of the
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The primary function of the Audit Committee is to assist the Board of Directors in fulfilling its oversight responsibilities by:
1. Reviewing the financial reports and other financial information provided by the Corporation to any government body or the public;
2. Reviewing the Corporation’s system of internal controls regarding finance and accounting;
3. Reviewing the Corporation’s auditing, accounting and financial reporting processes;
4. Serving as an independent and objective party to monitor the Corporation’s financial reporting process and internal control system;
5. Reviewing and appraising the audit efforts of the Corporation’s independent accountants; and
6. Providing an open avenue of communication among the independent accountants, financial and senior management and the Board of Directors.
The Audit Committee will primarily fulfill these responsibilities by carrying out the activities enumerated in Section IV of the Charter.
The Committee’s function is one of oversight, recognizing that the Corporation’s management is responsible for preparing the Corporation’s financial statements, and the independent auditor is responsible for auditing those statements. In adopting this Charter, the Board of Directors acknowledges that the Committee members are not employees of the Corporation and are not providing any expert or special assurance as to the Corporation’s financial statements or any professional certification as to the external auditor’s work or auditing standards. Each member of the Committee shall be entitled to rely on the integrity of those persons and organizations within and outside the Corporation that provide information to the Committee and the accuracy and completeness of the financial and other information provided to the Committee by such persons or organizations absent actual knowledge to the contrary.
The Audit Committee shall be comprised of one to three directors, each of whom shall be independent directors as required by applicable rules and regulations and free from any relationship that, in the opinion of the Board, would interfere with the exercise of his or her independent judgement as a member of the Committee.
Examples of such relationships might include:
· A director being employed by the Corporation or any of its affiliates for the current year or any of the past five years;
· A director accepting any compensation from the Corporation or any if its affiliates other than compensation for Board or committee service, benefits under a tax-qualified retirement plan, or non-discretionary compensation;
· A director being a member of the immediate family of an individual who is, or has been in any of the past five years, employed by the Corporation or any of its affiliates as an executive officer;
· A director being a partner in, or a controlling shareholder or an executive officer of, any for-profit business organization to which the Corporation made, or from which the Corporation received, payments that are or have been significant to the Corporation or business organization in any of the past five years; and
· A director being employed as an executive of another company where any of the Corporation’s executives serves on that company’s Compensation Committee.
A director who has one or more of these relationships may be appointed to the Audit Committee of the Board, under exceptional and limited circumstances, if the Board determines that membership on the Committee by the individual is required by the best interest of the Corporation and its shareholders, and the Board discloses, in the next annual proxy statement subsequent to such determination, the nature of the relationship and the reasons for the determination.
All members of the Committee shall have a working familiarity with basic finance and accounting practices, and at least one member of the Committee shall have accounting or related financial management expertise. Within the time frame required by applicable rules, the Committee shall have at least one audit committee financial expert, the designation of which shall be made annually by the Board of Directors.
The members of the Committee shall be elected by the Board at the annual meeting of the Board and shall serve on the Committee for a term of one year or until the Board appoints a successor. A Chair shall be appointed by the Board.
The Committee shall meet at least four times annually, or more frequently as circumstances dictate. The purpose of the four scheduled meetings of the Audit Committee is to review and approve the annual and quarterly financial results of the Corporation prior to release and to review and approve the scope of the annual audit to be performed by the Corporation’s independent accountants. As part of its job to foster open communication, the Committee should meet at least annually with management and the independent accountants in separate executive sessions to discuss any matters that the Committee or each of theses groups believe should be discussed privately. In addition, the Committee or at least its Chair should confer with the independent accountants and management quarterly to review the Corporation’s financials consistent with IV.3 below.
To fulfill its responsibilities and duties the Audit Committee shall:
Document / Reports Review
1. Review and update this Charter periodically, as conditions dictate.
2. Review the organization’s annual financial statements, the notes thereto and the related Management’s Discussion and Analysis, and any other reports or other financial information submitted to any government body or the public, including any certification, report, opinion or review rendered by the independent accountants.
3. Review with financial management and the independent accountants each 10-Q, including the financial statements included therein, the notes thereto, and the related Management’s Discussion and Analysis, prior to its filing. The Chair of the Committee may represent the entire Committee for purposes of this review.
4. Review with independent accountants the results of their annual audit, the report thereon (including any disclosure required in the Corporation’s public filings), as well as recommendations included in their management letter, if any, and their informal observations regarding the competence and adequacy of financial and accounting procedures of the Corporation. On the basis of this review, make recommendations to the Board of Directors for any changes that seem appropriate.
5. Prepare the minutes of each meeting and distribute to all members of the Board of Directors. The permanent file of the minutes will be maintained by the Secretary of the Corporation.
Registered Independent Public Accountants
6. Recommend to the Board of Directors the selection of the registered independent public accountants, considering independence and effectiveness. On an annual basis, the Committee should review and discuss with the accountants all significant relationships the accountants have with the Corporation and any other relationships that may adversely affect the independence of the accountants and, based on such review, determine the accountant’s independence.
7. Establish policies and procedures for the review and pre-approval by the Committee of all auditing services and permissible non-audit services (including the fees and terms thereof) to be performed by the independent accountants, with certain de minimus exceptions, and review the firm’s non-audit services and related fees.
8. Review the performance of the independent accountants and approve any proposed discharge of the independent accountants when circumstances warrant.
9. Periodically consult with the independent accountants out of the presence of management about internal controls and the fullness and accuracy of the organization’s financial statements.
10. Review and discuss reports from the independent accountants on all critical accounting policies and practices used by the Corporation, alternative accounting treatments within generally accepted accounting principles related to material items that have been discussed with management, including the ramifications of the use of the alternative treatments and the treatment preferred by the independent accountants, and other material written communications between the independent accountants and management.
Financial Reporting Process
11. Review with management the Corporation’s disclosure controls and procedures for financial reporting purposes and management’s assessment of the Corporation’s exposure to risk and steps management has taken to monitor and control any such exposure.
12. In consultation with the independent accountants, review the integrity of the organization’s financial reporting processes, both internal and external.
13. Consider the independent accountant’s judgements about the appropriateness of the Corporation’s accounting principles as applied in its financial reporting.
14. Consider and approve, if appropriate, major changes to the Corporation’s accounting principles and practices as suggested by the independent accountants or management.
15. Establish policies and procedures for related-party transactions and pre-approve all such transactions in accordance with such policies and procedures.
16. Establish regular and separate systems of reporting to the Audit Committee by management and independent accountants regarding any significant judgements made in management’s preparation of the financial statements and the view of each as to appropriateness of such judgements.
17. Following completion of the annual audit, review separately with management and the independent auditors any significant difficulties encountered during the course of the audit, including any restrictions on the scope of work or access to required information.
18. Review any significant disagreement among management and the independent accountants in connection with the preparation of financial statements.
19. Review with the independent accountants and management
the extent to which changes or improvements in financial or accounting
practices, as approved by the Audit Committee, have been implemented.