2003 Committee Charter : DPL
CHARTER OF FINANCE AND AUDIT REVIEW COMMITTEE
(as adopted January 28, 2003)
The Finance and Audit Review Committee of DPL Inc. (the "Company") shall have at
least three members comprised solely of "independent" directors as defined by relevant law and
the New York Stock Exchange listing standards. The members of the Committee must also
satisfy the financial literacy requirements of the NYSE and at least one member should be a
"financial expert" as required by relevant law and have accounting or related financial
The members of the Committee shall be appointed by the Board on the recommendation
of the Nominating and Governance Committee. Committee members shall hold their offices for
one year and until their successors are elected and qualified, or until their earlier resignation or
removal. The Chairman of the Committee, who shall be appointed by the Board, shall meet the
definition of "financial expert."
No member of the Committee may serve on the audit committee of more than three
public companies, including the Company, unless the Board of Directors (1) determines that
such simultaneous service would not impair the ability of such member to effectively serve on
the Committee and (2) discloses such determination in the annual proxy statement.
The Committee shall meet at least four times each year, or more frequently as
circumstances dictate. As part of the responsibility to foster open communication, the
Committee should meet at least twice per year with management and the internal audit staff and
the independent auditors in separate sessions to discuss any matters that the Committee or
either of these groups believe should be discussed privately. When, deemed appropriate,
meetings may be held in person or by telephone.
The Committee shall keep a separate book of minutes of its proceedings and actions. A
representative from the Company shall give notice, personally or by mail, telephone, facsimile or
electronically, to each member of the Committee of all meetings not later than 12 noon of the
day before the meeting, unless all of the members of the Committee in office waive notice
thereof in writing at or before the meeting, in which case the meeting may be held without the
aforesaid advance notice. A majority of the members of the Committee shall constitute a
quorum for the transaction of business.
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.
Each Committee must perform an annual evaluation of such Committee in accordance with the
NYSE listing standards.
The Committee is charged with overseeing the financial plan of the Company and
recommending to the Board actions and policies that will best accommodate the Company's
objectives and operating strategies while maintaining its sound fiscal health. In order to fulfill its
responsibilities to the Company's stockholders, potential stockholders, and the investment
community, the Committee will provide independent and objective oversight of the accounting
functions and internal controls and will monitor the integrity of the independent auditors and the
objectivity of the Company's financial statements and disclosures. Specifically, the Committee's
primary duties and responsibilities shall be to:
· monitor the integrity of the Company's financial reporting process and
systems of internal controls regarding finance, accounting, legal and
· monitor the independence and performance of the Company's
independent auditors and monitor the performance of the Company's
internal audit function;
· appoint or replace the Company's independent auditors and approve any
audit and non-audit work performed for the Company;
· provide an avenue of communication among the independent auditors,
management and the Board of Directors;
· prepare the report that SEC rules require to be included in the Company's
annual proxy statement; and
· perform such other similar duties and responsibilities which may be
referred to the Committee from time to time by the full Board of Directors.
The Committee has the authority to conduct any investigation appropriate to fulfilling its
responsibilities, and it has direct access to the independent auditors as well as anyone in the
organization. The Committee has the ability to retain, at the Company's expense, special legal,
accounting or other consultants or experts it deems necessary in the performance of its duties.
While the Committee has the responsibilities and powers set forth in this Charter, it is not
the duty of the 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 auditors.
Nor is it the duty of the Committee to conduct general investigations, to resolve disagreements,
if any, between management and the independent auditors or to assure compliance with laws
and regulations and the Company's compliance policies.
Responsibilities And Duties
To fulfill its responsibilities and duties, the Committee shall:
1. Review and reassess the adequacy of this Charter at least annually. Submit this
Charter to the Board for approval and have the document published in
accordance with the SEC and NYSE rules.
2. Review the Company's annual audited financial statements and quarterly
financial statements prior to filing with the SEC or distribution to stockholders and
the public. Review should include discussion with management and independent
auditors of significant issues regarding accounting principles, practices and
judgments, including the Company's disclosures under "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Based on review and discussions, make recommendations to the Board whether
the Company's annual audited financial statements should be filed with the SEC.
Discuss any significant changes to the Company's accounting principles and any
items required to be communicated by the independent auditors in accordance
with Statement on Auditing Standards (SAS) 61.
3. Discuss earnings press releases in general (i.e., discussion of the types of
information to be discussed and the type of presentation to be made); these
discussions need not take place in advance of each earnings release or each
instance in which the Company may provide earnings guidance.
4. In consultation with management, review and assess audits conducted by
federal, state and other regulatory agencies (including FERC and PUCO) with
respect to the Company's electric operations.
1. Appoint or replace the independent auditors and pre-approve all audit
engagement fees and terms and all non-audit engagements with the independent
auditors as required by applicable law and NYSE listing rules. The Committee
may consult with management but shall not delegate these responsibilities.
Ensure the rotation of the lead audit partner as required by law and consider
whether to rotate the audit firm itself. Verify that none of the Company's senior
executives were employed by the independent auditors during the year
preceding the date of initiation of an audit.
2. On an annual basis, review and discuss with the independent auditors all
significant relationships they have with the Company that could impair the
auditors' independence. The Company's independent auditors may not perform
the following services for the Company:
· accounting or bookkeeping services;
· internal audit services related to accounting controls, financial systems or
· financial information systems design implementation;
· broker, dealer, investment banking or investment adviser services;
· appraisal or valuation services;
· actuarial services;
· management services or human resources; and
· legal or other expert services, or any other service that the Public
Accounting Oversight Board prohibits through regulation.
3. Review the independent auditors' audit plan. Discuss scope, staffing, locations,
reliance upon management and general audit approach.
4. Recommend to the Board policies for the Company's hiring of employees or
former employees of the independent auditors who were engaged on the
5. Obtain and review a report by independent auditors describing auditors'
independence and internal quality-control procedures and all material issues
raised by the most recent internal quality-control review or by any inquiry or
investigation by governmental or professional authorities, within the preceding
five years, respecting one or more independent audits carried out by the firm,
and all steps to deal with such issues.
Financial Reporting Process
1. Prior to releasing year-end earnings, discuss the results of the audit with
the independent auditors. Discuss certain matters required to be
communicated to the Committee in accordance with SAS No. 61,
including such things as management judgments and accounting
estimates, significant audit adjustments, disagreements with management
and difficulties encountered in performing the audit.
2. Consider the independent auditors' judgments about the quality, not just
the acceptability, and appropriateness of the Company's accounting
principles as applied in financial accounting. Inquire as to the
independent auditors' views about whether management's choices of
accounting principles appear reasonable from the perspective of income,
asset and liability recognition, and whether those principles are common
practices or minority practices.
3. In consultation with management and the independent auditors, consider
the integrity of the Company's financial reporting processes and controls,
both external and internal. Discuss significant financial risk exposures
and the steps management has taken to monitor, control and report such
exposures, including the Company's risk assessment and risk
management policies. Review significant findings prepared by the
independent auditors together with management's responses, including
the status of previous recommendations.
4. Review (a) the accounting treatment accorded significant transactions, (b)
any significant accounting issues, including any second opinions sought
by management on accounting issues, (c) the development, selection and
disclosure of critical accounting estimates and analyses of the effects of
alternative GAAP methods, regulatory and accounting initiatives, and
off-balance sheet structures on the financial statements of the Company
and (d) the Company's use of reserves and accruals, as reported by
management and the independent auditors.
Internal Controls and Legal Compliance
1. Review and discuss with the independent auditors the budget, plan,
changes in plan, activities, organizational structure and qualifications of
the CFO and Controller's office and internal audit group, as needed.
Review significant reports prepared by the CFO and Controller's office
and internal audit group, together with management's response and
follow-up to these reports.
2. Review the appointment, performance and replacement of the controller
and any other senior personnel responsible for financial reporting.
3. Evaluate whether management is setting the appropriate tone at the top
by communicating the importance of internal controls and ensuring that all
individual's possess an understanding of their roles and responsibilities.
4. Consider and review with management, the internal audit group and the
independent auditors the effectiveness or weakness of the Company's
internal controls. Develop in consultation with management a timetable
for implementing recommendations to correct identified weaknesses.
Monitor significant changes in internal controls.
5. Review the coordination between the independent public accountants and
internal auditors and review the risk assessment processes, scopes and
procedures of the Company's internal audit work and whether such risk
assessment processes, scopes and procedures are adequate to attain
the internal audit objectives as determined by the Company's
management and approved by the committee; and review the quality and
composition of the Company's internal audit staff.
6. Review with the Company's counsel the Company's compliance with
laws, regulations and the Company's Code of Business Conduct and
confirm that management has proper review systems in place to ensure
that the Company's financial statements, reports and other information
disseminated to governmental organizations, and the public, satisfy legal
and regulatory requirements.
7. Establish and maintain procedures for (a) the receipt, retention and
treatment of complaints received by the Company regarding accounting,
internal accounting controls and auditing matters; and (b) the confidential,
anonymous submission by Company employees of concerns regarding
questionable accounting or auditing matters.
8. Obtain from the independent auditors assurance that Section 10A (audit
requirements) of the Securities Exchange Act of 1934 has not been
9. Request and receive reports on the design and implementation of internal
controls. Monitor significant changes in internal controls and address any
1. Review analyses prepared by management regarding the
Company's financial structure, dividend policy and financings.
When applicable, make recommendations to the Board regarding
financial advisors and financing transactions.
2. Review credit ratings, credit facilities and external financing.
1. Annually cause to be filed in the company's annual proxy statement a
report to stockholders as required by the reporting requirements of the
2. Make or authorize investigations into any matters within the Committee's
scope of responsibilities and, in connection therewith, may retain
independent counsel, accountants or others to assist it without having to
seek the approval of the Board.
3. Make regular reports to the Board and evaluate annually its performance
in accordance with relevant law and NYSE listing rules.
4. The Audit and Finance Committee shall perform any other activities
consistent with this Charter, the Company's By-laws and governing law,
as the Audit and Finance Committee deems appropriate or necessary.