Report highlights

What this report is about

Workers compensation schemes in NSW provide compulsory workplace injury insurance. The effective management of workers compensation is important to ensure injured workers are provided with prompt support to ensure timely, safe and sustainable return to work.

Insurance and Care NSW (icare) manages workers compensation insurance. The State Insurance and Regulatory Authority (SIRA) regulates workers compensation schemes. NSW Treasury has a stewardship role but does not directly manage the schemes.

This audit assessed the effectiveness and economy of icare’s management of workers compensation claims, and the effectiveness of SIRA’s oversight of workers compensation claims. 

Findings

icare is implementing major reforms to its approach to workers compensation claims management - but it is yet to demonstrate if these changes are the most effective or economical way to improve outcomes.

icare’s planning and assurance processes for its reforms have not adequately assessed existing claims models or analysed other reform options.

icare's activities have not focused enough on its core responsibilities of improving return to work and maintaining financial sustainability.

SIRA has improved the effectiveness of its workers compensation regulatory activities in recent years. Prior to 2019, SIRA was mostly focused on developing regulatory frameworks and was less active in its supervision of workers compensation schemes.

NSW Treasury's role in relation to workers compensation has been unclear, which has limited its support for performance improvements.

Recommendations

icare should:

• ensure that its annual Statement of Business Intent clearly sets out its approach to achieving its legislative objectives
• monitor and evaluate its workers compensation scheme reforms
• develop a quality assurance program to ensure insurance claim payments are accurate.

NSW Treasury should:

• work with relevant agencies to improve public sector workers compensation scheme outcomes
• engage with the icare Board to ensure icare's management is in line with relevant NSW Treasury policies.

SIRA should:

• address identified gaps in its fraud investigation
• develop a coordinated research strategy.

Further information

Please contact Ian Goodwin, Deputy Auditor-General on 9275 7347 or by email.

What this report is about

WestInvest is a $5 billion funding program announced in September 2021 to provide ‘local infrastructure to help communities hit hard by COVID-19’ in 15 local government areas (LGAs) selected by the government. It was divided into three parts: $3 billion for NSW government agency projects; $1.6 billion for competitive grants to councils and community groups; and $400 million for non-competitive grants to councils.

Following the change of government at the 2023 election, the program was renamed the Western Sydney Infrastructure Grants Program. Funding decisions made for the community and local government grants were retained, but multiple funding decisions for the NSW government projects were changed.

The audit objective was to assess the integrity of the design and implementation of the program and the award of program funding.

Findings

The design of the program lacked integrity because it was not informed by robust research or analysis to justify the commitment of public money to a program of this scale.

The then government did not have sufficient regard to the implications for the state's credit rating. A risk to the credit rating arose because the government may have been perceived to be using proceeds from major asset sales to fund new expenditure, rather than pay down its debt.

Decisions about program design were made by the then Treasurer's office without consultation with affected communities. The rationale for these decisions was not documented or made public.

For the NSW government projects, funding allocations did not follow advice from departments. Many funded projects did not meet the objectives of the program.

The two other rounds of the program were administered effectively, except for some gaps in documentation and quality assurance. The program guidelines did not require an equitable or needs-based distribution of funding across LGAs and there was a significant imbalance in funding between the 15 LGAs. 

Recommendations

Our recommendations for the administration of future funding programs included:

• considering whether competitive grants are the best way to achieve the program's purpose
• completing program design and guidelines before announcements
• ensuring adequate quality assurance.

We also recommended that when providing advice for submissions by Ministers to Cabinet, agencies should ensure that departmental advice is clearly identified and is distinct from other advice or political considerations.

Further information

Please contact Ian Goodwin, Deputy Auditor-General on 9275 7347 or by email.

What this report is about

This report assesses how effectively SafeWork NSW, a part of the Department of Customer Service (DCS), has performed its regulatory compliance functions for work health and safety in New South Wales.

The report includes a case study examining SafeWork NSW's management of a project to develop a real-time monitoring device for airborne silica in workplaces.

Findings

There is limited transparency about SafeWork NSW's effectiveness as a regulator. The limited performance information that is available is either subsumed within DCS reporting (or other sources) and is focused on activity, not outcomes.

As a work health and safety (WHS) regulator, SafeWork NSW lacks an effective strategic and data-driven approach to respond to emerging WHS risks.

It was slow to respond to the risk of respirable crystalline silica in manufactured stone.

SafeWork NSW is constrained by an information management system that is over 20 years old and has passed its effective useful life.

While it has invested effort into ensuring consistent regulatory decisions, SafeWork NSW needs to maintain a focus on this objective, including by ensuring that there is a comprehensive approach to quality assurance.

SafeWork NSW's engagement of a commercial partner to develop a real-time silica monitoring device did not comply with key procurement obligations.

There was ineffective governance and process to address important concerns about the accuracy of the real-time silica monitoring device.

As such, SafeWork NSW did not adequately manage potential WHS risks.

Recommendations

The report recommended that DCS should:

• ensure there is an independent investigation into the procurement of the research partner for the real‑time silica detector
• embed a formal process to review and set its annual regulatory priorities
• publish a consolidated performance report
• set long-term priorities, including for workforce planning and technology uplift
• improve its use of data, and start work to replace its existing complaints handling system
• review its risk culture and its risk management framework
• review the quality assurance measures that support consistent regulatory decisions.

Further information

Please contact Ian Goodwin, Deputy Auditor-General on 9275 7347 or by email.

What this report is about

Results of the audit of the Consolidated State Financial Statements of the New South Wales General Government Sector (GGS) and Total State Sector (TSS) for the year ended 30 June 2023.

Findings

The audit opinion on the 2022–23 Consolidated State Financial Statements was qualified in relation to two issues and included an emphasis of matter.

The first qualification matter is a continuation of the prior year limitation of scope on the audit relating to the Catholic Metropolitan Cemeteries Trust (CMCT), a controlled state entity, who continued to deny access to its management, books and records for the purposes of a financial audit. As a result, the Audit Office was unable to obtain sufficient appropriate audit evidence to support the assets, liabilities, income and expenses relating to CMCT recorded in the TSS and the equity investment recognised in the GGS relating to the net assets of CMCT.

The second qualification matter relates to the limitations on the accuracy and reliability of financial information relating to Statutory Land Managers (SLMs) and Common Trust entities (CTs) controlled by the State and were either exempted from requirements to prepare financial reports, or who were required to submit financial reports and have not done so. The Audit Office was unable to obtain sufficient appropriate audit evidence to determine the impact on the value of non-land assets and liabilities, income and expenses that should be recognised in the 2022–23 Consolidated State Financial Statements and which have not been recorded in the Consolidated State Financial Statements.

The independent audit opinion also includes an emphasis of matter drawing attention to key decisions made by the NSW Government regarding the future of the Transport Asset Holding Entity of New South Wales (TAHE).

Recommendations

The report includes recommendations for NSW Treasury to address several high-risk findings, including:

• ensuring accurate and reliable financial information is available to recognise the non-land balances of SLMs and CTs
• ensuring the CMCT, SLMs and CTs meet their statutory reporting obligations
• conducting a broader review of the financial reporting exemption framework
• continued monitoring of TAHE's control over its assets
• providing timely guidance to the sector relating to legislative or policy changes that impact financial reporting
• developing an accounting policy for the reimbursement of unsuccessful tender bid cost contributions.

Further information

Please contact Ian Goodwin, Deputy Auditor-General on 9275 7347 or by email.

What this report is about

Result of the Treasury portfolio of agencies' financial statement audits for the year ended 30 June 2023.

The results of the audit of the NSW Government's consolidated Total State Sector Accounts (TSSA), which are prepared by NSW Treasury, will be reported separately in our report on 'State Finances 2023'.

The audit found

Unqualified audit opinions were issued on all general purpose financial statement audits.

Qualified audit opinions were issued on two of the 24 other engagements prepared by portfolio agencies. These related to payments made from Special Deposit Accounts that did not comply with the relevant legislation.

The number of monetary misstatements identified in our audits increased from 29 in 2021–22 to 39 in 2022–23.

The new parental leave policy impacted agencies across all portfolios. NSW Treasury should perform annual assessments to identify changes in legislation and regulation and provide timely guidance to the sector.

Transport for NSW and Sydney Metro have capitalised over $300 million of tender bid costs paid to unsuccessful tender bidders relating to significant infrastructure projects. Whilst NSW Treasury policy provides clarity on the reimbursement of unsuccessful bidders' costs, clearer guidance on how to account for these costs in agencies' financial statements is required.

The key audit issues were

Five high-risk issues were reported in 2022–23. Three were new findings on contract management, accounting treatments for workers compensation renewal premium adjustments and the management and oversight of a Special Deposit Account. Two repeat issues referred to the need to improve quality review processes over financial reporting and the timely approval of administration costs.

Portfolio agencies should prioritise and action recommendations to address internal control deficiencies.

Further information

Please contact Ian Goodwin, Deputy Auditor-General on 9275 7347 or by email.

What this report is about

Results of the Planning and Environment portfolio financial statement audits for the year ended 30 June 2023.

The audit found

Unqualified audit opinions were issued for all completed Planning and Environment portfolio agencies. Seven audits are ongoing.

The Catholic Metropolitan Cemeteries Trust (CMCT) did not comply with its obligations under the Government Sector Finance Act 2018 (GSF Act) to prepare and submit financial statements for audit.

The Department of Planning and Environment (the department) has not yet provided their assessment of the financial reporting requirements for the 579 Category 2 Statutory Land Managers (SLMs) for 2022–23.

One-hundred and nineteen Commons Trusts are non-compliant with the GSF Act as they have not submitted their financial statements for audit.

We issued unqualified opinions on the Water Administration Ministerial Corporation's 2020–21, 2021–22 and 2022–23 financial statements.

The number of monetary misstatements identified in our audits decreased from 59 in 2021–22 to 51 in 2022–23, however the gross value of misstatements increased.

The key audit issues were

The former Resilience NSW and NSW Reconstruction Authority (the Authority) re-assessed the accounting implications arising from contractual agreements relating to temporary housing assets associated with the Northern Rivers Temporary Homes Program. This resulted in adjustments to recognise the associated assets and liabilities.

We continue to identify significant deficiencies in NSW Crown land information records.

The department has not been effective in addressing the differing practices for the financial reporting of rural firefighting equipment vested to councils under section 119 (2) of the Rural Fires Act 1997.

The number of findings across the portfolio reported to management increased from 132 in 2021–22 to 140 in 2022–23. Thirty per cent of issues were repeated from the prior year.

Seven high-risk issues were identified. These related to the findings outlined above, deficiencies in quality reviews of asset valuations, internal control processes and IT general controls.
 

The audit recommended 

Recommendations were made to the department and portfolio agencies to address these deficiencies.

Further information

Please contact Ian Goodwin, Deputy Auditor-General on 9275 7347 or by email.

What this report is about

Results of the Regional NSW financial statements audits for the year ended 30 June 2023.

What we found

Unqualified audit opinions were issued on all completed audits in the Regional NSW portfolio agencies.

The number of monetary misstatements identified in our audits increased from 28 in 2021–22 to 30 in 2022–23.

What the key issues were

Effective 1 July 2023, staff employed in the Northern Rivers Reconstruction Corporation Division of the Department of Regional NSW transferred to the NSW Reconstruction Authority Staff Agency.

The Regional NSW portfolio agencies were migrated into a new government wide enterprise resourcing planning system.

The total number of audit management letter findings across the portfolio of agencies decreased from 36 to 23.

A high risk matter was raised for the NSW Food Authority to improve the internal controls in the information technology environment including monitoring and managing privilege user access.

What we recommended

Local Land Services should prioritise completing all mandatory early close procedures.

Portfolio agencies should:

• ensure any changes to employee entitlements are assessed for their potential financial statements impact under the relevant Australian Accounting Standards
• prioritise and address internal control deficiencies identified in audit management letters.

Further information

Please contact Ian Goodwin, Deputy Auditor-General on 9275 7347 or by email.

What this report is about 

The Forestry Corporation of NSW (FCNSW) is a state-owned corporation that manages over two million hectares of public native forests and plantations supplying timber to sawmills across NSW.  

The NSW Environment Protection Authority (EPA) is responsible for regulating the native forestry industry in NSW. 

FCNSW must comply with Integrated Forestry Operations Approvals (IFOAs), which set out rules for how timber harvesting may occur.  

Most harvesting is undertaken under the Coastal IFOA, which commenced in 2018. 

This audit assesses how effectively Forestry Corporation of NSW manages its public native forestry activities to ensure compliance, and how effectively the Environment Protection Authority regulates these activities. 

What we found 

Forestry Corporation of NSW (FCNSW) clearly articulates its compliance obligations.  

While FCNSW undertakes monitoring of its contractors, it does not do so consistently and does not target its monitoring activities on a risk basis.  

FCNSW has largely fulfilled mandatory Coastal IFOA training requirements, but has not yet trained other staff who would also benefit from the training. 

Contractor compliance appears to be improving, but there are gaps and inconsistencies in FCNSW's documentation of this. 

FCNSW is not measuring its overall compliance to determine how it is tracking against its target. 

The EPA undertakes proactive inspections of Coastal IFOA harvesting operations on a risk basis. However, it does not assess the risk at harvest sites covered by other IFOAs.  

Most EPA compliance staff have received basic training, but few have received more advanced training required to effectively undertake forestry inspections.  

Some EPA offices do not have the necessary equipment to undertake forestry inspections. 

The EPA and FCNSW are not implementing all elements of a Memorandum of Understanding that aims to promote a cooperative relationship between the agencies. 

What we recommended 

The report made recommendations to FCNSW which aim to improve: 

• staff training 
• consistency of compliance reviews and data capture 
• targeting of compliance activities 
• measurement of performance. 

The report made recommendations to the EPA which aim to improve: 

• risk assessments  
• staff training  
• staff equipment. 

The report also recommended that FCNSW and EPA should fully implement their Memorandum of Understanding.  

Further information

Please contact Ian Goodwin, Deputy Auditor-General on 9275 7347 or by email.

What this report is about

This report draws together the financial impact of natural disasters on agencies integral to the response and impact of natural disasters during 2021–22.

What we found

Over the 2021–22 financial year $1.4 billion from a budget of $1.9 billion was spent by the NSW Government in response to natural disasters.

Total expenses were less than the budget due to underspend in the following areas:

• clean-up assistance, including council grants
• anticipated temporary accommodation support
• payments relating to the Northern Rivers Business Support scheme for small businesses.

Natural disaster events damaged council assets such as roads, bridges, waste collection centres and other facilities used to provide essential services. Additional staff, contractors and experts were engaged to restore and repair damaged assets and minimise disruption to service delivery.

At 30 June 2022, the estimated damage to council infrastructure assets totalled $349 million.

Over the first half of the 2022–23 financial year, councils experienced further damage to infrastructure assets due to natural disasters. NSW Government spending on natural disasters continued with a further $1.1 billion spent over this period.

Thirty-six councils did not identify climate change or natural disaster as a strategic risk despite 22 of these having at least one natural disaster during 2021–22.

Further information

Please contact Ian Goodwin, Deputy Auditor-General on 9275 7347 or by email.

What the report is about

The Bushfire Local Economic Recovery (BLER) program was created after the 2019–20 bushfires, and commits $541.8 million to bushfire affected areas in New South Wales. It is co-funded by the Commonwealth and NSW governments.

This audit assessed how effectively the Department of Regional NSW (the department) and Resilience NSW administered rounds one and two of the BLER program. These rounds were:

• Round one: early co-funding, split between two streams:

  • Fast-Tracked projects
  • Sector Development Grants (SDG)

• Round two: open round.

What we found

The Department of Regional NSW did not effectively administer the Fast-Tracked stream of the BLER. 

The administration process lacked integrity, given it did not have sufficiently detailed guidelines and the assessment process for projects lacked transparency and consistency. 

At the request of the Deputy Premier's office, a $1 million threshold was applied, below which projects were not approved for funding. The department advises that some of the projects excluded were subsequently funded from other programs. 

This threshold resulted in a number of shortlisted projects in areas highly impacted by the bushfires being excluded, including all shortlisted projects located in Labor Party-held electorates.

The department's administration of the SDG stream had a detailed and transparent assessment process. However, conflicts of interest were not effectively managed. 

The department's administration of the open round included a clearly documented, detailed and transparent assessment framework. Some weaknesses in the approach to conflicts of interest remained.

What we recommended

The Department of Regional NSW should ensure that for all future grant programs it:

1. establishes and follows guidelines that align with relevant good practice guidance
2. ensures a communications plan is in place, including the communication of guidelines to potential applicants
3. ensures staff declare conflicts of interest prior to the commencement of a grants stream, and that these conflicts of interest are recorded and managed
4. ensures regular monitoring is in place as part of funding deeds
5. documents all key decisions and approvals in line with record keeping obligations.

Further information

Please contact Ian Goodwin, Deputy Auditor-General on 9275 7347 or by email.