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Our Annual Report
2000 Highlights
Letter from
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2000 Year
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Delivering
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Audit Committee
Financial
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2000 Annual Report
- page 20 of 70
Charter of the
Audit Committee
In response to the general concerns of the Securities and Exchange
Commission about the functions of audit committees, the New York
Stock Exchange and the National Association of Securities Dealers
sponsored the Blue Ribbon Committee on Improving the Effectiveness
of Corporate Audit Committees. This committee made excellent recommendations.
Although we are not required to adopt these recommendations, we
have voluntarily amended our Audit Committee Charter to help ensure
that all stakeholders understand the Audit Committee’s composition,
duties and responsibilities, and that effective communication exists
between the Board of Governors, management, the Office of Inspector
General and our external auditors.
The Postal Reorganization Act provides that the Board of Governors
(the Board) “shall direct and control the expenditures and review
the practices and policies of the Postal Service.” The Board “may
establish such committees of the Board, and delegate such powers
to such committees, as the Board determines appropriate to carry
out its functions and duties.” Pursuant to this authority and to
Sections 4.1 and 5.1 of the Bylaws, and to assist it in the execution
of its statutory responsibility, the Board has established the following
charter for its Standing Audit Committee.
IT IS, THEREFORE, HEREBY RESOLVED:
Organization
This charter governs the operations of the audit
committee. The audit committee is a committee of the Board of Governors.
The duties and responsibilities of a member of the audit committee
are in addition to those duties set out for a member of the Board
of Governors. The charter will be reviewed and reassessed by the
committee and will be approved by the Board of Governors, at least
annually. The committee shall be appointed by the Chairman of the
Board in accordance with Section 4.1(a)(2) of the Bylaws and shall
comprise at least three Governors of the Postal Service, each of
whom are independent of management and the Postal Service. Members
of the committee will be considered independent if they have no
relationship that may interfere with the exercise of their independence
from management and the Postal Service. All committee members will
be financially literate, or will become financially literate within
a reasonable period of time after appointment to the committee,
and at least one member will have accounting or related financial
management expertise.
Statement of Policy
The audit committee will provide assistance to
the Board of Governors in fulfilling its oversight responsibility
relating to the Postal Service’s financial statements and the financial
reporting process, the systems of internal accounting and financial
controls, the Inspection Service function, the Inspector General’s
function and the annual independent audit of the Postal Service’s
financial statements. In so doing, it is the responsibility of the
committee to maintain free and open communication between the committee,
independent certified public accountants, the Inspection Service,
the Inspector General and management of the Postal Service. In discharging
its oversight role, the committee is empowered to investigate any
matter brought to its attention with full access to all books, records,
facilities and personnel of the Postal Service and the power to
retain outside counsel or other experts for this purpose.
Responsibilities and Processes
A significant responsibility of the audit committee
is to oversee the Postal Service’s financial reporting process on
behalf of the Board and report the results of their activities to
the Board. Management is responsible for preparing the Postal Service’s
financial statements, and the independent certified public accountants
are responsible for auditing those financial statements. The committee,
in carrying out its responsibilities, believes its policies and
procedures should remain flexible, in order to best react to changing
conditions and circumstances. The committee should take the appropriate
actions to set the overall “tone” for quality financial reporting,
sound business risk practices and ethical behavior.
The following shall be the principal recurring
processes of the audit committee in carrying out its oversight responsibilities.
The processes are set forth as a guide with the understanding that
the committee may supplement them as appropriate.
The committee shall have a clear understanding
with management and the independent certified public accountants
that the independent certified public accountants are ultimately
accountable to the Board and the audit committee. The committee
shall have the ultimate authority and responsibility to evaluate
and, where appropriate, replace the independent certified public
accountants. The committee shall discuss the independent certified
public accountants’ independence from management and the Postal
Service and the matters included in the annual written disclosures
required by the Independence Standards Board. Annually, the committee
will review and recommend to the Board the selection of the Postal
Service’s independent certified public accountants.
The committee shall discuss with the Inspection
Service and the Inspector General’s office the overall scope and
plans for their respective audits including the adequacy of staffing
and the compensation. Also, the committee will discuss with management,
the Inspection Service, the Inspector General’s office and the independent
certified public accountants the adequacy and effectiveness of the
accounting and financial controls, including the Postal Service’s
system to monitor and manage business risk, and legal and ethical
compliance programs. Further, the committee will meet separately
with the Inspection Service, the Inspector General’s office and
the independent certified public accountants, with and without management
present, to discuss the results of their examinations.
The committee shall invite the independent certified
public accountants to attend the full Board of Governors meeting
to assist in reporting the results of the annual audit or to answer
other Governors’ questions.
The committee shall periodically review the interim
financial statements with management. Also, the committee will discuss
the results of the interim financial statement review and any other
matters required to be communicated to the committee by the independent
certified public accountants under generally accepted auditing standards.
The chair of the committee may represent the entire committee for
the purposes of this review.
The committee shall review with management and
the independent certified public accountants the financial statements
to be included in the Postal Service’s Annual Report, including
their judgment about the quality, not just acceptability, of accounting
principles, the reasonableness of significant judgments and the
clarity of the disclosures in the financial statements. Also, the
committee will discuss the results of the annual audit and any other
matters required to be communicated to the committee by the independent
certified public accountants under generally accepted auditing standards.
Authority and Execution
Nothing in this charter shall be construed as
inconsistent with the Postal Reorganization Act, or as circumscribing
the Inspector General’s authority under the Inspector General Act,
5 U.S.C- app., or is intended to restrict the Inspector General’s
authority to conduct, supervise and coordinate audits and investigations
relating to programs and operations of the Postal Service.
This Resolution supersedes Resolution 82-1, adopted
February 9, 1982; Resolution 85-2, adopted February 5, 1985; Resolution
95-11, dated August 1, 1995; and Resolution 98-7, adopted June 30,
1998.
The foregoing Resolution was adopted by the Board
of Governors on June 6, 2000.
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