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Finance and Audit Committee Charter
Constitutional provision establishing the Finance and Audit Committee
The constitution of the Juvenile Diabetes Research Foundation in Australia, as adopted by the company on 8 April 2000, provides for the establishment of committees of directors as follows:
8.17 Committees of directors
- a) The directors may delegate any of their powers to a committee or committees consisting of such number of directors as they think fit.
- b) A committee to which any powers have been so delegated must exercise the powers delegated in accordance with any directions of the directors.
The board has approved the establishment and ongoing operation of a finance and audit committee comprising board, management and independent members. This document outlines the charter for the operation of this committee.
Finance and Audit Committee Charter
1. Purpose/objectives
The finance and audit committee is tasked by the board of directors to assist the board in discharging its oversight responsibilities. The committee will provide oversight and advice on the financial activities of the organisation and the financial reporting process to ensure the balance, transparency and integrity of published financial information. The committee will also monitor and review the following:
- The effectiveness of the company's internal controls.
- The effectiveness of the company's risk management activities.
- The conduct of the independent audit process, including recommending the appointment and assessing the performance of the external auditor.
In performing its duties, the committee will maintain effective working relationships with the board of directors, management and external auditors. To perform their role effectively, each committee member will develop and maintain their skills and knowledge, including an understanding of the committee's responsibilities and of the company's business, operations and risk.
2. Authority
The finance and audit committee is authorised by the board of directors, within the scope of its responsibilities and approved budgets, to:
2.1. Engage independent counsel and other advisors as it deems necessary to carry out its duties.
2.2. Ensure the attendance of company officers at meetings as appropriate.
2.3. Have unrestricted access to members of management, employees and relevant information.
2.4. Be directly responsible for the appointment, compensation, retention and oversight of the work of the external auditor.
2.5. Approve all audit engagement fees and terms as well as reviewing policies for the provision of non-audit services by the external auditor.
3. Organisation
Membership
3.1. The finance and audit committee will have a majority of independent directors and will be chaired by one of those independent directors, typically the Treasurer.
3.2. The finance and audit committee may invite non-director members to augment its range of backgrounds and experience. The committee may also appoint relevant specialists as advisors.
3.3. The finance and audit committee will comprise at least three (3) members with at least two (2) members being independent non-executive directors.
3.4. A quorum of any meeting will be two (2) members with at least one (1) present member being an independent non-executive director.
3.5. Each member must be financially literate; at least one (1) member must have accounting or related financial expertise.
3.6. Members will be appointed without a fixed term of office.
3.7. The secretary of the committee will be the company secretary, or such other person as nominated by the board of directors.
Meetings
3.8. Only committee members are entitled to attend meetings. The committee may invite other people (such as the CEO, COO, accountant and external auditor) to its meetings as it considers necessary.
3.9. External auditors should be invited to make presentations to the committee as appropriate.
3.10. Meetings will be held not less than quarterly and should correspond with the company's financial reporting cycle.
3.11. Special meetings may be convened as required. The secretary will convene a meeting on receipt of a request by the external auditors or the Treasurer.
3.12. The secretary will circulate the agenda and supporting documentation to the audit committee members within a reasonable time before each meeting.
3.13. The secretary will circulate the minutes of meetings to members of the committee and make them available to the board and the external auditor where appropriate.
3.14. As a minimum, the chairman of the committee (or other committee member) will attend the board meeting at which the financial statements are tabled for approval.
3.15. Members of the finance and audit committee should ideally attend every meeting of the committee.
3.16. The committee will meet with the external auditor at least once a year and is entitled to do so with or without management being present.
4. Roles and Responsibilities
Risk management and internal controls
The finance and audit committee will:
4.1. Work with the CEO and COO to set the organisation's risk appetite for adoption by the board of directors, and review annually.
4.2. Oversee management's identification, assessment and management of material risks including but not limited to financial, investment, fraud, anti-money laundering, operational and reputation risks and ascertain adequacy of management actions.
4.3. Monitor adherence to the organisation's policies and procedures.
4.4. Monitor the organisation's internal controls and report at least annually on their adequacy to the board of directors.
4.5. Review any material incidents or breaches and corrective actions, and escalate for board review any residual risks outside of the risk appetite.
4.6. Review the CEO's risk report on a semi-annual basis.
4.7. Monitor the organisation's framework for compliance with relevant statutory obligations including relevant laws, regulations and codes of practice, including by any joint venture partners or outsourced providers.
4.8. Review any material compliance breaches, ensure adequacy of corrective actions and escalate to the board where appropriate.
4.9. Recommend to the board the appointment of an external auditor and to review the appointment and scope of work annually.
4.10. Review the annual audit report for adoption by the board.
4.11. Review management's responses to any adverse audit findings or recommendations and monitor the implementation of corrective actions.
Financial Oversight
The finance and audit committee will:
4.12. Work with the CEO and the COO for the preparation of the annual budget for adoption by the board.
4.13. Monitor budgets and forecasts.
4.14. Review management accounts and statutory accounts for adoption by the board.
4.15. Consider and recommend to the board expenditure proposed by the CEO that is outside of the board-approved annual budget.
4.16. Develop and review the CEO's expenditure delegations for adoption by the board.
4.17. Develop an Investment Policy for adoption by the board, and oversight of its implementation by the CEO.
4.18. Develop a Gift Acceptance Policy for adoption by the board, and oversight of its implementation by the CEO.
Financial Reporting
The finance and audit committee will:
4.19. Gain an understanding of the current areas of greatest financial risk and how these are being managed.
4.20. Review significant accounting and reporting issues, including recent professional and regulatory pronouncements, and understand their impact on financial reports.
4.21. Oversee the periodic financial reporting process implemented by management and review the interim and annual financial statements before their release.
4.22. Meet with management and the external auditor to review financial statements, key accounting policies and decisions and the results of the audit.
4.23. Ensure that significant adjustments, unadjusted differences, disagreements with management and critical accounting policies and practices are discussed with the external auditor.
4.24. Review the other sections of the annual report before its release and consider whether the information is understandable and consistent with the members' knowledge about the company and its operations, and lacks bias.
Working with the external auditor
The finance and audit committee will:
4.25. Review the professional qualifications of the external auditor including background and experience of partner and auditing personnel.
4.26. Consider the independence of the external auditor and any potential conflicts of interest.
4.27. Review on an annual basis the performance of the external auditor and make recommendations to the board for the appointment, reappointment or termination of the appointment of the external auditor.
4.28. Review the extent of the external auditor's proposed audit scope and approach for the current year in light of the company's circumstances and changes in regulatory and other requirements.
4.29. Discuss with the external auditor any audit problems encountered in the normal course of audit work, including any restriction on audit scope or access to information.
4.30. Ensure that significant findings and recommendations made by the external auditor and management's proposed response are received, discussed and acted on appropriately.
4.31. Discuss with the external auditor the appropriateness of the accounting policies applied in the company's financial reports and whether they are considered to be aggressive, balanced or conservative.
4.32. Be available to meet separately with the external auditor at least once a year to discuss any matters that the committee or auditor believe should be discussed privately.
4.33. Ensure the external auditor has access to the chairman of the audit committee when required.
Reporting responsibilities
4.34. Regularly update the board about committee activities and make appropriate recommendations.
4.35. Ensure the board is aware, in a timely manner, of matters that may significantly affect the financial condition or affairs of the business.
4.36. Prepare any reports required by law, or as requested by the board, such as a report on the committee's activities and duties to be included in the section on corporate governance in the annual report.
Evaluating performance
The finance and audit committee will:
4.37. Evaluate the committee's own performance, of individual members and collectively, on a regular basis.
4.38. Assess the achievement of the duties specified in the charter and report annually the findings to the board of directors.
Review of the committee charter
The finance and audit committee will:
4.39. Review the finance and audit committee charter annually and discuss required changes with the board.
4.40. Ensure that the charter is approved or re-approved by the board, as required.