Audit and Compliance Committee Charter
This Charter establishes a framework for the operation of the Audit and Compliance Committee (the “Committee”) of the Board of Directors (the “Board”) of The University of North Carolina at Chapel Hill Public Health Foundation, Incorporated (the “Foundation”). The Committee was appointed by the Board pursuant to Article IV, Section 7 of the Bylaws of the Foundation.
Background
The Foundation is an Associated Entity of The University of North Carolina at Chapel Hill (the “University”) under the Required Elements of University-Associated Entity Relationship adopted by the Board of Governors of The University of North Carolina. Under the Required Elements, the Foundation must:
• Provide in its Bylaws for an audit committee to receive the report of the independent CPA firm that conducts the Foundation’s annual audit and relevant tax forms to be submitted by the Foundation;
• Use sound fiscal and business principles, ensure that a sound internal control structure is in place, and follow generally accepted accounting principles;
• Be audited on an annual basis by an independent CPA firm, which may not provide non-auditing services to the Foundation other than tax preparation services that are pre-approved by the audit committee; and
• Otherwise comply with the Required Elements with respect to the distribution of financial statements and related documents, annual budgets, transfers of funds from the Foundation to the University, whistleblower protection, conflict of interest and ethics policies and document retention.
Committee Composition
No Committee member may be an employee of the University or the Foundation, and each Committee member must be independent of management of the University and the Foundation and free of any relationship that would impair such independence. Committee members may not receive consulting, advisory or other fees from the University or the Foundation.
Audit and Compliance Committee
A majority of the members of the Committee should have the ability to understand fundamental financial information and statements and, if possible, at least one member should be a financial expert. A financial expert is an individual who has an understanding of generally accepted accounting principles and financial statements, preferably based upon or resulting from the individual’s higher education; experience in applying generally accepted accounting principles; experience in preparing, auditing, analyzing or evaluating financial information and financial statements; experience with internal controls and procedures for financial reporting; or an understanding of the audit committee function based on experience in serving on similar committees with other entities. If feasible, the role of financial expert should be rotated on a regular basis and all members of the Committee should be rotated at least every five years.
Duties and Responsibilities
The Committee shall have the following duties and responsibilities. These duties and responsibilities are not intended to replace or duplicate established management responsibilities and delegations. Instead, the Committee shall serve in an advisory capacity to guide the direction of management’s actions and set broad policy for ensuring accurate financial reporting, sound risk management and ethical behavior.
(A) General Duties and Responsibilities
• To review, from time to time, accounting policies and procedures and systems of internal control of the Foundation;
• To review the annual audit and tax returns of the Foundation with the Foundation’s external auditors and with employees of the University and the Foundation;
• To make recommendations to the Board with respect to the financial statements of the Foundation, the appointment of external auditors and the scope of their audit;
• To make such other recommendations and reports to the Board relating to internal controls, records and systems of the Foundation as the Committee shall deem appropriate from time to time;
• To review and approve minutes of Committee meetings and actions; and
• To undertake such other duties and responsibilities as may be delegated to the Committee from time to time by the Board.
(B) Audit Firm Oversight
• Meet in person at least one time each fiscal year with the Foundation’s independent CPA firm to review the Foundation’s financial statements and tax returns and be available at other times to meet with the independent CPA firm to discuss the firm’s judgments about the quality of the accounting principles and underlying estimates used in the preparation of the Foundation’s financial statement and about the Foundation’s internal controls;
• Review and resolve any significant disagreement between management and the CPA firm in connection with the preparation of financial statements, review audit adjustments (including those waived because of their small size) and determine whether any difficulties were encountered by the CPA firm in performing audit and tax preparation services;
• Review such matters as unusual fluctuations in the assets, liabilities, revenues or expenses of the Foundation; unexplained reserves; changes in accounting principles; changes in methods of allocating costs to functions; and significant new sources of revenue or new types of expenses;
• Review and evaluate the professional caliber and nonprofit industry experience of the partners and staff assigned by the independent CPA firm to the Foundation and the degree to which partners are involved in the audit;
• Request, as needed, that the CPA firm rotate the lead partner assigned to the Foundation’s audit at least every seven years, with a time out of at least two years;
• Review the audit engagement letters and other significant audit related communications between the CPA firm and the Foundation, including management’s representation letters to the CPA firm; and
• Approve the hiring of any employee of the CPA firm prior to the employee’s assumption of a senior administrative position with the Foundation or the University.
(C) Internal Controls
• Encourage direct and confidential interaction with internal auditors with respect to the effectiveness of the Foundation’s internal control systems and its compliance with laws, regulations and internal policies;
• Obtain and review reports on internal control systems and internal audit reports and direct management to devote attention to any issues raised in such reports; and
• Ensure that procedures are in place for the Committee to receive, resolve, and retain records of complaints regarding accounting, internal control and auditing matters and address any reports received by the Committee under the Foundation’s whistleblower policy.
Other committees: Executive, Nominating and Leadership Development, Strategic Initiatives, Student Support and Faculty Retention
