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Audit committee

Suggested Reading Suggested Reading

16 July 2020

Contents

Audit committees play an important role in supporting the governance of non-corporate Commonwealth entities, providing independent advice to accountable authorities, assisting them to meet their duties and obligations, and supporting the development of key practice and capacity within the agency.

Establishment

The Accountable Authority of the Clean Energy Regulator (the agency) has established the Clean Energy Regulator Audit Committee (the Audit Committee) in compliance with section 45 of the Public Governance, Performance and Accountability Act 2013 (the PGPA Act) and section 17 of the Public Governance, Performance and Accountability Rule 2014 (the PGPA Rule).

The Audit Committee has no managerial responsibilities. It does not make decisions in relation to the agency's processes and functions. It is established to provide independent advice to the Accountable Authority. This advice may be used by an Accountable Authority in discharging their duties and obligations.

The PGPA Rule (subsection 17(2)) states the functions of the Audit Committee must include reviewing the appropriateness of the Accountable Authority's financial reporting, performance reporting, system of risk oversight and management, and the system of internal control for the agency.

For the purposes of the PGPA Act, PGPA Rule, and consistent with the Resource Management Guide No 202, and consistent with rules of statutory interpretation, 'appropriateness' has its ordinary meaning of 'suitable or fitting for a particular purpose'.

Function

Section 17 of the PGPA Rule establishes mandatory functions for an Audit Committee, as follows:

  • Functions of the Audit Committee
    • The accountable authority of a Commonwealth agency must, by written charter, determine the functions of the audit committee for the agency.
    • The functions must include reviewing the appropriateness of the accountable authority's:
      1. financial reporting; and
      2. performance reporting; and
      3. system of risk oversight and management; and
      4. system of internal control for the entity.

Consistent with subsection 17(2) of the PGPA Rule, the Accountable Authority has determined that the functions of the Audit Committee are to review and give independent advice and assurance about the appropriateness of the agency's functions outlined below.

Financial reporting

The Audit Committee is required to review the appropriateness of the Accountable Authority's financial reporting, including the agency's:

  • processes and systems for preparing financial reporting information
  • the processes in place to allow the agency to stay informed throughout the year of any changes or additional requirements in relation to financial reporting, and
  • annual financial statements.

The Audit Committee will provide the Accountable Authority with written advice as to whether:

  • the annual financial statements, in the committee's view, comply with the PGPA Act, PGPA Rule, Accounting Standards and supporting guidance
  • additional agency information (other than financial statements) required by Finance for the purpose of preparing the Australian Government consolidated financial statements (including the supplementary reporting package) comply with the PGPA Act, PGPA Rule, Accounting Standards and supporting guidance, and
  • the agency's financial reporting as a whole is appropriate - with reference to any specific areas of concern or suggestions for improvement.

Performance reporting

The Audit Committee is required to review the appropriateness of the Accountable Authority's performance reporting, including the agency's:

  • systems and procedures for assessing, monitoring and reporting on achievement of its performance, including:
    • whether the Corporate Plan and Portfolio Budget Statements contain appropriate details of how the agency's performance will be measured and assessed
    • the agency's approach to measuring its performance throughout the financial year against the performance measures included in its Corporate Plan and Portfolio Budget Statements and is appropriate and in accordance with the Commonwealth Performance Framework
    • the agency has appropriate systems and processes in place for the preparation of its annual performance statement and inclusion of the statement in its annual report.

The Audit Committee will provide the Accountable Authority with written advice regarding the appropriateness of the agency's annual performance statements, its performance reporting as a whole and its compliance with the PGPA Act and PGPA Rule; referencing any specific areas of concern or suggestions for improvement.

System of risk oversight and management

The Audit Committee supports the Accountable Authority in relation to risk management by reviewing the appropriateness of its system of risk oversight and management.

The Audit Committee's role includes reviewing:

  • whether management has a current and appropriate enterprise risk management policy framework and the necessary internal controls for the effective identification and management of the agency's risks, in keeping with the Commonwealth Risk Management Policy, and
  • the process of developing and implementing the agency's fraud control arrangements consistent with the fraud control framework, and satisfy itself that the agency has adequate processes for detecting, capturing and effectively responding to fraud risks.

The Audit Committee will provide the Accountable Authority with a statement of the Audit Committee's view in relation to the appropriateness of the agency's systems for risk oversight and risk management as a whole, with reference to the Commonwealth Risk Management Policy and any specific areas of concern or suggestions for improvement.

System of internal control

The Audit Committee assists the Accountable Authority by reviewing the appropriateness of the Accountable Authority's system of internal control and providing independent advice to the Accountable Authority.

The Audit Committee's role includes consideration of:

  • the internal control framework, including
    • management's approach to maintaining an effective internal control framework and whether appropriate processes are in place for assessing whether key policies and procedures are complied with, and
    • whether management has in operation relevant policies and procedures - such as Accountable Authority instructions, delegations, and a business continuity management plan
  • legislative and policy compliance, including
    • the effectiveness of systems for monitoring the agency's compliance with laws, regulations and associated government policies with which the agency must comply, and
    • whether management has adequately considered legal and compliance risks as part of the agency's enterprise risk management framework, fraud control framework and planning.

The Audit Committee will provide a statement to the Accountable Authority in relation to the appropriateness of the agency's systems for internal control, with reference to any specific areas of concern or suggestions for improvement.

As far as is practicable, the Audit Committee should indicate which matters it will consider during any given year in a forward plan, noting that it may consider other or additional matters in response to changes in the agency's operations and environment.

Membership

Subsections 17(3) to (5) of the PGPA Rule establish requirements for Audit Committee membership, as follows.

17 Audit committee for Commonwealth entities

Membership of the audit committee

  1. The audit committee must consist of at least 3 persons who have appropriate qualifications, knowledge, skills or experience to assist the committee to perform its functions.
  2. On and after 1 July 2015, the majority of the members of the audit committee must:
    1. for a non-corporate Commonwealth entity—be persons who are not officials of the entity, or
    2. for a corporate Commonwealth entity—be persons who are not employees of the entity.
  1. A. However, a person employed or engaged primarily for the purpose of being a member of the audit committee is to be treated, for the purpose of subsection (4), as not being an official or employee of the entity.
  1. Despite subsections (3), (4) and (4A), the following persons must not be a member of the audit committee:
    1. the accountable authority or, if the accountable authority has more than one member, the head (however described) of the accountable authority
    2. the Chief Financial Officer (however described) of the entity, or
    3. the Chief Executive Officer (however described) of the entity.

The Audit Committee comprises three members, appointed by the Accountable Authority. The Chair of the Audit Committee (the Chair) will be an independent member and appointed by the Accountable Authority. A Deputy Chair may also be appointed by the Accountable Authority to act as chair in the absence of the Chair.

Audit Committee members will be appointed for an initial period determined by the Accountable Authority. Members may be re-appointed for further periods, after a formal review of their performance by the Accountable Authority.

Consistent with subsection 17(3) of the PGPA Rule, the members of the Audit Committee, taken collectively, will have a broad range of knowledge, skills and experience relevant to the operations of the agency, including its information technology environment. All Audit Committee members should be conversant with financial management reporting, and at least one member is to have accounting or related financial management experience and/or qualifications, and a comprehensive understanding of accounting and auditing standards.

Consistent with subsection 17(5) of the Rule and Resource Management Guide 20 - Audit committees for Commonwealth entities and Commonwealth companies, the Accountable Authority, Chief Operations Officer, Chief Financial Officer, Chief Information Officer, Chief Risk Officer and Chief Internal Auditor must not be members of the Audit Committee but may attend meetings as advisors and/or observers, as determined by the Chair. In addition, a member of the Clean Energy Regulator (the Regulator) may attend meetings as an advisor and/or observer.

Representatives from the Australian National Audit Office and internal audit's contracted service provider(s) will not be members of the Audit Committee. However, they may attend relevant Audit Committee meetings (in whole or in part) as observers, as determined by the Chair of the Audit Committee.

Audit Committee members must not use or disclose information obtained by the Audit Committee except in meeting the committee's responsibilities, or unless expressly agreed by the Accountable Authority.

Members with a potential conflict of interest will notify the Audit Committee as soon as this becomes apparent. Any member with a conflict of interest will absent themselves from discussions about relevant matters.

Sub-committees

The Audit Committee may use instruments to establish sub-committees to support the performance of its functions. Such sub-committees must be chaired by a member of the Audit Committee. The establishment of such sub-committees does not change the Audit Committee's functions under this charter.

Authority

The Accountable Authority authorises the Audit Committee, in performing its functions, to:

  • seek any information it requires from:
    • any official of the agency, and/or
    • external parties.
  • request legal or other professional advice, subject to approval by the appropriate delegate, and
  • request the attendance of any official of the agency at meetings, as appropriate.

The Accountable Authority directs officials of the agency to cooperate with the Audit Committee.

Meetings

The Audit Committee will meet at least four times per year - more often if required. Special meetings may be held to review the agency's annual financial statements and performance statements or to meet other specific responsibilities of the Audit Committee.

The Chair will call a meeting if requested to do so by the Accountable Authority, and may call a meeting if requested by another Audit Committee member.

A quorum for any Audit Committee meeting will be two members, one of whom must be the Chair or the Deputy Chair (if appointed).

The Audit Committee will hold private discussions with external audit and internal audit representatives on an annual basis.

Committee management

The Legal Services and Governance Branch will provide committee management services to the Audit Committee.

Conflicts of Interest

Once per year, the Audit Committee members will provide written declarations to the Chair for provision to the Accountable Authority declaring any potential or actual conflicts of interest they may have in relation to their responsibilities.

All attendees must declare any potential conflicts at the start of each meeting or before discussions of the relevant agenda item or topic. Details of any conflicts of interest should be appropriately recorded in the minutes from the meeting.

Review of functions

The Chair of the Audit Committee will initiate a review of the performance of the Committee at least once every two years. The outcomes of this assessment will be reported to the Accountable Authority.

The Audit Committee will review the appropriateness of this charter at least annually or following any changes to the PGPA framework that impact on Audit Committee functions. Reviews will be conducted in consultation with the Accountable Authority and outcomes of reviews will be formally reported to the Accountable Authority.



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