7-1950: Internal Audit Oversight

It is the policy of the County to maintain strong fiscal accountability through effective internal controls, budgetary compliance, sound financial practices, accurate and timely financial reporting, and regular audit review with appropriate follow-up.

To support these objectives, the County hereby establishes the Committee as a formal oversight body. The Committee shall serve as an independent forum for review, discussion, and evaluation of audit matters, financial practices, and internal control systems.

The purpose of the Committee is to provide the County Executive and the County with leadership in audits, financial practices, reporting, and to further demonstrate good stewardship of public resources. The Committee will assist the County in fulfilling its oversight responsibilities and maintaining fiscal accountability.

Additionally, the Committee serves as an important communication link between external auditors, internal auditors and operational management. Strong internal controls are a key component of safeguarding public resources, and each department shall be held accountable for internal controls within their various programs. 

The Committee shall consist of no fewer than four (4) and no more than seven (7) members who possess a basic understanding of governmental financial reporting and auditing.

Members may include, but are not limited to:

• Assistant County Executive
• Deputy County Executive
• Chief Fiscal Officer
• Director of Finance

Membership may be amended from time to time by mutual agreement of the County Executive and the Director of Finance.

The Department of Finance may only have the Director of Finance as a member of the Committee. The Committee shall act in an independent, collective capacity. Independence, for purposes of this policy, means that members shall avoid actual or perceived conflicts of interest and shall perform their duties objectively and without undue influence.

The Committee shall meet at least four (4) times per fiscal year and more frequently as necessary to fulfill its responsibilities. The Committee shall meet at least annually with the independent external auditors and may meet with internal or external auditors at other times as deemed appropriate.

Meeting agendas and supporting materials shall be distributed to members in advance of meetings. Minutes shall be prepared, reviewed, and approved by the Committee. 

County Financial Statements

• Review the effectiveness of the County financial reporting system including the system of internal controls.
• Review the selection of external auditor, in accordance with state laws and auditing standards, including the timing and scope.
• Meet with the independent auditors, as needed.
• Review the scope, timing and results of the annual financial audit and Single Audit.
• Monitor the resolution of internal and external audit findings and recommendations; follow-up with department heads as necessary.

External Audits

Department Heads or their designee are required to notify the Department of Finance, Internal Audits Unit of any external audit upon receipt of the audit engagement letter, entrance conference or other notification initiating an audit. Further, Department Heads or their designee are required to provide the finalized external audit report and their corrective action plan, if applicable, to the Internal Audits Unit.

The Committee will review the results of audits conducted by any external auditors or regulatory auditors on any County programs or departments.

The Committee will monitor the resolution of external audit findings and recommendations and ensure appropriate actions are taken to resolve any findings including follow-up with department heads, as necessary.

Internal Control and Internal Auditing

• Review the results of the County-wide risk assessment and audit plan, including potential for fraud, and consider the effectiveness of the internal control system to mitigate the identified risks. Determine that all significant internal control weaknesses identified are quantified, reviewed, and addressed. 
• Review the scope, effectiveness, and activity of the annual internal audit plan with the Director of Finance. 
• Receive and review the internal audit reports.     
  • Review the reports of the internal audit team for all audits completed since the prior audit committee meeting. 
  • Review and discuss the findings for each audit completed since the prior meeting, and management’s response(s) to the report. 
  • Monitor the resolution of internal audit findings and recommendations and ensure appropriate actions are taken to resolve any findings including following up directly with the department head, as necessary. 
• Monitor the reviews or investigations of reported potential fraud, waste and abuse, including those reported through the fraud hotline. 
• Discuss the internal audit’s compliance with applicable standards, including the requirement for a peer review (typically every three to five years per audit standards). 

Relief of Accountability

Department Relief of Accountability requests, after review by the Director of Finance, will be submitted to the Committee for review before submission by the Director of Finance to the Board. The Committee will:

• Review the cause of the loss and stolen assets; 
• Review prevention measures that have been or will be in place that should prevent any future loss of assets and thefts; and 
• Meet with the Department Head, as needed, as related to above Items a and b. 

Distribution of Audit Reports

After Committee review, internal audit reports, except for confidential reports, shall be uploaded to the Department of Finance website.

External audit reports shall be posted to the above websites when they are completed and received by the Department of Finance. If an external audit is performed, however the auditor does not issue a typical audit report, the Director of Finance shall determine what information, if any, should be posted.

The Director of Finance shall at minimum provide an annual reporting of internal audits completed to the Board to comply with Government Code 26883, which may be provided through the receive and file section of the Board agenda.

Reporting to the County Executive

A report on the Committee’s activities and actions will be provided at a minimum annually to the County Executive.

Review the Committee’s charter annually, reassess the adequacy of the charter, and recommend any proposed changes. This review shall include any required changes that are necessary as a result of new laws, regulations, or accounting and auditing standards.