Corporate Hse Audit

Petroleum Development Oman L.L.C. Document Title: Corporate HSE Audits Document ID

Document Type

Security

Discipline

Document Owner

Month and Year of Issue

Version

Keywords

PR-1969

Procedure

Unrestricted

HSE MS Audit

Corporate Function Discipline Head- Audit

April 2012

1.1

Audit

Development Oman, LLC. Neither the Copyright: This document is the property of Petroleum Development whole nor any part of this document may be disclosed to others or reproduced, stored in a retrieval system, or transmitted in any form by any means (electronic, mechanical, reprographic recording or otherwise) without prior written consent of the owner.

Petroleum Development Oman LLC

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Document Authorisation Document Owner

Document Custodian

Document Author  

Name in full: Naaman Naamany

Name in full: Saeed Maamary

Name in full: Younis Hinai

Title: Corporate SE Manager 

Title: Head HSE Corporate Planning

Corporate HSE Auditor 

Date: 01/04/2012

Date: 31/3/2012

Date: 27/3/2012

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Revision History The following is a brief summary of the four most recent revisions to this document. Details of all revisions prior  to these are held on file by the Document Custodian.

Version No.

1.0

Month &  Year 

Jan 2012

Author’s Name and Title Scope / Remarks

Younis Hinai

New Corporate Audit procedure Issued

Corporate HSE Auditor  1.1

March 2012

Younis Hinai

•

Minor text edits

Corporate HSE Auditor 

•

Drop of use of Risk Assessment Matrix

•

Inclusion of action close-out time-frame in table 3

User Notes: 1.

The requirements of this document are mandatory. Non-compliance shall only be authorised by a designated authority through STEP-OUT approval as described in this document.

2.

A controlled copy of the current version of this document is on PDO's live link. Before making reference to this document, it is the user's responsibility to ensure that any hard copy, or electronic copy, is current. For assistance, contact the Document Custodian.

3.

Users are encouraged to participate in the ongoing improvement of this document by providing constructive feedback.

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Related Business Processes & CMF Documents Related Business Processes Code

Document Title

CP-122

HSE MS

Parent Document(s) Doc. No.

Document Title

PL-04

HSE Policy

PL-10

Security & Emergency Response Policy

Other Related CMF Document(s) Doc. No.

Document Title

CP-142

Internal Audit Code of Practice

PR-1712

Level 3 Audit

The related CMF Documents can be retrieved from the Corporate Business Control Documentation Register CMF .

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TABLE OF CONTENTS 1

2

3

Introduction

7

1.1

Purpose and Objectives

7

1.2

Scope and Applicability

7

1.3

Review and Improvement

7

1.4

Distribution

7

Roles and Responsibilities

8

2.1

Roles and Responsibilities

8

2.2

Step-out Approval

9

Procedure

10

3.1

Overview

10

3.2

Develop Audit Program

10

3.2.1

Level 1 HSE Audits

10

3.2.2

Level 2 HSE Audits

11

3.2.3

Level 3 HSE Audits

11

3.3  Audit Execution

11

3.3.1

Initiate the audit

12

3.3.2

Conduct document review

13

3.3.3

Prepare for audit activities

13

3.3.4

Conduct audit activities

13

3.3.5

Prepare Audit Report

16

3.3.6

Conduct Audit Follow Up

17

4

 Auditor selection criteria

18

5

Performance Standards, Monitoring, and Reporting

19

6

5.1

Performance Standards

19

5.2

Performance Monitoring Requirements

19

5.3

Reporting Requirements

19

 Appendices 6.1

20

Definitions

20

6.2  Abbreviations

20

6.3

Key References

21

6.4

Formats and Templates

21

6.5  Additional Information

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Tables Table 1: Level 1 HSE audits program Table 2: Level 2 HSE Audits program Table 3: Classification of audit findings Table 4: Controls assessments color coding Table 5: HSE audits program compliance Table 6: HSE audits action close out status

10 11 15 16 19 19

Figures Figure 1: HSE Audit Hierarchy  Figure 2: Overview of audit activities

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7  12

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Introduction 1.1 Purpose and Objectives This procedure is required to define the levels of HSE MS Audit and the methodology to manage them.

1.2 Scope and Applicability This procedure applies to all levels of HSE Management Audits in PDO. PDO has a three-tiered Audit hierarchy as explained in the diagram below:

Figure 1: HSE Audit Hierarchy 

1.3 Review and Improvement This procedure needs to be reviewed every three years as a minimum but if there are major  changes affecting the auditing practices, it will be reviewed as frequently as required.

1.4 Distribution This procedure will be hyperlinked to the HSE MS of PDO and made accessible to all PDO personnel and any other parties tasked with carrying out work covered by this procedure on behalf of PDO.

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Roles and Responsibilities 1.5 Roles and Responsibilities Audit Manager  For Level 1 Audits: Head Corporate HSE Planning and Audits. For Level 2 Audits: Respective Directorate HSE Team Leader. For Level 3 Audits: Process/Activity Owner. The Audit manager is responsible for  • Establishing a risk based annual audit program •

Obtaining approval for the audit program – Internal Assurance committee (IAC) and Business Assurance Committee (BAC) for level 1 and Director/Asset manager for  levels 2 and 3.

•

Implementing audit program.

•

Appointing audit leader and team members.

•

Appointing, if required, an independent reviewer.

•

Evaluating and developing auditors

•

Reviewing and improving audit program

•

 Approving the Terms of Reference (ToR) and the Audit Report.

•

Performing supervisory oversight of Audit Teams.

•

Providing periodic analyses/reports to the IAC/BAC for Level 1 Audit and Asset Director for Level 2 Audits

•

Monitoring the quality of audit delivery.

Lead Auditor  •

Leading the Audit Team and managing the audit delivery process to achieve stated deliverables, according to the scope and time estimate in the agreed ToR.

•

Reviewing the audit work carried out by the Auditors and ensuring that Auditors properly conclude on the work performed.

•

Acting as the primary contact for the Auditee.

•

Preparing the draft ToR, the Audit plan and the Audit Report.

•

Ensuring full compliance with the ToR and this procedure in all steps of the audit Process.

•

Confirming audit dates, duration and resource requirements with Auditee.

Auditor  •

Preparing and participating in the audit teams.

•

Carrying out allocated audit work and taking responsibility for the work carried out.

•

Fully complying with the Audit ToR and in all steps of the Audit Process.

Independent Reviewer (by invitation) Page 8

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Reviewing the ToR, the Audit Programme and the Audit Report, ensuring that the  Audit Assessment and Audit Findings are sufficiently substantiated and is responsible for issuing an Independent Review to the Audit Lead before Close out meeting.

Principal Auditee •

Reviewing and agreeing the ToR and the plan for the audit

•

Nominating Audit facilitator and follow up coordinator 

•

Supporting the Audit Process, ensuring availability of people, access to facilities, documents and records for the audit

•

Attending Opening and Closing Meetings

•

Considering audit recommendations, identifying actions to address the root causes of  the findings, action parties and target dates.

•

Ensuring that the agreed actions are closed as per plan

Follow up coordinator  •

Inputting agreed actions, action parties and target dates in data management system (Fountain/equivalent) and reporting close out status to the Auditee.

Action party •

Confirming ownership to the given action and the target completion date.

•

Ensuring timely close-out of actions with supporting evidences.

1.6 Step-out Approval This procedure is mandatory and any deviation to this procedure must be authorised by the Head corporate HSE planning and audit. The Terms of Reference for an audit duly approved by the Audit Manager may, however, override the requirements of Sections 3.3 and 4.0.

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Procedure 1.7 Overview Level 1, Level 2 and Level 3 Audits are carried out to: − − − − −

Determine whether or not the elements and activities of PDO’s HSE Management System conform to the planned arrangements and are being implemented effectively. Determine whether or not PDO’s HSE Management System is fulfilling the Company’s HSE policy, objectives and performance criteria. Determine whether or not PDO’s HSE Management System complies with the relevant legislative and regulatory requirements. Identify areas for improvement in PDO’s HSE Management System, with the aim of  progressively improving the HSE Management System. Enable management to ensure that potential or actual flaws in the system are remedied through effective follow-up action.

1.8 Develop Audit Program  All business processes should be periodically audited, with the frequency and depth of HSE auditing being determined based on: The level of risk for the process/activity. • How critical the process or activity is, in relation to PDO’s business objectives. • The statutory, regulatory and contractual requirements. • • The contribution or potential contribution of the activity concerned to PDO’s overall HSE performance. The results of previous audits. • •  All business processes activities and assets should be audited within the audit cycle. The audit cycle should not be longer than five years, as it is likely that major changes (such as asset, staff, mode of operations, organization, etc) may have taken place during that time. 1.8.1 Level 1 HSE Audits Includes HSE audits conducted on behalf of PDO’s IAC and BAC as part of the Integrated  Audit Program, and also includes independent audits carried out by external bodies such as ISO 14001 certification audits.  ACTION

RESPONSIBILITY

Identify HSE Audit Units (assets, services, projects and functions)  Audit Manager  that have a risk potential to affect the Company’s HSE objectives) Prepare yearly and five-yearly Level 1 HSE Audit program based  Audit Manager  on the risk potentials Review and approve Level 1 HSE Audit Program

IAC & BAC

Direct and review the development and implementation of the Corporate HSE Audit Program

Corporate Safety and Environmental Manager 

Incorporate the Level 1 HSE Audit Program into Corporate HSE Business Plan

 Audit Manager 

Provide resources to manage the audit and lead the plan execution

Corporate Safety and Environmental Manager 

Implement level 1 HSE audit program

Audit Manager  

Report level 1 HSE audit and action status to IAC/BAC

Audit Manager  

Monitor level 1 audits and actions

IAC & BAC

Table 1: Level 1 HSE audits program

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1.8.2 Level 2 HSE Audits Includes HSE audits carried out on behalf of Asset Directors as part of their own Asset Level assurance processes and included in the Asset HSE Plan.  ACTION

RESPONSIBILITY

Coordinate development and implementation of the Asset HSE Audit Programme

 Asset Director 

Identify HSE Audit Units (areas, services and functions) that have a risk potential to affect the Asset’s HSE objectives

 Asset HSE Team Leader 

Prepare yearly Level 1 HSE Audit program based on the risk potentials.

 Asset HSE Team Leader 

Review and approve Level 2 HSE Audit Program

Asset director  

Incorporate the Level 2 HSE Audit Program into directorate  Asset HSE Team Leader  HSE Business Plan Implement level 2 HSE audit program

Asset HSE Team Leader  

Report level 2 HSE audit and action status to director

Asset HSE Team Leader 

Monitor level 2 audits and actions

Asset director  

Table 2: Level 2 HSE Audits program

1.8.3 Level 3 HSE Audits Includes planned and documented task verification activities to supplement the formal HSE audit process. This is planned and managed by the managers of areas, services and functions to assure compliance to requirements and procedures in processes. PR-1712 Level 3 Audit details the methodology for Level 3 Audits.

1.9 Audit Execution

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3.3.1 Initiate the audit • Appoint audit team leader • Establish ToR • Select audit team • Establish initial contact with the auditee

3.3.2 Conduct document review • Review relevant HSE documents including records to determine adequacy with respect to ToR.

3.3.3 Prepare for audit activities • Prepare the audit schedule • Assign work to the audit team • Prepare work documents

3.3.4 Conduct audit activities • Conduct opening meeting • Communication during the audit • Roles and responsibilities of guides and observers • Collect and verify information • Generate audit findings • Classify audit findings • Assess control acceptability • Conduct closing meeting

3.3.5 Prepare, approve & distribute the audit report • Prepare the audit report • Approve and distribute the audit report

3.3.6 Conduct audit follow up Figure 2: Overview of audit activities

1.9.1 Initiate the audit •

appoint the audit team leader for the specific audit.

•

establish and seek agreement from the principal auditee the ToR for each audit that should specify, as a minimum:  Audit Objectives Scope of the Audit Timing and duration of Audit Name and position of the Principal Auditee  Audit Team Leader   Audit Team Members  Audit Methodology  Audit follow up coordinator   Audit report Distribution

•

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Select audit team

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Majority of Personnel on the audit team must be independent of the facility or process audited, and may be sourced from within PDO or externally. People conducting HSE audits should be able to carry out the task objectively, impartially and effectively.  Audit Manager selects the audit team members so that their training, skills and knowledge are appropriate to the audit type and scope. •

Establish initial contact with the auditee by either audit manager or audit team leader  to: Establish communication channels with the auditee’s representative(s) Confirm the authority to conduct the audit Provide information on the proposed timing and audit team composition Request access to relevant documents, including records Determine applicable site safety rules Make arrangements for the audit  Agree on the attendance of observers and the need for guides for the audit team.

1.9.2 Conduct document review •

Auditee’s documentations should be reviewed to determine the conformity of the system, as documented, with audit ToR. The documentation may include relevant management system documents and records as well as previous audit reports.

1.9.3 Prepare for audit activities •

Audit team leader should prepare the audit schedule to provide the basis for the agreement among the auditee and audit team regarding the conduct of the audit. The schedule should cover the following: Organisational and functional units and processes to be audited Dates and places where audit activities are to be conducted Expected time and duration of audit activities, including meetings with the auditee’s management and audit team meetings Roles and responsibilities of the audit team members and accompanying persons  Allocation of appropriate resources to critical areas of the audit Logistics arrangements (travel, accommodation, working areas, etc)

•

Audit team leader, in consultation with the audit team, should assign to each team member responsibility for the auditing specific processes, functions, sites, areas or  activities. • Audit team members should review the information relevant to their audit assignments and prepare work documents as necessary for reference and for  recording audit proceedings such as checklists, audit sampling plans, forms for  recording information, audit working papers, etc. Work documents should be generally retained at least until audit completion, confidential documents should be suitably safeguarded at all times by the audit team members, however, the audit working papers should be filed and retained with the audit report.

1.9.4 Conduct audit activities • Page 13

The audit leader shall conduct an opening meeting with the auditee to: Corporate HSE Audits

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Confirm the audit plan and ToR Provide short summary of how the audit activities will be undertaken Confirm communication channels Provide opportunity for the auditee to ask questions •

The audit leader should confer periodically to exchange information, assess audit progress and to reassign work between the audit team members as needed. During the audit, the audit team leader should periodically communicate the progress of the audit and any major concerns to the auditee. Evidence collected during the audit that suggests an immediate and significant risk should be reported without delay to the auditee. Any need for changes to the audit scope should be reviewed with and approved by the auditee.

•

Guides and observers may accompany the audit team but are not a part of it. They should not influence or interfere with the conduct of the audit. They should assist the audit team and act on the request of the audit team leader. Their responsibilities may include: Establishing contact and timing for interviews  Arranging visits to specific parts of the site or organisation Ensuring that rules concerning site safety and security procedures are known and respected by the audit team Witnessing the audit on behalf of the auditee Providing clarification or assisting in collecting information.

•

During the audit, information related to the audit ToR should be collected by appropriate sampling and should be verified. Only information that is verifiable may be audit evidence. Audit evidence is based on samples of the available information and should be recorded to help reaching audit conclusions.

•

Generate audit findings  Audit team shall develop Audit Findings and determine ratings, risk/objectives based on the observations made during the interviews, field visits and examination of  documents and records. Every Audit Finding should be based on demonstrable facts or  evidence and rated in line with the Assurance ratings definitions. The primary criterion for rating Audit Findings is the risk to the achievement of  Business Objectives for the entity under audit. Whilst Low-Medium-High findings indicate a continuum of increasing risk to the entity under audit, a Serious Finding indicates a step-change in risk, and/or reflects notable impact on the entity under audit or the company. Classification of the audit findings shall be in accordance with the Rating Level table in line with the matrix below.

•

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Classify audit findings

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Petroleum Development Oman LLC Rating Level table for Classification of the audit findings: Rating level

Serious

High

Medium

Low

Compliance

Definition

Follow-up The next level of management The finding is likely to cause a high undesirable effect should take urgent (generally within on the achievement of the entity’s objectives and / 1 month) action to confront the or is likely to have a notable impact on other PDO situation and commit appropriate entities, therefore warranting immediate reporting to resources to immediate resolution of  senior management. e.g. Operations Manager or Asset the weaknesses. Senior Management Director  should monitor the implementation of agreed actions/improvements. The next level of management The finding is likely to cause a high undesirable effect should monitor the implementation on the achievement of one of the entity’s objectives, (generally within 3 months) of  warranting reporting to the Auditee’s management. agreed actions/improvements. The next level of management The finding is likely to cause a measurable undesirable should be advised (generally effect on the achievement of one of the entity’s within 6 months) of and review the objectives. actions being taken to enhance the framework.  No follow-up is required by the next The weakness is unlikely to have a measurable impact level of management, but action on the entity’s objectives, but its correction would should be completed within 12 enhance the risk based control framework. months. A non-compliance to a specific external legal or other  Immediate follow-up by the Auditee/ regulations applicable to the entity. Reference shall be Sponsor. made to the number of the specific law or regulation in the finding and after confirmation with Legal.

Table 3: Classification of audit findings

•

Assess control acceptability of major risk areas. The prime criterion for reaching a Control Acceptability Assessment is the level of  concern, as concluded by the Audit Team. This level of concern should be based upon three key considerations: The ‘implications’ for management, i.e. the action intended to be provoked and by whom; the degree to which the Audit Team determines the result of the audit needs to be escalated (or not). The ‘scope of concern’, i.e. whether the exposure is seen to be confined and contained, or whether it is far-reaching, potentially exposing other  entities. The evidence gathered during the audit regarding the suitability and effectiveness of the risk-based control framework for the entity under  audit in terms of achieving its objectives, i.e. the Audit Findings.  A three-point scale for Controls Assessments: Controls Acceptable, Controls Need Improvement or Controls Need Major Improvement. As with the rating of Audit Findings, this scale represents a continuum of increasing risk and increasing concern.  A “Controls Need Major Improvement” assessment indicates a step-change in the level of concern.

The following terminology and scale are to be used for the Controls Assessments: Colour Page 15

Category

Definition

Guidance

Impact on Business Objectives

Follow-up

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Controls Acceptable

 None, or a few Low and/or Medium rated findings are reported which indicate that a “once-off” rather  than process or  system structural weaknesses is present or that general enhancement of the controls, process or  system framework is not needed.

Controls  Need Improvement

Some Medium and / or one or more High rated findings are reported which indicate a weakness in key controls /  barriers or in a part of  the process or system structural framework.

1-2 High findings or 3-or-more Medium findings.

Three or more High and/or one or  more Serious rated findings are reported indicating failures in key controls / barriers or across a significant  part of the process or system structural framework.

Any Serious finding or 3or-more High findings.

Controls  Need Major  Improvement

Less than three Medium findings.

The expectation is that the entity will meet its Business Objectives.

 No followup is required  by the next level of  management.

The expectation is that the entity will not meet all its Business Objectives.

The next level of  management should be advised of  and review the actions  being taken to enhance the framework. The next level of  management should monitor the implementat ion of agreed actions/ improvements .

Table 4: Controls assessments color coding 

•

Conduct Closing Presentation to the Auditee that includes, as a minimum: Terms of Reference Summary of Audit findings and ratings Risk area Control Acceptability  Actions expected from the Auditee

1.9.5 Prepare Audit Report •

The Audit Lead shall prepare the Audit report from the audit team inputs.  As a minimum the Audit report shall contain: Terms of Reference  Audit findings Significance of findings Recommendations Risk area Control Acceptability

•

Distribute Audit Report The Audit Lead shall distribute report as determined by the ToR.  As a minimum, the report Audits shall be distributed to

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Principal Auditee Principal Auditee’s line Supervisor   Audit team Members  Audit manager  Corporate HSE manager 

1.9.6 Conduct Audit Follow Up  Audit Follow up coordinator and auditee shall retain and archive HSE Audit reports. The Follow up coordinator has to consider the recommendations, if any, from the audit and generate action plan that includes action parties and target completion dates for  all findings resulting from the HSE Audits. The Quality of Close out actions has to be reviewed and verified by the follow up coordinator and auditee. Evidences supporting the effective closure shall be retained until the next audit.

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Auditor selection criteria The audit team shall have: • • • • • • •

Knowledge of HSE matters. Adequate independence from the activities being audited, to enable objective and impartial judgement. Operational experience in the area being audited. The necessary expertise and experience in auditing practices and disciplines. Access to specialist HSE or other technical expertise, if necessary. The support and authority from management to procure the necessary information. Satisfactory completion of training program in auditing methodology

In order to maintain independence and objectivity, the Audit Team Leader and the majority of  the audit team should not have a direct reporting line to the Principal Auditee. The minimum training requirements in auditing for Audit Team members is a HSE Auditing course of 2 days duration. In addition, the minimum requirements of the Audit Team Leaders for Level 1 Audits are: • • • • •

Completion of a prescribed HSE Auditing course of 5 days duration Participation in three corporate HSE audit as a team member. Lead one corporate HSE audit under supervision of a Competent Lead Auditor  Job group 3 level or above. Deemed to be competent to lead audits by the HSE Audit Manager.

The minimum competency requirements of the Audit Team Leaders for Level 2 Audits are: • • • •

Completion of a prescribed HSE Auditing course of 5 days duration Participation in one corporate HSE audit as a team member. Job group 4 level or above. Deemed to be competent to lead audits by the HSE Audit Manager.

The minimum competency requirements of the Audit Team Leaders for Level 3 Audits are: • • • •

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Completion of a prescribed HSE Auditing course of 2 days duration Participation in two HSE audit as a team member. Lead one level 3 HSE audit under supervision of a Competent Lead Auditor  Deemed to be competent to lead audits by the HSE Audit Manager.

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Performance Standards, Monitoring, and Reporting 1.10 Performance Standards  Audit Program Compliance  Action close out status

1.11 Performance Monitoring Requirements  Audit managers report on a monthly basis the audit status and open & overdue actions from the audits

HSE Audits program compliance Audit Title

Current Status

E.g. Corporate HSE MS Audit

Planned for Q1 2011

Table 5: HSE audits program compliance

HSE Audits action close out status Directorate /Asset

E.g. MD

No. of Open Action Items  Audit Title

Principal  Auditee

Corporate HSE MS

MSEM

No. of Overdue Action Items

Serious

High

Medium

Low

Total

Serious

High

Medium

Low

Total

0

0

0

0

0

0

0

0

0

0

 All Total Table 6: HSE audits action close out status

1.12 Reporting Requirements Level 1 Audit  Audit manager shall report the compliance to the Audit Program and HSE Audits Action close out status to the IAC/BAC. Level 2 Audit  Audit manager shall report the compliance to the Audit Program and HSE Audits Action close out status to the Director. Level 3 Audits  Audit manager shall report the compliance to the Audit Program and HSE Audits Action close out status to the asset manager.

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Appendices 1.13 Definitions Audit program Set of risk-based audits planned for a specific time frame. Audit An objective examination of evidence for the purpose of providing an independent

assessment on risk management, control, or governance process for the organisation. Audit Finding An identified area for improvement in the risk-based control framework. Audit Objective The goals that an Audit Team plan to achieve in an Audit. Audit Process Three phases (Plan, Execute and Wrap-Up) to be followed to issue an Audit

Conclusion Audit Report A signed, written document which presents the purpose, scope, and results of 

the audit. Audit Scope Refers to the activities covered by the Audit. Audit Team A team consisting of a Lead Auditor and one or more Auditors. Auditee The person who manages the business area being audited. Entity That part of the Business being audited. The ‘entity’ is not necessarily an

organizational unit; it could be a corporate function, a process or a risk area. Terms of Reference A letter to the Auditee confirming the understanding of the

arrangements for the audit. Working Papers All documentation required to support the Audit Report (including

 Audit Findings and Audit conclusion).

1.14 Abbreviations BAC Board Assurance Committee IAC Internal Assurance Committee ToR Terms of Reference

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1.15 Key References In addition to the PDO documents listed on Page 3, the following references provide useful information related to this procedure. S. No.

Title, author’s name, year of publication

1

ISO 14001-2004 Environmental management systems - Requirements with guidance for use

2

GU 441- HSE Inspection Guideline

3

PR-1171-Contract HSE Management Procedure

4

ISO 19011:2002 Guidelines for quality and/or environmental management systems auditing

5

OHSAS 18001:2007 Occupational health and safety management systems - Requirements

1.16 Formats and Templates Model formats of ToR and Audit reports are given below. These are given as guidance; however the use of these formats is not mandatory.

ToR HSE Audit.docx

 Audit Re ort.docx

1.17 Additional Information Nil

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Corporate HSE Audits

The controlled version of this CMF Document resides online in Livelink®. Printed copies are UNCONTROLLED.