Sample charter for an NPO audit committee - Center for Corporate ...

Sample charter for anNPO audit committeeStructureThe audit committee consists of a minimum of three members, all of whom are members of theboard of directors, are independent of management and are financially literate.Committee members are appointed for a two-year term.The board shall appoint one of the committee members to be the committee chair.The committee meets at least five times each year. The committee may choose to hold additionalmeetings if it considers them necessary for it to carry out its responsibilities effectively. If memberscannot participate in person, they may participate in the meeting via the telephone.The independent auditor is to be provided notice of every meeting and is entitled to attend andparticipate in each meeting.At each meeting, time is to be allocated for the committee to meet separately with managementand with the independent auditor.Minutes of each meeting must be prepared and circulated to the board of directors within 14 daysof the committee’s meeting.ResponsibilitiesThe audit committee reports to the board of directors. The audit committee has responsibility for:1. Oversight of the reliability and integrity of the accounting principles and practices used bythe NPO.2. The NPO’s financial statements and other financial reporting, including:a. Reviewing and discussing with management and the independent auditor the NPO’sannual and quarterly financial statementsb. Recommending to the board of directors approval of the audited financial statementsc. Reviewing major issues regarding accounting principles and financial statementpresentationd. Reviewing all critical accounting policies and practices, including all alternative treatmentsof financial information etc.Sample charter for an NPO audit committee

3. Disclosure principles and practices followed by management.4. Oversight of the independent auditor’s qualifications, independence and performance,including:a. Recommending the independent auditor for appointment or replacement to the board ofdirectorsb. Recommending compensation of the independent auditor to the board of directorsc. Reviewing and pre-approval of all audit and non-audit services to be performed by theindependent auditord. Reviewing the overall scope of the independent audit plan at least annuallye. Receiving all reporting from the independent auditor (i.e., the independent auditor reportsto the audit committee)f. Periodically reviewing the status and findings of the independent auditor’s audit programg. Confirming the independent auditor’s independence, including reviewing the NPO’s hiringpolicies for employees or former employees of the independent auditor.5. Overseeing management’s establishment of an adequate system of internal controls andprocedures and effective performance of those internal controls and procedures.6. Establishing a whistleblower policy and oversight of the receipt, retention and treatment ofcomplaints received regarding questionable matters.7. Overseeing the performance of the internal audit function.8. Other decisions delegated to it by the board of directors (for example risk management orinvestment policy).Committee performanceThe performance and effectiveness of the audit committee and its individual members will beassessed annually as part of the board’s evaluation process.The board will review the committee’s charter on an annual basis to ensure that it remainsappropriate to the circumstances of the NPO and of the board.www.corpgov.deloitte.caDeloitte, one of Canada’s leading professional services firms, provides audit, tax, consulting and financial advisory services. Deloitte LLP, an Ontariolimited liability partnership, is the Canadian member firm of Deloitte Touche Tohmatsu Limited. Deloitte operates in Quebec as Deloitte s.e.n.c.r.l., aQuebec limitedDeloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms,each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure ofDeloitte Touche Tohmatsu Limited and its member firms.© 2013 Deloitte LLPDesigned and produced by the Creative Design Studio in Montreal. 13-15

AcknowledgementsThe Deloitte Centre for Corporate Governance would like to thank all of its professionals who assisted withdrafting, editing, and reviewing this alert, including those professionals listed below.Co-authors: Chantal Rassart (Deloitte LLP) and Hugh Miller ((Hugh Miller Communications)The authors would like to acknowledge the contributions to this publication from Deloitte’s Not-for-ProfitOrganizations specialist network: Dennis Alexander, Natalie Cooper, Helen Dutch, Sandra Haydon,Sam Persaud, Michel Rioux, Cindy Veinot, Gillian Wyett, and Howard YeungThe authors would like to also thank all directors who shared their experience with our experts during thedrafting phase, including Yuri Fulmer (United Way of the Lower Mainland), Gord Holloway (Institute ofChartered Accountants of British Columbia) and Joshua Dougherty (Victorian Order of Nurses of Canada).Their insights guided throughout the preparation of this publication.Finally, the authors cannot miss to salute the creativeness of Julie Charron, their designer, and the relentlessof Deloitte’s translation team.www.corpgov.deloitte.caDeloitte, one of Canada’s leading professional services firms, provides audit, tax, consulting and financialadvisory services. Deloitte LLP, an Ontario limited liability partnership, is the Canadian member firm of DeloitteTouche Tohmatsu Limited. Deloitte operates in Quebec as Deloitte s.e.n.c.r.l., a Quebec limitedDeloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited byguarantee, and its network of member firms, each of which is a legally separate and independent entity.Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte ToucheTohmatsu Limited and its member firms.© 2013 Deloitte LLPDesigned and produced by the Creative Design Studio in Montreal. 13-15