FAQ - Sector Consultation _Final_v2

Document Sample
FAQ - Sector Consultation _Final_v2 Powered By Docstoc
					                   FAQ – Audit Committee Regulation


1    Question   Can the Ministry tell us what its intention for the audit
                committee is? Is it oversight on the board of trustees
                fulfilling its stewardship responsibilities, or is it an advisory
                body to the board of trustees, or is it a parallel and equal
                body to the board of trustees with a separate mandate from
                the Ministry?

     Answer     The audit committee is a committee of the Board and will report to
                the board of trustees. The audit committee’s duties include
                reviewing; the financial reporting process, internal controls,
                internal auditing, external auditing, compliance matters, risk
                management, and any other Board proposed activity. The audit
                committee’s role is not one of oversight but rather to assist the
                board of trustees to fulfill their stewardship responsibilities. All
                final decisions rest with the board of trustees.


2    Question   There appears to be a specific formula to calculate the
                number of participants who shall sit on the audit committee.
                Do these numbers represent a maximum or minimum number
                of members?

     Answer     The number of members represents neither a minimum nor a
                maximum number, but rather an exact number.

3    Question   Can the Chair of our Board be an ex-officio member of the
                Audit Committee?

     Answer     No, the Chair of the Board cannot be an ex-officio member of the
                audit committee. If the school board would like the Chair of the
                Board to be a member of the audit committee, he or she would
                have to be one of the selected trustee members as noted in the

4    Question   It will be difficult for boards, particularly small rural boards, to
                attract enough qualified non-trustee members to participate
                in the audit committee, particularly with no compensation for
                the work? How will the Ministry address this concern?

     Answer     The Ministry has accounted for this concern through a number of
                1) Lengthy recruitment window. School boards will have a
                significant amount of time (September 2010 to January 2011) to
                recruit external members.
                2) Minimal time commitment. The time commitments for audit
                committee members will be minimal with only 3 scheduled
                meetings per year.
                3) Convenience. Audit committees will have the option of meeting
                via teleconference so as to avoid long trips and / or disruptions to
                personal time.
                4) Assistance. The Ministry will be a resource for school boards to
                use if they are having difficulties recruiting by having direct
                connections with professional accounting bodies that encourage
                their staff to give back to their communities.
                5) Advertisement. The Ministry is preparing a pamphlet that can
                be distributed to all school councils talking about why someone
                should consider being a member of a school board audit
                6) Reimbursement of out of pocket expenses. School boards have
                policies to reimburse members for travel to attend meetings and
                this would also apply to the audit committee.

5    Question   In the event that the Minister is required to appoint an
                external audit committee member to an audit committee, what
                considerations will be evaluated prior to the appointment?

     Answer     Every effort will be taken to ensure that the appointed candidates
                meet the following three requirements:
                1.     Knowledge of the territory that the school board services;
                2.     Resides in the territory that the school board services; and,
                3.     Speaks the language of the particular school board.

6    Question   If the Minister is required to appoint an external audit
                committee member, is this appointment until the board
                selects a replacement, or is the Minister’s appointee to serve
                the remaining term of the person replaced?

     Answer     The Minister’s appointment would be temporary until the school
                board can find a suitable replacement.


7    Question   The eligibility criteria for potential external candidates is
                limited to accounting, financial management and legal
                experience. Could the criteria be expanded to allow the
                participation of certain experts (example, engineers) given
                the types of internal audits that will be performed?
     Answer     No. The external members who participate in audit committees do
                not need to have expertise in the areas that internal audit will be
                auditing. It is up to the internal audit staff to have the necessary
                skills to audit the school board audit universe processes. Internal
                audit staff then makes recommendations to the audit committee
                based on their findings.

                The type of experience listed in the regulation focuses on the
                business side of a district school board. Having specialized skills
                in the areas of financial reporting, corporate governance, and
                internal control helps to ensure more effective management
                oversight, fosters financial statement accuracy and transparency,
                and places an appropriate focus on business risks and internal


8    Question   How does the Ministry ensure that the selection process for
                external candidates is impartial and transparent?

     Answer     The regulation stipulates that each school board shall have a
                selection committee for the purpose of identifying potential
                candidates to participate in the audit committee. These
                candidates will be interviewed by the selection committee. The
                selection committee shall be made up of three individuals:
                        1. Chair of the Board or trustee designated by the Chair
                        2. Director of Education
                        3. Senior Business Official

                Recommendations made by the selection committee shall be
                presented to the board of trustees for final approval.


9    Question   Can non board members /external members serve as
                committee chair?

     Answer     No the regulation requires that the chair of the committee be a
                board member. As the audit committee is a committee of the
                board, it makes the communication with the board of trustees and
                reporting to the board of trustees more effective.


10   Question   If the intent of having different appointment terms for trustees
                versus external members in the regulation is so that
                appointment dates are staggered for the various audit
                committee members, then would it not be wise to have a
                specific clause in the regulation that says as much?

     Answer     Although that is the intention of differing appointment terms, a
                regulation sets the terms of the rule but does not provide
                interpretation of the rule.

11   Question   Can appointments to the audit committee be done annually
                rather than every four years for a trustee and three years for
                external members? This will give an opportunity for trustee
                members to rotate on and off the committee and share the

     Answer     It is strongly recommended that trustees participate as active
                members of the audit committee for more than one year.
                Continuity of members is a key aspect in fully understanding the
                multi-faceted role this committee plays. Having the background
                knowledge of issues that cross more than one fiscal period (multi-
                year audits, revised risk assessments etc…) will increase the
                effectiveness of the audit committee.


12   Question   Will the Ministry consider changing the regulation to include
                the following two statements pertaining to vacancies?
                Vacancies shall be filled by appointment by the board upon
                recommendation from the selection committee. Vacancies
                are created by the resignation of a member of the audit

     Answer     No, these statements are implied in the regulation.


13   Question   Why doesn’t the regulation make specific reference to the
                regional internal auditors? Aren’t they the only ones bound
                by this regulation?

     Answer     The regulation doesn’t make specific reference to the regional
                internal audit function as the regional model is simply a
                mechanism to perform the internal audits in the most effective and
                efficient manner possible. All school board internal auditors are
                required to respect the requirements outlined in the audit
                committee regulation.

14   Question   Are the audit committee member duties that are specified in
                the regulation all inclusive or will there be additional duties?
     Answer     For the most part all of the duties are outlined in the regulation;
                however, other duties may be as assigned to account for any
                other duties that may have been overlooked.

15   Question   Will the regulation include an introductory sentence that
                makes it clear that the audit committees’ oversight duties are
                in respect to the Boards’ responsibilities regarding finance
                and business related matters?

     Answer     No it will not. The role of audit committees continues to evolve as
                a result of the passage of the Sarbanes-Oxley Act of 2002. Audit
                committees were typically charged with oversight of financial
                reporting and disclosure only. Many audit committees, as those in
                the education sector now have oversight in the additional areas of
                regulatory compliance and risk management activities.


16   Question   Clarity is needed on the statement ‘Review elements that
                could have an impact on the board’s financial statements’.
                There are few school activities that don’t have some impact
                on the financial statements. Is it the Ministry’s intention that
                the year to date financial reports and year end forecast are
                presented to the audit committee as well as all matters that
                may impact on enrolment?

     Answer     The wording in this section of the regulation was amended to state
                the following:
                An audit committee of a board has the following duties related to
                the financial reporting process: to review the effect of the following
                matters on the board’s financial statements:
                a) relevant accounting and reporting practices and issues;
                b) complex or unusual financial and commercial transactions of
                    the board;
                c) material judgments and accounting estimates of the board;
                d) any departures from current accounting principles published
                    by the Canadian Institute of Chartered Accountants.

17   Question   The regulation states that the audit committee should
                recommend that the board approve the annual audited
                financial statements. May financial statements be simply
                received or must they be approved by the board?

     Answer     School boards are obliged to follow the regulation and the
                regulation states that the audit committee recommends that the
                board approves the annual audited financial statements.

18   Question   What does review the overall effectiveness of the board's
                internal controls mean?

     Answer     Reviewing the overall effectiveness of the board's internal controls
                includes evaluating the efficiency and effectiveness of operations,
                the safeguarding of assets, examining the integrity of financial
                transactions and reviewing steps taken by management to
                minimize significant exposures.


19   Question   How will the Audit Committee “ensure” that there are no
                unjustified restrictions or limitations on the scope of the
                internal audits?

     Answer     The internal audit team, usually through the regional internal audit
                manager, will report to the audit committee whether or not there
                were some restrictions or limitations placed on the scope of the
                internal audit plan.

20   Question   One of the listed audit committee member duties pertaining
                to internal audit is to review the effectiveness of the internal
                auditor, including the International Standards for the
                Professional Practice of Internal Auditing. Audit committee
                members may not be qualified to complete this task. Wouldn’t
                they need to be very specialized to assess internal auditor
                compliance with internal auditing standards?

     Answer     The audit committee should evaluate internal audit based on their
                own experiences and ask management and external audit to
                provide their own assessments. In addition to these assessments,
                the regional internal audit manager will be requested to assess the
                department’s performance. The audit committee will need to
                ensure that they have appropriately qualified resources to
                consider the implications of the assessments.

21   Question   Will there be two internal audit processes underway at all
                boards? One will be conducted by the Regional Internal
                Audit Team (RIAT) and the second would be by each board
                undertaking additional internal audit work for its own board,
                at its discretion?

     Answer     The intention is to have a seamless internal audit process at the
                school boards. The RIAT will take the lead in performing risk
                assessments and conducting internal audits for all school boards
                and report its findings to the audit committees. However, if boards
                do have existing internal audit staff, they can assist in the
                performance of internal audits or conduct additional internal audits
                that the board deems necessary to provide greater coverage to
                address risks at the board.


22   Question   Please clarify the meaning of “to recommend to the board
                and oversee a policy designating services that the external
                audit may perform for the board”? Does this policy require
                board of trustee approval?

     Answer     The primary role of external auditors is to express an opinion on
                whether a school board’s financial statements are free of material
                misstatements. In order to express this opinion, users of the
                financial statements rely on the external auditor to be unbiased
                and independent. External auditors can perform other services
                such as review and compilation engagements, other audit
                services for regulatory reports, and consulting services to name a
                few. Therefore, the audit committee needs to ensure that the
                other services provided by the external auditor’s do not create a
                material relationship with the school board which, in the view of
                the Board, could reasonably be expected to interfere with the
                independence of the external auditor.

                Yes this policy should be approved by the Board.


23   Question   The regulation states the following: "Review the process for
                communicating the codes of conduct and the process for
                monitoring these codes of conduct", which code of conduct
                are you referring to, the one in Bill 177 or the one that staff
                and/or trustees are required to follow?

     Answer     The Ministry is referring to all existing codes of conduct at the
                district school board. Audit committee members have oversight
                responsibilities to ensure that:
                    - A code of conduct has been developed, reviewed and
                         updated as needed;
                    - All employees receive the code of conduct, understand it,
                         and receive training; and
                    - Management exhibits ethical behavior and reported
                         violations receive action.
24   Question   The term “to obtain confirmation that all statutory filings have
                been met” is too broad. How can this be done?

     Answer     Meeting statutory requirements is an obligation of any
                organization operating within the Province of Ontario. Therefore,
                the district school board should be aware of all the statutory
                requirements and be in a position to report to the audit committee
                that it has discharged its responsibility of having met those


25   Question   The term risk management seems broad, are you specifically
                referring to environmental risks, insurance risks, and
                financial risks?

     Answer     When the term risk management is mentioned in the regulation, it
                refers to enterprise risk management (ERM). ERM includes the
                key risk categories of operations risk, finance risk, human capital
                risks, information technology risks, legal risks and reputation risks.


26   Question   How will the Ministry address the concern that the audit
                committee has access, at all reasonable hours, to all records
                of the Board? Is there a potential privacy issue if the
                committee has unlimited access to human resource /
                personnel information?

     Answer     Although not specifically noted in the regulation, the audit
                committee will only have access to records required to discharge
                its duties and responsibilities. Following the sector consultation
                process this power has been reworded to “have access to all
                records of the board that were examined by the internal or
                external auditor”.

27   Question   How will the Ministry ensure that the audit committee knows
                its role and responsibilities and uses its powers effectively?

     Answer     The Ministry of Education is providing training to all audit
                committee members on their role, responsibilities and powers.
                During the training session the members should gain a clear
                understanding of how and when to use the powers listed in the

28   Question   When it comes to the costs, will the audit committee have the
                final say on retaining counsel, accountants or other
                professionals to advise the committee or will the board have
                some say?

     Answer     The audit committee regulation has been clarified indicating that
                this power is subject to the prior approval of the chair of the board.
                The audit committee does not have any final decision making
                authority, it makes recommendations to the board of trustees
                which in turn will make all the final decisions.


29   Question   Is teleconferencing available for audit committee meetings?

     Answer     Audit committee meetings can be held via teleconference. Boards
                should refer to Ontario Regulation 463/97 – Electronic Meetings.
                This regulation states that every district school board shall
                develop and implement a policy providing for the use of electronic
                means for holding of meetings of a board and meetings of a
                committee of a board.

30   Question   Can anyone attend audit committee meetings including
                resource staff, employees from finance and/or the existing
                internal auditors?

     Answer     No person shall be excluded from an audit committee meeting that
                is open to the public except for improper conduct. Should a
                meeting or a part thereof be closed to the public for the reasons
                listed in Subsection 207(2) of the Education Act, employees of the
                district school board can attend the closed section of the meeting
                only at the discretion of the audit committee members.

31   Question   Can external members vote as audit committee members?

     Answer     Yes, Section 11 – Meetings specifically states that each member
                of the audit committee is entitled to one vote.

32   Question   Who is responsible for setting the agenda for audit committee

     Answer     It would be a best practice that agendas are set by the audit
                committee chair in consultation with all interested parties including
                other committee members, management, internal and external

33   Question   Who can vote on agenda items?

     Answer     Only audit committee members can vote on agenda items at the
                audit committee meeting.
34   Question   Can trustees who are not audit committee members attend in-
                camera sessions?

     Answer     They can do so at the discretion of the chair of the audit

35   Question   It is unclear as to whether the chair of the audit committee
                will get no vote, a single vote, or two votes?

     Answer     The regulation is very specific on this matter. The chair will cast
                his or her vote as along with the other committee members. In the
                event of a tie vote, the chair is entitled to cast a second vote.


36   Question   The regulation states that the audit committee shall submit an
                annual report to the Board. For clarity should it not state that
                the audit committee shall submit an annual report to the
                Board in private session?

     Answer     No, the annual report is a public document that will be presented
                to the Board in open session.

37   Question   The regulation mentions two specific reports that need to be
                completed - one to the Ministry of Education and one to the
                Board of Trustees. Are there truly two reports or will one
                report satisfy both requirements?

     Answer     Section 15 of the regulation states that the annual report
                submitted to the board shall then be forwarded to the Ministry of
                Education by the board of trustees. Therefore it is indeed one

38   Question   Why is a report on the attendance records of the members of
                the audit committee necessary as compared to other
                committees of the board?

     Answer     A report on the attendance of audit committee members is
                necessary as non attendance can be cause for removal of a
                member from the audit committee under the regulation.

39   Question   Shouldn’t the audit committees report to an independent
                body instead of the board of trustees?

     Answer     No as the board of trustees is ultimately responsible for the district
                school board therefore the audit committee should report directly
                to the board of trustees.

40   Question   We strongly believe that information should not be available
                to trustee members of the audit committee in advance of
                other trustees and senior administration. To exclude these
                aforementioned parties is not conducive to a collaborative
                working environment for a school board.

     Answer     The Ministry agrees with this statement and believes that some
                school boards have a current policy that committee agendas are
                circulated to all trustees and senior administration at the same
                time in advance of any committee meeting. This practice would
                alleviate the knowledge gap that would be created if the agendas
                were not shared in advance.

41   Question   Will the Ministry provide specific funding for the audit

     Answer     No, the Ministry will not be providing dedicated funding for audit

42   Question   During one of the presentations it was mentioned that an
                external auditor has a conflict of interest by virtue of their
                position. How do we avoid this?

     Answer     The external auditor’s attendance at an audit committee meeting
                does not constitute a conflict of interest unless the external auditor
                provides other services to the board that creates a material
                relationship with the school board.

43   Question   The mandate does not distinguish between regional internal
                auditors and current board internal auditors and their roles
                and responsibilities. Will the Ministry be providing further
                guidance on the differences between these roles? For
                example, we would appreciate guidance under "Reporting" as
                to whether this reporting refers to regional internal audits,
                board internal audits, or both.

     Answer     It is our understanding that the mandate of the board’s current
                internal auditors is provided by the senior business officials. If this
                is the case, they are excluded from the roles and responsibilities
                of the regional internal audit team and are exempted from the
                reporting requirements.

                Should current internal audit staff satisfy independence
                requirements and perform an internal audit function as described
                in the sample internal audit mandate, they should report their
                findings to the audit committee.

44   Question   Is additional liability insurance required for the non-board

     Answer     No. As appointed volunteers representing the school board, they
                are covered by the board’s present liability insurance policy
                provided that they have been authorized by the board to be an
                audit committee member and are working within their established

45   Question   Do audit committees make recommendations to their
                respective boards or to regional audit committees?

     Answer     There was never mention of regional audit committees. Audit
                committees must be established by all district school boards by
                January 31, 2011. Audit committees report to the board of
                trustees of their respective school boards.

46   Question   Will the formation of this new audit committee mean that we
                are going to be required to dissolve our existing audit

     Answer     School boards that currently have audit committees will need to
                determine if they are in compliance with the requirements of the
                audit committee regulation. If boards are, they can continue to
                function under the status quo. If they are not, they will need to
                modify their existing audit committees to be in compliance with the

47   Question   The regulation mentions that there will be training for
                trustees on audit committees. Does this refer to all trustees
                or just the trustees sitting on the committee?

     Answer     A two day training session will only be offered to trustees that
                participate on the audit committee effective with the 2010-11
                school year.

                However, one of the training sessions will be videotaped (in
                English and in French) and will be accessible for others to follow
                on-line via the Ministry of Education Financial Analysis and
                Accountability Branch’s website in the summer of 2011.

48   Question   Do all school boards have to follow the audit committee

     Answer     Yes

49   Question   Our board has had an audit committee in place for several
                years, with two external members who are accountants.
                Since training will be mandated for audit committee
                members, consideration should be given to how we ask or
                require current members to attend this training.

     Answer     All current audit committee members will be strongly encouraged
                to attend the training session to ensure the effective functioning of
                audit committees. However, it is possible that some audit
                committee members may already possess the necessary skills
                and training to be an effective participant on an audit committee.
                In these very specific circumstances, those individuals are
                encouraged to have a discussion with Ministry of Education staff.

50   Question   It would be important to clarify what aspects internal audit is
                ultimately responsible for? Certain boards believe that it's
                only related to financial aspects, others believe it includes all
                operation aspects of the board - for example, transportation
                and information technology. Could the Ministry provide
                some examples of the types of internal audits that will be

     Answer     Internal auditors will be performing internal audits on all
                operational aspects of a district school board. Examples could
                include internal audits on information technology, special
                education, transportation, purchasing, accounts payable, etc.

Shared By: