-Profit Sector leadership program, Dalhousie University

30. Reporting to the Board of Trustees
Regulation requires that the Audit Committee report to the Board of Trustees
Where the Audit Committee is bringing forward a recommendation for the Board to adopt, the recommendation should be in writing.
Every year, no later than November 30, the Audit Committee will present an annual report
The Toolkit for this training and the Ministry of Education website has samples for required reporting.
Source: Ministry of Education website – Guideline on Audit Committee reporting

31. Reporting to the Board of Trustees
The annual report is to include:
summary of work performed by the committee
attendance record
internal audit results
assessment of Board’s progress in addressing findings
recommendations made by internal and external auditor
other relevant matters
Source: Ministry of Education website – Guideline on Audit Committee reporting

32. Due diligence considerations
Duties and Obligations of Individual Members
Standard of Care
Fiduciary Care
Business Judgment
Board Code of Conduct
Conflict of Interest
Confidentiality

33. Governance vs. Management Where is the right side of the line?
Board (through its various committees)
Governs the activities of the school board
Sets strategic direction for the school board
Monitors management and organizational performance
Reports to various stakeholders
Selects, supervises, assesses performance of Director of Education
Management
Manages day to day operations of the school board
Charged with implementing the strategic plan
Responsible for internal and external relationships
Identifies and manages enterprise-wide risks
Source: Deloitte

34. Governance vs. Management Discussion Question
Based on your experience what are the greatest challenges in maintaining the line between the role of an audit committee member and the role of management?

35. Powers of the Committee [ON Regulation 361/10 ]
In carrying out its functions and duties, an Audit Committee of the Board has the power to:
With Board’s approval, retain counsel, accountants or other professionals to advise or assist the committee
Meet with or require the attendance of Board members, school board staff, internal or external auditor or legal counsel or other representatives, and require such persons or entities to provide any information and explanation that may be requested
Meet with the Board’s external or internal auditor or any staff of the School Board, without the presence of other School Board staff or Board members, other than Board members who are members of the committee
Require the internal or external auditor to provide reports to the committee
Have access to all records that were examined by the internal or external auditor