III.H.1. External Audits
III.H.1.01 Independent Auditor
An independent auditor shall be approved and retained by the Board. Following retention, the independent auditor shall function in cooperation with, but independent of, the Chief Financial Officer and staff.
III.H.1.02 Scope of Services
The independent auditor is engaged to conduct an examination of the financial statements of the System in accordance with generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General, and to express an opinion as to the fairness of the financial statements in conformity with generally accepted accounting principles.
In accordance with Government Auditing Standards, the independent auditor shall also issue a report on his/her consideration of the System’s internal control over financial reporting, and his/her tests of its compliance with certain provisions of law, regulations, contracts and grants.
The independent auditor may meet with the Board Audit Committee to discuss the audit plan, results and other related matters.
The independent auditor may not be engaged to perform the non-audit services listed below:
- Financial information systems design, implementation or operation;
- Appraisal or valuation services;
- Actuarial services;
- Internal audit outsourcing services;
- Management functions or human resources services;
- Investment banking services; and
- Legal services
III.H.1.03 Term of Service
The Board shall periodically competitively procure independent audit services.
The Board shall engage independent auditors for a maximum period of five years. However, the Board shall retain the right to terminate the engagement at any time, upon due notice.
An independent auditor engaged in a current term is eligible to respond to a request for proposal for a subsequent term.
The Board, in consultation with the Chief Financial Officer and staff, shall evaluate the independent auditor annually.
An annual audit report for the fiscal year ending August 31 shall be filed with the Coordinating Board on or before January 1 following the close of the fiscal year for which the audit was made. A minimum of three copies of the audit shall be submitted to the Coordinating Board. Copies of the audit shall be submitted to any other agency or individual requesting such report.
LSCS Policy Manual Section adopted by the Board of Trustees on August 7, 2008
III.H.2.01 Internal Auditor
A director of internal audit shall be retained by the System to manage the internal audit function.
The mission of the Internal Audit Department is to provide independent, objective assurances and consulting services designed to add value and improve the System’s operations. Internal audit should assist the System in accomplishing its objectives by bringing a systematic, disciplined approach to evaluating and improving the effectiveness of risk management, control, operational and governance processes.
III.H.2.03 Purpose, Authority and Responsibility
The internal auditors shall perform their work in accordance with the International Standards for the Professional Practice of Internal Auditing (Standards).
The purpose, authority, and responsibility of the internal audit function shall be formally defined in a charter, consistent with the Standards and approved by the Board.
Periodic internal and external quality assessments and ongoing internal monitoring should be part of a quality assurance and improvement program designed to help the internal auditing activity add value, and improve the System’s operations.
Final communication of engagement results should be issued, and where appropriate, include the internal auditor’s overall opinion and/or conclusions.
LSCS Policy Manual Section adopted by the Board of Trustees on August 7, 2008
III.H.3.01 Fraud Prevention
College managers with supervisory or review authority have the following responsibilities:
i. Each supervisor shall become aware of what can go wrong in their area of authority.
ii. Each supervisor shall put into place and maintain effective monitoring, review, and control procedures that will prevent acts of wrongdoing.
iii. Each supervisor shall put into place and maintain effective monitoring, review, and control procedures that will promptly detect acts of wrongdoing should prevention efforts fail.
Accountability for the effectiveness of these responsibilities cannot be delegated and shall remain with the supervisors and managers.
III.H.3.02 Fraud Definition
The College prohibits fraud and financial impropriety in the actions of its trustees, employees, vendors, contractors, consultants, volunteers, and others seeking or maintaining a business relationship with the College.
Fraud and financial impropriety shall include, but not be limited to:
i. Forgery or alteration of a check, bank draft, or other financial document or account belonging to the College;
ii. Falsifying time sheets, expense reports, or other report documents;
iii. Misappropriation of funds, securities, supplies, or other assets;
iv. Impropriety in handling or reporting money or financial transactions;
v. Profiting as a result of insider knowledge of College activities;
vi. Disclosing confidential or proprietary information to outside parties;
vii. Accepting or seeking anything of material value from vendors or persons providing services/materials to the College, with the exception of a perishable gift less than $50 in value intended for a group of employees—provided, however, that an employee may, at the direction of the appropriate College manager, accept an invitation to attend a seminar or training program relevant to his or her job if the employee does not exercise discretion over pecuniary transactions between the College and the entity waiving the seminar or training program’s tuition and/or paying for related expenses. For any such seminar or training program, the College may accept a tuition waiver along with related transportation, lodging, and meal expenses for the employee to the extent that the College otherwise would pay for these expenses;
viii. Destruction, unauthorized modification, or disappearance of records, furniture, fixtures, or equipment; and
ix. Any similar or related irregularity to those mentioned in this section.
III.H.3.03 Investigation Responsibilities
The Internal Audit Department is responsible for the initial investigation and shall promptly notify the Location Executive Officer (LEO), General Counsel, and the Vice Chancellor for Administration and Finance/Chief Financial Officer of the review initiation. If any person who would otherwise be notified is a fact witness in the investigation, or in any other manner may be potentially implicated or involved in the investigation, he or she shall not be involved in the administrative oversight or reporting of the investigation. Once a factual investigation establishes fraud, the College’s General Counsel and Chief Financial Officer shall communicate the fraud to the Chancellor, and the Chancellor, in turn, shall communicate the findings to the Board of Trustees Audit Committee.
Decisions to prosecute or to turn the matter over to law enforcement authorities and/or regulatory agencies for independent investigation, and all final decisions regarding the disposition of the case, shall be made by the Chancellor, in consultation with the Board of Trustees.
Decisions regarding the continuing employment of persons who are involved in, or who failed to take appropriate action to protect against dishonest or fraudulent conduct, shall be made in accordance with Board Policies regarding discipline and discharge.
Any employee or student who reports suspected fraudulent activity in good faith shall be protected against any retaliation for making such a report. The reporting member of the College community shall refrain from confrontation with the suspect, further examination of the incident, or further discussion of the incident with anyone other than the employee’s or student’s supervisor or others involved in the resulting review or investigation. Persons found to be making frivolous claims under this Policy will be disciplined, up to and including discharge of employment for an employee, or expulsion from the College for a student.
The Director of Internal Audit may accept and initiate an investigation, on a confidential basis, from a College employee or student who suspects dishonest or fraudulent activity. Results of investigations conducted by the Internal Audit Department shall be disclosed to and discussed with only those persons associated with the College who have a legitimate need to know for the performance of their job duties and responsibilities.
LSCS Policy Manual Section adopted by the Board of Trustees on June 2, 2016