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Audit Committee Charter
This Audit Committee Charter ("Charter") has been adopted by the Board of Directors
(the "Board") of Dynagas LNG Partners LP (the "Partnership") on May 13, 2015. The Audit
Committee of the Board (the "Committee") shall review and reassess the adequacy of this charter
periodically and recommend any proposed changes to the Board for approval.
Role and Independence; Organization
The Committee assists the Board in its oversight of (1) the quality and integrity of the
Partnership’s financial statements and its accounting, auditing and financial reporting practices,
(2) the Partnership’s compliance with legal and regulatory requirements, (3) the independent
auditor’s qualifications and independence, (4) the performance of the Partnership’s independent
auditors and the Partnership’s internal audit function, if any, (5) the independent auditor’s annual
audit of the Partnership’s financial statements and (6) the Partnership’s systems of disclosure
controls and procedures and internal controls over financial reporting. It may also have such
other duties as may from time to time be assigned to it by the Board and are required by the rules
and regulations of the Securities and Exchange Commission (the “SEC”), the New York Stock
Exchange (the “NYSE”) or any other securities exchange on which the Partnership’s securities
are traded.
The Committee shall maintain free and open communication (including periodic private
executive sessions) with the independent auditors, any internal auditors, and Partnership
management. In discharging its oversight role, the Committee shall have full access to all
Partnership books, records, facilities, personnel and outside professionals. The Committee shall
have the authority and shall receive necessary funding from the Partnership to retain special
legal, accounting or other consultants or advisors employed by the Committee and shall obtain
such advice and assistance from such special legal, accounting or other consultants or advisors as
the Committee deems necessary. The Committee shall have sole authority to approve related
fees and retention terms. Each member of the Committee shall be entitled to rely on (i) the
integrity of those persons and organizations within and outside the Partnership from which it
receives information, (ii) the accuracy of the financial and other information provided by such
persons or organizations absent actual knowledge to the contrary (which shall be promptly
reported to the Board), and (iii) representations made by management as to all audit and non-
audit services provided by the independent auditors to the Partnership.
The membership of the Committee, which shall be appointed by the Board from among
its members, shall consist of at least one director. All the Committee members will meet the
independence and experience requirements of the NYSE or any other securities exchange on
which the Partnership’s securities are traded and Rule 10A-3 under the Securities Exchange Act
of 1934, as are applicable to the Partnership as a “foreign private issuer.” Each member of the
Committee will be financially literate, as such qualification is interpreted by the Board in its
business judgment, or become financially literate within a reasonable time after appointment to
the Committee. At least one member of the Committee will have accounting or related financial
management expertise, qualifying as an “audit committee financial expert”, based on the criteria
established by the SEC. The designation or determination by the Board of a person as an Audit
Committee financial expert will not impose on such person individually, on the Committee, or on
the Board as a whole, any greater duties, obligations or liability than would exist in the absence
of such designation or determination. Each director appointed to the Committee shall serve on
the Audit Committees of no more than two other companies.
The members of the Committee shall be elected at least annually by the Board at a
meeting of the Board and shall serve until their successors shall be duly elected and qualified.
One member of the Committee may be designated as Chairman, who shall be responsible for
leadership of the Committee, including scheduling and presiding over meetings, preparing
agendas, making regular reports to the Board, and liaising regularly with the Chief Executive
Officer, Chief Financial Officer, the lead independent audit partner and the director of internal
audit, if applicable. Unless a Chairman is elected by the Board, the members of the Committee
may elect a Chairman as set forth in the following paragraph.
The Committee shall meet in person or telephonically as often as it deems necessary in order to
perform its responsibilities, but not less than three times annually. The Committee shall also
periodically meet with the Partnership’s management, any internal auditors and independent
auditors separately from the Board. When the Committee is comprised of one or two members,
all actions of the Committee shall require the unanimous affirmative vote of the members of the
Committee. When the Committee is comprised of three or more members, a majority of the
members of the Committee present in person or by means of telephone conference call shall
constitute a quorum and all actions of the Committee shall require the vote of a majority of its
members present at a meeting of the Committee at which a quorum is present. The Committee
may also act by unanimous written consent in lieu of a meeting. The Committee shall maintain
minutes of its meetings and records relating to those meetings and the Committee’s activities.
The Committee may form and delegate authority to subcommittees consisting of one or more
members of the Committee when appropriate.
No member of the Committee may serve simultaneously on the audit committees of more than
two other public companies, unless the Board determines that simultaneous service would not
impair such director’s ability to serve effectively on the Committee and such determination is
disclosed in the Partnership’s annual report filed with the SEC.
Responsibilities
The Committee’s job is one of oversight. Management is responsible for the preparation,
presentation and integrity of the Partnership’s financial statements. Management and the internal
auditing department, if any, are responsible for maintaining appropriate accounting and financial
reporting principles and practices and internal controls and procedures designed to assure
compliance with accounting standards and applicable laws and regulations. The independent
auditors are responsible for auditing the annual financial statements.
The Committee and the Board recognize that management and the independent auditors
have more resources and time and more detailed knowledge and information regarding the
Partnership’s accounting, financial and auditing practices than do Committee members;
accordingly the Committee’s oversight role does not provide any expert or special assurance as
to the Partnership’s financial statements or any certification as to the work of the independent
auditors. Nor is it the duty of the Committee to conduct investigations or to assure compliance
with laws and regulations.
Although the Board and the Committee may wish to consider other duties from time to
time, the general recurring activities of the Committee in carrying out its oversight role are
described below. The Committee shall be responsible for:
- Review this charter periodically and recommend to the Board of Directors any
necessary amendments.
- The appointment, replacement, compensation, evaluation and oversight of the work
of the independent auditors to be retained to audit the annual financial statements of
the Partnership and review the quarterly financial statements of the Partnership, and
approve in advance the scope and costs of such audit and non-audit services to be
provided by the independent auditors. Approval of non-audit services will be
disclosed to investors in periodic reports required by Section 13(a) of the U.S
Securities Exchange Act of 1934. The Committee will also consider whether there
should be rotation of the firm itself. In making its evaluation, the Committee should
take into account the opinions of management and the Partnership’s internal auditors
(or other personnel responsible for the internal audit function). In response to this
evaluation, the Committee shall be entitled to take any action it deems appropriate
including removal of the independent auditor if circumstances warrant.
- Annually evaluate the performance and qualification of the independent auditors and
assess the independence of such auditors, including the compatibility with the
auditor’s performance of permissible non-audit services.
- Annually obtaining and reviewing the independent auditor’s formal written statement
describing: the firm’s internal quality-control procedures; any material issues raised
by the most recent internal quality-control review, or peer review, of the firm, or by
any inquiry or investigation by governmental or professional authorities, within the
preceding five years respecting one or more independent audits carried out by the
firm, and any steps taken to deal with any such issues.
- Annually obtaining from the independent auditors a formal written statement
describing all relationships between the auditors and the Partnership, addressing the
matters set forth in Rule 3526, Communication with Audit Committees Concerning
Independence. The Committee shall actively engage in a dialogue with the
independent auditors with respect to any disclosed relationships that may impact the
objectivity and independence of the auditors, and shall consider whether the
independent auditors’ provision of information technology consulting and other non-
audit services to the Partnership, if any, is compatible with the auditors’
independence. The Committee shall recommend that the Board take appropriate
actions to satisfy itself as to the auditors’ independence.
- Reviewing the annual audited financial statements and quarterly financial statements
and discussing them with management and the independent auditors. These
discussions shall include the matters required to be discussed under Auditing
Standard No. 16, Communications with Audit Committees, as modified or
supplemented, consideration of the quality of the Partnership’s accounting principles
as applied in its financial reporting, and the Partnership’s disclosures under
"Management’s Discussion and Analysis of Financial Condition and Results of
Operations." Such discussions shall also include, to the extent applicable, a review of
particularly sensitive accounting estimates, reserves and accruals, review of
judgmental areas, review of critical accounting policies and alternative treatments of
financial information, review of audit adjustments, review of financial risk exposures
that may have a material impact on the Partnership’s financial statements and the
policies and steps management has taken to monitor and control such exposures, and
other such inquiries as the Committee or the independent auditors shall deem
appropriate. Based on its review, and its confirmation that management believes the
financial statements to be included in the Partnership’s annual report contain no
materials misstatements the Committee shall make its recommendation to the Board
as to the inclusion of the Partnership’s audited financial statements in any Annual
Report of the Partnership on Form 20-F or any successor form thereto (or the Annual
Report to Shareholders, if distributed prior to the filing of the Form 20-F or successor
form).
- Review management’s report on internal control and independent auditor’s attestation
on management’s assertions to the extent that they are required under the Sarbanes-
Oxley Act of 2002.
- Overseeing the relationship with the independent auditors, including discussing with
the auditors the planning and staffing of the audit and, to the extent applicable, review
of the quarterly earnings releases other quarterly financial information and reports,
and the nature and rigor of the audit and quarterly review process, receiving and
reviewing audit and applicable quarterly reports, reviewing with the auditors any
problems or difficulties the auditors may have encountered in carrying out the audit,
including any restrictions placed on the scope of the audit or difficulties obtaining any
required information, reviewing with the independent auditors and management any
management letters provided by the auditors and the Partnership’s response to such
letters, and providing the auditors full access to the Committee and the Board to
report on all appropriate matters. The Committee shall undertake to resolve all
disagreements between the Partnership’s independent auditors and management
regarding financial reporting.
- Discussing with management the financial statements proposed to be included in the
Partnership’s annual report on Form 20-F and obtaining assurance from management
that such financial statements contain no material misstatements or omissions and
obtaining from the independent auditors confirmation that, in the course of their audit,
no material misstatements were detected.
- Providing oversight of the Partnership’s auditing, accounting and financial reporting
principles, policies, controls, procedures and practices, and reviewing significant
changes to the foregoing as suggested by the independent auditors, any internal
auditors or management.
- Establishing procedures for the receipt, retention and treatment of complaints from
the Partnership’s personnel and members of the public concerning violations of the
Partnership’s internal policies, its Code of Ethics and Conduct or illegal actions by
any employee of the company as well as complaints related to accounting, internal
accounting controls or auditing matters, as well as for confidential, anonymous
submissions by the Partnership’s employees of concerns regarding questionable
accounting or auditing matters.
- Establishing clear hiring policies for employees or former employees of the
independent auditors.
- Annually obtaining from the independent auditors a formal written statement of the
fees billed for audit services, information technology consulting services, and other
non-audit services rendered by the independent auditors for the most recent fiscal
year.
- Discussing with management and independent auditors earnings press releases, as
well as financial information and earnings guidance provided to analysts and rating
agencies.
- Discussing with management policies with respect to risk assessment and risk
management and reviewing the Partnership’s fraud risk assessment.
- Review and advise on the selection and removal of the internal audit function (or
other personnel responsible for the internal audit function).
- Discussing with management at least twice annually and with the independent
auditors at least annually the quality and adequacy of the Partnership’s internal audit
controls and procedures and, if applicable, the internal audit function’s organization,
responsibilities, plans, results, budget and staffing, as well as providing oversight to
any internal audit activities, including review of significant reports prepared by any
internal auditors, and management’s response.
- Periodically review with the head of internal audit any significant difficulties,
disagreements with management or scope restrictions encountered in the course of the
audit function’s work.
- Establish and implement policies and procedures for the Committee’s review and
approval of proposed transactions or courses of dealings with respect to which
executive officers or directors or members of their immediate families have an
interest (including all transactions required to be disclosed by Item 404(a) of
Regulation S-K).
- Discuss at least annually with management and the Partnership’s general counsel (i)
any legal matters (including the status of pending litigation) that may have a material
impact on the Partnership’s financial statements, (ii) any material reports or inquiries
from regulatory or governmental agencies and (iii) the effectiveness of the
Partnership’s legal, regulatory and corporate governance compliance programs.
- Make recommendations to the Board on the Partnership’s annual budget.
- Assess periodically and at least annually the Partnership and its subsidiaries’
compliance with any regulatory financial commitments.
- When deemed necessary or appropriate commence and oversee any investigation into
any matters within the scope of the Committee’s responsibilities and retain
independent counsel, accountants and other professional advisors and experts to assist
the Committee in such investigation to the extent deemed appropriate.
- Regularly reporting its activities to the full Board and making such recommendations
with respect to the above and any other matters as the Committee may deem
necessary or appropriate.
- Conduct an annual self-assessment with the goal of continuing improvement.
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