Volume Ten 2014 Focusing on Treasury and Finance (including Superannuation and Insurance)
Today the Auditor-General of New South Wales, Grant Hehir, released his Volume Ten 2014 Report to Parliament focusing on finance and treasury, superannuation and insurance.
Quality Financial Reporting
The quality of financial reporting in the Finance and Treasury cluster continues to improve with fewer reported misstatements over the last three years.
The financial statements of all cluster agencies received unqualified audit opinions, except for the New South Wales Self Insurance Corporation.
The NSW Government’s defined benefit superannuation funds earned double digit returns over the past two years, outperforming internal targets. Better than expected growth in the United States economy and stability in Australian markets contributed to the positive outcomes in 2013-14.
Over the last five years, the three largest funds’ investment values increased by $9.8 billion, while the liability for the combined members’ benefits increased by $5.6 billion, resulting in the unfunded liability decreasing to $15.8 billion.
“While contributions and positive investment returns have reduced the liability, there is still a way to go to achieve the Fiscal Responsibility Act’s target of eliminating unfunded superannuation liabilities by 2030,” the Auditor-General said.
Funds Amalgamation Project
In March 2014, the NSW Government announced plans to amalgamate $65 billion of the State’s financial assets. The amalgamation will centralise the funds management of Safety, Return to Work and Support (WorkCover) and STC Pooled Fund in NSW Treasury Corporation (TCorp).
“This is a major financial project for the State,” said the Auditor-General. “The key stakeholders need to ensure governance arrangements, risk management, resourcing and reporting requirements are adequately addressed”.
Improved financial position of WorkCover Scheme
The WorkCover Scheme’s financial position continued to improve in 2013-14, because of positive investment earnings and the reforms implemented in 2012, resulting in net assets increasing to $2.6 billion. The Scheme’s funding ratio has improved, exceeding the high end of its target range for the first time in the last six years and increasing to 118 per cent of total liabilities at 30 June 2014.
“To ensure the Scheme’s long-term sustainability, WorkCover should stress test the Scheme’s financial resilience and develop a strategy to manage its surplus,” said the Auditor-General. “This analysis will help ensure the Government’s decision making on premium and benefit levels can be soundly based,” he added.
WorkCover Authority’s regulatory and commercial roles
WorkCover Authority is both the regulator of the NSW workers compensation system and the manager of the workers compensation Insurance Fund as the Nominal Insurer.
“The Parliamentary Standing Committee on Law and Justice’s ‘Review of the exercise and functions of the WorkCover Authority’ has highlighted the need to resolve the potential conflict of interest arising from WorkCover’s multiple roles,” the Auditor-General said.
“WorkCover needs to ensure its current governance processes effectively and transparently manage its regulatory and commercial roles to avoid real and perceived conflicts,” he added.
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