Audit Committee Charter

AUDIT COMMITTEE CHARTER 

I. GENERAL PURPOSE AND AUTHORITY

This Audit Committee Charter (the Charter) shall guide the Audit Committee of the Board of Trustees in the fulfillment of its oversight responsibilities over the financial reporting process, the system of internal control, the audit process, risk management process and the Association’s process for monitoring compliance with laws and regulations and the Code of Conduct.

The Audit Committee shall have the authority from the Board to conduct or authorize audits into any matters within its scope of responsibility. The Committee is likewise empowered to:

    1. Recommend to the Board the appointment of any registered public accounting firm and oversee the work performed by the contracted firm;
    2. Resolve any disagreements between Management and the auditor regarding financial reporting;
    3. Pre-approve all audit and non-audit services;
    4. Retain independent counsel, accountants, or other professionals to advise the Committee or assist in the conduct of an audit;
    5. Seek any information from employees (all of whom are directed to cooperate with the Committee’s requests) or external parties; and
    6. Invite Association’s Officers, external auditors, or outside counsel as a resource person if necessary.

II. COMPOSITION 

    1. The Committee shall be composed of at least three (3) members of the Board of Trustees, nominated and appointed every three (3) years, or may be reorganized as deemed necessary by the Board of Trustees.
    2. Majority of the members of the Committee, including the Chairperson, shall be independent trustees.
    3. The Association’s Corporate Secretary shall be the Secretary of the Committee.
    4. The Committee may also invite Resource Person/s from the Management and employees who shall act as subject matter experts (SME) and provide comprehensive and reliable information to be used by the members of the Committee for their deliberation and decision-making.
    5. The Chairperson of the Committee or any of its Members may be removed from office only by the Board. Should any vacancy arise, the Board shall appoint a new Member in order to meet the required composition of the Committee.

III. QUALIFICATIONS

  1.  The Members of the Committee who are Trustees shall possess the same qualifications and none of the disqualifications of a Trustee, as prescribed by the Securities and Exchange Commission (SEC) and the Bangko Sentral ng Pilipinas (BSP). In addition, they must possess the following qualifications set by the Board of Trustees:
    1. Must have a Masteral Degree preferably in the field of Accounting, Management, Business Administration, Finance or its equivalent;
    2. Must be financially literate and with a degree or experience in accounting, financial management or other similar fields;
    3. Must be a graduate of the Professional Director’s Program of the Institute of Corporate Directors (ICD) or equivalent program providers accredited by BSP/SEC;
    4. Must have good leadership experience at a strategic or policy making level in a corporate, government or non-profit organization;
    5. Must be able to demonstrate financial, legal and business literacy through previous experiences;
    6. Must have a sufficient understanding of generally accepted accounting principles and financial statements, internal controls and procedures for financial reporting, and audit functions;
    7. Must have demonstrated that they have sufficient time and availability to fulfill the responsibilities of a member;
    8. Must have a reputation for ethical behaviour both personally and professionally; and
    9. Must be free from any conflict of interest that may impair the Trustee’s ability to make consistent and fair decisions in the best interests of the Association.
  1. In addition to the mandatory qualifications, a Trustee must demonstrate the following set of skills and personality traits:
    1. INTEGRITY – must be able to act in a manner that will sustain and improve trust to reinforce the Association’s reputation and brand.
    2. KNOWLEDGE OF GOVERNANCE – must have the experience as a leader in any organization of similar interests or strategic level with track record of preparing for, and contributing to, meetings, discussions and oversight in a lead role. Further, he must have the ability to readily distinguish between governance and operational matters as well as better understanding of risk management.
    3. COLLABORATIVE SKILLS – must be able to demonstrate ability to perform effectively as part of a team of the Board to help achieve expected Board performance. This includes effective negotiation skills, ability and willingness to build consensus, strong conflict management skills and willingness to accept and support Board decisions.
    4. COMMUNICATIONS – must have the ability to convey information during Board meetings effectively and efficiently by justifying viewpoints with logic, facts and figures as well as by listening effectively.
    5. BUSINESS ACUMEN – must have the experience in dealing with general business matters or understanding of complex business situations.
    6. INDEPENDENCE – must have sense of impartiality and freedom from influence by any factors other than the interest of the members of the Association.
    7. KNOWLEDGE ON LEGISLATION AND STANDARDS – must be familiar with relevant legislations, policies and standards applicable to Savings and Loan Industry.
  1. The members of the Committee shall be provided with necessary professional education/training relevant to the operations of the Association including the annual continuing training on relevant topics of at least eight (8) hours.
  1. Any member of the Committee who has been absent or who has not participated, for whatever reason, in more than fifty percent (50%) of all meetings cumulatively during a given period, both regular and special, shall be removed for cause and disqualified for reappointment in the succeeding election, except that if the Chairman certifies that said member was given the agenda for the meeting and their comments/discussions thereon were taken up in the meeting, said member shall be considered present in the meeting. This disqualification applies only for purposes of the immediately succeeding election.

IV. MEETINGS 

  1. The Committee shall meet once a month at least one week prior to the Board Meeting. The Committee Chairperson may call for one (1) special meeting a month as may be necessary.
  2. The Committee Chairperson shall preside at each meeting, and in his absence, another member of the Committee shall be designated by the Committee Chairperson as acting chair.
  3. A quorum shall comprise of majority of the Members of the Committee. Voting on Committee matters shall be on one member – one vote basis. Majority vote of all Members present shall constitute an official action of the Committee.
  4. The Members of the Committee shall attend its meetings in person or through teleconferencing and videoconferencing conducted in accordance with the rules and regulations of the SEC in such a manner that will allow the Member who is taking part in said meeting to actively take part in the deliberations on matters taken up therein, except when justifiable causes prevent his attendance to ensure that the quorum requirement will be met.
  5. The Chairperson shall direct the Secretary to prepare the agenda and related background information for each meeting. The agenda shall be reviewed and approved by the Chairperson prior to distribution. Members must receive the detailed Agenda along with briefing and/or background materials at least one (1) week before the scheduled meeting. Any member may recommend or suggest any other topics that may be discussed by the Committee.
  6. The Committee may invite members of Management, auditors or others to attend meetings and provide pertinent information as it deems necessary. To maximize effectiveness and support an atmosphere that allows open and honest discussion of sensitive matters, the Committee must limit attendance to those who can make contribution to agenda topics.
  7. The Secretary shall attend and record all meetings. The minutes of the meeting shall be signed by the Secretary and circulated to all members of the Committee and other personnel as directed by the Chairperson.
  8. Matters taken up in meetings of the Committee shall be reported to the Board of Trustees at its next regular meeting.
  9. The Committee must also conduct consultations throughout the year to provide the Chairperson with better insights into the issues the Association is dealing with, as well as enable a stronger rapport between the Chairperson and the Audit team.
  10. The Secretary shall keep a systematic record of Minutes of the meetings, briefing packages and other relevant documents related to the Agenda discussed and approved.
  11. The Committee shall ensure that follow-up actions on previous committee meetings are properly addressed and monitored.

V. DUTIES AND RESPONSIBILITIES

The Committee shall carry out the following responsibilities:

  1. Financial Statements
    1. Review significant accounting and reporting issues, including complex or unusual transactions and highly judgmental areas, and recent professional and regulatory pronouncements, and understand their impact on the financial statements.
    2. Review with Management and the External Auditors the results of the audit, including any difficulties encountered.
    3. Review the annual financial statements, and consider whether they are complete, consistent with information known lo Committee members, and reflect appropriate accounting principles.
    4. Review other sections of the annual report and related regulatory filings before release and consider the accuracy and completeness of the information.
    5. Review with Management and the External Auditors all matters required to be communicated to the Committee under Generally Accepted Auditing Standards.
    6. Understand how Management develops interim financial information, and the nature and extent of internal and external auditor involvement.
    7. Review interim financial reports with Management and the External Auditors before filing with regulators, and consider whether they are complete and consistent with the information known to Committee members.
  1. Risk Management Process
    1. Obtain information about training in and an understanding of risk management in order to acquire the knowledge necessary to adequately evaluate the risk management process.
    2. Ensure that the Association has a comprehensive policy on evaluating risk management.
    3. Evaluate the effectiveness of the Association’s risk management process, including risks of information technology systems.
    4. Reviews Management’s reports on Management’s self-assessment of risks and the mitigations of these risks.
    5. Understand the scope of Internal Auditor’s and External Auditor’s review of risk management over financial reporting.
    6. Understand the scope of Internal Auditor’s review of risk management over other processes, and obtain reports on significant findings and recommendations, together with Management’s responses.
    7. Understand the scope of any other External Auditor’s or consultant’s review of risk management.
  1. Internal Control Process
    1. Consider the effectiveness of the Association’s internal control processes, including information technology security and control.
    2. Understand the scope of Internal and External Auditors’ review of internal control over financial reporting, and obtain reports on significant findings and recommendations, together with Management’s responses.
  1. Internal Audit Process
    1. Review with Management and the Internal Audit Head the charter, activities, staffing, and organizational structure of the Internal Audit Department.
    2. Recommend to the Board the approval of the Audit Plan and all major changes to the plan.
    3. Ensure there are no unjustified restrictions or limitations, and review and concur in the appointment, replacement, or dismissal of the Internal Audit Head.
    4. At least once a year, review the performance of the Internal Audit Head and concur with his/her annual compensation or salary adjustment.
    5. Review the effectiveness of the Internal Audit Department, including compliance with The Institute of Internal Auditors’ International Professional Practices Framework for Internal Auditing consisting of the Definition of Internal Auditing, Code of Ethics and the Standards.
    6. The Audit Committee shall oversee the activities of the Internal Audit Department and shall undertake at least on an annual basis an appraisal of its work, including the review of compliance with the Internal Audit Charter and the Internal Audit Manual. Insights from the Management, External Auditors and the Internal Audit Head shall also be considered.
    7. Grant request of the Internal Audit Head to meet with the Audit Committee in order to discuss the status of the Internal Audit activities.
    8. On a regular basis, meet separately with the Internal Audit Head to discuss any matters that the Committee or Internal Audit believes should be discussed privately.
  1. External Audit
    1. Review the External Auditors’ proposed audit scope and approach, including coordination of audit effort with Internal Audit.
    2. Review the performance of the External Auditors, and endorse to the Board of Trustees the final approval on the appointment or discharge of the auditors.
    3. Review and confirm the independence of the External Auditors by obtaining statements from the auditors on relationships between the auditors and the Association, including non-audit services, and discussing the relationships with the auditors.
    4. On a regular basis, meet separately with the External Auditors to discuss any matters that the Committee or auditors believe should be discussed privately.
  1. Engagements with Other External Audit Firms
    1. Recommend to the Board of Trustees the appointment of any other certified public accounting firm contracted by the Association to perform engagements other than the audit of the financial statements.
    2. Oversee the work performed by the certified public accounting firm engaged by the Association.
  1. Compliance Monitoring Process
    1. Review the effectiveness of the system for monitoring compliance with laws and regulations and the results of Management’s audit and follow-up (including disciplinary action) of any instances of noncompliance.
    2. Review the findings of any examinations by regulatory agencies, and any observations by auditors.
    3. Review the process for communicating the code of conduct to Association’s personnel, and for monitoring compliance therewith.
    4. Obtain regular updates from Management and Association’s legal counsel regarding compliance matters.
  1. Special Audits and Whistleblower Mechanism
    1. Evaluate through the IAD the effectiveness of the fraud management program, and initiate the performance of a special audit as necessary.
    2. Provide an appropriate confidential mechanism for whistleblowers to provide information on potentially fraudulent financial reporting or breaches of internal control.
  1. Other Responsibilities
    1. Perform other activities related to this Charter as directed by the Board of Trustees.
    2. Review and assess the adequacy of the Audit Committee Charter annually, requesting Board approval for proposed changes, and ensure appropriate disclosure as may be required by laws or regulations.
    3. Confirm annually that all responsibilities outlined in this charter have been carried out.
    4. Evaluate the Committee’s and individual members’ performance on a regular basis.

VI. REPORTING 

The Audit Committee shall:

  1. Report monthly to the Board of Trustees about Committee activities, issues, and related recommendations.
  2. Provide an open avenue of communication between Internal Audit, the External Auditors, and the Board of Trustees.
  3. Report annually to the members, describing the Committee’s composition, responsibilities and how they were discharged, and any other information required by rule, including approval of non-audit services.
  4. Review any other reports the Association issues that relate to Committee responsibilities.
  5. Present the status of internal control system based on the external and internal assessment in the Annual General Assembly Meeting with the Members of the Association.

VII. CHARTER AMENDMENTS 

The Committee shall from time to time assess the adequacy of this Charter and approve, review and update at least annually or whenever there are significant changes in this Charter and recommend changes thereto to the Board.

Any amendment to this Committee Charter shall be approved by the Board of Trustees.