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Compliance priorities companion for auditors

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07 February 2019

Underpinned by the Compliance policy for education, monitoring and enforcement activities, the Clean Energy Regulator 2018–19 compliance priorities identify our focus areas for 2018–19.

The compliance priorities aim to increase our client’s awareness and willingness to comply voluntarily to meet our agency objectives, and highlights particular areas that we will focus on for each of the schemes we administer.

This companion piece has been developed to guide auditors in addressing the 2018–19 compliance priorities. The Clean Energy Regulator expects registered greenhouse and energy auditors to address these priorities in all assurance engagements carried out under our schemes.

Auditors in doubt about requirements under our schemes, or require assistance with legislative interpretation, should contact us at the Clean Energy Regulator.

Downloadable version of the companion piece

documentasset::Compliance priorities companion for registered greenhouse and energy auditors

Focus areas for auditors

Emissions Reduction Fund

To ensure that Emissions Reduction Fund regeneration projects receive Australian Carbon Credit Units (ACCUs) for genuine and additional abatement by:

Focus areaExpectations on auditorsRelevant resources
Expecting scheme participants to use field data as well as available geospatial algorithms to support their claims for ACCUs.

Auditors should have regard to the relevance and accuracy of field data and available geospatial algorithms including:

  • is there sufficient evidence to demonstrate that project activities have resulted in regeneration, or are likely to result in regeneration
  • are the project activities being undertaken in line with the intent of the method
  • is the project likely to achieve abatement in the medium term, and
  • has the data been derived correctly from the right activities.

Additionally, for all claims going forward auditors will need to test whether Clean Energy Regulator guidance has been applied in determining Carbon Estimated Areas, forest cover and forest potential.

Checking claims with high resolution imagery.

The Clean Energy Regulator is always looking to use the most granular spatial imagery available, including high resolution or field sampling spatial imagery. Where more than one imagery data source is available, auditors are encouraged to refer to all sources as appropriate. Auditors should also ensure that they consider relevant spatial imagery available under each method.

High resolution imagery can also be used to spot check compliance systems developed by reporters. Auditors are encouraged to refer to the Carbon Farming Initiative Mapping Guidelines for further details of spatial mapping requirements.

Ensuring compliance with record keeping obligations.

Auditors should ensure they note all observations of record keeping failures in Part B of the audit report.

Auditors should have regard to the specific record keeping requirements, as outlined in each method, as well as overarching requirements in the CFI act.

Auditors should also ensure that reporters maintain accurate and relevant records relating to the eligibility and calibration of monitoring equipment.

Where critical information is absent auditors should use their judgement in appropriately modifying their opinion.

Refusing over-claims and investigating where false and misleading information is provided. Where proven, the agency will consider options including removal from the scheme on fit and proper person grounds, relinquishment of ACCUs, pursuit of debts and court action.

Auditors should ensure the risk of fraud is considered in the planning and testing of any audit, where any instances of false and misleading information is provided, it should be immediately reported to the Clean Energy Regulator and included in the audit report.

Auditors should also consider the arrangement between proponents and agents and include the risk of agent committed fraud as part of the planning and testing of an audit.

Whilst an over claim may be immaterial, we expect that this will be reported in Part B of the audit report.

Additional Emissions Reduction Fund focus areas include:

Focus areaExpectations on auditorsRelevant resources
Confirming that the proponent has the legal right to conduct the project and be issued ACCUs by verifying on a risk based sample consents from landholders for sequestration projects.

Auditors should place a high priority on ensuring consents are given and demonstrate professional scepticism in testing any documents related to legal right and consent. Auditors must confirm with relevant parties that consent is obtained from all relevant parties and use their judgement as to when this should be undertaken.

Auditors should also be mindful that the arrangements for legal right and native title may change over the life of a project. Auditors will need to ensure that they include legal right and native title testing as part of subsequent audits and should not be relying on the testing conducted in previous audits.

Failure to obtain appropriate legal right or consent may be a material finding in an audit and auditors should modify their opinions accordingly.

Ensuring that Emissions Reduction Fund contract deliveries are made on time by pursuing buyer’s market damages where the Clean Energy Regulator and the contractor cannot agree to new delivery schedules.

Not directly applicable to audit activities. However, contract delivery dates may encourage project proponents to seek truncated audit timeframes.

Auditors must ensure they have sufficient time to effectively undertake an audit.

Contract delivery timeframes should be not accepted as a reason for an unreasonably short timeframe to conduct an audit.

National Greenhouse and Energy Reporting Scheme

To support the consistency and accuracy of emissions and energy data in the oil and gas, coal mining, power generation and transmission, and landfill sectors by:

Focus areaExpectations on auditorsRelevant resources
Promulgating guidance and checking through desktop assessments and audits that our approach is reflected in reports from these sectors.

Auditors should use guidance and are encouraged to incorporate these guides and directions in the planning and conduct of audits. If reporters are not reporting consistent with the guidance, auditors will need to ensure that the reporters can demonstrate that they are reporting consistent with the legislation. If a reporter’s interpretation of the legislation is inconsistent with the guidance, auditors will need to document in Part B of the audit report how they agreed it was compliant with the legislation.

Auditors should note that these guides are for industry-wide application and case specific matters may arise that still require close consideration of the legislative requirements, for which the guidance may not have specific information.

To improve overall quality of reporters’ data by:

Focus areaExpectations on auditorsRelevant resources
Tightening our resubmission policy, and considering the use of fines and other compliance tools for reporters with a history of submitting inaccurate data.

Where available, auditors should have regard to a reporter’s historical submission records. Where a reporter has a history of non-compliance or submitting inaccurate data, this information should be included as part of the auditor’s risk assessment process. Auditors will need to design appropriate assurance procedures to reduce any identified risks to an acceptable level.

Safeguard mechanism

To assess the accuracy of claims for calculated baselines for safeguard facilities by:

Focus areaExpectations on auditorsRelevant resources
Engaging early with responsible emitters identified as having potential excess emissions situations to work through information they will provide in support of emissions management applications.

Auditors will need to be aware of any engagement between the responsible emitter and the Clean Energy Regulator, with particular attention to any advice provided on:

  • production variables
  • how to structure an application, and
  • eligibility requirements for applications made under the ‘inherent emissions variability” and “significant expansion” criteria.

Auditors are encouraged to continue engaging with the Clean Energy Regulator on any advice provided to a responsible emitter that is unclear, or that does not appear to have reached an appropriate resolution.

Auditors should also note that the initial calculated baseline criteria is no longer available for applications made after 31 October 2017. Applications can be made under the following criteria:

  • New facility criteria
  • Inherent emissions variability criteria
  • Significant expansion criteria.

To encourage compliance for 2017-18 by:

Focus areaExpectations on auditorsRelevant resources
Encouraging responsible emitters to be proactive in planning their response to any excess emissions management situation. This includes early engagement with the agency on obtaining information about the legislative options available to them.See safeguard mechanism expectation above.

Renewable Energy Target

Renewable Energy Target Liability

To ensure that embedded generators on mine sites are properly identifying and reporting as RET liable entities we will:

Focus areaExpectations on auditorsRelevant resources
Cross match RET liable entities against National Greenhouse and Energy Reporting scheme reporters, and ask relevant entities with power stations to establish the existence of self-generation/use exemption under the RET where they have not disclosed as a RET liable entity.

In audits of RET liable entities and power stations, auditors should ensure that they consider self-generation as a key risk area including how self-generation is recorded and considered.

Any instances of self-generation should be noted in the audit report.

Impose liability and relevant penalties back four years as necessary.Auditors should consider the potential for any identified non-compliances to have occurred in previous reporting periods and include this information in Part B of the audit report.
Assess claims for self-generation exemptions in the calculation of relevant acquisitions.Auditors should note any incidences of self-generation in the audit report.
Actively pursue any outstanding shortfall debts.Not relevant to auditors.

Large-scale Renewable Energy Scheme

To ensure that only eligible renewable generation receives the right number of large-scale generation certificates (LGCs) by:

Focus areaExpectations on auditorsRelevant resources
Ensuring power stations are operating in accordance in legislative requirements.Auditors should be aware of the accreditation requirements for power stations and have particular regard to the documentation required for accreditation.
Running sophisticated analytics across claims, including using Australian Energy Market Operator (AEMO) and other third party dataAuditors are encouraged to ensure that claims align with AEMO and other third party data available to the auditor.
Requiring scheme participants to take greater accountability for the quality of data provided and accuracy of LGC creations.Auditors should assess data quality in relation to requirement for data provision and report on it.
Refusing over-claims and investigating where false and misleading information is provided. Where proven, options including removal from the scheme and court action will be considered.Auditors should ensure the risk of fraud is considered in the planning and testing of any audit. Where any instances of false and misleading information is provided, it should be immediately reported to the Clean Energy Regulator and included in the audit report.

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