VI. AUDIT AND MONITORING

1. In consultation and collaboration with the Corporate Compliance Officer, the Executive Director and key Department Office staff, will coordinate appropriate internal audits and surveys to verify adherence to and awareness of the requirements of the Corporate Compliance Plan and WNYIL Inc.'s ethics and compliance policies and procedures.


2. Internal audit shall:
   1. Identify audits required to verify adherence to, and awareness of, ethics and compliance policies at the Main and Satellite Offices levels as internal audits are carried out.
   
   
   2. Review the results of periodic surveys to test awareness of WNYIL Inc.'s ethics and legal compliance policies and procedures.
   
   
   3. Conduct special audits as necessary to verify adherence to WNYIL Inc.'s ethics and compliance policies and procedures. These audits may include
   1. On-site visits,
   
   
   2. Interviews with personnel,
   
   
   3. Reviews of written and electronic materials and documentation, and
   
   
   4. Trend analysis studies.
   
   
   5. Review of subcontractors' agreements.
   
   
   4. Monitor compliance with the terms of settlement agreements having system wide implications, including settlement of government investigations, or major litigation.


3. Internal audits strategically align with WNYIL Inc. to help ensure that the goals and objectives of the Corporation are carried out effectively. As WNYIL Inc. continues to develop an integrated Center for Independent Living, reduce cost, and improve services, internal audits will assist in setting priorities in a manner that will assist management in the effective discharge of their responsibilities. The audit process is a cooperative venture with management to identify opportunities for improvement. This partnership enhances management's ability to achieve organizational goals and objectives. Internal audits cannot be effective unless they first obtained cooperation from senior management. They must obtain formal management and board approval, and establish formal periodic reporting intervals. Considering the current makeup and growth of WNYIL Inc., we believe the goals of the process should be as follows:
   1. It is important that WNYIL Inc. focus on business risks and compliance, to be systems or process focused vs. materiality driven. Also, we need to rely more on professional judgment and less on formulas. We must learn to become more proactive, less reactive.
   
   
   2. The goal is to assist in accomplishing system wide objectives vs. department or unit objectives; and, to attain the ability to look forward. We look at the process across all functional lines. This is particularly important during cost reduction programs, their effects on the organization, and the control risks that result from the program. Information systems are critical to the success of the organization; therefore, we develop programs to help ensure that the integrity and security of data remains intact.
   
   
   3. The overriding principle is that, as the organization grows, internal audits should be clearly defined so the CCT and Management Team focus on clear common goals. This requires close coordination and communication with the Management Team and CCT. We must establish an open channel of communication so that information flows up and down the organization. The roles and requirements of the internal audit function are changing. To accomplish all of the above, the Corporate Compliance Team must develop a common baseline of accountability. This can be created through benchmarking activities.
   
   
   4. The traditional operational reviews are also important as the organization continues costs effectiveness efforts. In reviewing the various processes we attempt to identify opportunities for improvement and cost savings.
   
   
   5. Also, we help ensure that limited resources are being used effectively; and, that we maintain an effective level of control. Traditional audit responsibilities include:
   
   
   • Complete traditional operational reviews to ensure compliance with existing policies and procedures,
   
   
   • Complete follow-up audits on external and internal audit issues,
   
   
   • Continue to audit for any breakdowns in control,
   
   
   • To complete management driven requests.
   
   The Corporate Compliance Team must possess a certain degree of knowledge of internal control; financial accounting concepts, and other skills that will enable them to interact throughout the organization, and at all levels. The Corporate Compliance Team must also learn to act as facilitators: skillful in building consensus, and motivating people. An understanding of technology and its integration into business processes is also critical. Additionally, The CCT should be versed in process analysis, process mapping, and problem solving; therefore, a set of core competencies for the CCT must be developed.


4. Internal Audit Code of Ethics
   
   1. Interpretation of principles

   The provisions of this Code of Ethics cover basic principles in the various functions of the Corporate Compliance Team. The CCT shall realize that individual judgment is required in the application of these principles. We have a responsibility to conduct ourselves so that our good faith and integrity should not be open to question. While having due regard for the limit of our technical skills, we will promote the highest internal auditing standards to the end of advancing the interest of WNYIL Inc.

   2. Articles

   a. We shall have an obligation to exercise honesty, objectivity and diligence in the performance of our duties and responsibilities.

   b. We, in holding the trust of WNYIL Inc., shall exhibit loyalty in all matters pertaining to the affairs of WNYIL Inc. However, we shall not knowingly be a party to any illegal or improper activity.

   c. We shall refrain from entering into any activity, which would prejudice our ability to carry out objectively our duties and responsibilities.

   d. We shall exercise prudent stewardship in carrying out our responsibilities.

   e. We shall be prudent in the use of information acquired in the course of our manner, which would be detrimental to the welfare of WNYIL Inc.

   f. We, in expressing an opinion, shall use all reasonable care to obtain sufficient factual evidence to warrant such opinion. In our reporting we shall reveal such material facts known to us, which, if not revealed, could either distort the report of the results of operations under review or conceal an unlawful practice.

   g. We shall continually strive for improvement in the proficiency and effectiveness of our service.

   h. We shall abide by the by-laws and uphold the mission and objectives WNYIL Inc. In the performance of our duties, we shall be mindful of our obligation to maintain the high standard of competence, morality and dignity, which WNYIL Inc. has established.

   3. Internal audit role

   Internal audit is an independent appraisal activity established within the organization to examine and evaluate the corporation's activities. The objectives of internal audit are to assist WNYIL Inc. management in the effective discharge of their responsibilities by furnishing them analyses, appraisals and recommendations concerning the activities reviewed.

   The Corporate Compliance Team provides, through objective periodic reviews, assurance that the management control systems throughout the organization are sound, in place and operating as intended.

   The scope of internal audit includes any phase of business activity in which it may be of service to management. This service goes beyond the accounting and financial records to obtain a full understanding of the operations under review. The attainment of this overall objective includes, but is not limited to, the following activities:

   Review and appraise the soundness, adequacy, cost effectiveness and application of accounting, financial and other operating controls.

   Review compliance with policies, plans, procedures, laws or regulations.

   Determine the extent to which assets are accounted for and safeguarded from loss.

   Review and appraise the economy and efficiency with which resources are employed and established goals and objectives are accomplished.

   Review compliance with any adopted business ethics or conflict of interest policies and investigating fraud or other improprieties.

   4.Internal audit activities covered

   Any business activity of WNYIL Inc., and to the degree audit rights have been established, affiliates, partnerships, joint ventures, licensees, contractors, vendors, distributors, third parties, or other operations are subject to Internal Audit review.

   5. Internal audit independence and objectivity

   Independence is essential to the effectiveness of the internal audit and is provided through both organizational placement and objective assignments.

   Organizational placement of the Internal Audit function has been established to assure both a broad range of coverage and adequate consideration of audit recommendations. In addition, the Corporate Compliance Officer has a right to report directly to the President and/or Executive Director on any matter where the normal procedures for resolution of Internal Audit issues are either inappropriate or have failed.

   Objective assignments within Internal Audit recognize that internal auditors should not develop and install procedures, prepare records or engage in any other activity which they would normally review and appraise or which might otherwise compromise independence and objectivity.

   6. Internal audit planning and scope

   In establishing the Internal Audit plan previous audit coverage, significance of exceptions and the need for regular contact are primary considerations. The audit plan is based on an assessment of the various business risks of the corporation whether the risk is viewed as financial, operations, regulatory, or reputational. The plan is also carefully coordinated with the external auditors' requirements to provide the best possible coverage at minimum cost. Flexibility is maintained to accommodate unusual problems and to meet special unscheduled requests. Adequate review and forethought are given to each audit assignment or undertaking.

   Audit scope involves assessing:

   The control environment

   Risk assessments

   Control activities

   Monitoring activity

   Communication and reporting

   The annual audit plan is reviewed with the Management Team and submitted to the Board of Directors for approval.

   Common elements of each audit typically include:

   Pre-audit announcement to the entity or department being audited, and is routed through interested management.

   Pre-audit personal contact with responsible managers for concerns and information.

   Obtaining an understanding of the business, and the associated risks.

   Coordination with the external auditors when appropriate.

   Adequate testing to assure proper compliance with the systems, policies and procedures in place.

   Adequate documentation of work performed and conclusions reached.

   Closeout conference with location management with full and open communication.

   Audit execution consists of:

   Maintaining honest, inquisitive, objective, and diligent conduct.

   Emphasizing that audit efforts are of service to management.

   Handling information gained with prudence.

   Striving for improvement in proficiency and effectiveness of the Department and the individual auditor.

   7. Internal audit reports

   CCT produces internal audit reports. They are issued to report in concise terms the important aspects of an audit. When conducting audit activities at Satellite Offices, the Corporate Compliance Officer is responsible for reporting findings to management of the entity being reviewed. In this regard, audit reports are to be transmitted to the appropriate manager for review, action and written response.

   Reporting is normally conducted on an exception basis, with exemplary areas mentioned as well. While all audit reports and written responses will be available for executive management review, the normal reporting to these offices will be made on a regular basis in summary form highlighting audits performed and significant findings and observations.

   8. Relationship with external auditors

   CCT internal audit and the external auditors coordinate activities. Both evaluate internal control and examine financial and other records. Appraisal of those systems in which both have an interest is largely shared.

   Coordination includes:

   Coordination of efforts.

   Development of common techniques.

   Exchange of audit work performed.

   Joint audits where appropriate.

   Mutual participation in on-site reviews of audit work, as required.

   9. Fraud

   The organization's systems of internal control, of which CCT is a part, will be sufficiently effective to deter fraud and identify significant errors or irregularities in a timely fashion. The CCT auditors maintain a sense of alertness, which will permit adequate inspection of internal control. Audit evaluations will be designed to permit reasonable assurance that management will identify any material misstatement or loss of corporate assets.

   10. Management requests

   CCT's internal audit will be of constructive service where their abilities will provide the greatest benefit. Sufficient flexibility to accommodate management requests, which are consistent with the objectives and priorities of the Department, will be maintained



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