Audit and Risk Committee

The Committee's members include:

Fran Raymond – Committee Chair
Jenny Zahara – Member
Peter Dunlop – Member

Audit and Risk Committee Charter

The Accountable Authority of the Productivity Commission, the Productivity Commission Chair, has established an Audit and Risk Committee in compliance with section 45 of the Public Governance, Performance and Accountability Act 2013 (PGPA Act) and PGPA Rule section 17 Audit Committees for Commonwealth Entities.

This Charter defines the role, authority, responsibilities and functions of the Committee. It been developed in accordance with the PGPA Act, PGPA Rule, and ‘A guide for non-corporate Commonwealth entities on the role of audit committees’ issued by the Department of Finance in March 2020.

Role

The Committee’s role is to provide independent advice and assurance to the Accountable Authority on the Productivity Commission’s financial and performance reporting responsibilities, risk oversight and management, and system of internal control.

The Committee is not responsible for the executive management of these functions. The Committee will engage with management in a constructive and professional manner in discharging its advisory responsibilities and formulating its advice to the Accountable Authority.

The Committee will be assisted by the entity’s contracted internal auditors who will deliver an internal audit program in line with the Audit and Risk Committee’s guidance and subject to approval by the Head of Office or delegate.

Authority

The Committee has no executive powers, except those expressly provided by Commonwealth legislation or delegated to it by the Accountable Authority. The Accountable Authority authorises the Committee, in accordance with its role and responsibilities, to:

obtain any information it requires from any official or external party (subject to any legal obligation to protect information);
discuss any matters with the ANAO, or other external parties (subject to confidentiality considerations);
request any official, including the Accountable Authority, to attend a Committee meeting; and
obtain legal or other professional advice (subject to the approval of the Committee Chair and appropriate financial delegation arrangements), as considered necessary for the proper discharge of its functions and responsibilities.

Membership and responsibilities

The Accountable Authority determines the composition of the Committee and appoints its members. When appointing members, the Accountable Authority will ensure that the collective qualifications, knowledge, skills and experience of the Committee’s members are suitable to enable the Committee to perform its functions in the context of the agency. At least one member will have accounting or related financial management experience with an understanding of accounting and auditing standards in a public sector environment.

Committee members, taken collectively, will have a broad range of skills and experience relevant to the operations of the Productivity Commission and are expected to understand and observe the legal requirements of the PGPA Act 2013. The Committee will have a majority of independent members, as required by the PGPA Rule. Further, from 1 July 2021, all members of the Committee will be persons who are not officials of the Commission; and the majority of members will be persons who are not officials of any Commonwealth entity.

The Accountable Authority, Head of Office, Assistant Commissioner Corporate, Director of Finance and Office Services, Director ICT, or other management representatives may attend meetings as advisers or observers, as determined by the Chair, but will not be members of the Committee.

A representative(s) of the ANAO will be invited to attend meetings of the Committee, as an observer.

Members will be appointed for an initial period determined by the Accountable Authority and may be re-appointed for additional periods after a formal performance review.

Members, including the Chair, will ordinarily be appointed for three-year terms, with staggered starting dates to ensure a rotation of members over time, and will generally serve no more than two terms. This helps introduce new skills and new perspectives to the deliberations of the Committee. Shorter-term appointments may be made at the discretion of the Accountable Authority.

The membership of the Committee, and attendance by non-members at Committee meetings, is shown in Attachment A.

Responsibilities of the Audit and Risk Committee Chair

The Committee Chair will:

ensure the Committee is run effectively and inclusively, in line with an agreed agenda, to deal with the business at hand – having regard to the requirements under the PGPA Act, PGPA Rule, and guidance from the Department of Finance
help frame the issues for discussion and deliberation, and seek to engage all members in discussions
ensure decisions and actions arising from meetings are clearly articulated
ensure that minutes are kept and records maintained (delegated to secretariat)
provide leadership and determine the culture and behaviour of the Committee, and
engage with the Accountable Authority as appropriate on outcomes and decisions from the Committee.

The Committee Chair is accountable for the effective operation of the Committee and any advice provided to the Accountable Authority.

Responsibilities of members

Members of the Committee are expected to:

understand the Committee’s role and responsibilities, be familiar with the Committee’s relationship with management and the internal and external auditors, as well as have a sound knowledge of the entity’s operations and the environment in which it operates
contribute the time needed to study and understand the papers provided, apply good analytical skills, objectivity and good judgement; and express opinions frankly, ask questions that go to the fundamental core of the issue and pursue independent lines of enquiry
work collaboratively and cooperatively with the Committee Chair and other members of the Committee in the best interests of the entity generally and the business of the Committee specifically, and
bring their own expertise and experience to the Committee to enable completion of activities in an efficient and effective manner.

Committee members are accountable for assisting the Committee Chair by participating constructively in discussions, providing feedback, proactively identifying issues and proposing solutions for their resolution.

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

Committee members will be afforded access to all information necessary to enable the Committee to effectively carry out its role. Committee members are entitled to request further information from management as required, including requests for the Committee to engage with agency officials. The Committee will make such requests through the Head of Office.

New Committee members will receive an induction to the Committee, which will include a copy of this Charter and information to enable them to fulfil their responsibilities.

Functions¹

Financial reporting

To fulfil its responsibilities in respect of the financial reporting function the Committee will:

review the financial statements and provide advice to Accountable Authority; (including recommending their signing). In particular, the committee will review:
1. the Commission’s compliance with accounting standards, including an assessment of the appropriateness of accounting policies and disclosures
2. areas of significant judgement and financial statement balances that require estimation
3. any significant changes to accounting policies and practices (by May each year)
4. significant or unusual transactions, not covered by b) or c) above
5. sign-off by entity management in relation to the quality of the financial statements, internal controls and compliance, and
6. whether appropriate management action has been taken in response to any issues raised by the ANAO, including financial statement adjustments or revised disclosures.
act as a forum for communication between Commission management and the ANAO
review the processes in place designed to ensure that financial information included in the Commission annual report is consistent with the signed financial statements
discuss with the ANAO the auditor’s judgments about the adequacy of the Commission’s accounting policies and the quality of the entity’s processes for the preparation of the Commission’s financial statements.

Performance reporting

To fulfil its responsibilities in respect of the performance reporting function the Committee will:

review the proposed reporting of the Productivity Commission’s performance to satisfy itself that:
- the Portfolio Budget Statements and corporate plan include details of how performance will be measured and assessed
- the approach to measuring performance throughout the financial year against the performance measures included in its Portfolio Budget Statements and Corporate Plan is sound, and has taken into account guidance issued by the Department of Finance
- there are sound processes in place for the preparation of the annual Performance Statement and the inclusion of the Statement in the annual report, and
- the proposed Performance Statement is consistent with financial information, including the financial statements, that is proposed to be included in the annual report.

Note: the requirement for entities to prepare performance statements in accordance with section 39 of the PGPA Act applied from 2015-16.

Systems of risk oversight and management

To fulfil its responsibilities in respect of the risk oversight and management function the Committee will:

review whether management has in place a current and sound enterprise risk management framework and associated procedures for effective identification and management of the Commission’s business and financial risks
satisfy itself that a sound approach has been followed in managing the Commission’s major risks including those associated with individual projects, program implementation, and activities
satisfy itself that management has assessed the impact of the Commission’s enterprise risk management framework on the entity’s control environment, and insurance arrangements
review the process of developing and implementing the Commission’s fraud control arrangements and satisfy itself that the Commission has appropriate processes and systems in place to detect, capture and effectively respond to fraud risks
review reports on fraud from management that outline any significant or systemic allegations of fraud, the status of any ongoing investigations and any changes to identified fraud risk in the Commission.

System of internal control

To fulfil its responsibilities in respect of the system of internal function the Committee will:

Internal control framework

review whether management’s approach to maintaining an effective internal control framework, including in relation to functions performed by external parties such as contractors and advisers, is sound and effective
review whether management has in place relevant policies and procedures, including Accountable Authority Instructions or their equivalent, and that these are periodically reviewed and updated
satisfy itself that appropriate processes are in place to periodically (but not less than once per year) assess whether key policies and procedures are complied with
satisfy itself that management periodically assesses the adequacy of the Commission’s information security infrastructure

Delegations

review whether appropriate policies and associated procedures are in place for the management and exercise of delegations and authorisations

Business continuity management

satisfy itself that a sound approach has been followed in establishing the Commission’s business continuity planning arrangements, including whether business continuity and disaster recovery plans have been periodically updated and tested

Ethical and lawful behaviour

assess whether management has taken steps to embed a culture that promotes the proper use of Commonwealth resources and is committed to ethical and lawful behaviour

Internal audit

review the proposed internal audit coverage, ensure the coverage takes into account Commission’s key risks, and recommend approval of the Annual Work Plan by the Head of Office
review all audit reports and provide advice to the accountable authority on significant issues identified in audit reports and recommend action on significant issues raised, including identification and dissemination of good practice
monitor management’s implementation of internal audit recommendations
periodically review the performance of internal audit and provide advice to the Chair of the Commission on the appointment of the internal auditor contractor
advise the Chair of the Commission on the adequacy of internal audit resources, or budget, to carry out its responsibilities, including completion of the approved internal audit work plan

Legislative and policy compliance

review the effectiveness of the system for monitoring the Commission’s compliance with those laws, regulations and associated government policies with which the Commission must comply
determine whether management has appropriately considered legal and compliance risks as part of the entity’s enterprise risk management plan.

Order of consultation

The Audit and Risk Committee will consider and provide advice and/or recommendations on these functions through the agenda items brought forward by management, prior to them being considered or endorsed by the Accountable Authority.

Engagement with the ANAO

In undertaking its role, the Committee will engage with the ANAO, as the entity’s external auditor, in relation to the ANAO’s financial statement and performance audit coverage. In particular, the Committee will:

provide input on planned ANAO financial statement and performance audit coverage
review entity specific and relevant cross-entity external performance audit reports and monitor management’s response and implementation of audit recommendations
provide advice to the Accountable Authority on action to be taken on significant issues raised in relevant ANAO reports or better practice guides
meet privately with the ANAO when considered necessary.

Reporting

The Committee will, as often as necessary, and at least once a year, report to the Accountable Authority on its operation and activities during the year and confirm that all functions outlined in this charter have been satisfactorily addressed.

The Committee may, at any time, report to the Accountable Authority any other matter it deems of sufficient importance to do so. In addition, at any time an individual Committee member may request a meeting with the Accountable Authority.

Meeting arrangements

Meeting frequency

The Committee will meet at least four times per year. One or more special meetings may be held to review the Commission’s annual financial statements and performance statements or to meet other specific responsibilities of the Committee.

The Chair is required to call a meeting if asked to do so by the Accountable Authority, and decide if a meeting is required if requested by another member, internal audit or the ANAO.

Annual Work Plan

The Committee will develop a forward meeting schedule that includes the dates, location, and proposed agenda items for each meeting for the forthcoming year, and that covers all the functions outlined in this charter.

Quorum

A quorum will consist of a majority of Committee members (two). The quorum must be in place at all times during the meeting.

Secretariat

Secretariat services will be provided to the Committee as detailed at Attachment A.

Conflicts of interest

Each year, members of the Committee will provide written declarations, through the Chair of the Committee, to the Accountable Authority declaring any material personal interests they may have in relation to their responsibilities. External members should consider past employment, consultancy arrangements and related party issues in making these declarations and the Accountable Authority in consultation with the Audit and Risk Committee Chair, should be satisfied that there are sufficient processes in place to manage any real or perceived conflict.

At the beginning of each Committee meeting, members are required to declare any material personal interests that may apply to specific matters on the meeting agenda. Where required by the Chair, the member will be excused from the meeting or from the Committee’s consideration of the relevant agenda item(s). The Chair is also responsible for deciding, in consultation with the Chair where appropriate, if he/she should excuse themselves from the meeting or from the Committee’s consideration of the relevant agenda item(s). Details of material personal interests declared by the Chair and other members, and actions taken, will be appropriately recorded in the minutes.

Assessment arrangements

The Chair of the Committee, in consultation with the Accountable Authority, will undertake a review of the performance of the committee at least once every two years. The review will be conducted on a self-assessment basis.

The Chair of the Committee will provide advice to the Accountable Authority on an external member’s performance where an extension of the member’s tenure is being considered.

Review of charter

The Committee will review this charter every year, or as required, and advise the Accountable Authority of any substantive recommended changes for approval.

Approved

[signed]

Michael Brennan
Chair, Productivity Commission

Date 8 July 2022

Footnotes

PGPA Act Rule section 17 states that the functions of an audit committee must include reviewing the appropriateness of the accountable authority’s: financial reporting; performance reporting; system of risk oversight and management; and system of internal control. As such these functions are mandatory. Locate Footnote 1 above

Audit and Risk Committee