AUDIT COMMITTEE CHARTERCHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORSOFKAVLI FOUNDATIONI.

Purpose and Scope

The primary function of the Audit Committee (the “Committee”) of the Board ofDirectors (the “Board”) of the Kavli Foundation (the “Foundation”) is to (a) assist theBoard in fulfilling its responsibilities by reviewing (i) the financial reports provided to theFoundation and (ii) reviewing the auditor’s report to the Foundation’s regarding internalfinancial and accounting controls; (b) oversee the appointment, compensation, retention
and oversight of the work performed by any independent public accountants engaged
by the Foundation; and (c) review recommendations from the auditor regarding
procedures designed to improve the quality and reliability of the disclosure of theFoundation’s financial condition and results of operations.
II.

Composition

The Committee shall be comprised of not less than two (2) persons as appointed
by the Board. Aside from the chairperson, not all of the members of the Committee
need be members of the Board. A Director may not serve on the Committee if he or she
is a paid employee of the Organization or a “disqualified person” with respect to theOrganization (as that term is defined in section 4946(a) of the Internal Revenue Code of1986, as amended (the “Code”)), other than by reason of being an officer or director ofthe Organization.] Each member of the Committee shall be free from any relationshipthat, in the opinion of the Board, would interfere with the exercise of his or her
independent judgment as a member of the Committee.
At least one member of the Committee shall have a working familiarity with basic
finance and accounting practices.
The members and the chairperson of the Committee shall be appointed by theBoard and shall serve until their successors shall be duly elected and qualified or theirearlier resignation or removal.
The chairperson of the Committee shall be a member of the Board and have thefollowing roles and responsibilities:

Board approved 1/12/10

III.

A.

Provide leadership to the Committee.

B.

Work with staff to prepare the agenda for meetings.

C.

Report progress towards goals to the Board.

Responsibilities and Duties

To fulfill its responsibilities and duties, the Committee shall carry out the following
specific activities:
A.

Document Review

1.
Review and reassess the adequacy of this Charter periodically asconditions dictate, but at least annually, and recommend any proposed changes
to the Board for approval.
2.
Review with management and representatives of the independentaccounting firm the Foundation’s audited annual financial statements prior totheir issuance or publication. After such review and discussion, the Committee
shall decide and recommend to the Board whether such audited financial
statements should be accepted.
B.

Independent Accounting Firm

1.
Select the independent accounting firm to complete the audit and tonegotiate and approve the auditor’s compensation in connection with preparing
and issuing an audit report or related work.
2.
Meet with the independent accounting firm prior to the audit toreview the planning and staffing of the audit and consider whether or not toapprove the auditing services proposed to be provided.
3.
Evaluate the performance of the independent accounting firm andconsider recommending to the Board the discharge of the independentaccounting firm when circumstances warrant.
4.
To determine, whenever it deems appropriate, the change of thepartner in charge of the Foundation’s audit in order to assure continuing auditor
independence.
5.
Approve in advance any significant audit or non-audit engagement
or relationship between the Organization and the independent auditors. In thisregard, the Committee shall pay particular attention to the fairness of the terms of
any agreement pursuant to which the independent auditors would perform thefollowing non-audit services:

Board approved 1/12/10

2

a.

bookkeeping or other services related to the accounting
records or financial statements of the audit client;b.

financial information systems design and implementation;c.

appraisal or valuation services;d.

internal accounting outsourcing services;e.

management functions or human resources;f.

broker or dealer, investment adviser or investment banking
services; andg.

legal services and expert services unrelated to the audit.

6.
Periodically consult with the independent accountants out of thepresence of management and staff about internal controls, the fullness andaccuracy of the Foundation’s financial statements, and the financial affairs of theFoundation to ensure that they are in order.
C.

Financial Reporting Processes

1.
In consultation with the independent accounting firm andmanagement, review annually the adequacy of the Foundation’s internal financial
and accounting controls.
2.
Regularly review the Foundation’s critical accounting policies andaccounting estimates resulting from the application of these policies and inquireat least annually of both the Foundation’s internal auditors and the independentaccounting firm as to whether either has any concerns relative to the quality oraggressiveness of such accounting policies.
3.
Consider the independent accountant’s judgments about the quality
and appropriateness of the Foundation’s accounting principles as applied in its
financial reporting.
4.
Consider and approve, if appropriate, major changes to theFoundation’s auditing and accounting principles and practices as suggested by
the independent accountants or management.
5.
Establish regular and separate reporting to the Committee by eachof management and the independent accountants regarding any significant
judgments made in management’s preparation of the financial statements andthe view of each as to appropriateness of such judgments.
6.
Following completion of the annual audit, review separately witheach of management and the independent accountants any significant difficultiesBoard approved 1/12/10

3

encountered during the course of the audit, including any restrictions on thescope of work or access to required information.
7.
Review and resolve any significant disagreement between
management and the independent accountants in connection with thepreparation of the financial statements.
8.
Review with the independent accountants and management theextent to which changes or improvements in financial or accounting practices, asapproved by the Committee, have been implemented.
9.
Establish procedures for the receipt, retention and treatment ofcomplaints received by the Foundation regarding accounting, internal accounting
controls, or auditing matters.
D.

Compliance1.
To the extent deemed necessary by the Committee, engage
outside counsel, independent accounting consultants and/or other experts at theFoundation’s expense to review any matter under its responsibility.
2.
Review and approve in advance any proposed related-partytransactions.
3.
Perform any other activities consistent with this Charter, theFoundation’s bylaws and governing law, as the Committee or the Board deems
necessary or appropriate.
IV.

Meetings

The Committee will meet as may be necessary or appropriate in order todischarge the functions specified in this Charter. The Committee shall have at least twomeetings (which may be telephonic) annually with the independent accounting firm.
Minutes shall be kept of each meeting of the Committee and will be provided to eachmember of the Board. Any action of the Committee shall be subject to revision,
modification or rescission by the Board, provided that no rights of third parties shall beaffected by any such revision, modification or rescission.
V.

Limitation of Responsibility

While the Committee has the responsibilities and power set forth in this Charter,
it is not the duty of the Committee to plan or conduct audits or to determine that theFoundation’s financial statements are complete and accurate and are in accordancewith generally accepted accounting principles.

Board approved 1/12/10

4