AUDIT COMMITTEE CHARTER
The objective of the Audit Committee is to assist the Board of Directors of
Home Federal Bancorp, Inc. (the Company) in fulfilling its fiduciary and
oversight responsibilities for the internal and external audit functions;
administrative, operating and internal accounting controls; financial reporting
process; and process for monitoring compliance with laws, regulations, policies
and procedures. The Audit Committee shall give reasonable assurance regarding
the quality and integrity of financial and other data provided by the Company.
The Audit Committee has authority to conduct or authorize investigations into
any matters within its scope of responsibility. It is empowered to:
- Retain outside counsel, accountants, or others
to advise the Committee or assist in the conduct of an investigation.
- Seek any information it requires from employees
-- all of whom are directed to cooperate with the Committee's requests --
or external parties.
- Meet with company officers, external auditors,
or outside counsel, as necessary.
The Audit Committee shall consist of three or more independent members of the
Board of Directors. The Board or its nominating committee will appoint
Committee members and the Committee chair.
Each Committee member will be both independent and financially literate, as defined
by applicable regulations of the Securities and Exchange Commission and the
National Association of Securities Dealers, and the Board of Directors. At
least one member shall have expertise in accounting or financial reporting, as
defined by the National Association of Securities Dealers.
Members of the Audit Committee will be considered independent if they have no
relationship to the Company or the Company's subsidiary, Home Federal Bank (the
"Bank"), that may interfere with the exercise of their independent
judgment. Examples of such relationships include, but are not limited to:
- Being employed by the Company or the Bank for
the current year or any of the past five years.
- Accepting any compensation from the Company or
the Bank other than compensation for services as a Board member.
- Serving or having served in any of the past
five years as a consultant, advisor, promoter, or legal counsel of or to
the Company or the Bank.
- Being an immediate family member of an
individual who is, or has been in any of the past five years, employed as
an officer of the Company or the Bank.
The Audit Committee shall meet at least four times per year, with authority to
convene additional meetings as circumstances require. All Committee members are
expected to attend each meeting, in person or via tele-conference.
The Committee will invite members of the Board, management, auditors, or others
to attend meetings and provide pertinent information, as necessary. As part of
its job to foster open communication, the Committee should meet at least
annually with management, the Director of Internal Audit, and the external
auditors in separate executive sessions to discuss any matters that the
Committee or any of these parties believes should be discussed privately. In
addition, the Committee or at least its Chair should meet with the external
auditors and management quarterly to review the Company's quarterly and annual
financial statements. Meeting agendas will be prepared and provided in advance
to members, along with appropriate briefing materials. Minutes will be
The Audit Committee will carry out the following responsibilities:
- Review significant accounting and reporting
issues, including complex or unusual transactions and highly judgmental
areas, and recent professional and regulatory pronouncements, and
understand their impact on the financial statements.
- Review with management and the external
auditors the results of the audit, including any difficulties encountered.
- Review the Company's annual financial
statements and any financial statements submitted to the public, including
any certification, report, opinion, or review rendered by the external
- Review with management and the external
auditors all matters required to be communicated to the Committee under
generally accepted auditing standards.
- Understand how management develops interim
financial information and the nature and extent of internal and external
- Review with financial management and the
external auditors the financial statements, including disclosures made in
Management's Discussion and Analysis of Financial Condition and Results of
Operations, in the Company's reports on Forms 10-Q and 10-K and annual
report to stockholders prior to the filing of the report or prior to the
release of earnings. The Committee shall recommend to the Board whether or
not the audited financial statements should be included in the Company's
- Review disclosures made by the Company's chief
executive officer and chief financial officer regarding compliance with
their certification obligations as required under the Sarbanes-Oxley Act
of 2002 and the rules promulgated thereunder,
including the Company's disclosure controls and procedures and internal
control over financial reporting and evaluations thereof.
- Ensure that management has established and
maintains an adequate system of internal controls and performs risk
assessments of each significant function.
- Consider the effectiveness of the company's
internal control over annual and interim financial reporting, including
information technology security and control.
- Evaluate security for computer systems,
facilities, and back-up systems.
- Understand the scope of internal and external
auditors' reviews of internal control over financial reporting, and obtain
reports on significant findings and recommendations, together with
- Review with management and the Director of
Internal Audit the charter, Audit Policy, risk assessment, audit plan,
audit schedule, activities, staffing, and organizational structure of the
internal audit function at least annually.
- Review Audit Reports submitted by the Director
of Internal Audit at least quarterly, evaluate management's response to audit
findings, and ascertain that appropriate implementation of significant
recommendations is undertaken.
- As necessary, meet separately with the Director
of Internal Audit to discuss any matters that the Committee or internal
audit believes should be discussed privately.
- Ensure there are no unjustified restrictions or
limitations, and review and concur in the appointment, replacement, or
dismissal of the Director of Internal Audit, who is ultimately accountable
to the Committee and the Board.
- Review the effectiveness of the internal audit
function, including compliance with The Institute of Internal Auditors'
Standards for the Professional Practice of Internal Auditing.
- Be directly responsible for the appointment,
compensation, retention and oversight of the work of any registered public
accounting firm engaged for the purpose of preparing or issuing an audit
report, or performing other audit, review, or attest services for the
Company, and each such registered accounting firm shall report directly to
the Audit Committee.
- Review the external auditors' annual engagement
letter, including proposed audit scope and approach, coordination of audit
effort with internal audit, and estimated fees as proposed.
- Pre-approve all audit engagement fees and terms
and all non-audit engagements with the external auditors. The Committee
may delegate authority to pre-approve non-audit services to one or more
members of the Committee, provided that the delegatee
must present all approved non-audit services to the Committee at its next
- Ensure the external auditors' ultimate
accountability to the Audit Committee and the Board of Directors, as
representatives of the stockholders, receiving reports directly from the
- Ensure receipt from the external auditors of a
formal written statement delineating all relationships between the
auditors and the Company, consistent with Independence Standards Board
Standard 1. On an annual basis, review and discuss with the auditors any
such relationships to determine the auditors' independence and
objectivity. The Committee should take, or recommend to the Board that it
take, appropriate action to oversee the independence of the auditors.
- Discuss with the external auditors all matters
required to be communicated to audit committees in accordance with
Statement of Auditing Standards No. 61.
- Review significant accounting policies,
significant risks and exposures, audit activities, and audit findings.
- As necessary, meet separately with the external
auditors to discuss any matters that the Committee or auditors believe
should be discussed privately, such as internal controls and the
completeness and accuracy of the Company's financial statements.
- Ensure that the lead audit partner of the
external auditors and the concurring audit partner are rotated at least
every five years, and that all other audit partners are rotated at least
every seven years.
- Review the effectiveness of the system for
monitoring compliance with laws, regulations, and internal policies and
the results of management's investigation and follow-up (including
disciplinary action) of any instances of noncompliance.
- Review the findings of any examinations by
regulatory agencies and any auditor observations.
- Review the process for communicating the code
of conduct to company personnel and for monitoring compliance therewith.
- Coordinate the investigation of conflicts of
interest and unethical conduct.
- On an ongoing basis, review all related party
transactions for potential conflict of interest situations. Approve
related party transactions when warranted.
- Obtain regular updates from management and/or
company legal counsel regarding compliance matters.
- Regularly report the results of audits,
findings, related recommendations, and Committee activities to the Board
- Provide an independent, direct communication
channel between the Board of Directors and the Company's internal
auditors, external auditors, and regulators.
- Prepare the Audit Committee Report for
inclusion in the Company's annual proxy statement, consulting with the
Company's legal counsel, if necessary.
- Review any other reports the Company issues
that relate to Committee responsibilities.
- Review (and in the case of the external
auditors, settle) any disagreement among management and the external
auditors or the internal auditors in connection with the preparation of
- Establish procedures that allow employees of
the Company or any of its subsidiaries to submit confidential and
anonymous concerns regarding questionable accounting or auditing matters.
- Establish procedures for the receipt,
retention, and treatment of complaints received by the Company regarding
accounting, internal accounting controls, or auditing matters.
- Ensure policies in place are reasonably
designed to achieve disclosure and clarity regarding the Company's true
financial performance and business strategy.
- Perform other activities related to this
Charter as requested by the Board of Directors.
- Institute and oversee special investigations,
examinations, or reviews as the Committee deems advisable to ensure the
adequacy of the systems of internal controls and accounting practices.
- Review and assess the adequacy of this Charter
annually, requesting Board approval for proposed changes.
- Determine the appropriate funding for payment
of (i) compensation to the external auditors,
(ii) compensation to any advisers employed by the Committee, and (iii)
ordinary administrative expenses of the Committee that are necessary or
appropriate in carrying out its duties.
- Confirm annually that all responsibilities
outlined in this charter have been carried out.
- Evaluate the Committee's and individual
members' performance on a regular basis.
Limitations of the Audit Committee's
While the Committee has the responsibilities and powers set forth in this Audit
Committee Charter, it is not the duty of the Committee to prepare financial
statements, plan or conduct audits, or determine that the Company's financial
statements and disclosures are complete and accurate and are in accordance with
generally accepted accounting principles and applicable rules and regulations.
These are the responsibilities of management and the external auditors.
Standards for the Professional
Practice of Internal Auditing
The Standards address the following areas:
Purpose, Authority, and Responsibility
Independence and Objectivity
Impairments to Independence
Proficiency and Due Professional Care
Due Professional Care
Continuing Professional Development
Quality Assurance and Improvement Program
Quality Program Assessments
Reporting on the Quality Program
Use of "Conducted in Accordance with Standards"
Disclosure of Noncompliance
Managing the Internal Audit Activity
Communication and Approval
Policies and Procedures
Reporting to the Board and Senior Management
Nature of Work
Engagement Resource Allocation
Engagement Work Program
Performing the Engagement
Analysis and Evaluation
Criteria for Communicating
Quality of Communications
Engagement Disclosure of Noncompliance with the Standards
Management's Acceptance of Risk