Meeting of Audit & Risk Committee
Minutes
4 September 2024 9.00am to 1.30pm AEST Teams
Attendance
Committee members
- Dr Graeme Innes AM, Chair
- Ms Maryanne Diamond AO, Deputy Chair
- Dr Denis Napthine AO
- Mr Mark Darras
- Ms Meredith Allan
Board members
- Mr Kurt Fearnley AO — items 1 - 5
- Dr Richard Fejo
- Dr Peta Seaton AM
- Dr lan Watt AC
Management representatives
- Mr Samuel Porter, DCEO Enabling Services / Chief Operating Officer
- Mr Matthew Swainson, Acting DCEO, Governance, Risk & Legal
- Mr Stuart Fisher, Acting GM Risk, Audit and Resilience / Chief Risk Officer — all items except in camera
- Mr John Dardo, DCEO Integrity Transformation & Fraud Fusion Taskforce — items 4.1 & 6.4
- Mr David Gifford, Scheme Actuary — items 4.2 & 5.1
- Scott McNaughton, DCEO Service Delivery — items 4.1 & 7.1
- Penelope McKay, DCEO Partners, Providers and Home and Living — item 7.1
Other attendees
- Mr Chris Breitkreuz, Chief Financial Officer — items 4.1
- Mr Joshua Campbell, BM Agency Budget and Financial Control — item 4.1
- Kitsa Papadopoulos, GM Fraud Fusion Taskforce and Integrity Capability — item 4.1
- Ajay Satyan, Chief Information Officer — item 4.1
- Ms Analyn Vasquez, BM Audit — item 7.1
- Ms Ilana Idrus, Director Board & Governance (Secretariat) — all items except in camera
Administration
Mr Mick Turner, EO to Board Chair – 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 – items 6.3 - 10 Ms Prue Gordon, Senior Director, Performance Statements Audit Services Group, ANAO – all items except in camera
The Minutes are presented in the order that items were discussed. A quorum consists of 3 Committee members. A quorum was reached for all decisions made at this meeting.
1. Meeting open
1.1 Chair’s welcome, Acknowledgement of Country and apologies
The Chair opened the meeting at 9.00am and welcomed Members and NDIA management representatives to the meeting.
On behalf of the Committee, the Chair acknowledged the Traditional Owners and Custodians of the Country throughout Australia, in particular Tweed Heads, NSW that is the Ngandowal and Minyungbal people of the Bundjalung Country.
The Committee acknowledged Dr Watts appointment to the NDIA Board and noted that his attendance at today’s meeting was as a Board member not as specialist advisor to the Committee.
The Chair noted that Mr Fearnley was attending for part of the meeting, while Mr Turner would attend as observer to brief Mr Fearnley afterwards.
2. In camera
2.1 In camera – Committee Members
The Committee held an in camera session, with Mr Porter present from 9:13am until 9:31am.
Action 1: Board Secretariat to schedule the September 2025 Audit and Risk Committee for a full day with members attendance required in person.
3. Administration
3.1 Declarations of material interests
[redacted — s47]
Financial Reporting
s 47F - personal privacy
The Chair noted all declarations.
3.2 Minutes of the Audit & Risk Committee
The Committee endorsed the minutes of the meeting of 6 June 2024 Audit & Risk Committee Meeting & Out of Session resolution of 12 June 2024 meeting.
3.3 Matters arising
The Committee noted the Matters Arising and Ongoing report which identifies matters to be closed at the meeting and open matters, and agreed to close the matters proposed to be closed.
4. Financial Reporting
4.1 Financial Statements
ANAO representatives re-joined the meeting at 9.36am.
Mr McNaughton, Mr Satyan, Mr Campbell, Mr Breitkreuz and Ms Papadopoulos joined the meeting. Mr Dardo and Mr Gifford joined during the item.
Mr Porter introduced the item and provided an overview of the key matters for the Committee’s consideration as outlined in the paper, noting the ANAO were still considering their position on the statements and had not yet provided their Closing Letter to the Agency.
Ms Craswell confirmed that the ANAO intend to provide the Closing Letter to the Agency in the week ending 6 September 2024.
Mr Swainson provided an overview of the legal position of the NDIA’s scheme debt disclosure, noting a paper regarding NDIA Debt Management will be presented to the Board in September 2024. The Committee discussed issues surrounding the unquantifiable contingent liability and the ANAO’s concerns.
Mr Breitkreuz and Mr Campbell responded to questions regarding the sign off process for the Financial Statements.
The Committee discussed the ANAO’s material clearance of the key figures in the financial statements noted at point 3.14 of the paper. Ms Craswell confirmed that the items noted at item 3.14 of the paper had now been materially cleared, with the exception of scheme debt as a provision vs contingent liability.
The Committee discussed the current open Audit Findings and ANAO materiality threshold.
Action 2: Mr Breitkreuz to review in-kind wording in the financial statements notes to more clearly explain the movement between Gains and Revenue in relation to in-kind.
Action 3: Mr Dardo and Ms Papadopoulos to review the wording of the payment error disclosures in the financial statements and look to incorporate the wording from Audit and Risk Committee around positive errors that are not picked up by the current methodology, and also incorporate the mention of a future review of methodology to be undertaken.
[redacted — s47B] [redacted — s47C] [redacted — s47E(d)]
Participant Plan Provision & Residential Aged Care Payable
Action 4: Mr Breitkreuz to confirm the date the lodgement of the Financial Statements is required to be submitted to the Department of Finance. Action 5: Mr Campbell to draft an out of session paper with inputs on some of the new findings from the relevant business areas once the closing letter is received from ANAO. Action 6: Secretariat to arrange an out of session meeting of the Audit and Risk Committee to consider the Financial Statements.
Resolution: The Committee noted the NDIA’s 2023-24 Financial Statements, with a further out of session meeting to occur to endorse the Financial Statements for progression to the NDIA Board for approval and signing once the ANAO Closing Letter is received.
Mr Satyan, Mr Campbell, Mr Breitkreuz and Ms Papadopoulos left the meeting.
Mr Gifford introduced the item and provided an overview of the key matters for the Committee’s consideration as outlined in the paper.
The Committee discussed the Participant Plan Provision, including the reasons for applying the provision and how it is calculated. The Committee also discussed the Residential Aged Care (RAC) cross-billing arrangements for participants.
Resolution: The Audit Committee endorsed the Participant Plan Provision analysis for consideration by the Board.
Mr McNaughton left the meeting.
5. Performance Reporting
5.1 Performance Activity Update (including draft 2023-24 Performance Statements)
Mr Gifford introduced the item and gave an overview of the Agency’s performance in 2023-24. Mr Gifford confirmed the Agency achieved 9 of their targets, 4 were partly achieved and 5 were not achieved.
Mr Gifford noted that minor changes were required to the Statements prior to progression to the Board on 19 September 2024.
The Committee discussed the ANAO’s Interim Management Letter for the Annual Performance Statements audit, noting to date the Agency were yet to receive the ANAO’s Closing Letter for the 2023-24 Performance Statements.
The Committee also discussed the new Performance Measures in the 2024-25 Corporate Plan, which better reflect the Agency’s performance. The Committee considered whether the Statement of Preparation in the Agency’s 2023-24 Performance Statements should be updated to note the new Performance Measures and whether it should note that the Performance Statements are being audited by the ANAO for the first time.
Action 7: Management to review the language used in the Statement of Preparation in the 2023-24 Performance Statements, considering the new Performance Measures in the 2024-25 Corporate Plan and the fact they better reflect the Agency’s performance. Management to also consider the requirements of the Public Governance, Performance and Accountability Act 2013 (PGPA Act) and rules and requirements and policies in which the Board Chair is required to sign off.
Resolution:
The Committee agreed, subject to managements consideration of the requested amendments, to advise the NDIA Board that the annual performance statements accurately present the performance of the NDIA in the reporting period and comply with subsection 39(2) of the Public Governance, Performance and Accountability Act 2013 and section 16F of the Public Governance, Performance and Accountability Rule 2014.
The Committee recommends that the Chair of the Board sign the statement of preparation.
Mr Fearnley and Mr Gifford left the meeting.
6. Risk Oversight and Management
6.1 Chief Risk Officer Report (Q4 2023–24)
Mr Swainson and Mr Fisher introduced the item, advising the Committee of the upgrading of Strategic Risk 6 (SR6) from high to critical. The Chair requested that the Minister should be informed of the upgrading of SR6.
The Committee discussed the use of consultants for assurance work and independency.
The Committee discussed the Risk Management Architecture, with ANAO representatives making a request for a number of amendments to be made.
Action 8: Mr Fisher to amend the following in the Risk Management Architecture:
- Remove reference to ‘ANAO management’, to be replaced with ‘ANAO Coordination’ consistent with functional name.
Strategic Risk Settings 2024-25
Reference to the ANAO within the framework section of Architecture is to be removed, as they do not form part of the Agency’s assurance framework. Resolution: The Committee:
- Agreed that the Q4 FY2023–24 Chief Risk Officer Report (Q4 CRO Report) is an accurate account of NDIA risks and controls, and to remit relevant content to the next NDIA Board meeting on 19 September 2024.
- Noted the updated Risk Management Architecture for presentation at the next NDIA Board meeting.
- Discussed and endorsed the draft Risk Management Declaration 2023–24 for submission to the next NDIA Board meeting, subject to the requested amendments to the document as referenced by the ANAO.
Mr Fisher introduced the item and provided an overview of the key matters for the Committee’s consideration as outlined in the paper.
The Committee discussed the new Strategic Risk Appetite value statement (as per Attachment C of the paper), reflecting that it provides greater accountability and visibility and is reflective of the growing maturity of the Agency.
The Committee requested that management consider, and if possible, advise which of the Strategic Risk Mitigation Strategies are likely to be the main drivers for achievement of the 3-year Horizon rating.
Action 9: Management consider, and if possible, advise which of the Strategic Risk Mitigation Strategies are likely to be the main drivers for achievement of the 3-year Horizon rating. Resolution: The Committee endorsed the Strategic Risk settings for FY2024–25 and the draft NDIA Risk Appetite Statement 2024–25 for presentation to the NDIA Board.
Legal Risk Report
Ms Collins joined the meeting. Mr Swainson [redacted — s42]
Integrity Update
Mr Dardo joined the meeting and introduced the item, giving a detailed overview of the Integrity Program.
[redacted — s47C]
Action 11: Mr Dardo to arrange a briefing for Dr Watt on the Integrity work being undertaken. Mr Dardo left the meeting.
7. Internal Audit Control Framework
7.1 Audit Management Report
Mr McNaughton, Ms McKay and Ms Vaquez joined the meeting.
Mr Swainson introduced the paper, advising the Committee of the new format for the internal audit report is intended to give management and the Committee better visibility of status of the audit program and ANAO recommendations.
The Chair noted that he and Ms Diamond will meet with the internal auditor and Ernst and Young prior to each Audit and Risk Committee meeting. The Chair also advised the committee that the selection for new Chief Internal Auditor is ongoing.
Mr Fisher gave an overview of the key points outlined in the Audit Management Report and advised the Committee that the team would present the proposed changes to the reporting and governance framework at the November 2024 Audit and Risk Committee meeting.
Action 12: Management to present the revised Audit operating model (inclusive of new resources and functions) and related governance arrangements at the November 2024 Audit and Risk Committee meeting.
Resolution:
The Audit and Risk Committee discussed the update on internal and external audit activities and overdue issues and endorsed the draft 2024–25 to 2026–27 Internal Audit Plan, draft Internal Audit Charter and the new Audit Status Report.
Ms McKay and Ms Vaquez left the meeting.
7.2 Detailed briefing on Operation Royal
Mr Fisher introduced the item and provided an overview of the key matters for the Committee’s consideration as outlined in the paper. Mr Fisher noted the Operation Royal investigation remains ongoing and is due before the Federal Court week commencing 9 September 2024.
The Committee discussed the security measures and access controls put in place to prevent staff inappropriately accessing participant information.
Action 13: Management to provide a summary of operational enhancements post Operation Royal to be presented at November 2024 Audit and Risk Committee meeting (covering staff communications, ICT uplift , access provisioning, insider threat function, data breach protocols, etc.)
Mr McNaughton left the meeting.
8. External Audit Activity
8.1 ANAO Audit Activity Report
Ms Craswell introduced the item and gave an overview of the status of the Financial Statements and Performance Statements Audits. Ms Craswell advised that the Financial Statements Audit is close to finalisation and the Performance Statements Audit is progressing as expected.
The Committee discussed the progress of the Board Governance and Payment Claims Compliance Audits. Ms Collins noted that both audits are progressing well and engagement from the business area has been helpful.
Other Business
The Committee agreed that the Fraud enquiries from the ANAO would be addressed in camera with a formal response to the question to be submitted back to the ANAO by Friday 6 September.
- Other Business
The Chair noted the commitment of staff and management to gather all the material for today’s meeting. The Chair thanked Committee members and observers for their questions and constructive engagement with the papers.
Action 14: Ms McKenzie to provide a briefing on PACE for Dr Watt regarding issues put to Board and progress to date.
- Meeting Close
The Chair called the meeting to a close and the Committee held an in-camera session with Mr Porter present from 1:28pm.
Resolution: The Committee endorsed proposed responses to the ANAO fraud enquiries be provided to the ANAO in writing by COB 6 September 2024.