EXHIBIT 99.1
MINN-DAK FARMERS COOPERATIVE
AUDIT COMMITTEE CHARTER
(final draft approved at 9-22-03 Board Meeting)
Organization
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The Audit Committee of the Board of Directors shall be comprised of at least
three directors. Each member of the Audit Committee shall be independent of
management and the Cooperative. Members of the Audit Committee shall be members
of the Board of Directors and should include Directors with financial or
accounting backgrounds if available.
The Treasurer of the Board of Directors shall be designated the Audit Committee
Chair. All Committee members serve on a year-to-year basis and are subject to
reconfirmation annually by the Executive Committee of the Board of Directors.
The Audit Committee Chair and the President will establish the meeting agenda,
in accordance with this Charter.
The Chief Accounting Officer or Controller of the Cooperative will record
Committee activities.
Statement of Policy
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The Audit Committee shall provide assistance to the directors in fulfilling
their responsibility to the shareholders and potential shareholders relating to
corporate accounting and reporting practices of the Cooperative, the quality and
integrity of financial reports of the Cooperative; the financial reporting
process; the systems of internal accounting and financial controls; the
performance of the Cooperative's independent auditors; the independent auditor's
qualifications and independence; and the Cooperative's compliance with ethics
policies and legal and regulatory requirements. In so doing, it is the
responsibility of the Audit Committee to maintain free and open communication
between the directors, the independent auditors, and management of the
Cooperative.
Responsibilities
In carrying out its responsibilities, the Audit Committee believes its policies
and procedures should remain flexible, in order to best react to changing
conditions and to ensure to the directors and shareholders that the corporate
accounting and reporting practices of the Cooperative are in accordance with all
requirements and are of the highest quality.
In carrying out these responsibilities, the Audit Committee will strive to:
1. Obtain the full Board of Directors' approval of this Charter
and review and reassess this Charter as conditions dictate (at
least annually).
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2. Submit the minutes of all meetings of the Audit Committee to,
or discuss the matters discussed at each Audit Committee
meeting with, the Board of Directors.
3. Appoint, compensate and oversee the engagement, retention or
replacement of the independent auditors to audit the financial
statements of the Cooperative and its subsidiaries.
4. Approve all audit services to be performed by the independent
auditor.
5. Ensure that the independent auditor is not engaged to perform
the following non-audit services:
a. Bookkeeping and other services related to the
Cooperative's accounting records or financial
statements;
b. Financial information systems design and
implementation;
c. Appraisal or valuation services, fairness opinions
and contribution-in-kind reports;
d. Actuarial services;
e. Internal audit outsourcing services;
f. Management functions and human resources;
g. Broker-dealer, investment adviser and investment
banking services;
h. Legal services and expert services unrelated to the
audit; and
i. Any other service that the Public Cooperative
Accounting Oversight Board prohibits, by regulation.
6. Ensure that the independent auditor is not engaged to perform
any other non-audit services, not listed above, but deemed
incompatible with independence by the Commission, the Public
Cooperative Accounting Oversight Board or any applicable
regulatory authority.
7. Adopt and implement policies to govern approval of all
non-audit services not listed above to be performed by the
independent auditor. The committee may delegate pre-approval
authority to a member of the audit committee. The decisions of
any audit committee member to whom pre-approval authority is
delegated must be presented to the full audit committee at its
next scheduled meeting.
8. Ensure regular rotation of engagement and concurrent reviewer
partner on the independent audit team so that they do not
participate in audits for more than five consecutive fiscal
years, as required by regulation. Review the experience and
qualifications of the senior members of the independent
auditor team and the quality control procedures of the
independent auditor.
9. Establish hiring policies for employees or former employees of
the independent auditors that meet the SEC regulations and
stock exchange listing standards.
10. Obtain the annual certification by the CEO and CFO that they
have disclosed to the auditors and the Audit Committee all
significant deficiencies and material weaknesses in the design
or operation of internal controls, and any fraud, whether or
not material, that involves management or other employees who
have a significant role in the Cooperative's internal
controls.
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11. Have a clear understanding with the independent auditors that
they are ultimately accountable to the Board of Directors and
the Audit Committee, as the shareholders' representatives, who
have the ultimate authority in deciding to engage, evaluate,
and if appropriate, terminate their services.
12. Provide sufficient opportunity for the independent auditors to
meet with the members of the Audit Committee without members
of management present (pre-audit and post-audit meetings).
Among the items to be discussed in these meetings are the
independent auditors' evaluation of the Cooperative's
financial, accounting, and auditing personnel, and the
cooperation that the independent auditors received during the
course of audit. The Cooperative's legal counsel shall hold
separate minutes of these discussions.
13. On an annual basis, obtain from the independent auditors a
written communication delineating all their relationships and
professional services as required by Independence Standards
Board Standard No. 1, Independence Discussions with Audit
Committees. In addition, review with the independent auditors
the nature and scope of any disclosed relationships or
professional services and take, or recommend that the Board of
Directors take, appropriate action to ensure the continuing
independence of the auditors.
14. The committee shall review management's assertion on its
assessment of the effectiveness of internal controls as of the
end of the most recent fiscal year and the independent
auditors' report on management's assertion. (Note: Effective
date of this requirement is August 31, 2005.)
15. Receive, on an quarterly and annual basis, if so required, any
disclosures by management regarding:
a. All significant deficiencies in the design
or operation of internal controls that could
adversely affect the Cooperative's ability
to record, process, summarize and report
financial data; and
b. Any fraud, whether or not material, that
involves management or other employees who
have a significant role in the Cooperative's
internal controls.
16. Discuss significant accounting estimates and new developments
in accounting and financial standards with the Cooperative's
management and independent auditors on an annual basis.
17. Review periodically the code of ethics for the Cooperative's
senior financial officers and determine their adherence to the
same.
18. Establish procedures for:
a. Receipt, retention and treatment of
complaints received by the Cooperative
regarding accounting controls or auditing
matters; and
b. The confidential, anonymous submission by
employees of the Cooperative of concerns
regarding questionable accounting or
auditing matters.
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19. Have the authority to retain and compensate outside advisors
without seeking Board approval.
20. Investigate any matter brought to its attention within the
scope of its duties, with the power to retain outside counsel
for this purpose if, in its judgment, that is appropriate.
21. Have the authority to create policies and procedures, as it
deems necessary or appropriate, to comply with the
requirements of the Securities Exchange Act of 1934, the rules
or regulations of the Commission.
22. Review reports received from regulators and other legal and
regulatory matters that may have a material effect on the
financial statements or related Cooperative compliance
policies. Conduct an annual review with the Cooperative's
General Counsel on legal matters that may have a material
impact on the financial statements and obtain comments from
General Counsel in such matters.
23. The committee shall receive the Cooperative's attorneys'
reports of evidence of a material violation of securities laws
or breaches of fiduciary duty.
24. Inquire of management and the independent auditors about
significant financial risks or exposures and assess the steps
management has taken to minimize such risks to the
Cooperative.
25. Discuss with the CFO and the independent auditor the matters
required to be discussed by Statement of Auditing Standards
No. 61 (and as amended by Statement of Auditing Standards No.
90) relating to the conduct of the audit.
26. The committee shall review the interim financial statements
and disclosures under Management's Discussion and Analysis of
Financial Condition and Results of Operations with management
and the independent auditors prior to the filing of the
Cooperative's Quarterly Report on Form 10-Q. Also, the
committee shall discuss the results of the quarterly review
and any other matters required to be communicated to the
committee by the independent auditors under generally accepted
auditing standards. The Chairman of the Audit Committee, or
his designee, may represent the entire Committee for purposes
of this review.
27. The committee shall review with management and the independent
auditors the financial statements and disclosures under
Management's Discussion and Analysis of Financial Condition
and Results of Operations to be included in the Cooperative's
Annual Report on Form 10-K, including their judgment about the
quality, not just the acceptability, of accounting principles,
the reasonableness of significant judgments, and the clarity
of the disclosures in the financial statements and
particularly, the degree of aggressiveness or conservatism of
the organization's accounting principles and underlying
estimates, and other significant decisions made in preparing
the financial statements. Also, the committee shall discuss
the results of the annual audit and any other matters required
to be communicated to the committee by the independent
auditors under generally accepted auditing standards. Review
with financial management and the independent auditors the
results of their timely analysis of significant financial
reporting issues and practices, including changes in, or
adoptions of, accounting
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principles and disclosure practices, off-balance sheet
structures and discuss any other matters required to be
communicated to the Audit Committee by the auditors.
28. Report the results of the annual audit to the Board of
Directors. If requested by the Board, invite the independent
auditors to attend the full Board of Directors meeting to
assist in reporting the results of the annual audit or to
answer other directors' questions (alternatively, the other
directors may be invited to attend the Audit Committee meeting
during which the results of the annual audit are reviewed).
29. Review the report of the Audit Committee in the annual report
to shareholders and the Annual Report on Form 10-K disclosing
whether or not the Audit Committee had reviewed and discussed
with management and the independent auditors, as well as
discussed within the Audit Committee (without management or
the independent auditors present), the financial statements
and the quality of accounting principles and significant
judgments affecting the financial statements.
30. Review an analysis prepared by management and the independent
auditor of significant financial reporting issues and
judgments made in connection with the preparation of the
Cooperative's financial statements, including an analysis of
the effect of alternative GAAP methods on the Cooperative's
financial statements and a description of any transactions as
to which management obtained Statement of Auditing Standards
No. 50 (and as amended by Statement of Auditing Standards No
97) letters.
31. Review and evaluate any related party transactions and make
appropriate recommendations to the Board of Directors.
32. Review and evaluate each year the requirement to report to the
SEC the position of the Cooperative relative to placing a
financial expert on the Audit Committee. The Cooperative's
By-laws state that Audit Committee members must be appointed
from the Cooperative's Board of Directors. Currently the
Cooperative's Board of Directors do not have a member who
would qualify as a financial expert under the definition
provided for in the Sarbanes-Oxley/SEC laws/rules.
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 Cooperative's financial
statements are complete and accurate and are in accordance with
Generally Accepted Accounting Principles ("GAAP"). This is the
responsibility of management and the independent auditor. Nor is it the
duty of the Audit Committee to conduct investigations, to resolve
disagreements, if any, between management and the independent auditor
or to assure compliance with laws and regulations.
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