TIAA-CREF Funds Complex - Audit and Compliance Committees Charter
Amended as of December 6, 2011
The Audit and Compliance Committees (“Committee”) are standing committees of the Boards of Trustees1 (“Board”) of the TIAA-CREF Funds Complex2 (“Funds”), established to assist the Board in fulfilling its oversight responsibilities relating to the Funds’ accounting and financial reporting policies and practices, compliance programs, internal controls and general compliance with applicable laws and regulations. In addition, the Committee, through use of management’s Internal Audit Division and the Funds’ independent registered public accounting firm (“Independent Auditor”), shall oversee such audits and examinations of the records and affairs of the Funds, as it deems necessary or appropriate.
- The Committee shall have unrestricted access to the Funds’ records and personnel and shall be provided with resources necessary to discharge its responsibilities.
- Although the Committee has the responsibilities and powers set forth in this charter, it is not the duty of the Committee to plan or conduct audits or to determine that the Funds’ financial statements are complete, accurate and in accordance with generally accepted accounting principles.
- In carrying out the Committee’s responsibilities, each member of the Committee shall be entitled to rely, in good faith, on information, opinions, reports or statements, including financial statements and other financial data that are prepared and presented by persons who the Committee member reasonably believes to be reliable and competent in the matters presented, which persons may include, as applicable: (1) one or more officers of the Funds or other members of management; (2) legal counsel, public accountants or other persons as to matters within the person’s professional or expert competence; or (3) another committee of the Board.
- The Committee’s function is oversight. Management is responsible for maintaining appropriate systems for accounting and internal control over financial reporting and for the preparation of the Funds’ financial statements. The Independent Auditor is responsible for planning and carrying out a proper audit. The Independent Auditor shall report directly to the Committee and is ultimately accountable to the Board and the Committee.
- Independent Auditor
The Committees shall:
- Approve and recommend to the Board the appointment of the Independent Auditor and, if the Committee deems it appropriate, recommend to the Board the termination of the Independent Auditor.
- Approve the fees, scope of work and other terms of the audit engagement.
- Approve the Pre-Approval Policies for External Audit Firm Services (“Pre-Approval Policy).
- Approve any and all services to be provided by the Independent Auditor that require pre-approval pursuant to the Pre-Approval Policy. The Committee, pursuant to the Pre-Approval Policy, may delegate the authority to grant such pre-approval for services other than audit or audit-related services to one or more designated members of the Committee, who shall report on any such decisions to the full Committee at scheduled meetings. The Pre-Approval Policy may contain de minimis exceptions for non-audit services as described in applicable regulations of the Securities and Exchange Commission (“SEC”), which must be approved by the Committee prior to the completion of the audit. No fees or other compensation for audit or non-audit services to the Funds shall be paid to the Independent Auditor unless such fees or other compensation have been approved in advance by the Committee.
- Review the performance of the Independent Auditor and, at such times as the Committee deems appropriate, consider the desirability of replacing the current Independent Auditor with a different independent registered public accounting firm.
- Evaluate the independence of the Independent Auditor.
- Review at least annually a written report from the Independent Auditor describing the relationships between the Independent Auditor and the Funds, management or any affiliate of the Funds (including any entities controlling, controlled by or under common control with a Fund affiliate), which report shall include all disclosures required of the Independent Auditor under applicable rules and regulations as well as the amount and nature of all compensation relating to such relationships.
- Review with the Independent Auditor any disclosed relationships or services that may affect the objectivity and independence of the Independent Auditor and take or recommend the Board takes appropriate action to ensure independence of the Independent Auditor.
- Review information and reports provided by the Independent Auditor with respect to the following and, as the Committee deems appropriate, discuss with the Independent Auditor:
- Any matters of importance or significant concern relating to the Funds’ financial statements.
- The results of the audit(s) conducted by the Independent Auditor.
- Any difficulties encountered by the Independent Auditor in the course of conducting the audit(s).
- Any restrictions by management on the scope of the Independent Auditor’s activities or access to requested information.
- Any disagreements between the Independent Auditor and management regarding financial reporting or other matters.
- Any adjustments to the financial statements recommended by the Independent Auditor.
- The Funds’ significant accounting policies followed when preparing the financial statements.
- Any discussions with management regarding alternative accounting treatments.
- Changes in the Funds’ critical accounting policies and practices used when preparing the financial statements.
- The effect on the Funds of any changes in accounting principles or practices proposed by the Independent Auditor and any other matters that may have a material effect on the Funds’ financial statements.
- Any material, written communications between the Independent Auditor and management, including management letters.
- Any material changes to the Funds’ disclosure controls and procedures.
- Any matters relating the adequacy and effectiveness of internal controls with respect to the Funds.
- The Independent Auditor’s attestation to and report on management's assessment of the effectiveness of the Funds’ internal controls for financial reporting.
- Any concerns relating to the quality of the Funds’ financial, accounting, compliance and internal audit personnel and other members of management having an impact on internal accounting controls or financial reports.
- Significant new or revised accounting and financial reporting standards under consideration or adopted by professional or regulatory bodies.
- An annual report describing: (1) the Independent Auditor’s quality control policies and procedures; and (2) any material issues raised by any internal quality control review, or peer review, or by any inquiry or investigation by governmental or professional authorities, including any remedial measures, and discuss the impact of the matters addressed in such report on the quality of services performed by the Independent Auditor.
- Any other required communications from the Independent Auditor
- Internal Audit
The Committee shall review information and reports from the head of the Internal Audit Division with respect to the following and, as the Committee deems appropriate, discuss with the head of the Internal Audit Division:
- The Internal Audit Division’s responsibilities, staffing and annual audit plan, including any subsequent changes, as they pertain to Funds-related activities, and reasonable assurance that the Internal Audit Division’s resources are sufficient to conduct thorough and effective internal audits.
- Audits executed pertaining to Funds-related activities, including any difficulties the Internal Audit Division encountered in the course of its audits, any restrictions on the scope of its work or access to required information, and any significant issues discussed or significant disagreements with management.
- Accounting and Financial Reporting Policies and Practices
The Committee shall review information and reports provided by senior management and/or the Independent Auditor with respect to the following and, as the Committee deems appropriate, discuss with senior management and/or the Independent Auditor:
- Any significant estimates and judgments or, as appropriate, significant changes in estimates and judgments made in management’s preparation of the financial statements.
- If applicable, (a) any significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Funds’ ability to record, process, summarize, and report financial information, and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Funds’ internal control over financial reporting, each of which must be disclosed to the Committee by the principal executive officer and/or principal financial officer pursuant to the certification requirements of Form N-CSR.
- Compliance Program
The Committee shall review information and reports provided by the Funds’ Chief Compliance Officer (“CCO”) with respect to the following and, as the Committee deems appropriate, discuss with the Funds’ CCO:
- The operation of the Funds’ compliance policies and procedures, and any changes to the policies and procedures, in accordance with Rule 38a-1 under the Investment Company Act of 1940, as amended (“1940 Act”).
- The administration of the Funds’ compliance program and such other matters relating to the Funds’ compliance program and the Funds’ CCO function, as the Committee may deem appropriate.
- The Funds’ anti-money laundering (“AML”) program and the independent testing of the program by the Internal Audit Division. Any amendments to the Funds’ AML program requested by management shall be reviewed by the Committee, and the Committee shall recommend to the Board approval of such amendments, as appropriate.
- The Committee shall recommend the annual compensation for the Funds’ CCO to the Board for approval. The Committee shall consult with the Board’s Nominating and Governance Committee (“Nominating and Governance Committee”) to jointly recommend the initial compensation for any new CCO of the Funds.
- Legal and General Matters
The Committees shall:
- Review with the Chief Legal Officer any legal matter which the Committee has been advised could have a significant impact on the Funds’ financial statements.
- Review and discuss, as applicable, any reports presented by management on potential management employee conflicts of interest and on controls to address any such potential conflict.
- Review procedures for: (i) the receipt, retention and treatment of any complaints received by the Funds or the Funds’ service providers regarding accounting, internal accounting controls or auditing matters; and (ii) the confidential, anonymous submission by employees of the Funds or the Funds’ service providers of any concerns regarding questionable accounting or auditing matters.
- Review a summary of Funds-related complaints regarding accounting, internal accounting controls or auditing matters and reports on the current status and resolution of those complaints.
- Investigate any improprieties or suspected improprieties in the Funds’ financial operations, any matter brought to the Committee’s attention within the scope of the Committee’s duties, functions and responsibilities or any other significant matters as deemed warranted by the Committee.
Membership and Organization
- The Committees shall consist of at least three members, all of whom shall be independent. Trustees shall be considered independent if they are not “interested persons,” as that term is defined by the 1940 Act, of the Funds, and have been determined by the Board to meet applicable independence requirements.
- Although not required, it is the Board’s intention that: (i) all of the Committee’s members shall be “financially literate” as determined by the Board and (ii) at least one member shall be designated an “Audit Committee Financial Expert” as that term is defined by the rules of the SEC. The designation of a member as an Audit Committee Financial Expert does not impose on such person any duties or liabilities that are greater than the duties and liabilities imposed on such person as a member of the Committee and Board, nor does it affect the duties or liabilities of any other member of the Committee or the Board.
- The Board may appoint members for a period shorter than one year to fill vacancies.
- The Committee may delegate its authority to a subcommittee or subcommittees consisting of its members.
- Members of the Committee, including the Chair, shall be appointed by the Board after receipt of the recommendation of the Nominating and Governance Committee.
- Committee members shall serve until their successors are elected or their earlier resignation or removal. Any member of the Committee may be removed or replaced, for any reason at any time, by a majority vote of the Board.
- The Committee shall review and reassess this charter as it deems appropriate; however, changes will only be made following recommendation of the Nominating and Governance Committee and approval of the Board.
- The Committee shall meet at least four times per year.
- The Chair of the Committee may call a special meeting of the Committee upon due notice to the Corporate Secretary and each other member at least 48 hours prior to the meeting, or more promptly if the majority of the members of the Committee waive such advance notice.
- A majority of members of the Committee shall constitute a quorum.
- A majority of the members present in person or by telephone (or other communications facilities that permit all persons participating in the meeting to hear or communicate with each other simultaneously) shall decide any question brought before the Committee.
- The Committee shall meet at least annually in an executive session with the Funds’ CCO.
- The Committee shall meet at least annually in an executive session with the head of the Internal Audit Division.
- The Committee shall meet at least annually in an executive session with the Independent Auditor.
- The Committee shall have the right, upon request, to meet privately, in a separate executive session, with any other person as desired by the Committee. The Committee may also request that any such person meet with any member(s) of, or consultant(s) to, the Committee.
- The Committee shall inform the Board of the significant actions taken or issues discussed at its meetings and otherwise report to the Board as the Committee deems (or the Chair of the Committee deems) desirable and appropriate.
- The Committee shall keep minutes of its meetings and regularly submit approved minutes of its meetings to the Board.
The Committee shall have the authority, at the expense of the Funds, to retain such independent accountants, lawyers, consultants or other advisors as it deems appropriate to assist and advise the Committee in connection with its responsibilities or any investigations.
The Committee shall perform a self-evaluation annually and report on its evaluation to the Nominating and Governance Committee. Such evaluation may constitute a portion of the Board’s annual self-evaluation.
1 For TIAA Separate Account VA-1, this refers to the Management Committee.
2 TIAA-CREF Funds Complex consists of: College Retirement Equities Fund, TIAA-CREF Funds, TIAA Separate Account VA-1 and TIAA-CREF Life Funds.