Exhibit 99.01
VALERO ENERGY CORPORATION
Audit Committee Pre-Approval Policy
I. STATEMENT OF PRINCIPLES
Pursuant to Section 10A of the Securities Exchange Act of 1934, as amended
by Section 202 of the Sarbanes-Oxley Act of 2002 ("SOX Act"), the Audit
Committee of the board of directors (the "Audit Committee") of Valero
Energy Corporation (the "Company") is required to pre-approve the audit and
non-audit services performed by the Company's independent auditor to assure
that the provision of such services does not impair the auditor's
independence. The SEC's rules establish two approaches for pre-approving
services. The two approaches are not mutually exclusive:
- the Audit Committee may pre-approve each particular service on a
case-by-case basis ("separate pre-approval"), and
- the Audit Committee may adopt a pre-approval policy that is detailed
as to the particular types of services that may be provided by the
independent auditor without consideration by the Audit Committee on
a case-by-case basis ("policy-based pre-approval").
The Audit Committee believes that a combination of these approaches will
provide an effective and efficient procedure to pre-approve services
performed by the independent auditor. Therefore, unless a type of service
has received policy-based pre-approval (as specifically identified in the
appendices to this policy), it will require separate pre-approval by the
Audit Committee.
The appendices to this policy contain lists of services that have received
policy-based pre-approval of this Audit Committee in the following
categories (categorized in accordance with the SEC's rules):
- Audit Services
- Audit-Related Services
- Tax Services
- All Other Services
II. TERM OF PRE-APPROVALS
The term of the policy-based pre-approvals stated in the appendices to this
policy is the period from January 1, 2005 to January 31, 2006, unless the
Audit Committee specifically provides for a different period. The Audit
Committee will review and pre-approve, at least annually, the services that
may be provided by the independent auditor. The Audit Committee will revise
the list of policy-based pre-approved services from time to time as the
Committee deems necessary or appropriate.
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III. DELEGATION
In accordance with the SOX Act and SEC rules, the Audit Committee hereby
delegates to its Chairman the authority to grant separate pre-approvals of
services and fees in accordance with this policy. The Audit Committee may
further delegate pre-approval authority from time to time to one or more of
its other members in its discretion. Any committee member to whom
pre-approval authority is delegated shall report any pre-approval decisions
to the full Audit Committee at its next meeting. The Audit Committee does
not delegate its responsibilities to pre-approve services to any member of
the Company's management.
IV. SERVICES FOR WHICH SEPARATE PRE-APPROVAL IS REQUIRED
The terms and fees for the following services of the independent auditor
require separate pre-approval by the Audit Committee:
- the annual financial statement audit, including all audits, reviews,
procedures and other services required to be performed by the
independent auditor to form an opinion on the Company's consolidated
financial statements, and
- the annual audit of the Company's internal control over financial
reporting, including all services required to be performed by the
independent auditor to issue its report on (i) management's assessment
regarding the effectiveness of the Company's internal control over
financial reporting, and (ii) the effectiveness of the Company's
internal control over financial reporting.
The Audit Committee will monitor these engagements as it deems appropriate,
and will approve, if necessary, any changes in terms, conditions and fees
resulting from changes in engagement scope, changes in the Company's
structure or other matters.
V. SERVICES FOR WHICH POLICY-BASED PRE-APPROVAL IS AVAILABLE
A. AUDIT SERVICES
The Audit Committee may grant policy-based pre-approval for Audit Services
other than the services described in Section IV above. These Audit Services
are generally services that only the Company's independent auditor
reasonably can provide, and include:
- services associated with SEC registration statements (e.g., comfort
letters, consents), periodic reports and other documents filed with
the SEC or other documents issued in connection with securities
offerings,
- statutory audits or financial audits for subsidiaries or affiliates
of the Company.
The Audit Committee has given policy-based pre-approval for the Audit
Services listed in Appendix A. All other Audit Services must be separately
pre-approved by the Audit Committee.
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B. AUDIT-RELATED SERVICES
Audit-Related Services are assurance and related services that are reasonably
related to the performance of the annual audit or quarterly review of the
Company's financial statements or that are traditionally performed by the
independent auditor. The Audit Committee may grant policy-based pre-approval
for Audit-Related Services. These services would include:
- employee benefit plan audits,
- due diligence services related to proposed mergers and acquisitions,
and
- assistance with understanding and implementing new accounting and
financial reporting guidance from rulemaking authorities.
The Audit Committee believes that the provision of the Audit-Related Services
listed in Appendix B does not impair the independence of the auditor, and has
given policy-based pre-approval for the Audit-Related Services listed in
Appendix B. All other Audit-Related Services must be separately pre-approved
by the Audit Committee.
C. TAX SERVICES
The Audit Committee believes that the independent auditor can provide Tax
Services to the Company such as tax compliance, tax planning and tax advice
without impairing the auditor's independence. However, the Audit Committee
will not permit the retention of the independent auditor in connection with a
transaction initially recommended by the independent auditor, the purpose of
which may be tax avoidance and the tax treatment of which may not be
supported in the U.S. Internal Revenue Code and related regulations or in the
tax laws and regulations of any jurisdiction in which the Company is subject
to taxation. In addition, the independent auditor may not provide any tax
services to the Company that are deemed to be incompatible with auditor
independence per standards promulgated by the Public Company Accounting
Oversight Board ("PCAOB").
The Audit Committee has given policy-based pre-approval for the Tax Services
listed in Appendix C. All other Tax Services must be separately pre-approved
by the Audit Committee, including Tax Services related to large and complex
transactions and Tax Services proposed to be provided by the independent
auditor to any executive officer or director of the Company, in his or her
individual capacity, when such services are paid for by the Company.
D. ALL OTHER SERVICES
The Audit Committee may grant policy-based pre-approval for those permissible
non-audit services classified as All Other Services that it believes are
routine, recurring services that would not impair the independence of the
auditor. The Audit Committee has given policy-based pre-approval for the All
Other Services listed in Appendix D. Any permissible All Other Services that
are not listed in Appendix D must be separately pre-approved by the Audit
Committee.
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VI. PROHIBITED SERVICES
A list of the SEC's prohibited non-audit services is attached to this
policy as Appendix E. The list sets forth the several services that the SOX
Act and the SEC have specifically identified as services that may not be
performed by the Company's independent auditor. The Audit Committee will
consult the SEC's rules and relevant guidance, with the assistance of
counsel when necessary or appropriate, to determine whether any proposed
service by the independent auditor falls within any category of prohibited
non-audit services.
In addition, the independent auditor may not provide any service or product
to the Company for a contingent fee (as defined and interpreted by the SEC
pursuant to Rule 2-01(c)(5) of Regulation S-X) or a commission, or pursuant
to an agreement (written or otherwise) by the Company to pay a "value
added" fee based on the results of the independent auditor's performance of
a service.
VII. PRE-APPROVAL FEE LEVELS AND BUDGETED AMOUNTS
Pre-approval fee levels or budgeted amounts for all services to be provided
by the independent auditor will be established at least annually by the
Audit Committee. All services that have received policy-based pre-approval
are subject to the pre-approval fee levels or budgeted amounts set forth in
the appendices to this policy. Any proposed services exceeding these
amounts will require separate pre-approval by the Audit Committee or by any
person to whom pre-approval authority is granted under Section III above.
VIII. PROCEDURES
Requests or applications to provide services that require separate approval
by the Audit Committee must be submitted to the Audit Committee by both the
independent auditor and the Company's Chief Financial Officer (or his
designee), and must include a joint statement as to whether, in their view,
the request or application is consistent with the SEC's rules on auditor
independence. In connection with the Audit Committee's consideration of any
proposed service, the independent auditor, at the Committee's request, will
provide to the Audit Committee detailed documentation regarding the
specific services to be provided so that the Committee can make a
well-reasoned assessment of the impact of the service on the auditor's
independence.
The Audit Committee hereby designates the Company's Vice President of
Internal Audit (the "Monitor") to monitor the performance of all services
provided by the independent auditor and to determine whether such services
are in compliance with this policy. The Monitor will report to the Audit
Committee on a periodic basis the results of his monitoring.
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APPENDIX A
PRE-APPROVED AUDIT SERVICES
SERVICE
assistance with and review of documents filed with the SEC including
registration statements, reports on Forms 10-K and 10-Q, and other documents
services associated with other documents issued in connection with securities
offerings (e.g., comfort letters, consents)
assistance in responding to SEC comment letters
statutory audits (e.g., FERC audits) and financial audits for subsidiaries of
the Company
certificates, letters and opinions issued to regulators, agencies and other
third-parties (e.g., insurance, banking, environmental) regarding the Company's
assets and/or operations that only the Company's independent auditors reasonably
can provide
PRE-APPROVAL FEE LIMIT FOR AUDIT SERVICES (OTHER THAN SERVICES PERTAINING TO
REGISTRATION STATEMENTS OR PROSPECTUSES IN CONNECTION WITH SECURITIES OFFERINGS)
$250,000
PRE-APPROVAL FEE LIMIT FOR AUDIT SERVICES PERTAINING TO REGISTRATION STATEMENTS
OR PROSPECTUSES IN CONNECTION WITH SECURITIES OFFERINGS
$250,000 per registration statement or prospectus
APPENDIX B
PRE-APPROVED AUDIT-RELATED SERVICES
SERVICE
due diligence services pertaining to potential business acquisitions or
dispositions
financial statement audits of employee benefit plans
accounting consultations and audits in connection with acquisitions
consultations concerning principles of accounting and/or financial reporting
treatment (under standards or interpretations by the SEC, PCAOB, FASB or other
regulatory or standard-setting bodies)
agreed-upon or expanded audit procedures related to accounting and/or billing
records required to respond to or comply with financial, accounting or
regulatory reporting matters
PRE-APPROVAL FEE LIMIT FOR AUDIT-RELATED SERVICES
$500,000
APPENDIX C
PRE-APPROVED TAX SERVICES
SERVICE
Note: The following are subject to the terms of subsection C. of Section V.
of this policy.
U.S. federal, state and local tax compliance, including the preparation of
original and amended tax returns and claims for refunds
U.S. federal, state and local tax planning and advice, including assistance with
tax audits and appeals (but expressly excluding advocacy or litigation
services), tax advice related to mergers and acquisitions, tax advice relating
to employee benefit plans, and requests for rulings or technical advice from
taxing authorities
review of Canadian federal and provincial income tax returns
Canadian federal and provincial tax planning and advice, including assistance
with tax audits and appeals (but expressly excluding advocacy or litigation
services), and advice relating to the tax effects of certain employee benefit
arrangements
review of federal, state, local and international income, franchise, and other
tax returns
PRE-APPROVAL FEE LIMIT FOR TAX SERVICES
$750,000
APPENDIX D
PRE-APPROVED ALL OTHER SERVICES
SERVICES
none
PRE-APPROVAL FEE LIMIT FOR ALL OTHER SERVICES
$ 0
APPENDIX E
PROHIBITED NON-AUDIT SERVICES
- Bookkeeping or other services related to the accounting records or
financial statements of the audit client*
- Financial information systems design and implementation*
- Appraisal or valuation services, fairness opinions or
contribution-in-kind reports*
- Actuarial services*
- Internal audit outsourcing services*
- Management functions
- Human resources
- Broker-dealer, investment adviser or investment banking services
- Legal services
- Expert services unrelated to the audit
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* Provision of these non-audit services may be permitted if it is reasonable to
conclude that the results of these services will not be subject to audit
procedures. Materiality is not an appropriate basis upon which to overcome
the rebuttable presumption that prohibited services will be subject to audit
procedures.