"AUDIT COMMITTEE" CHARTER, COMBINED FINANCIAL REPORTS AND FOR ...
“AUDIT COMMITTEE”CHARTER, COMBINED FINANCIAL REPORTS AND
FOR GENERAL OFFICE OF FINANCE OPERATIONS
The Office of Finance (OF) Board constitutes and performs the duties of an “ audit committee”in connection with the oversight of
the 1) preparation of the Federal Home Loan Banks’(FHLBanks) annual and quarterly combined financial reports, which shall
include the combined financial statements of the FHLBanks and 2) the general operations of the OF, which shall include the annual
OF-Imprest Fund financial statements. In that role, the OF Board shall review the combined financial statements and OF financial
statements. To achieve this objective, the OF Board will direct senior management of the Office of Finance to maintain the reliability
and integrity of the accounting policies and financial reporting and disclosure practices of the OF.
In accordance with guidance from the Federal Housing Finance Agency (Finance Agency), the OF Board shall not be responsible
for the underlying financial statements and other data of the FHLBanks contained in the combined financial reports, and is entitled to
rely on those financial statements and other data as submitted by the individual FHLBanks. Furthermore, the combined financial
reports and combined financial statements are the responsibility of the OF and its senior management and the OF Board can only
review the material in an oversight capacity.
The purpose of the Audit Committee of the OF of the FHLBanks is to provide general oversight of the integrity of the combined
financial statements of the FHLBanks and the financial statements for the OF-Imprest Fund. In addition, it has oversight of:
• the OF’ accounting and financial reporting processes as it relates to the combining process and OF-Imprest Fund,
• the OF’ internal controls and procedures as it relates to the combining process and OF’ operations,
• the financial statement audits of the FHLBanks’combined financial report and OF-Imprest Fund,
• the appointment, qualifications, independence, performance and compensation of the OF’ external and internal auditors, and
• compliance with legal and regulatory requirements and ethical standards adopted by the OF.
Roles and Responsibilities
Management is primarily responsible for the preparation, presentation and integrity of the combined financial reports and the OF-
Imprest Fund financial reports, the OF’ accounting policies and the OF’ internal controls and procedures designed to address
operational and administrative risks and promote compliance with accounting standards, financial reporting and disclosure
requirements, applicable laws and regulations and the OF’ ethical standards. The independent auditor is responsible for performing
an audit of the annual combined financial statements, expressing an opinion as to the conformity of those financial statements with
generally accepted accounting principles, and reviewing the quarterly combined financial statements. The individual FHLBanks are
responsible for their respective underlying financial statements, accounting policies and internal controls and procedures. The Audit
Committee members oversee but are not intended to duplicate or to certify the activities of management and the independent auditor.
In connection with the combined financial reports and OF-Imprest Fund financial statements and consistent with Finance Agency
guidance, the OF Board is responsible for:
• Reviewing the FHLBanks’combined financial statements and OF-Imprest Fund financial statements, the external auditor’ s
opinion on the annual FHLBanks’combined financial statements and OF-Imprest Fund financial statements, and the combined
annual and quarterly financial reports, including the nature and extent of any significant changes in accounting principles or the
• Ensuring that policies are in place that are reasonably designed to achieve disclosure and transparency regarding the
FHLBanks’financial performance on a combined basis and the OF’ true financial performance and governance practices
relating to the OF-Imprest Fund financial statements.
• Reviewing the scope of audit services required, significant accounting policies, significant risks and exposures, audit activities
and audit findings with respect to the combined financial statements of the FHLBanks and the OF’ financial statements.
• Reviewing the activities and organizational structure of the OF’ Department of Accounting Policy & Financial Reporting.
• Monitoring the accomplishments of the Senior Director and Chief Accounting Officer, Accounting Policy & Financial
Reporting’ goals and objectives.
• Oversee the internal audit function by 1) reviewing the scope of the audit services required, significant risks and exposures,
audit activities and audit findings; 2) assessing the performance and determining the compensation of the Director, Internal
Audit; and 3) reviewing and approving the internal auditor’ work plan and budget.
• Approving the external auditor’ annual engagement letter, which shall require the external auditor to audit the annual OF-
Imprest financial statements and FHLBanks’combined financial statements and review the FHLBanks’combined financial
statements prior to their inclusion in the FHLBanks’quarterly combined financial reports.
• Reviewing and approving audit plans of the external auditors relating to the FHLBanks’combined financial statements and the
OF-Imprest Fund’ financial statements and debt servicing activities.
• Reviewing the performance of the external auditor.
• Making determinations regarding the appointment, renewal, or termination of the external auditor. And pre-approving all audit
and non-audit services in accordance with the applicable independence rules regarding permissible (audit related) and
• Providing an independent, direct communication channel between the OF Board and the OF’ Director, Internal Audit, the
external auditors and Finance Agency examiners.
• Conducting or authorizing investigations into any matters within the OF Board’ scope or responsibilities as it relates to the
FHLBanks’combined financial reports and the general OF operations.
• Reviewing the programs and policies established by senior management of the OF designed to ensure compliance with
applicable laws, regulations and policies relating to the disclosure process supporting the FHLBanks’joint debt issuance
programs and monitoring the results of these compliance efforts.
• Determining that no restrictions are imposed on audit scope of the combined financial statements of the FHLBanks and the OF-
Imprest Fund financial statements.
• Determining the extent to which internal auditors review computer systems and applications, the security of such systems and
applications, and the contingency plan for processing financial information in the event of a systems breakdown.
• Obtaining reasonable assurance that significant findings and recommendations made by the Director, Internal Audit and
external auditors relating to the FHLBanks’combined financial reports and OF’ general operations, including the OF-Imprest
Fund financial statements, are received and discussed on a timely basis, including evaluating management’ response to the
findings and reports.
• Monitor management implementation of internal and external audit recommendations.
• Coordinating the OF’ response to Finance Agency examination reports as they relate to the FHLBanks’combined financial
reports and OF’ general operations, including the OF-Imprest Fund financial statements.
• Considering such other matters in relation to the preparation and publication of the FHLBanks’combined financial reports and
preparation of the OF’ financial statements as the OF Board may, in its discretion, determine to be advisable.
• Prepare a report for inclusion in the FHLBanks’ combined annual financial report describing the discharge of its
responsibilities relating to the FHLBanks’combined financial statements, to the extent required by law.
• Review the policies and procedures established by senior management to assess and monitor implementation of the OF’
strategic business plan and the operating goals and objectives contained therein.
• Select, evaluate and, where appropriate, replace the Director, Internal Audit, who may be removed only with the approval of the
• Assess the effect on the OF of new accounting principles or policies promulgated by the accounting profession, the Financial
Accounting Standards Board or the SEC or proposed by the Finance Agency, relating to the OF’ financial statements and to
the combination aspects of the combined financial reports.
• Ascertain the sufficiency of budget funds for the internal audit function.
• Monitor compliance with the OF’ ethics policy and perform the annual review and approval of ethics and compliance policies.
• Review results of OF Quality Assurance Reviews.
• Ensure that senior management has established and is maintaining an adequate internal control system within the OF by
reviewing the OF’ internal control system and the resolution of identified material weaknesses and reportable conditions in the
OF’ internal control system, including the prevention or detection of management override or compromise of the internal
• Ensure that it regularly receives a report that summarizes the status of open comments on disclosures from external audit,
internal audit, the Finance Agency, and any other regulatory body and periodically discuss the comments with OF’ senior
management to confirm that the comments were resolved appropriately.
Authority Regarding Staff and Outside Consultants
The OF Board have the authority to retain staff and outside counsel, independent accountants, or other outside consultants at the
expense of the FHLBanks.
Interaction with External Auditors
The continued independence of the independent auditors in accordance with professional auditing standards and SEC
requirements, as practicable, shall be reviewed periodically with management, as well as with the external auditors. The Committee
shall require annually the written statement and letter from the external auditors disclosing relationships between the system and the
external auditors, consistent with Independence Standards Board Standard No. 1, and shall discuss with the external auditors their
independence in fact and in appearance, as well as consulting and other non-audit services provided by the external auditors, to
determine any potential effect on independence.
Subsequent to each audit, the OF Board shall meet with the external auditors to review and discuss accounting and audit matters,
including, but not limited to:
• Significant auditing or accounting areas of concern,
• New or unusual transactions, balances or financial statement disclosures of significance,
• The external auditors’judgments about the quality of the FHLBanks’combined accounting principles and OF-Imprest Fund
accounting principles as applied,
• The representation letters provided to the external auditors by the FHLBanks,
• The level of support provided by each FHLBank’ management, accounting and internal audit personnel, and
• Any other matters required to be discussed by Statement of Auditing Standards (SAS) 61 (as amended) and other concerns the
external auditors have with respect to positions taken in the combined financial statements.
The OF Board shall also review and discuss any matters that the external auditors are required under professional auditing
standards to communicate to the OF Board, such as:
• Significant audit adjustments,
• Disagreements with management, and
• Any irregularities or illegal acts detected during the audit.
The OF Board will also review the responses of management with regard to these matters.
Prior to release to the public, the annual combined audited financial statements of the FHLBanks shall be reviewed by the OF
Board and discussed with management and the external auditors. The purpose of the review shall be to determine whether to accept
the audited financial statements presented to it for publication in the annual FHLBanks’combined financial report. The OF Board
shall inquire about the following:
• Significant variations in financial information between reporting periods.
• Consistency of the Financial Discussion and Analysis of Combined Financial Condition and Combined Results of Operations
section of the annual FHLBanks’ combined financial report.
• Changes or proposed changes in accounting standards or rules issued by the Financial Accounting Standards Board or the SEC
or the Finance Agency that have an effect on the financial statements.
• Significant reporting or operational issues affecting the FHLBanks’combined financial statements.
• Accounting accruals, reserves and estimates made by management of the FHLBanks having a material impact on the
FHLBanks’combined financial statements.
The above responsibilities of the OF Board will be discharged through review of FHLBanks’ combined audit reports and
discussions with the external auditors, and the Senior Director and Chief Accounting Officer, Accounting Policy & Financial
Reporting. The Director, Internal Audit and external auditors shall have access to the OF Board on matters concerning the financial
reports without the need for any prior management knowledge or approval.
The OF Board shall review, assess the adequacy of, and, where appropriate, amend the Charter of the OF Board acting as “Audit
Committee” in connection with the financial report function on an annual basis. Amendments to the Charter can be adopted and
approved at any time. This Charter shall be re-adopted and re-approved not less often than every three years.
Other Best Practices
The OF Board shall establish a continuing education program that focuses on specific topics that are of current relevance and that
expand knowledge of the OF and FHLBanks’ business.
The OF Board shall perform a self-assessment annually relating to its effectiveness.
The OF Board shall meet at least quarterly with the OF’ Senior Director and Chief Accounting Officer, Accounting Policy &
Financial Reporting. The OF Board shall meet in executive session with each of the Senior Director and Chief Accounting Officer,
Accounting Policy & Financial Reporting, Director, Internal Audit and the external auditors at least annually to review the matters
which are the subject of this charter. The OF Board shall have unrestricted access to the Senior Director and Chief Accounting
Officer, Accounting Policy & Financial Reporting, without the need for any prior management knowledge or approval and can meet in
executive session with the Senior Director and Chief Accounting Officer, Accounting Policy & Financial Reporting and other senior
management of the OF as needed. Written minutes shall be prepared for each meeting with advice from legal counsel and shall
document the processes followed by the OF Board, the conclusions reached and the basis for those conclusions. The OF Board, or its
chairman, shall also meet with the external auditors, the Senior Director and Chief Accounting Officer, Accounting Policy & Financial
Reporting, and other senior management of the OF quarterly to review each FHLBanks’combined quarterly financial report prior to
Approved by the OF Board of Directors
December 21, 2009