Terms of Reference - Audit Committee

Authority

Financial Administration Act (FAA).
TB Policy on Internal Audit, April 1, 2006, Directive on Departmental Audit Committees.
CIHR By-Law - Article 5, section 5.04.

Chair(s) and Membership

The Audit Committee shall consist of a chair and a minimum of three (3) external members chosen by Governing Council on the advice of its Nominating and Governance Committee and the Office of the Comptroller General (OCG) and as approved by Treasury Board.

To be eligible as External Members, candidates must be independent of and external to the federal public service, and free of any real or perceived conflict of interest. Additionally candidates must:

Satisfy the requirement of the OCG Competency Profile for an Audit Committee.
Be familiar with private or public sector financial reporting or undertake to become familiar within the first year of appointment.

Members must be selected so that their collective skills, knowledge, and experience will allow the Committee to undertake its duties competently and efficiently. At least one member shall be a financial expert who possesses an understanding of generally accepted accounting principles and financial statements; experience in preparing, auditing, analyzing, or evaluating financial statements; understanding of internal controls and procedures for financial reporting; and understanding of audit committee functions.

The President of CIHR shall be an ex-officio non-voting member of the Committee.

Terms

Each initial member of the Committee shall be appointed for any term of not more than four years that will ensure, as far as possible, the expiry in any one year of the membership of not more than one third of the members. Subsequently appointed members shall be appointed for a four-year term. Members so appointed may be appointed to no more than two consecutive terms. The preceding does not apply to the President.

Meetings

The Committee shall meet at least four times a year at the call of the Chair or by request of the President. No alternates shall be permitted.

The President, the Chief Financial Officer (CFO), and the Chief Audit Executive (CAE) shall be expected to attend all audit-related meetings of the Committee. The Chair of the Committee may request the attendance of other CIHR officials.

The Chair shall, as necessary, ask a senior representative of the OAG to attend the Committee meeting to discuss the OAG's plans, findings, and other matters of mutual concern.

The Chair shall, if necessary, ask Treasury Board of Canada Secretariat officials to attend a Committee meeting.

As part of each meeting, the Committee shall, if required, meet individually in camera with each of the following: the President, the CFO, the CAE, the representative of the OAG when in attendance, and any other officials the Committee may identify.

The Chair, on behalf of the Committee and if required, shall brief the Minister periodically on significant items arising from the work of Internal Audit and the Committee.

Quorum

A majority of its members.

Reference

Bourinot's Rules of Order, 4th Edition.

Mandate

The mandate of the Audit Committee is to provide active oversight of core areas of risk, control and accountability at CIHR.

Roles and Responsibilities

The Audit Committee shall ensure that the President and the Governing Council have independent and objective advice, guidance, and assurance on, the adequacy of CIHR's control and accountability processes. The Committee shall have no executive authority. The Committee shall:

Values and Ethics. Review, at least annually, the arrangements established by CIHR management to exemplify and promote public service values and to ensure compliance with laws, regulations, policies, and standards of ethical conduct.
Risk Management. Review, at least annually, the corporate risk profile and risk management arrangements.
Management Control Framework. Review, at least annually, management's internal control arrangements, including the adequacy of management-led audits.¹
Internal Audit Function.
- Recommend a CIHR Internal Audit Policy and Internal Audit Charter for the Governing Council's approval and regularly review the Policy and Charter for their ongoing adequacy and effectiveness.
- Regularly review the adequacy of resources of the CIHR Internal Audit function.
- Review and recommend for the Governing Council's approval the risk assessment and internal audit plan prepared by the Chief Audit Executive (CAE).
- Regularly review the performance of the CIHR Internal Audit function.
- Advise the President and the Governing Council on the appointment and performance appraisal of the CAE.
- Receive for the Governing Council internal audit reports and management action plans to address recommendations.
- Be aware of audit engagements or tasks that do not result in a report to the Committee, and be informed of all matters of significance arising from such work.
Office of the Auditor General (OAG) and Central Agencies.
- Be fully briefed on all audit work relating to CIHR to be undertaken by the OAG, other agents of Parliament, or central agencies.
- Review the OAG's plan for its audit of CIHR's financial statements.
- Ensure that management has made adequate arrangements to support the OAG and central agencies in doing audit work in CIHR.
- Review the audit reports of the OAG and central agencies that have departmental or government-wide implications and recommend CIHR's responses and action plans for the Governing Council's approval.
- Periodically meet with the OAG and seek its comments and advice on matters of risk, control, and governance at CIHR.
- Be briefed on audit-related issues and priorities raised by central agencies and advise the President and the Governing Council on required action.
- Be briefed and advise the President and the Governing Council on the impact of government-wide initiatives to improve management practices.
Follow-up on Management Action Plans.
- Support the President in ensuring that there are effective arrangements in place to monitor and follow-up on management action plans responding to recommendations from internal audits, the OAG, or other sources.
- Periodically receive reports from management on actions taken.
- The CAE shall report periodically to the Committee on whether management's action plans have been implemented and whether the actions taken have been effective. The CAE's report shall identify any areas where he or she believes management has accepted a level of risk that is inappropriate to CIHR or to the government.
Financial Statements and Public Accounts Reporting. Review CIHR's financial statements and all significant accounting estimates and judgements therein with management and recommend to the Governing Council whether they should be accepted.
When the financial statements are audited, the Committee shall review:
- the audited financial statements with the external auditor and senior management, and discuss any significant adjustments to the statements required as a result of the audit, and any difficulties or disputes with management encountered in the course of the audit;
- management letters arising from the external audit of the financial statements or the Public Accounts; and
- the auditor's findings and recommendations relating to the internal controls in place for financial statement reporting.
Risk and Accountability Reporting. Review the Corporate Risk Profile, and the Report on Plans and Priorities (RPP), the Departmental Performance Report (DPR), and other significant accountability reports, to ensure that, to the best of its knowledge, there are no material misstatements or omissions.

Reporting

The Chair, on behalf of the Committee and if required, shall brief the Minister periodically on significant items arising from the work of Internal Audit and the Committee.

The Audit Committee shall normally report at each meeting of the Governing Council on all of its proceedings since the last meeting of the Governing Council.

The Chair shall prepare a plan to ensure that the annual and ongoing responsibilities are scheduled and fully addressed. The plan shall be presented to the Committee for its approval.

The Committee shall prepare an annual report to the President and the Governing Council that:

summarizes the Committee's audit-related activities undertaken and the results of its reviews;
provides the Chair's comment on the CAE's assessment of CIHR's system of internal controls;
documents any significant concerns the Committee may have in relation to CIHR's risk management, control, and accountability processes;
provides the Committee's assessment of the capacity and performance of the Internal Audit function; and
provides, as needed, recommendations for the improvement of risk management, control, and accountability processes, including recommendations for the improvement of the Internal Audit function.

The Committee shall respond to all matters related to the Committee's mandate as may be referred to it by the Governing Council.

Evaluation

The Committee annually shall carry out a review of its Terms of Reference and re-affirm its membership.

Appointments

Approved at the 61st Governing Council Meeting of June 24-25, 2009.