Audit

To provide procedures that will insure conformity in the gathering of information and the eventual discernment of that information on a District-wide basis while efficiently employing the resources and time of the District’s employees.

The accounts of the District shall be audited in accordance with the approved financial reporting system. Education Code 61.065

These procedures will allow the Board to be in compliance with the objectives as stated in the Lone Star College System Policy Manual, Sections CDC (Legal & Local).

The scope of this section is to provide general overall guidelines necessary to develop an audit plan that will allow management to have reasonable assurance about whether the financial statements are free of material misstatement. This audit plan will state procedures to identify and outline the specific functions to be performed, the regularity that those functions will be performed and the designated responsible individuals involved from both the College and District Business Offices.

Audits for the District shall be performed in accordance with generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General of the United States. The audits of the District shall include both external and internal audit procedures, and shall include examination of evidence, on a test basis, supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

An annual audit of all funds should be made to determine:

• The adequacy of the Board’s fiscal policies.

• The execution of those fiscal policies.

• A check and review of the District’s fiscal action for the preceding year.

Audits may be made of:
Lone Star College System as a whole (Colleges & District Office),
An individual College, or
The District Office.

The designation of responsibility will change depending upon the entity being audited, as explained below.

For the District, the Vice Chancellor of District Services and Chief Financial Officer is responsible for the overall financial statement presentation, for the audit of those statements and for the presentation of that audit to the Board.

For each College, the Vice President of Administration is responsible for the financial reporting and, therefore, the internal control procedures applicable and necessary for that College.

While the Vice Chancellor of District Services and Chief Financial Officer, Lone Star College System, is responsible for the financial reporting and internal control procedures for the District Offices, a Department Head, additionally, is responsible for the operations of his/her own Department.

In support of the above, the assessment and evaluation of all internal control procedures may be performed by the Internal Audit Coordinator, at the appointment and direction of the Vice Chancellor of District Services.

Additionally, independent external assessment of internal control procedures may be requested, as deemed necessary, by the Vice Chancellor of District Services.

The management of the District is responsible for establishing and maintaining an internal control structure. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of internal control structure policies and procedures. The objectives of an internal control structure are to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition and that transactions are executed in accordance with management’s authorization and recorded properly to permit the preparation of financial statements in accordance with generally accepted accounting principles. Because of inherent limitations in any internal control structure, errors or irregularities may nevertheless occur and not be detected. Also, projection of any evaluation of the structure to future periods is subject to the risk that procedures may become inadequate because of changes in conditions or that the effectiveness of the design and operation of policies and procedures may deteriorate.

1. The Lone Star College System Board shall select an auditing firm for a designated period through a Request for Proposal (RFP) or an engagement letter that outlines the Board’s expectations for the annual audit and ensures that the audit firm follows the guideline and standards of the American Institute of Certified Public Accountants (AICPA) and the Governmental Accounting Standards Board (GASB).

2. A comprehensive audit report of all funds and accounts of the District including a management letter shall be submitted annually to the Lone Star College System Board.

3. A copy of the independent audit shall become a part of the Lone Star College System Board’s official minutes and shall be available to the public for inspection during regular hours.

4. Periodically, the Chancellor shall submit reports to the Board evaluating the work of the District’s auditor.

5. The annual audit report for the fiscal year ending August 31 shall be filed with the Coordinating Board on or prior to December 1 next following the close of the fiscal year for which the audit was made. Three copies of the audit shall be submitted to the Coordinating Board.

All District accounts and records shall be subject to internal audit as deemed appropriate by the Vice Chancellor of District Services. The objective of internal accounting control is to provide reasonable assurance as to the safeguarding of assets against loss from unauthorized use or disposition and to evaluate the reliability of financial records for preparing financial statements and maintaining accountability for assets. Findings of such audits shall be reported to the Board.

1. The Internal Audit Process for the District is performed in four distinct functions:

   1. the audit schedule

   2. preliminary audit planning to determine objectives

   3. performing the audit

   4. audit findings and reporting

2. The Audit Schedule -

   1. Various areas of concern are incorporated into a suggested audit schedule.

   2. A proposed draft of the audit schedule is submitted to the Vice Chancellor of District Services for approval.

   3. Upon approval, entrance interviews are set up with the persons responsible for the areas to be audited. Memos are sent to the President or Department Head (if District Office), applicable Vice-President and auditee(s).

   4. Initial site visitation is made to discuss with the President or Department Head (if District Office), the nature of the engagement and to assess the engagement concerns and risks.

3. Preliminary Audit Planning To Determine Objectives -

   1. Preliminary planning is performed in order to acquire an understanding of the area to be audited.

   2. At this time, preliminary analytical procedures may be performed to determine the level of materiality and risk and to gain an understanding of the auditee’s service objectives.

4. Performing The Audit -

   1. Determination of risk is the control for the level of substantive testing to be performed.

      If a specific risk has been identified, the audit must include:

      1. a review of the controls in place that contributed to the risk,

      2. detailed substantive tests,

      3. the arising potential level of error from the risk, and

      4. controls that must be implemented to reduce and/or eliminate the risk.

   2. If no specific risk has been identified, the audit must include:

      1. an overall test of the controls in place and

      2. a reasonable level of substantive tests to insure that controls in place are appropriate.

   3. After the performance of the audit, an evaluation of the tests results and findings is developed.

5. Audit Findings And Reporting -

   1. A meeting with the auditee(s) is held to discuss the findings and possible resolutions.

   2. The auditor will prepare a draft report of the findings and submit it to the Vice Chancellor of District Services.

   3. The Vice Chancellor and auditor will meet to discuss the audit report and to determine the appropriate distribution.

   4. A conference with the appropriate administrator is held to discuss the draft audit report and to solicit management response.

   5. An official interim audit report is issued to the auditee(s) with responses incorporated, with copies to the: Vice Chancellor of District Services and appropriate Presidents, Vice Presidents and other Vice Chancellors.

   6. Additionally, the auditor will prepare a quarterly audit report and submit it to the Chancellor for distribution to the Board of Trustees at the Quarterly Audit Committee Meeting.

Annual Audit Report -

1. An annual audit report for the fiscal year ending August 31 shall be filed with the Coordinating Board on or prior to December 1 next following the close of the fiscal year for which the audit was made. Three copies of the audit shall be submitted to the Coordinating Board. (Lone Star College System Board Policy, Section CDC (Legal))

2. A comprehensive audit report of all funds and accounts of the District including a management letter shall be submitted annually to the Lone Star College System Board. A copy of the independent audit shall become a part of the Lone Star College System Board’s official minutes and shall be available to the public for inspection during regular hours. (Lone Star College System Board Policy, Section CDC (Local))

Quarterly Internal Audit Report -

The Internal Audit Coordinator will prepare a quarterly audit report of findings and submit it to the Chancellor for distribution to the Board of Trustees at the Quarterly Audit Committee Meeting.