Section 1. Purpose
The primary function of the Audit Committee (the "Committee") is to assist the Board of Trustees in fulfilling its oversight responsibilities relating to: the integrity of the University System of New Hampshire's (USNH) financial statements, the systems of internal control, the performance of USNH's independent auditors and internal audit function, the independent auditor's qualifications and independence, and USNH's compliance with legal and regulatory requirements. In so doing, it is the responsibility of the Committee to maintain free and open communication among the Committee, independent auditors, the internal auditors and management of USNH. The Committee shall take all appropriate actions to set the overall USNH tone for quality financial reporting, sound business risk practices, and ethical behavior.
Section 2. Membership
The Chair of the Board of Trustees shall annually appoint three or more members to the Committee who are independent of management and USNH. Members of the Committee shall be considered independent as long as they do not accept any consulting, advisory, or other compensatory fee from USNH and are not affiliated persons of USNH, its subsidiaries or management. Members can be appointed for successive terms.
Members of the Committee shall possess general accounting, business and financial knowledge, including the ability to read and understand fundamental financial statements. At least one member, preferably the Chair of the Committee, shall have accounting or financial expertise as defined by the Board. If any appointee does not have these credentials prior to appointment to the Audit Committee, they can obtain appropriate training in these areas after appointment. This person deemed to have financial expertise should be someone other than the Chair of the Financial Affairs Committee. The Chair of the Committee shall preside over Audit Committee meetings, and his/her designee shall serve in the Chair's absence.
Section 3. Duties and Responsibilities
While the Committee has the responsibilities and powers set forth in this Charter, it is not the duty of this Committee to plan or conduct audits or to determine that USNH's financial statements are complete, accurate and in accordance with generally accepted accounting principles. This is the responsibility of management and the independent auditors. Management is responsible for the preparation, presentation, and integrity of USNH's financial statements and for the appropriateness of the accounting principles and reporting policies used by USNH. The independent auditors are responsible for auditing USNH's financial statements.
The following shall be the principal duties and responsibilities of the Committee. These are set forth as a guide with the understanding that the Committee may modify or supplement them as appropriate.
Integrity of Financial Reporting:
- Review and approve the annual financial statements of USNH and the audit report on Federal Awards received by USNH as required by OMB Circular A-133.
- Review with management, the independent auditors and the internal auditors their judgments about: the quality, not just the acceptability, of USNH's accounting principles; the consistency in the application of accounting policies; the reasonableness of significant judgments; the degree of aggressiveness or conservatism in applying the accounting principles; and the clarity and completeness of the financial statements and related disclosures.
- Confirm with management and the independent auditor that the annual financial statements disclose all material off-balance sheet transactions, arrangements, obligations, and other relationships of USNH with unconsolidated entities or other persons, that may have a material current or future effect on financial condition, changes in financial condition, results of operations, liquidity, capital expenditures, capital resources, or significant components of revenues or expenses.
- Review new and significant accounting pronouncements with the independent auditor and understand their impact on USNH's financial statements.
- On an annual basis, obtain a report from the independent auditor regarding required communications under Statement of Auditing Standards No. 61, as amended. Review with the independent auditor:
- Any significant difficulties encountered during the course of the audit, any restrictions on the scope of work or access to required information and any significant disagreements between management and the independent auditor in connection with the preparation of the financial statements.
- Any formal communications between the audit team and the auditor's national office regarding auditing or accounting issues.
- Any letters issued addressing internal control or other recommendations and the schedule of unadjusted differences (if any) prepared by the auditor.
- Critical accounting policies and practices used by USNH, all alternative treatments of financial information within generally accepted accounting principles, the ramifications of the use of such alternative disclosures and treatments and the treatment preferred by the independent auditor.
- Inquire of management, the internal auditor, and the independent auditor about significant financial risks or exposures to USNH and assess the steps management has taken to mitigate such risks or exposures.
Overseeing the External Audit Process:
- Be directly responsible for the appointment, compensation, oversight and retention of USNH's independent auditor. Evaluate annually the qualifications and performance of the independent auditors. The independent auditor shall report directly to the Committee.
- On an annual basis, assess the independence of the independent auditor by reviewing a letter issued by the independent auditor under Independence Standards Board Standard No. 1 and discuss any relationships disclosed that may impact auditor objectivity and independence.
- The Committee or its Chair shall pre-approve all audit and non-audit services provided by the independent auditors in excess of $20,000. The independent auditor is prohibited from performing GAO-prohibited non-audit services, including the following:
- Bookkeeping
- Financial information systems design, implementation or operation
- Appraisal or valuation services, fairness opinions or contribution-in-kind reports
- Internal audit outsourcing services
- Management functions or human resources
- Broker or dealer, investment advisor, or investment banking services
- Legal services and expert services unrelated to the audit
- Preparing the indirect cost proposal or cost allocation plan
- Other services that would violate the U.S. General Accounting Office Independence Standard
Services approved by the Chair should be reported to the entire Committee at its next scheduled meeting.
- Ensure proper rotation of the lead audit partner on USNH's engagement.
- Resolve disagreements between management and the independent auditor regarding financial reporting.
Overseeing the Internal Audit Process:
- Review and appraise the organizational structure, qualifications, independence and activities of USNH's internal audit department.
- Review and approve the annual internal audit plan.
- Review and concur with the appointment, reassignment or termination of the Director of Internal Audit.
- Periodically review USNH's Internal Audit Charter for necessary changes.
- Receive prior to each meeting a summary of findings from completed internal audits and the status of implementing related recommendations.
- Receive a progress report on the internal audit plan.
Other:
- Establish procedures for the receipt, retention, and treatment of complaints received by USNH regarding accounting, internal accounting controls or auditing matters, including procedures for the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters.
- Obtain reports concerning any financial fraud resulting in losses in excess of $10,000 or involving a member of senior management.
- Monitor USNH's conflict of interest policies and related procedures.
- Review and assess the adequacy of this Charter on an annual basis and recommend any changes to the Board of Trustees.
Section 4. Resources and Authority
The Committee is empowered to investigate any matter brought to its attention with full access to all books, records, facilities, and personnel of USNH and has the authority to engage independent counsel and other advisors as it determines necessary to carry out its duties.
Section 5. Meetings
The Committee will hold at least three meetings each fiscal year.
A majority of the members of the Committee will constitute a quorum for the transaction of business. The Committee shall maintain written minutes of its meetings, which will be filed with the Secretary of the Corporation. Reports of all meetings will be made to the Board of Trustees
The Committee may request any officer, employee, outside counsel or independent auditor to attend a meeting of the Committee or to meet with any members of, or consultants to, the Committee.
As part of its responsibility to foster open communication, the Committee shall provide sufficient opportunity for the internal and independent auditors to meet privately with the Committee. At least annually, the Committee shall meet separately with the independent auditor, the internal auditor and management.