Draft Minutes Finance and Audit Committee

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1 Draft Minutes Finance and Audit Committee October 28, 2010 Conference Call Chair Fred Gorbet convened a duly-noticed open meeting by conference call of the Finance and Audit Committee of the North American Electric Reliability Corporation on October 28, 2010 at 2 p.m. ET. As required by the bylaws of the Corporation, dial-in access was provided to members of the Corporation and the public for the meeting. The meeting agenda is attached as Exhibit A. Trustees present on the call in addition to Chair Gorbet were NERC Board of Trustees Chair John Anderson, as well as board members Janice Case, Bruce Scherr, Dave Goulding, and Vicki Bailey. Additional attendees are listed in Exhibit B. Antitrust Compliance Guidelines Chair Gorbet directed the participants attention to the NERC Antitrust Compliance Guidelines. Minutes The committee approved the minutes of both the open and closed sessions of the August 4, 2010 meeting. (Exhibit C) Fourth Quarter Calendar of FAC Responsibilities Michael Walker, senior vice president and chief financial and administrative officer, reviewed the third quarter calendar of FAC responsibilities. Mr. Walker reviewed the Statement of Activities for the third quarter of 2010 noting NERC and all Regions were under budget in spending through the first nine months of NERC and all Regions, except MRO, expect to remain under budget through the end of the year. On motion by Bruce Scherr, the committee agreed to recommend the Statement of Activities to the Board of Trustees for acceptance. Mr. Walker continued with a review of audit fees and expenses requesting the committee approve the proposed fees of the company s independent auditor. WeiserMazars LLP submitted proposals with respect to (1) the audit of the company s 2010 financial statements, (2) tax return (Form 990) preparation, (3) savings and investment plan audit, and (4) other professional services requested by management. Mr. Walker noted the audit and tax fees represented a slight increase over 2009 and that the professional services proposal is consistent with current billing arrangements. After some discussion regarding the scope of hourly services, Mr. Walker clarified that the Committee was not being requested to approve any specific scope of work with respect Village Blvd. Princeton, NJ

2 to the hourly services and that the committee was only being requested to approve Weiser s proposal with respect to the three audits. Upon motion by Bruce Scherr, the committee approved the proposed fee arrangements for the three audits set forth in Wesier s proposal. Mr. Walker reviewed the Finance and Audit Committee s mandate. After a discussion by the committee members regarding the simplification of the committee s mandate, Chair Gorbet requested that management undertake a review of the committee mandate and make a proposal and recommendation at a future meeting regarding a more streamlined mandate for the committee s consideration. Chair Gorbet then recommended and motioned for approval for use for 2011 with the request that the mandate be updated accordingly for The committee approved the current mandate for use in 2011 and agreed with the recommendation to update the mandate for Mr. Walker led a review of the committee s annual self-assessment form and the timeframe for completion. Mr. Walker next reviewed the Investment Policy governing the investment of funds held by the Corporation, including investment options and returns. Mr. Walker recommended that the investment policy be maintained in its current form without modification. Upon motion of Chair Gorbet the committee unanimously agreed to retain Investment Policy without modification. Update on FERC 2011 Business Plan and Budget Filing Mr. Walker reviewed FERC s response to the 2011 Business Plan and Budget Filing noting that overall it was a clean order demonstrating firm support for the ERO initiatives. He also indicated there are several follow up items identified within the Order which management is reviewing and will be addressing in a compliance filing. Update on NERC s Office Relocation Gerry Cauley, president and CEO, provided a status report on NERC s Atlanta Office relocation, negotiations are occurring and the hope is to have an agreement signed by mid-november Internal Controls Program Chair Gorbet addressed the need for an internal controls and risk management program and requested that management further develop a framework and structure for review at the Committee s next meeting in February Finance and Audit Committee Meeting Draft Minutes October 28, 2010

3 Future Meetings The committee agreed on the following dates and times for future meetings: a. February 8, 2011 Conference Call 1:00 p.m. ET There being no further business, Chair Gorbet adjourned the meeting at 3:00 p.m. Submitted by, Michael Walker Chief Financial and Administrative Officer Finance and Audit Committee Meeting Draft Minutes October 28, 2010

4 Agenda Finance and Audit Committee Conference Call October 28, :00 3:00 p.m. EST Dial-In: Code: No Code Needed Introductions and Chairman s Remarks NERC Antitrust Compliance Guidelines 1. Minutes Approve* a. August 4, Fourth Quarter Calendar of FAC Responsibilities Review/Approve/ Recommendation* (Chair Gorbet/Mike Walker) a. Review and accept Third Quarter (unaudited) Statement of Activities Review Year End Projection b. Review and approve estimated audit fees and expenses c. Review FAC mandate and recommend to the board Corporate Governance and Human Resources Committee any changes to it that the FAC considers advisable d. Review FAC self-assessment to determine changes/edits if applicable; then complete self-assessment (December timeframe) to determine how effectively the FAC is meeting its responsibilities e. Review Investment Policy governing investment of funds held by the Corporation and, to the extent applicable, make recommendations on changes to the Board of Trustees 3. Update on FERC 2011 Business Plan and Budget Filing* (Mike Walker) 4. Update on Office Relocation (Gerry Cauley) 5. Internal Controls Program (Chair Gorbet) 6. Future Meetings a. February 8, 2011 Conference Call 1 p.m. EDT *Background material included Village Blvd. Princeton, NJ

5 Finance & Audit Committee Conference Call Reservation Number: Reservation Date/Time: 10-2 Chair Person: Tina McClellan Total Number of Lines: 15 Company Name: N AMER ELECTRIC RELIABILITY CORP First Name Last Name Company 1 John Anderson N/A 2 Vicky Bailey N/A 3 Patrick Brown Canadian Electricity Assoc 4 Janice Case N/A 5 Carter Edge S E R C Reliability Corp 6 Tim Friel Federal Energy Regulatory Commission 7 Fred Gorbet N/A 8 David Goulding N/A 9 Barry Lawson N R E C A 10 Heidi Lewis N P C C 11 Jennifer Mattiello N P C C 12 Tina McClellan N Amer Electric Reliability Corp 13 Daniel Phillips Federal Energy Regulatory Commission 14 Bruce Scherr N/A 15 Michael Walker N/A

6 Minutes Finance and Audit Committee August 4, :15-5:45 p.m. EDT Toronto Marriott Eaton Centre 525 Bay Street Toronto, ON, MSG 2L2 Chairman Fred Gorbet convened a duly noticed open meeting of the Finance and Audit Committee (FAC) of the North American Electric Reliability Corporation on August 4, 2010 at 4:15 p.m. EDT. The agenda is attached as Exhibit A. Chairman Gorbet and the full Board of Trustees were present including President and CEO Gerry Cauley. NERC staff members present included Michael Walker, David Cook, Susan Turpen, and Tina McClellan. Additional attendees are listed in Exhibit B. Antitrust Compliance Guidelines Chairman Gorbet directed the participants attention to the NERC Antitrust Compliance Guidelines. Minutes The committee approved the minutes of the July 19, Third Quarter Calendar of FAC Responsibilities Michael Walker, senior vice president and chief financial and administrative officer, reviewed the third quarter calendar of FAC responsibilities. Mr. Walker reviewed the policies for approval of senior management expenses, including those of the chief executive officer. Mr. Walker continued with a review of the Statement of Activities for the second quarter of 2010 and after discussion by members and on motion by Janice Case, the committee agreed to recommend the Statement of Activities to the Board of Trustees for acceptance. Status Report on Regional Delegation Agreements Metrics David Cook, senior vice president and general counsel deferred this topic to the Board of Trustees meeting for discussion. Renewal of NERC Line of Credit Mr. Walker reviewed that NERC maintains a line of credit with PNC Bank, that the line of credit comes up for renewal on annual basis in June of each year, and that the shift to accrual accounting for bonuses created a technical default of line of credit s covenants. NERC Management negotiated a waiver of these defaults with PNC and has negotiated an amendment to the loan documentation governing the line of credit to recognize these accrual adjustments on a going-forward basis for the Village Blvd. Princeton, NJ

7 remainder of the term of the line of credit through June 30, NERC Management also negotiated an extension of the term of the existing line of credit through August 9, 2010 to facilitate the Finance and Audit Committee s and NERC Board of Trustees authorization for management to proceed with the execution of this amendment. All other terms and conditions of the loan documents remained unchanged. On motion by Vicky Bailey, the committee approved recommendation to the board for approval. Financial Aspects of Form 990 Mr. Walker reviewed the financial aspects of the Form 990 and based on year end audited financial statements determined that NERC has 1,470 volunteers and this number will be included in the Form 990 filing. Final NERC and Regional Entity 2011 Business Plan and Budgets and Assessments Mr. Walker noted that NERC s and the Regional Entities revised 2011 business plans and budgets, together with proposed assessments, were complete and posted on NERC s Web site. Mr. Walker also made note of the presentation and discussion of this material during the Members Representative Committee meeting, which the representative of this committee also attended. After discussion of various aspects of the final business plans, budgets and assessments, including the benefits of ongoing and future long-term business planning and budget forecasting efforts by NERC and the Regional Entities, the committee unanimously voted to recommend approval thereof by the board. Future Meetings The committee agreed on the following dates and times for future meetings: a. October 28, 2010 Conference Call There being no further business; the committee adjourned into closed session. Submitted by, Michael Walker Chief Financial and Administrative Officer Finance and Audit Committee Meeting Minutes August 4, 2010

Draft Minutes Corporate Governance and Human Resources Committee

Draft Minutes Corporate Governance and Human Resources Committee Conference Call Chair Janice Case convened a duly noticed open conference call meeting of the Corporate Governance and Human Resources Committee