Audit and Risk Committee Charter March 2025

Objectives

The Audit and Risk Committee (Committee) assists the Governance Board (as the accountable authority of the Reserve Bank of Australia (RBA)) to fulfil certain obligations under the Reserve Bank Act 1959 and the Public Governance, Performance and Accountability Act 2013 (PGPA Act).

The functions of the Committee include reviewing the appropriateness of the RBA’s:

  • financial reporting, including the financial statements in the annual report
  • performance reporting, including the annual performance statement in the annual report
  • systems of risk oversight and management, including assisting the Governance Board to oversee the effectiveness of the RBA’s risk management and compliance framework
  • system of internal control.

The Committee has a role in overseeing the risks that could hamper the provision of quality and timely advice to the Monetary Policy Board and the Payments System Board, and the implications of the decisions of those Boards for the RBA’s reputation, finances or otherwise, but not the appropriateness of the decisions made by those Boards.

Membership

The Chair and other members of the Committee are appointed by the Governance Board. The Committee comprises at least three members, none of whom is an employee or executive of the RBA.

The Chair is a non-executive member of the Governance Board. Other members of the Committee comprise at least one non-executive member of the Governance Board and may include external appointments. Each of the members of the Committee must develop an appropriate level of understanding of the RBA’s operating environment and have appropriate qualifications, knowledge, skills or experience to assist the Committee to perform its functions. The collective experience of the Committee members should include knowledge of accounting and auditing standards and financial management, an understanding of the Commonwealth performance framework and reporting expectations, and risk management and audit expertise.

Committee members are appointed for a term coinciding with their appointment to the Governance Board or, in the case of external members, for a term of five years in the normal course, with a maximum of two terms.

All members of the Governance Board are entitled to attend Committee meetings and, when they elect to do so, will receive copies of Committee papers.

Meetings

The Committee will meet at least four times each calendar year. Additional meetings may be convened by the Chair, as required.

A quorum of the Committee is two members unless the Committee has more than four members, in which case a quorum is three members.

The Secretary of the RBA is Secretary of the Committee and will prepare minutes of meetings, to be approved by the Chair and other members of the Committee.

Representatives from internal audit and external audit and other members of management are expected to participate in Committee meetings as appropriate at the invitation of the Chair. The following executives are expected to attend meetings: the Deputy Governor, Chief Operating Officer, Chief Financial Officer, Chief Risk Officer (CRO), Head of Audit and the General Counsel.

Decisions

Within the scope of its responsibilities, decisions and conclusions of the Committee are generally reached by consensus. Where consensus cannot be achieved, decisions are made by majority of those present, but if an even number of members is present and there is no majority, then the decision will be made by the Chair of the meeting.

Authority

The Committee is authorised to seek any information or explanations from management that are necessary to carry out its responsibilities. It may also seek assistance from the internal or external auditors and other external experts at the RBA’s expense. The engagement of any external advisor will require the prior approval of the Chair of the Committee unless the Chair has a conflict of interest or obtaining that approval is not reasonably practicable in the relevant circumstances.

The Committee may raise directly with the Governance Board or the Governor any issues it considers relevant.

Conflicts of interest

Members of the Committee will be asked to declare any potential conflicts of interest in relation to the agenda items at the start of every meeting and the Committee will respond appropriately to declarations in particular circumstances. More broadly, members will inform the Chair as soon as possible if a conflict of interest arises or if members perceive that a conflict of interest might arise.

Responsibilities

The responsibilities of the Committee include, but are not limited to, the following:

Financial reporting

  • review the implementation of key accounting policies and the appropriateness of the RBA’s annual financial statements, including assurances provided by management, the opinion provided by the external auditor, and information required for the Australian Government’s consolidated financial statements
  • review areas of significant judgement in the financial statements
  • review the effect of changes in accounting standards and requirements and any other significant accounting and financial reporting issues, including from changes in the RBA’s operations
  • when satisfied with the financial statements and the associated reporting obligations, recommend to the Governance Board that it resolve to approve the statements and give them to the Auditor-General under the PGPA Act.

Performance reporting

  • review the appropriateness of the annual performance statement prepared under section 39 of the PGPA Act, including assessments and measures of performance
  • review the appropriateness of the systems and processes for preparation of the annual performance statement and inclusion in the annual report
  • convey the conclusions of its review of the annual performance statement to the Governance Board prior to its finalisation and publication.

Risk oversight and management

  • review, and advise the Governance Board in relation to:
    • the effectiveness of the RBA’s risk and compliance management framework, including systems of risk oversight and management. This involves monitoring the RBA’s risk culture and reviewing and recommending the Risk and Compliance Management Framework, Risk Management Policy and Risk Appetite Statement to the Governance Board for approval
    • regular assessments of the key risks to which the RBA is or may be exposed (including emerging material risks, policies for business continuity and operational resilience and environmental risk)
    • the actions taken by management to identify, assess, manage and mitigate those risks and the extent to which those actions are judged likely to be effective in keeping the RBA (or returning it) to the level of risk tolerance approved by the Governance Board
    • the extent to which the operational structure of the RBA facilitates effective risk management and that sufficient resources are dedicated to risk management
    • the measures in place to prevent, detect, investigate and report on fraud and corruption, including by overseeing regular fraud and corruption risk assessments and a control plan, reviewing reports by management on significant instances of fraud or corruption, and investigating such instances if necessary
    • the RBA’s policy on reporting wrongdoing and reports of significant instances of whistleblowing
  • consider the Governor’s recommendations and endorse the appointment or removal of the CRO for approval by the Governance Board. The CRO reports on risk and compliance matters to the Deputy Governor and the Committee and has unfettered access to the Committee
  • meet with the CRO without other management present as required.

Internal control

  • review the appropriateness of the RBA’s system of internal control, including whether appropriate systems and processes are in place for assessing compliance with key policies and procedures and key internal and external compliance requirements (including applicable legislation and external regulations)
  • review responses of management to incidents of non-compliance with laws or regulations.

Internal audit

  • approve the Audit Department (Audit) Charter
  • approve the risk-based internal audit plan, review the results of audits undertaken, and monitor the adequacy and appropriateness of action plans and timeliness of management’s actions to address deficiencies
  • review the resources, organisational structure, effectiveness and independence of Audit, and the appointment of any co-sourced providers of internal audit services
  • review the results from Audit’s quality assurance and improvement program
  • consider the Governor’s recommendations and endorse the appointment or removal of the Head of Audit for approval by the Governance Board. The Head of Audit reports on internal audit operations to the Deputy Governor and the Committee and has unfettered access to the Committee
  • meet with the Head of Audit without other management present as required.

External audit

  • acknowledge the role of the Australian National Audit Office (ANAO) as the appointed external auditor and the obligations of the Auditor-General to the Australian Parliament
  • review the annual external audit plan prepared by the ANAO
  • review the external auditor’s report on the annual audit of the RBA’s financial statements
  • review with the external auditor any audit or control concerns identified by the external auditor and the responses of management to the external auditor’s significant findings and recommendations
  • promote an appropriate level of cooperation between management and the external auditor
  • meet at least annually with the external auditor without management present.

Other

  • receive updates from the Chair of the Board of Note Printing Australia Limited (NPA), the RBA’s wholly owned subsidiary, on the activities of the NPA Audit and Risk Committee.

Reporting

Minutes of Committee meetings will be provided to Governance Board members prior to the Governance Board meeting subsequent to each Committee meeting. The Chair of the Committee will also report on major items of the Committee’s deliberations at that Governance Board meeting.

Operation of the Committee

The operation of the Committee will be reviewed annually, both by the Governance Board, as part of the annual review of its operation, and by means of a survey of members of the Committee, the external auditors and management who participate in Committee meetings.

Charter review

The Committee will review this Charter every two years, or as required, to ensure it remains consistent with statutory requirements and industry best practice. The results of the review will be reported to the Governance Board, which will be asked to approve any changes.