To assist the 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 and regulations.
The Audit Committee shall be comprised of no less than three (3) and no more than six (6) members of the board. The Chairman of the board will appoint committee members. Changes in membership on the committee will be reviewed by the Board Chairman as part of the annual re-organization of the board. The committee members shall select one member as Chairman and another member as Vice Chairman of the Audit Committee. 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.
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 Audit Committee.
The committee has the authority to engage independent counsel and other advisors as they deem necessary to carry out their 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 an Audit Committee’s decision for these resources.
The Audit Committee will generally meet quarterly or at any such time as determined necessary by the Chairman of the committee. The committee may also meet by conference call as necessary. The duration of the meeting will be dictated by the time required to effectively address the agenda. The committee will also meet in executive session as deemed necessary.
- Review and determine the adequacy of the institution’s accounting policies and practices through discussions with the Audit Department, 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 statement. The report should include discussions on all critical accounting principles and practices used by the institution, all material alternative accounting treatments of financial information 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 or written or electronic materials, including material posted on websites of the bank disclosing “pro-forma” or “adjusted non-GAAP information”.
- 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 controls over financial reporting which 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 statement prior to distribution and require financial management to discuss any significant changes to the bank’s accounting principles. The Chair of the committee 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.
- The independent auditor is ultimately accountable to the Audit Committee and 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 Audit Committee.
- 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 by the independent auditor with AgriBank.
- 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 AgriBank.
- 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 Audit Committee and the board of directors and administratively to the Chief Executive Officer (CEO).
- Review and determine that no restrictions are being placed on the Audit Department by management.
- 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 the internal audit department 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 Institute of Internal Auditor’s International Standards for the Professional Practice of Internal Auditing.
- Meet in executive session with the CAE at least annually.
- Establish procedures for the receipt, retention and treatment of complaints regarding accounting, financial reporting, accounting controls or auditing matters.
- Determine the adequacy of internal controls through a review of all audit reports issued by the Audit Department or the independent auditor relating to the bank or 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 examination reports of the bank, issued by FCA, and evaluate management’s response to the report.
- Review with the General Counsel, the program for monitoring compliance with the Standards of Conduct Regulations and at least annually with management and the independent and internal auditor, compliance with AgriBank’s Code of Ethics for senior management, principal accounting officers and the Controller.
- 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 the Audit Department 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’s review and discussion of the annual financial statements with management and reviewed and discussed matters with independent auditors as required.
- Include in minutes of meetings any review of a financial policy, procedure or report and their agreement or disagreement with the items reviewed.
- Share minutes with the board of directors and verbally report to the board of directors regularly.
- Maintain Audit Committee minutes for a minimum of six fiscal years.
- Perform a self-assessment of the effectiveness of the Audit Committee activities at least bi-annually.
- Periodically 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.
Approved by Audit Committee August 17, 2016
AgriBank Board approved August 18, 2016