Terms of Reference

The Board of Governors By-Law No. 1, section 15, sub-section 3 (a) states:

The Audit and Risk Committee shall be composed of the Chair and the Vice-Chair(s) of the Board, and a minimum of three other members of the Board. The Chair of the Committee shall be appointed by the Board on the recommendation of the Nominating Committee. Notwithstanding any other provisions in the By-laws, in any event, every Audit and Risk Committee member shall be an independent, external and unrelated Governor (not employed by the University nor enrolled in a course of study at the University). Members of the Audit and Risk Committee shall be financially literate, with the ability to read and understand financial statements of the breadth and complexity comparable to those of the University. Optimally, at least one member of the Committee a professional accounting designation.

One half of the membership of the Committee shall constitute a quorum.

The following individuals will normally be invited to attend Audit and Risk Committee meetings: the President, the Provost, the Vice-President (Operations and Finance), the Associate Vice-President and Chief Financial Officer, the Chief Internal Auditor, and the Chief Risk Officer.

Meetings shall be held as required or upon the request of a member of the Audit and Risk Committee or of the University’s internal or external auditors. The Committee Chair shall review an agenda in advance of each meeting.

The Audit and Risk Committee assists the Board in fulfilling its oversight responsibilities for the financial reporting process, the system of internal control, the audit process, the risk profile of the University and the University’s processes for monitoring compliance with laws, regulations and University policies.

The primary responsibilities of the Committee are:

1. Financial Statements: to oversee the system of internal control and the financial reporting process. In fulfilling this responsibility, the Committee shall:

1. 1. meet with the external auditors and review the results of the annual financial statement audit and approve such statements for recommendation to the Board;
   2. review other sections of the annual report, including Management’s Discussion and Analysis, and any report or opinion that the auditors propose to render, and consider the accuracy and completeness of the information;
   3. review and discuss with management and the external auditors significant variances, estimates and accruals, judgments, changes in accounting policies and standards, issues concerning litigation or contingencies and any difficulties encountered;
   4. review any recent and relevant professional and regulatory pronouncements to understand their impact on the financial statements;
   5. review and discuss with management whether adequate procedures and processes are in place to ensure the integrity of the financial statements;
   6. review the appropriateness of significant accounting principles and practices, reporting issues, unusual or extraordinary items, transactions with related parties and the adequacy of disclosures; and
   7. consider whether the financial statements are complete and consistent with information known to Committee members.

2. Internal Control: to oversee the internal control structure and processes, the Committee shall:

1. 1. review with management and the internal and external auditors, their evaluation of the University’s internal controls and processes, including internal controls over financial reporting, compliance with University policies and any material weaknesses or fraud and assess the steps management has taken to minimize significant risks or exposures; and
   2. consider the effectiveness of the internal control system, including information technology security and control.

3. External Audit: to oversee the external audit process, the Committee shall:

1. 1. select and recommend annually the public accountants for appointment as auditors for the ensuing fiscal year and, in consultation with the administration, the basis of their compensation;
   2. approve the engagement letter, receive the independence letter and review the management letter and related materials;
   3. discuss with the external auditors the scope and purpose of the upcoming audit and the procedures to be followed including coordination with internal audit;
   4. review all matters required to be communicated to the Committee under Generally Accepted Auditing Standards;
   5. review with the external auditors their findings, any restrictions on their work, cooperation received, and their recommendations and facilitate the resolution of any disagreements between management and the external auditors;
   6. receive privately the external auditors’ opinion on various matters, including the quality and effectiveness of financial and internal audit staff, significant accounting principles and practices, unresolved material differences of opinion or disputes;
   7. periodically review and approve a policy governing the engagement of the external auditors for the provision of non-audit services; and
   8. annually review and assess the independence and performance of the external auditors.

4. Internal Audit: to oversee the internal audit function and reports, the Committee shall:

1. 1. review with the Chief Internal Auditor a summary of findings, any restrictions or limitations on their work, cooperation received, special investigation reports, findings from third party auditors (not including work performed by the appointed external auditors), and any recommendations arising therefrom;
   2. review the proposed audit plans for the coming year, the criteria upon which they are based and the coordination of services provided to the external auditors;
   3. periodically review and approve the internal audit mandate (the Internal Audit Department Policy Statement) for continued relevance;
   4. review audit progress, findings, recommendations, responses and follow-up actions; in situations where the auditee has not responded appropriately in a timely fashion to the audit findings, follow-up and obtain a management response on those action items which remain outstanding for a significant period of time;
   5. satisfy itself as to internal audit independence, cooperation received from management, interaction with external audit and any unresolved material disagreements with management;
   6. review the budget, organizational structure, and qualifications of the internal audit department;
   7. through its Chair, act as the formal supervisor of the Chief Internal Auditor and in consultation with the President and the Vice-President (Operations and Finance), have the final approval to appoint or discharge the Chief Internal Auditor and complete an annual performance review of the Chief Internal Auditor;
   8. periodically review the effectiveness of the internal audit activity; and
   9. meet privately with the Chief Internal Auditor at least quarterly.

5. Compliance: to oversee compliance-related issues, the Committee shall:

1. 1. obtain regular updates from management and legal counsel regarding legislative and regulatory compliance and outstanding litigation matters;
   2. review the effectiveness of the system for monitoring compliance with laws and regulations and the results of management’s investigation and follow-up (including disciplinary action) of instances of non-compliance;
   3. review the findings of any examinations by regulatory agencies; and
   4. review the process for communicating conflict of interest and code of conduct policies to employees and monitoring compliance.

6. Enterprise-wide Risk Management: to oversee the University’s risk management framework which shall include approval of Management’s proposed Risk Appetite Statement and review of:

1. 1. the identification and quantification of all significant risks (e.g. strategic, financial, operational, reputational etc.) the University is exposed to;
   2. the University’s appetite and tolerance for these risks on both an inherent and residual basis;
   3. Management’s strategy and controls for managing these risks;
   4. the roles and responsibilities for risk identification and management including risk ownership;
   5. risk monitoring and reporting;
   6. emerging risks including risk horizon, likelihood and severity of such risks;
   7. opportunities identified by Management for the future growth of the University
   8. and shall provide input as appropriate as to the overall risk culture and tolerance of the University. The Audit and Risk Committee shall be satisfied that Management operates within the University’s approved Risk Appetite Statement.

7. Reporting: to fulfill its reporting responsibilities, the Committee shall:

1. 1. report to the Board of Governors as required about Committee activities, issues, and related recommendations;
   2. report to the Board of Governors, on its review of Management’s proposed Risk Appetite Statement and present a final version for approval by the Board
   3. complete periodic self-assessments of the Audit and Risk Committee’s effectiveness against its mandate and report any concerns to the Board;
   4. periodically review the Terms of Reference of the Audit and Risk Committee and recommend any proposed changes for consideration by the Board of Governors; and
   5. perform other activities as requested by the Board.

8. Other duties:

1. 1. oversee the work of any public accounting firm engaged by the University where such work would be defined as “public accounting” within the meaning of the standards of the Canadian Institute of Chartered Accountants;
   2. investigate any matter brought to its attention with full access to all books, records, facilities and personnel of the University; and
   3. review and ensure that procedures are in place for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or audit matters.

Terms of Reference

The Executive and Governance Committee of the Board shall be composed of the Chair and the Vice-Chair(s) of the Board, and representatives from every Board Committee, including but not limited to:

• Planning and Resources Committee Chair
• Audit and Risk Committee Chair
• University Advancement Committee Chair
• Investment Pool Committee Chair
• Remunerations Committee Chair
• One Board member who shall also be a member of the Pension Trust Committee, and as ex officio members, the Chancellor, the President, the Provost, and the Vice-President (Operations and Finance). The Chair of the Board shall be the Chair of the Committee. Five members of the Committee shall constitute a quorum.

The Executive and Governance Committee shall, between meetings of the Board, consider and take appropriate action on matters pertaining to the affairs of the Board, as referred to it by the Chair of the Board, the Standing Committees of the Board, the President or the Vice-Presidents. All decisions made by the Committee on behalf of the Board shall be reported to the Board at its next meeting and shall be subject to confirmation by the Board except that when unusual or urgent matters require decision the action of the Committee shall be brought to the attention of the Board at its next meeting for information only.

The Executive and Governance Committee shall make recommendations to the Board on the appropriate form of all by-laws of the Board and on any alteration or other matter pertaining to such by-laws.

The Executive and Governance Committee shall:

• Annually review and endorse the Strategy & Priorities put forward by the President for the upcoming Academic year, to be provided to the Board for approval.
• Annually review and endorse the list of key performance metrics to be presented by University leadership to the Board throughout the year.
• Annually develop a Board Workplan, taking into account the President’s priorities and other areas of interest to the Board for the upcoming Academic year.
• Annually review Terms of Reference and Calendar/Workplan for each Committee and make recommendations to Committee Chairs consistent with the Governance Agenda.
• Annually review the performance and effectiveness of the Board of Governors, and make recommendations to the Board regarding board composition, processes & practices, training, and other matters that may serve to improve overall University Governance.

Terms of Reference

The Board of Governors By-Law No. 1, section 15, sub-section 3 (k) states:

The Human Resources Committee shall be composed of the Chair, the Vice-Chair(s), the Chair of the Remunerations Committee of the Board and the Chair of the Planning and Resources Committee of the Board. A majority of the members of the Committee shall constitute a quorum.

The Committee shall:

1. Negotiate and approve the terms of the President’s contract of employment. A summary of the contractual terms shall be reported to the Board for information and prior to the relevant Board meeting a complete copy of the contract shall be made available through the office of the University Secretary for Board members to review;
2. Evaluate, at least annually, the performance of the President;
3. Annually determine the remuneration of the President, including the payment of any bonuses or other awards. The Committee shall report the outcome of its deliberations, together with any agreed changes to the terms of the President’s contract, to the Board for information;
4. Review and approve the terms of the Vice-Presidents’ contracts of employment prior to appointment or renewal. A summary of the terms of such contracts shall be reported to the Board for information;
5. Annually review the President’s assessment of the performance of the Vice-Presidents and approve any resultant recommendations regarding remuneration or the payment of any bonuses or other awards. Any such changes to remuneration or other contractual terms shall be reported to the Board for information;
6. Receive, at least annually, a report on the performance of associate vice-presidents, as well as other senior executives as requested by the Committee;
7. Review the contracts of employment of such other senior executive staff as the Committee shall determine or the Board shall request from time to time and report any concerns arising from such reviews to the Board.
8. Annually receive a report on succession planning at the senior executive level and assist the administration where appropriate;

The Committee shall be provided with such current, comprehensive market and comparative data regarding compensation and contractual terms as it shall require in order to undertake its work.

President’s Performance Review Process:

The evaluation of the President’s performance as specified in paragraph 2 above, shall include the following:

1. The Committee shall receive and review, annually, a written report from the President describing the President’s progress against the specific goals and priorities approved by the Committee at the beginning of the assessment period. In addition to highlighting progress made against those goals, the report should also outline additional initiatives, matters and issues addressed during the assessment period, as well as any areas of concern, along with commentary on what will be done to address these going forward.
2. The Committee shall adopt a “Knowledgeable Other” process to assess the effectiveness of the President. Annually, the HR Committee and the President shall mutually agree on a reasonable number of Knowledgeable Others who have had exposure and are familiar with aspects of the President’s work and priorities over the past year. The Board Chair shall seek input in writing from the Knowledgeable Others and shall consolidate the feedback (on an anonymous basis) into appropriate themes for sharing and discussion with the HR committee, and with the President.
3. Should the Committee determine in any particular assessment period that more comprehensive input on the President’s performance from a broader group of stakeholders is needed, the HR Committee may establish an “HR Advisory Panel”, whose members shall be decided in the sole discretion of the HR Committee. The HR Advisory Panel shall be provided with a “Terms of Reference” for gathering and consolidating input from specific stakeholders, potentially both internal and external to the University. The HR Advisory Panel shall compile a written report of its findings to be shared and discussed with the HR Committee, and with the President.

Terms of Reference

The Investment Pool Committee shall be a subcommittee of the Planning and Resources Committee and shall consist of not fewer than six members, as follows: at least two current members of the Board, appointed by the Board; two members with investment expertise appointed by the Planning and Resources Committee; the Associate Vice-President & Chief Financial Officer and the Treasurer. The President and Vice-President (Operations and Finance) shall be ex officio members, but shall have no vote. The Chair shall be designated by the Board of Governors from the Board appointed members on the Committee.

Four members of the Committee shall constitute a quorum.

Appointments shall become effective on July 1 and members shall hold office for a period of one year. Members shall be eligible for re-appointment.

The overall objective of the Investment Pool Committee is to bring advice and knowledge to the effective management of the investments included in the University’s Investment Pool, consistent with the approved fund objectives.

Within this context, the Committee shall:

1. review investment policies, objectives, strategies and make recommendations to the Planning and Resources Committee;
2. make recommendations to the Planning and Resources Committee concerning the engagement and termination of investment managers and consultants;
3. review and approve mandates and investment objectives given to individual investment managers;
4. meet quarterly to monitor investment performance of the total Fund and of individual managers;
5. meet regularly with external investment managers;
6. monitor operating expenses such as fees paid to external fund managers, consultants, fund measurement services and custodians;
7. monitor rebalancing of funds among the investment managers and exposure to non-Canadian currencies; and
8. provide semi-annual performance reports to the Planning and Resources Committee.

Terms of Reference

The Board of Governors By-Law No. 1, section 15, sub-section 3 (e) states:

The Nominating Committee shall be composed of the Chair of the Board who shall be the Chair of the Committee, the Vice-Chair(s) of the Board, the President, the Chancellor, and three or more additional members of the Board. One-half the members of the Committee, other than the President, shall constitute a quorum.

The Nominating Committee of the Board shall consider and recommend to the Board persons to be elected under Section 8 (1) (b) of the 1976 Act, the membership and Chairs of Board Committees (and Vice-Chair if appropriate), Honorary Governors, and the Chair, Vice-Chair(s), and University Secretary, and such other offices as may be referred to the Committee by the Board.

Terms of Reference

The Board of Governors By-Law No. 1, section 15, sub-section 3 (f) states:

The Pension Trust Committee shall be composed of the Chair and the Vice-Chair(s) of the Board, the President and the Vice-President (Operations and Finance) as ex officio members; four members appointed by, but not necessarily from, the Planning and Resources Committee of the Board; eight members of the Pension Plan, three of whom shall be appointed by the McMaster University Faculty Association, one of whom normally shall be appointed from the professional librarians; one of whom shall be appointed by the McMaster University Clinical Faculty Association; two of whom shall be appointed by UNIFOR, Local 5555; one of whom shall be appointed by the McMaster University Retirees Association; and one of whom shall be appointed by the President, in consultation with the Associate Vice-President & Chief Human Resources Officer, from The Management Group.

Eight members of the Committee shall constitute a quorum.

Appointments shall become effective on July 1, and members shall hold office for a period of one year but any member shall be eligible for re-appointment. If a vacancy occurs during the year, a replacement shall be appointed within sixty days in the same manner as the prior appointment. The Pension Trust Committee shall elect a Chair from among its members.

The Committee shall:

1. Recommend to the Board general pension investment policy and the annual Statement of Investment Policies and Objectives for submission to the Financial Services Commission of Ontario;
2. Monitor and review performance of Investment Consultants and Fund Managers:
   1. Make recommendations to the Board with respect to situations of deviation or proposed deviation by Fund Managers from the Statement of Investment Policies and Procedures;
   2. Make recommendations to the Board on the appointment or replacement of such Investment Consultants and Fund Managers;
3. Monitor the annual calculation of the “Net Interest on the Fund” and the “Annual Pension Increase”;
4. Discuss and promote awareness and understanding of the pension plan by members of the plan and persons receiving benefits under the plan;
5. Comment and make recommendations to the Planning and Resources Committee on the performance and appointment of the actuary; and the actuarial methods and assumptions used in determining the financial condition of the pension plan and the contributions to the pension plan;
6. Comment and make recommendations to the Planning and Resources Committee on proposed changes to the pension plan text, and propose changes to the pension plan text;
7. Monitor at least annually the administrative expenses paid from the pension plan, and determine whether they are appropriate. Changes in the nature and structure of administrative expenses paid may be approved by the Board only if recommended by the Pension Trust Committee as a result of a ballot of all Pension Trust Committee members.

Terms of Reference

The Planning and Resources Committee shall be composed of not fewer than five members of the Board in addition to the Chair and the Vice-Chair(s) of the Board, the Chair of the Audit and Risk Committee, the President, the Provost, and Vice-Presidents (or a designated delegate) as ex officio members. One-half of the membership of the Committee, excluding the President and Vice-Presidents, shall constitute quorum.

The primary responsibilities of the Planning and Resources Committee are:

Financial Affairs

1. Provide oversight of the financial affairs of the University and keep the Board informed thereon;
2. Approve financial expenditures as required by the Approval and Signing Authority Policy;
3. Review, at least once annually, interim financial statements in comparison with budgets;
4. Review final annual budgets and make recommendations to the Board;
5. Review and oversee the establishment of adequate financial controls to ensure the implementation of policies and decisions adopted by the Board, including budgetary matters;
6. Provide oversight of investment policies and the management of McMaster’s investments and delegate such responsibilities as it sees fit to the University Administration in the implementation of established policies;
7. Recommend to the Board of Governors the establishment and collection of fees and charges for tuition on behalf of any entity or organization of the University.

Capital Planning and Construction

1. Review and approve plans for capital expenditures and all matters relating to building, expansion, maintenance or alteration of the physical resources of the University, as required by the Approval and Signing Authority Policy;
2. Review and approve the award of contracts and the selection of professional consultants;
3. Ensure capital projects and expenditures are within the resources of the University;
4. With the approval of the Board, determine limits within which authority for commitment of funds may be delegated to University officials.
5. When making decisions regarding building on campus, the Committee will consider factors that impact the aesthetic quality of campus, as well as the surrounding community.

The Committee shall be responsible for reviewing projects and proposals with consideration to both financial and planning aspects of University business.

Terms of Reference

The Remunerations Committee shall be composed of not fewer than three members of the Board, in addition to the ex officio members who shall be the Chair and the Vice-Chair(s) of the Board, the President and the Vice-President (Operations and Finance). No employee of the University, other than the President and the Vice-President (Operations and Finance), shall be a member of the Remunerations Committee. Three members of the Committee, other than the President and Vice-President (Operations and Finance), shall constitute a quorum.

The primary function of the Remunerations Committee shall be to recommend to the Board policies regarding salaries, wages, benefits and other forms of remuneration and to provide advice, as necessary, to the University Administration in implementing and administering such policies.

In making its recommendations, the Committee shall have regard to the policies of the University as approved by the Planning and Resources Committee and the Board.

Terms of Reference

The Committee on University Advancement shall be composed of the Chancellor, the President, the Chair and the Vice-Chair(s) of the Board, the Vice-President, University Advancement, and the Chief Executive, External and Internal Engagement as ex officio members, and up to six other members, at least half of whom shall be members of the Board. One-half of the members of the Committee shall constitute a quorum.

The Committee shall make recommendations to the Board on policy matters related to institutional advancement, including external and internal communications, fund-raising, alumni relations, development and public relations.