The new audit framework under the NGER Act is now in place.
With the need for transparency proving to be a key component of discussions at Copenhagen, there have been some timely developments in relation to the greenhouse and energy audit framework under the National Greenhouse and Energy Reporting Act 2007.
Greenhouse and energy audits are a key element of the compliance framework under the NGER Act. The Government consulted on the greenhouse and energy audit framework in July 2009 and has since moved to implement the audit framework under the National Greenhouse and Energy Reporting Amendment Act 2009 and National Greenhouse and Energy Reporting Amendment Regulations 2009 (No.2).
Greenhouse and energy audits
The NGER Amendment Act 2009 made a number of amendments to the NGER Act, including requiring the Greenhouse and Energy Data Officer (GEDO) to establish a register of greenhouse and energy auditors and allowing the Minister to determine requirements to be met by the auditors in carrying out greenhouse and energy audits.
The greenhouse and energy audit framework allows an audit to be carried out in relation to one or more aspects of an entity's compliance with the NGER Act, including:
- definition of entity structure, operational control, financial control and facilities;
- requirements for identification and measurement of emission sources, energy consumption and production;
- requirements for accuracy, completeness and validity of reported greenhouse and energy data, including record-keeping requirements.
The GEDO may require a compliance audit to be carried out where it has reasonable grounds to suspect non-compliance by a registered corporation or a person otherwise required to provide reporting information in relation to the registered corporation.
In these types of audits, the corporation or person must appoint an audit team leader and arrange for the audit to be undertaken. The GEDO will either specify an audit team leader to be appointed, allow the corporation or person to choose from a number of specified audit team leaders, or allow the corporation or person to appoint an audit team leader of its choice. The GEDO will also specify the matters to be covered by the audit.
The GEDO may also require an audit to be carried out for any other purpose. It is expected that such audits will be required as part of a broader risk management framework, such as reviewing industry understanding and use of particular estimation methodologies. In these types of audits, the GEDO will appoint an audit team leader and specify the matters to be covered by the audit. The corporation or person must then arrange for the audit to be undertaken.
Importantly, only individuals registered with the GEDO as greenhouse and energy auditors may accept appointments as audit team leaders and conduct an audit for the purposes of the NGER Act.
Greenhouse and energy auditor registration
Detailed requirements for auditor registration were introduced by the NGER Amendment Regulations 2009 on 17 December 2009. The Regulations set out requirements for both the initial registration process and for maintaining registration with the GEDO.
The Regulations allow for the registration of three different categories of auditor based upon different knowledge and experience: Category 1 (technical and non-technical), Category 2 and Category 3 auditors.
Detailed registration criteria apply to each category of auditor based upon their knowledge of the NGER legislation, knowledge of auditing, audit team leadership and assurance, and auditing experience.
There are also a number of overarching criteria which apply to all auditors, including a requirement to hold relevant tertiary qualifications and to be a fit and proper person.
The Regulations set out a number of requirements which must be met in order for auditors to maintain their registration with the GEDO. In addition to a continuing requirement to be a fit and proper person, auditors will be required to abide by a Code of Conduct and meet detailed independence requirements to ensure that no conflict of interest exists between any member of the audit team and the audited entity.
The Code of Conduct is set out in the Regulations and includes requirements relating to integrity, objectivity, professional competency and due care while carrying out an audit and preparing audit reports, as well as requirements relating to marketing or promotion as an auditor.
Energy audit team
Given the broad range of issues that may form part of a greenhouse and energy audit, it is expected that a similarly broad range of skills and expertise will be required to properly carry out an audit. The audit framework deals with this issue by ensuring that one of the responsibilities of the appointed audit team leader is to engage appropriately qualified people to ensure that the audit is properly carried out. Audit team members will not be required to register with the GEDO.
Further details of the greenhouse and energy audit framework will be provided by the National Greenhouse and Energy Reporting (Audit) Determination. The Audit Determination will set out the Minister's detailed requirements for greenhouse and energy audits and is currently expected to be made early next year.