HIgHlIgHTS
01
Implemented a joint audit process for the Caisse’sbooks and accounts.
02
Reviewed the financial statement preparation process, particularly the investment valuation methodology.
Joint audit
In November 2009, the Québec government adopted a decree designating Ernst & Young to audit the Caisse’s books and accounts, as part of a joint audit with the Auditor General of Québec, for the years ending December 31, 2010 to 2014.
In order to optimize this first year of joint audit, both for the auditors and senior management, Ernst & Young carried out a shadowing for the audit of the financial statement books and accounts as at December 31, 2009. This engagement allowed the firm to present its perspective to senior management and the Audit Committee without acting as a signatory to the December 31, 2009 auditor report. The shadowing also helped the Audit Committee adjust to the dynamics of a joint audit. With respect to this new auditor, the Committee carried out the following activities:
Reviewed the monitoring report on the shadowing, particularly •
regarding the opening balances at January 1, 2010 and the impli- cations of the joint audit on the 2009 audit and 2010 joint audit exercises.
Recommended to the Board the adoption of an external auditor •
independence policy and reviewed the monitoring reports regarding compliance with this policy.
Financial information
The Committee fulfilled its financial information responsibilities as follows:
Reviewed the 2009 Combined Financial Statements with the •
Auditor General of Québec, in the presence of the co-auditor, and the following items:
The financial statement preparation process. –
The valuation of over-the-counter liquid investments, illiquid –
investments and ABTNs.
The methodology and parameters for measuring the fair –
value of ABTN investments.
The validation of the notional amount of derivatives instru- –
ments by an external firm.
The external audit of returns to ensure their calculation and –
presentation complies with industry standards.
Reviewed the report on the financial certification process that •
enables the President and Chief Executive Officer and Acting Chief Financial Officer to certify publicly that the disclosure controls and procedures are adequate and effective, and that the internal financial reporting controls are adequate.
Reviewed the activity reports of each Caisse real estate subsidi- •
ary’s Audit Committee.
Verified that an independent valuation of the fair value of over- •
the-counter liquid investments, private equity investments, ABTNs and the Caisse’s real estate assets has been carried out semi-annually, including:
The independent review of valuation data for 10 private equity –
investment files and the valuation of the fair market value of five other private equity investment files – by a renowned firm.
The independent external valuation of the fair value of certain –
liquid securities, real estate debt securities and corporate debt portfolio securities – by two world-renowned experts. Examined a benchmarking report on the fair market value •
determination processes and methods for private equity and infrastructure investments.
Recommended to the Board, for approval, amendments to the •
private equity and infrastructure investment valuation policy. Recommended the adoption of the Combined Financial •
Statements to the Board.
Received the report of the Auditor General of Québec issued to •
the Caisse’s senior management after its audit for 2009. Recommended that the Board approve an updated information •
disclosure policy.
Reviewed the press releases pertaining to the Caisse’s financial •
results.
Reviewed quarterly financial statements, operating expense •
budget monitoring and year-end budget estimates.
Discussed with the co-auditors their audit plan for the •
Caisse’s 2010 financial statements.
Reviewed the work on the new specialized portfolio offering’s •
implementation.
Reviewed and monitored the decisions of Canadian and inter- •
national authorities on the application of international financial reporting standards, and monitored the preparatory work for implementing these standards.
Held regular discussions with Finance personnel without the •
presence of senior management.
Held regular meetings with the co-auditors without the presence •
of senior management members to discuss various aspects of their mandate.
Internal audit
Reporting to the Audit Committee, Internal Audit is an activity that helps the Caisse achieve its objectives by adopting a systematic and methodical approach to evaluating risk management, control and corporate governance processes, and making proposals to enhance their effectiveness. Accordingly, during 2010, the Committee carried out the following activities with the Vice-President, Internal Audit:
Reviewed the 2010-2011 internal audit strategic plan and 2010 •
business plan of the Vice-President, Internal Audit. Reviewed and adopted the 2010 internal audit plan. •
Reviewed progress reports from the Internal Audit division, under •
the internal audit plan, mostly on internal control mechanisms, risk management process components and the optimal use of resources.
Examined the report on the creation of oversight roles to enable •
the board and its committees to fulfill their responsibilities. Reviewed the monitoring reports on the framework between the •
Caisse’s Vice-President, Internal Audit and the internal audit teams of the real estate subsidiaries.
Reviewed the activity report of the Internal Audit division •
for 2009.
Monitored the implementation of the Internal Audit division’s •
recommendations by the Caisse’s senior management. Evaluated the performance of the Vice-President, Internal Audit, •
and made a recommendation about her compensation to the Board.
Ensured that the Internal Audit team can act independently from •
the Caisse’s senior management.
Held periodic discussions with the Vice-President, Internal Audit •
without the presence of senior management.
Internal controls and plan for the optimal use of resources The Committee reviewed many aspects of internal controls and the optimal use of resources during 2010. To this end, it carried out the following activities, among others:
Discussed senior management’s overall self-assessment of the •
general control environment’s effectiveness.
Reviewed the Internal Audit assessment report on general •
environment and information technology processes and controls.
Examined the report on the Caisse’s Information Technology •
group issues and priorities.
Reviewed the quarterly reports on compliance with investment •
limits as specified in the Act governing the Caisse.
Monitored the investments made under the last paragraph in •
Section 37.1 of the Act governing the Caisse.
Reviewed the delegation of authority and recommended certain •
changes to the Board for approval.
Monitored activities surrounding the implementation of a plan •
for the optimal use of resources.
Risk management
The Board of Directors established the Risk Management Committee to support the Audit Committee in exercising its responsibility to implement a risk management process. The Committee therefore carried out the following activities to monitor all risk management efforts:
Received copies of the minutes of the Risk Management •
Committee meetings and the annual report on integrated risk management.
Received a copy of the certificates of compliance with depositors’ •
investment policies and the investment policies of the Caisse’s specialized portfolios.
The Chair of the Committee attended Risk Management •
Committee meetings.
Received reports on each Risk Management Committee meeting, •
tabled by its Chair, during Board meetings.