Purpose

The Audit and Compliance Committee of the Board of Trustees will assist the Board in fulfilling its governance and oversight responsibilities for the following activities.

  • The integrity of the University’s annual financial statements.
  • The University’s compliance with legal and regulatory requirements.
  • Oversight and direction of the internal audit and institutional compliance functions, any external auditors the Committee may employ, and engagements with the state auditors.
  • Oversight of the University’s internal control structure and management practices.
  • Knowledge of audit activities, informing the full Board and making recommendations when necessary, and other duties as directed by the Board.
  • Monitoring of compliance with University policies and procedures.

Authority

The Audit and Compliance Committee has authority to conduct or authorize investigations into any matter within its scope of responsibility. The Committee is empowered to:

  • Seek any information it requires from employees – all of whom are directed to cooperate with the Committee’s requests – or external parties.
  • Meet with University officials, external and internal auditors, the General Counsel, or others as necessary.
  • Delegate authority to subcommittees to handle any matter within the Committee’s scope of responsibility, provided that actions of the subcommittee are presented to the full Committee at a previously scheduled or called meeting.
  • Oversee the internal audit and institutional compliance functions of the University, which will report directly to the Audit and Compliance Committee through the Executive Director of the Office of Audit and Compliance.
  • Conduct executive sessions as authorized by law.

Composition of the Committee

The Audit and Compliance Committee shall be composed of no less than three members who meet the membership requirements established in the Board bylaws and who shall be appointed by the Board of Trustees on the recommendation of the Vice Chair of the Board. The Board shall appoint the Committee Chair on the recommendation of the Vice Chair of the Board. The Committee may be composed of one external member and two or more members of the Board of Trustees.

The Vice Chair of the Board shall serve as an ex officio member but shall not be counted for quorum purposes. A majority of voting members shall constitute a quorum. The President shall not serve as a member but shall attend meetings if requested by the Chair. The external member must have extensive accounting, auditing, or financial management expertise and may not serve as Chair. The term of appointment is two years, and the Chair may not serve more than two consecutive two-year terms as Chair. Also, there shall be no overlapping of membership of the Audit and Compliance Committee and the Finance and Administration Committee.

All members shall be financially literate, meaning they shall be able to read and understand financial statements, including a balance sheet, income statement, and cash flow statement. At all times, the Committee must have at least one member with extensive accounting, auditing, or financial management expertise. Each member shall be free of any relationship that would interfere with his or her exercise of independent judgment or give the appearance of a conflict of interests.


Committee Education

The University’s senior management and Office of Audit and Compliance are responsible for providing the Committee with educational resources related to accounting principles, internal controls, applicable policies, regulations, compliance risks, risk management, and other information that may be requested by the Committee to maintain appropriate financial and compliance literacy.


Meetings

Required Number and Call

The Committee shall meet as often as necessary to carry out its responsibilities but no less often than two times a year. A meeting of the Committee may be called by the Chair of the Board, the Vice Chair of the Board, the President, the Committee Chair, or by the Secretary upon the written request of two members of the Committee. The Committee will invite members of management, auditors, or others to attend and provide pertinent information. In carrying out Committee responsibilities, members may find it necessary from time to time to meet individually with management and internal and external auditors.

 

Notice

Notice of Committee meetings, including the purpose of the meeting, shall be given to all Committee members. Notice may be given by regular mail, electronic mail, or facsimile transmission. At least seven days’ notice shall be given when feasible, but less notice may be given when there is a need for urgent action by the Committee. If written notice is not feasible, by reason of urgency or other exigent circumstance, notice may be given by telephone.

Except when meeting in executive session as authorized by law, all meetings of the Committee shall be open to the public unless otherwise provided by the Tennessee Open Meetings Act or a judicially recognized exception to the Act.

 

Agenda

An agenda shall accompany the notice of every meeting of the Committee when feasible but, when not feasible, the notice shall state the purpose(s) for which the meeting is called.

Development of the Committee agenda shall be the responsibility of the Chair, in consultation with the Executive Director of the Office of Audit and Compliance. The agenda shall list in outline form each matter to be considered at the meeting. The Committee may use a consent agenda in the manner provided by the Board bylaws.

Matters not set forth on the agenda or in the notice may be considered only upon an affirmative vote of the number of Committee members constituting a majority of the entire Committee.

 

Quorum

A quorum shall be a majority (more than one-half) of the voting members of the Committee. The Vice Chair of the Board shall not be counted for quorum purposes. In the absence of a quorum, those attending may adjourn the meeting until a quorum is present.

 

Minutes

The Executive Director of the Office of Audit and Compliance shall cause minutes of all Committee meetings to be prepared, review the minutes with the Committee Chair, and provide the minutes to all Committee members before the next Committee meeting.


Responsibilities

Financial Statements

  • Review with the state auditors the scope and results of their examination of the University’s annual financial statements and any other matters related to the conduct of the audit, which should be communicated to the Committee.
  • Review with management and the General Counsel any legal matters (including pending litigation) that may have a material impact on the University’s financial statements and any material reports or inquiries from regulatory or governmental agencies.
  • Resolve any differences between management and the state auditors regarding financial reporting.

 

Internal Control

  • Consider the effectiveness of the University’s internal control system, including information technology security and control.
  • Understand the scope of internal and external auditors’ review of internal controls over financial reporting.
  • Review management’s risk assessment and the University’s Code of Conduct.
  • Ensure that procedures exist for the receipt, retention, and treatment of complaints regarding fraud, waste, and abuse, including procedures for anonymous complaints.
  • Ensure that the Code of Conduct is easy to access, widely communicated, easy to understand, includes an anonymous reporting mechanism, and is enforced.
  • Ensure that the University’s conflict of interests policy is comprehensive, clearly defines the term “conflict of interests,” and contains procedures for adequately resolving and documenting potential conflicts.
  • Review the University’s process for monitoring compliance with laws and regulations.

 

Office of Audit and Compliance

  • Ensure that the Office of Audit and Compliance has direct and unrestricted access to the Chair and other Committee members.
  • Review the Executive Director’s administrative reporting relationship to assure not only that independence is fostered, but adequate resources in terms of staff and budget are provided to enable the Office of Audit and Compliance to perform its responsibilities effectively.
  • Recommend to the Board the appointment and initial compensation of the Executive Director.
  • Review and approve the annual evaluation and compensation of the Executive Director.
  • Recommend to the Board reassignment, demotion, or dismissal of the Executive Director.
  • Review budget and staffing for the Office of Audit and Compliance.
  • Review compliance with professional standards.

 

Internal Audit

  • Review and approve the charter for the internal audit function.
  • Review and approve the annual audit plan.
  • Review the results of the year’s work with the Executive Director. Changes to the plan, including management requests for unplanned assignments, should also be reviewed.
  • Receive and review reports and other work prepared by the internal audit team.
  • Review any difficulties encountered in the course of performing audits, including restrictions on the scope of work and access to required information.

 

Institutional Compliance

  • Review and approve the annual institutional compliance work plan.
  • Review the results of the University’s compliance risk assessment process.
  • Review the results of compliance work on a regular basis.
  • Receive and review reports and other work prepared in conjunction with the institutional compliance efforts.

 

External Auditors

  • Present the external auditors’ conclusions to the full Board.
  • Meet regularly with the external auditors to discuss any matters that the Committee or auditors deem appropriate.

 

Communications and Reporting

  • Provide an open avenue of communication among the state auditors, the Office of Audit and Compliance, senior management, and the Board.
  • Report regularly to the Board about Committee activities and issues that arise with such recommendations, as the Committee deems appropriate.
  • Review and assess the adequacy of the Committee’s charter annually, recommending approval of proposed changes to either the Trusteeship Committee or the Board.

Approved November 2003.

Revised and approved by the State Comptroller November 2006.

Approved by the Audit Committee November 4, 2010.

Approved by the Audit Committee December 16, 2011.

Approved by the Audit Committee December 18, 2012.

Approved by the Audit Committee December 18, 2013.

Revised and approved by the Audit Committee December 8, 2014.

Revised and approved by the State Comptroller 2015.

Approved by the Audit Committee April 27, 2015.

Approved by the Audit and Compliance Committee December 7, 2015.

Approved by the Audit and Compliance Committee December 15, 2016.

Approved by the Audit and Compliance Committee May 3, 2017.