Message from J. Brett Harvey:

"This information describes the role of CONSOL Energy Inc's Internal Audit function. Briefly stated, Internal Auditing's mission is to provide a comprehensive value-added audit program at a competitive price. Internal Auditing is an independent and objective function that partners with the business to identify and manage risk, improve business processes, and ensure assets are properly accounted and safeguarded from loss.

The company's success depends to a great extent on the effectiveness of internal controls to safeguard assets and
to assure reliable records and data for internal business usage and other internal/external reporting requirements. Internal Auditing activities help ensure that our controls are designed properly and operating effectively.

In fulfilling its role, Internal Auditing has the full support of the board of directors, the audit committee and CONSOL Energy Inc. management. Internal Auditing reports administratively to the executive vice president and chief financial officer, and functionally to the audit committee of  the board of directors. It has unrestricted access to all records, information and personnel necessary to perform audits; and all employees are expected to cooperate fully with our professional audit staff in this regard."

J.B. Harvey

President and Chief Executive Officer - CONSOL Energy Inc.

Forward

CONSOL Energy Inc. must maintain a system of internal controls that provide reasonable assurance that reported operating data are accurate and reliable, that assets are properly protected, and that the company is in compliance with all applicable laws and regulations. Corporate business ethics standards and procedures, including the annual employee survey, are an integral part of  the internal control environment.

CONSOL Energy meets this obligation through a comprehensive system of internal controls. This system of internal controls is designed to provide for the protection of assets against loss from unauthorized use or disposition, and for the reliability of financial records for preparing financial statements and maintaining accountability for assets.

The cornerstone of the system is a Code of Business Conduct that requires employees to maintain the highest ethical standards in their conduct of business affairs. The system is also based on a requirement that all accounts and records be documented in a manner that clearly describes the true nature of business transactions, assets, liabilities, or equity; and properly and timely classifies and records entries in the financial records in conformity with generally accepted accounting principles.

The systems of internal control are monitored by an extensive program of internal auditing which reviews business activities on behalf of CONSOL Energy Inc. management and the board of directors.

Objective and Scope

Internal auditing undertakes comprehensive analyses and appraisals of all phases of business activities and provides management with  appropriate recommendations and pertinent comments concerning the activities reviewed.  All work performed is predicated on relative risk of the business activities and potential exposure to the company. This exposure may be in areas such as processing errors, inefficiencies, non-compliance with policy or legal requirements, and fraud. The scope of this work includes, but is not limited to the following: 

• Reviewing and appraising the soundness and adequacy of accounting, financial and operating controls and procedures, and promoting their cost-effective use.
• Reviewing the extent of compliance with established policies and procedures.
• Determining the extent to which assets are accounted and safeguarded from loss.
• Reviewing compliance with the Code of Business Conduct, and in coordination with appropriate legal, safety & human resources, or outside security personnel, conducting investigations regarding potential frauds, conflicts of interest, and other improprieties.
• Providing advisory assistance to operating management as may be requested from time to time.
• Evaluating the reliability and timeliness of financial and operating data developed within the organization and the means used to measure, classify, and report such data. 

Authority and Responsibility

In order to conduct the foregoing activities, CONSOL Energy's manager of internal auditing directs a continuing, comprehensive program of internal reviews throughout the company, including subsidiaries and affiliated companies, and, as appropriate, partnerships, joint ventures, licensees, contractors, vendors, distributors and other such
business relationships. The manager of internal auditing has the obligation to pursue matters to whatever level of management is necessary to achieve a satisfactory resolution. In discharging its responsibility, internal auditing will appropriately coordinate its activities with those of the external auditors, including assurance that audit coverage is comprehensive and that unnecessary duplication of effort does not occur.

In performing their functions, internal auditors shall have no direct responsibilities for, nor authority over any of the activities reviewed. Therefore, the review and appraisal by internal auditing does not in any way relieve other persons throughout the company of the responsibilities assigned to them.

Internal auditing has full and unrestricted access to any company activities, records, physical properties and
personnel relevant to subjects under review.

Independence and Objectivity

Independence and objectivity are essential to the effectiveness of internal auditing. The manager of internal
auditing reports administratively to the senior vice president-chief financial officer, and functionally direct to the audit committee of  the board of directors. Also, the manager of internal auditing has the right and obligation to report at any time directly to any member of CONSOL Energy management or to the audit committee on any matter which should be brought to their attention.

In order not to compromise the objectivity of the internal auditors, they should not be responsible for the development or installation of accounting or control procedures, nor should they prepare accounting records or engage in any
other activity which they would normally review and appraise. Objectivity is not adversely affected, however, by recommending standards of control to be applied in the development of new systems or policies and procedures under review. In addition, this objectively is not adversely affected by the evaluation of existing systems and
recommendations for modifications and improvements thereto in order to improve control and/or enhance
operational effectiveness.

Professional Standards

In meeting its responsibility to provide appropriate service to all levels of CONSOL Energy management, internal auditing will maintain  the highest professional and ethical standards and develop administrative policies and
procedures that are cost-effective.

Accordingly, internal auditing's policies and procedures are designed to be consistent with the Standards for
the Professional Practice of  Internal Auditing and the Code of Ethics as published by the The Institute of Internal Auditors. Such standards require high ethical conduct from auditors, as follows:

• Internal auditors shall have an obligation to exercise honesty, objectivity and diligence in the performance of their duties and responsibilities.
• Internal auditors shall exhibit loyalty in all matters pertaining to the affairs of CONSOL Energy. However, they shall not knowingly be a part to any illegal, improper or unethical activity nor engage in activities which discredit the company or the profession of internal auditing.
• Internal auditors shall refrain from entering into any activity which may be in conflict with the interest of CONSOL Energy or which would prejudice their ability to carry out their duties and responsibilities objectively.
• Internal auditors shall not accept anything of value from an employee, an auditee, a customer, a supplier, or a business associate which would impair or be presumed to impair their professional judgement.
• Internal auditors shall be prudent in their use of information acquired in the course of their duties. They shall not use confidential information for any personal gain or in a manner that would be contrary to law or detrimental to the welfare of CONSOL Energy or its employees.
• Internal auditors shall use all reasonable care to obtain sufficient factual evidence to support conclusions reached. In reporting, internal auditors shall reveal such material facts known to them which, if not disclosed, could either distort the report of the results of operations under review or conceal unlawful practice.
• Internal auditors shall continually strive for improvements in their professionalism, their proficiency and in the effectiveness and quality of their service.

External Audit Coordination

The manager of  internal auditing is responsible for establishing and maintaining a program of optimizing audit
coordination and cooperation with the external auditors. The program of coordination should include but not be
limited to:

• A system of joint planning to assure adequate and proficient total audit coverage without unnecessary duplication.
• Provision for internal auditing review and follow-up of the adequacy of management attention given to the external auditor's management letters and audit recommendations.