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Internal auditor briefs board on audits, advisories, fraud hotline and control framework
Summary
Internal Audit Director Kevin Washington reviewed the audit function, internal control framework, difference between advisories and audit reports, the fraud triangle, hotline history and the department's risk-based audit planning process.
Kevin Washington, the district's internal audit director, presented an overview of the internal audit function, saying the office was established under board policy BDHA and that its work supports efficient, lawful operations and safeguarding of district assets.
"The controlled environment, or culture, is the foundation and the most important component of the control framework," Washington told the board. He emphasized hiring practices, accountability, and the need for stronger attention to the district's operational ("right-side") functions to support academics.
Washington described the difference between audit advisories and formal audit reports: advisories are internal communications to a department asking for a self-assessment and are not distributed to the board; formal draft audit reports are issued, management is given business days to respond with action plans, and finalized reports are distributed to senior administration and the board. He said the department uses a risk-ranking matrix (developed Feb. 2015) to select audit targets and that the annual audit plan is risk-based.
On fraud risk, Washington displayed the fraud triangle (pressure, rationalization, opportunity) and said the district can best mitigate fraud by reducing opportunity through strong controls. He noted the district's compliance and ethics hotline was adopted in fiscal 2015 and that the internal audit office was designated coordinator; Washington told commissioners the process of transferring hotline coordination back to internal audit is in process.
Washington also explained that external auditors focus on attesting to financial statement accuracy while internal audit has a broader, continuous operational scope. He said a forensic audit is a separate, detailed review used when allegations of illegal activity are suspected and would typically be handled by a different firm than the external financial auditor.
Board members asked about follow-up on audit recommendations. Washington said management receives a draft, has an opportunity to respond and must return action plans; the typical process produces a final report with embedded management responses. He said most management responses are timely and that the former audit committee used to be a conduit for escalations; the policy (BDHA) still references an audit committee though the committee was vacated some years ago.
Ending: Washington invited commissioners to review the exhibits included in his packet and to bring questions; the board did not take new formal audit actions during the work session.
