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2018-19 Governance

GOVERNANCE FRAMEWORK

ARPC’s governance framework is based on the TI Act and ARPC’s status as a corporate Commonwealth entity for the purposes of the PGPA Act and the Public Governance, Performance and Accountability Rule 2014 (PGPA Rule).

ARPC is established as a body corporate under the TI Act (section 12) and comprises a Chair and six other members (referred to as the Board). Board members are appointed on a part-time basis by the responsible Minister. During the reporting period, the responsible Ministers were the Hon. Kelly O’Dwyer MP (to 24 August 2018), the Hon. Stuart Robert MP (from 26 August 2018 to 26 May 2019) and subsequently the Hon. Michael Sukkar MP.

The Minister may give written directions in relation to the performance of ARPC’s functions and the exercise of its powers.

The Board is the accountable authority for the purposes of the PGPA Act. As required by the PGPA Act (section 45), ARPC has an audit committee (the Audit and Compliance Committee) which was constituted by four Board members during the reporting period.

Under the PGPA Act (section 22), the Finance Minister may make an order (a Government Policy Order) specifying that a policy of the Australian Government is to apply in relation to one or more corporate Commonwealth entities. During the reporting period, there were no General Policy Orders (GPOs) applicable to ARPC.

Under the TI Act, the Board appoints the CEO of ARPC. The CEO manages the affairs of ARPC subject to the directions of, and in accordance with policies determined by the Board.

Figure 4.1 sets out the organisational framework of ARPC.

Figure 4.1: Organisational Chart
In addition to the statutory framework, ARPC’s corporate governance framework is underpinned by the Board Charter, the Audit and Compliance Committee Charter and a suite of policies and procedures in areas such as risk management, financial management, capital management, investment, privacy, delegations, people management, fraud control, conflict of interest, public interest disclosure, security management and business continuity planning.

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Board

During 2018-19, the Board comprised a Chair and six other (non-executive) members.
There were no changes to the Board membership during this reporting period. The names and details of ARPC Board members who held office during 2018-19 are outlined below.

Board members


Mr Ian Carson AM

Chair

BEc PGDip Professional Accounting FAICD
Term: 1 July 2017 – 30 June 2020

Mr Ian Carson was appointed Chair of the Board on 1 July 2017.

Ian is Chairman of Markets at PwC. Previously he was Chair of PPB Advisory, a professional advisory firm, of which he was a founding partner.

He is co-founder of SecondBite, a for purpose organisation which rescues nutritious food that would otherwise go to landfill. SecondBite transformed Australia by creating scale in fresh food rescue. In 2019, SecondBite will rescue enough food to create 40 million meals. He is President of The Victorian Arts Centre Trust and Trustee of The Melbourne Cricket Ground. In 2017, Ian was awarded an Order of Australia for his work in Food Rescue and Business. In 2018, together with his wife Simone, he was appointed ‘Melbournian of the Year’.


Ms Janet Torney

Member

BEc (Hons) FAICD FASFA
Term: 1 July 2018 – 30 June 2021

Ms Janet Torney was appointed a Member of the Board on 1 July 2015 and is Chair of the Audit & Compliance Committee.

Janet is a non-executive director with strong expertise in strategy, governance, risk and change management and investments. She is Chair of Whitehelm Capital and Chair of Club Plus Super. In the not-for-profit sector, Janet is Chair of Girl Guides Australia and a Director of the Australian Cricketers’ Association.

Janet’s career spans more than 30 years in the financial services sector – superannuation, investments, infrastructure, banking and insurance, in the engineering sector – manufacturing and consulting, and in the member-focussed sector – notably sport and female related. Janet is a Fellow of the Australian Institute of Company Directors and a Fellow of the Association of Superannuation Funds of Australia.


Ms Elaine Collins

Member

BSc (Hons) MEc FIAA FAICD
Term: 1 July 2018 – 30 June 2021

Ms Elaine Collins was appointed a Member of the Board on 1 July 2015 and is a member of the Audit and Compliance Committee.

Elaine is a non-executive director and actuary, with a career spanning 25 years in the insurance industry in Australia, New Zealand, Hong Kong, Singapore and Papua New Guinea.

She is a non-executive Director of Zurich Insurance Australia Ltd (ZAIL) and Chair of its Risk, Compliance and Audit Committee. Elaine recently completed her term as non-executive Director of the Motor Accident Insurance Board (MAIB) and Chair of its Audit Committee.

Elaine is a Fellow of the Actuaries Institute and a Fellow of the Australian Institute of Company Directors. She is a member of the Actuaries Institute’s Professional Standards Committee and
a Professor of Practice at the University of New South Wales.

She served in senior roles with KPMG and as a Partner with Deloitte, carrying out Appointed Actuary roles for more than ten years, with key expertise in strategic risk management, policy formulation and capital efficiency.


Mr John Peberdy

Member

ANZIIF (Snr Assoc) CIP GAICD
Term: 1 July 2018 – 30 June 2021

Mr John Peberdy was appointed a Member of the Board on 1 July 2015.

John has a proven track record as a strategic senior executive, having delivered improved business outcomes, in Australia and New Zealand, within Ansvar Insurance, a market leader in the care, community, faith and education insurance sector. John has extensive experience delivering on business growth and profitability, initiating and driving change and optimising daily operations through effective leadership of a strong executive team. His expertise includes strategy and planning, business management, leadership and people management, risk management and general insurance.

Among his current directorship roles, John is the Chair, EA Insurance Services Pty Ltd and Deputy Chair, Christian Super.


Mr Mike Callaghan

AM PSM
Member

BEc (Hons) LLB GAICD
Term: 5 October 2016 – 4 October 2019

Mr Mike Callaghan was appointed a Member of the Board on 5 October 2016.

Mike is Chair of the Aged Care Financing Authority and Chair of the Asian Development Bank’s replenishment of the Asian Development Fund. He is also a Non-resident Fellow at the Lowy Institute for International Policy. In 2017, he was the Chair of the Australian Government Review of the Petroleum Resource Rent Tax. He also led the review into the Economic Impact of the Government’s Regulation Agenda.

In 2015, Mike headed the Northern Australia Insurance Premiums Taskforce. Between 2012 and 2014, Mike was Program Director of the G20 Studies Centre at the Lowy Institute.

Mike was Deputy Secretary of the Treasury from 2004 until 2012. He also served as the Prime Minister’s Special Envoy, International Economy. He has had 39 years’ experience in the Treasury and the International Monetary Fund.


Ms Robin Low

Member

BCom FCA GAICD
Term: 5 October 2016 – 4 October 2019

Ms Robin Low was appointed a Member of the Board on 5 October 2016 and is a member of the Audit and Compliance Committee.

Robin is a non-executive director. She is the Deputy Chair of the Auditing and Assurance Standards Board and is on the board of four listed companies: Appen Limited, AUB Group Limited, CSG Limited and IPH Limited. She is also on the boards of two not for profit companies: Primary Ethics and Public Education Foundation.

Robin is a chartered accountant, with over 25 years’ experience with PricewaterhouseCoopers, including more than 17 years as an assurance partner specialising in financial services, particularly insurance.


Ms Karen Payne

Member

BCom MCom LLB CA CTA GAICD
Term: 5 October 2017 – 4 October 2020

Ms Karen Payne was appointed a Member of the Board on 5 October 2017 and is a member of the Audit and Compliance Committee.

Karen was appointed as the Inspector-General of Taxation and Taxation Ombudsman on 6 May 2019 for a term of five years. She was previously a part-time Member of the Board of Taxation and CEO of the Board of Taxation and prior to this, a partner with Minter Ellison Lawyers. Karen has more than 20 years’ experience as a specialist taxation advisor, specialising in the financial services sector. Ms Payne is a solicitor admitted in NSW and the High Court of Australia, chartered accountant and chartered tax adviser. Ms Payne is a member of the Australian Institute of Company Directors, the Tax Institute and Chartered Accountants in Australia and New Zealand.

Board meetings

The Board convened six meetings during the 2018-19 financial year, comprising five meetings for general business and one strategic planning workshop. Figure 4.2 lists the number of meetings attended by each member during the reporting period.

Figure 4.2: Number of meetings attended by each Member of the Board in 2018-19.

Name

Number of meetings
entitled to attend

Number of meetings
attended

Mr Ian Carson

6

5

Ms Janet Torney

6

6

Ms Elaine Collins

6

6

Mr John Peberdy

6

6

Mr Mike Callaghan

6

6

Ms Robin Low

6

6

Ms Karen Payne

6

6

Board remuneration

Remuneration for Board members in 2018-19, including travel and meeting allowances, was determined by the Remuneration Tribunal (Remuneration and Allowances for Holders of Part-time Public Office) Determination 2018 and the Remuneration Tribunal (Official Travel) Determination 2018. There was no remuneration for performing duties on the Audit and Compliance Committee.

Figure 4.3: Board member annual fees and meeting fees

Remuneration Basis

Chair Annual
Fee

Chair Meeting
Fee

Member Annual
Fee

Member Meeting
Fee

Annual Fee plus

Meeting Fee

$27,190

$1,143

$13,600

$1,029

Audit and compliance committee

Established in accordance with the PGPA Act (section 45), the Audit and Compliance Committee (Committee) supports the administration and governance of ARPC.

Under the PGPA Rule (section 17), the Committee must consist of at least three appropriately qualified and skilled members. In the reporting period, the Committee had four members.

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

  • financial reporting;
  • performance reporting;
  • system of risk oversight and management; and
  • system of internal controls.

The Committee performs these functions in addition to monitoring ARPC’s compliance with statutory obligations, overseeing the work of the internal and external auditors and overseeing ARPC’s governance framework. The Committee also provides a general forum for communication between members, ARPC’s senior executive team and the internal and external auditors.

During the reporting period, the Committee reviewed all reports received from ARPC’s internal auditors, PwC, and external auditors, the Australian National Audit Office (ANAO)1 and accepted ANAO’s terms of engagement. The Committee monitored the implementation of internal audit recommendations and reviewed and accepted PwC’s terms of engagement. It also reviewed the financial statements to assist the Board with its declarations under subsections 41(2) and 42(2) of the PGPA Act 2013 with respect to ARPC’s accounts and records and annual financial statements.

During 2018-19, four Committee meetings were held. The Committee members attended the number of meetings outlined in Figure 4.4.

Figure 4.4: Meetings attended by each member of the Audit and Compliance Committee in 2018-19

Name

Number of meetings
entitled to attend

Number of meetings
attended

Ms Janet Torney

4

4

Ms Elaine Collins

4

4

Ms Robin Low

4

4

Ms Karen Payne

4

4

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INTERNAL PROCESSES FOR MANAGING RISK

The PGPA Act (section 16) provides that the Board ‘has a duty to establish and maintain systems relating to risk and control.’ The Board performed this during the reporting period by having oversight of the Risk Management Policy and reviewing risk and tolerance levels, performance reports, risk strategies and controls at every meeting. In addition, each year the Board holds a strategic workshop which includes consideration of the influence of current and emerging risks on ARPC’s role.

ARPC uses a risk matrix to measure the likelihood and severity of incidents. These risks are reviewed by management prior to Board meetings and updated as appropriate for continued relevance or to record emerging risks identified by management and/or the Board.

ARPC’s control environment for governance, business continuity and security management continue to be refined to address emerging risks.

Processes implemented to manage risk include:

  1. Maintaining a Business Continuity Policy and Procedure. Staff access and test an alternative site up to three times per year. The site could be used if ARPC was unable to operate out of its Sydney CBD office. In addition, all staff are provided with the necessary tools to work remotely if required.
  2. Implementing a range of IT security measures.
  3. Having a deed of indemnity with each Board Member. In 2018-19, ARPC maintained and paid premiums for insurance covering members and senior executives against legal costs and other expenses that may be incurred in the performance of their duties. In compliance with the PGPA Rule (section 23), ARPC does not insure any ARPC officials against liabilities relating to breach of duty under the PGPA Act. The amount paid for Directors’ and Officers’ Indemnity Insurance in 2018-19 was $35,358 ($35,957 in 2017-18).
  4. Upon commencement, all ARPC staff and Board members are required to sign a confidentiality agreement which outlines their obligations relating to confidential information.

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INTERNAL AUDIT

ARPC’s internal audit function is outsourced to PwC and overseen by the Audit and Compliance Committee. During 2018-19, PwC continued to provide internal audit services to ARPC. The updated five-year rolling Strategic Internal Audit Plan (SIAP), which is closely aligned to the risk register and risk appetite and tolerance statement, was approved by the Committee and included in the 2018-19 Internal Audit work plan.

PwC works closely with the Committee, CEO and senior management to identify and analyse business risks. The Committee meets with PwC as its internal auditor independent of management periodically. Audit findings are reported to the Committee. Management actions or improvements identified through audits are agreed with management, approved by the Committee and tracked to completion on the Audit Issue Register. Internal audit has routine discussions with external audit to avoid any duplication of work and external audit has full access to internal audit work.

2018-19 Internal audit program

The Internal Audit Workplan for 2018-19 has been successfully completed, with all management actions or improvements accepted, recorded and tracked on the Audit Issues Register. The annual program also has flexibility to accommodate Board or management requests for ad hoc audit reviews.

The following reviews were completed during 2018-19:

  • HR management processes, including Work Health and Safety;
  • cyber security;
  • review of loss estimation models;
  • investments; and
  • DTI Test Debrief (management-initiated review).

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FRAUD PREVENTION AND CONTROL

Every two years, ARPC reviews and updates the ARPC Fraud Control Policy and underlying fraud risk assessments. The Fraud Control Policy allocates responsibilities for fraud risk management and control among the Audit and Compliance Committee, the CEO, ARPC management and staff. The Policy outlines legislative and governance requirements, and is framed around key fraud control strategies:

  • prevention;
  • detection;
  • response; and
  • monitoring, evaluation and reporting.

The Fraud Control Policy complies with requirements under section 10 of the Public Governance, Performance and Accountability Rule 2014, which provides the minimum standard for the management of risk and incidents of fraud by accountable authorities (the Board). ARPC staff are provided with regular information sessions in compliance with the Fraud Control Policy and the PGPA Rule.

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CORPORATE GOVERNANCE PRACTICES

The Board and ARPC’s leadership team are committed to maintaining the best practice corporate governance standards that are fit-for-purpose for ARPC’s operations.

In 2018-19, ARPC engaged PwC to undertake a review of its governance and compliance framework which resulted in recommendations for process improvements, including the frequency of board meetings, policy drafting and review cycles, market intelligence and attestation processes. The review recommendations were accepted by the Board in March 2019 and the implementation of the process improvements is ongoing.

ARPC continues to monitor governance trends in the public and private sectors.

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COMPLIANCE

In the reporting year, ARPC reviewed and improved its compliance plan and program of compliance testing. Regulatory compliance was further supported by a program of mandatory training for staff on relevant legislation and policies, routine information sessions for staff on relevant topics and a process of quarterly attestations by all senior managers covering key legislation including the TI Act, PGPA, PGPA Rule, the Privacy Act 1998 and Public Interest Disclosure Act 2013.

Under the TI Act (section 40), the Board may delegate all or any of its powers or functions to the CEO or any person employed under the TI Act. Delegations made by the Board are documented and reviewed at least every three years.

ARPC’s annual report is prepared and provided to the responsible Minister by 15 October each year in compliance with the PGPA Act (section 46). ARPC’s annual financial statements comply with accounting standards prescribed by the PGPA rules and are audited by the Auditor General as soon as practicable after preparation. The financial statements can be found in Chapter 6.

ARPC also prepares a Corporate Plan on a rolling four-year basis, in accordance with the PGPA Act (section 35) and provides it to the responsible Minister and the Minster for Finance by 31 August each year.

Under the PGPA Act (section 39), ARPC prepares an Annual Performance Statement to report on progress against purpose, as stated within the preceding Corporate Plan. ARPC’s Annual Performance Statement is outlined in Chapter 3.

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PUBLIC INTEREST DISCLOSURE

The Public Interest Disclosure Act 2013 (PID Act) promotes integrity and accountability in the Commonwealth public sector by encouraging the disclosure of information about suspected wrongdoing. It also protects people who make disclosures and requires agencies to investigate or take other appropriate actions.

In accordance with the PID Act, ARPC has a PID policy/procedure which is made available on the ARPC webpage. During the reporting period, ARPC received no public interest disclosures.

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INFORMATION PUBLICATION SCHEME STATEMENT

In accordance with the Freedom of Information (FOI) Act and the Information Publication Scheme (IPS), ARPC publishes a range of information on its website. In compliance with the Act and IPS, ARPC publishes its organisational structure, functions, appointments, annual reports, consultation arrangements, submissions to Parliament, routinely requested information and details of the freedom of information officer.

Further details are available on ARPC’s IPS webpage at: www.arpc.gov.au/ips

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JUDICIAL AND ADMINISTRATIVE DECISIONS

In 2018-19, there were no judicial decisions or decisions of administrative tribunals that could significantly affect ARPC’s operations.

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ANAO Performance Audit

A significant review of ARPC’s governance and performance was undertaken in the reporting period. The ANAO Performance Audit of ARPC, which began in 2018, was tabled in Parliament in June 2019.

The audit report concluded that ARPC is effective in managing the terrorism reinsurance scheme and that ARPC’s governance arrangements enable effective oversight and management of the scheme.

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CONSULTATION ARRANGEMENTS

ARPC employees regularly meet with insurers, industry bodies and other interested parties outside the Australian Government for discussions on various matters. A summary of the stakeholder engagement activity undertaken by ARPC during the reporting period can be found in Chapter 1.

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CONSULTANCIES

ARPC engages consultants to provide specialist skills to assist with key projects and tasks. During 2018-19, consultants were engaged (following the appropriate procurement processes outlined in ARPC’s Procurement Policy), to assist in the following areas:

  • strategic planning and stakeholder engagement facilitation;
  • specialist technical projects and maintenance e.g. website migration;
  • research projects e.g. cyber terrorism;
  • capital management advice;
  • retrocession advice;
  • independent review/advice on legal, and accounting issues;
  • staff development and training; and
  • work health and safety and recruitment.

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ECOLOGICALLY SUSTAINABLE DEVELOPMENT

ARPC continues to pursue initiatives designed to minimise waste, conserve energy and minimise water usage in the office, such as using electronic meeting papers, double-sided printing and scanning and energy efficient lighting throughout the office. ARPC’s premise has a NABERS 4.5-star energy and 4-star water rating.

The following Figure 4.5 lists the strategies used by the building owners and ARPC to assist in reducing its environmental footprint.

Figure 4.5: Steps taken to minimise energy, waste and water

Theme

Sydney office

Energy efficiency

The Sydney office has achieved a 5% Greenhouse emissions reduction and a
2% reduction in electricity consumption on the previous year.

Use of sensor lighting throughout the office.

Shutting down computers outside of working hours.

Purchasing and use of carbon neutral paper.

Waste

Using double sided printing or scanning to reduce the volume of paper used.

Recycling of paper, cardboard, print cartridges, plastics, glass E-waste and fluorescence tubes.

Water

The building has been accredited with a 4-star water rating.

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ARPC WELCOMES AUSTRALIAN NATIONAL AUDIT OFFICE AUDIT FINDINGS

ARPC welcomed the findings of the 2018 Performance Audit: Management of the Terrorism Reinsurance Scheme, by the Australian National Audit Office (ANAO).

The objective of the ANAO’s audit was “to assess the effectiveness of the Australian Reinsurance Pool Corporation’s management of the terrorism reinsurance scheme”.

The ANAO is the national auditor for the Australian Government. The ANAO reports to Parliament on where improvements can be made and makes specific recommendations to assist public sector entities to improve performance.

The audit concluded that ARPC is effective in managing the terrorism reinsurance scheme and that ARPC’s governance arrangements enable effective oversight and management of the scheme.

Audit criteria and scope

The ANAO’s audit addressed two criteria to assess ARPC:

  • Are there processes in place that support the effective management of the scheme?
  • Do governance arrangements enable effective oversight and management of the scheme?

The audit scope included:

  • policy approval and policy management processes, claims management processes and supporting policy and process documents;
  • governance arrangements, including of the Board and supporting Committees, and risk management;
  • stakeholder engagement activities; and
  • monitoring and review of scheme performance, including the Treasury’s assessment of economy in providing the scheme.

The audit methodology comprised:

  • reviewing the processes that ARPC undertakes to administer the scheme, particularly the claims management process and its supporting systems and documentation;
  • reviewing the legislation, budget papers, corporate plans, annual reports, review reports, meeting minutes and general publications;
  • assessing the Board’s role and the Executive team’s role in overseeing the scheme;
  • discussions with Treasury; and
  • discussions with ARPC.

Positive outcomes for governance and process

ANAO concluded that ARPC’s governance arrangements enable effective oversight and management of the scheme.

ARPC provides effective annual reporting of its performance, the Board is effective in overseeing the scheme and ARPC has a suitable organisational structure in place to support the operation of the scheme and appropriate arrangements for engaging and communicating with stakeholders.

ANAO stated that ARPC has adequate processes in place for reviewing and collecting premiums and for assessing whether the scheme’s participation requirements are being met.

Recommendations

There was one official ANAO recommendation contained in the report – that the Treasury reviews options to rebuild ARPC’s capital following a DTI event which resulted in significant claims on the scheme, in order to minimise the need for premium increases.

Areas of opportunity

ARPC will provide details on strategic projects which align more closely with the Department of Finance’s criteria for performance information.

A new key performance indicator (KPI) will also be introduced to measure the effectiveness of stakeholder engagement.

Both changes are incorporated in the 2019-23 Corporate Plan and will be reported on in the 2019-20 Annual Report.

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Footnotes

  1. ANAO subcontracts the field work to KPMG

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