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Appendix one – Misstatements in financial statements submitted for audit

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30 November 2023

Published

Enterprise, Investment and Trade 2023

Finance

Asset valuation

Compliance

Cyber security

Financial reporting

Information technology

Infrastructure

Internal controls and governance

Management and administration

Procurement

Project management

Regulation

Risk

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 – Response from agency

23 June 2023

Published

Management of the Critical Communications Enhancement Program

Finance

Health

Justice

Whole of Government

Cyber security

Information technology

Infrastructure

Internal controls and governance

Project management

Risk

Service delivery

Shared services and collaboration

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:

Have agreed ESO user requirements for the enhanced PSN been met under day-to-day and emergency operational conditions?
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.

Conclusion

In areas of New South Wales where the enhanced Public Safety Network has been implemented under the Critical Communications Enhancement Program, the NSW Telco Authority has delivered a radio network that meets most of the agreed requirements of Emergency Services Organisations for routine and emergency operations.

In April 2023, the enhanced Public Safety Network (PSN) was approximately 50% completed. In areas where it is used by Emergency Services Organisations (ESOs), the PSN generally meets agreed user requirements. This is demonstrated through extensive performance monitoring and reporting, which shows that agreed performance standards are generally achieved. Reviews by the NSW Government and the NSW Telco Authority found that the PSN performed effectively during major flood events in 2021 and 2022.

Where it is completed, PSN coverage is generally equal to or better than each ESO's individual pre-existing coverage. The NSW Telco Authority has a dedicated work program to address localised coverage gaps (or 'blackspots') in those areas where coverage has otherwise been substantively delivered. Available call capacity on the network far exceeds demand in everyday use. Any operational issues that may occur with the PSN are transparent to ESOs in real time.

The NSW Telco Authority consulted extensively with ESOs on requirements for the enhanced PSN, with relatively few ESO requirements not being included in the specifications for the enhanced PSN. Lessons from previous events, including the 2019–20 summer bushfires, have informed the design and implementation of the enhanced PSN (such as the need to ensure adequate backup power supply to inaccessible sites). The network is based on the Project 25 technical standards for mission-critical radio communications, which is widely-accepted in the public safety radio community throughout Australia and internationally.

There is no mechanism to ensure adequate radio coverage within new building infrastructure after the CCEP concludes, but the NSW Telco Authority and ESOs have agreed an approach to prioritise existing in-building sites for coverage for the duration of the CCEP.

The extent to which the PSN works within buildings and other built structures (such as railway tunnels) is of crucial importance to ESOs, especially the NSW Police Force, NSW Ambulance, and Fire and Rescue NSW. This is because a large proportion of their operational communications occurs within buildings.

There is no mechanism to ensure the adequacy of future in-building coverage for the PSN in new or refurbished buildings after the CCEP concludes. Planning, building, and fire regulations are silent on this issue. We note there are examples in the United States of how in-building coverage for public safety radio networks can be incorporated into building or fire safety codes.

In regard to existing buildings, it is not possible to know whether a building requires its own in-building PSN infrastructure until nearby outside radio sites, including towers and antennae, have been commissioned into the network. Only then can it be determined whether their radio transmissions are capable of penetrating inside nearby buildings. Accordingly, much of this work for in-building coverage cannot be done until outside radio sites are finished and operating.

In March 2023, the NSW Telco Authority and ESOs agreed on a list of 906 mandatory and 7,086

non-mandatory sites for in-building PSN coverage. Most of these sites will likely be able to receive radio coverage via external antennae and towers, however this cannot be confirmed until those nearby external PSN sites are completed. The parties also agreed on an approach to prioritising those sites where coverage is needed but not provided by antennae and towers. Available funding will likely only extend to ensuring coverage in sites deemed mandatory, which is nonetheless expected to meet the overall benchmark of achieving 'same or better' coverage than what ESOs had previously.

There is a risk that radio interoperability between ESOs will not be maximised because the NSW Telco Authority has not settled with ESOs how encryption will be used across the enhanced PSN.

End-to-end encryption of radio transmissions is a security feature that prevents radio transmissions being intercepted or listened to by people who are not meant to. The ability of the PSN to provide end-to-end encryption of operational communications is of critical importance to the two largest prospective users of the PSN: the NSW Police Force and NSW Ambulance. Given that encryption excludes other parties that do not have the requisite encryption keys, its use creates an obstacle to achieving a key intended benefit of the CCEP, that is a more interoperable PSN, where first responders are better able to communicate with other ESOs.

Further planning and collaboration between PSN participants are necessary to consider how these dual benefits can be achieved, including in what operational circumstances encrypted interoperability is necessary or appropriate.

The capital cost to the NSW Telco Authority of the CCEP, originally estimated at $400 million in 2016, was not made public until the 2021–22 NSW Budget disclosed an estimate of $1.325 billon.

The estimated capital cost to complete all stages of the CCEP increased over time. This increasing cost was progressively disclosed to the NSW Government through Cabinet processes between 2015–16 and 2021–22.

In 2016, the full capital cost to the NSW Telco Authority of completing the CCEP was estimated to be $400 million. This estimated cost was not publicly disclosed, nor were subsequent increases, until the cost of $1.325 billion was publicly disclosed in the 2021–22 NSW Budget (revised down in the 2022–23 NSW Budget to $1.293 billion).

There has been no transparency about the whole-of-government cost of implementing the enhanced PSN through the CCEP.

In addition to the capital costs incurred directly by the NSW Telco Authority for the CCEP, ESOs have incurred costs to maintain their own networks due to the delay in implementing the CCEP. The ESOs will continue to incur these costs until they are able to fully migrate to the enhanced PSN, which is expected to be in 2027. These costs have not been tracked or reported as part of transparently accounting for the whole-of-government cost of the enhanced PSN. This is despite Infrastructure NSW in 2019 recommending to the NSW Telco Authority that it conduct a stocktake of such costs so that a whole-of-government cost impact is available to the NSW Government.

¹The definition of 'emergency services organisation' is set out in the State Emergency and Rescue Management Act 1989 (NSW). In addition to the five ESOs discussed in this report, the definition also includes: Surf Life Saving New South Wales; New South Wales Volunteer Rescue Association Inc; Volunteer Marine Rescue NSW; an agency that manages or controls an accredited rescue unit; and a non-government agency that is prescribed by the regulations for the purposes of this definition.
²Section 15(1) of the Government Telecommunications Act 2018 (NSW).

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.

Exhibit 6: Estimated costs to fully implement the CCEP
Source	Capital cost ($ million)	Operating cost ($ million)	Completion date
March 2016 business case	400	37.3	2020
November 2017 internal review	476.7	41.7	2022
March 2020 business case	950–1,050	--	2025
October 2020 business case	1,263.1	56.1	2026

Source: CCEP business cases as identified.

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.

Exhibit 7: CCEP funding in NSW Budget papers from 2015–16 to 2022–23
Financial year	Type of major work	Description of expenditure	Forecast estimate to complete ($ million)	Estimated duration
2015–16	New work	Infrastructure Rationalisation Program: Planning and Pilot	18.3	2015–16
2016–17	Work in progress	CCEP Planning and Pilot	18.3	2015–17
2016–17	New work	CCEP	45	2016–17
2017–18	New work	CCEP	190.75	2017–21
2018–19	Work in progress	CCEP North Coast and State-wide Detailed Design	190.75	2017–21
2018–19	New work	CCEP Greater Metropolitan Area	236	2018–22
2019–20	Work in progress	CCEP	426.9	2018–22
2020–21	Work in progress	CCEP	664.8	2018–22
2021–22	Work in progress	CCEP	1,325	2018–26
2022–23	Work in progress	CCEP	1,292.8	2018–26

Source: NSW Treasury, Annual State Budget Papers.

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:

…coordinate a stocktake of the costs of operational bridging solutions implemented by PSAs [ESOs] as a result of the 18-month delay, so that a whole-of-government cost impact is available to the NSW Government.

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.

Exhibit 8: Stay Safe and Keep Operational forecast costs, 2017 to 2020
Year	2017	2018	2019	2020	Total
SSKO forecast ($ million)	12.5	15	10	2.5	40

Source: March 2016 CCEP business case.

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

Exhibit 9: Estimated whole-of-government costs of the enhanced PSN
	Estimated whole-of-government cost, over time
Cost type	2016¹	2017²	2020³	2023–Estimate A⁴	2023–Estimate B⁵
Cost type	$ million	$ million	$ million	$ million	$ million
CCEP capital expenditure	400^a	476.7^b	1,263.1^c	1,292.8^d	1,292.8^d
CCEP operating expenditure	37.3^a	41.7^b	41.5^e	139^d	139^d
CCEP total	437.3	518.4	1,304.6	1,431.8	1,431.8
ESO capital expenditure	75.2^a,f	183^b,e	75.4^e	258.4^g	292.5
ESO one-off operating expenditure	93^a	n.a.^l	86.5^e	86.5^h	273
ESO total	168.2	183	161.9	344.9	565.5
Paging	n.a.ⁱ	n.a.ⁱ	n.a.^j	60.3^k	60.3^k
Decommissioning	93	n.a.^l	201.0	201^h	201
Paging and decommissioning total	93	n.a.	201	261.3	261.3
Whole-of-government total	698.5	701.4	1,667.5	2,038	2,258.6

Notes:

Financial year 2016 to Financial year 2020.
Financial year 2016 to Financial year 2021.
Financial year 2016 to Financial year 2025.
Financial year 2016 to Financial year 2026.
Financial year 2022 to Financial year 2025.
Stay Safe and Keep Operational (SSKO) costs plus terminals costs.
November 2017 internal review and October 2020 Business case.
October 2020 Business case.
Included in CCEP capital expenditure at that time.
By 2020, a refresh of the paging network had been removed from the CCEP scope.
A separate business case for a refresh of the paging network was approved by government in 2022.
Figure not included in the source document.

Sources:

March 2016 CCEP business case.
November 2017 Internal Review conducted by the NSW Telco Authority.
October 2020 CCEP business case.
Derived from business cases, with ESO costs drawn from NSW Telco Authority data.
Derived from business cases, with ESO costs based on data provided to the Audit Office of New South Wales by each of the five ESOs.

Appendix two – Trunked public safety radio networks

Appendix three – About the audit

Appendix four – Performance auditing

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

8 February 2023

Published

Cyber Security NSW: governance, roles, and responsibilities

Local Government

Whole of Government

Finance

Cyber security

Information technology

Internal controls and governance

Management and administration

What the report is about

Cyber Security NSW is part of the Department of Customer Service, and aims to provide the NSW Government with an integrated approach to preventing and responding to cyber security threats.

This audit assessed the effectiveness of Cyber Security NSW's arrangements in contributing to the NSW Government's commitments under the NSW Cyber Security Strategy, in particular, increasing the NSW Government's cyber resiliency. The audit asked:

Are internal planning and governance processes in place to support Cyber Security NSW meet its objectives?
Are Cyber Security NSW's roles and responsibilities defined and understood across the public sector?

What we found

Cyber Security NSW has a clear purpose that is in line with wider government policy and objectives. However, it does not clearly and consistently communicate its key objectives, with too few reliable and meaningful ways of measuring progress toward those objectives.

Cyber Security NSW does not provide adequate assurance of the cyber security maturity self assessments performed by NSW Government agencies. Department heads are accountable for ensuring their agency's compliance with NSW government policy.

Cyber Security NSW has a remit to assist local government to improve cyber resilience. However, it cannot mandate action and does not have a strategic approach guiding its efforts.

What we recommended

By 30 June 2023 the Department of Customer Service should:

implement an approach that provides reasonable assurance that NSW government agencies are assessing and reporting their compliance with the NSW Government Cyber Security Policy in a manner that is consistent and accurate
ensure that Cyber Security NSW has a strategic plan that clearly demonstrates how the functions and services provided by Cyber Security NSW contribute to meeting its purpose and achieving NSW government outcomes
ensure that Cyber Security NSW has a detailed, complete and accessible catalogue of services available to agencies and councils
develop a comprehensive engagement strategy and plan for the local government sector, including councils, government bodies, and other relevant stakeholders.

The NSW Cyber Security Strategy details a vision for ‘…NSW to become a world leader in cyber security, protecting, growing, and advancing our digital economy’. Cyber Security NSW, located within the Department of Customer Service, has lead responsibility for one of the four commitments in the strategy: to increase the NSW Government’s cyber resilience.

Cyber Security NSW ‘aims to provide the NSW Government with an integrated approach to preventing and responding to cyber security threats’. It does not provide broader consumer-focused services.

In August 2020, the NSW Government approved a business case to enhance the funding and remit of Cyber Security NSW to include a broader range of services and functions. As a result, Cyber Security NSW is receiving $60 million in funding from 2020–21 to 2022–23, an increase from its previous funding of around $5 million per year (which had been sourced from contributions from each NSW Government department).

The objective of this performance audit was to assess the effectiveness of Cyber Security NSW’s arrangements in contributing to the NSW Government’s commitments under the NSW Cyber Security Strategy, in particular, to increase the NSW Government’s cyber resilience.

We assessed this objective through two lines of inquiry:

Are internal planning and governance processes in place to support Cyber Security NSW meet its objectives?
Are Cyber Security NSW roles and responsibilities defined and understood across the public sector?

The Audit Office of New South Wales has reported on the topic of cyber security previously. Most recently, the Internal Controls and Governance 2022 report included findings and recommendations relating to cyber security internal controls and governance at 25 of the largest agencies in the NSW public sector. While that report is multi-agency and sought to assess the level of cyber security attained in selected agencies, this current performance audit report focuses specifically on Cyber Security NSW and how well-equipped it is to meet its whole-of-government cyber security leadership and coordination roles.

Conclusion

Cyber Security NSW has a clear purpose that is aligned with wider government policy and objectives, but it cannot effectively demonstrate its progress toward improving cyber resilience

Cyber Security NSW's high-level purpose is to support the NSW Government’s delivery of digitised services that are protected, connected, and trusted. This purpose is consistent with broader NSW Government and Australian Government policy and builds on the purpose of the previous NSW Office of the Government Chief Information Security Officer, which was itself informed by external research and previous Audit Office of New South Wales recommendations.

In delivering its purpose, Cyber Security NSW provides a wide range of services to NSW government agencies and the local government sector. The majority of agencies and councils consulted during this audit reported that the services they received contributed to improving their individual cyber security.

However, Cyber Security NSW does not clearly and consistently communicate its key objectives to ensure that its efforts are effectively and efficiently targeted, prioritised, planned, and reported. This is despite it receiving enhanced funding to expand the scope of services it provides. It currently has many sets of objectives across a range of sources, including the Cyber Security Strategy, business plans, corporate material, and public communications. It has too few reliable and meaningful ways of measuring progress toward its objectives, and no overall workplan or roadmap to show how the objectives will be achieved.

Without a clear and consistent program logic, it is difficult to determine whether the functions and services delivered by Cyber Security NSW are helping to achieve the level of cyber resilience required to meet the increasing cyber threats faced by the NSW public sector.

Cyber Security NSW does not provide assurance of the cyber security maturity self-assessments performed by individual NSW Government agencies

The NSW Government has a devolved model for cyber security assurance. Cyber Security NSW administers the whole-of-government policy settings, and agency heads are responsible for ensuring compliance with policy requirements.

Cyber Security NSW has a remit to carry out audits of agencies’ self-assessments, but it has not carried out these audits and does not seek its own assurance of the results of these self-assessments. It is not sufficiently addressing previously identified inconsistencies and inaccuracies in how those self-assessments are performed and reported.

This form of auditing would be an important assurance that self-assessment and reporting is reliable. This is important given that maturity reporting is the main source of knowledge about the cyber security maturity and resilience of NSW Government agencies to cyber threats. If these self-assessments are unreliable, then it creates the risk that knowledge of the potential resilience of the NSW public sector to cyber security incidents is similarly unreliable. There is no other body in NSW with the mandate to routinely provide this form of assurance.

Cyber Security NSW has a remit to assist local government improve cyber resilience, however it cannot mandate action, and does not have a strategic approach guiding its efforts

Consistent with the expectations that accompanied its 2020 funding enhancement, Cyber Security NSW has engaged with the local government sector, albeit with mixed results. While these mixed results are partly a consequence of it not being provided a formal mandate in the sector, it has also been impacted by the fact that Cyber Security NSW has not established an engagement plan or strategy to guide its engagement with the local government sector.

Cyber security is an evolving landscape where the nature and scale of threats are increasing. The Australian Cyber Security Centre (ACSC), the Australian Government lead agency for cyber security, reported in its in 2020–21 annual report that it received over 67,500 cybercrime reports, equating to one report of a cyber attack every eight minutes, with no sector of the economy or type of government agency immune.

Citizens of NSW are increasingly accessing online government services in this context, providing different types of sensitive personal information. This reliance and transition to digital services has increased in recent times, particularly during the COVID-19 pandemic. The NSW Legislative Council’s Portfolio Committee (the Committee) noted in the March 2021 inquiry report into cyber security in NSW that ‘a failure to get cyber security right in New South Wales represents a significant risk to the State’s economy, business and community, and will affect public trust in government’.

The Committee noted that sound cyber security practices across NSW Government agencies, which Cyber Security NSW was established to drive, will enable the State and community to leverage opportunities from the digital world. Indeed, NSW aims to become a world leader in cyber security by protecting, growing and advancing the digital economy.

Establishment of Cyber Security NSW

Prior to the establishment of Cyber Security NSW, the Office of the Government Chief Information Security Officer was responsible for cyber security across the NSW government sector. This role was announced in March 2017 and was tasked with ‘identifying areas of high risk of attack, and working across NSW agencies to share intelligence, facilitate minimum security standards, and ultimately ensure that citizens can trust in the NSW Government’s delivery of digital transformation’. At the time of this appointment, the Minister for Customer Service and Digital Government stated that ‘cyber security and risk has emerged as one of the most high-profile, borderless and rapidly evolving risks facing government’.

The Office of the Government Chief Information Security Officer was renamed on 20 May 2019 to Cyber Security NSW. Governance updates at the time note that this was undertaken to ‘better reflect the leadership and coordination role required to uplift cyber security and decision-making across NSW Government’. The establishment of Cyber Security NSW was also partly in response to the Audit Office of New South Wales 2018 performance audit report on ‘Detecting and Responding to Cyber Security Incidents’. That audit found that there was no whole-of-government capability to detect and respond effectively to cyber security incidents. Cyber Security NSW is relatively new and is established as a branch within the Department of Customer Service (DCS).

The Office of the Government Chief Information Security Officer, and subsequently Cyber Security NSW, was initially funded through a levy imposed on clusters. Funding arrangements for Cyber Security NSW changed with the announcement in August 2020 of $240 million over three years for the stated purpose of bolstering the NSW Government’s cyber security capability and creating a world leading cyber industry. This funding included direct investment of $60 million from 2020–21 to 2022–23 for Cyber Security NSW to increase its capability and capacity, with the size of the team at the time expected to grow from 25 to 100 staff. In announcing this funding, the Minister for Customer Service and Digital Government stated that ‘…this is the biggest single cyber security investment in national history and will strengthen the government's capacity to detect and respond to the fast-moving cyber threat landscape’.

Cyber Security NSW is divided into two directorates, with one directorate having a focus on operations, and the other on policy and awareness. In turn, there are seven teams within the two directorates. As at March 2022, Cyber Security NSW had 76 ongoing positions filled, five contractors and 22 vacancies.

Cyber Security NSW states that its aim ‘…is to provide the NSW Government with an integrated approach to preventing and responding to cyber security threats. By building a stronger cyber resilience across whole-of-government, Cyber Security NSW is able to support the economic growth prosperity and efficiency of NSW’.

NSW Government Cyber Security Strategy

The NSW Government Cyber Security Strategy was released in September 2018 to ‘…guide and inform the safe management of government’s growing cyber footprint’. The 2018 Cyber Security Strategy also set out an action plan with success criteria against each of the six themes of the NSW cyber security framework. Based on a framework from the US National Institute of Standards and Technology (NIST), these themes are:

lead
prepare
prevent
detect
respond
recover.

The Strategy was revised in 2021 and combined with the Cyber Security Industry Development Strategy. The aim of this current strategy is to ‘…outline the key strategic objectives, guiding principles, and high-level focus areas that the NSW Government will use to align existing and future programs of work’. The strategy includes four NSW Government commitments to:

increase NSW Government cyber resiliency
help NSW cyber security businesses grow
enhance cyber security skills and workforce
support cyber security research and innovation.

Cyber Security NSW has responsibility as ‘lead agency’ on the first commitment. This role requires it to set commitment objectives and focus areas for the strategy and provide central leadership and coordination of programs and initiatives.

NSW Government Cyber Security Policy

The NSW Government’s Cyber Security Policy was released in February 2019, replacing the former Digital Information Security Policy. All NSW Government agencies must comply with the Cyber Security Policy, and it was recommended for adoption by State Owned Corporations (SOC), local councils, and universities.

The current version of the Cyber Security Policy sets out a range of mandatory requirements for agencies, including:

annual reporting of their self-assessed levels of maturity against all the mandatory requirements of the Policy and the Australian Cyber Security Centre’s ‘Essential Eight’ requirements
that agencies must provide a list of their ‘crown jewels’ and high and extreme risks to their cluster Chief Information Security Officer (CISO).

The Policy sets out that Cyber Security NSW:

may assist agencies with their implementation of the Policy with an FAQ document and guidelines on several cyber security topics
will summarise the maturity reports provided by agencies and provide the results to the relevant governance bodies including the Cyber Security Steering Group, Secretaries’ Board, relevant committees of Cabinet, Cyber Security Senior Officers’ Group, and the ICT and Digital Leadership Group, as well as use these reports to identify common themes and areas for improvement across NSW Government.

As discussed further in Chapter 3, a mandatory guideline issued by the Secretary of the Department of Customer Service in 2020 established that departments and agencies will be subject to audits by Cyber Security NSW. This is to test compliance with the Cyber Security Policy and report these outcomes to the Secretaries’ Board.

This chapter considers whether the Department of Customer Service has a strategic plan for Cyber Security NSW that includes a consistent hierarchy of priorities, which are then reflected in workplans, and inform decisions about specific functions and activities. It also considers whether:

there was a sound, evidence-based rationale for why Cyber Security NSW was established
the specific services and functions Cyber Security NSW provides are adequately targeted to agency and council needs
there is adequate performance assessment of how the services and functions performed by Cyber Security NSW contribute to uplifting cyber maturity and increasing cyber resilience.

This chapter considers the distribution of responsibility for cyber security in the NSW public sector, as well as whether the responsibilities and roles of Cyber Security NSW are clear and understood by agencies and councils. It also considers whether Cyber Security NSW has sufficient authority and mandate to fulfill its responsibilities for both NSW Government agencies and the local government sector.

Appendix one – Response from agency

Appendix two – About the audit

Appendix three – Performance auditing

Copyright notice

Parliamentary reference - Report number #374 - released 8 February 2023

19 December 2022

Published

Enterprise, Investment and Trade 2022

Finance

Asset valuation

Compliance

Cyber security

Financial reporting

Information technology

Internal controls and governance

Management and administration

Procurement

Regulation

Risk

What the report is about

Result of the Enterprise, Investment and Trade cluster agencies' financial statement audits for the year ended 30 June 2022.

What we found

The Machinery of Government changes within the Enterprise, Investment and Trade cluster resulted in the creation of the Department of Enterprise, Investment and Trade and the transfer of $1.0 billion of net assets into the new department.

Unmodified audit opinions were issued for all completed cluster agencies' 2021–22 financial statements audits. Two audits are ongoing.

An 'Other Matter' paragraph was included in the audit opinion for the Jobs for NSW Fund's 30 June 2021 financial report to reflect the non-compliance with the Jobs for NSW Act 2015 (the Act) and Government Sector Finance Act 2018. 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, 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.

Three cluster agencies accepted changes to their office leasing arrangements managed by Property NSW. This has resulted in the collective derecognition of $24.8 million of right-of-use assets and $26.7 million in lease liabilities, and recognition of $1.9 million of other gains.

What the key issues were

The number of issues we reported to management decreased from 108 in 2020–21 to 103 in 2021–22. Thirty per cent of issues were repeated from the prior year.

Six high-risk issues were identified across the cluster related to the quality and timeliness of financial reporting, governance processes and internal controls.

Recommendations were made to address these deficiencies.

This report provides Parliament and other users of the Enterprise, Investment and Trade cluster's 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 cluster (the cluster) for 2022.

Section highlights

Unqualified audit opinions were issued for all completed cluster agencies 2021–22 financial statements audits. The Jobs for NSW Fund and Responsible Gambling Fund audits are ongoing.
An 'Emphasis of Matter' paragraph was included in the Australian Institute of Asian Culture and Visual Arts Limited's 30 June 2022 financial statements to draw attention to management’s disclosures that the entity's financial statements for the year ended 30 June 2022 were prepared on a non-going concern basis following cessation of its operations and resolution by the directors in October 2021 to deregister the entity.
An 'Other Matter' paragraph was included in the Jobs for NSW Fund's 30 June 2021 financial report to reflect the non-compliance with the Jobs for NSW Act 2015 and Government Sector Finance Act 2018.
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 2021 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.

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 cluster.

Section highlights

In 2021–22, there were 103 findings raised across the cluster, a decrease from 2020–21.
In total, six high-risk findings were identified during 2021–22. Two related to 2021–22 whilst four were related to the audit of Jobs for NSW Fund's 30 June 2021 financial report.
Thirty per cent of all findings during 2021–22 were repeat issues. The most common repeat issues related to information technology controls and accounting for property plant and equipment notably fair value assessment and valuation.

Appendix one – Misstatements in financial statements submitted for audit

Appendix one – Misstatements in financial statements submitted for audit

Copyright notice

7 December 2022

Published

Health 2022

Health

Whole of Government

Asset valuation

Compliance

Cyber security

Financial reporting

Information technology

Infrastructure

Internal controls and governance

Management and administration

Procurement

Risk

Service delivery

Shared services and collaboration

Workforce and capability

What the report is about

Result of Health cluster (the cluster) agencies' financial statement audits for the year ended 30 June 2022.

What we found

Unmodified audit opinions were issued for the financial statements for all Health cluster agencies.

The COVID-19 pandemic continued to increase the complexity and number of accounting matters faced by the cluster. The total gross value of corrected misstatements in 2021–22 was $353.3 million, of which $186.7 million related to an increase in the impairment provision for Rapid Antigen Tests (RATs).

A qualified audit opinion was issued on the Annual Prudential Compliance Statement related to five residential aged care facilities. There were 20 instances (19 in 2020–21) of non-compliance with the prudential responsibilities within the Aged Care Act 1997.

What the key issues were

The total number of matters we reported to management across the cluster decreased from 116 in 2020–21 to 67 in 2021–22. Of the 67 issues raised, four were high risk (three in 2020-21) and 37 were moderate risk (57 in 2020–21). Nearly half of all control deficiencies reported in 2021–22 were repeat issues.

Three unresolved high-risk issues were:

COVID-19 inventories impairment – we continued to identify issues relating to management’s impairment model which relies on anticipated future consumption patterns. RATs had not been assessed for impairment.
Asset capitalisation threshold – management has not reviewed the appropriateness of the asset capitalisation threshold since 2006.
Forced-finalisation of HealthRoster time records – we continued to observe unapproved rosters being finalised by system administrators so payroll can be processed on time. 2.6 million time records were processed in this way in 2021–22.

What we recommended

COVID-19 inventories impairment – ensure consumption patterns are supported by relevant data and plans.
Assets capitalisation threshold – undertake further review of the appropriateness of applying a $10,000 threshold before capitalising expenditure on property, plant and equipment.
Forced-finalisation of HealthRoster time records – develop a methodology to quantify the potential monetary value of unapproved rosters being finalised.

This report provides Parliament and other users of Health cluster (the cluster) 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 cluster (the cluster) for 2022.

Section highlights

Unqualified audit opinions were issued for all cluster agencies required to prepare general purpose financial statements.
The total gross value of corrected monetary misstatements for 2021–22 was $353.3 million, of which, $186.7 million related to an increase in the impairment provision for Rapid Antigen Tests.
A qualified audit opinion was issued on the ministry's Annual Prudential Compliance Statements.

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 cluster.

Section highlights

The total number of internal control deficiencies has decreased from 116 in 2020–21 to 67 in 2021–22. Of the 67 issues raised in 2021–22, four were high (2020–21: 3) and 37 were moderate (2020–21: 57); with nearly half of all control deficiencies reported in 2021–22 being repeat issues.
The following four issues were reported in 2021–22 as high risk:
- impairment of COVID-19 inventories
- inadequate review over the appropriateness of asset capitalisation threshold
- forced-finalisation of HealthRoster time records
- COVID-19 vaccination inventories – data quality issue at 31 March 2022.
Management of excessive leave balances and poor quality or lack of documentation supporting key agreements continued to be the key repeat issues observed in the 2021–22 financial reporting period.

Appendix one – Misstatements in financial statements submitted for audit

Copyright notice

30 November 2022

Published

Customer Service 2022

Finance

Asset valuation

Compliance

Cyber security

Financial reporting

Information technology

Internal controls and governance

Management and administration

Procurement

Regulation

Risk

Service delivery

Shared services and collaboration

What the report is about

Result of the Customer Service cluster agencies' financial statement audits for the year ended 30 June 2022.

What we found

Unmodified audit opinions were issued for Customer Service cluster agencies.

What the key issues were

The number and size of Service NSW's administered grant programs have increased significantly in response to emergency events. Improvements are required to address gaps in Service NSW's policies, systems and processes in administering and financial reporting of grant programs.

The Department of Customer Service (the department) reported a retrospective correction of a prior period error of $33.3 million understatement of the land titling database, which is a service concession asset managed by a private operator.

The 2021–22 audits identified five high-risk issues across the cluster:

the department:
- control weaknesses in user access to GovConnect systems
- significant control deficiencies in information technology change management controls
Rental Bond Board:
- legislation amendment required to better support the accounting treatment of rental bonds
- no delegation instrument to government officers authorising them to approve expenditures
Service NSW:
- improvements required in the timeliness and quality of grant administration revenue assessment and controls over the recovery of grant administration costs.

Recommendations were made to address these deficiencies.

This report provides Parliament and other users of the Customer Service cluster's 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 cluster (the cluster) for 2022.

Section highlights

Unqualified audit opinions were issued on the financial statements of cluster agencies.
Reported corrected misstatements decreased from 33 in 2020–21 to 30 with a gross value of $406 million in 2021–22 ($418.9 million in 2020–21). Reported uncorrected misstatements decreased from 13 in 2020–21 to nine with a gross value of $31.8 million in 2021–22 ($78 million).
Seven of nine cluster agencies did not submit or complete certain mandatory early close procedures on time.
Service NSW's late resolution of the accounting of $256 million revenue from administering COVID-19 and flood grant programs resulted in misstatements and delays in financial reporting and audit.
The Department of Customer Service corrected prior period errors retrospectively related to the valuation of a service concession asset (land titling database) which reduced the prior year comparative for service concession asset by $33.3 million in the financial statements.

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 cluster.

Section highlights

The 2021–22 audits identified five high risks (three in 2020–21) and 36 moderate risk issues (59 in 2020–21) across the cluster. Fifty-three per cent of the issues (42% in 2020–21) were repeat issues. Many repeat issues related to information technology controls around user access management.
While improvement was noted in the number of control deficiencies in GovConnect ASAE 3402 controls assurance reports, internal control qualification and control deviation issues continued to occur in 2021–22. Ineffective controls at service providers increase the risk of fraud, error and security to data.
Cyber security governance and management requires improvement. The department is yet to fully implement Essential 8 Mitigation Strategies and the maturity level for several Essential 8 strategies is at Level Zero in the current maturity model. The department is in the process of completing the roll out of some long outstanding system patches.
Significant gaps were identified in Service NSW's policies, systems and processes in administering and financial reporting of grant programs.