1. AUDITS What you should know - a campus perspective. Franz Lozano Director/Budget Officer (former Internal Auditor) San Francisco State University Academic Resources Conference – April 2009

2. 2 Definition of Internal Auditing Definition of an Audit 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 An audit is an independent evaluation of a person, organization, system, process, project or product. Audits are performed to ascertain the validity and reliability of information; also to provide an assessment of a system’s internal control. The goal of an audit is to express an opinion which is based on work done on a test basis (i.e. statistical sampling). Audits ONLY seek to provide reasonable assurance that there is not a material error. Wikipedia These are the fancy definitions of Internal Auditing and Audit.

3. 3 AUDITS What does it mean to you! AUDITS - What does it mean to you! QUESTIONS, I’ve always wanted to ask and/or someone should have shared with me about AUDITS.  Demystify the “Audit.”  Who audits CSU campuses? Is my department informed of audits that take place on my campus?  What happens during a campus audit? Do auditors really review my department’s expenditures?  Is my department affected with the outcome of an audit?  What does an audit really mean to me and/or my department?  What steps can I and/or my department take to avoid being audited?  Are auditors really human, do they have feelings, why don’t they smile, why are they so secretive? Can I trust them?  What are internal controls?  What do I need to know to be an effective Administrator/Coordinator for my College and/or department?

4. 4 AUDITS - a campus perspective  What is an Audit in simple terms? It’s a process that an “independent” individual, CPA firm, Federal or State agency, or internal audit function confirms or verifies whether an organization (i.e. the campus) is spending funds appropriately and/or meeting its objectives.  Who audits our campus and/or our department? Office of the University Auditor (OUA – Systemwide Auditors), KPMG (Financial Statement Auditors), Other external Audit (i.e. firms who audit campus Auxiliary Organizations), and Federal and State government audit agencies. If your campus has an internal audit function and depending on how mgmt. utilizes its internal audit function, your campus internal auditor may also audit/review your department.  What happens during an audit? Auditors visit you with a specific purpose (e.g. to verify if you are complying with certain policies or regulations). Depending on how mgmt. handles audits on your campus - most of you never really know there is an audit except when you hear about it or someone tells you. Or the effects after an audit.

5. 5 AUDITS - a campus perspective  Do auditors really review my department’s expenditures? You BETCHA! The OUA, KPMG, and Federal and State Auditing agencies. Note: Auditors for some reason find the ONE thing you did not do right.  Is my department affected with the outcome of an audit? The entire campus is affected. New policies and procedures may be implemented which you may not agree with but must comply and adhere to.  What does audit really mean to me and/or my department? It will show whether your department or the campus is meeting its objectives. Are you or the campus following appropriate policies and procedures?  What steps can I and/or my department take to avoid being audited? Probably none. Your department may be audited because an external audit agency selected a particular grant or program to be reviewed, and you administer it. There are no steps to take to avoid an audit, however, you can take pro-active steps such as following policies and procedures to be ready.

6. 6 AUDITS - a campus perspective  Are auditors really human, do they have feelings, why don’t they smile, why are they so secretive? Yes! We are human. We have feelings. Believe it or not, we SMILE! It’s not about being secretive, Auditors must adhere to a code of ethics and standards required by the auditing profession and the public.  What does my campus internal auditor do? She/he will conduct/perform campus audits, reviews, and investigations; provide consultation to mgmt. and campus departments; assist in the coordination/coordinate the visit of external auditors. Most campus auditors are very knowledgeable & can be helpful to you about campus policies & procedures.  Can I trust auditors? Can I trust my campus auditor? The answer is Yes! However, this also depends on many factors.  What are internal controls? ……  What do I need to know?......

7. 7 AUDITS - a campus perspective Internal controls  What are they?  System of checks and balances  Procedures to prevent and detect errors, theft or unauthorized use  Ways to manage and reduce risk  Good business practices  Why do you need them?  Reliability and integrity of information and reports  Compliance with: laws and regulations; policies & procedures; contract & grant provisions  Safeguarding of assets  Economical and efficient use of resources  Accomplishment of goals and objectives  How should you use them?  Segregation of Duties  Authorization  Monthly Reconciliation of Accounting Financial Reports  Systems and Password Security  Training and Supervision

8. 8 AUDITS – What do I need to know!  What you need to know to be an effective College or department Administrator/Coordinator responsible for budgets & financial matters:  Reconcile your department’s financial accounts (i.e. monthly).  Follow campus, CSU, State policies and procedures including Federal rules & regs.  Have department employees (yes, that includes faculty) complete a “Property/Equipment Use Authorization form” when taking state property home or away from campus.  Be cognizant of the “Buy one get one free”. Yes, both of the items are considered state property. If you keep the “free one”, its called “theft”. And it’s against the law.  Procurement Card – don’t buy anything that is unallowable.  Monitor what’s going on; trust but verify; ask questions.  Review everything you sign – use only your own signature!  Use as a reference, the lessons learned from this session: “An Overview of CSU Funds” (i.e. Operating/General, Trust, & Lottery Funds) “Campus Audits: Chancellor’s Office Guide to (Audit) Survival” “Audits – What you should know - a campus perspective”

9. 9 AUDITS – What do I need to know!  About Fraud….  Motive and Opportunity – two combined can lead to fraud.  Ask questions you normally would.  Report any suspected fraud to Internal Audit or Public Safety.  “Whistleblowers” are protected. So you are protected.

10. Any Questions? Thank you! Academic Resources Conference – April 2009