Piotrowki, Craig

Yahr, Robert

English

epublications@Marquette

Marquette Universitye-Publications@MarquetteAccounting Faculty Research and Publications Accounting, Department of7-1-2006SOX Goes to CollegeCraig PiotrowkiRobert YahrMarquette University, robert.yahr@marquette.eduPublished version. On Balance, Vol. 2, No. 4 ( July-August 2006): 22-23. Publisher Link. © 2006Wisconsin Institute of Certified Public Accountants. Reprinted with permission from On Balance,the magazine of the Wisconsin Institute of Certified Public Accountants./ • IS A nonprofit audit committee formed By Craig Piotrowski, CPA and Robert B. Yahr, CPA, Ph.D. M etro Milwaukee commu-nity leaders have expressed concern about the future of some non profits following recent financial dilemmas. On a small scale, these events may mirror happenings in U.S. for-profit organizations that resulted in the Sarbanes-Oxley Act of2002. Just as a large part of the burden of regulatory reforms brought about by SOX falls on the shoulders of audit committees, the utilization of audit committees should be seriously explored by nonprofit organizations. For one thing, few of these orga-nizations have independent audit committees. In 2004, Milwaukee Area Techni-cal College's (MATC) independent certified public accountant, Virchow, Krause & Co. LLP, shared an internal audit recommenda-tion that the district review its policies and consider creating an audit committee. This recommendation was taken seriously by the MATC Board of Directors because of recent financial difficulties at several local nonprofits. MATC officials researched the audit com-mittee issue and found abundant guidance for governmental and other non profits flowing from SOX. The college focused on guidance from a PricewaterhouseCoopers' paper titled "The Changing Role of the Audit Committee: Leading Practices for Col-lege, Universities and Other Not-for-Profit Educational Institutions" 22 ON BALANCE JULY / AUG 2006 (http://www.pwcglobal.com/gx/eng/about/ ind/edu/audit_committee_final--1uly2004. pdf) . The National Association of College and University Business Officers advocates the formation of an independent audit com-mittee as a best practice. Although an audit committee is not required for non profits, the PwC paper also recommends the forma-tion of an independent audit committee as a best practice. The college surveyed other technical col-leges in Wisconsin and found that none of them had independent audit committees consistent with PwC's gu idance. The guid-ance requires members of the audit commit-tee to be independent and that at least one member of the committee be a "financial expert." In discussing audit committees informally with various Wisconsin CPAs, MATC found few governmen-tal audit committees that seemed to meet these criteria in Wisconsin. Since members of most governmen-tal boards are elected or appointed based on criteria which does not require financial expertise, the col-lege created an audit committee that recruited volunteer members with independent financial expertise. During 2005, the college formed the MATC Advisory Audit Commit-tee, which included two MATC Board members and five volunteers with diverse financial expertise. Current members of the MATC Audit Com-mittee are: • Chair Bobbie R. Webber, a Milwaukee Fire Department captai n and vice chair of the MATC Board • Vice chair Robert B. Yahr, CPA, associ-ate professor of accounting at Marquette University • Vice chair Charlotte Y. Ca nnon-Sain, tax compliance officer for Potawatomi Bingo Casino • Bonnie Baerwald, CPA, vice president of financial management at Moraine Park Technical College • Jeannette BeLl, mayor of the City of West Allis and chair of the MATC Board • Anne Szcygiel, Greendale School District Board member and former Milwaukee Coun ty Department of Adm inistrat ion bud-www.wicpa.org get analyst and budget unit manager • Thomas G. Wieland, CPA, partner at Rei lly, Penner & Benton LLP. Yahr, Baerwald and Wieland are members of the Wisconsin Institute of CPAs. GUIDANCE Some of the leading practice recommen-dations of PriceWaterhouseCoopers include: I. "Establish a separate audit committee." MATe's Advisory Audit Committee was established with a special adviser to ass ist in its creation and first year of operation. 2. "Appoint at least three members, and preTerably five or seven members." MATC formed a seven-member committee that combined a majority of members with fin ancial expertise, which includes the MATC Board chair and vice chair. The MATC Board's vice chair leads the commit-tee and meets with two vice chairs who have financial expertise. The meetings are held between the MATC Advisory Audit Com-mittee's regular quarterly meetings in order to review and plan meetings. 3. "Audit committee members should be independent - no members from manage-men t." There are no members of manage-ment on MATe's committee. 4. "If possible, include one financial expert as defi ned by Sarbanes." Again, the majority of MATC committee members are financial experts. 5. "Write a charter that includes the audit committee's responsibili-ties; review and update it periodi-cally." The nine-page MATC Advisory Audit Committee Charter was created in 1995, actively reviewed during its first year of operation, and is to be up-dated annuaJJy. 6. "Meet as often as necessary to fulfill the committee's responsibilities, typically four or more times per year." The MATC committee meets quarterly and holds ad-ditional meetings as needed. 7. "Be responsible for all facets of the relationship wi th the independent external auditor." The MATC committee is currently considering a five-year request-for-proposal for external auditors. 8. "Work closely with internal audit, an important resource for the aud it commit-tee." The MATC committee is re-establish-ing an independent internal audit function at the college and plans to utilize an outside firm fo r internal audit services. FUTURE PERSPECTIVE MATe's Advisory Audit Committee em-powers its Board of Trustees with financial expertise that provides them with added knowledge and understanding to perform fiscal responsibilities for district taxpayers and other stakeholders. Wisconsin nonprofit board members and their independent CPAs MATC Advisory Audit Committee vice chairs and chair Rob-ert B. Yalll; CPA, Ph.D. , Charlotte Cannon-Sain and Bobbie Webber (I-r). www.wicpa.org MILWAUKEE AREA TECHNICAL COLLEGE IS COMMITTED TO BEING A WORLD-CLASS EDUCATIONAL INSTITUTION THAT EMPOWERS STUDENTS, FACULTY AND STAFF TO REALIZE THEIR POTENTIAL. should evaluate whether nonprofi t boards have the independent financial expertise to fu lfill their fidu ciary responsibilities. ON BALANCE JULY /A UG 2006 23 

SOX Goes to College

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SOX Goes to College

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