Understanding the changing government landscape

PERFORMANCE AUDIT

In designing our program of performance audit topics, we consider the risks and challenges facing government, and opportunities for improved public‑sector accountability, governance and performance. We identify these risks and opportunities through research and consultation, and continuously scan the environment for emerging issues. The current areas of focus are:

Planning for the future

Governments play an important stewardship role. Their decisions need to consider intergenerational equity by ensuring that investment strategies are sustainable. Governments also need to consider the impact of their decisions on different parts of the community.

Meeting community expectations for key services

State and local governments exist to provide services to citizens, and citizens are playing a greater role in defining what services they want or need. Expectations about consultation, ease of access, timeliness, and customisation of services are rising. Governments face challenges to continually improve the way they plan and deliver services to meet these expectations and are increasingly moving to commissioning and partnership models with external providers. Governments also need to provide quality services for a growing and ageing population whilst working within a constrained financial environment.

The scale of investment in infrastructure

The NSW Government will invest $87.2 billion* in infrastructure over the next four years. Infrastructure investment of this size creates significant opportunities and risks. Competition for resources is high and maintaining the capability to manage and deliver projects effectively is challenging. Governments also need to plan effectively to ensure infrastructure built today will meet future needs.

*Source: Budget Paper No. 2 ‘Infrastructure Statement 2018–19’.

Managing the environment and natural resources

Governments face challenges in balancing the use of natural resources to meet diverse interests, while ensuring resources are used sustainably into the future. Governments need to supply communities with water, produce energy, and manage threats to the environment and human health. They also need to support farming, industry and economic development.

Ensuring good governance and transparency

A range of checks and balances is needed to support public confidence in government decision‑making. To maintain trust, government agencies and local councils should act transparently, and in accordance with relevant legislation and policy. This is particularly important as the public sector increasingly engages with external partners to deliver services and provide a more contestable environment.

Good governance arrangements should result in improved service delivery and more effective and efficient use of resources.

Responding to digital disruption

Global trends in digital technology provide governments with opportunities to interact with citizens in more immediate and responsive ways than was previously possible. Data is used to predict future demand for services, target interventions, respond to crises, and evaluate outcomes. When doing this, governments need to maintain secure digital environments that protect citizen interests, privacy, and autonomy.

 

FINANCIAL AUDIT

While we look for opportunities to improve public‑sector accountability, governance and administration, we also consider the risks and challenges to reporting the true financial position and performance of the State and local councils and how these may be addressed during our audits. Current risks or challenges that may impact financial reporting include:

Valuation of non‑financial assets:

Some of the largest entities we audit will perform full physical asset revaluations during 2017–18. Risks and challenges to financial reporting include:

  • complex valuation techniques for unique or specific purpose assets
  • the use of judgements in evaluating asset condition, useful life and restrictions
  • ensuring complete and accurate data for asset valuations.
Valuation of actuarially assessed balances

A large proportion of the entities we audit report provisions for employee benefits such as superannuation, which are actuarially assessed.

Risks and challenges to financial reporting include:

  • complex calculations
  • the use of economic and demographic assumptions
  • ensuring actuaries are given complete and accurate data.
Commercial transactions

The NSW Government’s asset recycling strategy is set to continue with the proceeds from the sale of government assets used to help fund its infrastructure investment program. The NSW Government is at varying stages of completion of the following commercial transactions:

  • the Commonwealth’s purchase of the NSW Government’s equity investment in Snowy Hydro Limited
  • the proposed sale of a 51 per cent stake in the Sydney Motorway Corporation.

Risks and challenges to financial reporting include:

  • complex accounting for these transactions
  • the unique and complex governance structures and legislative instruments created by government to effect these sales.
Impact of new accountings standards

Over the next two years, the following new accounting standards will come into effect and are likely to have a significant impact on all sectors:

  • AASB 15 ‘Revenue from Contracts with Customers’ and AASB 1058 ‘Income of Not‑for‑Profit Entities’ (applicable for the year ending 30 June 2019 for for‑profit entities and the year ending 30 June 2020 for not‑for‑profit entities)
  • AASB 16 ‘Leases’ (applicable for the year ending 30 June 2020)
  • AASB 1059 ‘Service Concession Arrangements: Grantor’ (applicable for the year ending 30 June 2020).

Risks and challenges to financial reporting include:

  • interpreting the new requirements and adequately planning for their application as many new rules apply and management judgement is needed
  • implementing new systems to capture more detailed information to meet increased reporting obligations.