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EXHIBIT 99.3
AMERICA SERVICE GROUP INC.
BOARD OF DIRECTORS
CHARTER
OF
AUDIT COMMITTEE
I. ORGANIZATION
The Audit Committee (the "Committee") of the Board of Directors shall
be comprised of three directors who are independent of management and
the Company. Members of the Committee shall be considered independent
if they have no relationship to the Company that may interfere with the
exercise of their independence from management and the Company. All
Committee members will be financially literate, and at least one member
will have accounting or related financial management expertise.
II. STATEMENT OF POLICY
The Committee shall provide assistance to the directors in fulfilling
their oversight responsibility to the shareholders, potential
shareholders, the investment community and others relating to the
Company's financial statements and the financial reporting process, the
systems of internal accounting and financial controls, the internal
audit function and the annual independent audit of the Company's
financial statements. In so doing, it is the responsibility of the
Committee to maintain free and open communication between the
Committee, independent auditors, internal auditors and management of
the Company. In discharging its oversight role, the Committee is
empowered to investigate any matter brought to its attention with full
access to all books, records, facilities and personnel of the Company
and the power to retain outside counsel or other experts for this
purpose.
III. RESPONSIBILITIES
In carrying out its responsibilities, the Committee believes its
policies and procedures should remain flexible, in order to best react
to changing conditions and to ensure to the directors and shareholders
that the corporate accounting and reporting practices of the Company
are in accordance with all requirements and are of the highest quality.
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In carrying out these responsibilities, the Committee will:
- Obtain the full Board of Directors' approval of this
Charter and review and reassess this Charter as
conditions dictate (at least annually).
- Review and recommend to the directors the independent
auditors to be selected to audit the financial
statements of the Company and its divisions and
subsidiaries.
- Have a clear understanding with the independent auditors
that they are ultimately accountable to the Board of
Directors and the Committee, as the shareholders'
representatives who have the ultimate authority in
deciding to engage, evaluate and, if appropriate,
terminate their services.
- Review with the independent auditors, the Company's
internal auditor, if any, and financial and accounting
personnel, the adequacy and effectiveness of the
accounting and financial controls of the Company, and
elicit any recommendations for the improvement of such
internal controls or particular areas where new or more
details controls or procedures are desirable. Particular
emphasis should be given to the adequacy of internal
controls to expose any payments, transactions or
procedures that might be deemed illegal or otherwise
improper. Further, the Committee periodically should
review Company policy statements to determine their
adherence to the code of conduct.
- Review reports received from regulators and other legal
and regulatory matters that may have a material effect
on the financial statements or related Company
compliance policies.
- Inquire of management and the independent auditors about
significant risks or exposures and assess the steps that
management has taken to minimize such risks to the
Company.
- Review the quarterly financial statements with financial
management and the independent auditors prior to the
filing of the Form 10-Q (or prior to the press release
of results, if possible) to determine that the
independent auditors do not take exception to the
disclosure and content of the financial statements and
discuss any other matters required to be communicated to
the Committee by the auditors. The chair of the
Committee may represent the entire Committee for
purposes of this review.
- Review the financial statements contained in the annual
report to shareholders with management and the
independent auditors to determine that the independent
auditors are satisfied with the disclosure and content
of the financial statements to be presented to the
shareholders. Review with financial management and the
independent auditors the results of their timely
analysis of significant financial reporting issues and
practices, including changes in, or adoptions of,
accounting principles and disclosure practices, and
discuss any other matters required to be communicated to
the Committee by the auditors. Also review with
financial management and the independent auditors their
judgments about the quality, not just acceptability, of
accounting principles and the clarity
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of the financial disclosure practices used or proposed
to be used, and particularly, the degree of
aggressiveness or conservatism of the organization's
accounting principles and underlying estimates, and
other significant decisions made in preparing the
financial statements.
- Provide sufficient opportunity for the internal and
independent auditors to meet with the members of the
Committee without members of management present. Among
the items to be discussed in these meetings are the
independent auditors' evaluation of the Company's
financial and accounting personnel, and the cooperation
that the independent auditors received during the course
of the audit.
- Review accounting and financial human resources and
succession planning within the Company.
- Report the results of the annual audit to the Board of
Directors. If requested by the Board, invite the
independent auditors to attend the full Board of
Directors' meeting to assist in reporting the results of
the annual audit or to answer other directors' questions
(alternatively, the other directors, particularly the
other independent directors, may be invited to attend
the Committee meeting during which the results of the
annual audit are reviewed).
- On an annual basis, obtain from the independent auditors
a written communication delineating all their
relationships and professional services as required by
Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees. In
addition, review with the independent auditors the
nature and scope of any disclosed relationships or
professional services and take, or recommend that the
Board of Directors take, appropriate action to ensure
the continuing independence of the auditors.
- Review the report of the Committee in the annual report
to shareholders and the annual report on Form 10-K
disclosing whether or not the Committee had reviewed and
discussed with management and the independent auditors,
as well as discussed within the Committee (without
management or the independent auditors present), the
financial statements and the quality of accounting
principles and significant judgments affecting the
financial statements.
- Submit the minutes of all meetings of the Committee to,
or discuss the matters discussed at each Committee
meeting with, the Board of Directors.
- Investigate any matter brought to its attention within
the scope of its duties, with the power to retain
outside counsel for this purpose if, in its judgment,
that is appropriate.
- Review the Company's disclosure in the proxy statement
for its annual meeting of shareholders that describes
that the Committee has satisfied its responsibilities
under this Charter for the prior year. In addition,
include a copy of this Charter in the annual report to
shareholders or the proxy statement at least triennially
or the year after any significant amendment to the
Charter.
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