Minutes of Audit & Risk Committee

The contents of this document are OFFICIAL: SENSITIVE

Thursday 6 June 2024 12.00pm – 4.00pm AEST – Dandenong / MS Teams

Attendance

Committee members

Dr Graeme Innes AM, Chair
Ms Maryanne Diamond AO, Deputy Chair
Ms Meredith Allan
Mr Mark Darras
Dr Denis Napthine AO

Board members

Mr Kurt Fearnley AO
Dr Richard Fejo

Management representatives

Ms Rebecca Falkingham, CEO
Mr Matthew Swainson, A/g DCEO Governance, Risk & Legal / Chief Counsel – all items except in camera
Mr Samuel Porter, DCEO Enabling Services / COO – all items except in camera
Mr Mark Sullivan, GM Audit & Risk Division – all items except in camera, 4.1, 4.2
Mr Chris Breitkreuz, Chief Financial Officer – Items 4.1, 4.2, 4.3 & 4.4
Mr David Gifford, Scheme Actuary – Items 5.1 & 6.5
Ms Corri McKenzie, DCEO Service Design & Improvement – Item 5.1
Mr Scott McNaughton, DCEO Service Delivery – Item 5.1
Mr John Dardo, DCEO Integrity Transformation & Fraud Fusion Taskforce – Item 6.3

Other attendees

Dr Ian Watt AC, Specialist Advisor
Ms Ilana Idrus, Director Board & Governance (Secretariat) – all items except in camera
Mr Mick Turner, EO to Board Chair

Observers – all items except in camera

Ms Lesa Craswell, A/g Group Executive Director, ANAO – all items except in camera
Ms Alexandra Collins, Executive Director, Performance Audit Services Group, ANAO – all items except in camera
Ms Prue Gordon, Senior Director, Performance Statements Audit Services Group, ANAO – all items except in camera
Ms Sophie Capel, Director, ANAO
Ms Rory Tredinnick, Performance Analyst, ANAO

Minutes

The Minutes are presented in the order that items were discussed.

Meeting open

1.1 Acknowledgement of Country

On behalf of the Committee, the Chair acknowledged the Traditional Owners and Custodians of the Country throughout Australia, in particular the Bunurong people whose lands the Committee was meeting on in Dandenong.

1.2 Chair’s welcome and open

The Chair opened the meeting at 11:25am and welcomed members and management to the meeting.

In camera

2.1 In camera – Committee Members

The Committee held an in camera session.

Dr Fejo joined the meeting.

Dr Watt joined the meeting.

Mr Fearnley joined the meeting.

Action 1: Board Secretariat to organise for the Chair, the CEO and Mr Swainson to meet with the ANAO to discuss historical findings in the second week of July.

Administration

Mr Porter and Mr Swainson joined the meeting.

Ms Craswell, Ms Collins, Ms Gordon, Ms Capel and Ms Tredinnick joined the meeting.

3.1 Declarations of material interests

The Chair noted there were no updates to the members’ declarations of material interests.

3.2 Minutes of the Audit & Risk Committee

The Committee endorsed the minutes of the meetings of 14 March 2024 and 24 April 2024 (Out of Session).

3.3 Matters arising

The Committee noted the matters arising report for June 2024, approving the closure of the items proposed to be closed.

Financial Reporting

4.1 Finance Activity Update

Mr Breitkreuz joined the meeting.

Mr Porter and Mr Breitkreuz introduced the paper and provided an overview of the key matters set out in the paper, in particular that the soft close process did not identify any particular concerns and noting the audit updates are also covered by item 7.1.

The Committee noted the paper and confirmed the timeline for the preparation of the financial statements for the Committee and Board in the discussion of the hard close financial statements.

Performance Reporting

4.2 Going Concern Assessment

Mr Breitkreuz provided an overview of the paper noting the Agency does not propose to change the assessment for going concern for FY2023 -24.

The Committee discussed the assessment and the reasoning underpinning the sensitivity analysis to reassure the Committee in accepting that no change in the assessment was necessary.

4.3 Change to Accounting Standards

Mr Breitkreuz introduced the paper and noted that there are no significant changes for the Agency as a result of the new accounting standards as the changes are already being implemented or do not apply to the Agency.

The Committee discussed the paper and sought clarification on the provisions regarding leases.

Mr Sullivan joined the meeting.

4.4 Hard Close Financial Statements

[redacted]

The Committee clarified timing for the sign off of the financial statements.

Ms Craswell clarified the role of the ANAO in financial statements which varied from what is set out in some parts of the paper.

Action 2: Management to draft letter for the Board Chair to DSS raising the concern of the WA payment deficit.

Mr Breitkreuz left the meeting.

5.1 Performance Activity Update

Mr Gifford, Ms McKenzie and Mr McNaughton joined the meeting

Mr Gifford introduced the paper and gave an overview of the Annual Performance Statements update as set out in the paper, noting the variances are consistent with the previous quarter. Mr McNaughton provided the Committee with an update on the performance against the Participant Service Guarantee (PSG) metrics.

The Committee discussed the Service Delivery remediation work and its impact on the performance metrics and the duplication of the participant satisfaction metric in both programs.

Risk Oversight and Management

6.1 Chief Risk Officer Report (Q3)

Mr Sullivan introduced the paper and gave an overview of the key insights set out for the Committee’s consideration, including the improvement in the risk profiles, the rebaselined risk register for 3P and the initial compliance assessment against the new Fraud and Corruption control framework and next steps to bring the Agency into compliance.

The Committee discussed the reasons for the rebaselining of the 3P program, the activities to improve the agency’s approach to Conflict of Interest for staff and the timeline for the Agency to meet the new Fraud and Corruption Control Register.

The Committee discussed Operation Royal, noting that affected participants had been notified and the matter came before the courts in relation to the individual charged. The Committee requested a more comprehensive report on Operation Royal at the next meeting.

Resolution:

The Committee agreed that the Q3 FY2023–24 Chief Risk Officer Report (Q3 CRO Report) is an accurate account of NDIA risks and controls, and to remit relevant content to the next NDIA Board meeting.

Action 3: Mr Sullivan to provide more detailed brief on Operation Royal.

6.2 Legal Risk Report

Mr Swainson [redacted — s42]

6.3 Integrity Update

Mr Dardo joined the meeting

Mr Dardo introduced the paper and gave an overview of the key matters for the Committee’s consideration including [redacted — s47C deliberative process; s 47E(d) operations of agency]

Annual Strategic Risk Review FY 2024-25

Mr Sullivan introduced the paper and gave an overview of the pathway for the Annual Strategic Risk Review and the key updates and changes proposed for Committee endorsement, as set out in the paper.

The Committee discussed the place of the PACE rollout and cyber security in the Strategic Risk Review, noting that many entities now list cyber security as their highest risk.

Mr Porter agreed it should be included in the strategic risks and undertook to work with Mr Sullivan to incorporate cyber security into the strategic risks.

The Committee sought further information about the types of scenario testing the Agency undertakes and information on the Agency’s Cyber Security Insurance.

The Committee asked about the change to participant goals and management confirmed that the risk review reflected the revised portfolio budget statement.

Ms Creswell noted the ANAO is starting to see regular reporting to Boards regarding cyber security and noted shared some information with the Committee regarding questions for board to ask about Cyber Security.

The Committee did not endorse the Annual Strategic Risk Review and asked management to bring the paper back out of session.

Action 7: Management to confirm the Agency’s cyber security insurance cover.

Action 8: Mr Porter to bring a paper to Board or Committee about cyber security.

Action 9: Mr Sullivan to redraft the strategic risks to include cyber security and resubmit to Board.

Removal of Risk Margin on the Participant Plan Provision

Mr Gifford rejoined the meeting.

Mr Gifford introduced the paper and gave an overview of the key matters for the Committee’s consideration as set out in the paper noting the Agency has received advice from the Australian Government Actuary supporting the removal of the Participant Plan Revision.

The Committee discussed the paper noting it should be supported and sought advice from the ANAO representatives regarding their position on the paper. Ms Craswell noted that the

Meeting Minutes

paper was fairly comprehensive and has not raised any concerns but further work was required and the ANAO will confirm its position in the next few weeks.

Resolution: The Committee endorsed the change in the approach for the calculation of Participant Plan Provision to cease adding a risk margin, for consideration by the Board, subject to endorsement from the ANAO.

Mr Gifford left the meeting.

7. Internal Audit Control Framework

7.1 Audit Management Report

Mr Sullivan introduced the paper and gave an overview of the key matters for the Committee’s consideration including activities underway as part of the ANAO performance audits, revised internal approach to meet timeframes to requests from the ANAO and the current status of audits from the Internal Audit plan.

The Committee noted their familiarity with many of the items discussed in the report from previous meetings and sought an update on the recruitment for a new internal auditor. Mr Swainson confirmed that the recruitment is expected to go to market imminently.

Ms Collins clarified processes related to requests from the ANAO. The CEO and the Committee acknowledged the work of Mr Sullivan and the Audit and Risk Branch in the midst of the current enormous reform agenda underway.

8. External Audit Activity

8.1 ANAO Audit Activity Report

Ms Craswell, Ms Collins and Ms Gordon introduced the paper and gave an overview of the status of the financial statements and performance statements audit activity, current and future performance audit outlining the approach to the upcoming payment claims compliance audit and noted that the ANAO is finalising the Interim Controls Report for Parliament.

The Committee noted the ANAO Audit Activity update.

9. Meeting Close

9.1 Other Business

The Chair noted he will not be at the Darwin Board meeting and the Deputy Chair will give the update to Board.

The Committee noted that they had significant conversations regarding the audit findings and activity during the in camera session and are pursuing the results of these discussions outside of the Committee.

The Committee sought confirmation that the Board will receive further updates on the status of the PACE rollout and management confirmed that PACE is a standing item on the Board agenda.

The Committee also noted the work being undertaken by Ernst & Young (EY) in regard to audit recommendations and activities. The Chair and Deputy Chair noted they met with EY and that the detailed reports will come to the Committee. The Chair and Deputy Chair will continue to meet with EY and the internal auditor before each Audit and Risk meeting.

The Chair closed the meeting at 3.25pm.

9.2 Next meeting

The next Committee meeting will be held on Thursday 4 September 2024.