Report: Audit Committee - May 01, 2023

REPORT NUMBER 152 OF THE AUDIT COMMITTEE

may 1, 2023

University of Toronto

Your Committee reports that it held a virtual meeting on Monday, May 1, 2023, at 4:00 p.m. with the following members present:

Present:
Joanne McNamara (Chair), Teodora Dechev (Vice-Chair), Anna Kennedy (Vice-Chair of the Governing Council), Sue Graham-Nutter, Paul Huyer, Rajiv Mathur, Rima Ramchandani, Lara Zink

Regrets: David Bowden

Non-Voting Assessors:
Alex Matos, Director of Internal Audit
Sheree Drummond, Secretary of the Governing Council
Scott Mabury, Vice President, Operations and Real Estate Partnerships
Trevor Rodgers, Chief Financial Officer*

Secretariat:
Timothy Harlick, Secretary

In Attendance:
Samuel Sanish, Controller and Director of Financial Services
André Greenidge, Senior IT Auditor
Diana Brouwer, Ernst & Young
Joyce Yu, Ernst & Young

*Attended Remotely

Audit Committee met in Closed Session

ITEM 5 WAS APPROVED BY THE COMMITTEE. ALL OTHER ITEMS ARE REPORTED TO THE BUSINESS BOARD FOR INFORMATION.

Pursuant to section 6.1 of the Audit Committee Terms of Reference, consideration of items 11 and 12 took place in camera.

1. Chair’s Remarks
   The Chair welcomed members and guests to the meeting.
2. Draft Audited Financial Statements and Notes - April 30, 2023
   The Committee received Draft Audited Financial Statements and Notes - April 30, 2023, for information. The Chair explained that the Committee would be asked at its June 20, 2023, meeting to recommend the full Audited Financial Statements to the Business Board for approval.Mr. Sanish Samuel, Controller and Director of Financial Services, reported on the Notes and highlighted the major changes that had been made which included:
   
   Note 2(n) – Change in accounting policy:
   Effective with the 2022-23 fiscal year, the University was required to account for its employee future benefits obligations using an actuarial valuation prepared for accounting purposes. In the past, the University had used actuarial valuations for funding purposes to value its employee future benefits obligations. This change was a result of amendments to accounting standards Section 3462, Employee Future Benefits and Section 3463, Reporting Employee Future Benefits by Not-for-Profit Organizations.
   
   Note 5 – Employee benefits plans:
   This note disclosure was revised to remove details of the establishment of the UPP which took place in fiscal 2021; Update the dates of the most recent valuations of certain benefits plans; and provide details regarding the discount rates used to value the opening employee future benefits obligations as a result of the amendments to the accounting standards for employee future benefits as reported above.
   
   Note 10 –Internally restricted net assets:
   The comparative column in this note had been updated to provide additional detail regarding the impact of the change in the discount rate used to value the University’s employee future benefits obligations at April 30, 2022.The change in the discount rate resulted in an actuarial loss estimated to be $84 million (unaudited) and recorded as a direct reduction to opening net assets.
   
   Note 21(f) – Contingencies – CURIE:
   This item had been added to the contingencies note to reflect the University re-entering the Canadian Universities Reciprocal Insurance Exchange (CURIE) effective January 1, 2023. As a member of the self-insurance reciprocal, the University shared the insurable property and liability risks of member universities for a term of not less than five years.Plan members were required to pay annual deposit premiums, which were expensed in the year. Plan members were subject to further assessment in proportion to their participation in the event premiums were insufficient to cover losses and expenses.
   
   Discussion
   In the ensuing discussion, the Committee was informed that restricted donations were captured in various reporting mechanisms depending on their treatment and that pledges were excluded because in Canada, pledges were not legally enforceable.
   
   The Chair thanked Mr. Rodgers and Mr. Samuel for their remarks.
3. Report on Non-audit Services by the External Auditors for the period from October 1, 2022 to March 31, 2023
   
   The Chair noted that in accordance with the Policy on the Use of the External Auditor for Non-Audit Services, the Audit Committee receives from the administration a quarterly report, resulting in an annual report. Mr. Rodgers commented that Report provided details of the payments made to the external auditors with respect to non-audit services for the period of October 1, 2022, to March 31, 2023.
   Ms Diana Brouwer, Ernst & Young (“EY”)noted that prior to performing any additional services, an internal process was completed to ensure compliance from an independence perspective.
   
   There were no questions by members.
    
4. Internal Audit Plan, 2023-2024
   
   Mr. Alex Matos, Director, Internal Audit Department, reviewed the Audit Plan for 2023-2024 with the Committee, highlighting the following:
    
   • The plan included a broad range of assurance and advisory projects that aligned with the University’s priorities and significant risks faced by the sector. The plan had been informed by discussions with senior management and reflected a shift towards increased levels of partnership and collaboration with the community across the tri-campus.
   • There would be 11,000 direct audit hours from a staff complement of 10. FTE.
   • The focus would be on institutional, divisional and departmental risks, and would include Operational audits, Continuous Audit, Restricted Funds Compliance Audit, Information Systems reviews, Follow-up reviews, Investigations and Advisory Services
   • Assistance would be provided to Ernst & Young.
   • Projects were selected based on industry insights, discussions with peers across the sector, consultations with leadership and senior management, and as a result of specific requests.
     
     Discussion
     In the ensuing discussion, Mr. Matos commented that:
   • Resourcing for the audit plan was adequate and included sufficient reserves for special projects when required.
   • The number of FTE hours allocated in the audit plan included the associated administrative hours required for each audit.
   • The audit plan continued Internal Audit’s shift in focus toward larger cross-sectional audits across the University.
   • Once the new risk reporting structure was in place, Internal Audit would ensure there would be continued assessment of risks reported by administration against those identified by the Internal Audit Department.
5. Report of the Previous Meeting: Report 151, March 13, 2023
   
   The Report of the previous meeting was approved, with an amendment to include that the Vice-Chair of the Governing Council had attended and would continue to attend meetings going forward.
6. Business Arising from the Report of the Previous Meeting
   
   There was no business arising from the report of the previous meeting.
7. Reports of the Administrative Assessors
   
   There we no reports of the Administrative Assessors.
8. Date of Next Meeting: June 19, 2023, at 4:00 p.m.
   
   The Chair confirmed that the final meeting for the 2022-2023 governance year for the Committee would be held on June 19, 2023.
9. Other Business
   
   There were no items of other business.
   
   The Committee moved in camera.
10. Internal Auditor: Private meeting
    
    Members of the administration absented themselves and the Committee met privately with the Director of Internal Audit.
11. Committee Members Alone
    
    The Committee members met alone.
    
    
    The Committee moved into closed session.