Financial Accounting Foundation
Board of Trustees
Audit and Finance Committee
Board of Trustees
Audit and Finance Committee
|Kenneth B. Robinson, Chair||Susan J. Carter|
|Christine M. Cumming||Jeffrey L. Esser|
|Shundrawn A. Thomas||Lawrence Salva|
|David C. Villa|
The Board of Trustees (Board) of the Financial Accounting Foundation (Foundation) has established the Audit and Finance Committee (Committee) to assist the Board in its oversight of:
- the integrity of the financial statements of the Foundation; the Foundation’s compliance with legal and regulatory requirements; and the independence, qualifications, and performance of the Foundation’s independent auditors (Auditors);
- the financial aspects of the Foundation, including review of: annual budgets; periodic review of financial results; evaluation of transactions that are material to the Foundation’s business; review of business and risk insurance policies, and funding of employee benefit plans; and review and approval of investments and investment plans;
- enterprise risk management and compliance assessment and review; and
- information technology strategy, projects and security.
The Committee shall be a standing committee of the Board and all Committee members shall be Trustees. The Committee shall consist of three or more members. The Chair and the other members of the Committee shall be appointed by the Board and shall serve until their successors shall be duly appointed and qualified or until their earlier resignation or removal.
All Committee members shall be financially literate and collectively shall possess a working familiarity with basic auditing, finance and investing practices. It is desirable that members of the Committee collectively shall possess competencies that reflect the various responsibilities of this Committee, which include oversight of the Foundation’s financial statements, investments, enterprise risk and compliance management and information technology. This shall be signified by, among other factors, employment experience in the fields of auditing, finance or investing, or other appropriate background or experience that has created financial sophistication on the part of the member. It is recognized that Committee members do not devote full-time efforts to the Committee’s functions and may not be experts in the fields of auditing, finance, investments, risk management, compliance or information technology.
Responsibilities with Respect to Financial Reporting
The Committee is charged with the following responsibilities:
- Reviewing the process by which Management develops and summarizes financial information and the extent to which the Auditors review financial information; obtaining explanations from Management and the Auditors on such material matters as the Committee deems necessary or appropriate.
- Reviewing and discussing with Management and the Auditors the annual financial statements and reports of the Foundation including, as the Committee deems appropriate, the results of the annual audits, including any problems, difficulties or significant findings, any restrictions on the scope of the Auditors’ activities or access to requested information, any significant disagreements with Management, and Management’s responses thereto, any management letters provided by the Auditors and Management’s responses thereto and other matters related to the conduct of the audit that are required to be communicated to the Committee in accordance with generally accepted auditing standards.
- Reviewing Management’s discussion and analysis included in the annual financial statements of the Foundation.
- Making a recommendation to the Board regarding the acceptance of the financial statements for publication in the Foundation’s Annual Report.
- Reviewing the annual financial statements of the Foundation’s Employees’ Pension Plan and the Foundation’s Employees’ Tax Sheltered Annuity Plan prior to their filing as part of IRS Form 5500 with the Department of Labor.
- Reviewing and approving the Foundation’s annual IRS Form 990, Return of Organization Exempt from Income Tax, prior to its filing, and following such review and approval, providing the Board of Trustees an opportunity to review such form prior to filing.
- Meeting with senior management of the Foundation (Management) and the Auditors in separate executive sessions at least annually.
- Reviewing the following with the Foundation’s Management and the Auditors:
- The adequacy of the Foundation’s internal controls.
- The existence of any significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting.
- The existence of any fraud, whether or not material, that involves Management or other employees who have a significant role in the Foundation’s internal control over financial reporting.
- The scope of the review of the Foundation’s internal control over financial reporting and reports on significant findings and recommendations, together with Management’s responses.
- The Foundation’s major financial risk exposures and the steps Management has taken to monitor and control such exposures.
- Reviewing and evaluating the performance of the Auditors on annual basis and monitoring the rotation of the lead audit partner.
- Discussing with the Auditors any relationships or services disclosed in their reports that may impact the objectivity or independence of the Auditors.
- Recommending annually the selection and retention of the Auditors for approval by the Board, approving the compensation of the Auditors, and considering and recommending to the Board the discharge of the Auditors if necessary.
- Conferring on the scope of the Auditors’ examination of the Foundation’s financial statements and discussing and approving the Auditors’ annual engagement letter. Approving, in advance, any work to be performed by the Auditors beyond the scope of the audit engagement letters.
- At least annually, reviewing the Auditors’ audit plan, including proposed scope and approach.
- On a regular basis, meeting separately with the Auditors to discuss any matters that the Committee or the Auditors believe should be discussed privately.
- At least annually, obtaining and reviewing a report by the Auditors describing its own internal quality-control procedures; any material issues raised by its most recent quality-control review or peer review; and any inquiry or investigation by governmental or professional authorities with respect to any of its audits within the past five years, together with any steps taken to deal with any such issues.
- Adopting, and/or advising other standing committees of the Board on the adoption of, policies regarding compliance matters (including ethics and document retention policies) and fostering a culture that encourages a commitment to compliance.
- Adopting and overseeing a reporting system for, an ombuds policy that is designed to prevent and detect violations of law.
- Ensuring that “non-retaliation” procedures are in place for employees who disclose potential legal and/or ethical violations.
- Liaising with in-house legal counsel on compliance matters as needed.
- Providing oversight of the Foundation’s management of key risks, including strategic and operational risks, as well as the guidelines, policies and processes for monitoring and mitigating such risks.
- Reviewing the proposed annual operating and capital budget of the Foundation, FASB and GASB, including the accounting support fee calculations, for the ensuing fiscal year as presented by Management.
- Recommending a final budget to the Board for approval. An approved budget formally delegates spending authority for operating costs to Management, subject to policies and procedures adopted by the Foundation.
- Reviewing the quarterly financial results consisting of year-to-date budget to actual amounts for revenues and expenses and the statement of financial position. These financial results will be accompanied by a narrative from management highlighting any financial issues and, where necessary, management actions related thereto.
- Reviewing potential material financial obligations and transactions including leases, license fee arrangements, procurement contracts, banking arrangements and designating the officers and employees of the Foundation who can execute these approved documents or arrangements and act on behalf of the Foundation in the ordinary course of business.
- Adopting, periodically reviewing, and revising (subject to approval of the Board) the investment policy and guidelines statements for the Employee’s Pension Plan (Pension Plan) Trust Fund, the Postretirement Health Coverage Plan (PHCP) Fund, the Reserve Fund, the Operating Funds of the Foundation and any other investment vehicles that may be established by the Foundation from time to time (collectively the “Investments”), including policies and guidelines regarding asset classes, asset allocation ranges, and prohibited investments.
- Authorizing the retention of investment managers as the Committee may deem appropriate.
- Monitoring the Investments of the Foundation and recommending changes, as necessary. The Committee may delegate certain investment management functions to officers and employees of the Foundation and/or to retained external investment managers.
- Monitoring the management of the Investments and performance of the investment managers by reviewing written reports from the investment managers and Management and by having discussions at Committee meetings that focus on the primary determinants of returns, including asset allocation and investment strategy. These evaluations will take into account compliance with investment policies and guidelines and risk levels.
- Reporting quarterly to the Board on the performance and operations of the Investments.
- Meeting with the investment managers on at least an annual basis.
- Adopting, periodically reviewing, and revising the Investment Policy Statement for the Employees’ Tax Sheltered Annuity (TSA) Plan.
- Periodically (at least annually) reviewing the investment options available in, and fund performance of, the TSA Plan and the 457(b) Deferred Compensation Plan.
- Reviewing the Foundation’s cash management strategies and banking structure as deemed necessary and appropriate.
- Reviewing on an annual basis, the Foundation’s insurance program, the scope and limitations of coverage, and the credit quality of its insurance carriers.
- Reviewing periodically (at least annually) the Foundation’s information technology strategy and cybersecurity status.
- Monitoring significant technology investments and projects, as deemed necessary and appropriate.
- Maintaining authority to retain, oversee and direct 1) independent counsel and 2) other professionals as appropriate to assist in the performance of its duties, including assisting in the conduct of or authorization of any investigation that is consistent with the Committee’s scope of responsibilities.
- Maintaining authority to require that counsel for the Foundation prepare an annual report detailing the legal and regulatory developments, if any, which may have a material impact on the Foundation’s financial statements and Foundation Management’s compliance plans with such matters.
- Performing such other functions as assigned by law, the Foundation’s certificate of incorporation or By-laws, or the Board.
- Determining the anticipated funding and resource needs of the Committee and notifying the Foundation of such requirements.
- Regularly reporting the Committee’s findings and recommendations to the Board.
- Performing periodic self-assessments of the Committee’s roles, functions and performance that will include a review of the Committee Charter and a recommendation to the Board of any necessary or appropriate amendments.
This charter may be amended only by the affirmative vote of the Board.
As amended by the FAF Board of Trustees on November 13, 2018