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.

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.

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.

What this report is about

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

What we found

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

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

What the key issues were

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

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

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

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

What we recommended

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

Portfolio agencies should:

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

This report provides Parliament and other users of the Regional NSW 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 Regional NSW portfolio of agencies (the portfolio) for 2023.

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 Regional NSW portfolio.

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.

What this report is about

Results of the Premier and Cabinet portfolio of agencies' financial statement audits for the year ended 30 June 2023.

What we found

Unqualified audit opinions were issued for all Premier and Cabinet portfolio agencies.

What the key issues were

The Administrative Arrangements Orders, effective 1 July 2023, changed the name of the Department of Premier and Cabinet to the Premier's Department and transferred parts of Department of Premier and Cabinet to The Cabinet Office.

The number of monetary misstatements identified in our audits decreased from 15 in 2021–22 to 12 in 2022–23.

The total number of management letter findings across the portfolio of agencies increased from ten in 2021–22 to 20 in 2022–23.

Thirty per cent of all issues were repeat issues. The most common repeat issues related to deficiencies in controls over financial reporting.

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
• prioritise and address internal control deficiencies identified in Audit Office management letters.

This report provides Parliament and other users of the Premier and Cabinet 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 Premier and Cabinet portfolio of agencies (the portfolio) for 2023.

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 Premier and Cabinet portfolio.

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.

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.

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.

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.

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.

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.

Appendix one – Early close procedures

Appendix two – 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.

What this report is about

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

What we found

Unmodified audit opinions were issued for all completed 30 June 2023 financial statements audits of Customer Service portfolio agencies. Two audits are ongoing.

What the key issues were

The total number of misstatements in the financial statements and findings reported to management decreased compared to the prior year.

For the first time since its establishment in 2015, GovConnect NSW received unqualified audit opinions for business process internal controls and information technology general controls managed by service providers.

The department controls Finance Co Trust (Fin Co), a special purpose trust created as part of its project to replace flammable cladding for eligible residential apartment buildings. Fin Co did not prepare financial statements which is a breach of the Government Sector Finance Act 2018 (GSF Act).

The department's land titling database was overstated by $42.5 million due to errors in the valuation model.

The New South Wales Government Telecommunications Authority corrected a prior period error of $10.2 million overstatement of property, plant and equipment.

A high-risk finding was reported to Service NSW regarding gaps in policies, systems and processes for administering and financial reporting on grant programs.

Recommendations were made to address these deficiencies.

This report provides Parliament and other users of the Customer Service 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 Customer Service portfolio of agencies (the portfolio) for 2023.

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 Customer Service portfolio.

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.

What the report is about

Effective radio communications are crucial to NSW's emergency services organisations.

The Critical Communications Enhancement Program (CCEP) aims to deliver an enhanced public safety radio network to serve the five emergency services organisations (ESOs), as well as a range of other users.

This report assesses whether the NSW Telco Authority is effectively managing the CCEP.

What we found

Where it has already been delivered (about 50% of the state), the enhanced network meets most of the requirements of ESOs.

The CCEP will provide additional infrastructure for public safety radio coverage in existing buildings agreed to with ESOs. However, radio coverage inside buildings constructed after the CCEP concludes will be at risk because building and fire regulations do not address the need for in-building public safety radio coverage.

Around 98% of radios connected to the network can be authenticated to protect against cloning, though only 42% are.

The NSW Telco Authority has not settled with ESOs on how call encryption will be used across the network. This creates the risk that radio interoperability between ESOs will not be maximised.

When completed, the public safety radio network will be the only mission critical radio network for ESOs. It is unclear whether governance for the ongoing running of the network will allow ESOs to participate in future network operational decisions.

The current estimated capital cost for the NSW Telco Authority to complete the CCEP is $1.293 billion. This is up from an estimated cost of $400 million in 2016. The estimated capital cost was not publicly disclosed until $1.325 billion was shown in the 2021–22 NSW Budget Papers.

We estimate that the full cost to government, including costs to the ESOs, of implementing the enhanced network is likely to exceed $2 billion.

We made recommendations about

• The governance of the enhanced Public Safety Network (PSN) to support agency relationships.
• The need to finalise a Traffic Mitigation Plan for when the network is congested.
• The need to provide advice to the NSW Government about the regulatory gap for ensuring adequate network reach in future buildings.
• The need to clarify how encryption and interoperability will work on the enhanced network.
• The need for the NSW Telco Authority to comply with its policy on Infrastructure Capacity Reservation.
• Expediting measures to protect against the risk of cloning by unauthenticated radios.

Public safety radio networks are critical for operational communications among Emergency Services Organisations (ESOs), which in New South Wales include:

• NSW Ambulance
• Fire and Rescue NSW
• NSW Police Force
• NSW Rural Fire Service
• NSW State Emergency Service.¹

Since 1993, these five ESOs have had access to a NSW Government owned and operated radio communications network, the Public Safety Network (PSN), to support their operational communications. Around 60 to 70 other entities also have access to this network, including other NSW government entities, Commonwealth government entities, local councils, community organisations, and utility companies.

Pursuant to the Government Telecommunications Act 2018 ('the Act'), the New South Wales Government Telecommunications Authority ('NSW Telco Authority') is responsible for the establishment, control, management, maintenance and operation of the PSN.²

Separate to the PSN, all ESOs and other government entities have historically maintained their own radio communication capabilities and networks. Accordingly, the PSN has been a supplementary source of operational radio communications for these entities.

These other radio networks maintained by ESOs and other entities are of varying size and capability, with many ageing and nearing their end-of-life. There was generally little or no interoperability between networks, infrastructure was often co-located and duplicative, and there were large gaps in geographic coverage.

In 2016, the NSW Telco Authority received dedicated NSW Government funding to commence the Critical Communications Enhancement Program (CCEP).

According to NSW Telco Authority's 2021–22 annual report, the CCEP is a transformation program for operational communications for NSW government agencies. The CCEP '…aims to deliver greater access to public safety standard radio communications for the State’s first responders and essential service agencies'. The objective of CCEP is to consolidate the large number of separate radio networks that are owned and operated by various NSW government entities and to enhance the state’s existing shared PSN. The program also aims to deliver increased PSN coverage throughout New South Wales.

The former NSW Government intended that as the enhanced PSN was progressively rolled-out across NSW, ESOs would migrate their radio communications to the enhanced network, before closing and decommissioning their own networks.

About this Audit

This audit assessed whether the CCEP is being effectively managed by the NSW Telco Authority to deliver an enhanced PSN that meets ESOs' requirements for operational communications.

We addressed the audit objective by answering the following two questions:

1. Have agreed ESO user requirements for the enhanced PSN been met under day-to-day and emergency operational conditions?
2. Has there been adequate transparency to the NSW Government and other stakeholders regarding whole-of-government costs related to the CCEP?

In answering the first question, we also considered how the agreed user requirements were determined. This included whether they were supported by evidence, whether they were sufficient to meet the intent of the CCEP (including in considering any role for new or alternative technologies), and whether they met any relevant technical standards and compliance obligations (including for cyber security resilience).

While other NSW government agencies and entities use the PSN, we focused on the experience of the five primary ESOs because these will be the largest users of the enhanced PSN.

Both the cost and time required to complete the CCEP roll-out have increased since 2016. While it was originally intended to be completed in 2020, this is now forecast to be 2027. Infrastructure NSW has previously assessed the reasons for the increases in time and cost. A summary of the findings made by Infrastructure NSW is presented in Chapter 1 of this report. Accordingly, as these matters had already been assessed, we did not re-examine them in this performance audit.

The auditee for this performance audit is the NSW Telco Authority, which is a statutory authority within the Department of Customer Service portfolio.

In addition to being responsible for the operation of the PSN, section 5 of the Act also prescribes that the NSW Telco Authority is:

• to identify, develop and deliver upgrades and enhancements to the government telecommunications network to improve operational communications for government sector agencies
• to develop policies, standards and guidelines for operational communications using telecommunications networks.

The NSW Telco Authority Advisory Board is established under section 10 of the Act. The role of the board is to advise the NSW Telco Authority and the minister on any matter relating to the telecommunications requirements of government sector agencies and on any other matter relating to the functions of the Authority. As of 2 June 2023, the responsible minister is the Minister for Customer Service and Digital Government.

The five identified ESOs are critical stakeholders of the CCEP and therefore they were consulted during this audit. However, the ESOs were not auditees for this performance audit.

The NSW Telco Authority established and tracked its own costs for the CCEP

Over the course of the program from 2016, the NSW Telco Authority prepared a series of business cases and program reviews that estimated its cost of implementing the program in full, including those shown in Exhibit 6 below.

In response to the 2016 CCEP business case, the then NSW Government approved the NSW Telco Authority implementing the CCEP in full, with funding provided in stages. The NSW Telco Authority tracked its costs against approved funding, with monthly reports provided to the multi-agency Program Steering Committee

Throughout the program, the NSW Government was informed of increasing costs being incurred by the NSW Telco Authority for the CCEP

The various business cases, program updates, and program reviews prepared by the NSW Telco Authority were provided to the NSW Government through the required Cabinet process when seeking approval for the program proceeding and requests for both capital and operational funding. These provided clear indication of the changing overall cost of the CCEP to the NSW Telco Authority, as well as the delays that were being experienced.

There was no transparency to the Parliament and community about changes in the capital cost of the CCEP until the 2021–22 NSW Budget

As the business cases for the CCEP were not publicly available, the only sources of information about capital cost were NSW Budget papers and media releases. The information provided in the annual Budget papers prior to the 2021–22 NSW Budget provided no visibility of the estimated full capital cost to complete all stages of the CCEP. As shown in Exhibit 7 below, this information was fragmented and complex.

Media releases about the progress of the CCEP did not provide the estimated total cost to the NSW Telco Authority of $1.325 billion to complete all stages of the CCEP until June 2021. Prior to this date, media releases only provided funding for the initial stages of the program or for the stages subject to a funding announcement.

Even during the September 2019 and March 2020 Parliamentary Estimate Committee hearings where the costings and delays to the CCEP were raised, the estimated full cost of the CCEP was not revealed.

The original business case for the CCEP included estimated ESO costs, though these costs were not tracked throughout the program

Estimates for ESO costs for operating and maintaining their own radio networks over the four years from 2016–17 were included in the original March 2016 business case. They included $75.2 million for capital expenditure and $95 million for one-off operating costs. These costs, as well as costs incurred by ESOs due to the delay in the program, were not subsequently tracked by the NSW Telco Authority.

In January 2017, Infrastructure NSW reviewed the CCEP business case of March 2016. In this review, Infrastructure NSW recommended that the NSW Telco Authority identify combined and apportioned costs and cashflow for all ESOs over the CCEP funding period reflecting all associated costs to deliver the CCEP. These to include additional incidental capital costs accruing to ESOs, transition and migration to the new network and the cost (capital and operational) of maintaining existing networks. This recommendation was implemented in the November 2017 program review, with ESO capital costs estimated as $183 million.

In 2019, Infrastructure NSW conducted a Deep Dive Review on the progress of the CCEP. In this review, Infrastructure NSW made what it described as a 'critical recommendation' that the NSW Telco Authority:

It should be noted that the delay to CCEP completion now is seven years and that further ‘operational bridging solutions’ have been needed by the ESOs.

'Stay Safe and Keep Operational' costs incurred by ESOs will be significantly higher than originally estimated

Stay Safe and Keep Operational (SSKO) funding was established to provide funding to ESOs to maintain their legacy networks while the CCEP was refreshing and enhancing the PSN. This recognised that much of the network infrastructure relied on by ESOs had reached – or was reaching – obsolescence and would either require extensive maintenance or replacement before the PSN was available for ESOs to migrate to it. ESOs may apply to NSW Treasury for SSKO funding, with their specific proposals being reviewed (and endorsed, where appropriate) by the NSW Telco Authority. Accordingly, SSKO expenditure does not fall within the CCEP budget allocation.

As shown in the table below, extracted from the March 2016 CCEP business case, the total expected cost for SSKO purposes over the course of the CCEP was originally $40 million, assuming the enhanced PSN would be fully available by 2020.

In October 2022, the expected completion date for the CCEP was re-baselined to August 2027. Accordingly, ESOs will be required to continue to maintain their radio networks using legacy equipment for seven years longer than the original 2020 forecast. This will likely become progressively more expensive and require additional SSKO funding. For example, NSW Telco Authority endorsed SSKO bids for 2022–23 exceeded $35 million for that year alone.

Compared to the original forecast made in the March 2016 CCEP business case of $40 million, we found ESOs had estimated SSKO spending to 2027 will be $292.5 million.

A refresh of paging network used by ESOs and the decommissioning of redundant sites were both removed from the original 2016 scope of the CCEP

Paging

A paging network is considered an important user requirement by the Fire and Rescue NSW, NSW Rural Fire Service, and NSW State Emergency Service. The 2016 CCEP business case included a paging network refresh within the program scope of works. This was reiterated in the November 2017 internal review of the program. These documents did not estimate a cost for this refresh. The March 2020 and October 2020 business cases excluded paging from the program scope. The audit is unable to identify when, why or by whom the decision was made to remove paging from the program scope, something that was also not well communicated to the affected ESOs.

In 2021, after representations from the affected ESOs, the NSW Telco Authority prepared a separate business case for a refresh of the paging network at an estimated capital cost of $60.31 million. This program was subsequently approved by the NSW Government and included in the 2022–23 NSW Budget.

In determining an estimated full whole-of-government cost of delivering the enhanced PSN, we have included the budgeted cost of the paging network refresh on the basis that:

• it was expressly included in the original approved March 2016 business case
• the capability is deemed essential to the needs of three ESOs.

Decommissioning costs

The 2016 CCEP business case included cost estimates for decommissioning surplus sites (whether ‘old’ GRN sites or sites belonging to ESOs’ own networks). These estimates were provided for both the NSW Telco Authority ($38 million) and for the ESOs ($55 million). However, while these estimates were described, they were not included as part of the NSW Telco Authority's estimated capital cost ($400 million) or (more relevantly) operating cost ($37.3 million) for the CCEP. This is despite decommissioning being included as one of eight planned activities for the rollout of the program.

In the October 2020 business case, an estimate of $201 million was included for decommissioning agency networks based on a model whereby:

• funding would be coordinated by the NSW Telco Authority
• scheduling and reporting through an inter-agency working group and
• where appropriate, agencies would be appointed as the most appropriate decommissioning party.

This estimated cost is not included in the CCEP budget.

In determining an estimated full whole-of-government cost of the enhanced PSN, we have included the estimated cost of decommissioning on the basis that:

• decommissioning was included in the 2016 CCEP business case as one of eight 'planned activities for the rollout of the program'
• effective decommissioning of surplus sites and equipment (including as described in the business case as incorporating asset decommissioning, asset re-use, and site make-good) is an inherent part of the program management for an enhanced PSN
• costs incurred in decommissioning are entirely a consequence of the CCEP program.

The estimated minimum cost of building an enhanced PSN consistent with the original proposal is over $2 billion

We have derived two estimated minimum whole-of-government costs for delivering an enhanced PSN. These are:

• $2.04 billion when calculated from NSW Telco Authority data – shown as estimate A in Exhibit 9 below.
• $2.26 billion when calculated from ESO supplied data – shown as estimate B in Exhibit 9.

Both totals include:

• budgeted amounts for both CCEP capital expenditure ($1,292.8 million) and operating expenditure ($139 million)
• the NSW Telco Authority's 2020 estimated cost for decommissioning ($201 million)
• the NSW Telco Authority's approved funding for paging refresh ($60.3 million).

The two estimated totals primarily vary around the capital expenditure of ESOs (particularly SSKO funding). To determine these costs, we used ESO provided actual SSKO costs to date, as well as their estimates for maintaining their legacy radio networks through to 2027.

The equivalent cost estimates from the NSW Telco Authority were sourced from the November 2017 internal review and the October 2020 business case for CCEP. It should be noted that the amounts for both estimates are not audited, or verified, but do provide an indication of how whole-of-government costs have grown over the course of the program.

The increase in and reasons for the increase in total CCEP costs (capital and one-off operating) incurred or forecast by the NSW Telco Authority (from $437.3 million in 2016 to $1,431.8 million in 2022) have been provided to the NSW Government through various business cases and reviews prepared by the NSW Telco Authority, as well as by reviews conducted by Infrastructure NSW as part of its project assurance responsibilities.

However, the growth in ESO costs and other consequential costs, such as paging and decommissioning, from around $263 million in the 2016 CCEP business case to between $600 million and $800 million, has to a large degree remained invisible and unexplained to the NSW Government and other stakeholders

Appendix one – Response from agency

Appendix two – Trunked public safety radio networks

Appendix three – About the audit

Appendix four – Performance auditing

© 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.

Parliamentary reference - Report number #383 - released 23 June 2023

The Auditor‑General for New South Wales, Margaret Crawford PSM, has tabled a special report into the financial affairs of the Catholic Metropolitan Cemeteries Trust.

Read the PDF version of the report

Introduction

The Auditor-General's financial and performance audits of local councils aim to improve financial management, governance and public accountability across the local government sector.

Annual Local Government reports to Parliament have consistently highlighted risks and weaknesses across the sector in relation to financial management and governance. We will continue to focus on these matters as a priority area in our forward work program.

While this report focuses on MidCoast Council, the findings should be considered by all councils to better understand the challenges and opportunities when addressing financial sustainability and financial management needs.

Findings and recommendations around the effectiveness of long-term financial planning, comprehensive and timely financial reporting and financial management governance arrangements are relevant for all councils.

What this report is about

The Local Government Act 1993 requires councils to apply sound financial management principles, including sustainable expenditure, effective financial management and regard to intergenerational equity.

This audit assessed whether MidCoast Council has effective financial management arrangements that support councillors and management to fulfill their responsibilities as financial stewards.

What we found

MidCoast Council has not met all legislative and policy requirements for long-term financial planning.

From FY2019–20 to FY2020–21, the Council had financial management and governance gaps. Some gaps were addressed throughout FY2021–22.

MidCoast Council experienced significant challenges in its implementation of a consolidated financial management system following amalgamation in 2016 and the merging of MidCoast Water in 2017. This led to gaps in finance processes and data quality.

What we recommended

The report recommends that MidCoast Council should:

• ensure its long-term financial plan meets legislative and policy requirements
• undertake service reviews to better understand net costs to inform budget and financial planning decisions
• improve the quality of asset management information to inform budget and financial planning decisions
• use the financial management components of the MC1 system to its full potential
• address control and process gaps identified in audits and reviews
• ensure competency of those responsible for finance and budget
• ensure financial sustainability initiatives account for the cost of services and asset management information.

Effective financial management is important in ensuring that councils achieve their long-term objectives, remain financially viable and deliver intended benefits to the community.

Sustainable financial management has been a priority for the local government sector since 2013 and continues to be one of the highest rated risks and priorities among councils in 2023.

According to data provided by the Department of Planning and Environment, during FY2020–21, NSW local councils:

• collected $7.8 billion in rates and annual charges
• received $5.8 billion in grants and contributions
• incurred $4.8 billion of employee benefits and on costs
• held $16.8 billion of cash and investments
• managed $175.2 billion in infrastructure, property plant and equipment
• entered into $3.7 billion of borrowings.

The Local Government Act 1993 (LG Act) requires local councils to apply sound financial management principles including responsible and sustainable expenditure, investment, and effective financial and asset management. Under the LG Act and the Local Government Regulation 2021 (LG Regulation) councils are required to:

• establish and monitor their budget position
• clearly establish approaches to raise revenue, including from rates and other sources
• develop and implement integrated planning to ensure financial sustainability in line with community priorities and needs
• regularly report on their financial performance through financial statements.

The objective of the audit is to assess whether MidCoast Council (the Council) has effective financial management arrangements that support councillors and management to fulfil their financial stewardship responsibilities. It considers whether:

• the Council has an effective governance framework for financial management, through the existence of governance, risk management, internal controls and provision of adequate financial management training, including whether:
  • governance, risk management and internal controls are in place for financial management
  • adequate financial management and governance training and support has been provided to councillors, management and operational managers.
• the Council has quality and comprehensive internal financial management reporting, including whether:
  • councillors and management have identified and implemented essential internal financial management reporting elements
  • council’s financial systems and data have integrity, and support identified financial management report production requirements
  • council reports are relevant, consistent, reliable, understandable, and tailored towards the requirements of key users (appendix two provides more information about the characteristics of effective financial management reporting).
• the financial management governance and reporting arrangements support councillors and management to fulfil their financial stewardship responsibilities, including whether councillors and management use internal financial management reporting to:
  • support budget decisions, resource allocation and cost setting (for example fees and charges)
  • monitor financial sustainability
  • assess operational efficiency, financial services and investments
  • make improvements where necessary.

This audit completed fieldwork during November 2022 to February 2023. The audit period of review was from 1 July 2019 to 30 June 2022.

Appendix one – Response from agency

Appendix two – Characteristics of effective financial management reporting

Appendix three – About the audit 

Appendix four – Performance auditing

© 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.

Parliamentary reference - Report number #381 - released 16 June 2023

This report is about

Results of the local government sector financial statement audits for the year ended 30 June 2022.

What we found

Unqualified audit opinions were issued for 83 councils, 11 joint organisations and nine county councils' financial statements.

The financial audits for two councils and two joint organisations are in progress due to accounting issues.

Fifty-seven councils and joint organisations (2021: 41) required extensions to submit their financial statements to the Office of Local Government (OLG), within the Department of Planning and Environment (the department).

The audit opinion on Kiama Municipal Council's 30 June 2021 financial statements was disclaimed due to deficient books and records.

Qualified audit opinions were issued on 43 councils' financial statements due to non-recognition of rural firefighting equipment vested under section 119 (2) of the Rural Fires Act 1997. Forty-seven councils appropriately recognised this equipment.

What we recommended

Consistent with the NSW Government's accounting position and the department's role of assessing councils' compliance with legislative responsibilities, standards or guidelines, the department should intervene where councils do not recognise vested rural firefighting equipment.

The key issues

There were 1,045 audit findings reported to councils in audit management letters, with 52% being unresolved from prior years.

What we recommended

Councils need to track progress of implementing audit recommendations, giving priority to high-risk and repeat issues.

Ninety-three high-risk matters were identified across the sector mainly relating to asset management, information technology, financial accounting and council governance procedures.

Asset valuations

Audit management letters reported 267 findings relating to asset management. Fifty-three councils had deficiencies in processes that ensure assets are fairly stated.

What we recommended

Councils need to complete timely asset valuations (repeat recommendation).

Integrity and completeness of asset source records

Fifty-two councils had weak processes over the integrity of fixed asset registers.

What we recommended

Councils need to improve controls that ensure integrity of asset records (repeat recommendation).

Cybersecurity

Our audits found that 47% of councils did not have a cyber security plan.

What we recommended

All councils need to prioritise creation of a cyber security plan to ensure data and assets are safeguarded.

Pursuant to the Local Government Act 1993 I am pleased to present my Auditor-General's report on Local Government 2022. My report provides the results of the 2021–22 financial audits of 126 councils, 11 joint organisations and nine county councils. The audits for two councils and two joint organisations are in progress due to significant accounting issues.

Unqualified audit opinions were issued for 83 councils, 11 joint organisations and nine county councils' 2021–22 financial statements. The statements for 43 councils were qualified due to non-recognition of rural firefighting equipment vested under section 119 (2) of the Rural Fires Act 1997. And the audit opinion on Kiama Municipal Council's 30 June 2021 financial statements was disclaimed due to deficiencies in books and records.

This year has again been challenging for many New South Wales local councils still recovering from the impact of emergency events and facing cost and resourcing pressures. We appreciate the efforts of council staff and management in meeting their financial reporting obligations. We share a mutual interest in raising the standard of financial management in this sector, and the importance of accurate and transparent reporting.

Disappointingly, accounting for the value of rural firefighting equipment vested in councils continued to be an unnecessary distraction and resulted in 43 councils having their financial statements qualified. We continue to recommend that the Office of Local Government should intervene where councils fail to comply with Australian Accounting Standards by not recognising assets vested to them under section 119(2) of the Rural Fires Act 1997.

Sound financial management is critical to councils' ability to instil trust and properly serve their communities. The recommendations in this report are intended to further improve their financial management and reporting capability, and encourage sound governance arrangements and cyber resilience. I am committed to continuing this work with councils in the 2022–23 year and beyond.

Margaret Crawford PSM

Auditor-General for New South Wales

Financial reporting is an important element of good governance. Confidence in and transparency of public sector decision-making are enhanced when financial reporting is accurate and timely.

This chapter outlines audit observations related to the financial reporting audit results of councils and joint organisations.

A strong system of internal controls enables councils to operate effectively and efficiently, produce reliable financial reports, comply with laws and regulations, and support ethical government.

This chapter outlines the overall trends in governance and internal controls across councils and joint organisations in 2021–22.

Financial audits focus on key governance matters and internal controls supporting the preparation of councils’ financial statements. Breakdowns and weaknesses in internal controls increase the risk of fraud and error. Deficiencies in internal controls, matters of governance interest and unresolved issues are reported to management and those charged with governance through audit management letters. These letters include our observations, related implications, recommendations and risk ratings.

Total number of findings reported in audit management letters decreased

The following shows the overall findings of the 2021–22 audits reported in management letters compared with the previous year.

Appendix one – Response from the Office of Local Government within the Department of Planning and Environment

Appendix two – Status of audits

Appendix three – Councils received qualified audit opinions

Appendix four – Common reasons for council extensions

Copyright notice

© 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.