Making the most of your audit committee |
On Board Online • March 26, 2012
By John Carroll
Leadership Development Manager
The state Legislature has required school boards to have audit committees since 2006, but is your audit committee being fully used to ensure the fiscal integrity of your school district?
Meeting the technical requirements of the law is not enough, according to financial experts. The law provides districts with latitude to structure audit committees to make them powerful and efficient tools for accountability and oversight. This is true regardless of whether your board appoints an audit committee or chooses to have the entire board function as the audit committee, as permitted by law.
For instance, the law only requires that an audit committee meet once a year. But to effectively carry out statutory responsibilities as well as any additional duties as defined by the board and charter, audit committee meetings should occur at least quarterly. Many school district audit committees meet more frequently than that. And remember – audit committee meetings are subject to the state Open Meetings Law.
The first step to getting maximum value out of your district’s audit committee is to ensure the committee has a well-written charter. Audit committees are required to have a charter that states how often the committee will meet and outlines how the audit committee will interface with the board, the administration and the district’s auditors. When board members express dissatisfaction with how their audit committee functions, their concerns often can be traced to vagueness or weakness in the audit committee’s charter.
A key area is committee membership, which is defined in the charter. If you want a strong audit committee, have strong membership requirements. While there is no legal requirement that audit committee members be financial professionals, it is highly desirable that they be able to “speak the same language” as the financial professionals with whom they are working. The board has the opportunity, through the charter, to set qualifications.
It’s important for the audit committee to interact with the board, the administration and district auditors. But, admittedly, the idea of an oversight committee that interfaces regularly with management conjures up the “M” word – micromanagement. This is especially true if the board doubles as the audit committee. However, all parties should recognize that the kind of oversight an audit committee exercises is quite different than the kind the board is supposed to exercise.
The audit committee’s self-evaluation process should also be described in the charter. A self-evaluation allows the committee to assess its overall impact on the financial and operational integrity of the school district and can help the committee understand if it is meeting frequently enough, if members are satisfied with how the committee reports to the board, and if the size and composition of the committee is adequate to carry out its duties. Since it’s considered good practice for school boards and superintendents to self-evaluate, then why not the audit committee?
If an audit committee is not functioning well, the risks range from inefficiency and waste to financial improprieties and loss of confidence of the public. Be certain your audit committee is all it can be.
To hear from a panel of audit committee experts, attend NYSSBA’s live video webinar on Wednesday, April 18. For more information, see www.nyssba.org/webinars.