Terms and Conditions of Appointment for Audit Committee Members

June 2007

Table of Contents

• Introduction
• Part I: Terms and Conditions
  • 1.1 Appointment Mechanism
  • 1.2 Tenure of Appointment
  • 1.3 Date of Appointment
  • 1.4 Acceptance of Appointment
  • 1.5 Term and Renewal
  • 1.6 Resignation.
  • 1.7 Indemnification and Legal Assistance
  • 1.8 Remuneration
  • 1.9 Business Travel and Other Expenses
• Part II: Terms of Service
  • 2.1 Meetings
  • 2.2 Expectations
  • 2.3 Roles and Responsibilities
  • 2.4 Roles and Responsibilities of Committee Chairs
  • 2.5 Duty to Inform and Duty to Resign—Disagreement
• Part III: Conflict of Interest and Ethical Conduct Code for Audit
  Committee Members Appointed by the Treasury Board
  • 3.1 Object
  • 3.2 Principles
• Part IV: Other Requirements
  • 4.1 Basis and Method of Payment
  • 4.2 Setting and Managing Days of Service
  • 4.3 Departmental Point of Contact
  • 4.4 Security.
  • 4.5 Non-Disclosure of Information

Introduction

This document sets out the terms and conditions of appointment for audit committee members appointed by the Treasury Board (Appointees), and may be amended by Treasury Board at its discretion.

Part I: Terms and Conditions

1.1 Appointment Mechanism

Appointments are made by Treasury Board, on the recommendation of the President of the Treasury Board, through a Treasury Board Appointment Order specifying the tenure of the appointment. The appointment shall also specify to which departmental audit committee the member has been named and whether the appointment is for a regular member or for the Chair of the committee.

1.2 Tenure of Appointment

Appointees serve at the pleasure of the Treasury Board of Canada. An appointment may be terminated at any time without prior notice and without any further compensation.

1.3 Date of Appointment

The date on the Treasury Board Appointment Order is the effective date for the appointment.

1.4 Acceptance of Appointment

To accept the appointment, Appointees must return a signed copy of the Appointment Acceptance Form to the Audit Committee Recruitment and Development Secretariat within 30 days of receiving it. By signing the Letter of Appointment, the Appointee attests that he or she has read the Terms and Conditions of Appointment, agrees to be bound by them, and accepts the appointment.

1.5 Term and Renewal

Unless otherwise stated, terms are for a period of four years, and may be renewed once, at the discretion of the Treasury Board, for an additional period not exceeding four years.

1.6 Resignation

When an Appointee resigns, a letter of resignation must be sent to the Deputy Head of the department in whose audit committee the Appointee is a member (hereinafter referred to as the “Deputy Head”) and the Comptroller General of Canada. The letter should state the explicit reason for the resignation (i.e., personal reason, disagreement with a person or action, conflict of interest).

1.7 Indemnification and Legal Assistance

Treasury Board approved an exception to the Treasury Board Policy on Indemnification of and Legal Assistance for Crown Servants to allow Appointees to be deemed “Crown Servants” for the purposes of the Policy until such time as it is amended.

1.8 Remuneration

Remuneration will be provided on a per diem basis, according to Schedule 1 unless otherwise stated. Schedule 2 identifies Tier I departments and agencies (reference levels over $1B).

Schedule 1: Per Diem Rates for Audit Committee Members

	Chair	Regular Member
Tier I	$1,800	$1,500
All others	$1,500	$1,200

Schedule 2: Tier I Departments and Agencies

• Agriculture and Agri-Food Canada
• Canada Border Services Agency
• Canadian Heritage
• Canadian International Development Agency
• Citizenship and Immigration
• Correctional Service Canada
• Environment Canada
• Department of Finance Canada
• Fisheries and Oceans Canada
• Foreign Affairs and International Trade Canada
• Health Canada
• Human Resources and Social Development
• Indian and Northern Affairs Canada
• Industry Canada
• Department of Justice Canada
• National Defence
• Natural Resources Canada
• Public Works and Government Services Canada
• Royal Canadian Mounted Police
• Transport Canada
• Treasury Board of Canada Secretariat
• Veterans Affairs Canada

1.9 Business Travel and Other Expenses

The Treasury Board Travel Directive, as it applies to the Executive Group of the Public Service, shall govern the reimbursement of travel expenses incurred by Appointees. Other incidental and out-of-pocket expenses, directly related to the exercise of duties as an Appointee, will be reimbursed at cost.

Part II: Terms of Service

2.1 Meetings

Appointees shall attend and participate in audit committee meetings, which will usually be held in the National Capital region, a minimum of four times per year, as arranged by the Chair. Appointees shall also attend and participate in other meetings or teleconferences as needed. In addition, the Appointees shall prepare written submissions, reports and analysis; participate in and contribute to presentations, briefings and assessments; and perform other related duties as may be required.

2.2 Expectations

As a member of the audit committee, Appointees must:

• Act honestly and in good faith in the public interest;
• Comply with the rules of conduct set out in the Conflict of Interest and Ethical Conduct Code for Audit Committee Members appointed by the Treasury Board found in Part III herein and to other compliance measures as may be determined by the Deputy Head of the department;
• Become thoroughly familiar with the role and responsibilities of an audit committee member by reviewing pertinent policies, directives and documents such as the “Guidebook for Audit Committees”;
• Attend orientation and development sessions, which will be provided, to increase knowledge and understanding of the department and of government operations;
• Attend all audit committee and related meetings and actively participate by being prepared in advance, fostering a culture of open, candid and direct communication and asking probing questions;
• Be accountable to the Deputy Head of the department for providing sound counsel and constructive challenge and exercising due diligence;
• Contribute to the development of an audit committee Charter or Terms of Reference, the annual audit committee plan and the annual audit committee report;
• Participate, as required, in a self-assessment of the performance of the audit committee during the previous period; and
• In the occurrence of disputes or disagreements which reflect on the integrity of operations of the department, vigorously pursue avenues of resolution.

2.3 Roles and Responsibilities

Appointees shall have the following roles and responsibilities, as described in the Treasury Board of Canada Directive on Departmental Audit Committees:

1. Values and Ethics:

Review and report, at least annually, on the arrangements established by management to exemplify and promote public service values and to ensure compliance with laws, regulations, policies, and standards of ethical conduct.

2. Risk Management:

Review and report, at least annually, on the corporate risk profile and departmental risk management arrangements.

3. Management Control Framework:

Review and report, at least annually, on departmental internal control arrangements, including the adequacy of management-led audit.

4. Internal Audit Function

• Recommend, and regularly review, a Departmental Internal Audit Charter or Policy on Internal Audit for approval by the Deputy Head;
• Regularly review the adequacy of resources of the internal audit function;
• Review and recommend for approval the risk assessment and the internal audit plan prepared by the Chief Audit Executive;
• Regularly review the performance of the internal audit function;
• Advise the Deputy Head on the appointment and performance appraisal of the Chief audit Executive;
• Receive and recommend for approval internal auditing reports and management action plans to address recommendations; and
• 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.

5. Office of the Auditor General and Central Agencies

• Ensure that management has adequate arrangements to support the Office of the Auditor General (OAG) and central agencies in doing audit work in the department;
• Be fully briefed on all audit work relating to the department to be undertaken by the OAG, other agents of Parliament or central agencies;
• Review the audit reports of the OAG and central agencies that have departmental or government-wide implications, and recommend for approval departmental responses and action plans;
• Periodically meet with the OAG and seek its comments and advice on matters of departmental risk, control, and governance;
• Be briefed on audit-related issues and priorities raised by central agencies and advise the Deputy Head on required action; and
• Be briefed on, and advise the Deputy Head on, the impact of government-wide initiatives to improve management practices.

6. Follow-up on Management Action Plans

• Ensure 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; and
• Periodically receive reports from management on actions taken.

7. Financial Statements and Public Accounts Reporting

Review the departmental financial statements with management and all significant accounting estimates and judgments therein, and recommend to the Deputy Head whether they should be accepted.

When the departmental financial statements are audited, review:

• The audited financial statements with the external auditor and senior management, 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 department's financial statements or the Public Accounts;
• The auditor's findings and recommendations relating to the internal controls in place for financial statement reporting; and
• The performance of the external auditor.

8. Risk and Accountability Reporting

Review the following to ensure that, to the best knowledge of the Appointee, there are no material misstatements or omissions in:

• The departmental Corporate Risk profile;
• The Report on Plans and Priorities;
• The Departmental Performance Report; and
• Other significant accountability reports.

2.4 Roles and Responsibilities of Committee Chairs

In addition to the expectations and the roles and responsibilities of the members described above, the audit committee member, appointed as the Chair, shall have the additional roles and responsibilities:

1. Oversee and lead in the preparation and presentation of:

• The periodically reviewed and reaffirmed Audit Committee Charter or Terms of Reference which outlines the committee’s role, responsibilities and operations, for approval of the Deputy Head, and
•  An annual audit committee plan to ensure that the committee’s ongoing responsibilities are scheduled and fully addressed
• An annual audit committee report to the Deputy Head which:
  • Summarizes the committee’s activities undertaken and the results of its reviews
  • Provides the committee’s assessment of the department’s system of internal controls
  • Document any significant concerns the committee may have in relation to the department’s risk management, controls and accountability process
  • Provides the committee’s assessment of the capacity and performance of the internal audit function
  • Provides, as needed, recommendations for the improvement of risk management, controls and accountability processes, including recommendations for the improvement of the departmental internal audit function
• An annual self-assessment report to gauge the performance of the committee in its ability to deliver on its Charter or Terms of Reference and on its contribution to the Deputy Head’s departmental oversight mandate

2. Oversee audit committee pre-meeting mechanics, including:

• Establishing the agenda
• Ensuring the timely distribution of pre-meeting materials
• Holding pre-meetings as required
• Encouraging attendance by members and others as required

3. Chair audit committee meetings, including:

• Ensuring sound management of the meeting and the agenda
• Encouraging open and meaningful participation of the members
• Managing conflicting positions and points of view
• Seeking consensus and agreement
• Initiating and conducting in camera individual meetings with the Minister, the Deputy Head, the Senior Financial Officer, the Chief Audit Executive, the Office of the Auditor General representative and other government officials, as required

4. Support a positive culture by:

• Providing a model of behaviour and conduct
• Openly accepting and embracing the expectations, roles and responsibilities of a member
• Encouraging respect and trust amongst members
• Supporting open, candid and direct communications amongst members and with management
• Respecting differences of opinion
• Committing to good governance and a team spirit

2.5 Duty to Inform and Duty to Resign—Disagreement

In the event that a regular member of an audit committee has a difference of opinion with another member that cannot be resolved by the Chair or if the member has an unresolved difference of opinion with the Chair and provided that the difference of opinion, from the perspective of the Appointee, has, or could have, a material, negative impact on the fairness of reported information or on the integrity of operations of the department or involves the questionable behaviour of an individual then the Appointee shall bring the issue forward for resolution, as follows:

• The Appointee shall bring the issue to the attention of the Deputy Head within a reasonable timeframe.
• If the Deputy Head is the Chair of the audit committee or if the Deputy Head is unable to resolve the issue and if the Appointee is of the opinion that the issue still remains, the Appointee shall bring the issue to the attention of the Minister of the department in question.
• If the Minister is unable to resolve the issue and if the Appointee is of the opinion that the issue still remains, the Appointee shall bring the issue to the attention of the Comptroller General of Canada.
• If the event that the Comptroller General of Canada is unable to resolve the issue and if the Appointee is of the opinion that the issues still remains, the Appointee has a duty to resign.

Part III: Conflict of Interest and Ethical Conduct Code for Audit Committee Members Appointed by the Treasury Board

3.1 Object

The object of the Code is to enhance public confidence in the integrity of audit committee members and the decision-making process in government

• awhile encouraging experienced and competent persons to seek and accept appointment;
• while facilitating interchange between the private and public sectors;
• by establishing clear rules of conduct respecting conflict of interest and post-employment practices for Appointees; and
• by minimizing the possibility of conflicts arising between the private interests and public duties of Appointees, and providing for the resolution of such conflicts in the public interest, should they arise.

3.2 Principles

Appointees are required to perform their duties in the public interest. Their impartiality must be beyond reproach. Consequently, the Conflict of Interest and Ethical Conduct Code has been developed based on Part I of the Conflict of Interest and Post-employment Code for Public Office Holders.

The Code sets standards to maintain and enhance public confidence in the integrity of Appointees. It sets out principles to avoid real or apparent conflicts between their private interests and public responsibilities.

Ethical Standards
Appointees shall act with honesty and uphold the highest ethical standards so that public confidence and trust in the integrity, objectivity and impartiality of government are conserved and enhanced.

Public Scrutiny
Appointees have an obligation to perform their official duties and arrange their private affairs in a manner that will bear the closest public scrutiny, an obligation that is not fully discharged by simply acting within the law.

Decision Making
Appointees, in fulfilling their official duties and responsibilities, shall make decisions in the public interest and with regard to the merits of each case.

Private Interests
Appointees shall not have private interests that would be affected particularly or significantly by government actions in which they participate.

Public Interest
On appointment, and thereafter, Appointees shall arrange their private affairs in a manner that will prevent real, potential or apparent conflicts of interest from arising, but if such a conflict does arise between the private interests of an Appointee and the official duties and responsibilities of that Appointee, the conflict shall be resolved in favour of the public interest.

Public Commentary
The Appointee must comply with the public comment protocols established by the Department. If none exist, the Appointee must refer to the Deputy Head for guidance before making public comment on audit committee matters.

Private Gain
The Appointee’s work should not result in any personal or private financial or other substantive gain for the Appointee or for families or businesses in which the Appointee has an interest. (Private gain does not include per diem payments received as an audit committee member.)

Duty to Disclose
The Appointee must inform the Deputy Head of the Department of any circumstance that may have a negative or harmful effect on the Appointee’s abilities to perform the duties required of the Appointment.

Duty to Inform and Duty to Resign—Conflict of Interest
Independence is demonstrated by the absence of real and perceived direct and indirect personal and financial interest of the Appointee or members of his or her family and business associates and competitors AND the personal capacity and behaviour of the Appointee to engage the management, the Chief Audit Executive and the Office of the Auditor General in demanding explorations of departmental practices and areas of concern. It extends to seeing this principle through to standing by one’s challenge to reports or practices held to be incompatible with the facts or to acceptable practices—even when colleagues on the committee may be inclined to defer. The consequence of this is the duty to inform the Deputy Head directly in such a case. Protection of independence may result in a mutual agreement to terminate the appointment.

Gifts, Hospitality and Benefits
Appointees and their families shall not solicit or accept transfers of economic benefit, other than incidental gifts, customary hospitality, or other benefits of nominal value, unless the transfer is pursuant to an enforceable contract or property right of the Appointees.

Preferential Treatment
Appointees shall not use their position to assist private entities or persons where this would result in preferential treatment to any person.

Insider Information
Appointees shall not knowingly take advantage of, or benefit from, information that is obtained in the course of their official duties and responsibilities and that is not generally available to the public.

Government Property
Appointees shall not directly or indirectly use, or allow the use of, government property of any kind, including property leased to the government, for anything other than officially approved activities.

Post-Employment
Appointees shall not act, after their appointment terms, in such a manner as to take improper advantage of their previous appointment. Furthermore, Appointees shall not make representations to, or solicit business from departments with which they have been engaged as audit committee members for a period of one year post-engagement.

Fundraising
Appointees are not to personally solicit funds from any person, group, organization or corporation where such fundraising could place Appointees in a position of obligation incompatible with their public duties.

Respect for Administration of the Code
Appointees shall respect the administration of this Code, and shall exercise appropriate restraint when commenting upon matters under review.

Part IV: Other Requirements

4.1 Basis and Method of Payment

Unless otherwise stated, the Appointee shall be paid a firm per diem rate for performing the duties and responsibilities of an audit committee member, in accordance with Section 1.8, Schedules 1 and 2.

A day is defined as 7.5 hours. Payment for services shall be made for days actually spent performing audit committee member duties and responsibilities as outlined in Schedule 3, with no provision for annual leave, statutory holidays or sick leave. In some instances, if time worked is more or less than a day, the per diem rate shall be prorated.

Schedule 3: Per Diem Equivalence

Activity	% of per diem
Audit Committee Meeting (in person)	100%
Audit Committee Meeting (by teleconference)	40%
Meeting Preparation Time	100% prorated
Travel Time	100% prorated

Travel and living expenses, properly and reasonably incurred by Appointees in providing services as audit committee members and authorized by the Deputy Head, will be reimbursed at cost, with no mark up, in accordance with the meal, private vehicle and incidental allowances specified in Appendices B, C and D of the Treasury Board Travel Directive, and with other provisions of the Directive referring to “travellers”, rather than those referring to “employees”. Appointees shall be allowed to use “Special Travel Authorities”, as provided for the Executive Group.

Other incidental expenses such as long distance telephone calls, document copying costs, etc., reasonably and properly incurred as part of the duties of audit committee members, shall be reimbursed at cost without mark up.

Payment shall be made no more frequently than once a month, provided that a request for payment is submitted to the departmental point of contact. The claim for payment should indicate or include:

• The name of the Appointee and the address to which the payment should be sent
• The period covered by the claim
• The number of days actually spent providing services during the period, together with a time sheet
• The amount payable (days worked multiplied by the appropriate per diem rate)
• Travel and living expenses incurred during the period, or during a previous period, in accordance with the Treasury Board Travel Directive
• Other incidental expenses incurred during the period, or a previous period
• The total amount of the claim
• Copies of receipts related to travel and living, and other incidental expenses being claimed
• The name and telephone number of a contact point

4.2 Setting and Managing Days of Service

The Chair or regular member of an audit committee, under normal circumstances, is not expected to perform the duties and responsibilities of the appointment for more than an estimated number of days per year. At the beginning of each calendar year, the point of contact will communicate the number of days of expected service during the term of the appointment and any extensions.

As a guideline, it is anticipated that an Appointee for a Tier 1 department would provide up to 30 days of service per year, as a Chair, and up to 20 days per year, as a regular member. The amount of service required of Chairs and regular members of other organizations is expected to be somewhat less.

Once the number of days of service for the Appointee has been set for the year, the Appointee cannot claim for payment in excess of that amount, unless otherwise agreed to by the Deputy Head. If additional days are required by the Appointee, the Appointee will submit, in writing, a request for the additional days needed to perform the duties during the year together with an explanation and support where possible.

4.3 Departmental Point of Contact

With respect to this appointment, a “point of contact” shall be named and identified to the Appointee. The point of contact shall be the representative of the department to which the Appointee has been assigned. The point of contact shall have the responsibility of identifying and managing the number of days of service that are expected to be provided and of offering assistance to the Appointee with respect to administrative matters concerning the appointment and shall be the person to whom the Appointee shall sent claims for payment. The Appointee should contact the point of contact for any administrative issue, including security clearances.

4.4 Security

In accordance with Section 2.1 of the Government Security Policy’s Personnel Security Standard—2-04, individuals must undergo a screening process if their duties or tasks necessitate access to sensitive information and assets. As a condition of appointment, the Appointee must hold, or must be able to obtain within a reasonable timeframe, a valid Secret security clearance issued by a recognized federal government security authority. Some organizations may require a higher-level security clearance. Prior to the commencement of duties, the Appointee must undergo a reliability check and be granted a reliability status. The departmental point of contact will assist the Appointee to obtain the necessary security screening. The Appointee shall not have access to any classified information until the security clearance is obtained.

Unless otherwise provided, the Appointee shall not remove “protected or classified” information from government premises unless the Appointee holds a valid Designated Organization Screening (DOS). If required, the point of contact shall assist the Appointee to obtain the necessary screening.

4.5 Non-Disclosure of Information

During the term of the appointment, the Appointee may gain access to government of Canada protected or classified information, including such things as financial statements, business plans and Cabinet documents. The Appointee shall hold all such protected or classified information in strict confidence.

Unless otherwise agreed, the Appointee shall not disclose, copy, transmit or provide protected or classified information to a third party. In addition, the Appointee shall not discuss or disclose the business, operations, decisions or recommendations of the audit committee to third parties.