NSW has a large and complex system of water sources. This includes surface water sources, such as rivers, lakes and wetlands, as well as groundwater sources, including the Great Artesian Basin and aquifers formed beneath river floodplains. Water is an important economic foundation for key sectors of the state’s economy, including irrigated agriculture and mining; it also has social and environmental significance. These resources are governed by both state and federal legislation, with the interjurisdictional nature of river systems adding to the complexity of their management and regulation.

Since 2017, major changes have been made to the regulation of non-urban water in NSW. These changes followed investigations into the integrity of water management and regulation. These reforms were primarily through the NSW Government’s November 2017 NSW Water Reform Action Plan, which had the objective of delivering on the state’s responsibility to ensure an equitable and transparent approach to the management of water, including building public trust and confidence. The plan’s goals include to ‘… build a compliance and enforcement regime to ensure strong and certain regulation’, as well as building capability to support implementation of water reforms.

Among the 40 commitments in the Water Reform Action Plan was the creation of the Natural Resources Access Regulator (NRAR) to enforce water law compliance in the state.

Alongside NRAR, other key state entities for the management and regulation of non-urban water in NSW include the Department of Climate Change, Energy, the Environment, and Water (DCCEEW), which is responsible for water policy and legislation, and WaterNSW, a state-owned corporation that is responsible for most water access licences.

Exhibit 1 provides a timeline of the reform agenda since 2017.

This audit assessed the effectiveness of DCCEEW, NRAR and WaterNSW in implementing compliance and enforcement measures for the sustainable and integrated management of non-urban water use in NSW.

Section 3.7 describes the inclusions and exclusions of this audit.

Since regulatory deficiencies in non-urban water management were identified in 2017, there has been significant policy, legislative and operational reform to improve water management and regulation in NSW. This includes the establishment of NRAR, and an associated increase in compliance and enforcement activity. However, further work is required by DCCEEW, NRAR and WaterNSW to demonstrate whether the implementation of compliance and enforcement measures has been effective in improving the sustainable and integrated management of non-urban water use in NSW.

The complexity of the policy and legislative reforms has created challenges in implementing effective compliance and enforcement measures. As the lead agency for policy and legislation, DCCEEW has not evaluated the overall environmental, social and economic impacts of the reform agenda or whether it has achieved the objectives of the Water Management Act 2000 (Water Management Act) and the Water Reform Action Plan.

Inadequate data is a significant risk to effective regulation of non-urban water use. The poor quality of historical licensing and approvals data managed by WaterNSW and DCCEEW hinders the effectiveness of regulation. The structure of legacy systems operated by WaterNSW, and gaps in the accuracy and completeness of data, have impeded the regulatory effectiveness of NRAR.

NRAR has established appropriate governance structures, policies and processes, and developed advanced operational technologies to support effective regulatory practice. However, NRAR’s data on its compliance and enforcement activities is poor, and it only developed outcomes-focused performance measures in late 2025, which have not yet been implemented.

A lack of clarity across the 3 water agencies around education and advisory functions has led to inconsistent advice being provided to stakeholders. This has undermined efforts to promote voluntary compliance and confidence in the regulation of the sector.

Significant policy, legislative and operational reform has been implemented to improve water management and regulation in NSW

Since regulatory deficiencies were identified in 2017, there has been a range of reforms to the regulation of non-urban water in NSW. These reforms have built upon the existing Water Management Act and related regulations. Most significant among the reforms is the establishment of NRAR and the staged introduction of reforms to non-urban metering and floodplain harvesting licensing. The reforms to non-urban metering and floodplain harvesting licensing included significant stakeholder consultation.

The complexity of reforms to non-urban water regulation has created challenges for its effective implementation and enforcement

NRAR reported that most instances of non-compliance are the result of water users misunderstanding complex water laws. Staff of the 3 water agencies have also found it difficult to understand how to interpret and apply the rules consistently.

These challenges have been compounded by a lack of clarity across the 3 water agencies regarding which entity should have lead responsibility for the provision of education and advice on compliance with the rules. While these functions are detailed in a Roles and Responsibilities Agreement between the agencies, we found numerous examples of field officers across different agencies providing conflicting advice to stakeholders, or creating confusion for water agencies and the regulated community around the interpretation of rules or requirements.

DCCEEW has assessed the expected impacts of some individual water reforms, but it has not evaluated the cumulative impact or overall achievement of outcomes from the reforms

As the lead agency for water legislation, policy and planning activities in NSW, DCCEEW has formally assessed the potential impact of some of the key water reforms. However, this has not been consistent. For example, while significant reforms to non-urban metering and floodplain harvesting licensing were subject to various forms of consultation and technical evaluation, they were not subject to regulatory impact assessments.

Moreover, regulatory impact, where assessed, has been done on a case-by-case basis before reforms were implemented. DCCEEW has not reviewed the cumulative impact of the water reform agenda. A review could include: lessons learned about effective reform delivery; assessment of the impact of new and compounding rules on complexity and certainty for government and stakeholders; assessment of community confidence; and evaluation of the extent to which the reforms have supported the overall objectives of the Water Management Act.

Significant data access and quality issues within water management IT systems limit the water agencies’ oversight of outcomes and risks

The 3 water agencies rely on several key IT systems to administer the delivery of non-urban water, including issuing water licences, approval of water supply works and accounting for water taken by users. This information is critical for water agencies to support water management services, and for developing policies and plans for water management. This information is also accessed by NRAR to support its regulatory functions and to identify non-compliance with water rules, such as taking excess water or breaching water access licence conditions.

Despite improvements to practice and governance arrangements since 2019, all 3 water agencies have identified significant remaining challenges with these systems in both data quality and access. Ongoing issues relate to inconsistent or inaccurate information held across legacy systems not designed for compliance purposes, several of which pre-date WaterNSW’s establishment. This has created challenges in contacting water users, using data to identify breaches of water rules, and meeting evidence standards required for criminal charges.

These issues limit the water agencies’ oversight of the overall effectiveness of and compliance with the water management framework. This includes limiting the oversight of compliance and enforcement of water licences and approvals, as well as understanding how the use of water by individual licence holders contributes to water availability at a system or water source level.

The water agencies have developed a collaborative plan to address data and system issues, but this is subject to approval and funding availability

As part of the water agencies’ 2025 joint submission to the Independent Pricing and Regulatory Tribunal’s (IPART) pricing review, and under the auspices of the Water Administration Ministerial Corporation (WAMC), the water agencies submitted a proposal for a technology roadmap to address data and system issues. Following IPART’s determination, the water agencies have revised the original proposal to $43.96 million for delivery of the WAMC roadmap initiatives.

WaterNSW has committed to debt funding the proposed cost of the technology roadmap. This is subject to approval through its standard governance processes for capital expenditure. Funding for the roadmap must also be considered against WaterNSW’s other priorities for capital expenditure, including water supply infrastructure, in the context of WaterNSW’s capital funding envelope to be sourced from available debt.

None of the water agencies’ risk management documentation has adequately accounted for the risk that funding is not available for delivery of the roadmap initiatives, or the impact of this on water management obligations and activities.

The independence of NRAR’s compliance and enforcement decision making is supported by its governance and resourcing

The legislative independence of the NRAR Board safeguards NRAR’s independence from the real or perceived risk of ministerial interference in regulatory decisions, such as whether to prosecute a matter. While the Minister has the authority to issue directions to the Board, these may only be general in nature and where a public interest test is met.

NRAR and DCCEEW have an internal reporting line for NRAR’s Chief Regulatory Officer that mitigates the risk of conflict of duties in how the Chief Regulatory Officer performs their enforcement functions over activities by other divisions within DCCEEW.

NRAR’s resourcing includes funds provided directly by the NSW Government and water user fees. Around 85% of its funding is from the Government, which reduces the risk of the regulator being subject to undue influence or capture by private water users and industry.

NRAR has a comprehensive policy framework to support its compliance and enforcement functions

As part of its initial establishment plan in 2018, NRAR developed a suite of policies to support how it delivers its regulatory functions, including articulating its regulatory posture. In addition to an overarching Regulatory Policy, this includes guidance for conducting investigations, approving enforceable undertakings and conducting prosecutions. These documents align with established good practice demonstrated by other regulatory agencies in Australia.

NRAR’s regulatory policies are consistent with good practice, but the regulator cannot demonstrate that they are applied effectively

NRAR’s regulatory policy framework demonstrates a clear understanding of good practice in compliance and enforcement decision making, including the critical role of ensuring consistency, timeliness and proportionality in regulatory outcomes. However, NRAR cannot clearly demonstrate that these principles are effectively applied in practice when making compliance and enforcement decisions. This is due to the lack of adequate data about the timeliness of investigations or how the proportionality of enforcement actions is ensured. There are also inconsistent practices in how investigation decisions are recorded, which also makes it hard to determine whether decision-making factors are applied consistently.

NRAR’s data on delivery of its compliance and enforcement functions is inadequate and limits its ability to demonstrate its regulatory effectiveness

NRAR has not effectively managed governance of data on its compliance and enforcement activities, which impacts its ability to demonstrate effectiveness as a regulator. NRAR does not have:

• a data governance framework, which would provide a strategic approach to managing data, including to ensure that it is treated as a valued organisational asset that is critical to transparent public reporting (which engenders trust and confidence), as well as being a potentially valuable source of intelligence
• an adequate performance measurement framework, with a hierarchy of measurable performance indicators that provide credible evidence of progress toward clearly defined outcomes
• sufficient quality data in key areas, including allowing for time-series analysis to show variation in performance.

Many of these deficiencies had previously been identified by NRAR, including as part of its own structured approach to regulatory maturity advancement. For example, NRAR’s most recent self-assessment of regulatory maturity in 2024 concluded that ‘… despite being an outcomes-focused regulator, NRAR could strengthen its capabilities in outcomes-based performance reporting’.

In November 2025, the NRAR Board endorsed an outcomes framework focused on promoting voluntary compliance, enforcement and public confidence. In addition, in March 2026, NRAR funded a dedicated project which aims to ‘… demonstrate its regulatory effectiveness with confidence’ by addressing misalignment between business processes, systems, data and performance reporting.

By June 2027, the Department of Climate Change, Energy, the Environment and Water, WaterNSW and the Natural Resources Access Regulator should:

1. Resolve the data and system issues that are impeding the delivery of compliance and enforcement activities, including by:
   1. exploring funding options and commencing implementation of priority collaborative initiatives
   2. ensuring data-related dependencies in new policies and programs are captured within existing data governance mechanisms
   3. finalising relevant governance schedules, including the ICT Service Schedule.

By June 2027, the Department of Climate Change, Energy, the Environment and Water should:

2. In collaboration with WaterNSW and the Natural Resources Access Regulator, conduct and publish a review of the post-2017 reform agenda, including to:
   1. evaluate the cumulative environmental, social and economic impacts and outcomes
   2. assess whether the objective of the Water Reform Action Plan has been achieved, and the extent to which it has contributed to the object of the Water Management Act 2000
   3. identify lessons learned from the reform process to guide future priorities to improve and simplify water management and regulation.

By December 2026, the Natural Resources Access Regulator should:

3. Establish and commence delivery of a plan to ensure effective data governance over its compliance and enforcement performance data, including implementing an outcomes-focused performance measurement and reporting framework and addressing critical data quality issues.
4. Review its processes and oversight mechanisms to ensure compliance and enforcement decision making aligns with good regulatory practice, including that regulatory actions are resolved in a timely manner, are proportionate to the level of harm, and that similar matters assessed against defined decision-making factors result in consistent regulatory actions.

NSW’s water resources form a complex system of 58,000 kilometres of rivers and major streams. These are divided between east and west by the Great Dividing Range. West of the range has longer, slower-moving inland rivers across a flat landscape. To the east and along the coast, the rivers are shorter, faster and include steep coastal streams. In addition, groundwater accounts for 27% of metered water use in NSW.

Most of the inland rivers in NSW are part of the Murray-Darling Basin, which covers 75% of the state west of the Great Dividing Range. The water from the Murray River flows on to Victoria and South Australia. Management of the basin is interjurisdictional.

River systems are either regulated or unregulated, with regulated systems having major dams or weirs that control the flow of water. In contrast, unregulated rivers have natural flows that are not controlled by major dams, weirs or locks. Regulated systems can increase the amount of water flowing through them by releasing more of it from water storage, but unregulated rivers are dependent on rainfall and natural water flows for the amount of water in them.

NSW has nearly 14,400 gigalitres of water entitlements (1 gigalitre is equivalent to 1 billion litres). A 2023 report commissioned by the Natural Resources Access Regulator (NRAR) estimates that, in NSW, the portion of water entitlements held by irrigated agriculture alone supports annual economic production worth $2.9 to $4.4 billion. Water is also essential to other industries, such as mining, electricity production, livestock and tourism. NRAR estimates that the total economic value of water entitlements in NSW in 2023 was between $31 and $41 billion.

Beyond economic activity, water also has significant social uses in supporting recreational and cultural activities. First Nations communities have important connections to water, including for stories, kinship and songlines.

The environmental significance of water includes supporting various ecosystems that support native flora and fauna, including in estuaries, wetlands and other waterways.

The objectives of the Water Management Act 2000 (Water Management Act) include an obligation to ‘protect, enhance and restore water sources, their associated ecosystems, ecological processes and biological diversity and their water quality’. One of the mechanisms that the NSW Government uses to support this objective is water allocations for environmental purposes, which enable the release of water into rivers and wetlands to mimic natural flows. Most environmental water remains within the river systems to benefit the environment. The NSW State of the Environment reported that, in 2021–22, of around 4,483 gigalitres extracted by water users, around 1,333 gigalitres (30%) related to licensed environmental water. Water for the environment includes both ‘planned’ environmental water (allocated within water sharing plans) and ‘held’ environmental water, which is allocated to licences held for environmental use, including purchased water access licences.

NSW’s water resources are regulated by both state and federal frameworks involving multiple agencies across both levels of government. The primary legislation for water management in NSW is the Water Management Act. The objects of this legislation are to provide for the ‘sustainable and integrated management of the water sources of the State for the benefit of both present and future generations’.

The Water Management Act lists a number of specific objects, including:

• protecting, enhancing and restoring water sources
• providing for the orderly, efficient and equitable sharing of water from water sources
• encouraging the sharing of responsibility for the sustainable and efficient use of water between the NSW Government and water users.

The Water Management Act requires 10-year water sharing plans to be made for each water source. Water sharing plans set the rules for sharing water among water users and the environment. These water sources may either be surface water (such as rivers or lakes) or groundwater sources (such as aquifers). As most parts of NSW have already allocated all available water resources among different uses, the plans also set rules for the trading of water rights to allow users to purchase more when needed.

The primary legislation at the federal level is the Commonwealth Water Act 2007, which incorporates the Murray-Darling Basin Agreement (Basin Agreement), to which NSW is a party. The Basin Agreement and the Murray-Darling Basin Plan establish requirements for water resource planning in the part of NSW that is within the Murray-Darling Basin. In 2024, the Australian Government and all state and territory governments agreed to the National Water Initiative,¹ a national plan for water reform, and included a range of commitments to improve the sustainability, transparency and accountability of water management. A new National Water Agreement is in the process of being finalised. However, the Water Act 2007, the Basin Agreement and the National Water Initiative frameworks are outside the scope of this audit.

¹ Western Australia joined the NWI in 2006.

In NSW, the volume of water that a licensed user can take in a ‘water year’ (July to June) is based on their ongoing water entitlement and their annual allocation.

An entitlement is a recurring right to a defined share of water from a specific water source. Entitlements are generally based on pre-existing water access arrangements and rights that existed under the Water Act 1912 prior to the Water Management Act coming into effect. Water users are charged an annual fee for their entitlement and are then charged an additional fee for how much water they take.

Each year, a licensed water user is issued a water allocation based on their water entitlement. The allocation tells the licensed water user what proportion of their water entitlement they may use. For example, in a year with plentiful water, the licence holder might be allocated 100% of their entitlement. During drought, their annual allocation may be a partial share of their entitlement.

Allocations are determined by the Department of Climate Change, Energy, the Environment and Water (DCCEEW) for a ‘water year’, and these are dependent on a range of factors, including licence type and water source. For surface water, factors can include dam storage levels, the level of river flows and catchment conditions. For groundwater, allocations are primarily determined by long-term sustainability limits and extraction history. There are also different categories of licence, which are given a different priority level in the allocation of available water. This means that when water is limited, town water supply and domestic and stock licence holders are supplied first before water is allocated to other licence types. Most water entitlements in NSW are general security entitlements.

As the regulator, NRAR is responsible for enforcing licence holders’ compliance with their water allocations. For example, NRAR is responsible for ensuring that water users are:

• not taking water in excess of their licence allocation
• not taking water without a licence
• complying with specific policy requirements, such as metering
• complying with licence conditions that define the conditions or circumstances under which water may be taken
• complying with conditions of approval that specify the type of infrastructure that may be installed to extract water, and for what purpose
• complying with other relevant requirements of water use and management.

In July 2017, the ABC TV Four Corners program broadcast allegations of widespread non-compliance with water laws in NSW, including water theft, meter tampering and regulatory failure resulting in ineffective enforcement. In response, the NSW Government commissioned an independent investigation by Mr Ken Matthews AO (the Matthews investigation) into the matters raised in the program.

A key finding in the Matthews investigation identified that the absence of effective regulation undermined public confidence in water compliance and enforcement arrangements and also contributed to a loss of trust in public officials. The investigation also raised concerns that arrangements for water management were complex, non-transparent, and difficult to access and understand for those without privileged status. It was noted that some stakeholders were afforded special access to NSW Government officials and information. The investigation recommended creating an independent authority for water law compliance in NSW – NRAR – with functions transferred from WaterNSW and the former Department of Planning, Industry and Environment. It also recommended implementing a ‘no meter, no pump’ policy for private water licence holders to address the regulatory risk that some water users were taking more water than their allocation.

In December 2017, the NSW Government released its Water Reform Action Plan as a full response to the issues raised in the Matthews investigation. This plan had the objective to deliver on the state’s responsibility to ensure there is an equitable and transparent approach to the management of water, including to build public trust and confidence. The plan’s stated goals included to ‘… build a compliance and enforcement regime to ensure strong and certain regulation’ , as well as to build capability to support implementation of water reforms. In February 2019, an external consultant conducted an early review of the Water Reform Action Plan.

Between March and April 2018, consultation on implementing the plan was undertaken and focused on water reforms in the key areas of:

• metering reform
• increased transparency in water management
• better management of environmental water
• implementing the floodplain harvesting policy.

A number of other significant investigations were conducted in relation to the matters considered by the Matthews investigation, including by the NSW Ombudsman and the NSW Independent Commission Against Corruption. These are described further in Appendix 3.

In addition to the establishment of NRAR, other significant reforms introduced to the water management framework since 2017 include:

• the progressive introduction, from 2018, of non-urban metering requirements to improve the standard and coverage of non-urban water meters in NSW, including requiring that the majority of licensed water take is measured by meters that are accurate, tamper proof and auditable
• the introduction of a floodplain harvest licensing scheme in 2022 to better regulate this form of water take, including by requiring, in some areas of NSW, the metering and reporting of floodplain water that is harvested
• amendments to metering and telemetry requirements emerging from the 2023 review of non-urban metering requirements, including extending compliance dates and reducing the number of low-risk and smaller works covered by the metering requirements, such as by making telemetry optional for smaller works
• the remake of the NRAR Regulation in 2023 to replace, with minor administrative amendments, the previous 2018 regulation that was due for repeal under Subordinate Legislation Act 1989
• the remake of the 2018 Water Management (General) Regulation in 2025, which provides procedural and technical matters, and specifies exemptions from licences and approval requirements under the Water Management Act
• the enactment of the Water Management Legislation Amendment (Stronger Enforcement and Penalties) Act 2025 to address legislative challenges that had been identified by NRAR in seeking to enforce water law, most significantly through the introduction of a civil penalties regime that requires the regulator to satisfy in prosecutions the lower civil standard of proof (‘balance of probabilities’) rather than the criminal standard (‘beyond reasonable doubt’).

Department of Climate Change, Energy, the Environment and Water

The NSW Department of Climate Change, Energy, the Environment and Water (DCCEEW) is responsible for administering the Water Management Act and setting the overarching policy frameworks for implementation by WaterNSW and NRAR. DCCEEW is responsible for developing water sharing plans, which establish rules around the long-term limits of water extraction for rivers and groundwater in NSW, as well as the trade of water within them. It is also the licensing authority for water licences and approvals for local councils, government agencies, major water utilities and certain other major water users, such as irrigation corporations, mine operators or State Significant Infrastructure.

The Water Group within DCCEEW leads all NSW water legislation, policy and planning activities in NSW, while the Conservation Programs Heritage and Regulation Group is responsible for managing allocations of water for the environment. In 2024–25, the Water Group had total expenses of $794 million and revenue of $819 million (including relating to NRAR). As of June 2025, it had 891 employees.

There is an identically named department with comparable functions in the Australian Government public sector. However, any reference in this audit report to DCCEEW should be taken to mean the NSW Government agency, unless specified otherwise. The Audit Office of NSW has no authority to conduct performance audits of Australian Government agencies.

WaterNSW

WaterNSW is a NSW Government state-owned corporation that maintains and operates the dams that supply water across NSW. It is also the licensing authority for water licences and approvals for rural landholders, rural industries and developments that are not state significant. These approvals include water supply works approvals for constructing works such as pumps or bores, and water use approvals to authorise the use of water for a specific purpose, such as irrigation.

As a state-owned corporation, WaterNSW must comply with the State Owned Corporations Act 1989. This legislation prescribes principal objectives for state-owned corporations, including that they must be a successful business, for example, by:

• operating at least as efficiently as any comparable business
• maximising the net worth of the NSW Government’s investment.

For 2024–25, WaterNSW reported revenue of $494.4 million and a net profit of $16.7 million. During this period, it employed 1,113.6 full-time equivalent staff. In August 2025, WaterNSW announced that it was reducing the number of executives and senior managers by more than 30% and intended to reduce its total workforce by approximately 300 employees by the end of the 2025 calendar year.

Appendix 3 contains further information on the establishment of WaterNSW.

Natural Resources Access Regulator

The delivery of regulatory, compliance and enforcement functions is enabled through the Natural Resources Access Regulator Act 2017 (the NRAR Act), which established the Natural Resources Access Regulator (NRAR). NRAR started operations in April 2018 and is responsible for enforcing compliance with water management laws. The NRAR Act focuses on the enforcement of compliance through functions and powers to prevent, detect and stop illegal water activities. The NRAR Act also expressly provides that the regulator’s functions may, in the future, be expanded beyond water legislation to other natural resource management legislation.

In June 2025, NRAR had 217 employees. The total funding for NRAR for 2024–25 was $44.82 million.

Water Administration Ministerial Corporation

The Water Administration Ministerial Corporation (WAMC) is a statutory authority established under the Water Management Act to provide services to the Minister for Water to deliver the water management framework. It is also the mechanism used for a joint funding submission between DCCEEW, WaterNSW and NRAR in 2025 under the Independent Pricing and Regulatory Tribunal’s (IPART) regulation of water prices (described further below).

Other key agencies in non-urban water regulation

IPART sets maximum prices for non-urban water in NSW. These prices are paid by customers to WaterNSW and WAMC, as most customers in regional and rural areas do not have a choice for their water supply. In determining price levels, IPART considers several factors, including the cost of delivering the service, the need for efficiency and the impact of prices on customers.

IPART makes a decision about the ‘efficient’ cost of activities delivered by water agencies, including an envelope for capital expenditure, based on a joint submission by WAMC. The 3 water agencies determine how this funding will be allocated based on their respective responsibilities. The current determination period runs from 1 October 2025 to 30 June 2029, or until replaced.

Of the total efficient cost, a portion will be allocated to a ‘customer share’ to be recovered through water prices. Another portion is allocated to a ‘government share’, which is not recoverable from customers, and water agencies may seek to request this through the NSW Government budget process. WaterNSW also operates under an operating licence monitored by IPART. The current operating licence is for the period 2024–28.

The Natural Resources Commission is an independent NSW government agency responsible for, among other non-water related functions, reviewing how water sharing plans contribute to environmental, social and economic outcomes. It also audits the implementation of water sharing plans and provides recommendations to DCCEEW for how plans may be improved. 

A number of Australian Government agencies also play a role in water regulation, particularly for water held in the Murray-Darling Basin, which includes inland rivers in NSW. These include:

• the Murray-Darling Basin Authority, which is responsible for water resource planning in the Basin area, including inland rivers in NSW
• the Australian Government Environmental Water Holder, a statutory position in the Australian Government DCCEEW that manages environmental water holdings held by the Commonwealth
• the Inspector-General of Water Compliance, an independent Australian Government integrity agency for the Murray-Darling Basin.

The objective of this audit is to assess the effectiveness of DCCEEW, NRAR and WaterNSW in implementing compliance and enforcement measures for the sustainable and integrated management of non-urban water use in NSW.

The audit addresses this objective with the following criteria:

1. Do DCCEEW, NRAR and WaterNSW have effective governance arrangements to support the oversight and enforcement of water laws in NSW?
2. Has NRAR developed and implemented regulatory policies and procedures that support effective enforcement of water laws in NSW?
3. Have DCCEEW, NRAR and WaterNSW maintained effective data and information management systems and procedures to support regulatory compliance?

This audit includes 3 auditees: DCCEEW, WaterNSW and NRAR. For simplicity, the term ‘water agencies’ is used to refer to the 3 auditees throughout the report.

For the purposes of the audit, ‘non-urban water use’ includes the withdrawal of water from water sources requiring a water access licence and associated approvals, including but not limited to regulated rivers, unregulated rivers, groundwater systems and floodwater. It does not include the management or regulation of water after it has been withdrawn by water utilities for the purposes of urban water supply to towns and cities.

This audit is the third in a series of water-related audits. The other completed performance audits are:

• Water conservation in Greater Sydney, 23 June 2020
• Support for regional town water infrastructure, 24 September 2020.

This audit makes findings and recommendations about the elements of water management and regulation that are within the authority of the NSW Government to affect. Because of the interconnected nature of the rivers that make up the Murray-Darling Basin, changes to a jurisdiction’s obligations under the Murray-Darling Basin Agreement can require negotiated adjustments to the principal agreement or can depend on the actions of another jurisdiction. Accordingly, this audit does not assess the impact or process of making water resource plans or other matters under the Murray-Darling Basin Agreement as they are not under NSW’s unilateral jurisdiction.

In addition, the audit does not cover the following activities:

• DCCEEW’s approach to making or remaking water sharing plans
• administration of water licences
• the management of urban reticulated water supply systems provided by water utilities
• trading of licences, water market mechanisms and activities
• water pricing determinations
• water quality standards, monitoring and compliance with drinking water guidelines.

Structure of this report

The report is divided thematically by the basic elements of the water management system to analyse interconnected issues existing at different levels of analysis.

Chapter 4 analyses whether the delivery of reform has been supported by effective governance, including how well the water agencies and regulated community understand their respective roles, responsibilities and obligations.

Chapter 5 focuses on the interactions between the 3 water agencies in the context of data sharing. This includes the existing arrangements for the sharing of data from WaterNSW to the other water agencies, efforts to improve data access and their results, and the impacts that issues with these have caused.

Chapter 6 presents findings about NRAR's governance arrangements, its resourcing and workforce management.

Chapter 7 analyses the design and implementation of NRAR’s regulatory policies, priorities and performance.

The complexity of the rules and regulations for water use creates significant challenges for regulatory implementation

Numerous interviews and written submissions to this audit stated that the complex nature of water regulation in NSW creates challenges to implementation for both the regulated community and the water agencies, particularly the regulator. It was reported that the complexity of water rules makes it difficult to understand and comply with their obligations. NRAR has publicly stated that most instances of non-compliance by water users have been due to misunderstanding complex water laws, rather than purposeful disregard for the law. Similarly, the Department of Climate Change, Energy, the Environment and Water’s (DCCEEW) 2024 report on its consultation for non-urban metering reform found many water users had difficulty understanding their compliance responsibilities.

The audit also identified instances where water agency staff may not fully understand, or have different interpretations of, the compliance obligations of water users. Some NRAR staff reported finding water laws complex to regulate, including because rules are not written in accessible and plain English formats, and licence conditions can be technical and opaque, or difficult to enforce.

In its 2018 report, the NSW Ombudsman found that an apparent lack of understanding of the legislative framework by some officers of the former regulator had contributed to the regulatory failures identified at the time. The Ombudsman found that a better understanding by officers of the legislative framework, or significant simplification of that framework, may avoid such errors in the future. This finding remains relevant. Other public inquiries and reviews have made similar findings about implementation challenges due to the complexity of water regulation.

This audit identified specific instances where complexity has created challenges for water agencies in implementing, or for stakeholders in interpreting and complying with, the rules, including:

• imprecise or non-existent definitions of regulatory terms, including those that relate to floodplain storages, landholding definitions and water take
• the interpretation and application of exemptions, including those introduced for non-urban metering regulation – this has been compounded when exemptions have changed, as in the case of smaller water users under non-urban metering reforms, which has resulted in some water users incurring costs for metering equipment that was subsequently not required
• measurement requirements for environmental watering actions, including the introduction of new regulations in 2025 to address changed interpretations of legislation (discussed further below in this section)
• the number of unique discretionary licence conditions, including those that are historically derived, imprecise or unenforceable (discussed in section 5.2)
• application of the regulation to complex ownership and licensing structures (discussed further below in this section)
• the interpretation of stock and domestic water rights, for example, a 2023 DCCEEW review of the management of these rights received over 2,000 responses from community (discussed further in Exhibit 4)
• accurately determining the amount of water taken by mining operations (discussed further in Exhibit 12).

Some of this complexity may be an unavoidable consequence of regulating a complex natural system impacted by geography, climate and environment. In addition, there are interjurisdictional consequences of inland water flowing between 4 basin states and through multiple interconnected river valleys, each with separate water sharing plans. There is also diversity in the purposes for which water may be used, including for extractive or environmental purposes, as well as to satisfy the needs of recreational water users and First Nations communities.

Source: Audit Office of NSW analysis.

DCCEEW has assessed the expected impact of some individual proposed water reforms

As the lead NSW government agency for water legislation, policy and planning, the importance of reducing complexity and achieving greater simplicity in water rules has been a theme in DCCEEW’s consultations and reviews for individual water reforms. For example, this was a consistent theme in DCCEEW’s initial consultation on the then proposed Water Reform Action Plan. In June 2018, DCCEEW reported in its first consultation report that a key message it had taken from the process was the need for ‘improved clarity and simplicity on rules’.

In July 2025, in response to complaints from stakeholders to the Minister about ongoing concerns with engagement fatigue and DCCEEW’s effectiveness in engagement, DCCEEW acknowledged that some stakeholders held the view that it had ‘… too many plans, programs and projects’. DCCEEW outlined a range of measures that it had taken or would take to address these concerns. Some of these measures may help to address the risk of stakeholder confusion about scale, pace and complexity of water reforms. The measures include:

• the repurposing, from October 2025, of the Water Advisory Groups convened by WaterNSW to include a dedicated afternoon session for DCCEEW to engage with stakeholders
• committing to provide greater feedback on the outcomes of consultations, including providing information on how feedback has informed decisions
• maintaining a new interactive map on DCCEEW’s website to ensure that programs and projects in each water sharing plan region are easy to find.

DCCEEW has undertaken assessments of regulatory impact for some of its water reforms, particularly where required by the Subordinate Legislation Act 1989.

For example, in February 2025, DCCEEW prepared and published an extensive regulatory impact assessment to support its proposed remake of the Water Management (General) Regulation. The assessment systemically addressed approximately 22 reforms included in the proposed remake, outlining the objectives, considered alternatives, as well as the costs and benefits of each.

These regulatory impact assessments are useful in ensuring that DCCEEW has considered the effectiveness of discrete regulatory interventions. However, they have not been conducted for all reforms introduced since 2017, including the establishment of NRAR. Moreover, while significant reforms to non-urban metering or floodplain harvesting licensing were subject to various forms of consultation and technical evaluation, they were not subject to regulatory impact assessments.

Lack of overall evaluation exposes the reform agenda to the risk that important lessons about regulatory reform and its cumulative impact will not be identified

While some reforms have been subject to regulatory impact assessment, these have been on a case-by-case basis that have not assessed the overall, cumulative and retrospective impact of the regulatory reforms introduced since 2017. This includes whether the reforms have contributed to progressing the objectives of the Water Management Act 2000 (Water Management Act) or whether any lessons can be learned to improve regulatory outcomes and processes.

Despite a clear message over time from multiple stakeholder groups that water regulation is excessively complex and creates the risk of non-compliance, there has been limited policy or legislative attention to promoting greater simplicity or clarity. Reforms to water regulation since 2017 have delivered a range of amendments to existing regulations, rather than a holistic review of cumulative impact, lessons learned or how effectively the objectives of the Water Management Act have been promoted.

With the 10-year anniversary of the Water Reform Action Plan falling in 2027, it may be timely for DCCEEW, in collaboration with NRAR and WaterNSW, and in consultation with other stakeholders, to reflect on lessons learned from the water policy reform process, including how it has been managed, overseen and implemented.

A mechanism for such a review may already exist. Section 10 of the Water Management Act requires the Minister to ensure that the work and activities of the department are reviewed at intervals of not more than 5 years to determine whether they have been effective in giving effect to the water management principles of the Water Management Act. The last review was conducted by DCCEEW in 2023, but the prior review was conducted in 2011.

The 2023 section 10 review resulted in DCCEEW publishing a corrective action plan to address a series of recommendations from the review. Implementation of the corrective action plan is assessed annually by the Natural Resources Commission.

DCCEEW does not have a consolidated approach to tracking progress against recommendations

DCCEEW has reported 7 of the 11 recommendations of the Matthews investigation as complete in 2022. Three further recommendations were noted as ‘Managed outside Water Group’, and it is unclear whether DCCEEW has maintained any oversight of progress against these recommendations.

In addition to the Matthews investigation, other related key inquiries were conducted by the Independent Commission Against Corruption (ICAC) and the NSW Ombudsman. DCCEEW reported that, at April 2023, all 15 recommendations of the ICAC report were complete. DCCEEW has not reported progress on delivery of the 35 recommendations of the NSW Ombudsman’s report, including those directed to WaterNSW and NRAR.

DCCEEW does not have a systematic or consolidated approach to monitoring and coordinating its response to independent or commissioned reviews, for example, a system to track the recommendations across reviews and inquiries. This is particularly important where DCCEEW’s actions to address recommendations may overlap or relate to similar issues or a need to capture additional recommendations from later internal audits or reviews. This will also be important to address recommendations arising from this audit.

For example, the Matthews investigation report (2018) and the ICAC report (2020) contained recommendations relating to defining DCCEEW’s stakeholder and community engagement approaches, as did a 2022 report commissioned by DCCEEW.

DCCEEW has not adequately considered alternative options and critical data dependencies when planning a new reporting requirement for water users, creating risks to the delivery of outcomes

Since 2024, water agencies have been developing a proof-of-concept trial to implement a regulatory requirement that aims to more precisely link water taken against specific licences. This was in response to a recommendation of the 2024 non-urban metering review. DCCEEW’s planned trial of attestation aims to address challenges in establishing how much water has been taken relative to the water allocation for a given licence. In most cases, this is straightforward, but in some cases, it can be extremely complex to establish (Exhibit 3).

For example, in some cases, there may be multiple approval holders authorised to take water against a particular licence. In other cases, one approval holder may be authorised to take water against multiple licences. DCCEEW reported that this is the case for around 5% of licences, but these represent as much as 67% of water take. Currently, approval holders must record and report water take, but, historically, compliance with these requirements has been low.

WaterNSW manages the process of tracking water use against licences. It has rules in place to guide this process, with around 94% of transactions in 2024–25 attributed to licences through pre-set rules, with the remainder manually attributed by WaterNSW officers. This means that WaterNSW has had to apply a degree of discretion in complex licence approval arrangements.

The water agencies have established detailed formal agreements defining their respective roles and responsibilities

In a complex operating environment, clearly defined roles and responsibilities are essential. Since 2021, formal agreements have been in place that aim to document the respective roles and responsibilities of the 3 water management entities. The first was a 2021 Roles and Responsibilities Agreement between DCCEEW, NRAR and WaterNSW. A revised Roles and Responsibilities Agreement was due to be updated by 30 June 2025, and was executed in November 2025, though associated schedules have not yet been finalised.

Additional agreements are in place to define responsibilities and expectations between parties on bilateral issues, including a Memorandum of Understanding between WaterNSW and NRAR. This was first signed in 2019 and renewed in December 2023, and aims to provide a framework for cooperative relationships and shared processes, including the sharing of records and information. WaterNSW’s new operating licence, revised in 2024, includes a new requirement for the entities to maintain a Cooperation Protocol to replace the Memorandum of Understanding. The water agencies advised that work is underway to develop this new protocol, which was planned for delivery by June 2025, but has not yet been finalised.

Despite these formal agreements, accountability for education on compliance with water rules is unclear in practice and has resulted in conflicting advice

Despite these formal arrangements, some accountabilities remain unclear in practice. Accountability for stakeholder education and engagement across the 3 entities has been defined under formal arrangements, including the 2025 Roles and Responsibilities Agreement, which contains a detailed schedule of responsibilities with respect to education and engagement. Under these arrangements, NRAR is responsible for education and engagement on compliance matters, WaterNSW is responsible for education on licensing and approvals, and DCCEEW has broad responsibility for education on policy matters, including the introduction of new policies.

In practice, though, the boundaries between advice on policy implementation and enforcement are not clear. This has resulted in a lack of clarity across the water agencies about which entity has lead responsibility for the provision of education and advice on the implementation of water licences and approvals, including with respect to compliance obligations. This lack of clarity also creates risks to the quality and consistency of advice. In 2023, WaterNSW identified the risk of conflicting advice between entities and advised its staff to give advice that is ‘general in nature only’.

Stakeholders reported confusion over the delineation of functions between DCCEEW, WaterNSW and NRAR, which results in uncertainty about who to contact with questions or issues, particularly in relation to water user requirements or obligations. This confusion particularly relates to the implementation of water rules, new policies and licensing conditions. For example, feedback to the audit from significant, well-resourced licence holders identified a lack of clarity around which agency to approach for information and advice, or for clarification around the implementation and compliance implications of new policy requirements. Stakeholders also reported being reluctant to approach NRAR for compliance advice, due to the associated risk of enforcement action for being non-compliant.

Staff from both NRAR and WaterNSW also reported that stakeholders routinely confuse WaterNSW and NRAR officers in the field. WaterNSW’s 2023 Phase 1 Customer and Community Insights Report found that ‘there is a level of customer and community confusion regarding the roles of WaterNSW, DPE-Water and NRAR, and the complexity of setting and reforming rules and regulations, delivering water and rules enforcement’.

In 2026, the 3 water agencies planned a joint forum to share information about upcoming communications and engagement activities. This forum aims to support consistent messaging across agencies, and to enable coordination on engagement and education activities. DCCEEW also advised that there are templates in place for call centre staff responding to queries relevant to other entities. However, the water agencies have not developed coordinated guidance for officers in the field who provide education and advice to water users.

The audit also found examples where members of the regulated community had been given inconsistent or conflicting advice from staff across the different water agencies. This related to matters such as metering requirements, the application of basic landholder rights, the meaning of specific licence conditions, circumstances in which logbooks are required to record water use, and historical practices that are no longer compliant with water rules.

Accountability for identifying and reporting suspected non-compliance with water rules was not clearly defined until 2025

The Memorandum of Understanding between WaterNSW and NRAR includes a requirement for WaterNSW to refer suspected non-compliance to NRAR. However, prior to 2025, formal governance arrangements between the 3 agencies did not include a requirement to refer potential non-compliance to NRAR for assessment. A provision was included in the 2025 revision of the Roles and Responsibilities Agreement that requires both DCCEEW and WaterNSW to notify NRAR of any known material breaches of NSW water legislation as soon as practicable. A framework has not yet been developed to clarify what types of matters should be referred and in what form, for example, to define what constitutes a ‘material’ breach. The Roles and Responsibilities Agreement specifies an intention to develop an Alleged Material Breach Notification Protocol, though the timing has not yet been established.

Water agencies can refer potential instances of non-compliance with water rules to NRAR through the same channels as a member of the public. The audit identified instances prior to 2025 where potential non-compliance with water rules, identified by DCCEEW and WaterNSW, was not referred to NRAR for assessment due to competing priorities. For example, in starting implementation of floodplain harvesting licensing in 2022, DCCEEW identified around 86 unauthorised flood work structures. These were not referred to NRAR for assessment until July 2024.

The role of WAMC as a separate entity has not been clearly communicated to relevant stakeholders to support understanding of the system

Water agencies have not adequately communicated the role of WAMC in relation to the water management framework , resulting in confusion among external stakeholders. For example, feedback from stakeholders to the audit identified confusion specifically in the distinction between fees attributed to WaterNSW and those attributed to WAMC. In a fee-based regulatory environment, the water agencies should prioritise transparency about funding mechanisms and allocation of fees.

WAMC is a statutory entity under the Water Management Act. It was established to provide services to the Minister for Water to deliver the water management framework and is largely administered by DCCEEW. However, WAMC is also the mechanism by which the 3 water agencies submit a joint funding submission under IPART’s regulation of water prices. The Roles and Responsibilities Agreement specifies that ‘[DCCEEW], NRAR and WaterNSW work together to deliver WAMC’s essential water management services’. However, given that WAMC is a separate statutory entity, the attribution of water agency responsibilities under the WAMC funding structure is a potential source of stakeholder confusion.

The 2025 IPART determination recommended that WAMC establish a website and engage more effectively with stakeholders. It also recommended that the Minister for Water initiate a review of WAMC to improve its governance arrangements.

Prior to 2026, water agencies did not formally manage shared risks and dependencies

Prior to 2026, the water agencies had not established a joint mechanism to capture shared risks and dependencies, and to allocate accountability for actions to mitigate these risks – for example, through the inclusion of risk management as a standing item in meeting agendas for the existing interagency governance bodies.

There is evidence that existing leadership forums, including the WAMC CEO’s forum and the Roles and Responsibilities Agreement Steering Committee, are appropriate forums to manage shared risks.

Currently, responsibility lies with each water agency to capture shared risks in their respective risk management frameworks. Water agencies’ individual risk registers reviewed during the audit did not adequately reflect risks relating to the interdependent operating environment of the water sector, reliance on other entities for delivery of legislative outcomes, and risks associated with tripartite funding arrangements. Furthermore, the audit observed that the individual water agencies’ approach to documenting risks affecting all parties and the adequacy of their proposed risk treatments varied significantly.

All 3 water agencies’ risk registers identify the relative importance of a collaborative technology plan (the technology roadmap), part of WAMC’s 2025 IPART submission, for the success of water management outcomes. For example, in the management of risks relating to customer service outcomes, agencies rely heavily on the delivery of the technology roadmap and assume that funding will be available for its implementation. None of the risk registers adequately documents the risk that sufficient funding is not available for delivery of the technology roadmap’s initiatives. In March 2026, a mechanism was established to document shared risks relating to implementation of a data strategy and governance initiative under the WAMC technology roadmap.

DCCEEW’s management of stakeholder engagement in non-urban water regulatory reform has been inconsistent, though it has matured in recent years

As the lead agency for water policy, legislation and planning, DCCEEW is also generally responsible for leading stakeholder engagement and consultation processes on water regulatory reform. Since the Water Reform Action Plan was made in 2017, significant effort and resourcing have been devoted to this function. While DCCEEW has demonstrated improved capability, ineffective stakeholder engagement for some key reforms contributed to delays in their implementation. This was most significant in the reforms to non-urban metering that emerged from recommendations made in the Matthews investigation.

On 1 December 2018, rules that gave effect to the non-urban metering reforms were introduced for ‘ensuring that the vast majority of licensed water take is measured by accurate, auditable and tamper-evident meters’. Prior to this, from March to April 2018, DCCEEW held initial consultation on the Water Reform Action Plan and sought views on how a metering policy could be implemented to support the overall ‘no meter, no pump’ objective.

In 30 September 2018, DCCEEW undertook formal consultation on a draft metering policy and regulation. It published reports of its findings from both rounds of consultation. In each round of consultation, submissions highlighted, among other matters:

• the overly ambitious implementation timeframes, particularly for small water users
• insufficient availability of adequate meters
• insufficient supply of accredited installers (termed Duly Qualified Persons or DQPs).

On 8 June 2023, the Minister for Water announced that the NSW Government was starting a review of the 2018 regulations for non-urban water metering, noting that NRAR would continue to enforce the existing rules while the review was underway. The review was due to start in December 2023, but was brought forward a few months because of poor reform uptake.

In June 2024, a report of this review was published. It forecast that, at the current trajectory, full metering implementation would not be achieved until around 2040. This review identified a range of reasons for the critical delays, including key issues identified in the initial consultation, particularly:

• the excessively ambitious timeframes
• the unavailability of essential metering equipment
• the lack of qualified installers.

The review proposed a revised approach to metering. This involved amendments to the policy settings for non-urban metering reform, including to extend compliance timeframes and remove obligations on smaller water users. This process and outcome appear to reflect a more consultative approach to the process of policy making and implementation. While these reforms were broadly welcomed by the sector, this audit was told that some water users had already spent money to become compliant but were now exempt, and considered this a wasted expense. This included water users with smaller entitlements or operations.

More recently, DCCEEW managed the process of introducing significant proposed reforms under the Water Management Legislation Amendment (Stronger Enforcement and Penalties) Act 2025. This Act was informed by NRAR’s experience in regulating the sector, particularly the difficulty of proving an offence to the criminal law standard of beyond reasonable doubt. The Act allows NRAR to prosecute some matters through the Land and Environment Court to the civil law standard of balance of probabilities.

The legislation was not subject to public consultation before its passage through Parliament. In April 2025, before the Bill was introduced to the Legislative Council on 26 June 2025, DCCEEW conducted limited briefings on the Bill with selected industry and environmental stakeholders. This engagement intended to build stakeholder awareness of the Bill, but not to seek feedback. Targeted engagement with key external groups was deemed appropriate on the grounds that ‘most changes will only impact persons seeking to contravene water laws’. The communication and engagement approach for the Bill specified that an exposure draft of the Bill would not be shared with stakeholders prior to the Bill being introduced to Parliament. Key industry stakeholders raised significant concerns about this approach to engagement on policy and legislative reform, as well as about the substance of the reforms.

This report notes the concerns raised by the Matthews investigation about extending what could be perceived as privileged access to the regulatory process to selected stakeholders only. The same risk applies to affording special status regarding the policy and legislative process. This audit has not found that it is necessary for all policy and regulatory processes to be open to broad based public engagement. However, the circumstances that justify targeted stakeholder engagement should be codified in the relevant stakeholder engagement policies or guidelines.

WaterNSW undertakes routine stakeholder engagement through its customer advisory groups

Under its operating licence, WaterNSW is required to ensure appropriate customer support and complaints management, including by engaging with customers and the community. This allows WaterNSW to engage in valley-specific and regional issues and understand how its systems and processes can support more effective relationships with customers. WaterNSW maintains customer advisory groups (CAGs) across 12 valleys in NSW. This is its primary mechanism for stakeholder engagement. It has maintained a regular cadence of meetings since at least 2017.

The CAGs are also a mechanism for DCCEEW and NRAR to engage with water stakeholders. While these meetings often discuss operational issues and matters unrelated to the regulatory framework for non-urban water, topics such as non-urban metering reform and floodplain harvesting have been frequently discussed. These meetings also provide NRAR with the opportunity to present its regulatory priorities and approach to enforcement.

From October 2025, a new approach to CAG meetings has been trialled. Under this approach, WaterNSW convenes the morning session to address issues relating to its licensing and related functions, and DCCEEW chairs the afternoon session, which is focused on its policy and legislative functions. Feedback from CAG members suggested that most participants found the new approach valuable.

Despite a range of guidance materials developed by all 3 water agencies, stakeholders reported critical knowledge gaps about their obligations for water use

All 3 water agencies have an extensive range of templates, toolkits and processes to support stakeholder engagement in the process of making non-urban water policy and law. However, the effectiveness in implementing stakeholder engagement has been mixed in relation to the water reforms introduced since 2017. DCCEEW developed a communication plan to accompany the Roles and Responsibilities Agreement in 2021, but communication with external stakeholders was not a priority as this plan was focused on internal stakeholders.

NRAR’s attitudinal surveys of stakeholders and water users have found that a significant proportion of water users are at risk of non-compliance because they do not fully understand their obligations, or because they do not know the range of materials available for stakeholders to support knowledge on water rules and compliance obligations.

The complex regulatory environment and unclear accountabilities discussed above contribute to some of the issues identified by stakeholders in understanding their obligations, or how to access the information they need.

Exhibit 4 illustrates one water management right where stakeholder understanding appears deficient.

Source: Audit Office analysis based on sources provided by DCCEEW, WaterNSW and NRAR.

WaterNSW has a core role as the custodian of statewide data on water use and has an obligation to share this information

WaterNSW’s operating licence and other formal arrangements establish core obligations on WaterNSW as the primary custodian for statewide water data. These include:

• providing accurate data to support the other entities to deliver their functions
• ensuring timeliness and continuity of access to data systems for other entities
• complying with requests from the regulator for access to any relevant information or records
• maintaining a single point of truth for water monitoring data and making this available to the other entities without charge
• keeping relevant databases up to date, including stakeholder contact details, and amending these on request from the other entities
• providing works relating to systems and data management either at no cost or under a fee-based arrangement.

WaterNSW has several data systems that the Natural Resources Access Regulator (NRAR) accesses for its compliance and enforcement activities. These include systems relating to water licensing and accounting, metering installation and metering data, hydrometric and flow data, and consolidated databases. Data held by WaterNSW that is used by the Department of Climate Change, Energy, the Environment and Water (DCCEEW) and NRAR includes details of:

• water licences and approvals
• individuals and entities holding these licences and approvals
• meters installed and other water infrastructure
• activity relating to volumes of water entitlements
• how much water has been taken against relevant licences.

The framework defining which system improvements require DCCEEW and NRAR to pay additional fees to WaterNSW has not been finalised

As the custodian of water management data and owner of the relevant information and data systems, WaterNSW also delivers a monopoly service for the provision of system amendments and improvements requested by DCCEEW and NRAR. These obligations are set out in a schedule of ICT and Data Services under the Roles and Responsibilities Agreement.

This schedule was delayed at the execution of the original Roles and Responsibilities Agreement in June 2021, and was finalised in November 2022. During the 2025 update to the Roles and Responsibilities Agreement, a revised ICT and Data Services Schedule was being drafted, but was not complete at the execution of the new agreement in November 2025. The timeline for finalisation of this schedule has not yet been determined.

This schedule is important to define WaterNSW’s obligations for system improvement, including to document exactly which data and system services it must provide to the other parties. As a monopoly provider, it is critical that WaterNSW is transparent about which services NRAR and DCCEEW will need to pay additional fees for.

NRAR requests data and system improvements from WaterNSW through a centralised email inbox and relies on support from WaterNSW to deliver these requests. In 2024–25, NRAR made around 284 requests to WaterNSW, with an average resolution time of 5 days. As many as 42% of these requests were related to water approvals and licences.

Several data and systems works requested by NRAR and DCCEEW to facilitate or improve the delivery of their respective functions have required significant investment of resources, including WaterNSW employing additional contracted staff. In 2025, NRAR initiated a project to develop 2 automated data interfaces in order to access WaterNSW systems, at a cost to NRAR of around $345,000. A further 6 interfaces are planned for future development.

A 12-month program of work commissioned by NRAR in 2023 sought to address systemic data problems relating to missing links between data records and missing or incorrect Lot/DP data in WaterNSW systems. The cost of around $400,000 was split between DCCEEW and WaterNSW.

In 2023, NRAR sought access to key compliance data around metering and floodplain harvesting from WaterNSW. This included establishing access to WaterNSW datasets for managing metering installations, with read-only access, at a cost to NRAR of around $85,000.

WaterNSW is off-track to meet timelines for data sharing obligations imposed by its 2024 operating licence

Following the update to WaterNSW’s operating licence that began on 1 July 2024, new statutory requirements were introduced to support the provision of data to other entities. These included 2 clauses with 30 sub-clauses that established requirements for WaterNSW to maintain a framework for data that guides activities relating to data governance and management, data quality, and data sharing with government and non-government entities. Any impact of these requirements on the current fee-based arrangements for data or system amendments (described above) has not yet been determined. The initial timeline for delivery of these requirements was July 2025, but was later extended to July 2026 at the request of WaterNSW.

At March 2025, WaterNSW reported that 7 of the 30 sub-clauses were compliant with operating licence requirements, including maintaining the relevant systems, keeping systems up to date and communicating the updates to stakeholders. In June 2025, an additional 4 sub-clauses were addressed through the development of WaterNSW’s Third Party Open Data Sharing Policy.

The remaining 19 items primarily relate to requirements for developing a data governance framework and associated policies for data quality and data sharing with NSW government agencies, as well as processes and practices for WaterNSW to lawfully provide agencies with access to data. These are important enablers for improved access to data and information to support the delivery of water management and regulatory functions by all water agencies.

Actions to deliver these requirements were incorporated into the 2024–25 joint WAMC submission to IPART under its technology roadmap proposal. In March 2025, WaterNSW reported that delivery of these actions was dependent on the IPART determination. As a result, WaterNSW delayed starting work to deliver key actions against mandatory requirements of its operating licence, which started in July 2024, until after the IPART determination was published in October 2025.

In December 2025, WaterNSW advised the audit that, to inform funding requests, it had engaged a consultant to develop a business case for the relevant initiative under the technology roadmap. As a result, the timeline for delivering its operating licence requirements is also dependent on engagement with the other water agencies. WaterNSW estimates that a business case will be finalised and approved by mid-2026, with delivery starting in the 2026–27 financial year. This means that WaterNSW is not on track to meet the July 2026 deadline for its operating licence requirements.

Obligations and expectations for the sharing of data have been defined through numerous formal arrangements operating in parallel

Numerous formal arrangements are in place to define the water agencies’ obligations in relation to water management data sharing and related expectations on the nature of the data being shared. However, there is no single agreement that sets out the respective obligations, accountabilities and deliverables of each entity with respect to data and information sharing. Instead, these are established through a complex suite of agreements, including:

• legislative provisions under the Natural Resources Access Regulator Act 2017 (the NRAR Act), and WaterNSW’s operating licence (renewed in 2024)
• the Roles and Responsibilities Agreement between DCCEEW, WaterNSW and NRAR signed in June 2021 (renewed in 2025), which includes an ICT and Data Services schedule and a schedule of data sharing arrangements
• a Memorandum of Understanding between WaterNSW and NRAR, executed in 2019, in relation to the provision of information and records (this was originally established as a requirement of WaterNSW’s operating licence and was renewed in 2023)
• a Data Sharing Agreement between WaterNSW and NRAR, which was established in December 2020 and renewed in 2024
• a Data Sharing Agreement between WaterNSW and DCCEEW, which was signed in July 2021 and renewed in May 2024.

The water agencies advised that the relevant data sharing instruments under the Roles and Responsibilities Agreement provide an overarching framework to support bilateral arrangements between the entities on specific matters. This is an intentional structure that aims to allow greater flexibility for bilateral arrangements to be established as required, and allows separation of strategic oversight from operational detail. However, this also creates inherent complexity whereby separate agreements must be read together to understand the full scope of the arrangements, and this is not always accurately reflected in the current structures. For example, details of NRAR’s access to specific WaterNSW systems and applications is fragmented across multiple agreements.

Formal data sharing arrangements have also provided for the establishment of associated governance forums and working groups to oversee delivery and provide a mechanism to resolve conflict. However, this has also resulted in separate lines of oversight being established to monitor and deliver activities relating to data and system improvements. Relevant reporting lines include working groups reporting to WAMC CEOs, including a Roles and Responsibilities Steering Committee and a Digital Ecosystem Oversight Committee.

In 2024, the Digital Ecosystem Oversight Committee was formed with oversight of technology roadmap initiatives; it also has various sub-committees for initiatives, including metering, compliance and customer portals. This committee is the primary governance forum through which activities relating to the water agencies’ data and systems are considered and prioritised. It makes recommendations to the CEOs that guide WAMC investments and priorities for technology programs. It replaced the Joint Agency ICT Committee, which ran from 2021–24.

Additional bilateral working groups between WaterNSW and NRAR include the WaterNSW/NRAR Strategic Group and Operational Group, established through the Memorandum of Understanding. A separate Data Remediation Program group was established in 2022 by the WaterNSW and NRAR Boards to deliver systems and data improvement activities. The water agencies advised that the purpose of establishing this group outside of existing data governance structures was to reflect the detailed nature of the work being undertaken.

Arrangements could more clearly define how priorities are reconciled between groups to reduce the risk of duplication or competing priorities for work on the same data and systems

Separate reporting lines and cross-reporting between groups on many of the same initiatives and activities create a risk of duplication or competing priorities between groups. Cross-reporting between groups may be one way to reduce the risk of siloed or duplicated efforts. However, where progress on initiatives is being reported across multiple separate working groups, it is necessary to clearly attribute ownership or accountability for relevant activities, and to be clear when updates are shared for transparency, rather than for oversight. For example, a project to remediate the accuracy of lot/DP data was discussed and monitored by at least 3 working groups, with separate reporting and action lists.

In early 2025, a prioritisation framework for the Digital Ecosystem Oversight Committee was defined to support the selection of projects for inclusion in the WAMC technology roadmap proposal. However, this framework does not prescribe how parallel working groups are identifying and prioritising resources to deliver improvement activities for the same data and systems. Many of these governance groups have similar membership and remits but separate plans and priority projects. For example, working groups overseeing the planning for policy reform to introduce attestation of water take (discussed above) have developed a list of actions for data and systems improvement, and attributed priority levels and timeframes, some of which have critical dependencies on roadmap initiatives. Adequate mechanisms are not in place for these priorities to be considered by the Digital Ecosystem Oversight Committee and to clarify how they relate to other priority initiatives under the roadmap.

Despite considerable effort, significant data access and quality issues limit all 3 water agencies’ oversight of water management effectiveness and delivery of enforcement functions

Despite improvements to practice and governance arrangements that have been in place since at least 2019, all 3 water agencies have identified significant deficiencies in both data quality and access. These issues limit water agencies’ oversight of the overall effectiveness of, and compliance with, the water management framework. This includes compliance with, and enforcement of, water licences and approvals, as well as how individual use is contributing to water availability at a system or water source level – for example, in relation to compliance with overall extraction limits set for many water sources.

Ongoing issues include:

• inconsistency between data sets or in the application of data management rules
• incomplete or inaccurate water user contact information, and an inability to correct identified errors or update records – such as contact details – in the source system due to cited privacy issues (also discussed in Exhibit 5)
• inconsistent or inaccurate information on the location of works or in the links between works and relevant approvals
• the structure of legacy systems that do not interact, or do not link relevant information, such as the location of meters and pumps
• time-lags in data being updated within systems, preventing active management and delayed debiting of water take against entitlements
• complex licensing and approvals arrangements creating challenges for accurately tracking and enforcing water use – for example, in cases where multiple licences are linked to multiple approvals (illustrated in Exhibit 3) or where one piece of infrastructure supplies multiple water users.

NRAR has documented a range of barriers to its compliance and enforcement activities that incomplete or inaccurate data impact. This has resulted in some investigations coming to an end, and prosecutions being unsuccessful or withdrawn, due to issues associated with data or records. In 2023, NRAR estimated that improved data could have saved 65% of compliance costs it had incurred, though it is unclear which compliance functions it included in this estimate.

WaterNSW has demonstrated that it has responded to feedback from both DCCEEW and NRAR on identified data and system issues, making a range of improvements to its data and information management practices. For example, it reported that work was undertaken in 2023 to update missing lot/DP information in over 11,000 approval records.

In response to identified data gaps and errors, NRAR has also used some of its on-ground resources to manually validate information relevant to its regulatory priorities. In 2025, NRAR’s Outreach team, which was previously focused on estimating baseline compliance rates through site visits, was redeployed to begin a trial of project-based work. The first project, which ran for the first half of 2025, sought to manually validate the status of around 750 water supply works as either active or inactive, by sending outreach officers on site visits to conduct visual inspections. This trial represented a significant investment of staff time and resourcing to remediate data held by WaterNSW.

However, significant issues across multiple systems continue to hamper implementation and oversight of water management and regulation. Key factors underpinning the lack of progress in addressing core system and data quality issues include:

• legacy water management data systems and structures that are not designed for compliance purposes, several of which pre-date WaterNSW’s establishment in 2014 – for example, to record the level of data assurance needed to meet the evidence standard for a criminal prosecution
• that most efforts to date have focused on low-cost interventions and lack a framework to prioritise efforts until 2025
• conflicting priorities between customer service and compliance
• no access to the competitive market to procure system updates and improvements (as discussed above).

In 2025, WaterNSW and DCCEEW were in the process of implementing a new information management system to replace legacy licensing systems. Beginning in 2023 through to November 2025, the new Water Market System has been implemented in stages, at a cost of around $36.9 million. This includes around $8.3 million from NSW DCCEEW and $1 million from Australian Government grant funding. WaterNSW anticipates that this new system will offer significant opportunities to improve the quality of licensing data, in particular data relating to the accuracy of water users’ contact details. However, the audit notes that these benefits have critical dependencies on the delivery of the WAMC technology roadmap to address data governance and access challenges. In particular, DCCEEW and NRAR operations face risks from significant system transition, including where these agencies rely on continued access to new and historic data, or will be affected by the decommissioning of previous data systems.

Water agencies have allocated a further $21 million for the Water Market System through the technology roadmap (Initiative 3, Exhibit 6); this is in addition to the $36.9 million already invested in the system. This proposal aims to deliver additional functionality (discussed further below).

Source: Audit Office analysis based on information provided by DCCEEW, WaterNSW and NRAR.

WaterNSW’s practices for the reconciliation of water accounts do not support accurate monitoring of water take and timely identification of potential breaches

WaterNSW has business rules and system validations to prevent water users from placing orders in excess of their licence allocation. However, the audit identified examples where water accounts have not been reconciled in a timely manner, particularly in relation to accounts with manual reporting requirements such as log books. This creates a risk that WaterNSW may deliver water orders against accounts that have exceeded their water allocation, until the accounts are reconciled for billing purposes. Timely reconciliation of water accounts is important for both the effective administration of water allocations and the enforcement of compliance.

The audit identified other examples where water take had not been debited against accounts, preventing the identification of possible compliance breaches with water take limits. For example, at November 2025, WaterNSW had not debited the water accounts of floodplain harvesting licence holders for water taken in a floodplain harvesting event that occurred in April 2024.

These system limitations prevent both water users and NRAR from being able to accurately monitor how much water is being taken and to identify where breaches have occurred. This has allowed some water users to order more than their water allocation. In 2023–24, NRAR estimated that around 6% of water accounts were overdrawn in 2021–22, a total of more than 40,000ML of water.

Historical licensing practices have created significant challenges for NRAR to establish non-compliance and to take enforcement action

In addition to data and system limitations, the enforceability of conditions attached to water access licences or water use approvals presents further challenges for NRAR’s compliance functions. This becomes a data and system issue due to the significant volume of historical licences and approvals, approved under previous water management frameworks, requiring review and amendment.

As the entity responsible for enforcement of licence conditions, NRAR has identified instances where licence conditions are not enforceable, including mandatory conditions set in water sharing plans. Unenforceable conditions continue to be a legal barrier to NRAR pursuing enforcement action against potential breaches, including initiating prosecution.

Conditions may be problematic because they set requirements for water flow based on physical landmarks or are impossible to validate after the fact. For example:

• water may not be taken unless flow reaches the level of a nail in a tree
• water must not be taken unless there is a visible flow in a creek at another location
• the dam must be operated to maintain a flow in the watercourse downstream of the dam.

IPART’s A best practice approach to designing and reviewing licensing schemes (2013) identifies the characteristics of effective licensing rules or conditions. These include that: they are focused on outcomes; they do not duplicate generic provisions; they are enforceable; and the associated penalties reflect the severity of the breach.

Prior to 2025, the formal arrangements between the 3 water agencies did not define a responsibility for entities to ensure the enforceability of conditions specified under water access licences and approvals. In recognition of this issue, a provision was included in the 2025 revision of the Roles and Responsibilities Agreement that requires DCCEEW and WaterNSW to:

This provides WaterNSW and DCCEEW with formal accountability to respond to identified issues with enforceability going forward. However, shared responsibility for the enforceability of licensing conditions creates a risk that accountability is diluted in implementation. This is particularly relevant in the context of agencies giving conflicting advice and education relating to the interpretation of licensing conditions (discussed in section 4.2).

NRAR has raised known problematic conditions with WaterNSW and DCCEEW to develop solutions. While the water agencies recognise the importance of improving the licensing and approvals data, they do not have dedicated resourcing to revise thousands of historical licence conditions to improve enforceability against current requirements. WaterNSW has made efforts to improve the consistency and enforceability of new licensing and approval conditions through staff training and guidance, and has engaged with NRAR on priorities for addressing identified issues. As part of a joint Data Remediation Plan in 2024, NRAR and WaterNSW collaborated on priorities to address the most urgent conditions requiring review. The respective Boards of WaterNSW and NRAR approved a plan of work to address these, with around 700 approvals with problematic conditions amended in early 2025. This program was paused in May 2025 due to changes in WaterNSW’s funding and organisational arrangements.

The water agencies have started developing detailed business cases for a collaborative plan to address data and system issues

A key accountability for the Digital Ecosystem Oversight Committee has been overseeing the delivery of a collaborative technology roadmap to address identified data and system issues for inclusion in the WAMC 2025 submission to the IPART pricing review.

The technology roadmap is the first strategic, coordinated approach to securing funding across all 3 water agencies. It comprises 4 key initiatives (see Exhibit 6), including developing a joint data strategy and governance, enhanced functionality for compliance, enhancing systems for metering data, and expanding the implementation of the new Water Market System.

Work undertaken by the water agencies identified that initiative 1 (ecosystem data strategy and governance) is the most important focus area, with the success of the other 3 initiatives dependent on delivery of this component.

The 2025 joint WAMC submission originally included a proposal for $46.4 million to deliver the 4 initiatives under the technology roadmap. Following the October 2025 IPART determination, the water agencies revised the original proposal to $43.96 million for the delivery of technology roadmap initiatives over 3 years to 2029.

It is important to note that the IPART determination does not result in allocation of funding but sets maximum prices that water agencies can charge water licence holders based on IPART’s forecast of efficient expenditure (including a forecast envelope of efficient capital expenditure). The agencies then manage this over the determination period, including seeking NSW Government budget allocations where relevant. The water agencies reported that work is underway in 2026 to develop detailed business cases for the roadmap initiatives.

Source: WaterNSW.

Delivery of the collaborative plan to address data and system issues is subject to WaterNSW’s governance approval and funding availability

WaterNSW has committed to debt funding the proposed cost of the technology roadmap, but this is subject to approval through its standard governance processes for capital expenditure. Funding allocated to WaterNSW by departmental or WAMC agreements, including joint priorities established under the technology roadmap, also requires approval by the WaterNSW Board or its capital investment governance committee in order to be allocated for its intended purposes. In the course of developing the technology roadmap, WaterNSW has been transparent to the other water agencies about its governance process for accessing capital funding.

While each agency is required to exercise its relevant financial delegations and controls, under the Digital Ecosystem Oversight Committee’s Terms of Reference, there must be committee endorsement of any deviation from WAMC funding decisions. It is not clear how a disagreement between these processes would be resolved. The water agencies have raised this gap as a risk during discussions in joint governance groups, but it is not clear what action has been taken to resolve it.

Proposed funding for the technology roadmap must also be considered against WaterNSW’s other priorities for capital expenditure, including water supply infrastructure, in the context of WaterNSW’s capital funding envelope to be sourced from available debt. None of the water agencies’ risk management documentation has adequately accounted for the risks of the prioritisation of capital expenditure – specifically, how prioritisation of limited funds might impact the timing and scope of implementation of the roadmap, and the consequential impact on water management obligations and activities.

In recommending the establishment of a new water regulatory system, the Matthews investigation states that one of the key principles that should underpin the regulatory system was that it:

Regarding regulator independence, the Organisation for Economic Co-operation and Development (OECD) states that:

This is particularly important where community confidence in the regulatory system needs to be maintained or re-established, where government and non-government entities are regulated, and where there are strong competing interests and impartiality needs to be protected. These 3 characteristics are each visible in non-urban water regulation in NSW.

NRAR’s legislation supports the independence of its compliance and enforcement decisions

Under the Natural Resources Access Regulatory Act 2018 (NRAR Act), the Natural Resources Access Regulator (NRAR) is governed by an independent Board that reports directly to the relevant Minister but is not subject to the control or direction of the Minister.

The NRAR Act provides that the responsible Minister may, where necessary and in the public interest, give the regulator written direction with respect to its functions. However, any such direction may be of a general nature only and may not relate to a specific matter that is being considered or determined by the regulator.

The NRAR Act requires that written directions from the Minister must be published on the NRAR website. While ministerial directions were provided to NRAR in 2018 and 2021, these directions have only been published on NRAR’s website since December 2025.

These arrangements support the NRAR Board’s independent decision making in relation to compliance and enforcement activities, including the decision on whether to proceed to prosecution for alleged breaches of the Water Management Act 2000 (Water Management Act).

NRAR has governance arrangements that support independent regulatory decision making, and it has managed potential risks from its administrative arrangements with DCCEEW

A service agreement and protocol between NRAR and the Department of Climate Change, Energy, the Environment and Water (DCCEEW), developed in June 2025, supports NRAR’s independence from departmental directions in its decision-making functions, including from the Secretary of DCCEEW.

NRAR has administrative dependencies on DCCEEW for a range of non-regulatory functions. These include the following services provided by DCCEEW at a cost to NRAR:

• an employment and reporting line for the Chief Regulatory Officer
• NRAR legal services, until December 2025
• human resources and work health and safety services, to support NRAR staff as employees of DCCEEW
• ICT, finance, procurement, internal communications, records and compliance, corporate finance, ministerial and cabinet liaison services
• audit, ethics and probity services, including use of DCCEEW’s online ethics portal for conflict of interest management
• payroll and employee administration, ICT, accounting and expense management through a shared service arrangement with the Department of Planning, Housing and Infrastructure.

The audit focused on the employment and reporting line for the Chief Regulatory Officer and the arrangements by which DCCEEW provided legal advice to NRAR. The management of ethics and probity services by DCCEEW is discussed in section 6.2.

DCCEEW and NRAR have worked to address potential real or perceived conflicts emerging from the Chief Regulatory Officer’s reporting lines within the department. As an employee of DCCEEW, between 2018 and 2024, the Chief Regulatory Officer reported to the Deputy Secretary overseeing water functions within DCCEEW. In early 2025, this reporting line was moved to DCCEEW’s Deputy Secretary of Conservation Programs, Heritage and Regulation, who oversees the department’s environmental water holdings.

In both cases, there were potential conflicts inherent to a regulator reporting to a senior executive accountable for regulatory policy or regulated functions.

In July 2025, the Chief Regulatory Officer’s reporting line was changed again, this time to report directly to the DCCEEW Secretary. This was intended to address the potential conflict in the Chief Regulatory Officer effectively regulating their direct supervisor’s management of environmental water. Prior to this change, in June 2025, DCCEEW and NRAR signed a service agreement and protocol, documenting shared expectations as to how the 2 agencies would work together while preserving NRAR’s independence.. The protocol stated that the Secretary did not have power to oversee decisions on prosecutions and investigations under natural resource management legislation, and NRAR is not expected to share information with DCCEEW regarding NRAR’s regulatory functions.

Given the complex legislative environment in which NRAR operates, access to legal services is a critical capability for the regulator. In 2018, NRAR developed the shared services approach to its legal function and documented the anticipated efficiencies of this approach. This included access to expertise within DCCEEW, as well as the need to establish clear boundaries for legal staff working on NRAR matters. However, this also created a potential conflict of duty in cases where NRAR may be taking legal action against DCCEEW for non-compliance with water rules.

In 2023, NRAR and DCCEEW signed a Memorandum of Understanding for the provision of legal services, with funding provided by NRAR. The audit identified gaps in the documentation of the approach to managing potential conflicts of duty for NRAR legal staff in the 2023 Memorandum of Understanding, though there was evidence of potential conflicts being managed in practice.

Following NRAR’s review of independence in 2024, from 12 January 2026, NRAR legal staff will report only to the NRAR Chief Regulatory Officer.

NRAR’s funding model reduces the risk of undue influence from fee-paying water users, though it has not transparently and routinely reported on its funding sources

NRAR requires adequate resources and staff to exercise its compliance functions effectively. This includes protecting against undue influence over decision making by any stakeholder or group and ensuring that NRAR has the capacity and capabilities needed to deliver its functions. Appropriate funding is essential to determine the extent to which the regulator can carry out its mandate and act independently.

In its 2018 investigation report, the NSW Ombudsman found that regulatory failure in the management of water was at least partly the result of the failure to ‘… adequately resource or secure funding to adequately resource their compliance functions’. Similarly, the Matthews investigation pointed to the need for the then proposed new regulator to be sufficiently resourced to perform compliance and enforcement functions.

NRAR receives its funding from a range of sources, which can be summarised as:

• fees paid by water users under a regulated pricing framework
• a subsidy paid by the NSW Government to offset the full cost to users
• a NSW Government share of the efficient cost under the regulated pricing framework
• NSW Government recurrent funding (approved by Cabinet)
• NSW Government temporary funding for specific projects or activities, including dedicated funding to implement non-urban metering and floodplain harvesting licence reforms (approved by Cabinet)
• a relatively small component from the Australian Government for specific projects.

Exhibit 7 shows the relative contribution of the NSW Government, the Australian Government and water users to total NRAR funding.

Effective regulatory governance requires transparency in how a regulator performs its functions. It also needs clear reporting against meaningful performance measures that reflect progress toward achieving outcomes.

In its November 2017 water compliance review, the Murray-Darling Basin Authority (MDBA) noted that:

The MDBA found that prior to the reforms discussed in this audit, NSW was one of the basin states for which there was a notable lack of transparency about compliance and enforcement activities.

NRAR’s performance measurement framework is inadequate, and the quality of its data is poor, which limits its ability to demonstrate its effectiveness or be transparent about its functions

NRAR has acknowledged the importance of transparency to address the issues identified by the Matthews investigation and which contributed to NRAR’s establishment. In its first 2018–19 annual progress report, NRAR established that:

On its website, NRAR reports activity data, such as the number of suspicious activity reports received and the types of decisions made. This includes a dashboard of compliance and enforcement activities, as well as a register of prosecutions. NRAR also publishes annual progress reports on its achievements in the previous 12 months, as required by the NRAR Act.

In early 2025, NRAR identified critical issues in its performance reporting against a range of key performance indicators, particularly at branch level. A committee paper explained that:

NRAR has assessed the maturity of its performance reporting using the Modern Regulator Improvement Tool (MRIT), which assesses regulatory good practice (discussed further in section 7.1). NRAR’s most recent MRIT assessment in 2024 identified that its performance reporting maturity had declined since a 2022 review and was still in the developing/maturing range. A subsequent independent external verification of NRAR’s self-assessment proposed that the assessment be upgraded to ‘maturing’. In considering opportunities to advance regulatory maturity, NRAR leaders identified that ‘Despite being an outcomes-focused regulator, NRAR could strengthen its capabilities in outcomes-based performance reporting’.

NRAR does not have a data governance strategy or framework to ensure that its activity data is managed effectively. Implementing one would ensure a holistic and strategic approach to how data is defined, collected, stored and utilised as a high-value asset.

In November 2025, the NRAR Board endorsed a new strategic plan for the 2026–28 financial years, along with an outcomes framework. The strategic plan and outcomes framework are intended to reflect that ‘NRAR is updating its strategy to focus on long-term outcomes instead of short-term outputs’. Operational elements of this plan and framework were still in development during this audit, but it was expected that all elements would be ready for publication by 1 July 2026.

In February 2026, an initial proposal was endorsed by NRAR management to begin the development of a dedicated project to ‘… uplift organisational maturity in business process management, system remediation, data integrity and performance reporting’. In March 2026, a project plan, including timing and resourcing, was endorsed by NRAR executive management. The project plan recognised that:

The uplift project intends to deliver a coordinated uplift to NRAR’s priority regulatory processes, supporting systems, data integrity and performance reporting foundations. The project is forecast to finish by 30 June 2027.

NRAR paused its internal performance reporting in 2025 while it addresses data quality issues

Following identification of data quality issues, NRAR advised that it paused its routine internal performance reporting in 2025. NRAR intends to re-establish its performance reporting dashboards and templates, and implement controls to improve data quality to support performance reporting. This work was underway at the time of the audit and coincides with the introduction of a new information management system.

NRAR’s performance reporting has been focused on activity, inputs and outputs, such as the number of reports received for investigation, and the breakdown of compliance and enforcement outcomes, such as investigations started and penalty infringement notices issued. NRAR is less able to demonstrate how it achieves outcomes, such as environmental and community benefits, through its regulatory activities. NRAR has not yet developed a comprehensive outcomes-based performance reporting framework. For example, it does not publish information on possible outcomes, such as how its functions drive behavioural change and voluntary compliance among water users, or on key quality measures, such as the timeliness of its investigation processes. In 2025, NRAR engaged a consultant to provide advice on its strategic planning process and transition to outcomes-based reporting. The result of this engagement was the Board’s November 2025 endorsement of a new strategic plan and outcomes framework, as discussed above.

There have been discrepancies in performance data published by NRAR

The audit reviewed performance data from the compliance activity dashboard on NRAR’s website. This dashboard allows for monthly compliance activity data to be interrogated and displayed.

A comparison between this data and performance data provided to the audit by NRAR found discrepancies in the data available for the most recent full financial year. In 2024–25, the performance data analysed by the audit suggested a much lower number of each type of regulatory action than was reported on the NRAR dashboard.

The audit also found inconsistencies in information published by NRAR across different sources. For example, in 2023–24, a comparison of performance data published in NRAR’s annual progress report against activity reported on the regulator’s website dashboard revealed:

• for the number of directions issued, 127 in the progress report against 231 on the dashboard
• for the number of warnings and cautions issued, 76 in the progress report against 237 on the dashboard.

There were smaller differences in some years, while in other years the numbers were consistent across sources. None of these inconsistencies necessarily overstates or understates NRAR’s effectiveness and the audit did not find evidence that there was any intent to publish misleading data.

However, these inconsistencies, coupled with the other data quality issues discussed above, limit confidence in the accuracy of the performance data being published by NRAR. In turn, this undermines NRAR’s efforts to be transparent about its performance.

While NRAR does not have a reliable approach to publishing data about performance measures, it does publish some information about prosecution outcomes and enforceable undertakings. It also publishes substantial information about regulatory campaigns, including the purpose of each campaign and both qualitative and quantitative outcomes from campaigns.

The Audit Office routinely tests the completeness and accuracy of data provided by auditees. This testing is intended to offer assurance that the data is fit for the purpose of analysis and can be relied upon to draw accurate audit conclusions. However, NRAR was unable to provide sufficient information to the audit to conduct this testing.

NRAR has developed its operational technology and data capabilities to identify compliance breaches and to inform strategic decision making

Since the establishment of its spatial and intelligence functions in 2022, NRAR has continued to develop its capabilities for identifying potential compliance breaches. Techniques include using analysis of spatial data showing water movement and flows, data on water take, new technology, such as drones and satellites to collect information, as well as intelligence gathered by NRAR officers in the field. NRAR’s data suggests that reports of suspicious activity generated through internal intelligence and submitted for triage have outnumbered suspicious activity reports from the public since 2022.

This information is used to inform NRAR’s activities in responding to and investigating individual matters. Increasingly it is used to identify strategic risks and trends for the development of broader regulatory priorities.

The role of the intelligence function has expanded and now contributes to activities and decisions across all branches of NRAR. For example, it is used to:

• identify potential non-compliance matters for referral to the investigations team through spatial and data analysis
• maintain and circulate a list of regulatory risks that can be used by all branches, including Education and Engagement, Outreach, and Regulatory Initiatives
• develop projects for the regulatory initiatives team to implement
• develop projects for the outreach team to fill identified data gaps through manual validation at site visits.

NRAR’s capabilities and application of intelligence and spatial data are well recognised both internally and externally. Staff across many branches of NRAR reported significant reliance on the output of data and intelligence analyses to enable delivery of core business as usual activities. This reliance could be expected to increase as intelligence plays an increasing role across NRAR’s activities.

NRAR’s operational technology priorities are guided by an Operational Technology Strategy and a 2024 Operational Technology Resource Uplift Project. In contrast, NRAR’s priorities for the use of its intelligence functions and capabilities have not had a similar level of strategic planning. NRAR has advised that it intends to develop a strategy for the use of intelligence data, including to guide the prioritisation of resources to meet service demand across the organisation.

In 2023–24, NRAR commissioned a new case management system, but its full benefits are yet to be realised

NRAR’s 2018 establishment plan included key activities to enhance existing IT systems for water compliance and enforcement, and to build new ones for future capability. These activities were planned to be delivered between January 2018 and June 2020. NRAR developed a business case for this work in 2022 and started delivery in 2023–24.

In December 2023, NRAR commissioned a new case management system to replace its legacy system. This was funded through an extreme budget risk proposal submitted to NSW Treasury. Because the funds were only available for expenditure in 2023–24, the new system needed to be implemented quickly. To date, the total cost of this system is around $5 million, including around $2 million from NSW Treasury and around $3 million from NRAR’s existing operating budget. This is 22% higher than the original anticipated cost of $4 million when the business case was developed in 2022.

The system has been implemented in stages, starting with NRAR investigations staff in August 2024, and the rest of the organisation in February 2025. NRAR delivered a clear plan for migrating and archiving relevant legacy data, and the legacy system was decommissioned in June 2025. Key anticipated benefits of the new system include business continuity, efficiency gains from improved data handling practices, improved effectiveness of data entry through automation and improved chain of custody for data management. Some benefits have already been delivered, including a wider uptake across business units.

Given the early stage of post-implementation, it is not yet clear whether the new system will deliver all the intended benefits. For example, the new system aims to improve data management practices by making fields mandatory and introducing validation of fields to reduce the use of free text. However, these requirements are not yet operational. NRAR advised that work is ongoing to ensure the system is fully fit for purpose. In March 2026, NRAR endorsed a project to deliver this work as part of a broader initiative to improve NRAR’s performance reporting capabilities (described above). NRAR aims to deliver this project by June 2027 at an estimated additional cost of around $2.3 million.

New information management systems commonly require an adjustment period for staff, and some challenges are to be expected. One issue raised by staff was their inability to review other cases during an investigation to understand actions and decisions on past and precedent matters. This functionality would be important to support consistent approaches to decision making between staff.

Well-designed regulatory policies, guidelines and related materials help to ensure that regulators make decisions in a consistent and predictable manner that aligns with the law being enforced. By effectively communicating its regulatory policies, a regulator can:

• promote transparency about how it performs its role
• foster confidence it will make appropriate regulatory decisions
• help regulated entities and other stakeholders understand the factors that are taken into account in regulatory decision making.

NRAR has a comprehensive framework of compliance and enforcement policies to support its regulatory decision making and activities

The Natural Resources Access Regulator’s (NRAR) suite of regulatory policies was developed and endorsed by the NRAR Board shortly after the regulator’s establishment, as key projects under the NRAR 2018 Establishment Plan. NRAR has been proactive in reviewing its policies and procedures, including its approach to prosecution and drawing on its regulatory experience to inform regulatory reform through the Department of Climate Change, Energy, the Environment and Water (DCCEEW), as the responsible policy department. In 2025, in anticipation of new enforcement powers under the (now enacted) Water Management Legislation Amendment (Stronger Enforcement and Penalties) Bill 2025, NRAR developed a revised Regulatory Policy.

The principal document is NRAR’s Regulatory Policy 2021 (revised in 2025), which sets out the regulator’s high-level approach to delivering its regulatory functions. The policy informs NRAR’s mix of enforcement and education activities, and its approach to reactive compliance (in response to complaints) and proactive compliance (including intelligence-driven campaigns and community outreach). The Regulatory Policy was developed to satisfy the NSW Government’s 2014 Quality Regulatory Services Initiative, which established the key expectation for NSW regulators that they promote a risk-based approach to compliance and enforcement, as well as requiring a greater focus on regulatory outcomes.

NRAR’s 2021 regulatory policy included 9 regulatory principles that were intended to guide how it performs its functions, exercises its powers and engages with the NSW community. This policy was revised in 2025, but the regulatory principles were retained. These principles are:

• committing to regulatory best practice
• taking a risk-based and strategic approach to regulation and decision making
• taking an outcomes-focused approach to regulation
• accepting accountability
• providing transparency
• acting in a timely way
• balancing the need for consistency with the need for flexibility
• demonstrating proportionality and exercising discretion in regulatory decision making
• acting within the law.

NRAR’s regulatory policy is generally consistent with a sample drawn from other regulators, except that it omits a principle on collaboration with stakeholders

We compared NRAR’s 9 regulatory principles against a sample of regulatory policies published by 18 other regulators in Australia, including 11 that are responsible for environmental or natural resources regulation. The principles adopted by NRAR are generally consistent with those that were benchmarked. The primary difference is that NRAR’s principles do not explicitly mention the role of effective stakeholder engagement and collaboration in the delivery of its regulatory functions.

How closely NRAR’s policies align with other regulators is a matter for the agency and there may be reasons why collaboration with stakeholders is not an explicit regulatory principle. The audit notes that NRAR maintains a publicly available stakeholder engagement strategy that was developed in 2021 and which is required to be reviewed at ‘periodic intervals’.

NRAR does not have clear guidelines for when it conducts targeted engagement with stakeholders

Engagement with stakeholders has been a vexed issue in water regulation in NSW. The Matthews investigation report highlighted the reputational and other risks that emerged due to the previous regulator and policy maker being seen to provide privileged access to information to certain groups, thereby giving them an advantage over other types of water users. This matter was dealt with extensively by the 2020 Independent Commission Against Corruption investigation into matters raised by the Matthews investigation. This report found that there had been a ‘… lack of transparency, balance and fairness’ in how the previous regulator had engaged with stakeholders.

This audit notes that in 2025, NRAR briefed or consulted with a targeted group of stakeholders in developing its guidelines to accompany the introduction of new regulatory powers following the enactment of the Water Management Legislation Amendment (Stronger Enforcement and Penalties) Act 2025. NRAR’s engagement was limited to those stakeholders most likely to be directly affected by the legislative amendment and in turn by the guidelines. The audit does not have evidence that this targeted approach to consultation was inappropriate in these circumstances. Moreover, it is unlikely to be either efficient or necessary for a regulator to conduct broad-based public consultation about every regulatory policy or operational consideration. This approach is consistent with the NSW Government’s Guide to Better Regulation, which states that an approach to consultation should be commensurate with the size of the problem being addressed and the significance of its impacts.

However, given the sensitivity of this issue in recent history, it would seem prudent for NRAR to address, at a minimum, the reputational risk from how such targeted consultations or engagements could be perceived. This includes being transparent in advance about the types of circumstances under which it may choose to conduct public versus targeted consultation. For example, the Natural Resources Commission publishes a policy on public consultation that sets out when broad-based versus targeted consultation will occur, as well as who may approve the latter.

NRAR communicates its approach to regulation in a consistent manner, with messaging that both encourages voluntary compliance and cautions against non-compliance

NRAR has publicly communicated a regulatory position that identifies itself as a risk-based regulator. It has explained the factors it considers in making enforcement decisions and has also communicated a preference to, wherever possible, assist water users to achieve voluntary compliance through education and awareness activities. It has also communicated clearly that it is willing to take enforcement action where warranted, including where a breach is serious or where aggravating factors apply, such as where a breach is associated with a poor compliance history.

NRAR’s stated preference to support voluntary compliance highlights the importance of clearly defined accountabilities for education and engagement (discussed in section 4.2). Furthermore, some stakeholders suggested to the audit that NRAR’s public communications were not always consistent with its stated regulatory posture, in that its media engagements could be excessively punitive or adversarial toward water users in specific regions. It was suggested that this approach, sometimes characterised as ‘name and shame’, could undermine community trust and the social licence of some water users to take water.

The audit reviewed 111 news announcements posted to NRAR’s website between November 2021 and January 2026. It found that NRAR’s media releases focused on:

• NRAR’s performance and priorities
• outcomes of enforcement actions, particularly publicly available court judgements for prosecutions of serious offences
• material promoting awareness of water law, including NRAR’s role as regulator
• the terms of enforceable undertakings (EUs) that NRAR had approved
• upcoming compliance campaigns in specific regions.

The audit did not find that NRAR has routinely used media releases to draw attention to poor compliance outcomes in specific water regions. Even when announcing forthcoming campaigns, which reflected around 20% of all NRAR media announcements, the content of the announcements frequently included messaging that the campaign aimed to help water users achieve voluntary compliance.

NRAR has demonstrated a commitment to continuous improvement as a regulator

Since 2019, NRAR has conducted 5 assessments of its regulatory maturity using the Modern Regulator Improvement Tool (MRIT), a self-assessment tool that allows a regulator to identify its strengths and areas for improvement against 12 attributes of a modern regulator. The MRIT was developed by the Australasian Environmental Law Enforcement and Regulators neTwork (AELERT) for use across Australasia. In 2024, NRAR self-assessed its regulatory philosophy and approach as ‘well established’. This assessment was validated by an external reviewer.

The 2024 assessment identified areas for future focus, including continuing to ensure alignment of NRAR’s regulatory philosophy with its activities and decisions. Other target areas for improvement included strengthening NRAR’s processes for core planning (including regulatory priorities and corporate planning), improving its data collection for outcomes-based measurement, strengthening governance and oversight, and refining its resource allocation.

In addition to conducting assessments using the MRIT, NRAR has undertaken other review activities aimed at improving how it delivers its functions. These include the 2021 review of its approach to prosecutions and a 2022 review of its triage process.

NRAR is still developing robust processes to support consistency in decision making and to quality assure compliance and enforcement decisions

Consistency and predictability in regulatory decision making is fundamental to good regulatory practice. Matters of similar materiality and causing similar harm should lead to consistent regulatory consequences, regardless of who the individual decision maker is or when a decision is made. This is recognised in NRAR’s regulatory policy, which sets out the following 4 factors that are considered when determining what action will be taken in response to non-compliance:

• level of harm
• level of public interest
• the offender’s level of culpability
• the offender’s attitude to compliance.

The policy explains that the ‘… greater the impact on any or all factors, the more significant the response and enforcement action will be’.

Consistency in regulatory outcomes means that similar cases lead to similar enforcement actions. In applying NRAR’s regulatory policy, where matters involve similar levels of harm and public interest, and where the offenders show similar levels of culpability and similar attitudes to compliance, decision makers should reach consistent outcomes, even if they are not identical. Assessing consistency requires reliable data on how decisions were made.

NRAR’s investigations are performed by teams based in 3 regions: the North West (essentially, the Northern Basin), the South West (Southern Basin) and the North East (effectively the whole NSW coast). There is little routine interaction or engagement between these teams, in part because of the large geographic distances between them. The NSW Ombudsman reported after its 2018 investigation into water compliance and enforcement that NRAR had indicated it would hold workshops on lessons learned from investigations, but the audit did not see evidence that this is a usual practice.

The Ombudsman also made 2 relevant formal recommendations to NRAR:

• that it should implement a peer review process for continuous improvement so that learning from cases, such as the case studies discussed in the Ombudsman’s report, can be used to educate and train staff
• that NRAR introduces quality assurance processes to ensure that there is an appropriate level of consistency in decision making among different areas across the state.

As outlined above, NRAR policies require that the same factors are applied to determine the appropriate response to non-compliance, including the seriousness and impact of the non-compliance, the water user’s culpability and attitude to compliance, and the public interest. However, NRAR has not established robust processes to support staff in making consistent decisions, or to ensure that these factors are interpreted consistently by staff making enforcement decisions. This creates the risk that comparable matters will be assessed differently either geographically or over time. While more serious matters that may proceed to prosecution are afforded the additional scrutiny of being referred to a single Enforcement Committee, there is limited assurance that teams are making consistent decisions for investigations of similar consequence below this threshold.

Case reviews by senior investigators and managers within each team are the primary method by which NRAR reviews and assures decisions. Consequently, a great deal depends on a relatively small number of managers, working in isolation, who endorse (or not) the recommendations of their investigators.

In 2025, NRAR started developing an enforcement matrix to help provide a ‘structured decision-support tool that links investigative findings and legal obligations to proportionate, transparent, and justifiable enforcement actions’.

In 2022, NRAR developed a new process for the triage of suspicious activity reports when they are first received. However, this process also lacks quality assurance of decisions, particularly those assessed at triage as not requiring further action.

Enforcement outcomes data suggests that investigations are resolved consistently across regions

While there was some variation between the 3 different regions of NSW, the overall mix of enforcement actions was consistent across 7 years (2018–19 to 2024–25) of NRAR data. In all regions, the most common enforcement action was an advisory letter, with official cautions used relatively infrequently.

While the overall pattern of tools was consistent, the data did reveal variations in the application of specific regulatory tools between regions. For example:

• penalty notices were less likely to be issued for matters in the Northern Basin (10% of all enforcement actions were penalties), compared to the Southern Basin (18%) or the Coast (17%)
• official cautions (an alternative to imposing a fine) were around twice as likely to be issued for matters investigated in the Southern Basin (10% of all enforcement actions), than the Northern Basin (6%) or the Coast (4%).

This suggests that while there is variation across regions, the differences do not appear to be material. The significant caveat for using this data is that it has not been standardised for the different mix of matters that may occur in each region. For example, the type of matters that occur in the unregulated river systems of the Northern Basin may be qualitatively different to those in the other 2 regions and may relate to different elements of water law, which in turn may invoke different penalties. The data may also be affected by decisions made by NRAR to run proactive enforcement campaigns in specific parts of the state, which again may affect the choice of enforcement outcomes by focusing on specific types of non-compliance. Finally, the staged roll-out of some reforms, particularly non-urban water metering, may have impacted the incidence of non-compliance between regions.

This audit also explored whether the reporting of all offences at the aggregate level created the risk of potentially masking material variations in how specific types of offences are resolved. This was done by focusing on specific provisions relating to unlawful water take. Of all breaches determined by NRAR up to August 2025, around 1,250 related to unlawful water take. For these types of offences, penalty notices and official cautions – which are issued as alternatives to penalties in prescribed circumstances – were much more likely to be the regulatory outcome in the Southern Basin (54% combined), compared to the Northern Basin (33%) or the Coast (28%).

Further ongoing analysis by NRAR is required to monitor potential variation in regulatory outcomes across regions and over time, including consideration of any contextual factors that may explain apparent differences in outcomes. This would include reviewing whether the prescribed decision-making factors, when similarly assessed, result in generally consistent enforcement actions. This analysis would depend on high-quality investigation decision-making reports that clearly set out how decision-making factors have been assessed across investigations.

NRAR’s data has been inadequate for analysis and reporting on the timeliness of its investigation process

The NRAR regulatory policy says that:

The Minister also expects that NRAR’s enforcement actions are performed in a timely way.

Data was not available, was not comparable over time or was of insufficient quality to make findings about the timeliness of NRAR investigations. This includes:

• the time taken to triage a suspicious activity report when first received by NRAR
• the time taken for an endorsed decision to be made
• the time taken to notify the regulated party about the outcome of their matter.

These quality issues reflect poor record keeping and ineffective controls on how data is entered. As discussed in section 6.3, NRAR has started a project to improve its performance measuring and reporting. In March 2026, NRAR advised that it had updated its internal performance indicator dashboards to report on triage time for externally reported matters, as well as the time taken to complete investigations following triage. It has not addressed the time taken to inform affected parties of the outcome of an investigation. The NSW Ombudsman has previously highlighted the importance of agencies communicating their decisions to affected parties in a timely way.

In addition, the introduction of a new data management system in 2025 was expected to impose more consistent data entry rules, though this has not yet been implemented.

NRAR recognises the importance of proportionality in regulatory decisions, but further clarification is needed about how proportionality is achieved

One of the regulatory principles that is set out in NRAR’s Regulatory Policy is:

Some stakeholders submitted a view to this audit that NRAR does not always exercise proportionality in its enforcement decision making.

The audit assessed the processes and guidance that are in place to support proportionality in decision making, based on the advice given in NRAR’s investigations manual and the use of NRAR’s investigation decision-making reporting template. The current NRAR investigations manual was released in 2023 and is the second version of the original document from 2019. The manual outlines the procedures to be followed by NRAR investigators when investigating alleged breaches of water laws. The document includes both requirements that must be followed and guidance to support investigations.

The manual explains the concept of proportionality with reference to the NRAR Regulatory Policy and the following 4 factors that influence compliance decisions: the degree of harm, public interest, culpability and attitude to compliance. NRAR’s investigation decision-making template also prescribes a larger number of around 12 decision-making factors that may be taken into account when determining the outcome of an investigation, with additional factors taken into account for potential prosecutions.

As discussed below, the audit assessed how proportionality is applied to 2 forms of enforcement action at different ends of the continuum of seriousness. These enforcement actions were advisory letters for less serious matters and formal directions for matters that were more serious.

The NRAR investigations manual does not explain when follow-up action is proportionate after no offence has occurred

Advisory letters are the most common outcome of NRAR investigations. In general, an advisory letter is a light touch enforcement action aimed at encouraging voluntary compliance through education and awareness, including in circumstances where no breach has been found.

The investigations manual sets out prerequisites for issuing an advisory letter. These are either that no breach of water laws has occurred, or any breach is minor and there is no associated harm or impact.

According to the manual, an advisory letter may be appropriate when:

• there is a suspected breach but there is insufficient available evidence to prove an offence
• based on the findings of the investigation, there is a potential risk of further offences being committed
• no offence has occurred (i.e. the activity was found to be lawful) but a record that the individual has been notified of the relevant legislative requirements is required
• it is considered beneficial to provide advice to educate the person.

From a sample of completed investigation reports, the audit found that the decision to issue an advisory letter can be accompanied by a decision to schedule future follow-up audit activity, usually within a period of a few months. The investigation manual does not provide guidance on the circumstances that may justify a follow-up audit. That is, given the very low non-compliance threshold that can trigger an advisory letter, it is unclear in what circumstances a follow-up audit might be perceived as being unreasonably intrusive and disproportionate. This ambiguity could lead to the risk that NRAR is perceived as exercising a regulatory tool against someone who has already been found to have not breached water law.

The guidance for issuing a mandatory direction acknowledges its potential regulatory burden, but this is not explicitly considered when this enforcement action is decided

NRAR has the power to issue mandatory directions to individuals for a range of matters, including to:

• stop an unlawful activity or to carry it out in a specified manner
• remove or modify unlawful water management works
• install metering equipment
• protect a water source or waterfront land
• carry out other actions with the aim of appropriately managing water resources.

NRAR’s investigation manual notes:

Given the potential regulatory burden on water users, NRAR’s operational policy has established the general expectation that directions are only issued if the activity subject of the direction has resulted in, among other things, more than minimal harm to the environment or to public health and safety. The investigation manual notes that ‘minimal harm’ is not defined in any legislative source. The manual itself does not provide advice on interpretation other than referencing other internal NRAR resources that may exist from time to time, or by seeking advice from ‘NRAR staff with suitable knowledge’.

From 2023–25, the audit reviewed a sample of 60 completed investigation decision-making reports (IDMRs) where the enforcement action included issuing a mandatory direction. This review focused on whether these IDMRs collectively demonstrated alignment with the investigation manual and operational policy. The review did not assess the merits of individual investigation decisions.

There was little evidence in the IDMRs that the regulatory burden of issuing a direction was explicitly considered. In addition, neither the investigation manual nor the report template invite this assessment. For example, the audit did not find that any IDMRs included reference to the regulatory burden on the water user – including the time or cost – of imposing a direction. While this may have been implicitly considered by decision makers, it was not documented as part of the process.

A sample of investigation decision-making reports found incomplete or inconsistent application of decision-making factors

In the IDMRs, the audit team assessed how investigators addressed a range of discretionary factors that are considered in NRAR enforcement decisions. These discretionary factors are built into the IDMR template and include:

• the seriousness of the breach and its potential impact
• any mitigating or aggravating factors
• the suspect’s culpability, attitude to compliance and previous compliance history.

The assessment revealed that investigators did not often record the factors they had considered in making an enforcement decision or how those factors had formed the rationale for their recommended action. For example, of the 60 cases where directions were issued:

• only 13 were recorded as being assessed by the investigator as highly serious, with only 1 of those also recorded as being assessed as high impact
• many did not have assessments recorded against multiple decision-making factors, including 8 that had no assessment of seriousness, 12 with no assessment of impact and 10 with no assessment of culpability.

The IDMRs also suggested different interpretations of how the factors were interpreted.

Similarly, the audit examined a sample of completed IDMRs where official cautions had been issued. The investigations manual explains that an ‘… official caution is a form of warning letter that applies when a penalty notice would normally have been issued for an alleged offence’. Importantly, a prerequisite for issuing an official caution is that one of the prescribed circumstances from the Attorney-General’s Caution Guidelines under the Fines Act 1996 applies. The manual specifies that the investigator:

Of the 25 completed IDMRs sampled from the last 3 full financial years where an official caution had been an outcome, most did not reference the Attorney-General’s guidelines either specifically or generally. Only 11 reports provided a reason that could be inferred as having been drawn from the guidelines, but only 2 of these specifically referenced the guidelines. The sample included 8 cases of local councils being issued official cautions, 5 of which did not include any justification for the use of an official caution.

NRAR has a sound framework for progressing prosecutions and has worked with DCCEEW to progress legislative amendments addressing issues identified from prosecution experience

Short of cancelling a water access licence, prosecutions are the most serious enforcement action available to NRAR. From 2018 to March 2026, NRAR started 48 prosecutions, leading to 130 convictions. Data on the number of unsuccessful prosecutions is not readily available, but in the first years of its establishment, NRAR published media statements when some prosecutions were unsuccessful.

NRAR’s approach to prosecutions is governed by its Prosecution Guidelines document, which is published on its website. These guidelines were first approved in February 2018 and were prepared under NRAR’s establishment plan as part of its policy architecture. Amendments to the guidelines were made most recently in January 2026.

Compared to good practice, the guidelines set out a high governance threshold for progressing a matter to prosecution, whereby a potential prosecution is subject to:

• review by NRAR’s Enforcement Committee
• review by the NRAR Board
• legal advice on whether there are reasonable prospects of prosecution.

These measures are designed to reduce the risk of unsuccessful prosecutions.

In 2021, at the Board’s request, the guidelines and NRAR’s general approach to prosecutions were internally reviewed. This included benchmarking the guidelines against good practice and assessing whether NRAR’s prosecution practice was aligned with its own guidelines. The review was seen as a quality assurance process supporting continuous improvement at a time when ‘… NRAR is moving from prosecuting legacy matters to managing and resourcing the full investigation and enforcement process itself’.

The review proposed a number of recommendations, endorsed by the NRAR Board, to drive continuous improvement in prosecution practice. This initial review was followed with:

• an implementation review in August 2021
• an effectiveness review in April 2022
• a final review and closure report in April 2023.

While it was beyond the scope of this audit to conduct a detailed review of NRAR’s prosecution practice, the review and follow-up process described above provides evidence of NRAR’s commitment to continuous improvement in this critical area.

In 2025, NRAR worked with DCCEEW to lead the development of amendments to the Water Management Act 2000 (Water Management Act) introduced through the Water Management Legislation Amendment (Stronger Enforcement and Penalties) Act 2025 (amendment Act). This amendment Act included a range of reforms relating to water management and regulation. Most significant of these was the introduction of civil penalties as an alternative to criminal prosecutions for breaches of water law.

This amendment was in response to a number of prosecutions where NRAR had been unable to satisfy the criminal standard of ‘beyond reasonable doubt’. The amendment makes it easier for NRAR to prosecute breaches as it is only required to meet the civil standard of ‘balance of probabilities’. The amendments also include much higher fines of up to $5 million for individuals and $10 million for companies, or 5 times the value of the water taken unlawfully.

The audit discussed earlier the approach taken by DCCEEW and NRAR to engaging stakeholders on these significant reforms. There was both strong support and opposition from different stakeholder groups, as well as the attestation provisions included in the amendment Act.

NRAR has governance for considering enforceable undertakings, though it has not consistently published copies of agreements or information about their progress

An alternative mechanism for potentially serious breaches is NRAR’s ability to enter into legally binding enforceable undertakings (EU) with alleged offenders. An EU is a more serious regulatory response than issuing a penalty notice and may be considered as an alternative to prosecution in appropriate circumstances. This includes where restorative justice is potentially more flexible and valuable than a financial penalty. Enforceable undertakings are also high-profile regulatory actions, comprising around 14% of all media announcements posted on NRAR’s website since 2021.

Enforceable undertakings are entered into voluntarily by the alleged offender. However, once agreed, they can be enforced through the courts.

Since December 2023, NRAR has developed and published Enforceable Undertaking Guidelines that set out the purpose for such agreements, factors that will be considered in deciding to accept an enforceable undertaking, and possible terms of enforceable undertakings. The guidelines set out a process whereby NRAR's Enforcement Committee reviews proposed EUs and provides advice to the Chief Regulatory Officer or delegated NRAR officer before any formal decision is made to accept or reject an EU. NRAR’s guidelines are consistent with a sample of equivalent documents published by a selection of 12 regulators reviewed by this audit. All existing 11 enforceable undertakings were approved before December 2023, so the guidelines had not yet been applied at the time of this audit.

Among other things, the guidelines state that enforceable undertakings are a matter of public record and details of all EUs that have been accepted will be published to NRAR’s public register.

Up until March 2026, NRAR had not published the full details of the 11 approved enforceable undertakings. While it has published media releases and short case studies, this information does not include details such as implementation timeframes or arrangements for monitoring and reporting whether the other party had complied with undertakings. We found that a majority of the sampled regulators published enforceable undertakings in their entirety. NRAR advised that it had historically published enforceable undertakings, though this website function had been disabled during a previous website update. Since late March 2026, NRAR has restored this reporting.

An essential part of ensuring that enforceable undertakings are credible and effective is their post-implementation monitoring. Enforceable undertakings are only a useful regulatory tool if the regulator ensures that their terms are met. NRAR described a process whereby follow-up actions to monitor enforceable undertaking were recorded as entries in its complaints management systems. In the absence of progress reports being available on the NRAR website, the audit sought evidence about the status of progress for each enforceable undertaking.

Five of the enforceable undertakings have been fully met. Progress in satisfying the undertakings made in the 11 agreements is summarised in Exhibit 11.

Source: Audit Office of NSW analysis of information provided by NRAR.

NRAR has conducted a reinspection project to assess recidivism

As discussed earlier, in making an investigation decision, NRAR may schedule a follow-up audit or a reinspection activity to confirm the future status of a matter. This includes verifying that a direction has been complied with or a commitment in a less serious matter has been met, such as where a water user commits to a credible short-term pathway to compliance.

In its 2018 investigation report, the NSW Ombudsman recommended that NRAR review its practice of closing cases and develop and implement a policy to ensure that cases are not closed when there are outstanding actions or necessary follow-up.

In 2024–25, NRAR conducted a Compliance Reinspection Project to systematically assess whether entities that had previously been subject to enforcement action had subsequently become compliant with applicable water laws. The project intended to evaluate recidivism rates among those previously subject to enforcement actions more serious than advice letters. Between March 2021 and March 2024, the project assessed 564 enforcement actions across 335 cases.

The project found relatively low rates of recidivism: only 5% of entities investigated were found to be non-compliant with an obligation. However, the project noted that this figure should be taken with caution, as a large proportion (48%) of entities in the target population were excluded from the project because they were under active management by other NRAR work teams.

The lessons learned from this project include that:

This audit also analysed the extent to which NRAR routinely follows up on audit and reinspection tasks as part of its business as usual. The audit extracted a sample of 25 investigation decision-making reports that included decisions that follow-up action was required. NRAR provided evidence that these actions had been followed up.

NRAR has established regulatory priorities that have been effectively communicated

NRAR’s Board has endorsed regulatory priorities annually since its establishment in 2018. Regulatory priorities play a fundamental role in driving NRAR’s compliance efforts and in setting a public tone for its areas of focus. NRAR has adopted a stance that explicitly elevates matters relating to regulatory priorities in its resourcing and decision making, in terms of triaging prospective matters and conducting investigations, as well as in the delivery of targeted projects.

NRAR publishes regulatory policies and priorities on its website and has used stakeholder and media channels to foster awareness of its approach among regulated entities. For example, during the implementation of metering reform, when it became apparent that water users were facing barriers to achieving compliance, NRAR was proactive in communicating its approach to enforcing compliance. During this period, the regulator adopted and communicated an approach to enforce compliance with the metering obligations, though it would also consider when water users had faced external barriers to compliance.

NRAR’s earlier regulatory priorities were based on tactical and operational insights, but in 2025, it adopted a new data-led process to identify its priorities

Since 2018, NRAR has had a risk-based approach to identifying its regulatory priorities. In 2021, NRAR introduced a new approach to defining these priorities, including identifying ‘annual priorities’ and ‘enduring priorities’. These priorities were developed through a more consultative approach driven by tactical and operational intelligence, but the decision-making process for selecting these priorities was not clearly documented. NRAR’s 2024 MRIT assessment found that this created the risk that NRAR resources could be deployed to a regulatory priority without understanding the problem. NRAR continued this approach to developing its priorities in subsequent years, with revised or new annual priorities selected each year between 2022 and 2024. NRAR’s enduring priorities have remained broadly unchanged since 2021 and are reflected in the 2024–25 Regulatory Priorities.

In 2024, NRAR conducted a self-assessment that identified the lack of an established decision-making process for selecting regulatory priorities. As a result, in early 2025, the NRAR Board approved a new approach to developing and identifying NRAR’s regulatory priorities for 2025–26. This approach included developing a regulatory risk register informed by data intelligence, and establishing prioritisation and selection criteria for regulatory priorities. The new approach also intends to allow more flexible timing depending on the complexity of the regulatory priority project.

NRAR’s success in meeting its regulatory priorities since 2018 has not been clearly reported. NRAR has published reports on its regulatory campaigns for 2023–25, but it has not consistently conducted evaluations or reported on all priority programs. For example, NRAR has had a regulatory priority to focus on compliance with metering reform requirements in every year since 2018. However, compliance with metering requirements remains low, with significant implementation barriers identified in a 2024 review that led to the policy requirements being substantially revised.

In 2021 and 2023, priorities relating to floodplain harvesting, and mining and extractive industries, were selected. In 2023, these priorities were removed due to challenges delivering the anticipated programs. The regulatory priority on water use in mining is discussed in Exhibit 12.

NRAR was slow to implement substantive actions to deliver against an enduring priority introduced in 2021 for Aboriginal cultural and spiritual water. This was until at least mid-2023, by which time an internal Aboriginal Support Network for NRAR staff had been established. A detailed project plan for work under this priority was not finalised until 2025, when it was endorsed by the NRAR Board in May of that year.

Source: Audit Office of NSW analysis of information provided by NRAR.

NRAR follows a structured approach to project management

NRAR ensures project governance through the Project Oversight Group (POG), a governance body for the approval and monitoring of its strategic projects. POG follows the internally developed Project Reporting Framework for its approval and monitoring process, which consists of distinct gateways to ensure projects are on track and meeting their objectives. The Audit Office reviewed a sample of significant projects and found that the framework had been adequately followed.