The Justice cluster was impacted by machinery-of-government changes set out in the 'Administrative Arrangements (Administrative Changes - Law Enforcement Conduct Commission) Order 2017'. The Order created the Law Enforcement Conduct Commission effective from 1 July 2017. The Order disbanded the Police Integrity Commission.

Audit opinions

Unqualified audit opinions were issued for all agencies' financial statements

Unqualified audit opinions were issued for all agencies' 30 June 2018 financial statements. Sufficient audit evidence was obtained to conclude the financial statements were free of material misstatement. However, there were several changes to some cluster agencies financial statements initially submitted to the Auditor-General for audit.

All financial statements were submitted and audits completed by statutory deadlines

The table below shows the timeliness of financial reporting across the Justice cluster for the year ending 30 June 2018.

	Timeliness of financial reporting
Cluster agencies	Early close procedures	Financial statements	Audit report
Principal department
Department of Justice*
Law and Order agencies
NSW Police Force
Legal Aid Commission of New South Wales
Office of the Director of Public Prosecutions
Judicial Commission of New South Wales
Legal Profession Admission Board
Crown Solicitor's Office
Information and Privacy Commission
NSW Trustee and Guardian
New South Wales Crime Commission
Law Enforcement Conduct Commission
Trustees of the Anzac Memorial Building
Emergency services agencies
Fire and Rescue NSW
Office of the NSW Rural Fire Service
Office of the NSW State Emergency Service

Key  Statutory reporting deadline was met   Statutory reporting deadline was not met

All cluster agencies' financial statements were submitted and audits completed by the statutory deadlines.

Cluster agencies would benefit from completing additional early close procedures 

Justice cluster agencies substantially complied with the mandatory early close requirements set by NSW Treasury. Some agencies can improve the effectiveness of early close procedures by:

• completing revaluations of property, plant and equipment during the early close process
• reconciling inter-agency balances and transactions with other government agencies
• assessing the impact of new and revised accounting standards.

NSW Treasury exempted the Department from completing its property, plant and equipment revaluation as part of the early close on the basis the Department required additional time to review the valuation results relating to Corrective Services' properties.

Early close procedures aim to bring forward year-end activities, such as valuing assets and resolving financial reporting issues, to reduce reporting timeframes and improve quality.

Law and order

Department of Justice

Restitution debts recovered from convicted criminals have increased by $7.0 million

The Department reports that in 2017–18 they issued 1,262 restitution orders with a value of $9.5 million and recovered $10.8 million from convicted offenders. The amount recovered was $7.0 million more when compared to the prior year. Over the last five years, restitution orders of $61.1 million have been issued compared to recoveries of $28.6 million, implying a recovery rate of 47 per cent of recognised debts (up from 30 per cent in 2016–17). 

The table below shows the value of restitution debts raised and the recoveries from offenders over the last five years.

The Department advises the increase in the recovery of restitution debts in 2017–18 is due to recent amendments to the Fines Act 1996 and Victims Rights and Support Act 2013, where restitution debts can now be enforced as court fines. From May 2017, all default restitution debts are transferred to Revenue NSW for enforcement. This function was previously performed by the Department. 

The Department also advises the decrease in value of new debts raised since 2014 is consistent with the decrease in amount of financial support available to victims of crime under the Victims Rights and Support Act 2013. Prior to the introduction of this Act the amounts awarded were larger in value. 

Victims of violent crime are entitled to financial support, even if the offender is unknown or not convicted. Restitution orders can be levied against convicted offenders to recover the financial support paid to victims. Levies are paid into the Victims Support Fund. 

The victims’ claims reassessment scheme cost more than $100 million 

On 2 August 2015, the NSW Attorney General announced that victims of crime, who transitioned between the Victims Compensation Scheme (VCS) and the Victims Support Scheme (VSS), could have their claims reassessed from 1 September 2015. Applicants had to apply to have claims reassessed before 31 August 2016. The Department received 10,039 applications for reassessment, of which it awarded 2,356 claims in 2017–18 (2,957 claims in 2016–17) at a cost of $25.8 million ($39.3 million in 2016–17). Over the life of the scheme, $80.6 million or 6,182 claims were awarded. An additional $21.0 million was incurred in administration costs. The Department advises all applications are now assessed and all claims determined and paid.

The NSW Police Force

The cost of the NSW Police Force Blue Ribbon Insurance Scheme decreased but remains above the statutory target

NSW Police data shows the cost of the NSW Police Death and Disability Insurance Scheme (Police Blue Ribbon Scheme) for the year ended 30 June 2018 was 5.3 per cent of total NSW Police Officers' remuneration (5.5 per cent in 2017). This cost remains higher than the statutory target of 4.6 per cent but is lower than the previous year.

The cost of the Police Blue Ribbon Scheme premium increased by 1.8 per cent to $111 million in 2017–18 ($109 million in 2016–17). The increase is due to higher employee costs during the year offset by a slightly lower premium of 7.1 per cent (7.3 per cent in 2016–17).

We recommend NSW Police estimate the scheme costs for future years, to understand when the statutory target of 4.6 per cent of total NSW Police Officers’ remuneration, will be met. This information will allow NSW Police to assess the success of its current workforce improvement program and determine whether future program effort needs to be reviewed.

Cluster agencies recorded a $637 million operating surplus in 2017–18

Cluster agencies recorded a combined operating surplus of $637 million in 2017–18 ($662 million in 2016–17). The financial results included:

• a $567 million surplus ($615 million surplus in 2016–17) in law and order agencies, including the Department
• a $70.0 million surplus ($47.0 million surplus in 2016–17) in emergency services agencies. 

Cluster revenue increased by $1.1 billion mainly due to higher government contributions. The Department's appropriations increased by $975 million for both recurrent and capital purposes, mainly to fund the ongoing prison bed capacity program and criminal justice reforms.
 
Expenditure in the cluster increased from $11.8 billion in 2016–17 to $12.9 billion in 2017–18 mainly due to:

• the Department receiving $1.1 billion in appropriations ($24.5 million in 2016–17) mainly relating to the Emergency Services Levy, which was subsequently passed on to emergency services agencies through grant and subsidy payments. In previous year's, emergency services agencies received this levy directly from local councils, insurance companies and NSW Treasury
• higher base salaries and wages expense of $141 million, due primarily to an increase in the number full time equivalent employees compared to the prior year
• increased natural disaster payments incurred by the Department of $53.9 million
• long service expenses at NSW Police increasing by $48.5 million, due to higher on-cost rates used in the actuarial assessment of long service leave liabilities compared to the prior year. 

Expenditure in emergency services agencies rose by $24.0 million, because:

• Fire and Rescue NSW incurred additional costs of $11.6 million on the Death and Disability Scheme
• natural disaster payments at the Office of the NSW Rural Fire Service increased by $22.2 million.

Cluster assets increased from $8.8 billion at 30 June 2017 to $9.5 billion at 30 June 2018 due to a revaluation increase at NSW Police ($126.7 million) offset by a decrease at the Department ($59.5 million) and capital projects of $980 million, including the Department's prison bed capacity program. Total liabilities across the cluster remained steady increasing slightly from $2.1 billion at 30 June 2017 to $2.2 billion at 30 June 2018.

Appendix four summarises key financial information for each agency.

Salaries and wages and other expenditure continue to increase 

Activity in the Justice cluster continues to increase, with base salaries and wages increasing by 3.4 per cent and other expenditure by 2.3 per cent compared to the prior year. While base salaries and wages increased by more than the 2.5 per cent pay increase received by Crown employees from 1 July 2017, overall employee related expenses across the cluster was within budget.
 
The table below shows base salaries and wages and other expenses of cluster agencies for the last three years and the movement between 2017 and 2018.

In response to the Department's prison bed capacity program and criminal justice reforms, staffing levels in the Department and the Legal Aid Commission of New South Wales have increased. Staffing levels at the Office of the Director of Public Prosecutions have also increased in response to the criminal justice reforms.

Salaries and wages continued to fall at NSW Trustee and Guardian as there have been redundancies over the past two years associated with operational changes. On average, the number of full time equivalent positions in the NSW Crime Commission was lower compared to the prior year following redundancies in 2016–17. 

Staffing levels at the Office of the NSW Rural Fire Service increased when compared to the prior year. The increase in salary and wages was within the Office's approved budget.

NSW Police's salaries and wages for the year ended 30 June 2018 increased largely due to the 2.5 per cent pay increase awarded to Crown employees from 1 July 2017. NSW Police advise it undertook a major restructure throughout 2017–18, with amalgamations of Local Area of Commands, rank restructures and reviews of activities, which are likely to achieve annual savings in 2018–19 and forward years of $14.4 million.

'Other expenditure' increased at the Judicial Commission of New South Wales because its Conduct Division incurred costs of $531,000 investigating three complaints against judicial officers in 2017–18 (nil in 2016–17). At the Crown Solicitors Office, expenses increased due to a rise in the number of contract staff to support multiple accommodation and information technology initiatives.

A new demand funding model is being considered for the criminal and civil justice systems

The 2016 Auditor-General's Report to Parliament recommended that, in making decisions about Justice cluster resources, the Department should consider the activities of the interrelated components of the criminal justice system.

Funding in the criminal and civil justice system is determined in advance through the annual appropriation process. This does not always reflect required expenditure, which is driven by the level of activity. The actual costs incurred by downstream agencies are also heavily influenced by upstream factors such as policing activity and sentencing by judicial officers.

Where funding does not meet demand, added pressure is placed on downstream agencies which tend to respond by reducing non-core services to meet budget constraints. 

The Department is addressing this issue by: 

• working on a new demand funding model for the criminal and civil justice systems
• developing dashboards to track activity and performance across the cluster
• undertaking justice impact assessments to identify the system-wide impacts of new policy proposals
• building cost models for major functions across the cluster.

Work on the new funding model is being undertaken by various agencies from across the cluster in conjunction with NSW Treasury. 

Managing annual leave

More than a third of Justice cluster employees continue to have annual leave balances above the state's target

Reducing annual leave to meet the state target continues to be challenging for the Justice cluster. Justice cluster data shows at 30 June 2018, 14,746 (14,877 at 30 June 2017) or 36.6 per cent (37.6 per cent) of full time equivalent employees (FTE) had balances exceeding the state's target.

Front line staff in NSW Police and the Department represented 70.4 per cent of the cluster's leave balances which were above the state's target at 30 June 2018. The Department and NSW Police are the highest employers of frontline staff in the cluster.

The Corrective Services NSW division of the Department continues to be impacted by increasing inmate numbers in the NSW prison system. This reduces the opportunity for frontline staff to take annual leave.

Some employees accrue 20 days annual leave each year, while others are entitled to additional days. The higher entitlement recognises some staff need more leave due to the nature or location of their work.

The table below shows the number of employees with annual leave balances above the state's target, over a three-year period and the movement between 2017 and 2018.

At 30 June 2018, Fire and Rescue NSW had the highest percentage of employees with balances exceeding the target (58.4 per cent), followed by NSW Police (39.7 per cent) and the Department (29.9 per cent).

The implications of excessive leave balances include: 

• possible work health and safety issues
• disruptions to service delivery when key employees take lengthy periods of leave
• employee fraud remaining undetected
• an increasing financial liability over time as salaries increase.

Most cluster agencies report they monitor current and projected leave balances monthly. The 2017–18 audits identified some agencies where employees did not have formally documented leave plans to reduce balances to acceptable levels. We noted a greater proportion of employees with excess leave balances at these agencies. 

Treasury Circular TC16/03 ‘Managing Accrued Recreation Leave Balances’ requires agencies to manage accrued employee recreation leave balances to a maximum of 30 days or less on an ongoing basis, within the constraints of relevant industrial instruments and legislation.

Many employees took little or no annual leave during 2017–18

The number of cluster employees that took less than five days annual leave during the year increased from 4,394 in 2016–17 to 4,693 in 2017–18, an increase of 6.8 per cent. Last year’s Auditor-General's Report to Parliament recommended cluster agencies monitor employees who have taken little or no leave in the last 12 months. 

The health and wellbeing of staff can be adversely affected if staff do not take sufficient leave.

Sick leave

Sick leave taken by Justice cluster employees decreased by 1.8 per cent

Justice cluster data shows that sick leave across the cluster decreased by 1.8 per cent (1.3 hours) per FTE in 2017–18. The total cost of sick leave was $135 million in 2017–18 ($121 million in 2016–17).

Effectively managing sick leave is challenging for many agencies. Each FTE employee in the cluster took an average of 71.0 hours sick leave in 2017–18 (72.3 hours in 2016–17). This is more than the 2016–17 public sector average of 64.1 hours per FTE employee referred to in the Public Service Commission's 'State of the NSW Public Sector Report 2017'.

Sick leave taken by administrative staff at NSW Police and the Department increased

NSW Police data shows that sick leave taken by their administrative employees increased 10.4 per cent (7.4 hours) per FTE employee compared to the prior year. 

Administrative employees' sick leave increased in the Department by 6.5 per cent (3.5 hours) over the same period. 

The table below shows sick leave taken by administrative staff in the Department and NSW Police, which are the biggest employer agencies in the Justice cluster. 

Sick leave taken by frontline staff in NSW Police increased by 7.1 per cent

NSW Police data shows that sick leave taken by their frontline staff increased by 7.1 per cent (4.3 hours) per FTE employee from the prior year.

Data from the Department shows sick leave taken by the Department’s frontline staff, mainly custodial officers within the Corrective Services NSW and Juvenile Justice divisions, has decreased 16.7 per cent (16.4 hours) per FTE employee since 2015. However, in 2017–18 it was 27.9 per cent more than the 2016–17 public sector average of 64.1 hours. 

Sick leave taken by employees at Fire and Rescue NSW decreased by more than 13 per cent, but remains above the public sector average

Emergency services data shows that in 2017–18, average sick leave rose by 11.5 per cent at the Office of the NSW Rural Fire Service, 13.3 per cent at the Office of the NSW State Emergency Service, but fell by 13.2 per cent at Fire and Rescue NSW. While average sick leave rose at the Office of the NSW Rural Fire Service and the Office of the NSW State Emergency Service, it remains below the 2016–17 public sector average of 64.1 hours.

On average emergency services employees took 9.0 hours less sick leave in 2017–18 than in the previous year. The average sick leave taken per FTE employee was 81.4 hours in 2017–18 (90.4 hours in 2016–17).

TC14/13 ‘Managing Sick Leave Policy’ allows agencies to adopt a range of strategies that suit the workplace to help address genuine illness and sick leave abuse by employees. The strategies include:

• using information management systems to monitor, measure and analyse sick leave data/information
• identifying options, strategies and support available to manage absences when they occur
• developing return to work plans and conducting effective return to work interviews.

Workers’ compensation claims in the cluster continue to rise 

Justice cluster data shows agencies paid $234 million in workers compensation insurance premiums in 2017–18 ($234 million in 2016–17) despite the number of claims rising over the past three years. 

Workers' compensation claims increased across the cluster by 225 claims (4.9 per cent) in 2017–18. The largest increase was at NSW Police where claims increased by 217 (7.1 per cent).

Employee injury rates in the Corrective Services NSW division, which includes prison officers, is the highest in the Department. The division's claims represent 74.8 per cent of all Department claims in 2017–18 (67.6 per cent in 2016–17). The most common cause of claims for prison officers is injuries sustained while forcefully dealing with and restraining inmates, during physical training exercises or while responding to incidents.

The Department advised it is implementing the following initiatives to reduce workplace injuries to prison officers:

• a three-year Safety, Health and Wellbeing Strategy
• commencing development of a new Safety Management System
• continuing with its Employee Assistance Program which offers support services in areas of mental and physical health and provides assistance to individuals following traumatic events
• continuing its Peer Support Program
• continuing the delivery of its risk management and health and safety representative training, including resilience and hyper vigilance training in targeted areas.

Parliamentary inquiry into bullying, harassment and discrimination

A parliamentary committee held an inquiry into bullying, harassment and discrimination within emergency services agencies, including Fire and Rescue NSW, Office of the NSW Rural Fire Service, Office of the NSW State Emergency Service and NSW Police. The Committee handed down its report in July 2018 and noted 'the committee was shocked by the many cases presented to us and by the seriousness of the allegations, which at times seemed to go unnoticed by the agency itself'.

The report made 27 recommendations spanning across the emergency service agencies and central government. 

The key recommendation from the inquiry is to establish an independent, external complaints management oversight body for workplace bullying, harassment and discrimination across all emergency services agencies. 

Another key theme in this inquiry was the mental health and wellbeing of first responders. The Committee noted that emergency services workers have a much higher risk of developing mental health illnesses given the nature of their work and their heightened exposure to traumatic events. The committee made several recommendations to make employee mental health a priority action. Those recommendations included establishing a specialist 24/7 telephone trauma counselling service for emergency service workers.

The government response to the report is due on 24 January 2019.

For details, refer to the Parliament of New South Wales website.

NSW Police Force

Lost hours due to workplace injuries in NSW Police continue to increase

NSW Police data shows frontline staff recorded average workplace injury leave of 71.3 hours per FTE employee in 2017–18 (65.6 hours in 2016–17), a 17.6 hour (32.8 per cent) increase over the last four years. 

The total cost of workplace injury leave in 2017–18 was $39.4 million ($34.6 million). On average, workplace injury leave per frontline FTE cost $2,412 in 2017–18 ($2,130 in 2016–17) an increase of 13.2 per cent.

NSW Police lost 129.5 hours per FTE employee in 2017–18 (118.7 hours in 2016–17) for sick leave and workplace injury leave across frontline and administrative staff. The total cost of sick and work place injury leave for frontline and administrative staff was $107 million in 2017–18 ($96.7 million in 2016–17). NSW Police attribute the rising sick and injury leave to an ageing workforce.

One in three internal control and governance issues reported were repeat issues 

The 2017–18 financial audits of cluster agencies reported 116 (94 in 2016–17) internal control or governance related issues, of which 35 per cent were repeat findings from previous financial audits. Management of the relevant agencies responded to these findings and have agreed to implement additional controls to address the deficiencies identified.

A delay in implementing audit recommendations can prolong the risk of fraud and error. It also impacts on the quality of financial information and the effectiveness of decision making and exposes an agency to the risk of financial loss. Audit Office management letter recommendations to address internal control and governance weaknesses should be actioned promptly, with a focus on addressing repeat issues.

We report deficiencies in internal controls, matters of governance interest and unresolved issues identified during our audits to management and those charged with governance. We do this through our Management letters, which include our observations, related implications, recommendations and risk ratings.

The table below provides information on 2017–18 Management letter findings for Justice cluster agencies by risk rating.

The graph below shows that 30 per cent of reported deficiencies were information technology related. The rest were split between internal control deficiencies (28 per cent), governance and oversight (19 per cent), financial reporting (14 per cent) and non-compliance with key legislation and/or central agency polices (9 per cent).

Each year our financial audits examine a small number of specific topics across agencies. We determine which topics to consider by looking 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 how these may be addressed during our audits.

Risks and challenges that may impact on financial reporting of Justice cluster agencies this year include:

• rectification of identified control issues
• valuation of land and buildings
• project management.

Rectification of identified control issues 

More effort is required to ensure the Department's controls are operating as intended 

Last year’s Auditor-General’s Report to Parliament recommended the Department reinstate controls over financial information as soon as possible.

The recommendation was made because there were significant IT, payroll and general finance related issues resulting from the Department's implementation of the interrelated Justice SAP and Business Support Centre (BSC) projects in 2016–17. 

During the year, the Department continued to make progress in stabilising its internal control environment, however more effort is required to ensure controls are operating as intended. Further issues were identified in 2017–18, including: 

• roles and responsibilities not being assigned properly in the SAP system
• privileged user access not being effectively managed in the SAP system
• ineffective processes for recording, reconciling and settling inter-agency transactions and balances
• concerns over the accuracy of long service leave balances.

The issues are collectively considered to be high risk in the context of the Department’s overall control environment. However, individually they are rated as low or moderate risk.

The Department provides financial, human resources and IT services to other independently governed agencies within the cluster. The internal control environment at these agencies is similarly impacted by the Department's Justice SAP and BSC issues. 

Actions the Department took in 2017–18 in resolving implementation issues included: 

• addressing the remaining underlying SAP system issues
• up-skilling internal resources including the BSC
• introducing more structured payroll processes
• realigning the Goulburn and Parramatta Payroll team responsibilities, including establishing and up-skilling a specialist superannuation, workers compensation and post pay reconciliation team
• engaging an external accounting firm to help investigate and resolve issues relating to key account reconciliations. 

Future initiatives planned by the Department include: 

• completing a capability assessment of internal resources and addressing skill gaps
• identifying and resolving policy and procedural issues to drive consistent service delivery
• establishing best practice business processes and procedures to assist the BSC support team
• improving system change management.

The Department reports it spent $17.0 million in 2017–18 ($2.0 million in 2016–17) addressing the implementation issues. 

Valuation of land and buildings

Department of Justice

The Department can improve the timeliness of its asset valuations

As referred to in the financial reporting chapter, the Department did not complete its revaluation of property, plant and equipment by the early close deadline as it received an exemption from NSW Treasury. The draft revaluation results were provided to the Audit Office after 30 June 2018. The main reason for the delay was the significant analysis and investigation required by management and the valuer to ensure completeness and accuracy of the assets recorded.

In future, revaluations should be performed early and completed by the early close procedures deadline.  

Early close procedures are designed to improve the quality and timeliness of financial reporting. Completing revaluations early in the financial reporting process helps ensure a smoother year-end process and more effective resolution of issues. 

Asset valuations are inherently complex. The Department has a large, geographically dispersed asset base, consisting of over 2,200 land, building and infrastructure assets. Significant resources, judgement and estimation techniques are required to determine fair values.

Revaluations must be supported by adequate quality assurance processes

Inadequate quality assurance processes led to the identification of a $82.7 million audit adjustment relating to finance lease assets. This was corrected in the Department's 30 June 2018 financial statements.

Management are ultimately responsible for the revaluation process. Prior to signing off on a revaluation, management should ensure they have performed adequate quality assurance procedures over the external valuers' report, including:

• ensuring all assets are identified, recorded and reconciled before being provided to the valuer and the valuation methodology is agreed and documented
• conducting a robust review of the report, including challenging the valuer's findings, assumptions, methodologies and sources
• ensuring the external valuer’s findings are consistent with the agency’s assets and circumstances and are suitable for the assets reviewed
• reviewing significant movements in individual asset values since the previous revaluation and interrogating the results with scepticism
• reconciling the valuers' report to the fixed asset register and financial statements
• preparing work papers setting out management's proposed accounting treatments, judgements and assumptions
• ensuring sufficient documentation exists to evidence their involvement in the revaluation process. 

Some of these issues are similar to those identified in the Department's previous revaluation in 2015. The 'Volume Seven 2015 Auditor-General's Report to Parliament, Law and Order' reported observations and recommendations relating to the timeliness and level of quality review performed over the 2015 revaluation.

The Department's next comprehensive revaluation is expected to be performed in 2020–21. Its forward work program should capture lessons learned from the recent revaluation to ensure the findings are not repeated.

The Auditor-General's 'Report on State Finances 2018' includes other important matters agencies should consider when planning and conducting asset valuations. 

Project management

Agencies across the cluster spent $980 million on capital investment in 2017–18 ($726 million in 2016–17). High volumes of capital spending can present challenges to agencies in delivering projects on time, to budget and at sufficient quality, whilst managing project risk. Investments included the construction of new correctional centres, court houses and police stations and the purchase of plant and equipment and intangibles such as software. 

Department of Justice

Delays in project implementation led to a capital underspend of $905 million against budget

The Department spent $671 million on capital projects in 2017–18, which was $905 million, or 57.4 per cent less than budgeted. The Department advised the underspend was mainly due to delays in implementing the prison bed capacity reform program. The Department obtained NSW Treasury's approval to carry forward most of the unused capital funds into future years.

The Department relies on manual processes to manage its capital projects

The Department does not have an Enterprise Asset Management (EAM) system and generally relies on manual processes to manage its projects. For example: 

• key project information, such as approved budgets, approved variations to budget, forecasts and actual spend are not maintained centrally 
• monthly capital project reports comparing actuals to budget, at a program and individual project level are manually prepared. 

These manual processes may not enable the Department to optimally manage their capital projects. This increases the risk of incorrect decision making, financial reporting misstatements and ineffective governance and oversight processes.
 
The Department advised:

• it aims to develop a 20-year Cluster Infrastructure Strategy, through the State Infrastructure Strategy 2018, including a long-term asset investment strategy and possible EAM system implementation
• it is in the process of completing an asset review, including: 
  • a baseline asset condition and capacity assessment 
  • a review of the role of digital technology in asset management and service delivery 
  • an end-to-end assessment of system pressure points 
  • identification of opportunities for co-located services
• future business cases for investment decisions, including an EAM system will be based upon the baseline asset conditions and management strategy throughout 2019–20
• the Justice Infrastructure and Assets (JIA) unit recently implemented a project record management system to centrally manage its commercial and financial project related information. JIA plan to implement this system across projects previously managed by the former Property and Asset Services group within the Department.

The Department does not have an enterprise wide project methodology and framework

An internal review conducted by the Department during 2017–18 found weaknesses in its project management practices. Key findings include:

• lack of an enterprise wide project methodology
• no consistent project governance framework
• project managers often having limited experience and qualifications in delivering projects
• manual project reporting
• reallocation of project funding to non-project related expenses.

The review made recommendations, including:

• implementing an externally recognised project methodology 
• developing a consistent project governance framework 
• standardising project reporting tools.

Law and order

Eleven capital projects at NSW Police totalling $333 million are delayed by a year or more

Data from NSW Police shows it has 16 capital projects currently in progress each with a budget of $10.0 million or more. These projects primarily relate to information, communication and technology projects, a hazardous materials management program and the building of new Police stations. The reported revised budgeted cost of these projects is $455 million, which is $58.0 million greater than originally planned. NSW Police attribute most of the increase to changes in scope and tenders received with costs higher than originally planned.

Eleven of these capital projects totalling $333 million have experienced delays in completion dates ranging from one to six years. NSW Police advise:

• the delays are mainly due to design and contractor performance issues and scope changes to original business cases
• the Deniliquin Police Station project is currently six years behind the original completion date due to a significant lapse of time between the preparation and approval of the original and final business cases.

Total budgeted capital expenditure for 2017–18 was $244 million. Actual expenditure was $175 million, 28.3 per cent less than planned. 

NSW Trustee and Guardian wrote off an additional $3.9 million of project costs in 2017–18

NSW Trustee and Guardian ceased work on their new client management system (TAGS) during the year, writing off $3.9 million in development costs. Additional development costs of $1.1 million were written-off in 2014–15, resulting in total project write-offs of $5.0 million. The budget for the project was $5.0 million in 2012–13, but this had increased to $17.6 million by 2016–17.

Before ceasing work on TAGS, three of seven planned modules and two client portals were implemented with varying degrees of completion, and project costs of over $11.0 million (before write-off) had been incurred.

Management commissioned an external review of TAGS during the year, which found:

• significant short-comings with the governance and management of the project, including inadequate risk management, and monitoring of project costs
• a lack of clarity over the project scope, with expected benefits being unclear and not monitored
• unclear responsibilities for project deliverables.

Many of the issues noted with the TAGS implementation project are similar to those detailed in our 2017 Auditor-General’s Report to Parliament on the Department of Justice’s SAP implementation.

Emergency services

The revised cost of the Fire and Rescue NSW training facility is $9.4 million more than originally budgeted

Fire and Rescue NSW is relocating its training academy to a new purpose built leased facility. In addition to the leased facility, it planned to construct additional buildings and facilities to be used in training exercises. The original budget for those works was $8.9 million and is estimated to have more than doubled to $18.3 million in July 2018.

The cost overruns are reported to have arisen from changes to the scope of the planned works from the original business case and cost variations from estimates.

Justice cluster agencies spent $146 million on maintenance expenses in 2017–18 ($146 million in 2016–17). We reviewed asset maintenance at a selection of agencies, representing almost 80 per cent of the cluster's total maintenance expenditure in 2017–18.

Some cluster agencies do not have a current asset maintenance plan

The NSW Treasury 'Total Asset Management Guideline - Asset Maintenance Strategic Planning' requires budget dependent agencies to develop asset maintenance strategic plans. Maintenance planning plays a key role in optimising the economic life and operating performance of existing assets.

Two cluster agencies we reviewed do not have a current asset maintenance plan. In one agency, we found a maintenance plan does not exist whilst in another the plan is more than two years old.

Effective maintenance planning helps agencies to:

• quantify and budget asset maintenance costs
• support service delivery at the lowest possible long-term cost
• reduce service disruptions and losses due to asset failure
• identify and respond to risks posed by its assets.

Agencies advise this issue is being addressed as part of the Justice Cluster State Infrastructure Strategy referred to earlier in this chapter.

Policy framework

We reviewed whether the selected agencies have a clear policy on what constitutes maintenance, enhancement and operating expenses.

Cluster agencies have maintenance policies in place but some can be improved

Cluster agencies have maintenance policies in place but some can be improved by including more specific guidance on what constitutes maintenance, enhancement and operating expenses. The absence of specific guidance increases the risk of:

• incorrectly classifying maintenance expenditure in the financial statements
• inappropriately capitalising costs during various stages of a project
• routine maintenance activities may be treated as capital expenses.

The NSW Treasury 'Guidelines for the Capitalisation of Expenditure on Property, Plant and Equipment' provides guidance on the appropriate accounting treatment of capital and maintenance expenditure. 

Backlog maintenance

The extent of backlog maintenance is unknown

Total backlog maintenance in the Justice cluster is unknown because some agencies assess backlog maintenance while others do not. This makes it difficult for agencies to develop an accurate and effective maintenance plan that focuses on areas of highest need. It also means agencies' maintenance plans are reactive rather than preventative.

The graph below shows that 39.0 per cent of the expenditure incurred on maintenance in 2017–18 was unplanned (36.7 per cent in 2016–17).
 

A key objective of public sector reform is to improve performance and create a culture of accountability. Performance reporting against benchmarks and targets is an effective measure of the success of these reforms.

Premier and State Priorities

The Justice cluster is the lead cluster delivering the following NSW Premier and  per cent priorities: 

• to reduce the proportion of domestic violence perpetrators reoffending within 12 months by 25 per cent by 2019
• for local government areas to have stable or falling reported violent crime rates by 2019 
• to reduce adult reoffending by five per cent by 2019
• to reduce road fatalities by at least 30 per cent from 2011 levels by 2021 - this is a collaborative priority between the NSW Police Force and partner agencies.

Targets have been established to measure the government's progress in achieving each priority.

The rate of domestic violence reoffending remains above the Premier's target

Data from the NSW Bureau of Crime Statistics and Research (BOCSAR) shows that the rate of reoffence by perpetrators of domestic violence decreased slightly between 2015–16 and 2016–17 but is 4.6 percentage points higher than the NSW Premier's Priority target of 10.7 per cent.

The 2016–17 state Budget allocated whole-of-government funding of $300 million over four years to help support the Premier’s Priority to address and reduce domestic and family violence reoffending. This included $44.0 million to the Justice cluster to hold perpetrators to account under the Premier’s Priority. Measures include GPS tracking of high risk offenders, behavioural change programs for higher-risk perpetrators and establishment of NSW Police Domestic Violence High Risk Offender Teams across the state. In the 2017–18 state budget, the commitment to the whole-of-government specialist domestic and family violence response was extended to $350 million over four years.

Local Government Area violent crime trends have worsened during the year and are now below the State Priority target

BOCSAR crime statistics show that Local Government Areas (LGA's) with stable or falling rates of violent crime decreased to 96.0 per cent at 30 June 2018 (98.6 per cent at 30 June 2017). This is now below the State Priority target of 98.0 per cent of LGA's with stable or falling rates of violent crime by 2019.

The rate of adult reoffending is not on track to meet the target

The State Priority to reduce adult reoffending targets a five per cent reduction in reoffending by 2019. Department data indicates that it is not on track to meet this target. 

Since 2012, the rate of prisoners reconvicted for offences committed within 12 months following release from custody has increased by 3.7 percentage points. Similarly, the rate of offenders reconvicted for offences committed within 12 months following a non-custodial penalty has increased by 3.6 percentage points. 

The Department advises that a broad range of factors influence reoffending. For example, police activity targeting offenders with existing convictions may result in an increased number of arrests and reconvictions and an increase in the reoffending rate. Similarly, increased compliance monitoring by Community Corrections officers can have the same effect.

The Department's strategy to reduce reoffending is supported by a funding package of $330 million from the NSW Government until 30 June 2020. Reforms being implemented under the strategy include:

• maximising opportunities for supervision of community-based offenders and more flexibility to tailor the conditions and interventions of a sentence to the individual
• early intervention for priority offenders
• improved custodial case management
• improved exit planning and reintegration support.

The impact of these initiatives on reoffending rates will not be known for several years. 

New South Wales' road fatalities per 100,000 people exceeded the 2017–18 target

Statistics from the NSW Centre for Road Safety shows that New South Wales' road fatalities increased from 4.6 deaths to 4.9 deaths per 100,000 people in 2017–18. This is slightly above the State Priority target to reduce road fatalities by at least 30 per cent from 2011 levels by 2021.

NSW Police report they are working with partner agencies to enable the free flow of traffic and promote road safety through education, innovation and targeted enforcement.

NSW Police advise it spent $157 million in 2017–18 ($153 million in 2016–17) on Police Patrol to reduce road fatalities, an increase of 5.7 per cent over the last two years.

Department of Justice

Courts and Tribunal Services

Demand for criminal and civil justice trials is rising in New South Wales

Data from BOCSAR shows the number of finalised court appearances across all NSW courts has increased by 17.1 per cent since 2012–13, to 141,024 appearances in 2016–17.