5.  FINANCIAL REPORTING

a.  Annual Financial Report

Each state university shall submit to the President and Chief Executive Officer a comprehensive financial report for the prior fiscal year in accordance with the schedule maintained on the Board of Regents’ website.  The President and Chief Executive Officer shall be responsible for recommending to the Board any specific financial report findings that should be further reviewed by the Board.  The financial report shall conform to a format determined by the Council of Business Officers.  The financial report shall reflect conformity with financial reporting methods and formats promulgated by the American Institute of Certified Public Accountants and Governmental Accounting Standards Board and the Financial Accounting and Reporting Manual for Higher Education (formerly CUBA) unless otherwise provided by state law, practices or procedures.

b.  Internal Audit Function

i.  Each state university shall have an internal audit function.  The responsibility of the internal audit function is to serve the university in a manner that is consistent with the International Professional Practices Framework (IPPF) promulgated by the Institute of Internal Auditors.  Additional resources, tools and guidance should be obtained through the Association of College and University Auditors and the Committee of Sponsoring Organizations.

ii.  The purpose, authority, and responsibility of each university’s internal audit function shall be defined in a formal written document (internal audit charter) that is approved by each state university’s chief executive officer.   The charter shall make clear the purposes of the internal audit function, specify the unrestricted scope of its work, and declare that auditors are to have no responsibility for the activities they audit.  The scope of work of the internal auditors shall include review of university controlled affiliated corporations, including a review of the IRS form 990 for each such corporation, with a focus on potential conflicts of interest and transactions between the university and university controlled affiliated corporations.   The charter shall endow internal auditors with the authority to fully and freely access all the university’s records, properties, and personnel relevant to an audit.  The charter shall provide that the auditor report directly to the university chief executive officer on all audit matters.   The charter shall clearly state that internal auditors shall report directly to the Board Fiscal Affairs and Audit Committee any situation wherein the auditor perceives a conflict of interest with or on the part of the university chief executive officer’s involvement with the subject of an audit.  In addition, each state university shall include the charter in university manuals, policies, and procedures as appropriate.  Each state university internal audit department shall report annually to the Board’s Committee on Fiscal Affairs and Audit, summarizing the prior year’s activities and audit plans for the coming year.  Each state university shall notify the Board’s Committee on Fiscal Affairs and Audit in writing of any personnel change in the position of university internal auditor.

iii.  Each state university shall develop and maintain an internal audit plan. At a minimum, internal controls for the university’s highest risk units, based on public funds exposure, should be assessed on a regular basis.

iv.  Each completed internal audit reporting material financial weaknesses or fraud shall be submitted to the Board President and Chief Executive Officer who shall be responsible for recommending to the Committee on Fiscal Affairs and Audit any specific audit findings that should be further reviewed by the Committee.

c.  Non-Public Funds Management Review

i.  Each state university chief executive officer shall maintain on file at the university a current list and description of the non-public, unrestricted funds under his or her direction or that of direct subordinates.

ii.  Each state university chief executive officer shall maintain and provide to the Board annually a list of all affiliated corporations (controlled and non-controlled) and a description of their respective governing boards and management structure.

 iii.  Each state university shall annually review the roles of direct subordinates in or with such affiliated corporations for the purpose of identifying potential conflicts of interest. If appropriate and to the extent it is within the chief executive officer’s control, the university chief executive officer shall initiate a plan to either eliminate or manage any identified actual or potential conflicts of interest and shall file the plan with the President and Chief Executive Officer of the Board of Regents.

iv.  The President and Chief Executive Officer of the Board shall annually review the roles of the state university chief executive officers in or with all affiliated corporations for the purpose of identifying potential conflicts of interest.  If appropriate, the President and Chief Executive Officer of the Board shall initiate a plan to either eliminate or manage any actual or potential conflicts of interest and shall submit such plans to the Board Chair and Vice-chair for approval.

v.  The Board may initiate external management reviews of the use and expenditure of non-public, unrestricted funds held by the university or an affiliated corporation of the university and under the direction of each state university chief executive officer and each state university chief executive officer’s direct subordinates at any time, but such reviews shall be conducted no less than once every 5 years beginning fiscal year 2013.  Additionally, such reviews shall be conducted when there is a change in the chief executive officer.  All such reviews shall be contracted by the Board and financed by a transfer of funds to the Board from the state university under review.  The university shall request its university non-controlled affiliated corporations having non-public, unrestricted funds that are under the direction of the university chief executive officer or the chief executive officer’s direct subordinates to cooperate in the conduct of such reviews.

vi.  Each state university chief executive officer shall request the board of directors of each university non-controlled affiliated corporation to include in the scope of its annual independent audit identification of actual or potential conflicts of interest involving unrestricted, non-public funds under the authority or direction of the university chief executive officer or the chief executive officer’s direct subordinates.  The state university chief executive officer shall request that such review include an examination of fund transfers and other transactions between and among the university, its affiliated corporations, and external entities reported on statements of substantial interest forms, and that the university non-controlled affiliated corporation share a report of each such review with the President and Chief Executive Officer of the Board.

vii.  For purposes of paragraph c.,

(1)  “non-public funds” means any funds expended for the benefit of the state university but not processed through the state financial system, and

(2)  “affiliated corporation” shall not include the Wichita State University Board of Trustees.