School Board Audit Committee Training Module 7 Evaluation of the Audit Committee

1. School Board Audit Committee Training Module 7 Evaluation of the Audit Committee

2. Session objectives After completing this session you will: Have a refresher on the highlights of the audit committee regulation Understand why evaluation of the audit committee is important Understand how self evaluation works

3. Understand the Highlights of Regulation 361/10 There are 15 main sections of Ontario Regulation 361/10: Interpretation • Who it applies to • Definitions – external auditor, internal auditor, reporting entity, senior business official Establishment of audit committee • No later than January 31, 2011 • First meeting no later than March 31, 2011 • Provisions where boards are created after regulation is enacted Composition of audit committee • Less than 8 board members = 2 trustees, 2 non-trustees • 8 or more, but less than 15 board members = 3 trustees, 2 non-trustees • 15 or more board members = 4 trustees, 3 non-trustees

4. Understand the Highlights of Regulation 361/10 Eligibility for non-trustees • Accounting, financial management or other relevant business experience • Not an employee of the school board at the time of appointment • No conflicts of interest at time of appointment • Identified by selection committee • To identify external members • Composed of Director of Education, Senior Business Official and Chair of the Board or member designated by the Chair Selection committee • Elected chair at the first meeting of the audit committee each year • Members may elect a chair for a meeting where the chair is not present Chair of the audit committee

5. Understand the Highlights of Regulation 361/10 • Trustee  not to exceed 4 years • Non-trustee  not to exceed 3 years • Non-trustees may not be appointed to the audit committee more than twice unless: • The position was advertised for > 30 days; and • After 30 days, the selection committee didn’t identify any potential candidates Term of appointment Vacancies • All committee members if: • Convicted of an indictable offence • Unauthorized absences from 2 consecutive regular meetings • Non-trustees only if: • Becomes an employee of the school board • Discovery of conflict of interest at time of appointment

6. Understand the Highlights of Regulation 361/10 Duties • Financial reporting process • Internal controls • Internal audit • External audit • Compliance and ethics • Risk management Powers • With prior board of trustees approval, retain counsel, accountants or other professionals • Meet with any person necessary to carry out duties • Meet with external and internal audit in private • Require internal and external auditors to provide reports to the committee • Have access to all records of the board reviewed by internal or external audit

7. Understand the Highlights of Regulation 361/10 Meetings • Minimum 3 meetings per year, or more at call of Chair • First meeting must be before March 31, 2011 • In subsequent years, first meeting must be before June 30th Code of conduct • Any code of conduct of the school board that applies to trustees, also applies to audit committee members who are not trustees Remuneration and compensation • No remuneration for participation on audit committee • Excludes provision for attendance at meetings and reimbursement of out of pocket expenses to attend

8. Understand the Highlights of Regulation 361/10 Declaration of conflicts • Written declaration upon appointment and at the first meeting each year • Potential benefits  declare and withdraw from the meeting during the discussion and shall not vote on the matter • 1st report (annual report) • Annual and multi-year internal audit plan • Description of changes made to plans • Summary of internal audit work performed • Summary of risks identified and findings of Internal auditor • 2nd report • Summary of work performed since last report • Assessment of the school board’s progress in addressing audit findings • Summary of matters addressed by the committee • Attendance record of members Reporting

9. Why Evaluation is Important • Audit Committees are accountable for their own governance and, as such, they need mechanisms to assess their performance • Audit Committee evaluations help ensure that the governance structure and processes remain strategically aligned with the realities of the School Board • The activities of the audit committee should be assessed in relation to its mandate • The primary role of the Audit Committee is to assist the Board of Trustees in fulfilling its duties related to governance and oversight • Ontario Regulation 361/10 requires the audit committee to report annually on the committee’s performance of its duties

10. Why Evaluation is Important • A well crafted performance assessment process can provide a number of benefits to the Audit Committee: • Prioritizing the Audit Committee agendas and meeting structure to focus on the most critical issues • Shifting compliance oversight into the time between live meetings • Revisiting the timing, level of detail, and quality of materials provided by management • Identifying topics for continuing education • Self evaluation should aid the audit committee in assessing its strengths and weaknesses and lay a foundation for future improvement • An evaluation performed in a routine manner, without a plan to act upon the results, does not lead to continuous improvement Source: Deloitte: Audit Committee Resource Guide

11. How Does Self Evaluation Work • The Ministry has provided an Audit Committee Self-Assessment questionnaire on its website. (See also copy in toolkit) • The audit committee self-assessment covers the following topics: • Composition and quality • Understanding the business, including risks • Policies and procedures • Oversight of the financial reporting process • Oversight of the audit function • Ethics and compliance • Monitoring activities

12. How Does Self Evaluation Work • Each Audit Committee member to complete a self assessment questionnaire • When completing the evaluation, consider the following process: • Select a coordinator (i.e. Chair of the audit committee) • Establish a timeline for the process • Consider asking the Regional Internal Audit Manager, Chair of the Board of Trustees, Director of Education, Superintendent of Business, etc. to also provide feedback • Consolidate the results into a summarized document for discussion and review by the committee, and ultimately report to the Board of Trustees

13. Exercise • Refer to the sample audit committee self-assessment in your toolkit, and perform a self assessment of your current audit committee. Discuss the areas of strength and areas for improvement amongst your table group.