EXHIBIT 99.1
WASHINGTON HOMES, INC.
AUDIT COMMITTEE CHARTER
I. PURPOSE
A. The Audit Committee and the Board of Directors shall have ultimate
authority and responsibility to select, evaluate, and where appropriate,
replace the outside auditor, or to nominate the outside auditor for
shareholder approval in the proxy statement.
B. The Audit Committee will assist the Board of Directors in fulfilling its
oversight responsibilities. The Audit Committee will review the financial
reporting process, the system of internal controls, and the audit process.
In performing its duties, the Committee will utilize its business judgment
and will endeavor to maintain effective working relationships with the
Board of Directors, management, and any internal and outside auditors.
C. Nothing contained herein, however, shall impose a duty on the Audit
Committee to plan or conduct audits or to determine whether the Company's
financial statements are accurate or in accordance with generally accepted
accounting principles. These duties are the responsibility of management
and the outside auditor. It is also not the duty of the Audit Committee to
independently verify information presented to it unless special
circumstances justify such verification.
II. ORGANIZATION
A. Number. The Audit Committee shall consist of at least three independent
members of the Board of Director meeting the requirement set forth in
Section II B.
B. Membership qualifications.
1. Each Audit Committee member must be "financially literate".
Committee members must be able to read and understand fundamental
financial statements, including a balance sheet, income
statement, and cash flow statement. At least one Audit Committee
member must have accounting or related financial management
expertise which shall include past employment experience in
finance or accounting, requisite professional certification in
accounting, or any other company experience or background which
results in the individual's financial sophistication, including
but not limited to serving as been a chief executive officer,
chief financial officer or other senior officer with financial
oversight responsibilities.
2. Each Audit Committee member must be "independent". A member is
independent if he or she is not an officer or employee of the
Company or its subsidiaries, if he or she has no relationship
which, in the opinion of the
1
Company's Board of Directors, would interfere with his or her
exercise of independent judgment in carrying out the
responsibilities of a director, and if he or she:
a. Has not been an employee of the Company or any affiliate of
the Company for the past three years;
b. Has no immediate family member who has been employed by the
Company or an affiliate of the Company in any of the past
three years.
c. Is not employed as an executive of any entity, other than
the Company, having a compensation committee which includes
any of the Company's executives; and
d. Has not in any of the past three years been a partner in, or
controlling shareholder or executive of, an organization
that has had a business relationship with the Company or has
a direct business relationship with the Company unless the
Board of Directors in the exercise of its business judgment
determines that the relationship does not interfere with the
exercise of the Director's independent judgment.
Under exceptional and limited circumstances, one director who has
a relationship making him or her not independent, and who is not
a Company employee or an immediate family member of a Company
employee, may serve on the Audit Committee if the Board of
Directors determines that the director's membership on the Audit
Committee is required by the best interests of the Company and
its shareholders, and discloses in the next annual proxy
statement after such determination the nature of the relationship
and the reasons for the determination.
C. Chairperson. The Committee shall have a chairperson who shall be
appointed by the Board of Directors.
III. ROLES AND RESPONSIBILITIES
A. The Audit Committee should discuss with the outside auditor the matters
required by SAS 61 (Codification of Standards on Auditing Standards, AU ss.
380), as it may be modified or supplemented, from time to time.
B. The Audit Committee should receive the written disclosure and the letter
from the outside auditor required by Independence Standard Board Standard
No 1, as it may be modified or supplemented from time to time, and discuss
with the outside auditor, such auditor's independence.
C. The Audit Committee shall be responsible (i) for ensuring that the
outside auditor submits on a periodic basis to the Audit Committee a formal
written statement delineating all relationships between such auditor and
the Company, (ii) for actively engaging in a dialogue with the outside
auditor with respect to any
2
disclosed relationships or services that may impact the objectivity and
independence of the outside auditor and, (iii) for recommending that the
Board of Directors take appropriate action in response to the outside
auditor's report to satisfy itself of the outside auditor's independence.
D. The Audit Committee shall review and discuss the audited financial
statements of the Company and its subsidiaries with management.
E. Based upon its reviews and discussions, the Audit Committee shall
determine whether to recommend to the Board of Directors that the audited
financial statements of the Company and its subsidiaries be included in the
Company's Annual Report on Form 10-K.
F. The Audit Committee must review and reassess the adequacy of this
Charter on an annual basis.
IV. OTHER RESPONSIBILITIES
A. The Audit Committee should meet with the outside auditor, any employee
involved in internal audits and management in separate executive sessions
to discuss any matters that the Committee or these groups believe should be
discussed privately;
B. The Committee should review significant findings and recommendations
made by the internal and outside auditors and discuss them on a timely
basis;
C. The Committee should review annual engagement proposal for retention of
the outside auditor and make recommendations to the Board concerning its
fees;
D. The Committee should regularly update the Board of Directors about
Committee activities and make appropriate recommendations; and
E. Disclosures about the Audit Committee and its functioning required under
applicable SEC rules should be prepared and reviewed by the Committee for
inclusion in the Company's proxy statement.
V. DEFINITIONS
The term "Company" as used herein shall include all affiliates and
subsidiaries of Washington Homes, Inc.
Adopted by order of the Board of Directors June 6, 2000.
3