The Benefits of a CRC Internal Audit

           Carbon and Climate

The Treasury has announced that the final reporting year for the CRC Energy Efficiency Scheme (CRC) will be 2018/19, with the corresponding reports submitted in summer 2019. This means that the CRC is continuing for longer than had originally been rumoured, with four more annual reports being submitted between now and the termination of the scheme. Now that there is more certainty around the future of the CRC, participants are turning their attention back to the mandatory requirements of the scheme, one of those being the obligation for an annual internal audit.

However, an internal audit provides wider benefits than purely meeting a mandatory requirement as it gives the organisation confidence that it is ready for a possible external audit of its CRC evidence pack by the Environment Agency (EA). It also goes further than checks of mandatory areas by also recommending procedures that could be implemented as best practice and so ensure the smooth running of scheme, even if the principal parties change.

The process is typically carried out in two stages, with the first stage making recommendations and the second stage focusing on the corrective actions that have been taken as a result. There is a requirement for the final report to be signed off by an authorised contact, and a senior member of staff who exercises management control over the appropriate activities within the organisation. This process helps to highlight the risks of non-compliance to all of the responsible parties such as the civil penalties that can be incurred. For example, an inaccurate annual report could result in a fine of £40 for each tonne of CO2 inaccurately reported.

The EA published an update of civil penalties at the end of March that showed a number of companies and public sector organisations that have been fined for late submissions and administrative errors. This indicates the approach the EA is likely to take for the remainder of the scheme and emphasises the importance of conducting an internal audit prior to the submission of your CRC annual report. The Internal Audit is an essential element of the evidence pack:


If the EA chooses to carry out an external audit of a CRC participant’s evidence pack, it will usually ask for certain information to be sent to them in advance of the first meeting, with one of these being a copy of the participant’s most recent internal audit report and evidence of the checks that have been carried out. The EA will be looking for details of who carried out the internal checks, when they were conducted and records of any issues raised, together with details of how they were resolved. This could relate to questions over area such as data accuracy, site records, special events, or organisational structure.

When the CRC is abolished in 2019, the income stream to the government is due to be recouped via an increase in the Climate Change Levy from April 2019. An annual reporting requirement is expected under a new regime and a full consultation on the detail of the new scheme will be launched in summer 2016.

Note: The CRC is a mandatory annual carbon reporting scheme that applies to large organisations that consume at least 6,000 MWh of electricity per annum through half hourly meters. Electricity and gas consumption is reported annually as tonnes of CO2, against which allowances are purchased at a current cost of £16.10/tCO2 for the forecast sale and £16.90/ tCO2 for the compliance sale.

Nikki Wilson

Nikki joined Alfa Energy in September 2015 as a Carbon Management Consultant where she advises clients on legislation, compliance, and the implementation of carbon management schemes. She is a Practitioner member of IEMA, has a postgraduate diploma in Environmental Decision Making, and has over 15 years’ experience in energy consultancy.