Mandatory & Voluntary Reporting – emerging trends and managing both

Chair: Wayne Wescott, Member, GRI Australian Advisory Group

Peter McVay, Audit Manager, Performance Audit, Australian Audit OfficeKate Phillips, Senior Associate, Baker & McKenzieTim Youngberry, First Assistant Secretary, Financial Reporting and Cash Management, Department of Finance and Deregulation

AUDIT OF THE ADMINISTRATION OF THE NATIONAL GREENHOUSE AND

ENERGY REPORTING SCHEME (NGERS)

Peter McVay Senior Director

Australian National Audit Office27 March 2012

Background

National Greenhouse and Energy Reporting Act 2007 came into effect 1 July 2008.

Administered by Dept of Climate Change & Energy Efficiency.

Aims to introduce a single national reporting framework for data relating to greenhouse gas emissions, and energy production.

2011 - 775 corporations met threshold levels of emissions for registration.

Background and context

The 100 corporations with the largest direct greenhouse gas emissions (Scope 1) account for over 90% of total direct emissions reported.

Audit objective

The objective of the audit was to assess the effectiveness of DCCEE’s implementation and administration of NGERS.

The audit examined whether DCCEE had effectively implemented the scheme; managed the integrity, security and quality of scheme data; streamlined reporting arrangements in line with the agreement by governments and monitored industry compliance with the provisions of the NGER Act.

Audit conclusions

substantial and complex undertaking. challenging operating environment - CPRS 2010-11,

carbon price 2012, emissions trading scheme in 2015. workable scheme - a more accurate measurement of

greenhouse gas emissions and energy use compared to previous surveys and programs.

a positive relationship with the majority of registered corporations. Over 50% of corporations indicated tangible benefits have been obtained from measuring their GH gases and energy use.

Nevertheless, key aspects of administration require strengtheningThese include: enhancing the integrity of reported greenhouse

gas emissions and energy use data; improving data security; better managing compliance with the regulatory

requirements; and streamlining reporting obligations as intended

by COAG.

Data integrity

Data integrity critical to the objectives of the NGER Act. Data quality of reports over the first two years of NGERS:

material errors and gaps in the data; Year 1 (2008 09) more than half of all reports to the department ‑

contained minor mistakes and about one per cent had major errors; and

Year 2 (2009 10) the department undertook a more in-depth ‑validation process. Of the 545 reports analysed, 72% contained errors - 17% with serious material errors.

manual spreadsheet problem, poor record keeping, problems with contractors and lack of materiality threshold.

Resubmission process and data quality improvement strategy introduced by DCCEE to fix problems.

Data security

Strict provisions in the legislation to protect data security. ANAO used IT consultant and conducted a penetration test. 40 technical recommendations to DCCEE. 8 recommendations classified as high priority.

Recommendations being implemented by DCCEE. Security concerns related to matters such as:

formalising the security patch management process; hardening the protection of the servers running online reporting; limiting administrator access and privileges within the online

reporting environment; and ensuring that there is an adequate security around the network of

private service providers with administrator access.

Streamlining Protocol Streamlining Protocol signed by Prime Minister and Premiers in

July 2009. designed to reinforce objective of NGER Act to reduce

duplication and create a single national reporting framework (e.g. 15 reports to reduce to one).

No progress with most state governments after two years; (Only QLD, NT & ACT have agreed; up to 10 reports still required).

Tensions over: potential conflicts in Commonwealth and state legislation; controls over the release of sensitive, commercial-in-confidence

information; limited warranties over the quality of data; and costs involved for state agencies in meeting Commonwealth

confidentiality and disclosure standards.

Compliance

Implementation of compliance and audit slower than planned and constrained by limited resources.

DCCEE have been effective in achieving compliance with registration requirements and in achieving a high rate of reporting.

2006 cost of compliance estimated at up to $10,000. 2011 - for most corporations capital costs were from

$5000 and recurrent costs from $1500. The top 100 corporations (in terms of emissions)

reported capital costs of up to $3 million and recurrent costs up to $1.5 million.

Recommendations

Three recommendations were made to: reduce the compliance costs for industry - consider an

appropriate materiality threshold(s) for reporting by registered corporations.

address NGERS data sharing and access issues through a forum of relevant stakeholders and complete outstanding memoranda of understanding with data users.

meet the objectives of Streamlining Protocol by involving relevant state/territory jurisdictions in progressing the agreed objective; and consulting with industry representatives to implement streamlining initiatives and to identify further streamlining opportunities.

All recommendations were agreed by DCCEE.

Implications for non financial reporting in Australia

Streamlining and integration; Commonwealth/State cooperation; Data integrity and assurance; Focus on material matters; Managing costs of compliance; Recognising tangible benefits from measuring energy use

and production; and GRI as the basis for greater consistency in reporting

globally?