We encourage public entities to adapt these examples to ensure that they are suitable and appropriate for their particular circumstances.

Example 1: Based on the Australian National Audit Office’s model charter for audit committees

Objective

The objective of the Audit Committee (the Committee) is to provide independent assurance and assistance to the [governing body/departmental chief executive] on [the entity’s] risk, control and compliance framework, and its external accountability responsibilities.

Authority

The [governing body/departmental chief executive] authorises the Committee, within the scope of its role and responsibilities, to:

• obtain any information it needs from any employee and/or external party (subject to their legal obligation to protect information);
• discuss any matters with the external auditor, or other external parties (subject to confidentiality considerations);
• request the attendance of any employee, including the Chief Executive, at Committee meetings; and
• obtain external legal or other professional advice, as considered necessary to meet its responsibilities, at [the entity’s] expense.

Composition and tenure

The Committee will consist of at least three and not more than five members appointed by the [governing body/departmental chief executive]. The majority of the Committee will comprise independent members.

The [governing body/departmental chief executive] will appoint the chairperson of the Committee.

Members will be appointed for an initial period not exceeding three years after which they will be eligible for extension or re-appointment, after a formal review of their performance.

The Chief Executive, the Chief Finance Officer, and the Head of Internal Audit will not be members of the Committee, but may attend meetings as observers as determined by the Chairperson.

The members, taken collectively, will have a broad range of skills and experience relevant to the operations of [the entity]. At least one member of the Committee should have accounting or related financial management experience with an understanding of accounting and auditing standards in a public sector environment.

Role and responsibilities

The Committee has no executive powers.

The Committee is directly responsible and accountable to the [governing body/departmental chief executive] for the exercise of its responsibilities. In carrying out its responsibilities, the Committee must at all times recognise that primary responsibility for management of [the entity] rests with the Chief Executive.

The responsibilities of the Committee may be revised or expanded in consultation with, or as requested by, the [governing body/departmental chief executive] from time to time.

[Entities may need to refer to the terms of reference of other related committees to provide a full picture of the governance framework.]

Risk management

The Committee’s responsibilities are to:

• review whether management has in place a current and comprehensive risk management framework, and associated procedures for effective identification and management of [the entity’s] financial and business risks, including fraud;
• review whether a sound and effective approach has been followed in developing strategic risk management plans for major projects or undertakings;
• review the effect of [the entity’s] risk management framework on its control environment and insurance arrangements;
• review whether a sound and effective approach has been followed in establishing [the entity’s] business continuity planning arrangements, including whether disaster recovery plans have been tested periodically; and
• review [the entity’s] fraud control plan and satisfy itself that [the entity] has appropriate processes and systems in place to capture and effectively investigate fraud-related information.

Control framework

The Committee’s responsibilities are to:

• review whether management’s approach to maintaining an effective internal control framework, including over external parties such as contractors and advisers, is sound and effective;
• review whether management has in place relevant policies and procedures, and that these are periodically reviewed and updated;
• determine whether the appropriate processes are in place to assess, at least once a year, whether policies and procedures are complied with;
• review whether appropriate policies and procedures are in place for the management and exercise of delegations;
• consider how management identifies any required changes to the design or implementation of internal controls; and
• review whether management has taken steps to embed a culture which is committed to ethical and lawful behaviour.

[Entities may wish to include consideration of controls over service performance information.]

External accountability

The Committee’s responsibilities are to:

• review the financial statements and provide advice to the [governing body/departmental chief executive] (including whether appropriate action has been taken in response to audit recommendations and adjustments), and recommend their signing by the [governing body/ departmental chief executive];
• satisfy itself that the financial statements are supported by appropriate management sign-off on the statements and on the adequacy of the systems of internal controls;
• review the processes in place designed to ensure that financial information included in [the entity’s] annual report is consistent with the signed financial statements;
• satisfy itself that [the entity] has appropriate mechanisms in place to review and implement, where appropriate, relevant external audit reports and recommendations; and
• satisfy itself that [the entity] has a performance management framework that is linked to organisational objectives and outcomes.

[Entities may wish to include responsibilities regarding other accountability documents and reporting of service performance information.]

Legislative compliance

The Committee’s responsibilities are to:

• determine whether management has appropriately considered legal and compliance risks as part of [the entity’s] risk assessment and management arrangements; and
• review the effectiveness of the system for monitoring [the entity’s] compliance with relevant laws, regulations, and associated government policies.

Internal audit

The Committee’s responsibilities are to:

• act as a forum for communication between the Chief Executive, senior management, and internal and external auditors;
• review the internal audit coverage and annual work plan, ensure that the plan is based on [the entity’s] risk management plan, and recommend approval of the plan by the [governing body/departmental chief executive];
• advise the [governing body/departmental chief executive] on the adequacy of resources to carry out the internal audit, including completion of the approved internal audit plan;
• oversee the co-ordination of audit programmes conducted by the internal and external auditors and other review functions;
• review all audit reports and provide advice to the [governing body/departmental chief executive] on significant issues identified in audit reports and action taken on issues raised, including identification and dissemination of good practice;
• monitor management’s implementation of the internal auditor’s recommendations;
• review the internal audit charter to ensure that appropriate organisational structures, authority, access, and reporting arrangements are in place;
• provide advice to the [governing body/departmental chief executive] on the appointment of the Head of Internal Audit (in the case of an in-house internal audit function);
• recommend to the [governing body/departmental chief executive] the appointment of the internal auditor;
• periodically review the performance and effectiveness of the internal auditor; and
• be satisfied that any dismissal of the Head of Internal Audit is based on proper and appropriate reasons, to safeguard the independence of the audit function.

External audit

The Committee’s responsibilities are to:

• act as a forum for communication between the Chief Executive, senior management, and internal and external auditors;
• provide input and feedback on the financial statements and the audit coverage proposed by the external auditor, and provide feedback on the audit services provided;
• review all external plans and reports for planned or completed audits and monitor management’s implementation of audit recommendations;
• oversee the co-ordination of audit programmes conducted by the internal and external auditors and other review functions: and
• provide advice to the [governing body/departmental chief executive] on action taken on significant issues raised in relevant external audit reports and good practice guides.

Projects

[Entities may wish to include overseeing major projects within the role of the audit committee.]

Governance

[Entities may wish to include responsibilities for reviewing governance frameworks and processes.]

Responsibilities of Committee members

Members of the Committee are expected to:

• 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 core of the issue, and pursue independent lines of enquiry.

Reporting

The Committee will regularly, but at least once a year, report to the [governing body/departmental chief executive] on its operation and activities during the year.

The report should include:

• a summary of the work the Committee performed to fully discharge its responsibilities during the preceding year; and
• a summary of [the entity’s] progress in addressing the findings and recommendations made in internal and external audit reports, and the Auditor-General’s reports (if applicable).

The Committee may, at any time, report to the Chief Executive or the [governing body] 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 Chief Executive or the [governing body].

Administrative arrangements

Meetings

The Committee will meet at least four times each year. A special meeting may be held to review [the entity’s] annual report.

The chairperson is required to call a meeting if requested to do so by the [governing body/departmental chief executive], or another Committee member.

A meeting plan, including dates and agenda items, will be agreed by the Committee each year. The meeting plan will cover all of the Committee’s responsibilities as detailed in this charter.

Attendance at meetings and quorums

A quorum will consist of a majority of Committee members. Where there is more than one independent member on the Committee, a quorum will include at least one independent member.

Meetings can be held in person, by telephone, or by video conference.

The Head of Internal Audit and external audit representatives will be invited to attend each meeting, unless requested not to do so by the chairperson of the Committee. The Committee may also ask the Chief Finance Officer or other employees to attend Committee meetings or participate for certain agenda items.

The Committee will meet separately with both the internal and external auditors at least once a year.

The Chief Executive may be invited to attend Committee meetings to participate in specific discussions or provide strategic briefings to the Committee.

Secretariat

The Chief Executive will appoint a person to provide secretariat support to the Committee. The Secretariat will ensure that the agenda for each meeting and supporting papers are circulated, after approval from the Chairperson, at least one week before the meeting, and ensure that the minutes of the meetings are prepared and maintained. Minutes must be approved by the chairperson and circulated within two weeks of the meeting to each member and Committee observers, as appropriate.

Conflicts of interest

Once a year, Committee members will provide written declarations to the [chairperson of the governing body/departmental chief executive] stating they do not have any conflicts of interest that would preclude them from being members of the Committee.

Committee members must declare any conflicts of interest at the start of each meeting or before discussion of the relevant agenda item or topic. Details of any conflicts of interest should be appropriately recorded in the minutes.

Where any member is deemed to have a real, or perceived, conflict of interest at a Committee meeting, it may be appropriate that they are excused from Committee deliberations on the issue where the conflict of interest exists.

Induction

New members will receive relevant information and briefings on their appointment to assist them to meet their Committee responsibilities.

Assessment arrangements

The chairperson of the Committee, in consultation with the [chairperson of the governing body/departmental chief executive], will initiate a review of the performance of the Committee at least once every two years. The review will be conducted on a self-assessment basis (unless otherwise determined by the [chairperson of the governing body/departmental chief executive]) with appropriate input sought from the Chief Executive, the internal and external auditors, management, and any other relevant stakeholders, as determined by the [chairperson of the governing body/departmental chief executive] in discussion with the chairperson of the Committee.

Review of charter

At least once a year, the Committee will review this charter. This review will include consultation with the [governing body/departmental chief executive].

Any substantive changes to the charter will be recommended by the Committee and formally approved by the [governing body/departmental chief executive].

Example 2: Charter for a departmental audit committee

Introduction

The Audit Committee has been established by the Chief Executive to provide independent advice to assist the Chief Executive discharge their responsibilities for the maintenance of systems of internal control, responsible resource management, and the management of risk.

It is expected that the Audit Committee’s role will result in improved management and therefore organisational performance through the provision of alternative perspectives and informed independent advice.

The primary benefit of the Audit Committee is its independence and objectivity in relation to management. The Audit Committee should not assume any management functions nor should management be allowed to exert inappropriate influence over the work of the Audit Committee.

Purpose

The Audit Committee (the Committee) is an independent Committee of [name of department] (the Department), reporting directly to the Chief Executive.

The role of the Committee is to assist the Chief Executive to fulfil their governance duties.

The purpose of the Committee is to provide independent advice and observations to the Chief Executive on the quality of:

• risk management processes;
• internal control mechanisms;
• internal and external audit functions;
• integrity of performance information;
• the governance framework and processes; and
• policies and processes adopted to ensure compliance with legislation, policies, and procedures.

The Committee is advisory only and should not assume any management functions or make decisions that are the statutory responsibility of the Chief Executive.

Membership

The Chief Executive will appoint the chairperson and will appoint other Committee members in consultation with the chairperson.

The Chief Executive may, after consulting the chairperson, remove a Committee member. In the event of the non-performance of the chairperson, the Chief Executive will consult at least two other Committee members before replacing the chairperson.

The Committee will have four Committee members and comprise a majority of external members. The independent Committee members will collectively have risk management, financial, and broad public sector expertise and experience.

The Head of Internal Audit and representatives from the external auditors may attend meetings as observers. The Committee has the right to request that they do not attend certain meetings or parts thereof.

Terms of appointment

Committee members will be appointed for a term of three years initially but may be reappointed for up to two further years. This is to enable continuity in membership of the Committee.

Members’ terms should be staggered so that not all members are due for reappointment in the same year.

Duties and responsibilities

General duties

The Committee will:

• seek to understand the key business activities of the Department and the risks which relate to each of these;
• maintain an independent perspective in all its work; and
• report to the Chief Executive on any matter that it sees fit to do so.

Risk management and internal control

The Committee will:

• satisfy itself that appropriate internal processes and procedures and risk management are in place and are operating effectively;
• review compliance with relevant regulatory and statutory requirements;
• monitor implementation of the Department’s Code of Conduct/ethical policies; and
• review and monitor the Department’s policies and practices on sensitive issues, including sensitive expenditure.

The chairperson will monitor the travel and other reimbursed expenses of the Chief Executive.

Audit functions

Internal audit

The Committee will:

• recommend for the Chief Executive’s endorsement the structure of the internal audit programme and recommend adequate resource allocation;
• monitor effective implementation of the internal audit programme and timely implementation of endorsed recommendations; and
• identify issues that ought to be subject to audit, and recommend audit where appropriate.

External audit

The Committee will:

• discuss with the external auditor the external auditor’s audit plan and the nature and scope of the audit;
• discuss issues arising from the interim and final audits, and any matters the external auditor may wish to discuss;
• consider the external auditor’s reports;
• monitor the implementation of any recommendations made by the external auditor; and
• monitor and review the independence of the external auditor.

External reporting/performance reporting

The Committee will review the annual report before it is signed by the Chief Executive, focusing particularly on:

• any changes in accounting policies and practices;
• major judgemental areas;
• significant adjustments resulting from the audit;
• compliance with financial reporting and other applicable standards;
• compliance with statutory requirements; and
• other reports prepared by management for release to stakeholders, such as any summary financial reports.

Governance framework and processes

The Committee will:

• review the governance framework and processes of the Department from time to time; and
• provide advice and recommendations to the Chief Executive on the governance framework and processes.

Meetings

Frequency

It is anticipated that the Committee will meet three or four times each year, but it may hold additional meetings as determined by the chairperson in order for the Committee to fulfil its duties and responsibilities.

Quorum

A quorum is two Committee members, who must be independent Committee members.

Additional attendees

The Committee may invite various parties to attend its meetings. These parties may include other members of senior management or line managers as appropriate. When the Committee is considering a report, the manager responsible for the area under review will be given the opportunity to discuss the report with the Committee.

Meetings without management present

The Committee shall meet with the external auditor without management present at least annually.

The Committee shall meet with the Chief Internal Auditor without management present at least twice a year.

Decision-making and voting

It is expected that decisions of the Committee shall be arrived at by consensus.

If it is not possible to arrive at a consensual decision, a vote may be taken at the meeting. The matter will be decided by a majority vote.

Agenda

The agenda will be agreed to by the chairperson before the meeting. The agenda and papers will normally be prepared and distributed by [position] at least one week before meeting dates.

Meeting minutes

Minutes will be kept of all meetings and minutes will be distributed to all Committee members. Minutes will be reviewed by the chairperson before they are circulated and endorsed by the Committee at the following meeting.

The minutes, excluding any parts that the Committee considers confidential, will be made available to the Department’s executive management team after each meeting. Relevant extracts of the minutes will be made available to Department employees as determined by the Committee.

Confidentiality

Committee members have a responsibility to treat all information with appropriate confidentiality. This includes matters tabled or discussed at the Committee meetings, as well as any additional issues that are raised outside meetings.

Conflicts of interest

Committee members are responsible for declaring a conflict of interest, whether pecuniary or non-pecuniary. In all cases where a conflict of interest exists, or may be reasonably perceived to exist, the chairperson will rule on whether the member, having disclosed the interest:

• may participate in the discussion;
• may remain in the meeting room but not participate in the discussion; or
• should leave the room and be excluded from any consideration.

Right of access

The Committee shall, through the chairperson, have access to all employees of the Department. The Committee shall have the right to seek independent professional advice when considered necessary and the power to obtain information from management and to consult directly with the Chief Internal Auditor and external auditor.

Monitoring Committee performance

The Committee will ensure that an assessment of its performance and charter is conducted at least once every two years, to ensure that it continues to be focused, effective, and provides a quality service to the Chief Executive.

DATE