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Practice Guide to Auditing Mining Revenues and Financial Assurances for Site Remediation

Internal Controls Over Financial Assurances

The value of the financial assurances that need to be provided by leaseholders to cover the costs of future remediation activities for an extraction site will vary over time for a number of reasons, which may include the following:

  • Early remediation work has already started, reducing future liabilities.
  • New remediation technologies and techniques become available or the costs of current technologies and techniques change.
  • Evolving environmental standards and evolving land claim decisions may affect the required level of remediation.
  • Significant changes are made to decommissioning plans.
  • The mineral reserve estimate has been revised, changing revenue expectation and the expected capacity of a leaseholder to pay for remediation costs.

To ensure that governments hold sufficient financial assurances for site remediation, the responsible organizations need to review all the decommissioning plans they receive from leaseholders and to verify the amounts that should be provided as guarantee.

For further assurance, governments can monitor leaseholders and their mining sites to ensure that site information provided by mining companies is still accurate and up to date. (A company’s operational plans may have changed significantly over time.) However, there can be thousands of mining sites in a jurisdiction and it is unlikely that government inspectors (or hired consultants) can visit each site every year. For this reason, governments need to have risk-based inspection strategies to target their limited resources at higher risk sites.

Once a leaseholder remediates a site, the government can return the financial guarantee to the leaseholder. However, there should be controls in place to ensure that sites have been remediated in accordance with applicable standards. Review of remediation reports and site inspections are two control mechanisms that can be relied on. In the absence of such controls, there is a risk that governments may end up being liable for the costs of cleaning up sites that were not adequately remediated.

Auditors working on an audit of financial assurances for the remediation of mining sites can therefore audit whether governments:

  • have established adequate controls to ensure they are holding sufficient financial assurances to cover expected remediation costs in the future and
  • have adequate controls to ensure that they release financial assurances only when mining sites have met all applicable remediation standards.

Table 16 includes examples of knowledge of business questions that auditors can ask about internal controls over financial assurances during the planning phase. Examples of related audit objectives and criteria are provided in later sections of the Practice Guide.

Table 16 – Internal Controls Over Financial Assurances: Examples of Knowledge of Business Questions


Knowledge of Business Questions

Completeness of information and accuracy of cost estimates

Remediation plan validation

  • Are resource extraction companies required to provide supporting evidence or independent verification of their remediation cost estimates?
  • Are the remediation plans provided by leaseholders reviewed by a specialist to confirm reasonability and compliance with relevant requirements (regulations, standards, industry good practices, or contract condition)? If so, are those reviews documented?
  • Is there guidance and/or standards on how to validate cost estimates provided by leaseholders?
  • Are financial guarantees recalculated based on data provided?
  • Are there time standards for completing reviews and data validation?
  • Is there a backlog of reviews and recalculations to complete?

Site inspections

  • Are periodic site inspections conducted to monitor site status and validate information provided in remediation plans?
  • Is there a risk-based inspection strategy?
  • Are all planned inspections conducted? Is there an inspection backlog?
  • Do inspections include sample collection and testing or just a physical inspection of the sites?
  • Is timely action taken to follow up on inspection results that indicate non-compliance or other issues?
  • At the end of the remediation process for a specific site, is a site inspection conducted before issuing a remediation certificate?
  • Are there sufficient qualified inspectors on staff to conduct all planned inspections?
  • Are the results of inspections documented?


  • Have internal audits of the financial assurance program been conducted?
  • Have recommendations for improvement been implemented

Staffing and training

  • Has the number of inspectors needed to conduct all planned inspections been determined? Are all required inspector positions staffed?
  • Is specialized training provided to inspectors?
  • Is there a hiring and retention strategy for inspectors?
  • Is there a staff rotation policy to ensure that inspectors do not become too closely involved with individual cases?


  • Where there is more than one responsible organization, is there a formal coordination agreement in place (memorandum of understanding or other)?
  • Are the roles and responsibilities of all parties clearly documented?

Once auditors have obtained answers to their knowledge of business questions, they can better assess the risks related to the internal controls over the financial assurance program.

Auditors should consider including the internal controls over the financial assurance program in their audit plan if their preliminary audit work indicates the following:

  • Remediation plans submitted by mining companies are not reviewed by an internal or independent specialist.
  • There is no guidance to explain to staff how to validate the remediation cost estimates provided by mining companies.
  • Site visits are not conducted periodically to assess whether remediation plans still reflect the reality of activities at mining sites.
  • Site inspections are not conducted in a timely manner and there is an inspection backlog.
  • No internal or external audits of the financial assurance program and internal controls have been conducted.

This list of potential audit issues is indicative, not exhaustive. It is the responsibility of audit teams to review and analyze the information they collect in the planning phase in order to identify and assess significant risk areas. Only after conducting this work will auditors be able to decide whether to include the internal controls over the financial assurance program in their audit plan.