2006 Proxy Statement
Appendix B
The Audit Committee (the "Committee") of the Board of Directors (the "Board") of the Federal Home Loan Mortgage Corporation ("Freddie Mac") shall consist of at least three members, including at least one "audit committee financial expert", as defined in the regulations of the Securities and Exchange Commission. The membership of the Committee shall be independent and shall comply with all applicable laws, regulations and listing standards.
One member of the Committee shall be designated by the Board as the Committee's Chairman.
Committee meetings generally shall include regular sessions with management and executive sessions with the internal auditors, the independent public accountants and the Chief Compliance Officer. At least annually, the Committee shall meet in executive session with the Chief Financial Officer. The Committee's Chairman shall report regularly to the Board on the Committee's activities and minutes of the Committee's meetings shall be submitted to the Board.
The members of the Committee shall have access to any employees of Freddie Mac, and shall have the authority to engage outside consultants or advisors including, but not limited to, attorneys, accountants, auditors and management consultants, as the Committee may deem appropriate to fulfill its responsibilities. Freddie Mac shall provide appropriate funding for the retention of any such consultants or advisors and for other necessary and appropriate administrative expenses of the Committee, all as determined by the Committee.
Pursuant to the authority granted to it by the Board, the Committee is hereby charged with the following authority and responsibilities:
1. To oversee the performance of the Internal Audit Department, including:
(a) to approve the Charter for the Internal Audit Department and any subsequent changes thereto;
(b) to hire and, at least annually, to evaluate the performance and determine the compensation of, and decide whether to retain, the Senior Vice President — General Auditor;
(c) to approve the annual plan, organization and staffing for the Internal Audit Department for the upcoming year, including any amendments to such plan;
(d) to review, with the Senior Vice President — General Auditor, the results of audits completed since the previous report and the status of the internal audit plan; and
(e) to assess the effectiveness of the Internal Audit Department in light of its Charter, its annual plan, and applicable professional standards.
2. To appoint and to oversee the performance of, and relationship with, the independent public accountants, who shall report directly to, and be ultimately accountable to, the Committee, including:
(a) to appoint, evaluate and, as the Committee may deem it appropriate, terminate and replace the independent public accountants, in accordance with applicable legal requirements, including those relating to conflicts of interest and rotation of audit partners;
(b) to pre-approve any audit services, and any non-audit services permitted under applicable law, to be performed by the independent public accountants (or to designate one or more members of the Committee to pre-approve such services and to report such pre-approval to the Committee);
(c) to determine the compensation of the independent public accountants, funding for which shall be provided by Freddie Mac, and to approve any other fees that may be paid for services performed by any affiliate of the independent public accountants;
(d) to approve the independent public accountants' proposed audit scope and approach;
(e) to review with the independent public accountants and, as the Committee deems appropriate, with management, the annual audit, the management letter and management's responses to the letter, any other material communications between the independent public accountants and management, including any such communications required by applicable professional standards, and any other matters the Committee may deem appropriate;
(f) to resolve any disagreements between management and the independent public accountants concerning financial reporting;
(g) to review with the independent public accountants any audit problems or difficulties and management's response;
(h) to obtain and review, at least annually, a formal written statement by the independent public accountants delineating all relationships between the independent public accountants and Freddie Mac, to discuss with the independent public accountants any disclosed relationships or services that may affect the objectivity and independence of the independent public accountants and to take appropriate action in response to the independent public accountants' statement to satisfy itself as to the continuing independence of the independent public accountants; and
(i) to obtain and review, at least annually, a report by the independent public accountants describing the firm's internal quality-control procedures and any material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry, investigation or inspection 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.
3. To approve and review compliance with a policy concerning the hiring by Freddie Mac of current or former employees of the independent public accountants.
4. To approve and review compliance with a policy concerning the retention by Freddie Mac of accounting firms other than the independent public accountants.