Audit of Australian Greenhouse Reporting

The Australian National Audit Office has released a report on the effectiveness of the "Administration of the National Greenhouse and Energy Reporting Scheme" (7 February 2012). The report is positive overall, suggesting some measures to improve integrity, compliance and streamline reporting. This report should be of interest to my ICT Sustainability students. Available are a brochure and the full
audit report.

Overall conclusion

14. The passing of the NGER Act in September 2007 created a new regulatory regime for Australia, with 775 constitutional corporations required to self assess and report their greenhouse gas emissions, energy use and production. This assessment and reporting was a critical prerequisite to underpin the proposed emissions trading scheme. It was also fundamental to the transparent reporting of Australia’s national and global commitments to reduce greenhouse gas emissions and energy use. Accurate and complete datasets are also integral to the integrity of Australia’s National Greenhouse Gas Inventory¹⁴ and other international reporting obligations under the Framework Convention on Climate Change.

15. The establishment of NGERS was a substantial and complex undertaking for DCCEE given the scale and broad coverage of the legislation across the Australian economy. The changing operating environment, particularly in relation to the proposed introduction of an emissions trading scheme in 2015 and the more recent carbon pricing mechanism, presented additional challenges for DCCEE that have impacted on the department’s implementation of NGERS. Nevertheless, DCCEE has established a workable greenhouse gas and energy reporting scheme that provides a more accurate measurement of greenhouse gas emissions and energy use within Australia when compared to the voluntary industry surveys and programs that were previously in place. DCCEE has established a positive relationship with the majority of registered corporations. In addition, over 50 per cent of corporations have indicated in their response to the ANAO’s survey that tangible benefits have been obtained from measuring their greenhouse gases and energy use.

16. Notwithstanding these positive findings and progress to date, key aspects of DCCEE’s administration require strengthening to improve the operation of NGERS. These include enhancing the integrity of reported greenhouse gas emission and energy use data; better managing compliance with the regulatory requirements; and streamlining reporting obligations as intended by COAG.

Data integrity

17. The quality and accuracy of reports submitted by corporations is critical for the overall integrity of the NGERS dataset. As the scheme relies on the self assessment and reporting of greenhouse gas emissions and energy data by corporations, a sound quality assurance process supported by a risk-based compliance program are key elements for effective administration. Currently, DCCEE does not verify¹⁵ the data reported by corporations. Rather the department’s quality assurance relies on a desk top review of submitted data.¹⁶ It is intended that verification will be a major component of DCCEE’s compliance and audit program in 2012. In 2009–10, DCCEE identified that nearly three quarters of submitted reports contained errors, with 17 per cent of reports containing significant errors. The importance of accurate greenhouse gas emission and energy use data will increase significantly with the introduction of a carbon price in 2012. DCCEE has taken steps to improve data quality, including initiating a report re-submission process and the introduction of the recent Data Quality Improvement Strategy, to better position the department to monitor the integrity of data provided by registered corporations.

18. The integrity of the data collected under NGERS also relies on the functionality and security of the IT system (OSCAR) used by entities with NGERS obligations, to report and store data. The IT security testing undertaken as part of this audit, identified significant security vulnerabilities within the system that increased the risk of an unauthorised person gaining access to, and threatening the integrity of NGERS data. The subsequent report made forty specific recommendations to improve security. Eight of these recommendations were classified as high priority. The results of this security testing highlight the importance of managing risks through sound change and release management controls for the update and enhancement of IT systems. The ANAO’s recommendations are being progressed by DCCEE.

Compliance management

19. As the regulator, DCCEE is responsible for ensuring that regulated entities have met legislative requirements. DCCEE has put in place a number of strategies designed to educate and train representatives from corporations and to encourage compliance with NGERS registration and reporting requirements. However, the implementation of the NGERS compliance and audit program has been slower than planned. Implementation was constrained by the redistribution of resources following the deferral of the emissions trading scheme, and the lower priority afforded to this work within the first three years of NGERS. Consequently, a systematic, risk-based audit and compliance program is still in the process of being implemented. There remains substantial work to be undertaken to establish a program that is capable of providing an appropriate level of assurance that corporations are complying with their obligations. The cost of compliance for corporations is also significantly higher than the estimates in the NGERS regulatory impact statement. Striking the appropriate balance between meeting compliance obligations and the associated cost for regulated entities will be an important consideration for DCCEE in implementing the NGERS compliance and audit program.

Streamlined reporting

20. NGERS was intended to reduce the duplication of reporting requirements across related programs and create a single national reporting framework. This legislated objective was reinforced by a Protocol agreed by Australian, state and territory governments in July 2009. There was initial progress under the Protocol to streamline reporting obligations, with DCCEE ceasing a number of national programs as well as voluntary company surveys. Despite this initial streamlining activity, progress effectively stalled from April 2010 when the Government deferred the introduction of an emissions trading scheme. As a consequence, multiple reporting obligations remain.¹⁷ Reporting obligations and the associated inefficient use of resources were frequently cited as a significant problem by respondents to the ANAO survey and during discussions with stakeholders. Of the corporations surveyed, 63 out of 108 respondents (58.3 per cent) stated there had been no reduction in reporting requirements. If the objectives of the agreed Protocol are to be realised, DCCEE will need to give priority to working with jurisdictions to streamline current reporting requirements.

21. The ANAO has made three recommendations designed to: better target departmental compliance efforts; improve data sharing with Australian Government and authorised state or territory agencies; and advance efforts to further streamline greenhouse gas emission and energy use reporting requirements. ...

From: Administration of the National Greenhouse and Energy Reporting Scheme: Audit brochure, Australian National Audit Office, 7 February 2012