Audit, Finance and Risk Committee charter

1. Mandate

1.1 The Audit, Finance and Risk Committee (Committee) of the Board of Management (Board) of the Canada Revenue Agency (Agency) assists the Board in fulfilling its independent oversight responsibilities with respect to:

• the accuracy of the CRA’s financial statements prepared by management;
• the CRA’s accounting framework, financial reporting, and performance information, operating and capital budgets, procurement, internal controls, risk tolerance and compliance with financial laws, regulations, and legislation;
• the internal audit, evaluation, and risk functions;
• enterprise risk management;
• the performance and annual financial statements audits undertaken by the Office of the Auditor General (OAG) of Canada; and
• in collaboration with the Board Committees, the Agency’s overall internal controls.

2. Composition

2.1 The Committee will be comprised of a minimum of three directors of the Board, including a Chair and a Vice-Chair.

2.2 Based upon changes in Board membership and/or on an annual basis, the Chair of the Board, in consultation with the Chair and Vice-Chair of the Committee, will review the composition of the Committee and recommend to the Board any changes in Committee membership. All changes in Committee membership will be approved by resolution of the Board at the earliest opportunity.

2.3 The CRA’s Commissioner is not a member of the Committee.

2.4 The Chair of the Audit, Finance and Risk Committee is to be a member of the Technology and Security Committee.

2.5 The Chair of the Technology and Security Committee is to be a member of the Audit, Finance and Risk Committee.

2.6 All members of the Committee are to be independent of the Agency. The Commissioner, the Chief Financial Officer (CFO), the Assistant Commissioner and Chief Audit Executive (AC-CAE), and a representative of the OAG are to attend as observers in regular closed sessions of the Committee meetings. Board directors who are not members of the Committee may attend the regular closed sessions with approval from the Committee Chair and/or in-camera sessions as observers, by request or by invitation of the Committee Chair. Requests to observe should be submitted to the Board Secretariat at least two business days in advance of the meeting. Any other person not having business before the Committee may attend the regular closed session with approval from the Committee Chair.

2.7 At a minimum, the Chair and the Vice-Chair will have a Canadian accounting designation (CPA). All Committee members will have the ability and financial literacy to understand financial statements and reporting and have a background in internal audit or government auditing to perform the function, or be prepared to learn.

3. Responsibilities and duties

3.1 In discharging their duties under this mandate, each member of the Committee is obliged to exercise the care, diligence, and skill a reasonable person would exercise in comparable circumstances.

3.2 In discharging its duties under this mandate, the Committee may seek and rely in good faith upon any report of a lawyer, accountant, and officer of the Agency or any other person whose profession provides credibility to the statement made by such person.

To fulfill its mandate, the Committee will:

3.3 Financial Statements

1. Review financial information, and management’s certifications of it, in the annual Financial Statements – Agency Activities, and – Administered Activities, and other financial reports to determine whether the statements are materially accurate, and when appropriate, recommend their approval to the Board;
2. Review the quarterly financial reports (QFR) of the Agency prior to their online publication; and
3. Review with management changes to accounting policies, disclosures, practices, key estimates and judgements to determine whether they are fair, accurate and prudent.

3.4 Financial Reporting

1. Review and discuss with management the Quarterly Resource Management Report;
2. Review and discuss with management the Annual Resource Alignment Plan (ARAP);
3. Review and discuss with management the CRA’s procurement activities, including the annual procurement (contracting) report;
4. Review and discuss with management any actual or anticipated contingent liabilities, write-offs, bad debts, doubtful accounts and unpaid taxes which could have a material current or future effect on the Agency’s financial statements, and the manner in which these have been disclosed in the financial statements; and
5. The Chair and the Vice-Chair to meet quarterly with the CFO and update the Committee as appropriate.

3.5 Internal Controls

1. Review and assess the adequacy and effectiveness of the Agency’s internal control environment and reporting systems by monitoring and reviewing corporate policies related to financial reporting and reviewing with the CFO and the AC-CAE management’s philosophy with respect to internal controls and all significant control-related findings; and
2. Receive advice from the Board committees with respect to the internal controls that are related to their mandates to assist the Audit, Finance and Risk Committee in its oversight of the Agency’s overall internal controls in an integrated manner.

3.6 Internal Audit Function

1. Review and discuss with the AC-CAE the Risk-Based Assurance and Advisory Plan (RBAAP), including objectives, scope, value-add, and timing, at least once annually and recommend the RBAAP to the Board for approval;
2. Review and discuss with the AC-CAE the Internal Audit Policy and the Evaluation Policy and recommend them to the Board for approval;
3. Review the external independent assessments of the internal audit and evaluation functions, at least every five years;
4. Review the Quality Assurance and Improvement Program (QAIP), including the results of internal and external assessments, at least annually;
5. Review final reports of the internal audit and evaluation engagements, including recommendations, action plans, the value-add, and management’s response on any issues identified, and, if deemed appropriate, recommend them to the Commissioner for approval;
6. Review, monitor the progress, and make recommendations to the Agency on Management Action Plans (MAPs), and corresponding timelines (or any subsequent changes to the MAPs or associated timelines) which are developed in response to internal audit and evaluation reports by the AC-CAE, the OAG, or any other external audit and evaluation reports and decide which Board committee will monitor the MAPs;
7. Review the Audit, Evaluation and Risk Branch (AERB) strategic plan on an annual basis and monitor the performance objectives and the extent to which they are being met:
8. Review the AC-CAE Annual Report;
9. Review, periodically, the Audit, Finance and Risk Committee's relationship with the AERB;
10. Discuss the AC-CAE’s performance and independence at least annually with the Commissioner of the Agency;
11. Meet regularly with the AC-CAE in the absence of management and the OAG to review and discuss the CAE’s independence and any matters of concern; and
12. During the AC-CAE appointment, deployment, replacement, or departure process, the Chair of the Audit, Finance and Risk Committee will be consulted by the Commissioner.

3.7 Enterprise Risk Management (ERM)

1. Review with management and the OAG, the identification and assessment of any significant financial risks to the Agency;
2. Receive regular updates from management on the Corporate Risk Profile (CRP) which identifies the principal risks, including emerging risks, to which the Agency is exposed;
3. Assess the quality, adequacy and timeliness of risk-related information provided by management to ensure the Committee has the information needed to oversee and evaluate the Agency’s risks, and management’s strategies for managing those risks;
4. Review the Agency’s ERM Policy and recommend it to the Board for approval;
5. Receive advice from the Board committees with respect to risk management that is related to their mandates to assist the Committee in its oversight of the Agency’s overall risk profile and risk exposure in an integrated manner.

3.8 Fraud

1. Respond annually to the OAG fraud questions confirming if the Audit, Finance and Risk Committee and the Board members have knowledge of any instances of fraud or error affecting the Agency and recommend it to the Board for approval;
2. Review CRA's comprehensive report of suspicious activities and internal and external fraud and resolutions at least semi-annually;
3. Review significant suspicious activities and internal and external fraud that may affect financial reporting and disclosure at least annually;
4. Review all significant fraud matters as they may arise from time to time within CRA;
5. Ensure sufficient procedures are in place to receive and manage complaints or concerns received by the Agency about accounting, internal accounting controls and audit matters including those submitted anonymously by employees of the Agency, and receive periodic reports on such procedures, and complaints, and concerns received;
6. Periodically review the sufficiency of internal controls related to fraud, and any significant deviations from them, with the AC-CAE, the Agency Security Officer, the CFO, and the OAG;
7. Review the annual report to the Treasury Board Secretariat on internal disclosures within the CRA, as well as any other reports that the CRA’s Senior Officer for Internal Disclosure may provide to the Committee, to ensure procedures regarding internal disclosure are being followed in accordance with the provisions of the Public Servants Disclosure Protection Act; and
8. Review the plans of the AERB, the Finance and Administration Branch and the OAG to determine whether the combined evaluation and testing of internal financial controls is comprehensive and coordinated.

3.9 Compliance

1. Review and, when appropriate, make recommendations to the Board on the Agency’s compliance with financial legislation, regulations, and policies.

3.10 Office of the Audit General of Canada (OAG)

1. Review with the OAG the areas of special emphasis to be addressed in the planned audits, the materiality levels which the OAG proposes to employ, and other issues which are appropriate in the view of the Committee or the OAG;
2. Review the OAG’s reports on the audited financial statements of the Agency, and any other audits or assessments pertaining to the Agency performed by the OAG and, when appropriate, make recommendations to the Board; and
3. The Chair and Vice-Chair of the Committee and the Board Chair meet with the OAG in the absence of management on a quarterly basis to discuss specific issues and significant matters that the OAG may wish to bring to the Committee for its consideration.

3.11 Integrity, Values, Ethics^{Footnote 1}

1. Alert the Board Chair and/or Commissioner to any matters related to the integrity of senior Agency officials and assure that the appropriate steps are taken to investigate and address the conduct in question.

3.12 Accountability

1. Develop an Audit, Finance and Risk Committee work plan on an annual basis, identifying priorities and objectives;
2. Review the charter annually and make a recommendation to the Governance and Service Committee for Board approval; and
3. Undertake any other duties the Board may delegate to the Committee.

4. Operating procedures

4.1 Meetings

1. Meetings of the Committee will take place in accordance with the procedures set out in sections 9, 17, and 18 of Board of Management By-Law # 1. All meetings of the Committee are closed meetings. At the start and at the end of each meeting of the Committee, there may be an in-camera session for independent Board members scheduled on the agenda. There may also be an in-camera session with the Commissioner scheduled on the agenda, at the beginning and/or the end of each meeting of the Committee;
2. The Chair of the Committee may adopt any combination of in-camera sessions as they may deem appropriate;
3. Section 7.1 of the Manual – Meeting Modalities defines and describes the procedures for closed and in-camera meetings/sessions;
4. If the Committee so chooses, it may call the AC-CAE, the CFO or other Agency executives to attend either a portion of or an entire in-camera session. Similarly, if the Committee so chooses, it may call an official from the OAG to attend either a portion of or an entire in-camera session. Whenever an official from the OAG attends an in-camera session, the Commissioner and/or the AC-CAE will attend as observer(s);
5. The Committee will hold, at each quarterly meeting, an in-camera session with the AC-CAE; and
6. A majority of Committee members shall constitute a quorum of the Committee.

4.2 Absence of Committee Chair

1. In the absence of the Committee Chair, the Committee Vice-Chair will act as Chair.

4.3 Secretary

1. Unless the Committee specifies otherwise, the Corporate Secretary will act as Secretary for all meetings of the Committee.

4.4 Reporting to the Board

1. The Committee, through its Chair, will report to the Board, in an abridged manner, at the next regular Board meeting while ensuring the following elements are included in the report:
   • an overview of items discussed;
   • an opportunity to receive comments or questions from other Board members; and
   • any recommendations and/or decisions for the Board.

4.5 Minutes

1. Minutes of each meeting of the Committee will be prepared by the Board Secretariat and provided to members for review and approval at the next meeting of the Committee. The Chair will, as required, brief the Corporate Secretary and the Commissioner following in-camera sessions.

4.6 Reading material

1. Reading material for each Committee meeting will be available in both official languages and provided to Committee members by the Board Secretariat. Every effort is to be made to allow Committee members at least two weekends to review the material before the meetings. Committee members will be expected to have read the material prior to the meeting and thus will be expected to participate fully in Committee discussions on the subject matter contained within the reading material.

4.7 Legal Advice

1. At any time, Committee members may seek legal advice from the legal counsel assigned to the Board of Management by the CRA. All requests for advice will be made in writing to the Agency's legal counsel, with a copy provided to the Corporate Secretary.