The Board of Stanwell Corporation Limited ('Stanwell') has established a committee of directors to be known as the Audit and Risk Management Committee ('Committee') with its objectives, composition, term of office and duties and responsibilities detailed below.
Objectives
The Audit objective of the Committee is to assist the Board in fulfilling its responsibilities relating to the accounting and reporting practices and operating activities of the Company. In addition, the Committee will:
- make recommendations to the Board in relation to the adequacy and integrity of Stanwell's accounting, administrative and internal controls and financial risk management;
- assist the Board in fulfilling their oversight responsibilities by reviewing and reporting to the Board matters relating to Stanwell's financial risk management including those associated with electricity trading, credit, liquidity, interest rate, exchange rate and commodity risks;
- maintain, by scheduling regular meetings, open lines of communications amongst members of the Board, the internal auditors and the external auditors to exchange information and views, as well as confirm their respective authority and responsibilities;
- oversee and appraise the quality and cost of audits conducted both by Stanwell's internal auditors and external auditors; and
- serve as an independent party to review the financial information presented by Management to Stanwell's shareholders and the general public.
The Risk Management objective of the Committee is to assist the Board in fulfilling its duties in relation to applicable law to introduce and maintain a Business Risk Management process which identifies, measures and provides the framework for the cost-effective control of those risks which have the potential to threaten assets, earnings or the essential products of Stanwell.
In addition, the Committee will assist the Board in establishing and maintaining processes to:
- oversight compliance with all applicable laws, regulations and company policies; and
- monitor management performance in establishing and maintaining an effective system of internal controls, business and financial risk management systems and the safeguarding of assets.
The Committee will:
- through the Board, clearly communicate Stanwell's risk management philosophy, policies and strategies to Management, employees and stakeholders;
- oversee the establishment, maintenance, operation and demonstration of an appropriate framework of business procedures and controls to ensure that corporate policies are implemented and followed; and
- maintain a 'risk aware' culture which reflects Stanwell's risk policies and philosophies.
Composition
The Committee shall be appointed by the Board of directors.
The Committee is to be comprised of at least two non executive directors, one of whom shall be appointed by the Board to be the Chairman of the Committee.
The Chairman of the Committee is to be someone other than the Chair of the Board. Each Committee member shall be independent of the senior management of Stanwell and free from any other relationships which might in the opinion of the Board be construed as an actual, potential or perceived conflict of interest.
Committee members are to have sufficient knowledge and understanding to allow them to discharge their duties as Committee members. Where the Committee considers additional independent financial expertise is required at the meetings, one or more external consultants may be engaged by the Chairman of the Committee for this purpose. An external consultant will not be a Director or a Committee member and will not have any voting rights.
The Committee shall have no executive powers with regard to its findings and recommendations. All executive powers are to remain with the Board.
Representatives of the internal auditor, external auditor and Management may attend all or part of each Committee meeting on the invitation of the Chairman of the Committee. When accepting this invitation to attend, the external auditors agree to take whatever action they deem necessary to preserve their independence.
At least once a year, the Committee will hold discussions with representatives of the internal auditor and external auditor without the presence of Management.
The Chairman of the Committee may call a specific Committee meeting if requested to do so by the Board or any director of the Board.
Any other director may attend Committee Meetings but will have no voting rights at the Committee Meeting.
Term of Membership
The Board shall determine, at its discretion, a member's term of membership of the Committee. Vacancies on or absences from the Committee shall be approved by the Board as required.
External Auditor
Under the Queensland Government Owned Corporations Act (1993), the external auditor of Stanwell is the Queensland Auditor-General.
The Queensland Auditor-General is required by section 76(1) of the Government Owned Corporations (Application of FA and A Act Provisions) Regulation 1997 to conduct external, independent audits in a manner considered appropriate, having regard to the character of the relevant internal control systems and recognised standards and practices.
The Auditor-General also has the capacity to conduct audits of performance management systems to assess whether stated objectives are being achieved economically, efficiently and effectively. Interim audit reports and year-end audit reports are to be tabled at Committee meetings as completed.
Meetings
Meetings shall be held in accordance with the Board calendar and as and when required by the Committee.
Stanwell's Company Secretary shall be responsible, in conjunction with the Chairman of the Committee, for preparing the Meeting Agenda and circulating the Agenda and Committee Memorandums to the Chairman of the Committee and members of the Committee, Management, the internal auditor and the external auditor.
The Company Secretary shall be responsible for keeping the minutes of the Meeting of the Committee, and circulating the minutes of each Meeting to the Board. The Company Secretary is not a member of the Committee.
The Chairman of the Committee shall report the findings and recommendations of the Committee to the Board after each Committee meeting.
A quorum shall be one Committee member who must be a Director. The Committee shall hold at least four meetings per annum and such additional meetings as the Chairman of the Committee shall decide in order to fulfil its duties. The Committee shall hold meetings at such times considered appropriate to fulfil its role and responsibilities.
Access
The Committee shall have the authority to seek any information it requires from any officer or employee of the Company (or its subsidiaries). The Committee (through the Chairman of the Committee) is authorised to consult independent experts for advice as it reasonably considers necessary to execute its duties and responsibilities.
The Internal Auditor and the External Auditor have the right to have unfettered access to the Committee through the Chairman of the Committee and/or the Chairman of the Board (if necessary).
Performance Evaluation
The Board shall review membership of the Committee and its performance and effectiveness on an ongoing basis.
Committee Duties and Responsibilities
The Committee shall consider any matters relating to the operations and activities of Stanwell's risk, governance and control environment and the role of internal audit and external audit that it deems to be desirable. In addition, the Committee shall examine any other matters referred to it by the Board.
Specific duties and responsibilities of the Committee are as follows:
Compliance and Audit - Control and Policies
- Determine whether Management has appropriately considered legal, financial and compliance risks as a part of Stanwell's risk assessment and Management arrangements;
- Review the effectiveness of the Legal Compliance System for monitoring Stanwell’s compliance with relevant laws, regulations and associated government policies and that appropriate actions have been taken to address any compliance breaches. The oversight will include being notified of non compliances with requirements relating to Stanwell’s financial risk management (including unauthorised trading), the remedial actions taken and evaluation whether associated risks have been appropriately mitigated as a result;
- Act as a forum for communication between the Board, Management, internal audit and external audit;
- Establish processes to evaluate the Stanwell’s exposure to corporate risk (including financial) and fraud and monitor the development and ensure the implementation of internal controls to contain such risks and frauds;
- Evaluate the adequacy and effectiveness of Stanwell's accounting, administrative, information technology and operating policies through active communication with Management, the internal auditor and the external auditor;
- Evaluate the adequacy and integrity of Stanwell's accounting control system and its information technology and operational controls and procedures, by reviewing reports from internal auditors, external auditors and other experts and monitor Management's responses and actions to correct any noted deficiencies;
- Monitor the standard of corporate conduct in areas such as arm's-length dealings and likely conflicts of interest;
- Review the policies and procedures for ensuring that Stanwell complies with various forms of federal, state and local government legislation; and
- Take an active interest in ethical considerations regarding Stanwell's policies and practices.
Financial Reporting
Review, provide input and feedback to the Board on:
- all significant accounting policy changes;
- the content of the Annual Report; and
- Stanwell's annual financial statements, including the external auditor's report.
Risk Management Process
The Committee will review:
- methods of identifying broad areas of risk and set parameters or guidelines for business risk review;
- the potential effect of identified risks on the business;
- methods of controlling identified risks taking care to correctly balance risk and control;
- the disaster recovery contingency planning process;
- the risk profiles and related risk tolerance levels / limits (including those related to electricity trading and financial risk management);
- risk management plans for, and methods of financing, identified exposures;
- the adequacy of policies related to Stanwell's financial risk management (including the managing of risks associated with electricity trading, credit, liquidity, interest rates, foreign exchange rates and commodities); and
- activities of the Trading Risk Management Committee, Trading Compliance Committee and the Financial Risk Management Committee.
Other matters
The Committee will:
- review any regulatory reports presented to Stanwell and ensure Management responds to them; and
- identify and direct any special projects or investigations deemed necessary.
Review of the Committee Charter
The Committee shall review its Charter at the Board's annual performance evaluation to ensure that the Committee Charter is in keeping with current best practice and the actual operations of the Committee and Board requirements.