COmmIttEE mANDAtE
Under the terms of its mandate, the Audit Committee ensures that the Caisse’s financial statements accurately reflect its finan- cial position. To that end, it reviews the financial statements in co-operation with the Auditor General of Québec and recom- mends them to the Board of Directors for approval.
The Audit Committee ensures that sufficient and effective internal control mechanisms are in place. It also ensures that a risk management process for the Caisse’s operations and a plan for optimal use of resources are put in place. It also follows up on the plan.
The Committee reviews any activity that may adversely affect the sound financial position of the Caisse. It is obliged to inform the Board of Directors, in writing, of any management operation or practice that is unsound or that does not comply with the laws, regulations or policies that govern the operations of the Caisse.
Furthermore, the Committee appoints the Vice-President, Internal Audit, and approves the audit plan. It receives internal audit reports on such matters as the application of internal control mechanisms, the risk management process and a plan for optimal use of resources. The Committee also ensures that the organiza- tional structure gives the Internal Audit team the requisite independence in respect of Caisse senior management so that it can carry out its role effectively.
COmPOSItION OF tHE COmmIttEE
The Audit Committee consisted of four independent members as at December 31, 2008.
Chairman: Claude Garcia
Members: Christiane Bergevin
Claudette Carbonneau A. Michel Lavigne
In addition, the Chairman of the Board of Directors regularly attends the meetings of the Audit Committee.
The Chairman of the Audit Committee and its members do not sit on any other committee of the Caisse’s Board of Directors. The Chairman of the Committee is a guest member at the meetings of the Risk Management Committee.
ACCOUNtING Or FINANCIAl EXPErtISE
All the members of the Audit Committee have the required experi- ence and knowledge to understand the Committee’s mandate and to properly fulfill their role.
In their education and careers, they have acquired the abilities and skills to read and understand the Caisse’s financial state- ments. Moreover, the Audit Committee includes members with financial or accounting expertise.
rEPOrt OF tHE AUDIt COmmIttEE
rEPOrt OF tHE AUDIt COmmIttEE ON tHE PErFOrmANCE OF ItS mANDAtE AND tHE PlAN FOr OPtImAl USE OF rESOUrCES
The Audit Committee met nine times in 2008. To perform its mandate, the Committee carried out the tasks described below. FINANCIAL INFORMATION
The Committee reviewed the quarterly financial statements /
and budgetary monitoring of operating expenses. As it does each year, the Committee oversaw an /
independent valuation of the fair value of the over-the- counter liquid investments, private equity and real estate in which the Caisse invested. In light of the unusual market conditions that developed in 2008, the Committee also oversaw an independent review of data pertaining to the valuations of 10 private equity investments as well as an additional external valuation of three investments; the Committee received a report on the valuation process. The members of the Committee discussed with the Auditor /
General his audit plan for the Caisse’s financial statements. The Committee reviewed the combined annual financial /
statements with the Auditor General; the members also reviewed such matters as the procedure for preparation of the financial statements, the valuation of over-the-counter liquid investments, illiquid investments and ABCP being restructured, and external audit of returns. The Committee recommended that the Board of Directors approve the combined financial statements.
The Committee received the report to senior management /
issued by the Auditor General after his annual audit. As they do each year, the Committee members met with the /
Auditor General twice in the absence of members of senior management to discuss various aspects of his mandate and related matters.
The Committee reviewed the report on the financial /
certification process that enables the President and Chief Executive Officer and the Executive Vice-President, Finance and Operations, to certify publicly that the disclosure controls and procedures are sufficient and effective, and that the internal control over financial reporting is sufficient. The Committee reviewed the recommendations of the /
Canadian Securities Administrators regarding the evaluation of the effectiveness of internal control over financial reporting. It recommended that the Board issue a full certificate starting in 2009, as is done in the Canadian banking sector.
The Committee reviewed the summaries of the activities of /
the Audit Committees of the Caisse’s real estate subsidiaries.
The Committee considered the impact, on the Caisse and its /
subsidiaries, of the introduction of joint auditing of the books and accounts of state-owned enterprises. It discussed this matter with the Auditor General and recommended preparatory work to the Board.
The Committee analyzed the impact on the Caisse’s 2008 /
financial statements and Annual Report of the adoption of Sections 3862 and 3863 of the CICA Handbook.
The Committee reviewed the material impacts for the /
Caisse and its subsidiaries of the adoption by Canada of international accounting standards starting in 2011 and endorsed a project to implement these standards; the Committee members attended a special information session devoted exclusively to IFRS standards.
ABCP
After a discussion with the Auditor General on the method used to allocate the ABCP expense, the Committee recommended that the Board approve it. The Committee received quarterly reports on the fair value of the ABCP. At the end of 2008 and the start of 2009, the Committee reviewed the methodology and parameters used to establish the fair value of the ABCP as at December 31, 2008.
In addition, Committee members were regularly informed of the status of the negotiations on the restructuring of third-party ABCP during the meetings of the Board of Directors.
INTERNAL AUDIT
The Committee reviewed the 2008 business plan of the /
Internal Audit Vice-Presidency, as well as the audit universe and the overall risk assessment of the operations of each Executive Vice-Presidency for the year.
The Committee reviewed and adopted the internal audit plan /
for 2008 and occasionally gave the Vice-President, Internal Audit, specific mandates.
The members of the Committee reviewed the links between /
the internal audit functions at the Caisse and those of its real estate units; they endorsed implementation, starting in 2009, of an internal audit function for all the real estate units, centralized within the Caisse Real Estate group.
The Committee reviewed Internal Audit’s quarterly reports /
on such matters as internal control mechanisms, components of the risk management process and optimal use of resources according to the plan in effect.
The Committee reviewed Internal Audit’s report on the /
evaluation of the procedures and controls related to the general control environment and evaluation of the general information technology controls.
The Committee ensured that Caisse senior management /
gave effect to the recommendations made by Internal Audit. For example, they discussed with an Executive Vice-
President the action plans that he intended to put in place to give effect to the recommendations made by Internal Audit during the previous audit cycle; the Committee ensured that the appropriate action plans were put in place.
The Committee evaluated performance of the Vice- /
President, Internal Audit, and recommended the terms of his remuneration to the Board.
The members of the Committee reviewed the Internal Audit /
report on various components of fraud risk and endorsed Internal Audit’s campaign to make the Caisse’s employees aware of fraud risks.
The Committee ensured the Internal Audit team can act /
independently of Caisse management.
The members of the Committee met regularly with the /
Internal Audit Vice-Presidency after their meetings in the absence of members of management.
INTERNAL CONTROLS AND THE PLAN FOR OPTIMAL USE OF RESOURCES
The members of the Committee discussed management’s /
overall self-assessment of the effectiveness of the general control environment and oversight of fraud prevention and detection.
The members of the Committee reviewed the report on the /
monitoring and measurement activities carried out during the year under the financial and non-financial compliance programs.
The Committee reviewed the activities carried out in 2007 in /
respect of the plan for optimal use of resources in 2007-2008 and reviewed the action plan 2008 in respect of the plan; the Committee also monitored the plan during the year. Each quarter, the Committee reviewed the reports on /
compliance with the investment limits specified in the Act respecting the Caisse. The Committee also conducted regular monitoring of the investments made pursuant to the last paragraph of section 37.1 of the Act respecting the Caisse. RISK MANAGEMENT
The Risk Management Committee was given responsibility for implementation of a risk management process. To that end, the Audit Committee took the following initiatives:
The Committee received copies of the minutes of the /
meetings of the Risk Management Committee, as well as the annual reporting document on integrated risk management. The Committee also received a copy of the certificates of /
compliance with the depositors’ investment policies and the investment policies of the Caisse’s specialized portfolios. The Chairman of the Audit Committee sat, as a guest /
member, on the Risk Management Committee.
The Audit Committee and the Risk Management Committee /
held a joint meeting during which the committee members discussed reports by senior management on such matters as internal control, compliance and risk management. At the meetings of the Board of Directors, the members of /
the Audit Committee received the report provided by the Chairman of the Risk Management Committee after each meeting of that Committee.
After each of its meetings, the Committee provided an oral and written report to the Board of Directors on its activities. In the exercise of their functions, the Board of Directors and its committees may retain the services of external experts. The Audit Committee did not use such services in 2008. It nevertheless supported senior management in its decision to retain a consulting firm to do an independent review of data pertaining to private equity valuation.
This report has been approved by the members of the Audit Committee.