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III.H.1. External Financial Audits

III.H.1. External Financial Audits

III.H.1.1. Policy

The College conducts an annual external audit to assess whether the College’s financial statements present fairly, in all material respects, the financial position of the College.

III.H.1.2. Definitions

  1. Annual Audit Report means a financial audit report prepared by an Independent Auditor for each fiscal year. This report is filed every year with the Texas Higher Education Coordinating Board on or before December 31, following the close of the fiscal year for which the audit was made.
  1. Independent Auditor means a Board-approved and -retained external financial audit services firm. The Board engages this firm following a competitive process. The Board may engage this firm for a five-year maximum term, with an option to terminate the engagement at any time with proper notice. The Board evaluates this firm annually. This firm is eligible to respond to a request for qualifications for a subsequent term.
  1. Government Auditing Standards means professional auditing standards promulgated by the Comptroller General of the United States.

III.H.1.3. Conducting an External Audit

The Board engages an Independent Auditor to examine and assess the College’s financial statements in accordance with generally accepted auditing standards and Government Auditing Standards. The Independent Auditor also assesses the College’s internal financial reporting controls and compliance with certain provisions of law, regulations, contracts, and grants. The Independent Auditor, in cooperation with, but independent of, the Chief Financial Officer prepares the Annual Audit Report. Within 60 days of delivery of the final Annual Audit Report, the College’s Chief Financial Officer and the College’s Internal Auditor shall independently, and without the other one present, review and comment on the Annual Audit Report with the Board’s audit committee.

III.H.2. Internal Audits

III.H.2.1. Policy

The College’s Internal Audit Department brings a systematic, disciplined approach to evaluating and improving the College’s risk management, control, operational, and governance processes. The Internal Audit Department provides risk-based and objective assurance, advice, and insight.

III.H.2.2. Definitions

  1. Charter means a document adopted by the Board outlining the Internal Audit Department’s purpose, authority, and responsibility.
  1. Internal Auditing means an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations as defined by the Institute of Internal Auditors. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, controls, and governance processes.
  1. International Standards for the Professional Practice of Internal Auditing means statements of basic requirements for the professional practice of internal auditing and for evaluating its effectiveness.
  1. Government Auditing Standards means professional auditing standards promulgated by the Comptroller General of the United States.
  1. Code of Ethics means the Institute of Internal Auditors’ four principles of integrity, objectivity, confidentiality, and competency.

III.H.2.3. Purpose, Authority, and Responsibility

The Internal Audit Department voluntarily adheres to the Texas Internal Auditing Act, which incorporates International Standards for the Professional Practice of Internal Auditing and Government Auditing Standards (“the Standards”). The purpose, authority, and responsibility of the Internal Audit Department is defined in its Charter, consistent with the Definition of Internal Auditing, the Code of Ethics, and the Standards.

III.H.3. Reporting and Investigating Dishonesty or Fraud

III.H.3.1. Policy

Serious Acts of Dishonesty or Fraud may compromise the College’s mission. The College takes seriously all allegations of trustee, employee, vendor, contractor, consultant, or volunteer dishonesty or fraud. Any such allegations are investigated and may be reported to appropriate authorities.

III.H.3.2. Definitions

  1. Serious Act of Dishonesty or Fraud means (1) forgery or alteration of a College check, bank draft, or other financial document or account; (2) falsifying time sheets, expense reports, or other report documents; (3) misappropriating funds, securities, supplies, or other assets; (4) improperly handling or reporting money or financial transactions; (5) profiting from insider knowledge of College activities; (6) disclosing confidential or proprietary information to outside parties; (7) accepting or seeking anything of material value from vendors or persons providing the College services or material, except for a perishable group gift less than $50 in value or a vendor-provided seminar or training—any employee attending such a training must have prior appropriate supervisor approval and the training must be relevant to their job—including a tuition waiver along with transportation, lodging, and meal expenses for the employee to the extent that the College otherwise would pay for these expenses; (8) destruction or disappearance of records, furniture, fixtures, or equipment; (9) unauthorized conversion, alteration, or tampering with any College record for any purposes; (10) failing to provide financial records required by state or local entities; (11) failure to disclose conflicts of interest as required by law or Board Policy; or (12) any similar or related irregularity.

III.H.3.3. Reporting Fraud

Anyone who suspects or detects a Serious Act of Dishonesty or Fraud must report it immediately. A report can be filed through a secure confidential ethics hotline available at https://secure.ethicspoint.com/domain/media/en/gui/43698/index.html or at the toll free number (855) 233-3143. This hotline is available 24 hours a day, every day of the year.

A report may also be made to the State Auditor’s Office using their website at http://sao.fraud.tx.us. If the College has reasonable cause to believe that Serious Acts of Dishonesty or Fraud, waste, or abuse of state funds may have occurred, such matters will be forwarded to the State Auditor’s Office as required by Texas Government Code, Section 321.022.

III.H.3.4. Internal Supervisor Reporting

Each College supervisor has a duty to know what is considered Serious Act of Dishonesty or Fraud, and establish appropriate operating rules or manuals that will help identify such conduct. Each College supervisor must report this conduct to the Internal Audit Department.

III.H.3.5. Serious Acts of Dishonesty or Fraud Investigation

The College’s Internal Audit Department investigates Serious Acts of Dishonesty or Fraud reports. The Internal Audit Department promptly notifies the Chancellor, college president, General Counsel, and the Chief Financial Officer, if applicable, that such a report has been filed. 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, that person will not be involved in the investigation’s administrative oversight or reporting line.

If an investigation finds that a Serious Act of Dishonesty or Fraud occurred, the Chancellor reports the findings to the Board. The Chancellor decides, with Board input, (1) whether to report the Serious Act of Dishonesty or Fraud to law enforcement authorities or regulatory agencies, and (2) any appropriate remedial action. Decisions regarding the continuing employment of persons involved in, or who failed to take appropriate action to protect against, Serious Acts of Dishonesty or Fraud, are made in accordance with Board policies regarding discipline and discharge.

III.H.3.6. Confidentiality

Persons may report Serious Acts of Dishonesty or Fraud using confidential information.  Investigation results are disclosed to and discussed only with College-associated individuals with a legitimate need to know, in the performance of their job duties and responsibilities.

III.H.3.7. Non-Retaliation

The College may not suspend or terminate the employment of an employee who in good faith reports a violation of law by the College or another public employee to an appropriate law enforcement authority. Moreover, the College prohibits retaliation against any College employee or student for reporting a Serious Act of Dishonesty or Fraud in good faith. However, individuals may face adverse consequences for knowingly making false reports.

 

 LSCS Policy Manual Section adopted by the Board of Trustees on May 4, 2017