Volume Eight 2014 Focusing on Police and Justice (Law, Order and Emergency Services)

Today the Auditor-General of New South Wales, Grant Hehir, released his Volume Eight 2014 Report to Parliament focusing on law, order and emergency services agencies.

Governance and reporting

Improved financial reporting

The quality of financial reporting in the cluster continues to improve with the number of reported misstatements identified during audit decreasing over the past five years.

The audits resulted in unqualified audit opinions on the financial statements of all cluster agencies for the year ended 30 June 2014, with the exception of the State Emergency Service.

Deficient governance frameworks

The governance arrangements of a number of agencies are exposing the cluster to operational and financial risks.
Incidents of actual and/or alleged fraud and other financial irregularities were identified within the Department of Justice (formerly the Department of Police and Justice), the NSW Trustee and Guardian, the NSW State Emergency Service, the NSW Rural Fire Service and Fire and Rescue NSW.

“Such incidents are minimised if appropriate governance structures are in place,” said the Auditor-General. “The audits identified key areas for improvement in agencies where governance structures are ineffective”.

While NSW Trustee and Guardian, NSW Rural Fire Service and Fire and Rescue NSW have adequate governance structures, the Department of Justice and NSW State Emergency Service need to address governance deficiencies.

The Department of Justice has not yet finalised or fully implemented its governance arrangements, since its creation in 2009, five years ago.

“The Department needs to finalise and implement its governance and integration plans urgently. Once complete, the Department should consider rolling out its integrated policies and systems to other agencies in the cluster to maximise the benefits of the clustering arrangement,” said the Auditor-General.

The NSW State Emergency Service has not had effective governance arrangements in place since September 2012, significantly impacting every aspect of its business and exposing it to significant financial and operational risks.

"I recommended the Service urgently address recent Independent Commission Against Corruption and Public Service Commission findings on governance deficiencies and re-establish proper governance", said the Auditor-General. ‘Enhanced governance arrangements will help improve financial controls, financial management and reporting,’ he added.

Throughout 2014 the Service’s senior executive positions have been filled by acting officers, an impediment to effecting significant organisational change.

“The acting officers need to be empowered to make the changes necessary to improve governance arrangements. These arrangements should include an overarching risk assessment and treatment plan for the emergency services agencies within the cluster,” said the Auditor-General.

Improved performance monitoring and reporting needed

Performance monitoring and reporting are important to drive improved business outcomes.
A 2009 Legislative Council Inquiry into the privatisation of prisons and prison related services recommended Corrective Services develop a more rigorous methodology to compare costs between publicly and privately operated prisons.

“The Department of Justice subjects private operators’ performance to continuous appraisal, incorporating monitoring and reporting against performance-linked fees and operating specifications within the contracts,” said the Auditor-General.

The State’s publicly managed correctional centres should be subject to the same degree of oversight and performance management and reporting as applied to the privately managed centres”.

The Department engaged consultants to develop a framework to evaluate the public and private sector operations of correctional centres with a view to increasing efficiencies based on best practice models. The Government is considering the report’s findings and recommendations.

The NSW Trustee and Guardian only uses and reports a limited number of indicators which measure its activities rather than its performance.

“Meaningful indicators and targets are important to drive efficiencies and effectiveness in an organisation’s operations,” emphasised the Auditor-General. “Reporting performance outcomes against targets gives decision makers and other key stakeholders critical information and insights into the business. Transparency around performance also enables management and those charged with the governance of the organisation to be held to account”.

The Auditor-General recommended that ‘the NSW Trustee and Guardian identify meaningful and measurable performance indicators and targets for the cost and quality of the services provided to the community. These should include measures such as the cost per trust managed, the time taken to identify and secure client assets, and customer satisfaction and complaints.

Death and disability schemes

The Police Blue Ribbon Insurance Scheme

The NSW Police Force’s Blue Ribbon insurance scheme was implemented in 2012 and a statutory cost target of approximately 4.6 per cent of the total cost of police officers’ remuneration was established.

To achieve the cost target, the NSW Police Force needs to maintain the number of claims, payments and medical discharges close to current levels. The financial cost of the scheme for the year ended 30 June 2014 equated to 8.3 per cent of total police officers’ remuneration, 3.7 per cent higher than the target.

The scheme’s insurance premium increased by $24.8 million (24.8 per cent) to $124.7 million, reflecting improved policy features and benefits for officers, and an increase in their numbers.

The Force advises it is seeking actuarial advice on the required pattern of claims and responsibilities to achieve the cost target.

Fire and Rescue NSW’s Death and Disability Scheme

The Fire and Rescue Death and Disability Scheme’s liabilities have increased by 45.9 per cent from $91.9 million in 2012-13 to $134 million in 2013-14.

The increase in the liability was mainly due to higher incurred but not reported (IBNR) total and permanent incapacity claims. The fund’s secretary has confirmed the scheme is operating within original design parameters.

Further Information

Please contact Barry Underwood on 9275 7220 or 0403 073 664; email barry.underwood@audit.nsw.gov.au