EXHIBIT A
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS OF
OHIO CASUALTY CORPORATION
Revised February 13, 2003
This charter identifies the membership, purpose, authority and responsibilities
of the Audit Committee of the Board of Directors of Ohio Casualty Corporation
(the "Company").
I. MEMBERSHIP
A. The Board of Directors shall appoint an Audit Committee (the
"Committee") comprised of not less than three directors who shall
meet the financial and independence requirements of the NASDAQ
Stock Market, Inc.
In addition, each director serving on the Committee shall have such
qualification(s) and/or expertise as may from time to time be
required by the applicable rules and standards of the SEC and/or
the primary exchange upon which the Company's common shares are
then traded (the "Applicable Rules and Standards").
The Board of Directors shall appoint one of the independent members
of the Committee to be Chairman of the Committee.
B. Members of the Committee shall serve at the discretion of the Board
of Directors until their successors are appointed.
II. MEETINGS
A. The Committee shall meet at least quarterly, or more frequent as
may be necessary or appropriate in its judgment. Minutes of each
Committee meeting shall be submitted to the Board of Directors. At
the discretion of the Board of Directors, the Chairman of the
Committee will report orally to the full Board of Directors on
matters discussed at the most recent Committee meeting.
B. To provide access to the Committee for the internal auditors,
independent accountants and key financial management, the Committee
may request the attendance at its meetings of a representative of
the independent accountants, the internal auditors, and such
members of the Company's management as circumstances may require.
At least annually, the Committee shall meet separately with the
internal auditors and separately with the independent accountants
without members of management present.
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III. PURPOSE
The purpose of the Committee is to represent the Board of Directors by
providing an independent oversight of accounting and financial
reporting practices and the Company's system of internal control. The
Committee shall assist the Board of Directors in monitoring the
independence and integrity in the financial reporting process and the
adequacy of the internal control structure of the organization.
The Committee shall review management's performance regarding financial
reporting and shall make inquiry on a periodic basis of management, the
internal auditors and the independent accountants with respect to the
following:
A. whether a fair presentation of published financial information is
made in compliance with all applicable professional and regulatory
requirements;
B. whether an effective internal control structure has been
established and maintained, including adequate policies and
procedures over financial reporting, operations, and compliance
with laws and regulations;
C. whether the quality of internal and external audit efforts is
adequate and the Company's public accountants are independent.
IV. AUTHORITY
The Committee is authorized by the Board of Directors to investigate
any activity of the Company, which it deems relevant to the fulfillment
of its responsibilities. This authority shall include the right to
initiate special or additional audits or investigations and retain
special counsel or other outside experts to achieve the purpose of this
charter. All executives and employees are directed to cooperate as
reasonably requested by members of the Committee or their designee.
V. DUTIES AND RESPONSIBILITIES
A. Financial Reporting and the Independent Accountants
1. Recommend to the Board of Directors the appointment of the
independent accountants to be engaged for the examination of the
consolidated financial statements of the Company and its
subsidiaries for each fiscal year.
2. Review the independent accountants' proposed audit scope and
approach, the fees therefor, and review and discuss the results
of the audit for each fiscal year with the independent
accountants, the head of Corporate Audit, and appropriate
management representatives.
3. Review the quarterly reporting process and the controls that
management has established to protect the integrity of such
process. In doing so, the
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Committee should discuss with the independent accountants their
review of the Company's financial results prior to their release
to the public, including but not limited to, the Company's Annual
Report to shareholders, Forms 10-K and 10-Q and any other similar
forms, as well as actual quarterly financial results that vary
significantly from budgeted or projected results, significant
transactions not a normal part of the Company's operations,
changes, if any, during the year in the Company's accounting
principles or their application, and significant adjustments
proposed by the independent accountants.
4. Review and discuss the statements from the independent
accountants concerning any relationships between the independent
accountants and the Company or any other relationships that may
adversely affect the independence of the independent
accountants, and based on such review, assess the independence
of the independent accountants.
5. Review and approve, in advance, management's plans for engaging
the Company's independent accountants to perform non-audit
services during the year. Such review should involve both the
types of services rendered and the applicable fees. The
Committee should weigh the effects such services may have on the
continuing independence of the independent accountants.
6. Maintain open lines of communication with the Company's
principal financial officer and the head of Corporate Audit.
7. Discuss with the independent accountants the matters required to
be discussed by Statement on Auditing Standards No. 61 (as such
Standard may be modified or supplemented) relating to the
conduct of the audit.
B. Oversight of Investment Committee
1. Approve the members of the Investment Committee.
2. Approve any hiring of external investment managers who are not
certified by the Association for Investment Management and
and Research (AIMR).
3. Review and approve annually the Investment Guidelines.
4. Review and approve any exceptions to the Investment Guidelines
that exceed the parameters for approval delegated to the
Investment Committee.
5. Review quarterly the investment performance of the Investment
Department and external investment managers and significant
changes in investment strategy.
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C. Internal Controls and the Internal Audit Function
1. Review the internal auditors' involvement in the audit of the
financial reporting process and the coordination of their
activities with the independent accountants.
2. Review the activities and reports of the internal auditors and
management's cooperation with the internal audit process.
3. Consult with the independent accountants, internal auditors and
management, together or separately, as appropriate, regarding
the adequacy of the Company's system of internal control and any
control failures that may have been detected.
4. Review the scope of the internal auditors' responsibilities,
including the annual audit plan, any change in the internal
audit role or function, the resources committed to the internal
audit function and the quality and depth of staffing.
5. Review and approve the appointment or dismissal of the head of
Corporate Audit.
D. Other Responsibilities
1. Provide a direct and, when necessary, confidential line of
communication to the independent accountants, internal auditors,
legal counsel and management.
2. Establish and maintain procedures to receive and address
complaints, including confidential submissions made by employees,
regarding accounting, internal accounting controls, or auditing
matters.
3. Review policies and procedures as well as audit results
associated with directors' and officers' expense accounts and
perquisites.
4. Review and assess this Charter at least annually and recommend
to the Board of Directors for adoption any revisions that the
Committee believes are appropriate or necessary. In accordance
with SEC rules and regulations, at least every three years, this
Charter shall be filed, as an appendix to the Company's Proxy
Statement.
5. Prepare for inclusion in the Company's Proxy Statement the
annual report to shareholders required by the rules of the SEC.
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6. Perform such other or additional duties and responsibilities as
may be specified from time to time by the Board of Directors.
E. Limits of Responsibility
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 accountants. Nor is it the duty
of the Committee to conduct investigations, to resolve
disagreements, if any, between management and the independent
accountants or to ensure compliance with laws and regulations and
the Company's internal rules, policies and codes of conduct.
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