- Purpose: The purposes of the Audit Committee shall be: A. to provide oversight of the Institute’s financial practices, internal controls, financial management, compliance with laws and regulations, and its Business Ethics and Conflict of Interest policies; B. to ensure the integrity of the Institute’s financial statements; C. to interact directly with and evaluate the performance of the Institute’s independent auditors, including to determine whether to engage or dismiss the independent auditors and to monitor the independent auditors’ qualifications and independence; and D. to promote and oversee development of broad risk management practices.
- Review of charter. This charter shall be reviewed and reassessed by the Audit Committee at least annually, and any proposed changes shall be submitted to the Board of Trustees for approval.
- Membership/structure/quorum. The Audit Committee shall consist of five or more members appointed by and serving at the pleasure of the Chair of the Board. The Chair of the Audit Committee shall be appointed by the Chair of the Board. The Chair of the Board and the President shall be members ex officio of the Audit Committee. Committee members shall be independent and these individuals, or their immediate relatives, shall not hold a salaried position with the Institute nor be employed by any entity that provides services for a fee to the Institute. The members of the Audit Committee should be financially literate, and at least one shall be knowledgeable, by training and experience, in generally accepted accounting principles (GAAP), the preparation of financial statements and the principles of internal control. A quorum for any meeting of the Audit Committee shall consist of a majority of its voting members.
- Staff designee. The Vice President for Finance & Operations (CFO) and the Controller shall be staff to the Committee.
- Meetings. The Audit Committee shall meet at least two times annually. To foster open communication, the Audit Committee shall meet with management and the independent auditors in separate executive sessions. The Audit Committee shall also encourage discussion as part of each meeting. Members of the Audit Committee shall be invited to attend Budget and Finance Committee meetings.
- Agenda, minutes and reports. The Chair of the Audit Committee, in collaboration with the staff designee(s), shall be responsible for establishing the agendas for meetings of the Audit Committee. An agenda, together with relevant materials, shall be sent to the Committee members in advance of each meeting. Minutes for all meetings shall be prepared in draft form by the staff designee(s) and reviewed by the Chair, and shall be approved by the Committee members at the following meeting. The minutes shall be distributed periodically to the full Board of Trustees. The Audit Committee shall make regular reports to the Board of Trustees.
Authority and responsibilities: Although the Audit Committee has the responsibilities and powers set forth in this Charter, the role of the Committee is oversight. The Audit Committee does not assume operational responsibilities, financial statement preparation, or provide assurance of accuracy or compliance (these rest with management); nor provide auditing (this rests with the independent auditor). The Committee’s primary responsibilities are as follows:
- Annually recommend to the Board the appointment, retention, and, if appropriate, termination of the independent auditor;
- Prior to the start of the audit, review and approve the terms of the independent auditor’s engagement, and scope of the annual audit, and pre-approve any audit related and permitted non-audit services (including the fees and terms thereof) to be provided by the independent auditor;
- Review and confirm the independence of the independent auditor annually by obtaining and reviewing a report from the independent auditor delineating all relationships between the independent auditor and the Institute and discussing with the independent auditor any such disclosed relationships and their impact on the independent auditor’s independence and by obtaining the auditor’s assertion of independence in accordance with professional standards;
- Require proper rotation every 7 years of the lead and concurring audit partners;
- Annually review a report from the independent auditor describing the auditing firm’s internal quality-control procedures and any material issues raised by the most recent quality-control review of the firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, with respect to one or more independent audits carried out by the firm, and any steps taken to deal with any such issues;
- Review with the independent auditor any problems the auditor has encountered performing the audit and any management letter provided and the Institute’s response to that letter, and matters that the independent auditor is required to communicate to the Committee; and
- Meet at least annually with management to discuss management’s evaluation of the work performed by the independent auditor. The Committee shall evaluate annually the performance of the independent auditor.
Internal Control, Risk Mitigation, and Compliance:
- Review with management and the independent auditor the Institution’s major financial risk exposures and evaluate the steps management has taken to monitor and minimize such exposures;
- Monitor the effectiveness of the Institute’s internal control systems, including through regular executive sessions, whether internal control recommendations identified by the independent auditors have been implemented by management;
- Recommend to the Board, a Business Ethics Policy for all staff, faculty and volunteers, and review the policy annually and the effectiveness of the procedures established to monitor compliance;
- Recommend to the Board, a Conflict of Interest Policy for all trustees, staff, faculty and volunteers, and review the policy annually and the effectiveness of the procedures established to monitor compliance.
- Establish procedures for receiving, retaining, and treating complaints received by the Institute regarding accounting, internal accounting controls, or auditing matters and the confidential, anonymous submission by Institution employees regarding questionable accounting or auditing matters. Review any submissions that have been received, the current status, and the resolution, if one has been reached;
- Review with management all legal and ethical compliance issues; and
- Ascertain through inquiry and other appropriate means that management is communicating the importance of the organization’s values, business conduct policies, and internal controls.
- Review with management and the independent auditor significant accounting and reporting issues, including recent professional and regulatory pronouncements, understand their impact on the financial statements, and ascertain that all such issues have been considered in the preparation of the financial statements; and
- Review with management and the independent auditor key functional activities of the Institute, including legal, tax, or regulatory matters that may have a material impact on the financial statements and any material reports or inquiries received from regulators or government agencies.
Annual Financial Statements
- Review with management and the independent auditor any complex and/or unusual transactions;
- Review with management and the independent auditor issues related to judgments made involving valuation of assets and liabilities and commitments and contingencies;
- Review with management and the independent auditor, the annual financial statements and audit report on Federal Awards required under OMB Circular A-133, and the results of the audits;
- Review with management the recommendations of the independent auditor, including any audit problems, difficulties, and management’s response;
- Recommend to the Board for its approval the annual financial statements; and
- Meet annually with management to review any issues or judgmental areas relating to the disclosures in the Institute’s IRS and Commonwealth of Massachusetts tax and disclosure filings.
- Review with management and approve all related party transactions;
- Review policies and procedures to ascertain management’s compliance with IRS Code Section 4958 (Excess Benefit Transactions and Intermediate Sanctions);
- Obtain advice and assistance from internal and/or external legal, accounting and other advisors, as deemed necessary;
- Conduct executive sessions with the independent auditors, CFO, and general counsel in conjunction with regularly scheduled meetings or as necessary; and
- Conduct an annual self-evaluation of the performance of the Committee, and the effectiveness and compliance with this charter.
- Independent Audit:
Approved by the Audit Committee May 18, 2007
Approved by the Board of Trustees May 18, 2007