Audit Committee

I. Purpose

The purpose of the Audit Committee (Committee) of South Jersey Industries, Inc. (Company) is to assist the Board of Directors in fulfilling its responsibility for oversight of the quality and integrity of the accounting, auditing and financial reporting practices of the Company. The Committee’s purpose is to oversee the Company’s accounting and financial process by reviewing: the financial reports and other financial information provided to any governmental body or the public; the Company’s systems of internal controls regarding finance, accounting, legal compliance and ethical standards that management and the Board have established; and the Company’s auditing, accounting and financial reporting processes generally. Consistent with this function, the Committee should encourage continuous improvement of, and should foster adherence to, the Company’s policies, procedures and practices at all levels. The Committee's primary duties and responsibilities are to:

  • Serve as an independent and objective party to monitor the Company's financial reporting process and internal control system
  • Serve as an independent and objective party to monitor the following risk areas: 1) financial reporting process; 2) financial disclosures; 3) financial controls; and 4) accounting/taxes
  • Review and appraise the audit efforts of the Company’s independent accountants and internal auditing department. The independent accountants and head of the internal auditing department shall report to the Committee
  • Provide an open avenue of communication among the independent accountants, financial and senior
  • management, the internal auditing department, and the Board of Directors
  • Provide an open avenue of communication regarding ethical behavior

The Committee will primarily fulfill these responsibilities by carrying out the activities enumerated in section IV of this charter.

In discharging its role, the Committee is empowered to inquire into any matter it considers appropriate to carry out its responsibilities, with access to all books, records, facilities and personnel of the Company, and, subject to the direction of the Board, the Committee is authorized and delegated the authority to act on behalf of the Board with respect to any matter necessary or appropriate to the accomplishment of its purposes. The Committee is empowered to retain legal counsel and any other auditor, advisors or consultants to assist it in carrying out its activities. The Company shall provide adequate resources to support the Committee’s activities, including compensation of the Company’s auditors, legal counsel or other advisors or consultants retained by the Committee.

 

II. Composition

The Committee shall comprise a minimum of three Directors as determined by the Board, each of whomshall be independent directors as defined by the rules of the New York Stock Exchange and free from any relationship that, in the opinion of the Board, would interfere with the exercise of his or her independent judgment as a member of the Committee. Pursuant to the Company’s Bylaws and this Charter, the NonExecutive Chairman shall be an ex-officio member of the Committee. The quorum is one-third of the entire authorized number of members, but no fewer than two persons. The members of the Committee and the Committee Chair shall be recommended by the Governance Committee, elected by the Board at the annual organizational meeting of the Board and shall serve until their successors shall be duly elected.

All members of the Committee shall have a working familiarity with basic finance and accounting practices, and at least one member of the Committee shall be an “audit committee financial expert” as required and defined by the Securities and Exchange Commission. Committee members may enhance their familiarity with finance and accounting by participating in educational programs conducted by the Company, attendance at outside programs, or an outside consultant.

No Committee member may simultaneously serve on the audit committee of more than three public companies, unless the Board determines that such simultaneous service does not impair the Committee member’s ability to effectively serve on the Committee and such determination is disclosed in the proxy statement.

 

III. Meetings

The Committee will meet at least four times a year, with authority to convene additional meetings, as circumstances require. All Committee members are expected to attend each meeting, in person or via telephone or video conference. The Committee will invite members of management, outside professionals, or others to attend meetings and provide pertinent information as necessary and at the sole discretion of the Committee. The Committee will meet in executive session attended by the Committee members or other Independent Directors at the invitation of the Committee Chairman. Meeting agendas will be prepared and provided in advance to members, along with appropriate briefing materials. Minutes will be prepared.

As part of its job to foster open communication, the Committee will meet quarterly with management, the head of the internal auditing department, and the independent accountants in separate executive sessions to discuss any matters that the committee or each of these groups believe should be discussed privately. In addition, the Committee or at least its Chair should meet with the independent accountants and management quarterly to review the Company’s financial statements consistent with Section IV below. The Committee will undergo an annual performance evaluation which may be conducted by the Committee itself or an outside party.

 

IV. Responsibilities and Duties

To fulfill its responsibilities and duties, the Committee shall:

A. Audit

  1. Documents/reports review
    • Review the Company's financial statements and any reports or other financial information submitted to any governmental body, or the public, which include any certification, report, opinion, or review rendered by the independent accountants
    • Review the regular internal reports to management prepared by the internal auditing department and management's response
    • Review and discuss with management and the independent auditor, prior to public release, the Company’s annual audited financial statements, including matters required to be reviewed under applicable legal, regulatory or NYSE requirements
    • Review and discuss financial information and earnings guidance provided to analysts and rating agencies
  2. Independent accountants
    • Recommend to the Board of Directors the selection of the independent accountants, considering independence and effectiveness
    • Approve the fees and other compensation to be paid to the independent accountants.
    • Set clear hiring policies for employees or former employees of the independent auditors
      • On an annual basis, the Committee should review and discuss with the accountants all significant relationships the accountants have with the Company to determine the accountants' independence and any matters required to be discussed under the standards of the Public Company Accounting Oversight Board
      • Review the performance of the independent accountants and approve any proposed discharge of the independent accountants when circumstances warrant
      • Review any problems or difficulties submitted by the independent accountants and management’s response
      • Periodically consult with the independent accountants out of the presence of management about internal controls and the fullness and accuracy of the organization's financial statements
      • Ensure the rotation of the lead independent accounting partner every five years or as otherwise required by law
  3. Internal audit
    • Review and approve the internal audit plan and discuss significant findings made by the internal auditor
    • Review the responsibilities, activities, and organizational structure of the internal audit function
    • Report and make recommendations to the Board of Directors with respect to the reports of the internal auditor
    • Review the effectiveness of the Company’s internal audit processes
  4. Financial reporting processes
    • In consultation with the independent accountants and the internal auditors, review the integrity of the organization's financial reporting processes, both internal and external
    • Consider the independent accountants' judgments about the quality and appropriateness of the Company's accounting principles as applied in its financial reporting
    • Consider and approve, if appropriate, major changes to the Company's auditing and accounting principles and practices as suggested by the independent accountants, management, or the internal auditing department
    • Review Management’s plans to comply with revisions to major accounting and/or financial reporting requirements
  5. Process improvement
    • Establish regular and separate systems of reporting to the Committee by each of management, the independent accountants, and the internal auditors regarding any significant judgments made in management's preparation of the financial statements and the view of each as to appropriateness of such judgments
    • Following completion of the annual audit, review separately with each of management, the independent accountants and the internal auditing department any significant difficulties encountered during the course of the audit, including any restrictions on the scope of work or access to required information
    • Review any significant disagreement among management and the independent accountants or the internal auditing department in connection with the preparation of the financial statements
    • Review with the independent accountants, the internal auditing department and Management the extent to which changes or improvements in financial or accounting practices, as approved by the Committee, have been implemented. (This review should be conducted at an appropriate time subsequent to implementation of changes or improvements, as decided by the Committee.)
  6. Ethical and legal compliance
    • Establish, review and update periodically the organization’s ethical codes as they relate to financial controls and disclosures, and ensure that management has established a system to enforce these codes
    • Review management's monitoring of the Company's compliance with the organization's ethical codes as they relate to financial controls and disclosures and ensure that management has the proper review system in place to ensure that the Company's financial statements, reports and other financial information disseminated to governmental organizations, and the public satisfy legal requirements
    • Review, with the organization's counsel, legal compliance matters including corporate securities trading policies
    • Review, with the organization's counsel, any legal matter that could have a significant impact on the organization's financial statements
    • Oversee the investigation of all matters related to the Company’s financial controls and disclosures and accounting processes, including those received via the Company’s anonymous reporting platform
  7. Risk Management
    • Oversee, review and evaluate the Company’s major financial reporting and accounting risk exposures and the steps Management has taken to monitor and control these exposures.
    • Oversee and review the effectiveness of risk program implementation (via internal audit).
    • Oversee financial reporting and accounting and ERM assessment and reporting.
    • Oversee overall SJI Enterprise risk management committees. Review and approve all violations or deviations of risk tolerances and limits.
    • Review the guidelines and policies that govern the process by which risk assessment and management is undertaken by the Board and Management

Perform any other activities consistent with this Charter, the Company's By-laws and governing law, as the Committee or the Board deems necessary or appropriate.

B. Reporting Responsibility

  1. Regularly report to the Board on Committee activities, issues, and related recommendations
  2. Review any other reports the Company issues that relate to Committee responsibilities

V. Review of Charter

After initial approval of this Charter by the Board, the Committee shall review Charter annually and recommend any proposed changes to the Board.

Rev. 04.24.20