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Finance, audit and risk management committee terms of reference


1. Purpose

The purpose of this policy is to define the Terms of Reference (TOR) for the Finance, Audit and Risk Management Committee (FARM) of the Board.

These TOR describe the FARM Committee’s composition, responsibilities, delegations of authority, interactions with auditors, reporting requirements and meeting procedures.

2. Application

This policy applies to the FARM Committee. This policy is to be read in conjunction with the Treasury and Investment Policy, Risk Management Policy and Risk Management Framework, Board Delegations Policy and Instrument and the Procurement Policy.

3. Purpose of the FARM Committee

The FARM Committee will provide assistance to the Board of Directors in fulfilling the Board’s oversight responsibility relating to the:

  • overall financial performance of the RACGP;
  • effectiveness of the RACGP’s risk management framework and controls;
  • integrity of the RACGP’s financial statements;
  • operation of the Treasury and Investment Policy;
  • effectiveness of the RACGP’s internal control over financial, statutory and grants reporting;
  • RACGP’s compliance with legal and regulatory requirements;
  • independent auditor’s qualifications and independence;
  • regular review of internal and external audits; and
  • performance of the RACGP’s internal and external auditors.

The FARM Committee is also required to:

  • maintain free and open communication between itself, the external auditor, the internal auditors and management of the RACGP; and
  • determine that all parties are aware of their responsibilities.

4. FARM Committee Roles and Responsibilities

4.1 Overview

The FARM Committee’s key responsibilities and functions are to:

  • monitor the independence of the internal and external auditor and the internal and external audit function;
  • review the quarterly financial statements and reports including the Annual Report Financials and Budgets;
  • oversee the RACGP’s financial controls and systems; and
  • oversee the process of identification and management of risk.

4.2 Audit and Finance

The FARM Committee’s primary roles are to:

  • assist the Board in relation to the oversight and reporting of financial information;
  • ensure the appropriate application and review of accounting policies and procedures;
  • ensure the appointment, independence and remuneration of the external and internal auditor; and
  • provide a link between the external and internal auditors, the Board and senior management of the RACGP.

4.3 Risk and Controls

The FARM Committee’s function with respect to risk management is to review and report to the Board whether:

  • the RACGP’s ongoing risk management program effectively identifies areas of potential risk;
  • the RACGP’s anti-fraud programs and controls are adequate;
  • there are any issues from monitoring management’s steps to manage the RACGP’s major financial risk exposures;
  • adequate policies and procedures have been designed and implemented to manage identified risks, including a risk register, which describes the material risks facing the RACGP; and
  • effective remedial action is being undertaken to redress areas of weakness.

4.4 Treasury and Investment

The FARM Committee’s primary roles with respect to treasury and investment are to:

  • advise and monitor the operation of the Treasury and Investment Policy;
  • advise and assist the Board on the development of investment objectives consistent with the Treasury and Investment Policy;
  • monitor and review the investment philosophy of the RACGP as outlined by the Board and stated in the Treasury and Investment Policy;
  • periodically review the Treasury and Investment Policy;
  • ensure that investments are aligned with RACGP objectives;
  • participate in the Investment Adviser procurement process and recommend selection of the Investment Adviser to the Board;
  • manage and review the performance of the Investment Adviser and the investments on a periodic basis at least once every 6 months;
  • submit Investment Adviser recommendations to the Board, report to the Board periodically on key investment metrics, possible compliance breaches and any other investment information requested by the Board and as required by the Treasury and Investment Policy (if any); and
  • provide a link between the Investment adviser, the Board and senior management of the RACGP.

4.5 Compliance

The FARM Committee’s function with respect to compliance is to review and report to the Board regarding the effectiveness of the compliance framework, including:

  • compliance with laws and regulations (particularly those which have a major potential impact on the RACGP in areas such as trade practices, occupational health and safety, and the environment); and
  • compliance with Corporate Governance practices and regulations including ACNC Rules, Corporations Act and AASB requirements and other best practice corporate governance processes.

4.6 Financial Reporting

The FARM Committee’s function with respect to financial reporting is to review and report to the Board on the financial reports of the RACGP including:

  • reviewing the quarterly financials and management’s analysis report;
  • reviewing the annual audited financial statements;
  • discussing the annual external audit;
  • reviewing and assessing the appropriateness of the RACGP’s accounting policies and principles and any significant changes;
  • reviewing and assessing any significant estimates and judgments in financial reports; and
  • reviewing and assessing the processes used by management to monitor and ensure compliance with laws, regulations and other requirements relating to external reporting by the RACGP of financial and non-financial information.

4.7 Internal Auditors

The FARM Committee responsibilities for the internal audit function include the following:

  • make recommendations to the Board for the termination or appointment of internal auditors;
  • review the internal auditor’s mission, charter and resources;
  • communicate in writing the Committee’s expectations to the internal auditor;
  • review and assess the scope of the internal audit and the audit plan, as well as the systems to monitor and evaluate the effectiveness of the internal auditor;
  • monitor and assess the progress of the internal audit and any implications that may arise for the control environment;
  • review and monitor management’s responsiveness to the internal auditor’s findings and recommendations;
  • oversee the co-ordination of the internal auditors with the work of the external auditors; and
  • ensure that the internal auditor reports to the Board via the FARM Committee.

The FARM Committee must review the appointment of an internal auditor at least every three years with the appointment not to exceed a cumulative period of 5 years.

An external tender must be sought at the latest by the end of every 5 years.

4.8 External Auditors

The FARM Committee responsibilities for the external audit function include the following:

  • review the scope of the external audit including identified risk areas and any additional agreed-upon procedures;
  • review and assess non-audit services, with particular consideration given to the potential for the provision of these services to impair the external auditor’s judgment or independence;
  • review the external auditor’s audit fee, and be satisfied that an effective, comprehensive and complete audit can be conducted for that fee;
  • review and monitor management’s responsiveness to the external auditor’s findings and recommendations;
  • review with the external auditor any significant disagreements between the external auditor and management, regardless of whether they have been resolved;
  • review all representation letters signed by management, and be satisfied that the information provided is complete and appropriate; and
  • Evaluate the External Auditor’s independence by:
    • considering, taken as a whole, the various relationships between the RACGP and the external auditor;
    • reviewing and assessing information from internal and external auditors that may affect the quality of financial reports; and
    • reviewing and assessing documents and reports to regulators and make recommendations to the Board.

The FARM Committee must review the appointment of an external auditor at least every three years.

A Partner is required to be rotated every 5 years.

An external tender is to be sought at the end of every 5 years.

4.9 Board Reporting

Consistently with the Treasury and Investment Policy, the FARM Committee must provide the Board with the:

  • results of the six-monthly investment performance review;
  • results of the annual Investment Adviser review;
  • recommended investment policy update for Board endorsement;
  • recommended or updated asset allocation benchmarks and tolerance bands;
  • investment adviser reports; and
  • relevant information for the Board to remain informed and up to date about RACGP’s investment funds and returns.

5. Committee Membership

The FARM committee constitutes a maximum of seven positions. The Board appoints members to the FARM Committee. The members of the FARM Committee shall be:

  • an independent member with finance, audit and risk management expertise as Chair;
  • the President of the RACGP or delegate;
  • up to three independent members with appropriate expertise in a business setting; and
  • two RACGP Board Members.

5.1 Member Terms

FARM Committee Members are appointed for a two-year period and are eligible for reappointment for a further two terms of two years each, which may be extended at the Board’s discretion.

Where a member retires before the date of reappointment or no longer holds the position which gave rise to their membership on the FARM Committee, a new member may be appointed for the remainder of the term of appointment, provided the appropriate composition is maintained.

5.2 Role of the Chair

In addition to the leadership role of an office bearer, the Chair of the FARM Committee chairs, and is responsible for the efficient functioning of the Committee.

The Chair of the FARM Committee must:

  • be familiar with contemporary standards, practices and concepts in risk management;
  • understand the statutory financial reporting requirements of the RACGP as a Not-for-Profit organisation in respect of financial record keeping and legal requirements of reporting;
  • contribute to other RACGP committees at the request of the Board or CEO;
  • provide advice to the Board on statutory reporting matters;
  • report to the Board (FARM Report) at each Board meeting as required;
  • provide advice to the Board on financial and risk matters as required;
  • provide recommendations to the nominations and remunerations committee regarding FARM skills matrix; and
  • conduct an annual FARM self-assessment

5.3 Role of Independent Members

An independent member of the FARM Committee is a person who has been appointed following external advertisement, is not a member of the RACGP and who:

  • has skills relevant to a finance audit and risk committee;
  • has not, within the last three years, been employed by the RACGP;
  • is not a member of the immediate family of a person who, within the last three years, has been employed as an executive or acting executive by the RACGP. Immediate family member has the same meaning as in section 9 of the Corporations Act 2001 (C’th);
  • is not a principal of, or consultant to, a professional adviser to the RACGP where that professional adviser has provided significant services to the RACGP in the last three years;
  • is not a significant supplier or customer of the RACGP or a related entity or an officer of or otherwise associated directly or indirectly with a significant supplier or customer in the last three years; and
  • is free from any interest and any business or other relationship that could, or could reasonably be perceived to, materially interfere with the member’s ability to act in the best interests of the RACGP.

5.4 Secretariat

Unless otherwise determined by the CEO in writing, the Secretariat is provided by the CFO.

5.5 FARM Authority

The FARM Committee will at all times act within its delegation as described in the Board Delegations Policy and Instrument.

The FARM Committee may request information from any employee and any relevant external party where that information is required in order for the FARM Committee to carry out its responsibilities under these TOR. Any requests must be made by the Chair through the CEO.

The Committee may request meetings with the internal and external auditors in the absence of management.

The Committee may obtain independent professional advice to assist in the discharge of its responsibilities under these TOR. The Board must be advised in writing before the Committee commissions such advice.

5.6 Reporting Requirements

The FARM Committee’s reports to each Board meeting will, unless otherwise determined include as a minimum:

  • an executive summary of the quarterly financial reports;
  • quarterly financial statements as agreed, including profit and loss statements, balance sheets, and projected cash flow statements;
  • description of any residual risks rated as HIGH under the RACGP’s Risk Management Policy as identified by the FARM Committee and the status of actions to address these risks including any material emerging risks;
  • recommendations for policies relating to financial management;
  • a review of the annual financial statements to make recommendations to the Board as required;
  • results of internal and external audits;
  • report any investment decisions as delegated within the Board delegations; and
  • any recommendations requiring the Board’s approval and/or action.

6. Meeting Proceedings

The Committee will hold regular meetings in accordance with the agreed annual work plan. During the course of the year, additional ad hoc meetings may also be called by the Chair of the FARM Committee.

An ad hoc meeting must be scheduled by the Chair if called by:

  • direction of the Board;
  • any two FARM Committee members acting jointly; or
  • the internal auditor or external auditor.

The Chair must give at least 3 clear days’ notice of any ad hoc meetings.

At any meeting, the CEO, the CFO and the Secretariat have standing invitations. Internal and external auditors, and any other staff member may be invited for any meeting or part of it as required by the FARM Committee. All Board Members have standing invitations to attend as an observer.

6.1 Agenda

The Secretariat, in conjunction with the Chair, is responsible for agenda preparation, with supporting documentation, and its circulation. Agenda papers can be requested from management.

The agenda and supporting agenda papers must be distributed at least five working days prior to each meeting.

6.2 Quorum

Quorum is four Committee members, at least two of whom must be on the RACGP Board. Where the Chair is absent from a meeting, the Committee must nominate a member to Chair that meeting.

6.3 Absence from Meetings

Where possible, absences should be advised in advance and agreed with the Chair prior to the meeting or as soon as practical following the meeting where circumstances did not allow prior notice.

The Chair will review the ongoing membership on the Committee of any Committee member who is absent from three meetings in twelve months without prior formal leave of absence granted by the Chair.

6.4 Conflicts of Interest

The Chair of FARM will remind members at the beginning of each meeting of their obligation to declare any conflicts of interest in relation to matters being dealt with by the Committee.

6.5 Minutes

The Secretariat is responsible for keeping the Minutes of all Committee meetings. Draft minutes should be prepared and sent to the Chair within five working days of the meeting. FARM must provide the Board with copies of all Minutes and resolutions of meetings. The Secretariat is responsible for circulating the Minutes to Committee members and the Board.

7. Amendment of this Policy

The FARM Committee may, without the consent of the Board, make Minor Amendments to this policy at any time.

If the FARM Committee makes Minor Amendments, the Chair must advise the CEO and the Board of those amendments as soon as practicable.
The Board may make amendments to this policy at any time.

8. Responsibilities


Responsible for amendments.

FARM Committee

Responsible for Minor Amendments. Must comply with the policy.

9. Glossary

Investment Adviser

a firm or person engaged by the RACGP to invest funds on its behalf.

Minor Amendment

An amendment to style, to correct grammatical mistakes, to change overall formatting, to make updates which do not materially change meaning, or any other amendment, which in the opinion of the FARM, does not materially alter the operation of the policy. 

10. Related Documents, Legislation and Policies

Board Delegations of Authority and Instrument

Conflict of Interest and Related party Transactions Policy

Procurement Policy

Risk Management Policy

Treasury and Investment Policy and Risk Management Framework


This policy complies with all relevant legislation, in particular:



11. Policy Review and Currency

This policy will be reviewed every year from the last approval date, or when there is a significant change in the intent of the policy. A review will determine these TOR’s continuing adequacy for current circumstances.

Version History

Release notice


Date of effect

Amendment details

Amended by



Initial release  
1.1   Minor amendments upon commencement of new FARM Manager, Risk and Compliance
1.2 3 August 2023 Align FARM and PCNR Board member appointments to 2 or more Company Secretary

Record no.:


Policy owner:


Approved by:


Approved on:


Next Review Due:

October 2024