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Export Certification Australian Quarantine and Inspection Service
The objective of this audit was to assess AQIS's management of export certification. In particular, it addressed the systems, procedures, processes and resources used to: register premises and license exporters; monitor compliance with arrangements; and manage non-compliance. The audit focussed on regulatory activities for assuring that Australian exports meet food safety and quarantine requirements. The methodology involved an examination of each of the seven AQIS export programmes.
Exports from Australia's meat, dairy, fish, horticulture, grain, live animal and organics export industries are worth an estimated $32 billion per year. An estimated $21 billion of these goods must be certified each year as meeting importing country health and quarantine requirements, prior to their export. These goods are classed as ‘prescribed goods' under the Export Control Act 1982 (ECA).
Export certification protects Australia's reputation as a safe and reliable source of food and other agricultural and horticultural products. By providing assurance that standards have been met, it facilitates Australian access to foreign markets. It is an important service, affecting a significant portion of Australia's exports.
The Australian Quarantine and Inspection Service (AQIS) is part of the Department of Agriculture, Fisheries and Forestry (DAFF). Amongst its responsibilities is providing assurance (in the form of an export certificate) that exports of food and other products are prepared in accordance with the health or quarantine requirements of the importing country. AQIS does this through:
- registration of establishments intending to prepare prescribed goods for export from Australia;
- licensing of exporters intending to export prescribed goods from Australia;
- auditing registered establishments and licensed exporters to assess compliance with required standards; and
- where required, product inspections.
AQIS manages export certification through seven commodity-based programmes. These are the Meat, Fish, Dairy, Grain, Horticulture, Live Animals and Organics export programmes. The programmes are administered by officers located in AQIS's central office (Canberra) and across its eight regional offices. Third-party providers deliver export certification services for the Dairy and Organics export programmes on behalf of AQIS.
The ECA sets out the requirements for entities wanting to export prescribed goods. It also gives effect to the regulatory powers required by AQIS to fulfil its role. The Export Control (Prescribed Goods – General) Order 2005 and the Australian Meat and Livestock Industry Act 1997 (AMLIA) support and complement the ECA. There are also AMLIA Regulations and ten commodity specific Export Control Orders (e.g. Export Control (Meat and Meat Products) Orders 2005).
Following a National Competition Review (and other reviews), the Export Control Orders for all of the export programmes were reviewed and simplified by AQIS, in consultation with industry.1 The new Orders were finalised in 2004 and came into effect in December 20042 and July 2005.3 In accordance with a recommendation of the National Competition Review, domestic and export food standards have been harmonised and made consistent with international standards.
Under the Export Control Orders, primary responsibility for meeting food safety and importing country requirements rests with the occupier of a registered establishment or the exporter of prescribed goods. This obligation is expressed in the form of an approved arrangement, or similar system that describes how compliance is achieved.
AQIS's role is to provide assurance that approved arrangements are working and requirements are being met. It does this through audits of approved arrangements and, where required, inspections of export products to verify that the required standards have been met.
The objective of this audit was to assess AQIS's management of export certification. In particular, it addressed the systems, procedures, processes and resources used to:
- register premises and license exporters;
- monitor compliance with arrangements; and
- manage non-compliance.
The audit focussed on regulatory activities for assuring that Australian exports meet food safety and quarantine requirements. The methodology involved an examination of each of the seven AQIS export programmes.
The ANAO concluded that many aspects of AQIS's administrative procedures support sound management of export certification. It has procedures in place to verify that establishments seeking registration to prepare products for export, and exporters seeking an export licence, meet legislative requirements. Its programmes of audits and inspections check compliance with the food safety and quarantine requirements of importing countries, and require establishments and exporters to take action to address identified non-compliance. Its services provide Australian exporters with the certification they require to access foreign markets.
However, the ANAO identified opportunities for AQIS to improve its administration of export certification by:
- improving guidance to industry on the requirements for registration and licensing;
- assuring audit quality and reliability; and
- better management reporting and performance information.
The extent of improvement possible varies by programme, with the Meat export programme, which accounts for 68 percent of AQIS export certification resources, having the most well developed administrative and information systems.
Improving guidance to industry
The current Export Control Orders are less prescriptive and more outcomes-focused than previous orders. In these circumstances, providing industry with guidance on AQIS's expectations and working cooperatively with industry to aid understanding, assists compliance with regulatory requirements and reduces the regulatory burden on industry.
While most AQIS programmes had guidance for industry and staff, some was in draft form or out of date. Also, available guidance material for the majority of programmes was not broadly communicated.
The ANAO has recommended that, to assist industry understanding of export certification, AQIS review and improve the availability of export registration and licensing information.
Assuring audit quality and reliability
A central issue for AQIS's management of industry compliance is the consistency and quality of its assessments and decisions. AQIS has some systems to facilitate audit quality and reliability, including audit checklists and peer reviews of audits conducted. However, the extent to which these measures were used varied between export programmes. This limits management assurance on audit quality and reliability for most programmes. The exception was the Meat export programme, which has a range of such measures.
The ANAO has recommended that export programmes strengthen assurance arrangements by capturing and assessing data on the extent and cause of variance between audits.
Better management reporting and performance information
AQIS conducts audits and inspections to confirm that required standards are being met. However, with the exception of the Meat export programme, there was no reporting to national or senior management on audit progress and results. This is partly because the systems used for managing audits are regionally based or managed by third party providers. The systems do not allow for the capture and routine reporting of management data on audit progress, nor on results, compliance and corrective action.
This limits AQIS's ability to analyse trends and patterns of non-compliance and associated risks.
The ANAO has recommended that AQIS strengthen its information management systems to enable the routine capture, monitoring and reporting of audit and non-compliance data. This will not require collecting new information, but better utilisation of information that AQIS already retains.
Limitations in capture, use and reporting of information on audit outcomes is reflected in AQIS having few Key Performance Indicators (KPIs) that assist management with, and inform stakeholders on, its regulatory activities.
The DAFF Annual Report and Report to Clients are the primary means used by AQIS for reporting its performance to the Government, industry and the public. The ANAO found that these reports provide only limited insight into AQIS's regulatory activities and overall effectiveness. To support external reporting, and for management purposes, the ANAO has recommended that AQIS develop performance indicators that measure an appropriate range of regulatory activities.
Overall, AQIS recognises the report as an accurate representation of its business activities in relation to export certification and believes that the report findings will be a useful blueprint to sustain its commitment to continual business improvement.
In response to the recommendations of the report AQIS agrees to all six recommendations.
Export registration and licensing (Chapter 2)
Establishments and exporters intending to prepare prescribed goods for export or manage the export of meat and livestock from Australia must be registered and/or licensed by AQIS before export operations can commence.
The broad processes and requirements for registering an establishment and obtaining an export licence are detailed in the Export Control Act, 1982 (ECA), the Australian Meat and Live-stock Industry Act 1997 (AMLIA), the various Export Control Orders and the AMLIA Regulations. AQIS has established procedures for ensuring that establishments seeking to produce goods for export, and exporters seeking an export licence, meet legislative requirements.
Export programmes have developed guidance on the processes for registering establishments and the requirements that establishments must meet in order to be registered. However, some guidance was in draft form, or needed to be updated to be consistent with new export control orders.
The AQIS website is the primary source of information on export requirements for potential occupiers of establishments and exporters seeking information on registering an establishment and obtaining an export licence.
The information on the website is of assistance to exporters. However, the ANAO found considerable variation between the seven export programmes in terms of the volume and type of guidance available on the AQIS website. The Fish, Meat and Live Animals export programmes had published guidance on establishment registration, with Live Animals guidance also including licensing requirements for livestock exporters. The Fish and Meat export programmes also published their audit and inspection policies and processes, increasing their transparency and the accountability of AQIS.
Overall, while AQIS has sound registration processes, there is scope to improve the content and availability of information on export certification requirements, for the benefit of exporters.
Assessing industry compliance (Chapter 3)
Audit and inspection
The current Export Control Orders require establishments, as a condition of registration, to have complying or approved arrangements in place.4 These detail the quality management system that the establishment or exporter will use to ensure products prepared for export comply with legislative and importing country requirements.
AQIS export programmes routinely audit establishments against their approved arrangements to confirm that standards are being met and that the occupiers have discharged their regulatory responsibilities. These include both announced and unannounced audits. For some export products, AQIS also conducts a physical inspection. In particular, AQIS is required to inspect all meat carcasses.
For livestock exports, AQIS currently conducts leave-for-loading inspections5 and monitors dock-side inspections of animals prior to their export. Initial audits of exporter compliance with arrangements commenced in December 2005. At the time of the audit, AQIS audits of livestock registered establishments had not commenced.
Where registered horticulture or grain establishments do not operate under an approved arrangement, AQIS conducts end-point inspections of a sample of product.
Audit policies and procedures
A sound regulatory environment includes emphasis on communicating audit procedures to staff and industry. All AQIS export programmes have documented audit policies and procedures. However, as with the registration guidelines, some are still being updated to reflect the new export control orders.
A draft of the policies and procedures for the Dairy export programme had provisions, particularly on the reporting of audits, which were not consistent with the Export Control (Milk and Milk Products) Orders 2005. This needs to be corrected.
Generally, audit policies or procedures set out the frequency at which audits were to be conducted. However, for most programmes, the rationale supporting audit frequencies was not documented, reducing assurance that audit coverage adequately addresses risk.
Maintaining and monitoring audit schedules
All AQIS export programmes6 had audit schedules or work programmes that detailed the audits to be conducted by establishment. However, the extent to which there was information to assist management monitoring of delivery against schedules varied.
The Meat export programme has a database which provides a national view of audits planned and conducted, as well as the audit result, for each establishment in the programme. However, the Fish, Horticulture and Grain export programmes relied on regionally developed systems to manage audit schedules. These systems do not provide readily accessible information for assurance, locally or nationally, of the extent to which schedules are being met.
As well, audit schedules for the Dairy and Organics export programmes were developed and maintained by third-party providers. The extent to which providers adhered to audit schedules was not routinely monitored.
Assuring audit quality and reliability
A central issue for those subject to regulation, and those relying on the assurance provided by the regulator, is consistency and quality of regulatory assessments and decisions. All AQIS export certification programmes had some processes to facilitate audit quality and reliability. For example: audit procedures; audit checklists; verification audits or peer reviews of audits conducted; and training programmes. However, the extent to which these measures were used and effectively applied varied between export programmes.
The Meat export programme used its database to analyse data on audit results. Other export AQIS export programmes provide some routine reporting to national management on audit activity. However, the lack of national data reduces assurance that audits undertaken address risks as intended.
Managing audit records
An effective regulatory system includes sound records management, including documentary records of key regulatory decisions and the underpinning reasons. AQIS files and systems generally provided sufficient documentation of registration approvals and compliance audits or inspections conducted. However, there were instances where supporting evidence for audit reports was not well documented.
The ANAO also identified other deficiencies in recordkeeping practices for some export programmes and regional offices. These included the use of non-official recordkeeping systems for registering audit files and, to a lesser extent, the non¬creation and incomplete maintenance of records. These limitations would be addressed by better utilisation of DAFF's record keeping system, consistent with departmental policy.
Managing non-compliance (Chapter 4)
The effective management of non-compliance is particularly important for AQIS, as its role in export certification involves obtaining assurance for importing countries and other stakeholders that registered establishments and exporters continue to comply with requirements. This necessitates a shared understanding between AQIS and industry of: how non-compliance is defined and assessed; the processes and requirements for rectifying non¬compliance; the range of sanctions that may be applied; and dispute and appeals processes.
AQIS has defined non-compliance, and procedures and sanctions, in audit policies and supporting procedural guidance. However, with the exception of the Horticulture, Grain and Organics export programmes, this guidance did not describe procedures for exporters to appeal audit findings. The ANAO has recommended that AQIS better communicate to clients procedures for appealing audit findings, to improve accountability and transparency of processes.
Most AQIS audits reveal a number of operational practices that do not comply with approved arrangements or broader legislative requirements. Details of the non-compliance, the proposed corrective action and the date for rectification are recorded in a Corrective Action Request (CAR).7 These are issued to the occupier of the establishment at the completion of the audit. A CAR is finalised or ‘closed out' when AQIS is satisfied that it has objective evidence that the non-compliance has been rectified.
The Meat export programme has the most effective systems to support management of non-compliance. All CARs are recorded and monitored on a national system, with an audit rating of ‘unacceptable'8 assigned if a CAR is not closed out in time.
Other export programmes do not enable the routine capture, monitoring and reporting of non-compliance data, such as the number of CARs issued, and the type and nature of non-compliance. These programmes record CARs as part of the audit report, which are usually held on paper files at regional offices. This limits management assurance that action to rectify non-compliance had been taken. ANAO analysis of AQIS files found that CARs were not always finalised or were carried over to the next audit.
Instances of ‘critical'9 non-compliance are reported to national programme management. However, for most programmes, there is no systematic reporting on other non-compliance issues. This reduces management assurance that non-compliance is being managed effectively. It also limits the ability to utilise information collected to plan future audit programmes.
The ANAO found that, for export programmes other than Live Animals, the estimated volume of CARs presents difficulty as a manual process. Effective oversight of follow-up action on CARs requires timely and complete information. The use of automated systems may assist AQIS in this regard.
Supporting the regulatory function (Chapter 5)
All export programmes report quarterly against a range of mandatory and programme-specific KPIs. These KPIs provide address a range of financial and non-financial aspects of performance. However, AQIS has few KPIs that allow it to monitor and assess the extent of industry compliance or its own performance in regulating export certification.
The DAFF Annual Report and Report to Clients are the primary means used by AQIS for reporting its performance to the Government, industry and the public. The ANAO found that these reports also provide limited insight into AQIS's regulatory activities and overall effectiveness.
1 Except for Organics.
2 Live Animals.
3 Other programmes.
4 An approved arrangement is a voluntary requirement for registered establishments within the Horticulture and Grain export programmes.
5 An inspection of animals, to confirm that requirements have been met, at assembly points (registered establishments), by an AQIS veterinarian immediately prior to the transport of the animals to the dock or airport.
6 The Live-Animals programme had yet to commence audits at the time of fieldwork.
7 Also known as a Defect Report.
8 In the Meat export programme, an establishment that receives an audit rating of unacceptable must successfully complete a Corrective Action Plan agreed with AQIS if it wishes to continue to export.
9 A non-compliance is critical if it would result in unsafe food or in product that does not meet importing country quarantine or food safety requirements. A defect that leaves AQIS unable to assess whether the product meets quarantine or food safety requirements is also a critical non-compliance.