Sep 04, 2018 Audit Committee Meeting

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>> okay, guys, let's get going. We will be here until at least 8:30-9:00 tonight. This open meeting of the board of trustees is authorized in accordance with the texas government code, ♪ 551.001 through 551.146. Verification of notice of meeting and agenda are on file in the office of the chancellor. Per texas government code ♪ 551.1282, this meeting is being broadcast over the internet in the manner prescribed by texas government code, 551.128. I will first call on deana. >> I would like to thank trustee williams for chairing the audit committee and compton for accepting and serving on the audit committee. Thank you for accepting the appointments I was able to make based on your acceptance.

1. Certification of Notice Posted for the Meeting

>> I certify this meeting was posted due to 31st of August texas government code 551.054. >> I will introduce paul styrvoky.

2A. 4th Quarter Report from Internal Audit for Quarter Ended August 31, 2018 Presenter: Paul Styrvoky

We are happy to have him back to do the update to the committee for the fourth quarter ending August 31st, 2018. >> thank you, paul. >> chairperson williams. Trustee thank you for the honor to present to you for the fourth quarter. >> jl s. Williams: You have to speak up a little or bring the mic up. >> is that better? We issued two reports, the first is the inventory report. Two locations had not completed the inventory as of the April 30th deadline subsequently and the resolution o the audit findings and recommendations did clear the vast majority of those items. We identified 993 inventory items totaling $1.8 million. I did a detailed analysis of all the items. The bulk of those items are computers that are valued between $1,500 and $3,000 that have a usable life between 2-3 years. Typically replaced in te course of operations and their net value with -- are there any questions about the inventory report? >> jl s. Williams: Just a reminder because of accounting practices we don't show a depreciated value. The value may be zero, we show them at whatever the purchase price was? >> that's right. For items less than $5,000. >> we are required to do that, we can choose to do that or not? We are required to show them at their original value, not the depreciated value, is that what you are saying? >> only for te items -- are expensed in the period they are purchased. The other items are appreciated based on what the department sets up. >> what happens to those once they are zeroed out? >> they my be auctioned, they may be salvaged. They may be transferred to a different program. We have had instances where police vehicles were transferred to the law enforcement academies. >> there's a very strict state law requirements on the property of that nature and we follow those -- >> so for eample, we have a district-approved -- that collects the items and disposes of them. Our second audit we issued was telecommuting employees.


We have information from human resources at all locations. We interviewed several of the supervisors and we found that the current policy did not address the definition of the central personnel. My understanding is that is being reviewed and will be updated accordingly. The audits in progress, the trio upward bound grant at richland, we received the responses, we got final clearance and that report issued today. You will see that in the first quarter report at next meeting. There are two findings. One related to documentation. The other related to some minor issues with stipend payments. We do not see those as overall systemic problems and the college has taken prompt action. In a-133 reviews, that will take the bulk of our time. Any audits we show in progress, are temporarily on hold while we finish the grand parton work. The other we are recording is we provided assistance to another grand fort team, they will speak to that later in today's meeting. >> there's not a single item listed on here, it's numbers. >> that should have read summary of items. >> I think the detailed list is available. >> yes, I have a detailed list. >> yeah, when it says list of items, I was expecting to see chairs... >> if you you want us to provide. >> it's just the report titled. >> that's a good catch. Thank you very much. >> jl s. Williams: Anything else for paul? Anything else?

2B. Update from Grant Thornton on 2018 Audit Presenters: Ben Kohnle and Juliet Williams

Next we will be hearing from grant thornton on the 2018 audit. If I could get ben and juliet to come forward. >> these are the two hot seats. Trustee williams you said you were hoping to make it closer to 8:30-9:00 we will make it closer to 8:30. Do w have a presentation? >> >> yes, ma'am. >> you are in what year of the contract? >> we are in three? >> four. >> is it four? We have done three, this is the fourth year. >> out of how many years? >> five. Everybody have materials? I know it's behind you. I know it will be more difficult for you to see, we have the presentation and hard copy as well. You can ask questions as we go through each page. By the same token, I won't cover every single thing. This is provided in detail. We will cover the key points in addition with the upcoming audit. Feel free to jump in if you prefer to save your questions until then. I'm on page 1, values are clear, juliet is battling some fall allergies so I tld her I would do the speaking today and she could make sure I don't get too far off the pages. The values are clear. I think the good news from the board and this committee's perspective, we have values. I think it's probably important to start there, I think from an overall perspective, there aren't any more values, we believe through the acronym c.L.E.A.R. Those are the value that's serve our foundation as we provide services to the district to add -- adhere to


those values. In essence the board and this committee has engaged our firm to former an audit according to general standards as well as government auditing standards because they are a recipient of state and federal awards we have requirements in connection to those. But ultimately we form an opinion as to whether they are materially misstated or not and issue opinions on the schedule of state expenditures in connection with the single audit or your federal and state program audits. Again, those are the primary things you see. Secondary things, nothing has changed from what we have reported on historically. But again, the ultimate objective is a report on the opinion of financial statements as to whether the financial statement is prepared with your oversight or free from material misstatement. The next page is really the summary of responsibilities -- yes ma'am? >> can I ask a question? >> yes, ma'am. >> the next two -- >> yes, ma'am. >> the next two says communicate specific matters on a timely basis. We do not design our audit for this purpose. What does that mean? >> what that means our audit is designed for the purpose of determining whether the audit have a material misstatement, we have required statements, so this committee and ultimately the board. If that were to occur, we would ultimately have the responsibility to have those communications. >> we do not design our audit -- >> that's right. The audit is designed to determine whether or not the financial statements are materially misstated or not, not for communicating controlled deficiencies. That's more of the by-product. We communicate any material weaknesses or significant deficiencies -- >> mike market -- >> that's right. Great questions. The next are the day-to-day responsibilitis with management. I won't go through each individually. In essence the board -- establishing oversight for management to establish controls. Certainly those regarding financial reporting and certainly those regarding compliance with material grant compliance, direct and material responsibilities that management has in connection with that. But in essence, you are the oversight responsibility for the district and its carrying out its responsibilities for district and verification. Those are really outlined on the left side and the right side of the page, management's responsibilities. Their job in essence is to prepare the information in the financial statements we ultimately opine on, to the extent there's significant controls, any important matters that should be communicated to us, or for governance and certainly those communications are required to be made. To the extent we also make fraud inquiries, we will make those throughout the conduct of the audit to keep people that should be familiar with any fraud or illegal acts occurring. So we will be making those inquiries and have some dialogue with respect to those matters. To the extent there were material misstatements identified we would recommend adjustmentles -- adjustments be made. And if there are any subsequent events the district would make us aare and include those in the financial statements as a foot note to make sure the reader is aware of any subsequent events after the end of the year, intended to be issued the first week of December. And management ultimately formalizes those representations in a final, what we call representation letter, in terms of wrapping up the audit. The next page is really the audit time line and scope. I know john and pat probably don't think we ever leave, we do leave. We take a couple months off but we are certainly thinking about them through other parts of the year and accessible, but we start in about July with a client continuance process. The audit scope, the work we


will be performing and the time line. We set up our weekly status meetings, those are done throughout the summer. We had the planning and preliminary risk assessment procedures from July-September. You could see those detailed out there. Certainly part of that is this initial audit committee communications we are having today where we are actually laying out the audit plan on a fairly high-level basis. To the extent we have additional questions we raise, but we develop an adit plan, it's a risk-based approach. We identify the numbers that may be more likely to be materially misstated. >> those are strictly financial risk management measures. The other side will deal with other risks? >> that's right. We are looking to opine on the financial statements that are issued. So we look not only at the numbers but foot notes included in there. I see it's more of a financial risk and those that tend to be what ultimately gets populated as part of the testing approach. Kind of the interim fill work, August-October 2018 time frame, really paul mentioned in his comments they are performing testing on our behalf and they are and they are in that window where they are performing that work. We basically go through and there's a four-step risk-based risk assessment process that we have to do as part of the single audit. We select certain programs for testing, we review those, we perform sub testing, we have to reperform some of the tsting of their team ad ultimately reported on in connection with the financial audit statement, the last window October-December 2018 time line. That's the final fill work and deliverables, issuance of the financial statements. I mentioned materiality and the importance of that. Without going through in great detail we look at different benchmarks. Total assets we continue to believe is an important one. Take a small percentage, that is financial statement materiality. We also look at expenditures on the single audit. These are based on federal and state expenditures, the benchmark, we take a percentage and that becomes what we consider material. Certainly we also evaluate qualitative in addition to the quantitative issues we look at. Page 6, this group, special points. I would just ask as we typically do in this meeting. If you have awareness of significant matters you think we should be aware of with respect to either fraud, awareness of fraud, areas of concern, anything in the district's operations you think we should be taking a pretty close look at in the conduct of audit. >> you will also provide a phone number for us, right? >> ithink we do. We can get it to you. We are accessible. We will make sure trustee williams has it. Feel free to call us. That's a laundry list. If you have any concerns, feel free to let us know. specialist. We are c.P.A., certified public accountants by training. Oped, I will explain that, we use experts to make sure they are reasonable or not unreasonable, more appropriately. Internal audit, as you are aware, paul will continue to perform testing and we also continue to use minority firms in connection with the conduct of this audit. Very valuable members of our team. Areas of audit focus. Not the detailed work program but years you would expect us to focus on, more significant not only in terms of quantitatively material but qualitatively material. Next page is page 9. These are really what we have determined to be the major programs this year. Our team, in connection with internal audit paul and his team will be performing a testing on each of the six programs. The last year audited as well as expenditures, the district with fiscal year, they expect


those programs being majors to the extent they have signature activity that ends up crossing a threshold, we will certainly add that. But at this point those ae certainly ones we are looking at testing for fiscal year 2018, a lot of that testing is under way. Page 10, a lot of conversations on a lot of different things. I think the things we certainly have professionals involved in the audit. They will make inquiries and continue to have conversations on cyber security. We read it in the press. The purpose of the audit is not to determine cyber security assessment, but we have to identify I.T.-Related risk. Also internal controls we do opine on controls and compliance in connection with a single audit. Not the financial statement audit, we do have to perform testing and controls in light of the single audit, federal and state because we report on control and compliance there. Obviously we talked to the board and this committee in the past about the use of data analytics and we will continue to use those in connection with the fiscal year 2018 audit. Gasb standard board is always busy implementing new standards issued in this public sector. Certainly the district is required to implement those required to be implemented that have a material impact on the financial statements of the district. The one I would bring to your attention this year is we hd talked about really, for the last several years this one was coming. Gasb 68 is the one implemented in connection with pensions. So that net pension obligation showed up on the district's financial statement several years ago. This time, this year, this was kind of the second element of that, you have pensions and other post-employment benefits other than pensions, primarily retiree health care ad those obligations ultimately entered into on behalf of the state. Really do an allocation, john probably has additional financial information related to the extent you have an interest. We will go through the implementation of gasb 75 with john patton this year and you would expect to see significant liability recorded in connection with the fiscal year 2018 audit, because of the implementation of this statement. It's really one that we have been talking about for a couple years. I think the biggest change, no different than pensions is historically the actuary would determine the contribution that should be made to the plan in order to keep the plan actuarially sound. That determined the accounting in the past before the new statements were issued, to the extent the district in your case made the actuarially required statement estimated by the actuary. Now pensions and beginning this year for opeb. What those future benefit payments will be for retirees and those ultimately receiving benefits. This is to the current date and those amounts are actually reflected in your financial statements this year. >> does your audit include the investment directions of the funds in that pension fund or just districtly the financial statements as they exist? >> financial statements, they will. We will conduct the audit. The majority will be conducted over the next several months. >> how long has been gasb been around, '75, '68. How many gasbs are there? >> well, we are up to almost 90 now. Approaching 90. Someone says they have been around to long but they think they are providing valuable insight and they are the regulators. I expect the next year or two we will be over 100 statements issued by gasb. >> we have to talk about this maybe offline but in terms of the retiree benefits, can you, real quickly, we budget annually based on the numbers out there and book it accordingly but you are indicating we will have to book out an actuarial life span of folks? >> right. So chancellor, you are exactly right. Historically before the issuance of this statement, most governments across the country, frankly, did this as a pay-as-you-go basis, as opposed


to employees and employers make a contribution. Each year you expected in terms -- >> this will be a huge liability? >> yeah, huge liability. >> $200 million? >> we basically, at the end of last year we had an unfunded, or unrestricted net position of $251 million. That included pension liability already recorded for $60 million in total. In-flows, out-flows and unfunded liability. The q.R.S. Portion, the health care benefit portion is going to be, I think the number we calculated so far is $204 million, that doesn't include the in-flows and out-flows we won't get to. It will pretty much wipe out just about all of our unrestricted net position. This is based on last year's numbers, if we haven't closed out the books for this year. But as we do, the important part of it is the rating agencies are very aware of these changes also. It will not affect our bond rating. In fact we will be one of the few clleges in texas that will still be positive in the net restricted position. Most went negative with just the pension 68 gasb policy. Now with the health care, they will go in a negative net position. We will still be positive, though not one time not too long ago about $300-$350 million. These liabilities recorded called mumbo jumbo reporting because it's a liability that would b very rare for anyone to actually make claim on. We are required by gasb. That's a profit and not for profit group that regulates the accounting industry that looks at that and they have been for years trying to make our statements the same. For comparative purposes you see the same thing on the for profit company as balance sheet and income statements of a government agency. I don't think that's possible, quite frankly, but I'm not a c.P.A. Or accountant. I'm more of a managerial accountant who knows about reading those -- >> I think good news, john, these are long-term, 30 year, you you will continue to make benefit payments ultimately made for those purposes. But it's not like this is an obligation that's payable tomorrow. Because that gets everybody concerned we have a net position of $50 million, at one point was over $300 million. The bottom line is we all have to -- these payments get paid -- it's pshing it to the face of the financial statements so that liability is a lot more transparent than it's ever been. The fasb rules canged over a decade ago, so they are reflecting those liabilities. Not a current obligation but if they continue to provide benefit, ultimately continues to provide those benefits there's a calculated amount, based on mortality, years of service, mortality, you will start receiving benefits x-date through death, right? If you discounted that back to today, that's basically the discounted value of the payments. >> more importantly here, this is the state's unfunded or actuarially determined health care benefit costs. It's not ours directly, it's the state's portion. P.R.S. Has an unfunded liability of $32 billion in unfunded liability on the pension plan that is required. Remember, we have two types of retirement plans. The t.R.S., defined benefit plan, and o.R.P., defined contribution plan. Businesses moved out of defined


benefit plans and defined contribution plans with the growth of 401(k)'s years ago. So as long as the state continues to have, as most governments do, pension plans, as you read in the paper, you will see all of them are sitting on unfunded liabilities they will some day have to be paid by the tax payers. >> we still have an active defined benefit plan that's operational? >> t.R.S. Is the legally defined and legally we have to go to the optional retirement, only a certain group of employees allowed to do that. Don't get me on my soap box. >> you said in the change of accounting standards we aren't negatively impacted. Is that because of fund balance or why do you make that statement? >> as opposed to many other colleges who don't have the number of 4-6 months fund balances we have, I will use the word fund balance in lieu of net position here. We have always been very financially healthy. We still have that money. But we are recording a long-term liability on our books, it doesn't mean we will have to pay that or we are losing any of this money. We still have the cash. >> but you you are saying we aren't negatively affected? >> we are negatively affected, but not as bad as everybody else. >> joe, does that answer your question? >> yes, thank you very much. >> that's the biggest one. I could go through the other 12 over the next several years but for the sake of trying goat -- get us out of here by 8:30, right? >> don't encourage him. >> yeah, john knows. Any other questions? If not, we will make sure we have the contact information. >> any surprise or anything, that has wowed you or anything? >> well -- juliet? >> she does all of the good work. But again, w have done the interim work so we have final authority, but at least so far, so good. >> >> jl s. Williams: Any questions before they leave? >> thanks, again for the opportunity to work with you

2C. Update on Search for new Director of Internal Audit and Assessment of Internal Audit Department by Grant Thornton Presenters: Rob Wendland, Priya Sarjoo and Shawn Jacob

you. We appreciate it. >> jl s. Williams: Thank you. Next, update on search for new director of internal audit. Rob, priya and shawn. Did I say that right? >> as I mentioned at the outset of the meeting, rafael served and retired August 31st after over 20 years of service to the district. We thought it would be a time to take that opportunity with rafael moving to look at the operations of internal audit, really a critical function in the district. And with a district of this size of complexity and benchmark is against where we should be, what we should be doing internal audit, what our capacities are, what our areas of what the standards are by which we measure ourselves and test ourselves, if the committee will remember I was working over the last year ad rafael was working with the gentleman who was helping us move some of our practices and policies ad procedures in internal audit forward. They hadn't been revisited in some time and tragically dan passed away in January. I had been talking to dan about extending his engagement and continuing to work with us toward assessing internal audit department, the function of the processes it was following. Dan passed away in January, and I look to our trusted allies and say can you help me out with respect. They have the opportunity to hire the next executive director serving over 20 years, we want to make sure we were best positioned in hiring the next person, the person to succeed rafael, that person possessed the capacities and vision and strategic priorities that we are needing, so I have delayed until such time we could do this assessment. By that I kow we said we would be finished by 8:30. I have priya sarjoo and shawn jacob, who have come in and worked with many stakeholders to do an assessment. I will turn it over to them.


>> can you speak a little louder and introduce those ladies again? With grant thornton? >> yes, priya sarjoo to my immediate left and shawn jacob is to her left. And I will let tem tell you about themselves but they are with grant thornton. I will turn it over t priya and shawn. >> thank you, it's a pleasure to be here. If you let me I could talk about this all day but we will try not to go over our allotted time. We are in the practice at grant thornton, shawn is a manager in that process. This is what we do for a living. Internal audit practitioners. As part of what we do with internal audit where's we deliver internal audits to clients we also evaluate the performance of internal audit functions. We get evaluated as well. So we know what it's like to be on the other end of a review. But one of the things we have actually focused quite considerably on is where should internal audit be? How should it be positioned? What should the structure of internal audit look like? All with an eye to, how does internal audit actually provide support to the organizations? If it supports, enables, helps in terms of risk management. And that was the view that we took as we went through this review. We looked at today's current internal audit operations and we evaluated that against what else? Where else could internal audit be? What we have found from not just talking with a number of folks here over a dozen folks here at the district, but as well from what we do for a living, which is work with internal auditors in multiple industries, what we have seen and what we have found is that internal audit is changing. And the expectation of internal audit is changing. So gone are the days of auditing, following behind external audit. Following behind folks like ben and juliet and looking at the financial statements. Financial statements get a lot of attention. So internal audit today needs to be more than just another aspect of financial statement audit. It neds t be a partner with the business of the district to help us achieve the goals we have set out, the strategic objectives we have set out as a group for the district. That's the perspective we took as we did this review. You should have received in your packet our executive summary. I think you might have got a couple pages. You should have received the executive summary and that's what we will be going through today. Please stop us, as you hve been doing, stop us at any point to answer questions, if I'm going through something too quickly, or not quickly enough. Internal audit is changing. What does that mean? What is the expectations on practitioners like us, and expectation folks like you who rely on internal audit, what do you expect of internal audit? Good news we found the expectations of executives, leaders, we spoke with trustee williams, the expectation of folks at the district is, it is completely consistent with what we see in the rest of the world. So what we have laid out here in terms of the dcccd expectation is consistent with what we see elsewhere. I want to draw attention to that because it's important for us to recognize the recommendations coming out of this report are not unusual, are not specific, necessarily in a unique way to this organization. This is what's happening out in the world. Another piece of good news, whomever you are looking at as your new head of internal audit, this should be their expectation and the way they operate as well. Because again, we aren't taking an approach that is so vastly different from what is out internal audit today and of the future looks like. So what did we hear? What we heard from the folk wes talk with and what we know from our work with other organizations is, and some o this wll be obvious when I say it, or it should be obvious when I say it, we expect the internal audit should focus on the highest risks. If we are focused on lower risks, we are probably not doing what we need to do to bring value to the organization.


We need to understand what the highest risks are and focus on them. Internal audit should be regarded as somebody who, any of you, as a function that any of you could talk to to get advice. We use this concept of the trusted advisor and it's purposeful even if it may sound a little cliche but you want to rely on your head of internal audit as somebody who could come to an executive meeting and be a resource you could lean onto get their opinion. >> you said highest risk. Highest risk in a financial area? Not necessarily operational area. For example, cyber security. Do we hve a protection program for student records, that's not what you are looking at? >> no, that's exactly what we should be looking at. There's a financial component as well but it should be financial plus operational, plus compliance, plus emerging risks of other sorts. >> I think she is working on the back of the document of the executive summary. >> I'm going down the left side. The question though is exactly right. If you look at item 3 in that column, what the expectation is, internal audit should be able to bring capabilities for something different. Not jst what we did last year but the risk, the question, the consideration facing us today. It could be something like cyber security. That is a perfect example. It could be the data analytics question that ben mentioned earlier, a special I.T. Project. A new program that is being considered, the balance of day classes versus night classes, an analysis that could be done around that. Mere examples, I'm not suggesting those are the right areas of focus here but internal audit should be a resource that te chancellor and others could lean on for analysis. >> c. Rogers compton: What kind of risk? >> we are staffed with the executive director with four personnel in internal audit. >> c. Rogers compton: But what kind of staff would you need to be able to determine all the different areas of our operations if there was a risk? >> I don't know I'm prepared to answer that just today, that's one of the things. We have a risk management center? >> we have a risk management department but that looks at more physical risk, the insurance, commercial liability insurance in our compliance with those things that present dangers and inherent risks with the real property and improvements we have. It's not programmatic or operational in a sense. It goes in those areas some but it's primary focus is not that. >> we would not recommend staffing up to identify potential risks. What we would recommend is a comprehensive risk assessment, similar to what's done now, but that doesn't require a lot of bodies, except for folks I the operations, in the academia, in the day-to-day running of the organization. What I mean by that is, folks like us should not go and do a risk assessment off in the corner in the dark. We need to engage with the folks in the trenches who are doing the work. So that's where tere tends to be a burden when we go out and talk with folks to sy, chancellor may, let's talk about where in terms of the next three years, where are you headed? What's going to change in this organization. That requires some of his time. But the internal audit function itself doesn't need a lot of bodies to do the risk assessment. >> let's keep it moving. >> yes, sir. The last couple points is around having god recommendations come out of the internal audit and performing audits aligned with the highest risks, so they need to be relevant. I can summarize very quickly over on the right-hand side of that page what that means, in terms of your next, as you transform internal audit what that means in terms of the function.


Look for somebody and have an eye toward folks who have an understanding of the business of the district, not just the financials of the district, or where are we going as an organization. You may need to obtain additional capabilities. So a you look at what is needed to deal with the highest risks, then you consider what else do we need, it doesn't mean adding them as full-time employees necessarily, it just means having resources you cn lean onto bring in specialists. I do want to call out one of these bullets. This is item 2. Around, when we have a good sense of the bsiness and of the highest risks, we necessarily then pay attention to recommendations that matter. Not all audit findings and recommendations are created equal. We have to consider what is truly the impact, what is the cost of remediation, what is the impact of fixing it. You have to have a sense of the business to do that. And lastly, this judgment that fits into understanding .Business. We need to work on what's important and what's really going to add value as internal auditors. If we find, in the middle of an audit, there's really nothing there, it's okay to stop and that professional judgment needs to come into play where we can say we will walk away from this and focus our efforts in another area where there might be value. I will stop there and see if there are any questions or comments. >> you look add the the charter for the audit committee in your work? >> we did read through it, yes. >> I guess, that is an item later but comments have been made by a couple people that we are financially focused and asset management focused in terms of our he audit process and we occasionally hear about risks outside of that space, we don't see anything at the board level that even remotely approaches a comprehensive risk assessment and prioritizes those risks in terms of things we should be focusing on as we do our budgets and create policies and so forth and also the other thing the way we practice, we have tis internal financial mnagement focus, do we need a separate risk assessment function, if you will, within the district, or should that be integrated into internal audit. It's done in different places but, I think, I'm getting the sense we feel as a board we might need to pay more attention to risk assessment and risk management. In terms of approaching that, do we integrate it into internal audit, do we direct the chancellor to look at that as a separate issue. What is the best way t think about it structurally? >> it's very common to have that included as part of the internal audit per view. Purview. Very common. It looks at risks across the enterprise, not just in financial areas. It's an accepted approach to have internal audit look at that role. >> we have done, historically. The job description for director of internal audit needs to be revisited, hasn't been in many, many years. As priya said, the transformation of the function organizations like ours has been profound and distinct in recent years. That's one of the reasons why I didn't look for the successor to rafael at this point, not to demeanor disparage rafael in anything, but doing thing that's comport with what are the accepted ways of doing things. Different expertises, it's really to say that, I think we need to take a different approach to how we do things in the district and that's what we want to do. >> just a few years ago we began really realizing we needed to move in this direction and that's when we brought in dan centa, we did an external risk assessment because at that time we didn't have the internal folks, but


what we are seeing with the opening, we have the opportunity to hire staff in line with the direction that we really laid out we want to go. >> I think it goes to the vision, the role of the director, the person who leads that effort is going to dictate a lot about the results that we can expect to obtain from that. We have very fine people in internal audit. They are very accomplished folks with training, with an emphasis on these other areas, we have a lot of capacities and capabilities and I think shawn and priya would agree with me. We haven't focused on those things necessarily that we should be focusing on. Given complexities and risks to what we do in the district. I think when that said we want to move in another direction, grant thornton engage help us assess where we are and where we want to be and put together, they actually developed a plan to phase into getting where we want to be as a function here. >> so the expectations fr the new director will incorporate in her background tese stakeholder expectations being philosophically and practically a way to move forward. >> they are just not, they weren't in our realm o thinking the way we did things before, they will be going forward and that will be the expectation, as we hire to that role we will want somebody who embraces these. As priya said, somebody has the expectation this is what you want. >> any other questions of priya or shawn? >> >> d. Flores: It's gratifying to see the accomplishments of the team of grant thornton. I wish we could say that about all of our internal teams but we will get there. Thank you. >> thanks, everyone. We appreciated the time. >> jl s. Williams: Since you are all with grant thornton, do you all ride in the same car? >> it wasn't intended to all fall on the same meeting but it worked out that way.

3A. Committee Charter and Memberships

>> the charter was prepared and created for the committee last year, we developed charters for not only this committee, education workforce and finance. The charter itself have termed reviewed by the audit committee and go to the board, this is a relatively new charter, I would just commend it to you for your review, if you see things you believe might be deserving o comment or change, then please bring them to my attention and I will work with, we will schedule time in the next audit committee to discuss changes that mght be proposed and you can make recommendations to the full board. >> d. Flores: Chair, questions? Does this recommend how you want internal audit to move, in terms of the risk assessments? >> no, not specifically, I don't believe. Because this I the committee audit. >> >> >> d. Flores: I understand that, but does it sufficiently include at least a bullet or two that would remind us this is a focus of internal audit now? >> it may not as robustly as it should. That's something I will come back and make recommendations. At the time we were thinking in the old narrow optic in terms of how we did things as internal audit. It might be it is appropriate in this charter as well. >> d. Flores: Now that we reviewing it, we will see if we want to change it up. >> in addition to incorporating the risk management pilosophy into it, when I re-read the charter, the preparation for the meeting, kind of struck me we might want to have a better articulation of better audits role I overseeing our internal practices and procedures and board policies, because nowhere is that cited at all. I was thinking faculty load, systemic non-compliance with board policies for a variety of reasons. It would seem we ought to as a board have competence our internal auditor is looking at policies and making sure we are adhering to them. If that's not specified we think that function ought to be doing, we ought to say so. >> I agree. I think that's certainly


something I think, in terms of looking at as a district, how are we presenting ourselves to deal with the risks. I will come back with some recommendations for the charter for the next audit committee remeeting with language that embraces some of the concepts we hve been talking about. >> jl s. Williams: We ae in a different day. You mentioned rafael had been here 20 years. I thought it was 30 or 35. >> I think it's been 25 plus. Paul, d you remember? >> 30. >> jl s. Williams: Different day, looking at it, sometimes we don't go to sleep, oh we did it that way forever, just different times. Anything else, rob? Priya? >> I think the suggestion when we have executive leadership convene to discuss programmatic things we meet as a chancellor staff and as a c.E.O. Dialogue, examples of the interim stakeholders. Not the board necessarily, engagement with the board of internal audit is very important as well. Being involved with the processes being discussed, whether they are programmatic or strategic is important, I don't want to put words in their mouth but I think that's what they are looking for is somebody would sit and actually be engaged with the process at the inception. Lawyers are most effective if they are involved from the outset instead of after the fact when it's already gone off the rails in one way or the other. >> jl s. Williams: Other questions? Anything else?

* This transcript was compiled from uncorrected Closed Captioning.