The following report focuses on key observations and findings from the most recent financial statement audits of agencies in the Transport cluster.
Unqualified audit opinions were issued for all agencies' financial statements. However, the report notes the agencies can improve their asset revaluation processes.
1. Financial reporting and controls
2. Service Delivery
1.1 Snapshot of the Transport Cluster
1.2 Operational snapshot
a) Bus passenger journeys, passenger revenue and government funding include STA and private bus operators. Operating expenses are made up of bus contract payments by TfNSW to bus operators. Net assets relate to STA only.
b) Operating expenses are ferry contract payments by TfNSW to a private ferry operator and Sydney Ferries' operating expenditure. Net assets relate to Sydney Ferries only.
c) Rail excludes Light Rail results (10.0 million passenger journeys, $11.0 million passenger revenue, $33.0 million operating expenses). Government funding includes cash equity injections. Operating expenses exclude inter-rail transactions.
d) Collections consists of license and registration fees, stamp duty, motor vehicle weight tax, and fines and other revenue collected by RMS from road users which is predominantly paid to the Treasury.
* Source: Transport agencies' financial statements (audited).
** Source: Information from transport agencies (unaudited).
1.3 Changes to Cluster
The Transport cluster was impacted by the Transport Administration Amendment (Independent Transport Safety Regulator) Act 2017. Effective from 1 April 2017, the responsibility and function of the Independent Transport Safety Regulator (ITSR) was transferred to the Office of the National Rail Safety Regulator (ONRSR).
2. Financial reporting and controls
2.1 Quality of financial reporting
Unqualified audit opinions were issued for all agencies' financial statements
Unqualified audit opinions were issued on the 2016–17 financial statements of all agencies in the Transport cluster.
In 2015–16, we reported one significant matter relating to the impairment of leased buses. TfNSW recognised an impairment loss of $179 million against the carrying value of the bus fleet leased from STA. We recommended management assess whether this impairment has implications for the value of the bus fleet leased from private operators. In 2016–17 management conducted a revaluation of finance leased buses which considered impairment implications resulting in a decrease in value of $168 million for the bus fleet leased from private operators.
Key audit matters
The cluster corrected the value of rail tunnels and earthworks for an additional $8.5 billion
The accounting standards require all infrastructure assets to be valued and recorded in the financial statements. Some rail tunnels and earthworks have never been valued by TfNSW and RailCorp. These include the City Circle, the country regional network, and other tunnels and earthworks built before year 2000.
TfNSW and RailCorp (and previous agencies) did not account for these assets as they believed their value could not be reliably measured. This year an independent valuer was engaged to perform a comprehensive valuation. The methodology used demonstrated that the assets could have been reliably reflected in earlier financial statements. TfNSW and RailCorp recorded an additional $8.5 billion to correct the value of infrastructure assets at 1 July 2016.
In addition, a physical inspection of a sample of assets identified significant variations in TfNSW’s database used in the initial valuation to support the existence and condition of earthworks in the country regional network. In response to the identified variations, the final valuation was revised. The process encountered significant data accuracy challenges and several changes were required to arrive at a reasonable and acceptable valuation.
Agencies materially complied with the disclosure requirements for related parties
For the first time, not-for-profit public sector agencies were required to include disclosures about related party relationships and transactions in their financial statements. Agency financial statements disclosed the:
- compensation paid to their key management personnel
- nature of related party relationships
- amount and nature of their related party transactions, outstanding balances and
- commitments and outstanding balances (including commitments).
Agencies complied with the disclosure requirements.
2.2 Timeliness of financial reporting
Cluster agencies' financial statements were submitted on time
Most Transport cluster agencies submitted financial statements on time in accordance with Treasury Circular TC 17–06 ‘Agency Guidelines for the 2016–17 Mandatory Annual Returns to Treasury’. TfNSW and RailCorp received an extension from the Treasury to formally submit the financial statements by 11 August 2017. The Treasury extended TfNSW and RailCorp's deadline for submitting the 2016–17 financial statements in order to address complex issues relating to the valuation of tunnels and earthworks. Timely and accurate financial reporting is essential for effective decision making, timely management of public funds and enhancing public accountability.
Treasury Circular 16–13 'Agency guidelines for the 2016–17 Mandatory Early Close' limited the mandatory early close procedures to non-financial asset valuations and proforma financial statements. Completion of early close procedures helps to resolve potential issues before the end of the financial year.
The Treasury encouraged agencies to maintain the disciplines implemented over the last few years and recommended they complete the additional good practice procedures listed in the circular. Except for the matters referred to below, agencies substantially complied with the Treasury's early close procedures. All agencies submitted proforma financial statements on time.
|Cluster agencies||Timeliness of financial reporting and audit reporting||Management Letter Findings|
|Early close procedures||Financial statements||Audit report||High||Moderate||Low||Total||Repeat^|
|Cluster lead entity|
|Department of Transport||--||--||--||--||--|
|Transport for NSW||*||
|Transport service providers|
|Roads and Maritime Services||--||4||6||10||3|
|State Transit Authority||--||--||2||2||--|
|Independent Transport Safety Regulator||N/A**||**||--||--||--||--||--|
|Office of Transport Safety Investigations||***||--||--||--||--||--|
|Port Authority of New South Wales||--||1||1||2||1|
|Transport Service of New South Wales||--||--||--||--||--|
2.3 Financial sustainability
2.4 Passenger revenue and patronage
|Number||Total Opal free and discounted trips||Percentage of Total Opal Trips|
|Year ended 30 June||2017 Free trips||2017 Half price trips||2017 total||2016||2015||2017|
|Mode of public transport||'000||'000||'000||'000||'000||%|
2.5 Cost recovery from public transport users
2.6 Analysis of financial information
|Year ended 30 June||2017||2016||Increase/(decrease)||Increase/(decrease)|
|Employee related expenses||2,965||2,940||25||0.9|
|Depreciation and amortisation||3,157||3,007||150||5.0|
|Grants and subsidies||747||638||109||17.1|
|Grants and contributions||2,720||1,357||1,363||100.4|
|Sale of goods and services||2,109||1,996||113||5.7|
|Total other comprehensive income||1,702||784||918||117.1|
|Total comprehensive income||6,417||3,718||2,699||72.6|
|At 30 June||$m||$m||$m||%|
A restructuring of borrowings in RailCorp caused a transfer from current to non-current liabilities of approximately $570 million. This increase in non-current liabilities was partially offset by a reduction of $256 million in the superannuation liability.
Other Financial Information
As at 30 June 2017, Department of Transport has $11.3 billion in capital commitments over the next five years. This has increased from $6.3 billion in 2015–16. Capital commitments include contractual commitments transport agencies have entered into for various capital projects, including:
- $4.9 billion on TfNSW capital projects (Sydney Metro City and Southwest, Sydney Metro Northwest Private Partnership project and CBD Light Rail)
- $3.4 billion on RMS capital projects (largely on upgrades to Pacific Highway, Northern Beaches Hospital roadworks and M5 ancillary roadworks)
- $2.9 billion on TfNSW major rail projects (Sydney Metro Northwest, New Intercity Fleet and Sydney Growth Trains).
RMS has a number of compulsory property acquisition matters under litigation with an estimated contingent liability of $676 million (2016: $659 million). These amounts are net of any reimbursement from the Treasury Managed Fund (TMF).
2.7 Internal controls
2.8 Transport Asset Holding Entity (TAHE)
3. Service Delivery
|Year ended 30 June||2017||2017||2016|
|Sydney Trains Suburban||92.0||93.4||94.2|
|NSW Trains Intercity||92.0||88.8||89.3|
|NSW Trains Regional||78.0||74.8||78.6|
** Contract 11 routes were included in the new Contract 10 when it commenced on 1 January 2013.
Source: Transport (unaudited).
There are 14 contract regions in the Sydney metropolitan area and 12 contract regions in the outer metropolitan area. STA provides services in four metropolitan contract regions, operating as Sydney Buses, while all other contract regions are serviced by private providers. A private company was recenlty awarded a 10-year-contract to operate Newcastle buses, originally run by STA, from 1 July 2017.
A ferry service is considered punctual if it departs from the service origin wharf within five minutes of the timetable. The target for all services is 98.5 per cent.
Data provided by Transport indicates punctuality performance for ferry services in all service areas has been above target for the past five years. In 2016–17, average performance in all areas was above 99 per cent.
Light rail services are considered punctual if they run within a two minute deviation of the planned frequency. The target for all services is 90 per cent.
Data provided by Transport indicate Inner West Light Rail line services’ average punctuality performance was above target at 91 per cent in 2016–17. This line provides services across two fare zones, between Central and Dulwich Hill.
The CBD and South East Light Rail is a new light rail network for Sydney, currently under construction. The new line will extend from Circular Quay along George Street to Central Station and through Surry Hills to Moore Park. It will then proceed to Kensington and Kingsford via Anzac Parade and Randwick via Alison Road and High Street.
3.2 Fleet ageing and reliability
Data provided by Transport indicates average monthly peak rail incidents increased six per cent from 56.4 in 2015–16 to 59.8 in 2016–17. However, 24 hour incidents dropped 21 per cent from 550 to 437. Transport advised that technical and non-technical initiatives that contributed to this included:
- target reliability growth plans for each fleet, identifying the systems and components with repeat failures and initiatives to eliminate or reduce them
- regular auditing of maintenance practices and actions in place to address issues
- dedicated depot based reliability engineers focusing on systematic reliability issues and depot reliability plans focusing on technical and non-technical issues.
Average monthly carriage failures fell nine per cent, from 140 carriages in 2015–16 to 128 carriages in 2016–17. The percentage of carriage failures to total carriages in operation dropped from seven per cent in 2016 to six per cent in 2017.
The chart below analyses the actual and targeted reported average monthly electric fleet failures over the last three years.
|Year ended 30 June||2017||2016|
|Mechanical failures per 1,000 engine hours||73||86|
3.3 Public transport capacity
3.4 Customer Satisfaction
|May 2017||May 2016|
|Mode||Partially to very satisfied %||Partially to very satisfied %|
|Mode||Number of complaints||Number of complaints||Complaints per 100,000 passengers||Complaints per 100,000 passengers|
3.5 Project management
|Projects||Original completion year||Forecast completion year||Original budget ($)||Revised budget ($)|
|Westconnex||2023||2023||14.9 billion*||16.8 billion*|
|Sydney Metro Northwest||2019||2019||8.3 billion||8.3 billion|
|Sydney Metro City and Southwest||2024||2024||11.5 billion to 12.5 billion||11.5 billion to 12.5 billion|
|Woolgoolga to Ballina - Pacific Highway upgrade||2020||2020||4.1 billion||4.1 billion|
|NorthConnex||2019||2019||3.0 billion||3.0 billion|
|CBD and South East Light Rail||2019||2019||1.6 billion||2.1 billion|
|Newcastle Light Rail||2018||2019||255 million||290 million|
|Parramatta Light Rail||2023||2023||3.4 billion||3.4 billion|
Source: Transport (unaudited).
Woolgoolga to Ballina - Pacific Highway upgrade
The Woolgoolga to Ballina project is part of Pacific Highway upgrade project. It will provide a four lane divided road from Hexham to Queensland. The Woolgoolga to Ballina project involves upgrading about 155 kilometres of highway. The project starts approximately six kilometres north of Woolgoolga (north of Coffs Harbour) and ends approximately six kilometres south of Ballina.
Below is the development map.
NorthConnex will provide twin motorway tunnels around nine kilometres in length. It will link the M1 Pacific Motorway at Wahroonga to the Hills M2 Motorway at West Pennant Hills. Major construction work started in June 2015, and is expected to complete in December 2019.
The original budget of the project is $3.0 billion with $992 million funded by the NSW and Australian Governments and the rest by the private sector.
The Audit Office completed a performance audit in 2017 on 'NorthConnex'. The audit found that the processes used to assess NorthConnex adequately considered value for money for taxpayers.
Below is the development map.
CBD and South East Light Rail
The CBD and South East Light Rail is a 12-kilometre route that will connect passengers from Circular Quay to Randwick and Kingsford. It features 19 stops designed to service major transport hubs and create easy interchange points with buses, trains, ferries and the Inner West Light Rail. The original budget for the project was $1.6 billion and this was revised upwards by $549 million in December 2014 mostly due to mispricing and omissions in the business case.
The Audit Office completed a performance audit in 2016 on the 'CBD and South East Light Rail Project'.
Below is the development map.
Newcastle Light Rail
The Newcastle Light Rail is a high capacity, frequent service through Newcastle city centre.
The Audit Office has included an audit on Newcastle Transport Reforms in the 2017–18 forward performance audit program.
Below is the development map.
Parramatta Light Rail
The Parramatta Light Rail is in the investment decision stage. The 12-kilometre line is aimed at helping passengers travel across greater Parramatta including to their homes, hospitals and universities.
Below is the development map.
3.6 Safety performance
|Year ended 30 June||2017*||2016||2015|
|Compliance activities completed||116||166||188|
|Statutory notices issued||63||93||100|
|Year ended 30 June||2017||2016||2015|
|Notifiable incidents reported||652||678||640|
|Notifiable rail incidents reported to ATSB||131||103||110|
|Incident investigations conducted||17||20||13|
|Confidential safety information and reporting scheme investigations conducted||23||18||10|
|Year ended 30 June||2017 Actual||2016 Actual||2015 Actual||2014 Actual||2013 Actual|
|Road fatalities per 100,000 population||4.6||5.1||4.0||4.5||4.6|
RMS has a maintenance backlog of $3.7 billion
A maintenance backlog is the estimated cost to bring infrastructure, buildings and other structures to a defined standard, measured at a point in time.
RMS estimated maintenance backlog at June 2017 of $3.7 billion which is 9.7 per cent higher than the amount reported in 2016 of $3.4 billion. Transport advises the increment largely relates to two factors - $135 million due to the adoption of survey technology which identified more pavement distress and $145 million due to increases in rates of road pavements renewal.
Transport advises that the current level of pavement backlog is manageable and meets the minimum network condition which has been set to manage risks to assets and services at an acceptable level.
Sydney Trains estimated maintenance backlog of $360 million at 30 June 2017 ($242 million at 30 June 2016).
Postponing maintenance can lead to more costly and extensive maintenance. As the cost of maintenance and complexity increases, less can be done within the available funding. This can further increase backlog maintenance.
Transport cluster agencies manage $134 billion in property, plants and equipment. The total backlog maintenance of $4.1 billion at 30 June 2017 represents 3.1 per cent of those assets.
Transport cluster agencies maintenance expenditure was $73.8 million lower than planned
During 2016–17, maintenance expense reported was $73.8 million less than budget. Agencies attribute this to higher capitalised maintenance expenditure, reprioritisation of the maintenance budget to fund Local Council special purpose grants, and $18.3 million of maintenance carried forward into 2017–18.
Maintenance expenditure remained stable at $1.8 billion during 2016–17 and 2015–16.
3.8 Road Congestion
Journey time reliability
Data provided by Transport indicates journey time reliability is largely unchanged from 86 per cent in 2015–16 to 87 per cent in 2016–17. This measure is below the NSW State Priority of 90 per cent of peak travel on key road routes being on time.
TfNSW attributes the increase in reliability to multiple factors, including:
- reduction in incidents occurring on key arterial roads has improved the flow of traffic across the network, for example unplanned towing incidents (parked cars towed away in no stopping zones) has decreased by 13 per cent
- improved traffic management around major infrastructure development sites has reduced the impact on customers travelling during the peak periods.
Journey time reliability measures the proportion of days during the reporting period where the daily average travel times rose above a threshold (a five-minute variation on a typical thirty-minute journey). The measurement is conducted during AM and PM peak periods for 92 Sydney metropolitan area roads, using a combination of GPS Fleet Vehicle data and linear interpolation. Use of Google Travel Time data for Journey Time Reliability reporting will commence in 2017–18.
TfNSW adopted the journey time reliability as a measure after it undertook a Customer Value Proposition Research (the Research) in 2015. The Research identified consistency of travel time having a high importance and strong impact on customer satisfaction.
Managing road congestion
RMS initiated measures to address road congestion in 2016–17
The Sydney Road Congestion Capital program is a ten-year major capital works plan developed for many projects aimed at alleviating congestion in Sydney. The $3.5 billion program is expected to be completed in December 2026. In addition, $1.3 billion was approved in 2016–17 to fund The Easing Sydney's Congestion program, which aims to improve the management of Sydney’s road network. Key initiatives include the delivery of the M4 Smart Motorway, the Parramatta Congestion Improvement Program and accelerated Pinch Point and Clearways Programs.
3.9 Level Crossings
The number of recorded incidents at level crossings significantly increased in 2016–17
A level crossing is where a railway line and road intersect at the same level, providing passage for both rail and other road users including pedestrians.
Data provided by Transport indicates the number of incidents at level crossings involving Sydney Trains increased 37 per cent from 52 in 2015–16 to 71 in 2016–17. The agency advised the increase is due to a higher number of vandalism incidents and damage caused by road vehicles to the level crossings.
NSW Trains reported 454 incidents in 2016–17, up 97 per cent from 230 in 2015–16. Transport advised that this was partly due to improved reporting since the opening of the Regional Customer Support Centre. Level crossings on the South Coast intercity rail line continue to incur the highest number of incidents.
The number of level crossings for both Sydney Trains and NSW Trains remain the same in the last two years.
The table below shows the number of level crossings, incidents, near misses and fatalities at level crossings for both rail operators.
|Sydney Trains||NSW Trains|
|Year ended 30 June||2017 Actual||2016 Actual||2017 Actual||2016 Actual|
|Number of level crossings||57||57||580||580|
|Number of incidents*||71||52||454||230|
|Number of near misses**||7||9||117||140|
|Number of fatalities||0||0||3||2|
** Occurrences where a train driver took emergency action or had insufficient time to take emergency action to avoid impact with a person at a level crossing and no collision occurred.
Source: TfNSW (unaudited).
NSW Trains reported three fatalities in 2016–17 (two in 2015–16) where people were struck by trains at level crossings while Sydney Trains reported none in the last two years. The number of near miss incidents fell by 22 per cent and 16 per cent for Sydney Trains and NSW Trains respectively compared to 2015–16.
To reduce risks to the public, a Level Crossing Improvement Program was established. The program funds level crossing upgrades and supports safety initiatives.
Transport advise it is also planning to undertake works on level crossings in the next three to five years. These include:
- upgrading the East Richmond level crossing
- automating the Adamstown level crossing and installing traffic lights at the adjoining road intersections and,
- upgrading the Berry level crossing from a passive crossing to an active one.