The Audit Committee (“Committee”) assists the AgriBank, FCB (“Bank”) board of directors in fulfilling its oversight responsibilities for financial reporting, the system of internal control, the audit process and the Bank’s process for monitoring compliance with laws, regulations, and the standards of conduct.
The Committee shall be comprised of no less than three (3) members. Only members of the board of directors are eligible to serve, and each member must be free from any relationship that, in the opinion of the board, would interfere with the exercise of the Committee member’s independent judgment. The Chairperson of the board will appoint Committee members annually as part of the reorganization of the board of directors. The Committee shall select one member to serve as Chair and another member to serve as Vice Chair of the Committee. The Committee Chair will serve as a key contact between the Committee, board and Bank senior management. The Committee reports only to the Bank board of directors. The majority of the committee members should be independent as defined by the board of directors. All members of the Committee should be familiar with general business and/or basic accounting practices and at least one member should have accounting or financial management expertise. A majority of Committee members shall constitute a quorum.
The Committee generally will meet quarterly or at any such time as determined necessary by the Committee Chair or as directed by the board. Committee meetings may be called by the Committee Chair and may be conducted in person, by conference call, or by other digital means that allows each member to interact with other members simultaneously. The duration of the meeting will be dictated by the time required to effectively address the agenda. The Committee may meet in executive session as it deems necessary.
The Committee will retain records of its meetings, including attendance, for at least six (6) fiscal years. Records will include any review of a financial policy, procedure or report and the committee’s agreement or disagreement with the items reviewed. Records will be available for review by the Committee and will be shared with the board of directors.
As delegated by the board of directors, the Committee has the authority for the appointment, compensation, retention and oversight of the work of their independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work. The independent auditor will report directly to the Committee and is ultimately accountable to the Committee and the board of directors.
The Committee will have unrestricted access to records, procedures, activities and personnel relevant and necessary to the fulfillment of its responsibilities.
- Review and determine the adequacy of the institution’s accounting policies and practicesthrough discussions with Internal Audit, independent auditor and Bank management.
- Require periodic reporting on current regulatory, accounting or reporting developments and any significant accounting changes from management and the independent auditor.
- Receive from the independent auditor, a report of the Bank’s annual audited financial statements. The report should include all critical accounting principles and practices used, all material alternative accounting treatments of financial information, including significant and unusual transactions, and other material written communications between the independent auditor and management, such as management letters, schedule of unadjusted differences, reports on observations and recommendations on internal controls, a listing of adjustments and reclassifications and the independent auditor’s independence letter.
- Review with management and the independent auditors the effect of off-balance sheet arrangements that could have current or future effect on financial conditions, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources, and earnings press releases and other reports.
- Review with Bank management or others required to make certifications to the Farm Credit Administration (FCA) on annual and quarterly reports or certifications with respect to compliance with the Disclosure Program, including all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting that are reasonably likely to adversely affect the Bank’s ability to record, process, summarize and report financial information and any fraud, whether or not material that involves management or other employees who have a significant role in the Bank’s internal controls.
- Review management’s certification on the effectiveness of controls related to financial reporting.
- Review and approve the quarterly financial statements prior to distribution and require financial management to discuss any significant changes to the Bank’s accounting principles. The Committee Chair may represent the entire Committee for purpose of these discussions when deemed necessary.
- Review and approve, prior to issuance, quarterly and annual press releases of financial results as well as any interim press releases.
- Review and oversee the performance of the independent auditor and exercise final approval on the appointment or discharge of the auditors.
- Meet with the independent auditor to review and approve their annual audit plans and receive regular reports based on their audit activity.
- Review and discuss periodically with management and the independent auditor their respective disclosure controls and procedures.
- Review and determine that no restrictions are being placed on the independent auditor by management.
- Pre-approve any allowable non-audit services to be provided to the Bank by the independent auditor.
- Receive a report from the independent auditor at least annually of any non-audit engagements with district associations and receive written certification on an annual basis that they are not providing any prohibited non-audit services to the Bank.
- Review the independent auditor’s annual engagement letter with the Controller.
- Meet in executive session with the independent auditor at least annually.
- AgriBank will not employ a partner, concurring partner, or lead member of the engagement team within one year after the conclusion of the audit engagement.
- The Chief Audit Executive (CAE) will report functionally to the Committee and the board of directors and administratively to the Chief Executive Officer (CEO), or to a sufficient level within the organization that allows the internal audit activity to fulfill its responsibilities.
- Review and determine that no restrictions are being placed on Internal Audit by management or the board.
- Annually review and approve the performance objectives and the performance evaluation of the CAE. Obtain input from the CEO regarding these performance objectives and the performance evaluation.
- Review and approve the appointment, reassignment, replacement or dismissal of the CAE.
- Review and approve the audit plan developed and recommended by Internal Audit and approve any changes to the plan.
- Receive a report on Internal Audit’s Quality Assurance and Improvement Program including an opinion on conformance to the mandatory guidance of The Institute of Internal Auditor’s International Professional Practices Framework
- Meet in executive session with the CAE at least annually.
- Review and approve the Internal Audit Charter.
- Establish and maintain procedures for the receipt, retention and treatment of complaints regarding accounting, financial reporting, accounting controls or auditing matters.
- Receive reports of complaints regarding accounting, financial reporting, internal controls or auditing matters.
- Determine the adequacy of internal controls, including the control environment, through a review of all audit reports issued by Internal Audit or the independent auditor relating to the Bank’s operations.
- Review the testing results of management’s controls related to financial reporting.
- Understand the scope of internal audit’s review of information technology area including security and controls.
- Review all FCA examination reports of the Bank and evaluate management’s response to the reports.
- Review with the General Counsel, the program for monitoring compliance with the Standards of Conduct Regulations and review at least annually with management and the independent and internal auditor, compliance with AgriBank’s Code of Ethics for officers and senior financial professionals.
- Review management’s internal control report with the independent auditor and the internal auditor.
- Review and discuss with management, any significant findings by the independent auditor or Internal Audit together with management’s response to such findings.
- Annually review the Audit Committee Charter and recommend to the board of directors any amendments to that charter as appropriate.
- Annually prepare a report to be included in AgriBank’s annual report, disclosing the committee reviewed and discussed the annual financial statements with management and reviewed and discussed matters with independent auditors as required.
- Provide regular oral reports to the board of directors.
- Perform a self-assessment of the effectiveness of the Committee activities at least bi-annually.
- Meet with representatives of FCA as deemed necessary.
- Respond to any concerns identified by the System Audit Committee and conduct any audit committee activities that are necessary for the System Audit Committee to fulfill its chartered responsibilities.
- Perform any other activities related to this charter as requested by the board of directors.
The Committee has the authority to engage independent counsel and other advisors as it deems necessary to carry out its duties. The Committee shall have the authority to call for special or investigative audits. The Bank will provide appropriate funding as required by the Committee for payment of service fees to the independent auditor, independent counsel, or other advisors. A two- thirds majority vote of the full board of directors is required to override the Committee's decision for these resources.
The Committee also has the authority to access and utilize a range of resources to direct research and analysis, review audit-related programs or practices, and gain access to other information needed in performing its duties, including appropriate and ongoing training. The Committee is authorized to access or retain resources including, but not limited to:
- Internal Audit staff, who will provide information, analysis and recommendations as needed or requested;
- Bank’s General Counsel;
- The Chief Executive Officer and other Bank management, as requested;
- Professional consultants, external advisors or other resources requested.
Approved by Audit Committee January 16, 2018
AgriBank board approved January 18, 2018