Synagro Technologies, Inc.
AUDIT Committee Charter
(As Amended December 1, 2005)
This charter governs the operations of the Audit Committee (the “Committee”) of the Board of Directors of Synagro Technologies, Inc. (the “Company”). The Committee shall consist of no less than three (3) members of the Board of Directors, each of whom shall be “independent” within the meaning of the applicable listing rules of The Nasdaq Stock Market, Inc. and Archipelago Exchange (ArcaEx). The number of Committee members may be increased from time to time by resolution of the Board of Directors.
Each member of the Audit Committee shall be financially literate, as such qualification is interpreted by the Company’s Board in its business judgment. In addition, at least one member of the Audit Committee shall be an “audit committee financial expert” as defined under the rules and regulations adopted by the Securities and Exchange Commission (“SEC”) and interpreted by the Company’s board in its business judgment; provided, however, that if at least one member of the Audit Committee is not determined by the Board to be an “audit committee financial expert,” then the Company shall disclose such determination as required by applicable SEC rules and regulations.
Committee members shall be appointed by the Board and shall hold their offices until their successors are appointed and qualified, or until their earlier resignation or removal. Any member of the Committee may be removed by resolution of the Board of Directors. All vacancies in the Committee (by death, resignation, removal or otherwise) shall be filled by the Board. The Board shall designate one of the members as Chairman of the Committee, and the Committee shall keep a separate book of minutes of its proceedings and actions
The Committee shall meet periodically, as deemed necessary by the Chairman of the Committee; provided, however, that it shall meet at least on a quarterly basis. All meetings shall be at the call of the Chairman of the Committee. A majority of the members of the Committee shall constitute a quorum for the transaction of business. The Committee may act only upon approval of a majority of its members. The action of the Committee at a meeting at which a quorum is present shall be the act of the Committee. The Committee may act in writing by the unanimous consent of its members.
Except as otherwise provided herein, the Committee may form one or more subcommittees, each of which may take such actions as may be delegated by the Committee. The Committee shall periodically report on its activities to the Board and make such recommendations and findings as it deems appropriate. The Committee members shall perform an annual evaluation of the Committee. The Committee may, in its sole discretion and at the Company's expense, retain and terminate legal, accounting or other consultants or experts, including search firms, it deems necessary in the performance of its duties and without having to seek the approval of the Board.
The Audit Committee is a committee of the Board of Directors. Its primary function is to assist the Board in fulfilling its oversight responsibilities to ensure the integrity of the Company’s financial statements, compliance with the legal and regulatory requirements, the independent auditor’s qualifications, independence and performance and the performance of the Company’s internal audit functions. In doing so, it is the responsibility of the Audit Committee to provide an open avenue of communication between the Board of Directors, management, the internal auditors, and the independent auditors.
The Audit Committee is granted the authority to perform each of the specific duties listed under “Specific Duties” in the Charter. In addition, the Chairman of the Board may, from time to time, direct specific assignments to the Audit Committee. All employees and consultants are directed to cooperate as requested by members of the Committee. The Committee is empowered to retain persons having special competence as necessary to assist the Committee in fulfilling its responsibilities.
The Audit Committee shall be solely and directly responsible for the appointment, compensation, determine funding for and oversight of the independent auditor. The independent auditor shall report directly to the Audit Committee. The Audit Committee shall receive the independent auditor’s report and address the General Counsel’s report of violations, if any. The Audit Committee shall be responsible for resolving disagreements between management and the independent auditor regarding financial reporting. These responsibilities do not preclude the Audit Committee from obtaining the input of management, but these responsibilities may not be delegated to management.
The Audit Committee is the focal point for communication between other directors, the independent auditors and management as their duties relate to financial accounting, reporting and controls. No officer, director or any person acting under their direction may fraudulently influence the independent auditors for the purpose of rendering financial statements misleading.
The Audit Committee is responsible for inquiring of management and determining that adequate communication has occurred between management and the outside auditor with respect to internal control systems and policies to control business and financial reporting risks.
The Audit Committee shall establish the procedures to address “whistle blower” communications. These procedures shall include the method of receipt, retention and treatment of complaints to the Company regarding accounting, internal controls, or auditing matters. Such complaints shall include the maintaining of confidential and anonymous submissions by employees of concerns regarding questionable accounting or auditing matters.
The Audit Committee shall have the sole authority to permit and must pre-approve all audit and “permissible non-audit services” (as set forth in Section 202 of the Sarbanes-Oxley Act) of the independent auditor and must disclose such approvals in periodic reports. Prohibited services by the independent auditor, which may not be approved by anyone, include bookkeeping and related services, financial information systems, appraisals and evaluations, actuarial services, internal auditing outsourcing, management functions or human resources, broker, dealer or investment advisors services, legal services and expert services. The Audit Committee shall have the sole authority to review and approve related party transactions.
The Audit Committee shall meet with the independent auditors and financial management of the Company to review the scope of the proposed audit for the current year and the audit procedures to be utilized, and at the conclusion thereof review such audit, including any comments or recommendations of the independent auditors.
The Audit Committee shall meet with management and the independent auditor to discuss the annual and quarterly financial statements (including the Management Discussion and Analysis of Financial Condition and Results of Operations), and other filings with the SEC as necessary. Any material changes in accounting principles will be discussed.
The Audit Committee shall take reasonable steps to ensure that management follows Company disclosure controls and procedures and conducts appropriate due diligence to support the integrity of the financial information.
The Audit Committee shall review with the independent auditors the recommendations included in the informal observances, competence and adequacy of financial, accounting, and internal audit control procedures of the Company and its subsidiaries. On the basis of this review the Audit Committee may make recommendations to the Board for any material changes which seem appropriate, and follow up to ensure satisfactory resolution.
The Audit Committee shall review with the independent auditors and financial management of the Company the disposition of the recommendations from the previous audits.
The Audit Committee shall review the statement from the outside auditor which delineates all relationships between the auditor and the Company and take action to ensure independence of the outside auditor.
The Audit Committee shall discuss earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies, discuss policies with respect to risk assessment and risk management, review major issues regarding accounting principles and financial statement presentations; including any significant changes in the company’s selection or application of accounting principles, and major issues as to the adequacy of the company’s internal controls and any special audit steps adopted in light of material control deficiencies. They shall review analyses prepared by management and/or the independent auditor setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including analyses of the effects of alternative GAAP methods on the financial statements; review the effect of regulatory and accounting initiatives, as well as off-balance sheet structures on the financial statement of the company; and review earning press releases (paying particular attention to any use of “pro forma” or “adjusted” non-GAAP information), as well as financial information and earnings guidance provided to analysts and rating agencies.
The Audit Committee shall determine by interview with the public accounting firm if there were restrictions imposed by management on the scope or conduct of any audit or examination.
The Audit Committee shall consult with the general counsel, corporate financial management, and the independent auditors to confirm that they are unaware of any violations of public law and accounting practices relating to financial reports of the Company and its subsidiaries, the absence of conflicts of interest of Directors and officers, and compliance with the provisions of the Foreign Corrupt Practices Act.
The Audit Committee shall set clear hiring policies for employees or former employees of the independent auditor in compliance with applicable law. At a minimum, the Audit Committee will adopt hiring policies in compliance with Section 10A(l) of the Securities Exchange Act of 1934.
The Audit Committee shall periodically review its own charter and may report the results of that review and any recommendations to the Board of Directors.
At each meeting of the Board of Directors the Chairman shall present an oral report of activities and the status of any ongoing studies or investigations.
Annually, the Audit Committee shall document the fulfilling of the Committee’s responsibilities and duties performed.
The Audit Committee will perform such other functions as assigned by applicable law, the rules of The Nasdaq Stock Market, Inc., Archipelago Exchange (ArcaEx), the Company’s certificate of incorporation or By-laws, or the Board of Directors.
While the Audit Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Audit Committee to plan or conduct audits or to determine that the Company’s financial statements are complete and accurate and are in accordance with generally accepted accounting principles. This is the responsibility of management and the independent auditor. Nor is it the duty of the Audit Committee to assure compliance with the laws and regulations and the Company’s compliance policies. Additionally, the Audit Committee recognizes that financial management, including the internal audit staff, as well as the independent auditor, have more knowledge and more detailed information about the Company than do members of the Audit Committee; consequently, in carrying out its oversight responsibilities, the Audit Committee is not providing any expert assurance as to the Company’s financial statements or any professional certification as to the independent auditor’s work.