Reports
Local Government 2023
What this report is about
Results of the local government sector financial statement audits for the year ended 30 June 2023.
Findings
Unqualified audit opinions were issued for 85 councils, eight county councils and 12 joint organisations.
Qualified audit opinions were issued for 36 councils due to non-recognition of rural firefighting equipment vested under section 119(2) of the Rural Fires Act 1997.
The audits of seven councils, one county council and one joint organisation remain in progress at the date of this report due to significant accounting issues.
Fifty councils, county councils and joint organisations missed the statutory deadline of submitting their financial statements to the Office of Local Government, within the Department of Planning, Housing and Infrastructure, by 31 October.
Audit management letters included 1,131 findings with 40% being repeat findings and 91 findings being high-risk. Governance, asset management and information technology continue to represent 65% of the key areas for improvement.
Fifty councils do not have basic governance and internal controls to manage cyber security.
Recommendations
To improve quality and timeliness of financial reporting, councils should:
- adopt early financial reporting procedures, including asset valuations
- ensure integrity and completeness of asset source records
- perform procedures to confirm completeness, accuracy and condition of vested rural firefighting equipment.
To improve internal controls, councils should:
- track progress of implementing audit recommendations, and prioritise high-risk repeat issues
- continue to focus on cyber security governance and controls.
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State Finances 2023
What this report is about
Results of the audit of the Consolidated State Financial Statements of the New South Wales General Government Sector (GGS) and Total State Sector (TSS) for the year ended 30 June 2023.
Findings
The audit opinion on the 2022–23 Consolidated State Financial Statements was qualified in relation to two issues and included an emphasis of matter.
The first qualification matter is a continuation of the prior year limitation of scope on the audit relating to the Catholic Metropolitan Cemeteries Trust (CMCT), a controlled state entity, who continued to deny access to its management, books and records for the purposes of a financial audit. As a result, the Audit Office was unable to obtain sufficient appropriate audit evidence to support the assets, liabilities, income and expenses relating to CMCT recorded in the TSS and the equity investment recognised in the GGS relating to the net assets of CMCT.
The second qualification matter relates to the limitations on the accuracy and reliability of financial information relating to Statutory Land Managers (SLMs) and Common Trust entities (CTs) controlled by the State and were either exempted from requirements to prepare financial reports, or who were required to submit financial reports and have not done so. The Audit Office was unable to obtain sufficient appropriate audit evidence to determine the impact on the value of non-land assets and liabilities, income and expenses that should be recognised in the 2022–23 Consolidated State Financial Statements and which have not been recorded in the Consolidated State Financial Statements.
The independent audit opinion also includes an emphasis of matter drawing attention to key decisions made by the NSW Government regarding the future of the Transport Asset Holding Entity of New South Wales (TAHE).
Recommendations
The report includes recommendations for NSW Treasury to address several high-risk findings, including:
- ensuring accurate and reliable financial information is available to recognise the non-land balances of SLMs and CTs
- ensuring the CMCT, SLMs and CTs meet their statutory reporting obligations
- conducting a broader review of the financial reporting exemption framework
- continued monitoring of TAHE's control over its assets
- providing timely guidance to the sector relating to legislative or policy changes that impact financial reporting
- developing an accounting policy for the reimbursement of unsuccessful tender bid cost contributions.
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Internal controls and governance 2023
What this report is about
This report analyses the internal controls and governance of the 25 largest agencies in the NSW public sector, excluding state owned corporations and public financial corporations, for the year ended 30 June 2023.
Findings
Internal control trends
The proportion of control deficiencies identified as high-risk this year decreased to 4.5% (8.2% in 2022).
Repeat findings of control deficiencies represent 38% of all findings (48% in 2022).
Information technology
Over half of the agencies reviewed have deficiencies in managing user access to their information systems. Over a third of agencies had deficiencies in their controls over privileged user accounts within their information technology environments.
Cyber security
Over 80% of assessments for maturity levels against the NSW Cyber Security Policy have reported one or more self-assessed Mandatory Requirements are not practiced on a consistent and regular basis.
Essential Eight cyber controls have not improved, and they need to.
Governance framework
Deficiencies were noted in agencies' governance and risk management frameworks, namely: outdated risk management policies, lack of risk appetite statements, and internal audit functions not being externally evaluated.
Payroll and work health and safety (WHS)
Overtime expenses increased by 40% between 2020 and 2023, compared to salaries and wages which increased by 16% over the same period.
Five agencies have WHS policies that do not reflect current WHS regulations.
Recommendations
Several important recommendations were made for agencies to prioritise efforts to improve cyber security controls and cyber resilience measures.
It was also recommended that agencies periodically review their risk management maturity and implement action plans, and ensure their WHS policies and procedures reflect current legislation requirements including the need to manage psychosocial risks.
Internal controls are processes, policies and procedures that help agencies to:
- operate effectively and efficiently
- produce reliable financial reports
- comply with laws and regulations
- support ethical government.
This chapter outlines the overall trends for agency controls and governance issues, including the number of audit findings, the degree of risk those deficiencies pose to the agency, and a summary of the most common deficiencies found across agencies.
For consistency and comparability, we have adjusted the 2022 results to incorporate additional audit findings that were reported after the date of the Internal controls and governance 2022 report. Therefore, the 2022 figures will not necessarily align with those reported in our 2022 report.
Section highlights
- The Audit Office identified 12 high-risk findings, compared to 23 last year, with eight repeated from last year. Eleven of the high-risk findings related to financial controls while one related to other (governance) controls.
- The proportion of repeat deficiencies has decreased from 48% in 2021–22 to 38% in 2022–23.
This chapter outlines our audit observations, conclusions and recommendations arising from our review of agency controls to manage key financial systems.
Section highlights
- Over half of the agencies reviewed have deficiencies in managing user access.
- Thirty-six per cent of agencies had deficiencies in their controls over privileged accounts.
- Weaknesses were identified in how agencies manage service providers or other organisations which have access to their systems and data.
- Inadequate records were kept to demonstrate approvals for key system implementation milestones, including successful data migration testing and approval for go-live.
- Thirty-two per cent of agencies had not implemented segregations of duties over key payroll functions.
This chapter outlines our audit observations, conclusions and recommendations arising from our review of agencies' cyber security.
Section highlights
- Eighty-three per cent of maturity assessments have reported one or more Mandatory Requirements below level three, which is the level at which the requirement is self-assessed and considered to be practiced on a consistent and regular basis.
- Essential Eight maturity levels have remained unchanged or have declined, and may not be suitable for the level of risk agencies face.
- All 25 agencies reviewed have a cyber incident response plan and all but two newly created agencies tested their plan.
- Systems to detect cyber incidents across agencies could improve.
- There is a risk of under reporting cyber incidents at six agencies that kept insufficient records to support their cyber incident classifications.
- Overall, agencies need to increase their focus and prioritise efforts to ensure effective cyber security and resilience measures are in place.
Governance in the context of the NSW public service refers to the structures, processes, and mechanisms by which government departments and agencies are held to account when they make decisions and implement policies and programs in the service of the public interest. It also includes the principles and practices that guide how these agencies work together.
This chapter outlines our audit observations, conclusions and recommendations from our review of agencies' governance frameworks and practices, with consideration of NSW Treasury issued policies and best practices. It focuses on two key areas: governance arrangements and risk management.
Section highlights
- Whilst agencies have generally adopted governance and risk management frameworks that align with Treasury issued policies and best practices, we noted deficiencies, including:
- 20% of governing boards operated without a board charter
- 16% of agencies had risk management policies that were beyond their scheduled review date
- 16% of agencies did not have a risk appetite statement
- 28% of agency internal audit functions have not been externally evaluated in the last five years.
- Agencies should perform periodic assessments/reviews of their risk maturity and implement action plans where required.
This chapter outlines our audit observations, conclusions and recommendations arising from our review of agencies' payroll controls and management of work health and safety (WHS).
Section highlights
- Agencies should improve their controls around payroll masterfile maintenance, such as enforcing segregation of duties in system access levels and ensuring changes to data are reviewed by an independent officer.
- On average, overtime expenses represented three per cent of total salaries and wages in 2023 and have increased by 40.2% since 2020, compared to salaries and wages which increased by 16.3% over the same period.
- Five agencies have outdated WHS policies, which do not reflect changes to WHS regulations. Sixteen per cent of agencies have not included psychosocial hazards in their WHS procedures or risk assessment process.
Treasury 2023
What this report is about
Result of the Treasury portfolio of agencies’ financial statement audits for the year ended 30 June 2023.
The results of the audit of the NSW Government’s consolidated Total State Sector Accounts (TSSA), which are prepared by NSW Treasury, will be reported separately in our report on ‘State Finances 2023’.
The audit found
Unqualified audit opinions were issued on all general purpose financial statement audits.
Qualified audit opinions were issued on two of the 24 other engagements prepared by portfolio agencies. These related to payments made from Special Deposit Accounts that did not comply with the relevant legislation.
The number of monetary misstatements identified in our audits increased from 29 in 2021–22 to 39 in 2022–23.
The new parental leave policy impacted agencies across all portfolios. NSW Treasury should perform annual assessments to identify changes in legislation and regulation and provide timely guidance to the sector.
Transport for NSW and Sydney Metro have capitalised over $300 million of tender bid costs paid to unsuccessful tender bidders relating to significant infrastructure projects. Whilst NSW Treasury policy provides clarity on the reimbursement of unsuccessful bidders’ costs, clearer guidance on how to account for these costs in agencies’ financial statements is required.
The key audit issues were
Five high-risk issues were reported in 2022–23. Three were new findings on contract management, accounting treatments for workers compensation renewal premium adjustments and the management and oversight of a Special Deposit Account. Two repeat issues referred to the need to improve quality review processes over financial reporting and the timely approval of administration costs.
Portfolio agencies should prioritise and action recommendations to address internal control deficiencies.
This report provides Parliament and other users of the Treasury portfolio of agencies’ financial statements with the results of our audits, analysis, conclusions and recommendations in the following areas:
- financial reporting
- audit observations.
Financial reporting is an important element of good governance. Confidence and transparency in public sector decision-making are enhanced when financial reporting is accurate and timely.
This chapter outlines our audit observations related to the financial reporting of agencies in the Treasury portfolio of agencies (the portfolio) for 2023.
Section highlights
- Unqualified audit opinions were issued on all Treasury portfolio agencies’ 2022–23 financial statements.
- Two qualified audit opinions were issued on special purpose financial reports, relating to whether payments from the Electricity Retained Interest Corporation – Ausgrid (ERIC-A) Fund and the Electricity Retained Interest Corporation – Endeavour (ERIC-E) Fund, complied with the relevant legislation.
- The total number of errors (both corrected and uncorrected) in the financial statements increased from 29 in 2021–22 to 39 in 2022–23.
Reported corrected misstatements increased from 15 in 2021–22 to 25 with a gross value of $7.1 billion in 2022–23. Reported uncorrected misstatements increased from 13 in 2021–22 to 14 in 2022–23, with a gross value of $277.6 million in 2022–23.
Appropriate financial controls help ensure the efficient and effective use of resources and administration of agency policies. They are essential for quality and timely decision-making.
This chapter outlines our observations and insights from our financial statement audits of agencies in the Treasury portfolio.
Section highlights
- Five high-risk issues were reported in 2022–23. Three were new findings on contract management, accounting treatments for workers compensation renewal premium adjustments and the management and oversight of a Special Deposit Account.
- A further 35 moderate risk findings were reported in 2022–23, of which ten were repeat findings.
- Some agencies have again spent monies without an authorised delegation.
- The quality of information provided for audit purposes needs to improve.
Appendix one – Misstatements in financial statements submitted for audit
Appendix two – Early close procedures
Appendix three – Timeliness of financial reporting
Appendix four – Financial data
Appendix five – Acquittals and other opinions
© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.
Health 2023
What this report is about
Results of the Health portfolio of agencies' financial statement audits for the year ended 30 June 2023.
The audit found
Unmodified audit opinions were issued for all Health portfolio agencies' financial statements.
The number of monetary misstatements increased in 2022–23, driven by key accounting issues, including the first-time recognition of paid parental leave and plant and equipment fair value adjustments.
The key audit issues were
NSW Health identified errors regarding the recognition and calculation of long service leave entitlements for employees with ten or more years of service that had periods of part time service in the first ten years, resulting in prior period restatements.
Comprehensive revaluation of buildings at the Graythwaite Charitable Trust found errors in the previous year's valuation, resulting in prior period restatements.
New parental leave legislation increased employee liabilities for portfolio agencies. The Ministry of Health corrected the consolidated financial statements to record parental leave liabilities for all agencies within the Health portfolio.
A repeat high-risk issue relates to processing time records by administrators that have not been reviewed prior to running the pay cycle.
Thirty per cent of reported issues were repeat issues.
The audit recommended
Portfolio agencies should ensure any changes to employee entitlements are assessed for their potential financial statements impact under the relevant Australian Accounting Standards.
Portfolio agencies should address deficiencies that resulted in qualified reports on:
- the design and operation of shared service controls
- prudential non-compliance at residential aged care facilities.
This report provides Parliament and other users of the Health portfolio of agencies’ financial statements with the results of our audits, analysis, conclusions and recommendations in the following areas:
- financial reporting
- audit observations.
Financial reporting is an important element of good governance. Confidence and transparency in public sector decision-making are enhanced when financial reporting is accurate and timely.
This chapter outlines our audit observations related to the financial reporting of agencies in the Health portfolio of agencies (the portfolio) for 2023.
Section highlights
- Unqualified audit opinions were issued for all portfolio agencies required to prepare general purpose financial statements.
- The total number of errors (including corrected and uncorrected) in the financial statements increased compared to the prior year.
- The Ministry of Health retrospectively corrected an $18.9 million adjustment in its financial statements relating to long service leave entitlements for certain employees.
- Graythwaite Charitable Trust retrospectively corrected a $4.2 million adjustment in its financial statements related to prior period valuations.
Appropriate financial controls help ensure the efficient and effective use of resources and administration of agency policies. They are essential for quality and timely decision-making.
This chapter outlines observations and insights from our financial statement audits of agencies in the Health portfolio.
Section highlights
- The 2022–23 audits identified one high-risk and 57 moderate risk issues across the portfolio.
- The high-risk matter related to the forced-finalisation of time records.
- The total number of findings increased from 67 to 111 in 2022–23.
- Thirty per cent of the issues were repeat issues. Most repeat issues related to internal control deficiencies or non-compliance with key legislation and/or central agency policies.
- Forced-finalisation of time records, accounting for the new paid parental leave provision and user access review deficiencies were the most commonly reported issues.
- Qualified Assurance Practitioner's reports were issued on:
- the design and operation of controls as documented by HealthShare NSW
- the Ministry's Annual Prudential Compliance Statements in relation to residential aged care facilities.
Appendix one – Misstatements in financial statements submitted for audit
Appendix two – Early close procedures
Appendix three – Timeliness of financial reporting
Appendix four – Financial data
© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.
Transport 2023
What this report is about
Result of the Transport portfolio of agencies' financial statement audits for the year ended 30 June 2023.
The audit found
Unqualified audit opinions were issued for all Transport portfolio agencies.
An 'emphasis of matter' paragraph was included in the Transport Asset Holding Entity of New South Wales' (TAHE) independent auditor's report, which draws attention to management's disclosure regarding proposed changes to TAHE's operating model.
Government's decision to convert TAHE into a non-commercial Public Non-Financial Corporation may impact the future valuation and the control of TAHE's assets.
Transport for NSW's valuation of roads and bridges resulted in a net increase to its asset value by $15.7 billion.
Transport for NSW and Sydney Metro have capitalised over $300 million of tender bid costs paid to unsuccessful tender bidders relating to significant infrastructure projects. Whilst NSW Treasury policy provides clarity on the reimbursement of unsuccessful bidders' costs, clearer guidance on how to account for these costs in agency's financial statements is required.
The key audit issues were
The number of issues reported to management decreased from 53 in 2021–22 to 49 in 2022–23.
High-risk findings include:
- gaps in how Sydney Metro manages its contractors and how conflicts of interest are recorded and managed
- future financial reporting implications to account for government's proposed changes to TAHE's future operating model, including asset valuations and control assessments of assets and operations
- Parramatta Park Trust's tree assets' valuation methodology needs to be addressed.
Recommendations were made to address the identified deficiencies.
This report provides Parliament and other users of the Transport portfolio of agencies’ financial statements with the results of our audits, analysis, conclusions and recommendations in the following areas:
- financial reporting
- audit observations.
Financial reporting is an important element of good governance. Confidence and transparency in public sector decision making are enhanced when financial reporting is accurate and timely.
This chapter outlines our audit observations related to the financial reporting of agencies in the Transport portfolio of agencies (the portfolio) for 2023.
Section highlights
- Unqualified audit opinions were issued on all the portfolio agencies’ 30 June 2023 financial statements.
- An 'Emphasis of Matter' paragraph was included in the Transport Asset Holding Entity of New South Wales’ (TAHE) Independent Auditor's Report to draw attention to management's disclosure regarding the proposed changes to TAHE's future operating model.
- The total number of errors (including corrected and uncorrected) in the financial statements increased by 59% compared to the prior year.
- The recent government's decision to convert TAHE into a non-commercial Public Non-Financial Corporation may impact the future valuation and the control of TAHE’s assets.
- Transport for NSW needs to further improve its quality assurance processes over comprehensive valuations, in particular, ensuring key inputs used in the valuations are properly supported and verified.
- Transport for NSW and Sydney Metro capitalised over $300 million of bid costs paid to unsuccessful bidders. NSW Treasury’s Bid Cost Contributions Policy does not contemplate how these costs should be recognised in agency’s financial statements. Transport agencies should work with NSW Treasury to develop an accounting policy for the bid cost contributions to ensure consistent application across the sector.
Appropriate financial controls help ensure the efficient and effective use of resources and administration of agency policies. They are essential for quality and timely decision-making.
This chapter outlines our observations and insights from our financial statement audits of agencies in the Transport portfolio.
Section highlights
- The 2022–23 audits identified four high risks and 28 moderate risk issues across the portfolio. Thirty-nine per cent of issues were repeat findings.
- Four high risk findings include:
- TAHE’s asset valuations (new)
- TAHE’s control of assets and operations (new)
- Sydney Metro’s management of contractors and conflicts of interest (new)
- Parramatta Park Trust’s valuation of trees (repeat).
- The total number of findings decreased from 53 in 2021–22 to 49 in 2022–23. Many repeat findings related to control weaknesses over the asset valuation, payroll processes, conflicts of interest and information technology user access administration.
Appendix one – Misstatements in financial statements submitted for audit
Appendix two – Early close procedures
Appendix three – Timeliness of financial reporting
Appendix four – Financial data
© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.
Planning and Environment 2023
What this report is about
Results of the Planning and Environment portfolio financial statement audits for the year ended 30 June 2023.
The audit found
Unqualified audit opinions were issued for all completed Planning and Environment portfolio agencies. Seven audits are ongoing.
The Catholic Metropolitan Cemeteries Trust (CMCT) did not comply with its obligations under the Government Sector Finance Act 2018 (GSF Act) to prepare and submit financial statements for audit.
The Department of Planning and Environment (the department) has not yet provided their assessment of the financial reporting requirements for the 579 Category 2 Statutory Land Managers (SLMs) for 2022–23.
One-hundred-and-nineteen Commons Trusts are non-compliant with the GSF Act as they have not submitted their financial statements for audit.
We issued unqualified opinions on the Water Administration Ministerial Corporation's 2020–21, 2021–22 and 2022–23 financial statements.
The number of monetary misstatements identified in our audits decreased from 59 in 2021–22 to 51 in 2022–23, however the gross value of misstatements increased.
The key audit issues were
The former Resilience NSW and NSW Reconstruction Authority (the Authority) re-assessed the accounting implications arising from contractual agreements relating to temporary housing assets associated with the Northern Rivers Temporary Homes Program. This resulted in adjustments to recognise the associated assets and liabilities.
We continue to identify significant deficiencies in NSW Crown land information records.
The department has not been effective in addressing the differing practices for the financial reporting of rural firefighting equipment vested to councils under section 119 (2) of the Rural Fires Act 1997.
The number of findings across the portfolio reported to management increased from 132 in 2021–22 to 140 in 2022–23. Thirty per cent of issues were repeated from the prior year.
Seven high-risk issues were identified. These related to the findings outlined above, deficiencies in quality reviews of asset valuations, internal control processes and IT general controls.
The audit recommended
Recommendations were made to the department and portfolio agencies to address these deficiencies.
This report provides Parliament and other users of the Planning and Environment portfolio of agencies’ financial statements with the results of our audits, analysis, conclusions and recommendations in the following areas:
-
financial reporting
- audit observations.
Financial reporting is an important element of good governance. Confidence and transparency in public sector decision-making are enhanced when financial reporting is accurate and timely.
This chapter outlines our audit observations related to the financial reporting of agencies in the Planning and Environment portfolio of agencies (the portfolio) for 2023.
Section highlights
-
Unqualified audit opinions were issued on all completed 30 June 2023 financial statements audits of portfolio agencies. Seven audits are ongoing.
-
We have been unable to commence audits of the Catholic Metropolitan Cemeteries Trust (CMCT). NSW Treasury's position remains that the Catholic CMCT is a controlled entity of the State for financial reporting purposes. This means CMCT is a Government Sector Finance (GSF) agency and is obliged under Section 7.6 of the Government Sector Finance Act 2018 (GSF Act) to prepare financial statements and submit them to the Auditor-General for audit. To date, CMCT has not met its statutory obligations under the GSF Act.
-
The Department of Planning and Environment has not yet provided their assessment against the reporting exemption requirements in the Government Sector Finance Regulation 2018 (GSF Regulation) for the estimated 579 Category 2 Statutory Land Managers (SLMs) or 119 Commons Trusts for 2022–23 and no Category 2 SLM or Commons Trust has submitted its 2022–23
financial statements for audit. Consequently, the lack of compliance with reporting requirements by these 698 agencies presents a challenge to obtaining reliable financial data for these agencies for the purposes of consolidation to the Total State Sector Accounts.
-
The audits of the Water Administration Ministerial Corporation's (WAMC) financial statements for the years ended 30 June 2021 and 30 June 2022 were completed in June 2023 and unqualified audit opinions issued. The 30 June 2023 audit was completed and an unqualified audit opinion was issued on 12 October 2023.
-
The number of reported corrected misstatements decreased from 46 in 2021–22 to 36, however the gross value of misstatements increased from $73 million in 2021–22 to $491.8 million in 2022–23.
-
Portfolio agencies met the statutory deadline for submitting their 2022–23 early close financial statements and other mandatory procedures.
-
A change to the NSW paid parental leave scheme, effective October 2023, created a new legal obligation that needed to be recognised by impacted government agencies. Impact to the agencies' financial statements were not material.
Appropriate financial controls help ensure the efficient and effective use of resources and administration of agency policies. They are essential for quality and timely decision-making.
This chapter outlines our observations and insights from our financial statement audits of agencies in the portfolio.
Section highlights
-
The number of findings across the portfolio reported to management increased from 132 in 2021–22 to 140 in 2022–23 and 30% were repeat issues (34% in 2021–22).
-
The 2022–23 audits identified seven high-risk and 76 moderate risk issues across the portfolio. Four of the high-risk issues were repeat issues, one was a repeat issue with the risk rating reassessed to high-risk in the current year and two were new findings in 2022–23.
-
The former Resilience NSW and NSW Reconstruction Authority had previously assessed that they did not control the temporary housing assets associated with the administration of the Northern Rivers Temporary Homes Program, under relevant accounting standards. A re-assessment of the agreements was made subsequent to the submission of the Authority’s 2022–23 financial statements for audit, which determined that the Authority was the appropriate NSW Government agency to recognise these assets and associated liabilities not previously recognised by the Authority or the former Resilience NSW.
-
There continues to be significant deficiencies in Crown land records. The department should continue to implement their data strategy and action plan to ensure the Crown land database is complete and accurate.
-
Since 2017, the Audit Office has recommended that the department, through OLG should address the differing practices for the financial reporting of rural firefighting equipment vested to councils under section 119 (2) of the Rural Fires Act 1997. The department has not been effective in resolving this issue. In 2023, twenty-six of 108 completed audits of councils received qualified audit opinions on their 2023 financial statements (43 of 146 completed audits in 2022). Six councils had their qualifications for not recognising vested rural firefighting equipment removed in 2022–23.
Appendix one – Misstatements in financial statements submitted for audit
Appendix two – Early close procedures
Appendix three – Timeliness of financial reporting
Appendix four – Financial data
© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.
Enterprise, Investment and Trade 2023
What this report is about
Results of the Enterprise, Investment and Trade portfolio of financial statement audits for the year ended 30 June 2023.
What we found
Unqualified audit opinions were issued for all completed Enterprise, Investment and Trade portfolio agencies.
An 'other matter' paragraph was included in the Jobs for NSW Fund's 30 June 2022 independent auditor's report to reflect the non-compliance with the Jobs for NSW Act 2015 (the Act). The Act requires the board to consist of seven members that include the Secretary of the Treasury, the Secretary of the Premier's Department, and five ministerial appointments. The board has consisted of two secretaries since 24 May 2019 when the independent members resigned. The remaining five members have not been appointed by the ministers as required by section 5(2) of the Act.
Financial statements were not prepared for the Responsible Gambling Fund, a special deposit account. Financial statements should be prepared unless NSW Treasury releases a Treasurer's Direction under section 7.8 of the GSF Act that will exempt the SDA from financial reporting requirements.
What the key issues were
The number of issues reported to management decreased from 65 in 2021–22 to 44 in 2022–23. Forty-six per cent of issues were repeated from the prior year.
Two high-risk issues were identified across the portfolio. One was a repeat issue where the Jobs for NSW Fund did not comply with legislation. The other high-risk issue was first identified in 2022–23 when the Department for Enterprise, Investment and Trade incorrectly recorded grants that did not meet the requirements of Australian Accounting Standards.
What we recommended
The Department should develop a robust model to ensure it only provides for grants that meet the eligibility criteria.
This report provides Parliament and other users of the Enterprise, Investment and Trade portfolio of agencies’ financial statements with the results of our audits, analysis, conclusions and recommendations in the following areas:
- financial reporting
- audit observations.
Financial reporting is an important element of good governance. Confidence and transparency in public sector decision-making are enhanced when financial reporting is accurate and timely.
This chapter outlines our audit observations related to the financial reporting of agencies in the Enterprise, Investment and Trade portfolio of agencies (the portfolio) for 2023.
Section highlights
- Unqualified audit opinions were issued on all completed portfolio agencies’ 2022–23 financial statements.
- An ‘other matter’ paragraph was included for the Jobs for NSW Fund’s 30 June 2022 financial report to reflect non-compliance with the Jobs for NSW Act 2015.
- The Act requires the board to consist of seven members that include the Secretary of the Treasury, the Secretary of the Department of Premier and Cabinet (or their nominees) and five ministerial appointments, one of whom is to be appointed as Chair of the board. The board has consisted of the two secretaries since 24 May 2019 when the independent members resigned. The remaining five members have not been appointed by the ministers as required by section 5(2) of the Act.
- An ‘emphasis of matter’ paragraph was included in the Jobs for NSW Fund’s 30 June 2022 financial report to draw attention to the financial report being prepared for the purpose of fulfilling the Jobs for NSW Fund’s financial reporting responsibilities as requested by the Treasurer’s delegate.
- The total number of errors (including corrected and uncorrected) in the financial statements increased by 12% compared to the prior year.
- The Responsible Gambling Fund (Special Deposit Account) did not prepare financial statements for the year ended 30 June 2023. Financial statements should be prepared unless NSW Treasury releases a Treasurer’s Direction under section 7.8 of the GSF Act that will exempt the Fund from financial reporting requirements.
Appropriate financial controls help ensure the efficient and effective use of resources and administration of agency policies. They are essential for quality and timely decision-making.
This chapter outlines our observations and insights from our financial statement audits of agencies in the Enterprise, Investment and Trade portfolio.
Section highlights
- The audits identified two high-risk and 20 moderate risk issues across the portfolio. Of these, one was a high-risk repeat issue and ten were moderate-risk repeat issues.
- One of the high-risk matters related to the Jobs for NSW Fund audit for the year ended 30 June 2022.
- The other high-risk matter related to overstating grants relating to the Jobs Plus Program as the criteria to pay the grant was not met at 30 June 2023.
- The total number of findings decreased from 65 to 44 with 2022–23 findings mainly related to deficiencies in accounting for property, plant and equipment and agencies having outdated policies.
Appendix one – Misstatements in financial statements submitted for audit
Appendix two – Early close procedures
Appendix three – Timeliness of financial reporting
Appendix four – Financial data
© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.
Stronger Communities 2023
What this report is about
Results of the Stronger Communities financial statement audits for the year ended 30 June 2023.
What we found
Unqualified audit opinions were issued on all completed Stronger Communities portfolio agencies.
Machinery of government changes during the year returned the sports-related agencies to the Stronger Communities portfolio.
Resilience NSW was abolished on 16 December 2022 with most of its functions transferred to the newly created NSW Reconstruction Authority.
The Trustee for the First Australian Mortgage Acceptance Corporation (FANMAC) is a prescribed entity under the Government Sector Finance Regulation 2018. The Trustee should have presented the FANMAC's financial statements for audit after it became a GSF agency on 1 July 2020.
The number of monetary misstatements identified in our audits decreased from 42 in 2021–22 to 29 in 2022–23.
What the key issues were
In 2022–23, agencies in the portfolio recorded net revaluation uplifts to land and buildings totalling $643 million.
Out of home care and permanency support grant expenditure has increased by 27% since 2019–20. An upcoming performance audit report will focus on the timeliness and quality of the child protection services provided by the department and its non-government service providers.
A high-risk matter was raised for the department over segregation of duties deficiencies in the Justice Link system.
Four high-risk matters reported in 2021–22 have been resolved.
Thirty-three agencies were onboarded into a new government-wide enterprise resource planning system. Additional agencies will be onboarded in three tranches from April 2024 through to October 2024.
What we recommended
Portfolio agencies should:
- ensure any changes to employee entitlements are assessed for their financial statement impact under the relevant Australian Accounting Standards
- prioritise and address internal control deficiencies identified in our management letters.
This report provides Parliament and other users of the Stronger Communities portfolio of agencies’ financial statements with the results of our audits, analysis, conclusions and recommendations in the following areas:
- financial reporting
- audit observations.
Financial reporting is an important element of good governance. Confidence and transparency in public sector decision-making are enhanced when financial reporting is accurate and timely.
This chapter outlines our audit observations related to the financial reporting of agencies in the Stronger Communities portfolio of agencies (the portfolio) for 2023.
Section highlights
- Unqualified audit opinions were issued on all completed 30 June 2023 financial statements audits of portfolio agencies, including the audit of the Crown Solicitor's Office's Trust Account for compliance with clause 14 of the Legal Profession Uniform Law Application Regulation 2015.
- The financial statement audits of the NSW Trustee and Guardian Common Funds (the common funds) – year ended 30 June 2022 were certified by management on 6 December 2022 and independent auditor's reports issued 21 December 2022. The 30 June 2023 financial statements audits of the common funds are ongoing.
- A variation to an agreement between the Commonwealth Attorney-General and the Legal Aid Commission of New South Wales for legal services to support the Royal Commission into Violence, Neglect and Exploitation of people with disability program extended the reporting period from 30 June 2023 to 29 September 2023 – the conclusion of the Royal Commission. The audit of the financial report acquitting expenditure under the agreement is expected to be completed before 28 February 2024.
- The audit of the Home Purchase Assistance Fund's (the fund) 30 June 2022 financial statements remains incomplete. Those charged with governance of the fund have not provided sufficient and appropriate evidence to support the carrying value of material investments reported in the fund's financial statements. The financial audit of the fund's 2023 financial statements remain incomplete as a result.
- The Trustee for the First Australian Mortgage Acceptance Corporation Master and Pooled Super Trusts had not prepared general purpose financial statements since 30 June 2021 when the financial reporting provisions of the Government Finance Sector Act 2018 were enacted and the Trustee was prescribed as a GSF agency under the regulations. The audits of these financial statements are ongoing.
- Reported corrected misstatements decreased from 28 in 2021–22 to six with a gross value of $8.8 million in 2022–23 ($277 million in 2021–22).
- Portfolio agencies met the statutory deadline for submitting their 2022–23 early close financial statements and other mandatory procedures.
- In 2022–23, portfolio agencies collectively recorded net revaluation uplifts to the carrying values of land and buildings totalling $643 million (2021–22: $993 million) initiated through a combination of comprehensive and desktop valuations.
- The Department of Communities and Justice (the department) had previously deferred performing a comprehensive revaluation of its land and building portfolio relating to the Corrective Services and Youth Justice functions. The deferral was due to the challenges in providing valuers sufficient access to the facilities due to the pandemic. The department is scheduled to perform a comprehensive revaluation of its full land and building portfolio in 2023–24.
Appropriate financial controls help ensure the efficient and effective use of resources and administration of agency policies. They are essential for quality and timely decision-making.
This chapter outlines our observations and insights from our financial statement audits of agencies in the Stronger Communities portfolio.
Section highlights
- The number of findings reported to management has decreased from 142 in 2021–22, to 71 in 2022–23, and 35% were repeat issues (36% in 2021–22). Repeat issues related to non-compliance with key legislation and/or agency policies, information technology and internal control deficiencies.
- A long-standing issue about segregation of duties over the JusticeLink system managed by the department has been elevated from moderate to high risk.
- Four out of six high-risk issues reported in the prior year have been addressed.
- Of the 15 newly identified moderate risk issues, 11 related to information technology and internal control deficiencies.
Appendix one – Misstatements in financial statements submitted for audit
Appendix two – Early close procedures
Appendix three – Timeliness of financial reporting
Appendix four – Financial data
© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.
Education 2023
What this report is about
Results of the Education portfolio of agencies’ financial statements audits for the year ended 30 June 2023.
What we found
Unqualified audit opinions were issued for all Education portfolio agencies.
An ‘other matter’ paragraph was included in the TAFE Commission’s independent auditor’s report as it did not have a delegation or sub-delegation from the Minister for Education and Early Learning to incur expenditure on grants from other portfolio agencies.
What the key issues were
Comprehensive valuations of buildings at the Department of Education (the department) and at the TAFE Commission found that certain assumptions applied in previous years needed to be updated, resulting in prior period restatements.
The department prepaid a building contractor for early works on a project and some of the prepayment is in legal dispute.
The department duplicated a claim for project funding from Restart NSW in 2021.
New parental leave legislation increased employee liabilities for portfolio agencies. The department and the NSW Education Standards Authority (the Authority) updated their financial statements to record parental leave liabilities.
A high risk matter was raised for the Authority to improve the quality and timeliness of information to support their financial statement close process.
What we recommended
Portfolio agencies should ensure any changes to employee entitlements are assessed for their potential financial statements impact under the relevant Australian Accounting Standards.
The department should:
- improve processes to ensure project claims are not duplicated
- assess the risks associated with providing prepayments to contractors.
This report provides Parliament and other users of the Education portfolio of agencies’ financial statements with the results of our audits, analysis, conclusions and recommendations in the following areas:
- financial reporting
- audit observations.
Financial reporting is an important element of good governance. Confidence and transparency in public sector decision-making are enhanced when financial reporting is accurate and timely.
This chapter outlines our audit observations related to the financial reporting of agencies in the Education portfolio (the portfolio) for 2023.
Section highlights
- Unqualified audit opinions were issued on all the portfolio agencies 2022–23 financial statements.
- An ‘other matter’ paragraph was included in the independent auditor’s report for the Technical and Further Education Commission (the TAFE Commission) as it did not have a delegation or sub-delegation from the Minister for Education and Early Learning to incur expenditure on grants from other portfolio agencies.
- Comprehensive valuations of buildings in the current year identified that certain assumptions applied in previous years were incorrect. The effects of these corrections are disclosed as prior period errors in the financial statements of the Department of Education (the department) and the TAFE Commission.
- The department made corrections to its financial statements to reflect increases to NSW teachers’ wages announced post balance date. This impacted amounts recorded as liabilities for a range of employee benefits and entitlements totalling $225.4 million, of which $147.9 million is accepted by the Crown and $77.5 million is borne by the department.
- A change to the NSW paid parental leave scheme, effective October 2022, created a new legal obligation that needed to be recognised by impacted government agencies. Of the three affected portfolio agencies, only the department and the NSW Education Standards Authority recognised a liability to account for this change. The aggregated unrecorded liabilities of other agencies in the portfolio totalled $2.4 million. The errors within the individual agencies’ financial statements were not material.
- The total number of errors (including corrected and uncorrected) in the financial statements increased compared to the prior year.
- The NSW Childcare and Economic Opportunity Fund should prepare financial statements unless NSW Treasury releases a Treasurer’s Direction under section 7.8 of the GSF Act that will exempt the SDA from financial reporting requirements.
Appropriate financial controls help ensure the efficient and effective use of resources and administration of agency policies. They are essential for quality and timely decision-making.
This chapter outlines our observations and insights from our financial statement audits of agencies in the Education portfolio.
Section highlights
- The 2022–23 audits identified one high risk and 20 moderate risk issues across the portfolio. Of these, one was a high risk repeat issue and four were moderate risk repeat issues.
- The total number of findings increased from 29 to 36, which mainly related to deficiencies in financial reporting, information technology, payroll and purchasing controls.
- The high risk matter relates to the lack of quality and timely information to support the financial statement close process at the NSW Education Standards Authority.
Appendix one – Early close procedures
© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.
