Report: Audit Committee - November 20, 2024

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Chairs' Boardroom, Simcoe Hall, 2nd Floor

REPORT NUMBER 160 OF THE AUDIT COMMITTEE

WEDNESDAY, NOVEMBER 20, 2024


To the Business Board,
University of Toronto,

Your Audit Committee reports that it held a meeting in Chairs’ Board Room, 2nd floor Simcoe Hall, on November 20, 2024, at 4:00 p.m. with the following members present:


PRESENT: Joanne McNamara (Chair), Paul Huyer (Vice-Chair), Sandra Hanington (Vice-Chair of Governing Council), Sue Graham-Nutter, Scott MacKendrick, Rajiv Mathur, Rima Ramchandani

REGRETS: Brian Madden, Samuel Elfassy

NON-VOTING ASSESSORS:
Sheree Drummond, Secretary of the Governing Council
Scott Mabury, Vice President, Operations & Real Estate Partnerships

Trevor Rodgers, Chief Financial Officer

SECRETARIAT:  Timothy Harlick, Secretary

IN ATTENDANCE:
Sanish Samuel, Controller and Director of Financial Services 
Elizabeth Cragg, Director, Office of the Vice-President, Operations and Real Estate Partnerships
Kathi Aspros, Ernst & Young
Alanna Charles, Ernst & Young

The Audit Committee met in Closed Session.  
 

Pursuant to section 38 of By-Law Number 2,
consideration of items 12 and 13 took place in camera.


CLOSED SESSION 

  1. Chair’s Remarks

    The Chair welcomed members and guests to the meeting. 
  2. Reports of the Administrative Assessors

    Professor Scott Mabury, Vice-President Operations & Real Estate Partnerships provided an update on the following:

    Kosher Food Offerings

    Professor Mabury reported on the new kosher food program initiated by the University. Previously, the University had collaborated with the Wolfond Centre for Jewish Campus Lif offering a hot meal for dinner at a nominal cost. Additionally, grab-and-go kosher food options were available at various campus locations, albeit at a slightly higher cost due to labor and specific requirements.

    Beginning in December, the University planned to expand its kosher food offerings across multiple locations, including those managed by independent and private food operators. These meals would be frozen and available for reheating, with the subsidization provided by the Vice-President & Provost to match the cost of regular offerings. The University was also exploring the possibility of recruiting a kosher food operator for a new space in one of its buildings.

    Fall Enrolment Update

    Professor Scott Mabury reported on fall enrolment, highlighting both international and domestic student intake. The anticipated international intake fell short by 978 students, a 6% variance to budget, translating to a financial shortfall of approximately $62 million. Despite this, the University fared better than other institutions, which saw an average 40% shortall. 

    Domestic intake exceeded its target by 733 students, contributing an additional $5 million in revenue. Retention rates were higher than expected, resulting in $15 million in unrealized revenues. Overall, the University was $30 million below the budget plan for the year, but this was considered manageable within the context of a $4 billion budget.

    Professor Mabury also commented on the impact of recent changes in immigration policies by Immigration, Refugees and Citizenship Canada (IRCC), including a 10% reduction in international study permits for 2025-26 and the introduction of provincial attestation letters (PALs) for certain students. Despite these challenges, the University remained optimistic in meeting its PAL allocation. The cancellation of the Student Direct Stream (SDS) was noted as a potential factor in slower visa processing times, which had already affected some students' ability to arrive on time.

    The Committee moved In Camera. 

    The Committee received an update on an ongoing matter relevant to the Committee.

    The Committee returned to Closed Session.
  3. Risk Assessment Report

    The Chair welcomed Ms Elizabeth Cragg, Director, Office of the Vice-President, Operations and Real Estate Partnerships to the meeting.

    Professor Mabury and Ms Cragg presented the interim Risk Assessment Report, noting that the current reporting format was established for 2023-24 based on the Taskforce for Risk Reporting (TFRR) recommendations and consultation with executive leadership. Ms Cragg acknowledged that the dashboard provided served as an interim measure while a more comprehensive reporting framework was under development, emphasizing the iterative nature of the process.

    Discussion

    Committee members provided strategic input focused on two key areas of development emphasizing the need for comprehensive risk summaries that effectively communicate significance, likelihood, and consequences, supported by specific metrics for each identified risk. Members further discussed the importance of understanding risk interconnectivity, using the international students' risk as an example of how interrelated factors influence overall impact evaluation. The Committee expressed support for the progress achieved while maintaining their interest in the continued evolution of the reporting framework.
  4. External Auditors: Report on Non-Audit Services, Engagement Letter, Audit Plans, and Audit Fees

    The Committee received and reviewed the Audit Plan, including the Engagement Letter for 2025 and Report on Non-Audit Services.

    Mr. Rodgers advised that the Engagement Letter set out the terms of the engagement with Ernst and Young, a summary of the audit approach for 2025, and areas of audit emphasis and risk. He commented that the audit plan introduced a new fee structure for endowment and expendable funds, while the advancement investment model for recognizing investment income was refined.

    Ms Kathi Aspros, Engagement Partner, Ernst & Young reported that the planning materiality for the University of Toronto was set at $123 million, based on 3% of estimated total expenses of $4.1 billion, with any unadjusted differences exceeding $6.15 million reported at year-end. The audit documented and reviewed significant processes within the University, testing controls over entity-level processes, investments, and cash disbursements, while continuing a digital audit approach for other areas. The internal audit department's work was assessed, though it was not expected to be relied upon for the financial statement audit.

    Actuarial estimates for non-pension employee future benefit costs were provided by Aon, and collaboration with other auditors occurred regarding joint investments. Key areas of emphasis included revenue recognition, pension and retirement benefits, investments, significant contracts and agreements, legal matters, and the risk of management override of controls.

    During the meeting, it was noted that regulatory requirements mandate a valuation of the University Pension Plan (UPP) every three years, with the next valuation scheduled for 2027. However, the University conducted its own valuations annually.

On motion duly made and seconded,

IT WAS RESOLVED

THAT the Audit Committee accept the external auditors’ audit plan and engagement letter for the University for the year ended April 30, 2025, as outlined in the report from Ernst & Young dated November 6, 2024.

  1. Annual Administrative Accountability Reports, 2023-24

    The Annual Administrative Accountability Reports for 2023-24 was received by the Committee for information.

    Mr. Sanish Samuel, Controller and Director of Financial Services indicated that Financial Services was responsible for facilitating reviews of the annual accountability reports. The President reviewed the reports for the fiscal year ending April 30, 2024, submitted by his direct reports. There were no negative responses to the questions posed, and the President affirmed 'yes' to all inquiries in his report to the Chair of the Governing Council.

    All accountability reports from Deans and Principals were submitted to the Vice-President and Provost, and a review of these reports also indicated no negative responses.

    For the 2023-24 year, the Finance Division piloted an online tool to streamline the administrative accountability reporting process in three units: the Office of the Vice-President, People Strategy, Equity and Culture; the Office of the Chief Financial Officer; and the Office of the Dean of the Faculty of Arts & Science. Plans were made to expand the use of this online tool to other divisions in future years to enhance report collection and compliance reviews.
  2. Enrolment Report to the Ministry of Colleges and Universities 2023-24

    The Committee received and reviewed the Enrolment Report to the Ministry of Colleges and Universities (“MCU”), 2023-2024.

    Mr. Rodgers reported that under the 2020-2025 Strategic Mandate Agreements (SMA3), the Ministry shifted a portion of enrolment-based funding from the core operating grant to a new differentiation envelope, with part of this linked to performance metrics. In the 2023-24 fiscal year, 55% of funding was allocated through this differentiation envelope, including 10% tied to the SMA3 performance metrics framework. This allocation was set to increase to 60% in 2024-25, with 25% of total funding linked to metrics. While the total operating grant funding remained unchanged, the distribution across the two envelopes varied. For 2023-24, each WGU generated core operating grant funding of $1,325, a decrease from $2,903 per WGU in 2019-20, with the difference now part of the Differentiation Envelope.

    In 2023-24, eligible FTE enrolment increased by 1.1%, and WGU enrolment rose by 0.9% compared to the previous year, partly due to growth in nursing and medicine programs. Overall, enrolment remained within the University’s funded corridor, and with a freeze on funding for domestic general enrolment growth, the University planned for minimal annual changes in WGUs, aside from the separately funded nursing, medicine, and Scarborough Academy of Medicine & Integrated Health (SAMIH) expansion programs.
  3. Internal Audit: Semi-Annual Activity Report for the Six Months Ended October 31, 2024

    Mr. Alex Matos, Director, Internal Audit, provided an overview of semi-annual internal audit activity for the six months ended October 31, 2024.

    The report summarized the activities of the Internal Audit Department from May 1 to October 31, 2024, highlighting progress toward the long-term vision and outlining plans for the remainder of the year.

    The Annual Internal Audit Plan for 2024-2025 remained generally on schedule, with some adjustments made due to increased management engagement and unexpected turnover. Key themes included challenges and opportunities for improvement in resource deployment, data management, and oversight, with a focus on leveraging technology.

    The Internal Audit Department expanded its engagement within the community, supporting educational initiatives and enhancing the continuous audit function to address significant risks. Additionally, assistance was provided to Ernst & Young for the audit of the University’s financial statements, enrolment audit, and program audits.

    Discussion

    During the discussion, examples of recurring risks were requested, and issues related to resource deployment, oversight and accountability, and data management were addressed. It was noted that leveraging buying power and improving invoice processing times were areas for improvement.

    A member inquired about the progress in planning the use of data analytics, to which Mr. Matos responded that compliance work currently utilizes data analytics, and there were plans to incorporate AI into their processes.
  4. Report of the Previous Meeting – Report Number 159 (September 18, 2024)

    The report of the previous meeting was approved.  
  5. Business Arising from the Report of the Previous Meeting

    There was no business arising from the report of the previous meeting. 
  6. Date of the Next Meeting: January 22, 2025, 4:00 p.m. – 6:00 p.m.

    The Chair confirmed that the next meeting of the Committee would be held on January 22, 2025 
  7. Other Business

    There was no other business. 

The Committee moved In-Camera. 


IN CAMERA SESSION

  1. Internal Auditor: Private meeting

    Members of the administration absented themselves and the Committee met privately with Mr. Alex Matos, Director of Internal Audit.
  2. Committee Members Alone

    Committee members discussed topics of interest.  

The Committee returned to Closed Session. 


The meeting adjourned at 6:02 p.m.
 

December 5, 2024