Reports
Internal Controls and Governance 2018
The Auditor-General for New South Wales Margaret Crawford found that as NSW state government agencies’ digital footprint increases they need to do more to address new and emerging information technology (IT) risks. This is one of the key findings to emerge from the second stand-alone report on internal controls and governance of the 40 largest NSW state government agencies.
This report analyses the internal controls and governance of the 40 largest agencies in the NSW public sector for the year ended 30 June 2018.
This report covers the findings and recommendations from our 2017–18 financial audits that relate to internal controls and governance at the 40 largest agencies (refer to Appendix three) in the NSW public sector.
This report offers insights into internal controls and governance in the NSW public sector
This is our second report dedicated to internal controls and governance at NSW State Government agencies. The report provides insights into the effectiveness of controls and governance processes in the NSW public sector by:
- highlighting the potential risks posed by weaknesses in controls and governance processes
- helping agencies benchmark the adequacy of their processes against their peers
- focusing on new and emerging risks, and the internal controls and governance processes that might address those risks.
Without strong governance systems and internal controls, agencies increase the risks associated with effectively managing their finances and delivering services to citizens. The way agencies deliver services increasingly relies on contracts and partnerships with the private sector. Many of these arrangements deliver front line services, but others provide less visible back office support. For example, an agency may rely on an IT service provider to manage a key system used to provide services to the community. The contract and service level agreements are only truly effective where they are actively managed to reduce risks to continuous quality service delivery, such as interruptions caused by system outages, cyber security attacks and data security breaches.
Our audits do not review all aspects of internal controls and governance every year. We select a range of measures, and report on those that present heightened risks for agencies to mitigate. This report divides these into the following five areas:
- Internal control trends
- Information technology (IT), including IT vendor management
- Transparency and performance reporting
- Management of purchasing cards and taxis
- Fraud and corruption control.
The findings in this report should not be used to draw conclusions on the effectiveness of individual agency control environments and governance arrangements. Specific financial reporting, controls and service delivery comments are included in the individual 2018 cluster financial audit reports, which will be tabled in Parliament from November to December 2018.
The focus of the report has changed since last year
Last year's report topics included asset management, ethics and conduct, and risk management. We are reporting on new topics this year. We plan to introduce new topics and re-visit our previous topics in subsequent reports on a cyclical basis. This will provide a baseline against which to measure the NSW public sectors’ progress in implementing appropriate internal controls and governance processes to mitigate existing, new and emerging risks in the public sector.
Agencies selected for the volume account for 95 per cent of the state's expenditure
While we have covered only 40 agencies in this report, those selected are a large enough group to identify common issues and insights. They represent about 95 per cent of total expenditure for all NSW public sector agencies.
Internal controls are processes, policies and procedures that help agencies to:
- operate effectively and efficiently
- produce reliable financial reports
- comply with laws and regulations
- support ethical government.
This chapter outlines the overall trends for agency controls and governance issues, including the number of findings, level of risk and the most common deficiencies we found across agencies. The rest of this volume presents this year’s controls and governance findings in more detail.
| Observation | Conclusions and recommendations |
|---|---|
| 2.1 High risk findings | |
| We found six high risk findings (seven in 2016–17), one of which was repeated from both last year and 2015–16. | Recommendation: Agencies should reduce risk by addressing high risk internal control deficiencies as a priority. |
| 2.2 Common findings | |
| We found several internal controls and governance findings common to multiple agencies. | Conclusion: Central agencies or the lead agency in a cluster can play a lead role in helping ensure agency responses to common findings are consistent, timely, efficient and effective. |
| 2.3 New and repeat findings | |
| Although internal control deficiencies decreased over the last four years, this year has seen a 42 per cent increase in internal control deficiencies. | The increase in new IT control deficiencies and repeat IT control deficiencies signifies an emerging risk for agencies. |
| IT control deficiencies feature in this increase, having risen by 63 per cent since last year. The number of repeat IT control deficiencies has doubled and is driven by the increasing digital footprint left by agencies as government prioritises on-line interfaces with citizens, and the number of transactions conducted through digital channels increases |
Recommendation: Agencies should reduce IT risks by:
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Government agencies’ financial reporting is now heavily reliant on information technology (IT). IT is also increasingly important to the delivery of agency services. These systems often provide the data to help monitor the efficiency and effectiveness of agency processes and services they deliver. Our audits reviewed whether agencies have effective controls in place to manage both key financial systems and IT service contracts.
| Observation | Conclusions and recommendations |
|---|---|
| 3.1 Management of IT vendors | |
| Contract management framework Although 87 per cent of agencies have a contract management policy to manage IT vendors, one fifth require review. |
Conclusion: Agencies can more effectively manage IT vendor contracts by developing policies and procedures to ensure vendor management frameworks are kept up to date, plans are in place to manage vendor performance and risk, and compliance with the framework is monitored by:
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| Contract risk management Forty-one per cent of agencies are not using contract management plans and do not assess contract risks. Half of the agencies that did assess contract risks, had not updated the risk assessments since the commencement of the contract. |
Conclusion: Instead of applying a 'set and forget' approach in relation to management of contract risks, agencies should assess risk regularly and develop a plan to actively manage identified risks throughout the contract lifecycle - from negotiation and commencement, to termination. |
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Performance management Only 24 per cent of agencies sought assurance about the accuracy of vendor reporting against KPIs, yet sixty-seven per cent of the IT contracts allow agencies to determine performance based payments and/or penalise underperformance. |
Conclusion: Agencies are monitoring IT vendor performance, but could improve outcomes and more effectively manage under-performance by:
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Transitioning services Where IT vendor contracts do make provision for transitioning-out, only 28 per cent of agencies have developed a transitioning-out plan with their IT vendor. |
Conclusion: Contract transition/phase out clauses and plans can mitigate risks to service disruption, ensure internal controls remain in place, avoid unnecessary costs and reduce the risk of 'vendor lock-in'. |
| Contract Registers Eleven out of forty agencies did not have a contract register, or have registers that are not accurate and/or complete. |
Conclusion: A contract register helps to manage an agency’s compliance obligations under the Government Information (Public Access) Act 2009 (the GIPA Act). However, it also helps agencies more effectively manage IT vendors by:
Recommendation: Agencies should ensure their contract registers are complete and accurate so they can more effectively govern contracts and manage compliance obligations. |
| 3.2 IT general controls | |
| Governance Ninety-five per cent of agencies have established policies to manage key IT processes and functions within the agency, with ten per cent of those due for review. |
Conclusion: Regular review of IT policies ensures risks are considered and appropriate strategies and procedures are implemented to manage these risks on a consistent basis. An absence of policies can lead to ad-hoc responses to risks, and failure to consider emerging IT risks and changes to agency IT environments. |
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User access administration
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Recommendation: Agencies should strengthen the administration of user access to prevent inappropriate access to key systems. |
| Privileged access Forty per cent of agencies do not periodically review logs of the activities of privileged users to identify suspicious or unauthorised activities. |
Recommendation: Agencies should:
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| Password controls Twenty-three per cent of agencies did not comply with their own policy on password parameters. |
Recommendation: Agencies should ensure IT password settings comply with their password policies. |
| Program changes Fifteen per cent of agencies had deficient IT program change controls mainly related to segregation of duties and authorisation and testing of IT program changes prior to deployment. |
Recommendation: Agencies should maintain appropriate segregation of duties in their IT functions and test system changes before they are deployed. |
This chapter outlines our audit observations, conclusions and recommendations from our review of how agencies reported their performance in their 2016–17 annual reports. The Annual Reports (Statutory Bodies) Regulation 2015 and Annual Reports (Departments) Regulation 2015 (annual reports regulation) currently prescribes the minimum requirements for agency annual reports.
| Observation | Conclusion or recommendation |
| 4.1 Reporting on performance | |
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Only 57 per cent of agencies linked reporting on performance to their strategic objectives. The use of targets and reporting performance over time was limited and applied inconsistently. |
Conclusion: There is significant disparity in the quality and consistency of how agencies report on their performance in their annual reports. This limits the reliability and transparency of reported performance information. Agencies could improve performance reporting by clearly linking strategic objectives to reported outcomes, and reporting on performance against targets over time. NSW Treasury may need to provide more guidance to agencies to support consistent and high-quality performance reporting in annual reports. |
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There is no independent assurance that the performance metrics agencies report in their annual reports are accurate. Prior performance audits have noted issues related to the collection of performance information. For example, our 2016 Report on Red Tape Reduction highlighted inaccuracies in how the dollar-value of red tape reduction had been reported. |
Conclusion: The ability of Parliament and the public to rely on reported information as a relevant and accurate reflection of an agency's performance is limited. The relevance and accuracy of performance information is enhanced when:
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| 4.2 Reporting on reports | |
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Agency reporting on major projects does not meet the requirements of the annual reports regulation. Forty-seven per cent of agencies did not report on costs to date and estimated completion dates for major works in progress. Of the 47 per cent of agencies that reported on major works, only one agency reported detail about significant cost overruns, delays, amendments, deferments or cancellations. |
NSW Treasury produce an annual report checklist to help agencies comply with their annual report obligations. Recommendation: Agencies should comply with the annual reports regulation and report on all mandatory fields, including significant cost overruns and delays, for their major works in progress. |
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The information the annual reports regulation requires agencies to report deals only with major works in progress. There is no requirement to report on completed works. Sixteen of 30 agencies reported some information on completed major works. |
Conclusion: Agencies could improve their transparency if they reported, or were required to report:
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This chapter outlines our audit observations, conclusions and recommendations, arising from our review of agency preventative and detective controls over purchasing card and taxi use for 2017–18.
| Observation | Conclusion or recommendation |
| 5.1 Management of purchasing cards | |
| Volume of credit card spend Purchasing card expenditure has increased by 76 per cent over the last four years in response to a government review into the cost savings possible from using purchasing cards for low value, high volume procurement. |
Conclusion: The increasing use of purchasing cards highlights the importance of an effective framework for the use and management of purchasing cards. |
| Policy framework We found all agencies that held purchasing cards had a policy in place, but 26 per cent of agencies have not reviewed their purchasing card policy by the scheduled date, or do not have a scheduled revision date stated within their policy. |
Recommendation: Agencies should mitigate the risks associated with increased purchasing card use by ensuring policies and purchasing card frameworks remain current and compliant with the core requirements of TPP 17–09 'Use and Management of NSW Government Purchasing Cards'. |
| Preventative controls We found that:
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Agencies have designed and implemented preventative controls aimed at deterring the potential misuse of purchasing cards. Conclusion: Further opportunities exist for agencies to better control the use of purchasing cards, such as:
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Detective controls Major reviews, such as data analytics (29 per cent of agencies) and independent spot checks (49 per cent of agencies) are not widely used. |
Agencies have designed and implemented detective controls aimed at identifying potential misuse of purchasing cards. Conclusion: More effective monitoring using purchasing card data can provide better visibility over spending activity and can be used to:
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| 5.2 Management of taxis | |
| Policy framework Thirteen per cent of agencies have not developed and implemented a policy to manage taxi use. In addition:
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Conclusion: Agencies can promote savings and provide more options to staff where their taxi use policies:
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| Detective controls All agencies approve taxi expenditure by expense reimbursement, purchasing card and Cabcharge, and have implemented controls around this approval process. However, beyond this there is minimal monitoring and review activity, such as data monitoring, independent spot checks or internal audit reviews. |
Conclusion: Taxi spend at agencies is not significant in terms of its dollar value, but it is significant from a probity perspective. Agencies can better address the probity risk by incorporating taxi use into a broader purchasing card or fraud monitoring program. |
Fraud and corruption control is one of the 17 key elements of our governance lighthouse. Recent reports from ICAC into state agencies and local government councils highlight the need for effective fraud control and ethical frameworks. Effective frameworks can help protect an agency from events that risk serious reputational damage and financial loss.
Our 2016 Fraud Survey found the NSW Government agencies we surveyed reported 1,077 frauds over the three year period to 30 June 2015. For those frauds where an estimate of losses was made, the reported value exceeded $10.0 million. The report also highlighted that the full extent of fraud in the NSW public sector could be higher than reported because:
- unreported frauds in organisations can be almost three times the number of reported frauds
- our 2015 survey did not include all NSW public sector agencies, nor did it include any NSW universities or local councils
- fraud committed by citizens such as fare evasion and fraudulent state tax self-assessments was not within the scope of our 2015 survey
- agencies did not estimate a value for 599 of the 1,077 (56 per cent) reported frauds.
Commissioning and outsourcing of services to the private sector and the advancement of digital technology are changing the fraud and corruption risks agencies face. Fraud risk assessments should be updated regularly and in particular where there are changes in agency business models. NSW Treasury Circular TC18-02 NSW Fraud and Corruption Control Policy now requires agencies develop, implement and maintain a fraud and corruption control framework, effective from 1 July 2018.
Our Fraud Control Improvement Kit provides guidance and practical advice to help organisations implement an effective fraud control framework. The kit is divided into ten attributes. Three key attributes have been assessed below; prevention, detection and notification systems.
This chapter outlines our audit observations, conclusions and recommendations, arising from our review of agency fraud and corruption controls for 2017–18.
| Observation | Conclusion or recommendation |
| 6.1 Prevention systems | |
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Prevention systems Only 54 per cent of agencies have an employment screening policy and all agencies have IT security policies, but gaps in IT security controls could undermine their policies. |
Conclusion: Most agencies have implemented fraud prevention systems to reduce the risk of fraud. However poor IT security along with other gaps in agency prevention systems, such as employment screening practices heightens the risk of fraud and inappropriate use of data. Agencies can improve their fraud prevention systems by:
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| Twenty-three per cent of agencies were not performing fraud risk assessments and some agency fraud risk assessments may not be as robust as they could be. | Conclusion: Agencies' systems of internal controls may be less effective where new and emerging fraud risks have been overlooked, or known weaknesses have not been rectified. |
| 6.2 Detection systems | |
| Detection systems Several agencies reported they were developing a data monitoring program, but only 38 per cent of agencies had already implemented a program. |
Studies have shown data monitoring, whereby entire populations of transactional data are analysed for indicators of fraudulent activity, is one of the most effective methods of early detection. Early detection decreases the duration a fraud remains undetected thereby limiting the extent of losses. Conclusion: Data monitoring is an effective tool for early detection of fraud and is more effective when informed by a comprehensive fraud risk assessment. |
| 6.3 Notification systems | |
| Notification system All agencies have notification systems for reporting actual or suspected fraud and corruption. Most agencies provide multiple reporting lines, provide training and publicise options for staff to report actual or suspected fraud and corruption. |
Conclusion: Training staff about their obligations and the use of fraud notification systems promotes a fraud-aware culture |
Report on Education 2017
The Auditor-General, Margaret Crawford released her report on the results of the financial audits of agencies in the Education cluster. The report focuses on key observations and findings from the most recent audits of these agencies.
'I am pleased to report that unqualified audit opinions were issued on the financial statements for all agencies in the Education cluster', the Auditor-General said. 'The quality and timeliness of financial reporting remains strong'.
Industry 2017
The following report highlights the results of the financial audits of NSW Government entities in the Industry cluster. The report focuses on key observations and findings from the most recent audits of these entities.
The report notes that TAFE NSW will continue to incur extra costs each year to produce reliable financial information due to deficiencies in its student administration system. TAFE NSW plans to replace its Student Administration and Learning Management system in 2018-19 at an estimated cost of $89 million.
1. Financial reporting and controls
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Financial reporting |
Unqualified audit opinions were issued for 44 out of 48 financial statement audits with four audits incomplete. Early close procedures continue to promote earlier and better quality financial reporting. |
| Financial performance | The cluster recorded a net deficit of $107 million in 2016–17 ($78.0 million in 2015–16). Contributing to the overall cluster net deficit was the Department's $226 million net deficit offset by net surpluses at Water NSW and the Forestry Corporation of New South Wales. |
| TAFE NSW continues to experience system issues | TAFE NSW incurs extra costs each year to produce reliable financial information due to deficiencies in its student administration system. TAFE NSW plans to replace its Student Administration and Learning Management system in 2018–19 at an estimated cost of $89 million. |
| Internal controls |
We identified 180 internal control issues, including 61 repeat issues across the cluster. We rated four of these issues as 'high' risk, 98 as ‘moderate’ risk and 78 as ‘low’ risk. Of the 180 issues raised, 37 related to financial reporting and 52 related to controls over processes such as procurement and fixed assets. Some internal control issues and recommendations identified in previous years, have been repeated and should be addressed promptly to reduce risks and improve processes. |
| Deficient user administration access | Agencies need to strengthen user access administration to critical financial systems. |
2. Service delivery
| Premier and State Priorities |
Australian Bureau of Statistics data shows the Premier's priority for job creation has been achieved. While performance has declined for the State priority to increase the proportion of people completing apprenticeships and traineeships, the Department advises it has initiatives in place to achieve this State priority, and the State priority for New South Wales to lead Australia in business confidence. |
| Crown land | The Department is working to respond to the recommendations from a Parliamentary Inquiry into Crown Land and to implement the revised framework contained in the Crown Land Management Act 2016. |
| Aboriginal land claims |
Despite a continued focus, the Department has been unsuccessful in reducing the number of unprocessed Aboriginal land claims. The Department should continue to implement measures to reduce the backlog of unprocessed Aboriginal land claims. |
This report focuses on agencies in the Industry cluster. The report focuses on audit results, observations, conclusions and recommendations for financial reporting and controls, and service delivery.
This cluster leads the State's promotion of New South Wales as the place to invest and produce goods and services. Significant cluster agencies deliver services in the following areas:
Confidence in public sector decision-making and transparency is enhanced when financial reporting is accurate and timely. Appropriate financial controls help ensure the efficient and effective use of resources and administration of agency policies.
This chapter outlines audit observations, conclusions and recommendations for the financial reporting and controls of agencies in the cluster for 2016–17.
| Observation | Conclusion or recommendation |
| 2.1 Quality of financial reporting | |
| Unqualified audit opinions were issued for 44 out of 48 financial statement audits. Four audits are continuing. | Ongoing improvements in the preparation of financial statements helped identify and resolve material issues. |
| The number of misstatements within the cluster fell from 104 in 2015–16 to 70 in 2016–17. | The ‘early close procedures’ initiative introduced by the Treasury in 2011–12 has reduced the number of misstatements each year. |
| 2.2 Timeliness of financial reporting | |
| Most agencies complied with the Treasury’s early close procedures and the timetable for the preparation and audit of financial statements. | Greater focus on financial reporting and effective early close procedures has improved the timeliness of financial reporting, but further improvements are required. |
| 2.3 Key financial issues from cluster agencies | |
| The Department of Industry completed a revaluation of Crown land and continues work on improving the accounting for Crown land. | The value of Crown land recognised in the Department's financial statements at 30 June 2017 was $5.3 billion. The revaluation was carried out using a revised mass valuation approach which reduced complexity and subjectivity and improved transparency. |
| There is no process in place to ensure agencies recognise all the Crown land they manage and control. | Recommendation: The Department should confirm the completeness and accuracy of the Crown land database with other organisations that manage and control Crown land to improve the reliability of its records. |
| TAFE NSW incurred approximately $6 million of direct costs to deal with issues in its student administration system and establish the integrity of its financial data for 2016–17. | TAFE NSW will continue to incur extra costs each year to produce reliable financial information. TAFE NSW advises it intends to replace the Student Administration and Learning Management system it jointly implemented with the Department of Education three years ago at a cost $40.2 million. TAFE plans to implement the new system in 2018–19 at an estimated cost of $89 million. |
| 2.4 Key financial information | |
| The cluster recorded a net deficit of $107 million in 2016–17 ($78.0 million in 2015–16). | The overall cluster net deficit included the Department's $226 million net deficit which was partly offset by net surpluses in a number of other agencies, including Water NSW and the Forestry Corporation of New South Wales. Most agencies in the cluster, including the Department, but excluding the State owned corporations, are dependent on the NSW Government for the majority of their revenue. |
| 2.5 Financial performance and sustainability | |
| We assessed the performance of certain agencies against key financial sustainability indicators. This identified four agencies with adjusted net deficits and two agencies with liquidity ratios below one. | Overall, based on our analysis these agencies are not at high risk of sustainability concerns. |
| 2.6 Internal controls | |
| A significant number of repeat internal control issues were again raised with management for certain agencies in the cluster. |
Recommendation (repeat issue): Internal control issues and recommendations from previous years should be addressed promptly to reduce risks and improve processes. |
| User access administration over financial systems needs to be improved. 17 moderate risk issues related to user access administration across nine agencies were identified. |
Recommendation: Agencies should ensure administration of user access to critical systems
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Government outcomes can be achieved by delivering services through a mix of the public, private or not-for-profit sectors. Service delivery reform is most successful if there is clear accountability for service delivery outcomes, decisions are aligned to the government's strategic direction, and performance and value for money are monitored and evaluated.
This chapter outlines our audit observations, conclusions and recommendations for the service delivery of agencies in the cluster for 2016–17.
| Issues | Conclusion or recommendation |
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3.1 Measuring and reporting on performance |
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| The Department is responsible for two State priorities (increasing apprenticeships and business confidence) and the Premier's priority of creating jobs. The Department also supports four state priorities. | Australian Bureau of Statistics data shows the Premier's priority for job creation continues to be achieved. The Department reported that the number of people completing apprenticeships and traineeships had declined to 59 per cent against a 2019 target of 65 per cent, while the State was ranked first or second on a range of business confidence indicators. |
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3.2 Improvements required in the administration of Crown land |
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| The Department faces many challenges in the administration of Crown land. These challenges range from inadequate systems and processes through to satisfying competing commercial, environmental, and community interests. |
The Department has implemented, or is implementing the recommendations from a performance audit on the Sale and Lease of Crown land and the Parliamentary Inquiry into Crown land. It is also implementing the revised framework for Crown land contained in the Crown Land Management Act 2016. |
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3.3 Aboriginal land claims over Crown land |
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| The number of unprocessed Aboriginal land claims continues to increase. Work on finalising Aboriginal Land Agreements, which may help address the claims backlog, is continuing. | Recommendation (repeat Issue): The Department should continue to implement measures to reduce the number of unprocessed Aboriginal land claims. |
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3.4 Skills development |
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| Eleven contracted Smart and Skilled service providers had their contracts cancelled for quality issues. There were 391 providers of Smart and Skilled qualifications as at October 2017. | The Department of Industry spent $1.4 billion on the provision of vocational education and training. The Department has controls in place to monitor the performance of contracted service providers to ensure quality delivery of training. |
Health 2017
The following report highlights results of the financial audits of entities in the NSW health cluster. The report focuses on key observations and findings from the most recent audits of these entities.
The report also includes a range of findings on service delivery. Overall, NSW Health is achieving most of their targets. Some local health districts are continuing to experience increased demand for their services and are finding it more difficult to meet their targets. For example, three local health districts had not achieved some emergency department response time targets for three consecutive years.
1. Financial reporting and controls
| Financial Reporting |
All health cluster entities received unqualified audit opinions and the quality of financial reporting remains high across the cluster. Early close procedures were largely completed and all financial statements were submitted by the deadlines. |
| Financial performance |
Overall, NSW Health recorded an operating surplus of $407 million in 2016–17. Eleven local health districts/specialty networks recorded operating deficits in 2016–17, four more than 2015–16. Expenses across NSW Health increased by 4.4 per cent in 2016–17 (6.0 per cent in 2015–16), lower than the expected long term annual expense growth rate. |
| Excess annual leave | Managing excess annual leave is a continual challenge for NSW Health, with thirty–five per cent of the workforce having excess balances. |
| Overtime payments | NSW Health entities are generally managing overtime well; however NSW Ambulance’s overtime payments, $74.6 million in 2016–17, remain significantly higher than other health entities. |
| Time and leave recording practices | Unapproved employee timesheets continue to be a problem for health entities. Weak timesheet approval controls increase the risk of staff claiming and being paid for hours they have not worked. There is also an increased risk of high volumes of roster adjustments, manual pays, salary overpayments and leave not being recorded accurately. |
2. Service Delivery
| Service Agreements | Most of the service agreements between the Secretary of NSW Health and health entities were signed earlier than prior years. |
| Performance monitoring | Five NSW Health entities are not meeting the Ministry of Health’s performance expectations at 30 June 2017. |
| Emergency department performance | Data provided by the Ministry indicates NSW Health, on average, met emergency department triage response time targets across all triage categories for the fourth consecutive year. |
| Ambulance response times | Data provided by the Ministry shows NSW Ambulance response times for imminently life‑threatening incidents of 7.5 minutes in 2016–17 was within the Ministry’s target of 10.0 minutes. Data provided by the Ministry indicates NSW Ambulance response times for potentially life‑threatening incidents did not improve in 2016–17. The median response time of 11.1 minutes in 2016–17 was similar to 2015–16 (11.0 minutes). This is despite the number of Priority 1 responses reducing by 4.3 per cent. |
| Unplanned hospital re-admissions | Data provided by the Ministry shows eight local health districts achieved the Ministry of Health’s unplanned hospital re‑admissions target in 2016–17. The target is for local health districts to reduce re‑admission rates from the previous financial year. |
This report sets out the results of the 30 June 2017 financial statement audits of Health cluster entities.
The report has been structured into two chapters focusing on:
- Financial reporting and controls
- Service delivery.
This chapter outlines audit observations, conclusions and recommendations related to financial reporting and internal controls of entities for 2016-17.
| Observation | Conclusion or recommendation |
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2.1 Quality of financial reporting |
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| All cluster entities received unqualified audit opinions and misstatements identified in financial statements fell. | The quality of financial reporting remains high across the cluster. |
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2.2 Timeliness of financial reporting |
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| Early close procedures were largely completed and all financial statements were submitted by the deadlines. | Health entities controlled by the Ministry of Health continued submitting their financial statements well ahead of the statutory deadlines. |
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2.4 Financial and sustainability analysis |
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NSW Health recorded an operating surplus of $407 million in 2016–17.
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The statewide operating surplus was $84 million higher than 2015–16. Net surpluses contribute to NSW Health’s ability to invest in new facilities, upgrades and redevelopments. The 2016–17 financial results were once again impacted by the NSW Government initiative to improve cash management across the sector. |
| 2.5 Performance against budget | |
| Ten local health districts/specialty networks’ expense budget variance was outside performance expectations agreed with the Ministry at the beginning of 2016–17. | The Ministry continues to manage performance across NSW Health to improve the accuracy of budgeting practices. |
| 2.7 Human Resources | |
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Thirty-five per cent of NSW Health’s workforce have excess annual leave balances.
NSW Ambulance had the highest average sick leave rate in NSW Health of 85.2 hours per FTE in 2016–17 (78.7 hours in 2015–16). This was higher than the statewide average of 62.1 hours (62.0 hours in 2015–16).
Unapproved employee timesheets continue to be a problem for health entities. Weak timesheet approval controls increase the risk of staff claiming and being paid for hours they have not worked.
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Managing excess annual leave is a continual challenge for health entities.
Recommendation: NSW Ambulance should further review the effectiveness of its rostering practices to identify strategies to reduce excessive overtime payments. Recommendation: Health entities should conduct a risk‑based review of time and leave recording practices to ensure control weaknesses are identified and fixed. |
This chapter outlines our audit observations, conclusions and recommendations relating to service delivery for 2016–17.
| Observation | Conclusion or recommendation |
| 3.1 Service agreements in NSW Health | |
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Most of the service agreements between the Secretary of NSW Health and health entities were signed earlier than prior years. Thirteen local health districts/specialty networks signed their service agreements by the 31 July 2017 due date. This is a significant improvement with only seven local health districts/specialty networks meeting the date in 2015–16. |
Having service agreements signed as close as possible to the start of each year provides the Ministry and NSW Health entities with clarity around roles, responsibilities, performance measures, budgets, and service volumes and levels. |
| 3.2 Performance of NSW Health entities | |
| Five NSW Health entities were not meeting the Ministry’s performance expectations at 30 June 2017. | The Ministry is managing the five entities in accordance with its performance review process. |
| 3.4 Emergency department response times | |
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Data provided by the Ministry indicates NSW Health again, on average, met emergency department triage response time targets across all triage categories for the fourth consecutive year. The Ministry manages performance across NSW Health to ensure patients presenting at emergency departments receive care in a clinically appropriate timeframe. |
Based on the Ministry’s data, local health districts/specialty networks are, on average, meeting triage targets despite increasing emergency department attendances. The data shows eleven local health districts met all triage targets in 2016–17, compared to eight in |
| 3.5 Emergency treatment performance | |
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The Ministry manages public patient access to emergency services in public hospitals. It has an emergency treatment performance target of 81 per cent of patients leaving emergency departments within four hours. |
Data provided by the Ministry indicates NSW Health maintained its overall emergency treatment performance in 2016–17, but did not achieve its target. The State average emergency treatment performance was 74.2 per cent (74.2 per cent in 2015–16). Based on the Ministry’s data, only four local health districts achieved the target in 2016–17, five in |
| 3.6 Ambulance response times | |
| NSW Ambulance has a response time target of 10.0 minutes for imminently life‑threatening incidents in New South Wales. | Data provided by the Ministry indicates NSW Ambulance response times for imminently life-threatening incidents of 7.5 minutes in 2016–17 was within the Ministry’s target. |
| 3.7 Transfer of care | |
| The Ministry has a target of 90 per cent for the number of ambulance arrivals within a 30 minute ‘transfer of care’ timeframe. | Data provided by the Ministry indicates the rate of ambulance arrivals within a 30 minute 'transfer of care' timeframe improved from 87.6 per cent in 2015–16 to 91.7 per cent in 2016–17, exceeding the Ministry’s target. |
| 3.8 Average length of stay in hospital | |
| Based on the Ministry’s 2016–17 data, the average length of stay for acute episodes was 3.0 days. The average length of stay in New South Wales hospitals is lower than the national average of 3.2 days (in 2015–16). | The Ministry’s data shows the average length of stay by patients for acute episodes has remained stable in New South Wales hospitals for four years. |
| 3.9 Elective surgery access performance | |
| Data provided by the Ministry indicates NSW Health continues to manage waiting times for elective surgery in public hospitals. | The Ministry’s data shows NSW Health improved on‑time admission of patients for elective surgery in 2016–17 despite a 1.8 per cent increase in admissions. While the result improved, only one of the three targets for elective surgery waiting times was met in 2016–17. |
| 3.10 Unplanned hospital re-admissions | |
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Data provided by the Ministry indicates NSW Health, on average, did not reduce the rate of unplanned hospital re‑admissions in 2016–17. The Ministry has a target of reducing unplanned hospital re‑admissions compared to the previous financial year. Low re‑admission rates may indicate good patient management practices and post-discharge care. |
The Ministry’s data shows eight local health district met the target to reduce the rate of re‑admissions compared to the previous financial year. The statewide average rate increased from 6.3 per cent to 6.4 per cent. |
| 3.11 Post discharge care for acute mental health patients | |
| NSW Health has a goal to increase community-based care to acute mental health patients after they are discharged. Continuity of care in the community can lead to reduced symptom severity, lower re‑admission rates, and improved quality of life. | The Ministry’s 2016–17 data shows the statewide average for post discharge follow-up of acute mental health patients within seven days was 70.0 per cent (66.0 per cent in 2015–16). The statewide average improved and met the NSW Health target of 70 per cent. Nine local health districts exceeded the NSW Health target. |
| 3.12 Mental health acute re-admissions | |
| NSW Health has a goal to reduce acute public sector mental health re-admissions. High re‑admission rates may indicate deficiencies in inpatient treatment and follow up care. | The Ministry’s data shows twelve local health districts did not achieve the NSW Health target of 13 per cent mental health acute re‑admissions in 2016–17. |
| 3.13 Unplanned and emergency re‑presentations | |
|
NSW Health aims to reduce the number of unplanned and emergency re‑presentations to emergency departments. The Ministry’s 2016–17 data shows the State average of emergency department re‑presentations decreased marginally from 5.0 per cent in 2015–16 to 4.9 per cent. |
Patients attending rural emergency departments are more likely to re‑present within 48 hours of being discharged than those in regional or metropolitan emergency departments. |
| 3.14 Healthcare associated infection | |
| The national target for the rate of Staphylococcus aureus (golden staph) bloodstream infection is two cases per 10,000 bed days. | Data provided by the Ministry indicates the rate of golden staph bloodstream infection in New South Wales hospitals continues to be well below the target and national benchmark at 0.72 cases per 10,000 bed days in 2016–17 (0.75 in 2015–16). |
| 3.15 Patient experience and satisfaction | |
|
The Bureau of Health Information analyses and reports on the results of patient surveys. The Bureau’s survey shows 65 per cent of adult admitted patients rated the care they received in hospital as ‘very good’ and 29 per cent rated it as ‘good’. |
NSW Health recognises that patient surveys are an important feedback mechanism on the health care system that can only come from personal experiences. |
Agency compliance with NSW Government travel policies
Overall, agencies materially complied with NSW Government travel policies.
However, the Auditor-General found some agencies:
- did not always book official travel through the approved supplier
- had weaknesses in their travel approval processes
- had travel policies that were inconsistent with the NSW Government policy
- did not adequately manage their travel records.
We asked the 15 participating agencies to complete a self assessment of the processes they have implemented to comply with the new policy. The key observations are summarised below.
Government Advertising: Campaigns for 2015–16 and 2016–17
The 'Stronger Councils, Stronger Communities' and the 'Dogs deserve better' government advertising campaigns complied with the Government Advertising Act and most elements of the Government Advertising Guidelines.
However, some advertisements were designed to build support for government policy and used subjective or emotive messages. This is inconsistent with the requirement in the Government Advertising Guidelines for 'objective presentation in a fair and accessible manner'.
Advertisements in the 'Stronger Councils, Stronger Communities' campaign used subjective statements such as 'the system is broken' and 'brighter future'. While advertisements in the 'Dogs deserve better' campaign used confronting imagery such as gun targets, blood smears and gravestones.
The Government Advertising Act 2011 (the Act) requires the Auditor-General to conduct a performance audit in relation to at least one government advertising campaign in each financial year. The performance audit assesses whether advertising campaigns were carried out effectively, economically and efficiently and in compliance with the Act, the regulations, other laws and the Government Advertising Guidelines (the Guidelines). In this audit, we examined two campaigns:
- the ‘Stronger Councils, Stronger Communities’ campaign run by the Office of Local Government and the Department of Premier and Cabinet
- the ‘Dogs deserve better’ campaign run by the Department of Justice.
Section 6 of the Act details the specific prohibitions on political advertising. Under this section, material that is part of a government advertising campaign must not contain the name, voice or image of a minister, member of parliament or a candidate nominated for election to parliament or the name, logo or any slogan of a political party. Further, a campaign must not be designed so as to influence (directly or indirectly) support for a political party.
The ‘Stronger Councils, Stronger Communities’ government advertising campaign was run by the Office of Local Government and the Department of Premier and Cabinet in four phases from August 2015 to May 2016. The total cost of the campaign was over $4.5 million. See Appendix 2 for more details on this campaign.
Two factors potentially compromised value for money for the campaign. The request for quotes for the design of the Phase 1 advertisement did not reflect the full scale of work to be undertaken, which was substantially greater than initially quoted. Further, the department did not meet all recommended timeframes to minimise media booking costs for all phases of the campaign.
The campaign did not comply with all administrative requirements in all phases. Advertising for Phase 1 commenced before the compliance certificate was signed. There was no evidence that a compliance certificate was signed for Phase 2 extension. The cost benefit analyses for Phase 2 and Phase 2 extension did not sufficiently consider alternatives to advertising, as is required by the Government Advertising Guidelines.
Advertisements adopted subjective messages designed to build public support for council mergers and directed audiences to websites for more detailed information. Campaign research identified statements that were most likely to reduce resistance to mergers. Some advertising content used subjective language, which we consider inconsistent with the requirement for ‘objective presentation’. Evaluations of advertising effectiveness also measured the success of the advertisements in increasing public support for council mergers.
No breach of specific prohibitions in the Act
Section 6 of the Act prohibits the use of government advertising for political advertising. A government advertising campaign must not:
- be designed to influence (directly or indirectly) support for a political party
- contain the name, voice or image of a minister, any other member of parliament or a candidate nominated for election to parliament
- contain the name, logo or any slogan of, or any other reference relating to, a political party.
We did not identify any breach of the specific prohibitions listed above in the advertising content of this campaign.
Request for quotes to design advertisement did not reflect the full scope required
The request for quotes for the design of the Phase 1 advertisement did not reflect the full scale of work that was to be undertaken, and this created a risk to achieving value for money. The Office of Local Government sought quotes for design of a television advertisement only. It did not request an estimate for radio, online advertisements, or translation for linguistically diverse audiences, which were ultimately required for the campaign.
A full and fair assessment of which supplier could provide the best value for money could not be made given that the quotes obtained did not reflect the full scope of work. The final amount paid for the design of Phase 1 was 2.7 times the original quote. It is possible that another supplier that provided a quote could have provided overall better value for money.
The Office of Local Government continued to use the Phase 1 supplier for Phase 2 and Phase 2 extension (Exhibit 4). Where there are other suppliers that could feasibly compete for a contract, direct negotiation increases the risk the agency has not obtained the best value for money. The department advised that it continued with the same agency to avoid costs involved in briefing a new agency on the campaign.
The ‘Dogs deserve better’ government advertising campaign was run by the Department of Justice from August 2016, after the government announced its decision to prohibit greyhound racing, and was terminated in October 2016 after a change of government policy. The campaign had a budget of $1.6 million, with an actual spend of $1.3 million. See Appendix 2 for more details on this campaign.
The Secretary of the department determined that urgent circumstances existed that required advertising to commence prior to completing a cost benefit analysis and peer review. There was a concern that industry participants may make impulse decisions to destroy greyhounds without further information on support services; there was also an identified need to promote public greyhound adoptions.
Phase 1 advertisements focused on explaining the reasons for the prohibition on greyhound racing with a reference to a website for further information. While industry participants were identified as the primary audience, media expenditure was not specifically targeted to this group. Phase 2 advertisements more effectively addressed the originally identified ‘urgent needs’ of providing information on support services for greyhound owners and information on how the public could adopt a greyhound.
The urgency to advertise potentially compromised value for money. The department did not use price competition when selecting a creative supplier due to a concern this would add to timeframes. Further, the department did not meet recommended timeframes to minimise media booking costs.
We identified three other areas in Phase 1 advertisements that were inconsistent with government advertising requirements. Advertisements used provocative language and confronting imagery, which we consider to be inconsistent with the requirement for ‘objective presentation’. Two statements presented as fact based on the Special Commission’s Inquiry report were inaccurate; one of these was due to a calculation error. Radio advertisements did not clearly identify that they were authorised by the New South Wales Government for the first few days of the campaign.
No breach of specific prohibitions in the Act
Section 6 of the Act prohibits the use of government advertising for political advertising. A government advertising campaign must not:
- be designed to influence (directly or indirectly) support for a political party
- contain the name, voice or image of a minister, any other member of parliament or a candidate nominated for election to parliament
- contain the name, logo or any slogan of, or any other reference relating to, a political party.
We did not identify any breach of the specific prohibitions listed above in the advertising content of this campaign.
Animal welfare concerns were identified as the reason for urgent advertising
A brief prepared by the department in July 2016 raised concerns about the welfare of greyhounds following the NSW Premier’s announcement that the government would prohibit greyhound racing. The brief raised the risk that industry members may make impulse decisions to destroy their greyhounds without information on support that was being offered.
The department used the provisions in Sections 7(4) and 8(3) of the Act to expedite the release of advertising due to ‘other urgent circumstances’. This provision allows advertising to commence prior to completing the peer review process and cost benefit analysis.
In introducing the Government Advertising Bill to parliament in 2011, the then Premier noted that exceptional circumstances would cover situations ‘such as a civil emergency or sudden health epidemic’. There is no other guidance on when it is appropriate to use this section. It is at the discretion of a government agency head to determine whether a campaign is urgent.
Phase 1 advertisements did not focus on the urgent needs
This advertising campaign had three overarching objectives:
- to increase public awareness of the animal welfare reasons for the closure of the greyhound racing industry
- to change the behaviour of dog owners from potentially harming their greyhounds to treating them humanely, by accessing the support options and packages available
- to promote greyhound adoptions by the public.
Alongside advertising, the department took other steps to engage with the greyhound racing industry. This included direct mail, face to face meetings around the State, setting up a call centre and community consultation through an online survey. Other government agencies and animal welfare agencies were also engaged to reach out to affected stakeholders.
Phase 1 advertising content focused on providing information about the reasons for the closure of the industry. The department’s radio and television advertisements did not refer to support packages or encourage the public to adopt a greyhound. While print advertisements did mention these things, this was only presented in fine print. In all advertisements, audiences were referred to a website for further information.
The focus of advertisements on the reasons for industry closure was not consistent with the identified needs to urgently commence advertising to influence the behaviour of dog owners and encourage the public to adopt a greyhound.
The content in Phase 2 advertisements, which began around four weeks after the first phase, was more explicit in highlighting the services and support for industry members such as offering business and retraining advice. These advertisements also referred audiences to a call centre number as well as the website.
Peer review process limited to influencing second phase of advertisements
In urgent circumstances, the Act allows for peer review to be completed after advertising has commenced. For this campaign, the peer review process was completed on 19 August 2016, two weeks after advertising had commenced. Where advertising commences before the peer review process is completed, the usefulness of peer reviewers’ recommendations is limited to informing subsequent phases of advertising and the post-campaign evaluation.
The peer review report found the messages in Phase 1 advertisements were not clearly defined, and the role of advertising was not clearly defined amongst other campaign activities. These recommendations informed the second phase of advertising, which ran from 27 August 2016 until the campaign was terminated in October 2016.
The department could not demonstrate value for money was achieved for creative work
The department provided a fixed budget for creative work when requesting quotes from creative agencies to develop advertising material. This is not consistent with the quotation requirements in the government’s Guidelines for Advertising and Digital Communication Services. This approach creates risks to achieving value for money as creative agencies are not required to compete on price for their services. The department advised that it had pre-set the creative costs based on a comparative government campaign of a similar size. This was done due to a concern that requiring agencies to compete on price would affect the short timeframe given to develop creative material.
Three creative agencies accepted the opportunity to present design ideas for the campaign. The department was unable to provide evidence of how it chose the preferred supplier out of these three agencies. Records are important for accountability and allow a procurement decision to be audited after an urgent decision.
Short notice did not allow for cost-efficient media booking for all phases
Placement of advertisements in various media channels was done through the State’s Media Agency Services contract. This contract achieves savings as the government can use its aggregated media spend to gain discounts from the media supplier.
The Department of Premier and Cabinet provides guidance to ensure cost efficient media booking. For example, media time for a television advertisement should be booked at least 6 to 12 weeks in advance. Radio advertisements should be booked at least 2 to 8 weeks in advance.
The peer review report noted that the department did not have adequate time to look for the most cost-efficient way to advertise. In its response to the peer reviewers, the department acknowledged this to be due to the urgency to start advertising. The media booking authority was signed by the department one day before the campaign commenced.
The department used a wide public campaign for a narrow target audience
The campaign identified greyhound industry participants as the primary target audience. In 201516 there were 1,342 greyhound trainers, 1,695 owner/trainers, 983 attendants and 1,247 breeders in New South Wales. The department’s advertising submission identified ‘concerns that industry members could make impulsive decisions, potentially jeopardising the welfare of a large number of dogs, prior to the shutdown of the industry’.
The submission’s evidence of advertising effectiveness focused on increasing the level of wider community support for the ban rather than stopping industry members from making impulse decisions. It used an early opinion poll to show that total support for the ban on greyhound racing rises by 17 points and opposition drops by four points following explanation of the findings of the Special Commission of Inquiry report.
The peer review report noted that the role of advertising was not clearly defined amongst the department’s range of other direct and targeted communications and consultations held with industry members.
No demonstrated basis for use of confronting imagery and provocative language
The Guidelines require ‘objective presentation in a fair and accessible manner’. Neither the Guidelines or Handbook further explain what objective presentation means. We have used an ordinary definition of this term as ‘not influenced by personal feelings or opinions in considering and representing facts’. This is synonymous with terms like ‘impartial’, ‘neutral’, and ‘dispassionate’ and opposite to ‘subjective’. We consider that to meet the current requirements in the Guidelines for objectivity, advertising content should contain accurate statements or facts, and avoid subjective language.
Phase 1 focussed on the ongoing consequences if no action was taken to close the industry. The advertisements used provocative language, for example ‘Up to 70 per cent of dogs are deemed wastage by their own industry. Wastage! Slaughtered just for being slow’. Advertisements used confronting imagery like gravestones, blood smears and gun targets.
Our literature review into this area highlighted mixed findings on the effectiveness of confrontational advertising materials. In some cases, shock campaigns may cause an audience to reject or ignore the message, and may even encourage people to do the opposite of the intended behaviour. In other cases, such as in road safety campaigns, this style of advertising can be successful. This shows the importance of conducting pre-campaign research before adopting a confrontational or emotive approach in advertising.
The Government Advertising Handbook recommends that an agency explain the rationale and the evidence for their chosen advertising approach. There was no evidence that the department researched the effectiveness of its advertising approach with its target audience. The department had planned to undertake creative concept testing as part of a strategy to ensure the creative material was understood by its audience. The department advised that due to the urgency of the campaign, it did not have time to conduct this testing.
Not all Phase 1 radio advertisements clearly identified that they were authorised by the New South Wales Government
For the first few days on air, Phase 1 radio advertisements ended by referring the audience to a government website, instead of clearly identifying that it had been authorised by the New South Wales Government. Government authorisations and logos ensure the work and the programs of the NSW Government are easily identifiable by the community.
The department’s cost benefit analysis did not consider alternatives to advertising
For government advertising campaigns that cost over $1.0 million, the Act requires the advertising agency to carry out a cost benefit analysis and obtain approval from the Cabinet Standing Committee on Communications, prior to commencing the campaign.
The department engaged with audiences through direct mail, face to face forums, and a telephone helpline in addition to advertising. However, the department’s cost benefit analysis did not meet the requirements in the Guidelines to specify the extent to which expected benefits could be achieved without advertising, and to compare costs of options other than advertising that could be used to successfully implement the program (see Exhibit 6).
The cost benefit analysis made optimistic assumptions about the impact of the campaign on greyhound adoptions. It estimated that 2,360 greyhounds would be adopted if the campaign was run. This is significantly higher than the ‘most optimistic outcome’ of re-homing in the Special Commission Inquiry report (we calculated this to be 1,467 greyhounds). There was insufficient evidence to support the higher number of adoptions in the cost benefit analysis.
The sensitivity analysis shows that using the Special Commission’s ‘most optimistic outcome’ figure of re-homing would reduce the net present value of advertising to be negative. Further, the cost benefit analysis also assumed that increased government funding would be made available to animal welfare and rehoming organisations to support more adoptions, but did not estimate or include this cost when calculating the net present value of advertising.
There were two factual inaccuracies in key messages used for Phase 1 advertisements
Section 8(2) of the Act requires the head of a government agency to certify that the proposed campaign ‘contains accurate information’. The Secretary of the Department of Justice signed the compliance certificate on 29 July 2016, before advertisements commenced.
We examined the accuracy of factual claims in this advertising campaign, by comparing the key statements to the report of Special Commission of Inquiry into the Greyhound Racing Industry (the Commissioner report). The Commissioner report was quoted by the NSW Government as the basis for its policy to transition the greyhound racing industry to closure.
We identified that two of the key statements used in Phase 1 advertisements to support the animal welfare reasons for industry closure were inaccurate (Exhibit 7).
Appendix one - Responses from agencies
Appendix two - About the campaigns
Appendix three - About the Audit
Appendix four - Performance Auditing
Parliamentary reference - Report number #294 - released 2 November 2017
Office of Strategic Lands
The Office of Strategic Lands effectively fulfils most aspects of its defined role, however, it could do more to support strategic land planning by identifying and acquiring land for future public use proactively rather than waiting for agencies or landholders to approach it. It may also have greater impact if it expanded its activities beyond greater Sydney.
The Office of Strategic Lands (OSL) was established under the Environmental Planning and Assessment Act 1979 (EP&A Act) to identify, acquire, manage and divest land required for long-term planning by the NSW Government, particularly for open space and public purposes.
OSL is a Corporation Sole acting on behalf of the Minister for Planning and is run within the Department of Planning and Environment (DPE). OSL is a self-funding entity, and is responsible for administering the Sydney Region Development Fund (SRDF), a statutory fund used for ongoing land acquisition and management. OSL currently only operates within greater Sydney and holds over a billion dollars in land assets in this region.
This audit assessed whether OSL effectively fulfils its role to identify, acquire, manage and dispose of land, and whether OSL ensures it is sustainable over the long-term to meet its objectives.
Conclusion:
OSL effectively fulfils most aspects of its defined role, but is not supporting strategic land planning through proactive identification and acquisition of land for future public use. OSL is diligent in its financial management over the short and medium terms. However, it has identified that relying on the sale of surplus land to continue funding its ongoing operations is not sustainable, and it is yet to finalise a strategy to address this.
OSL does not currently have a strategic or proactive focus to improve land planning outcomes. This is primarily due to the lack of a clear strategy and business plan to direct its work which defines OSL’s purpose, objectives, goals and performance targets.
OSL expects to finalise and implement a Strategic Business Plan to guide its future direction and long-term sustainability, in late 2017.
OSL has three primary sources of funding. The largest source is Treasury loans which it needs to repay. The next most significant source of funding is from sales of land no longer required for government’s long-term needs. OSL has identified that it is likely to run out of surplus land within ten years. This is a significant financial risk for OSL, which should be addressed through a long-term financial strategy.
Contributions by Sydney councils into the SRDF are OSL’s only regular and consistent income stream. The formula to calculate these contributions has not been reviewed for over 25 years, and recent council mergers and border changes have increased the need to review the formula.
OSL is not used as extensively as it could be by other NSW Government agencies. It has the potential to play a much bigger role in assisting NSW Government agencies with longer term planning by partnering with them to identify, acquire, hold and manage land for future needs. For example, it could acquire land in future residential growth areas for needed public services such as schools, hospitals and transport corridors. There is also potential for OSL to expand its operations beyond the greater Sydney region into other parts of NSW to provide a statewide benefit from its unique role in government.
OSL has a unique role amongst government agencies, and could be used across NSW
NSW Government agencies we spoke with consider OSL fulfils an important role for the state that no other government agency performs. As a self-funding long-term land holder and manager, OSL can acquire and manage land beyond the four-year budget cycle that other government agencies face. Consideration should be given to expanding to other growth areas in NSW, where its unique role could assist in longer term land planning.
OSL has established good processes and procedures for most aspects of its role. This includes governance processes that we found to have been applied effectively. There was also adequate oversight and approvals for land transactions.
OSL has yet to finalise a business strategy to ensure long-term sustainability
OSL has shown that it is financially and operationally viable in the short to medium term. However, it does not have an overarching business strategy to guide its operations and ensure it is financially sustainable for the long-term. With a unique role in government, it is important for OSL to clarify its direction and implement a strategic business plan to drive its progress.
While there is no overarching long-term strategy, OSL has documented operating plans which guide its land acquisition and land divestment activities over the short to medium term. It has not developed a plan for its ongoing land management activities.
OSL advised that its Strategic Business Plan will be finalised and implemented in late 2017. This Plan should clarify OSL’s long-term direction, and guide its business to ensure it is financially sustainable.
OSL does not have adequate performance targets and measures
OSL has four key deliverables as part of DPE’s business plan. These deliverables cover land management, working with other agencies, and ensuring the SRDF is sustainable. There was no evidence that OSL or DPE monitor whether OSL achieves all key deliverables.
Currently, OSL’s performance targets are limited to meeting dollar values. OSL does not have any measures to demonstrate the achievement of outcomes that align with its core business, such as its success in land management or in working with other agencies. OSL staff also said that dollar targets were not always adequate or appropriate to measure its business performance.
With the development of its Strategic Business Plan, OSL has the opportunity to clarify its future business direction. This includes ensuring it has a range of relevant goals and performance measures that will support it becoming a strategic land planning partner with NSW Government agencies and local councils, and a land holder for the long-term.
OSL’s current financial management approach may impact long-term sustainability
OSL has valued the land that it needs to purchase on behalf of government to meet long-term strategic land needs in the Greater Sydney region, at $1.2 billion. However, OSLs annual budget for purchasing land is only between $40 million and $50 million until 2021. Also, in each of the last four years, OSL has not spent more than $30 million on land purchases because it relies on landowners to initiate contact when they are ready to sell their land.
Without a more proactive approach, it is not possible for OSL to make needed purchases in a timely manner. OSL acknowledges the substantial gap between these values, but has not established a budget or plan for how it will purchase all the identified land.
OSL has developed a Divestment Strategy which provides a five-year schedule of planned divestments. This is land OSL owns which has been identified as no longer required for government purposes. OSL has established an approach to generate the best and highest price for these sales. While funds are generated through the sale of surplus land, it also means that OSL holds fewer land assets to sell. OSL has identified it will run out of surplus land within ten years.
OSL needs to finalise and implement a business model to ensure it is financially and operationally capable to sustain and grow its business for the long-term.
OSL is working to improve transparency and engagement with key stakeholders
To deliver on its role, OSL needs to be able to effectively engage and work with its stakeholders, including NSW Government agencies, local councils, and people selling or buying land.
NSW Government agencies we spoke with are generally satisfied with OSL’s level of engagement and consultation. However, it would be beneficial for all parties to clarify and document their expectations of each other through a formal arrangement. OSL could also be more proactive in promoting its services, and working with additional NSW Government agencies to identify strategic lands.
The local councils in the Sydney region we spoke with are not as satisfied with OSL’s engagement and communication. The councils advised that they do not consider they are well-informed of OSL’s plans for their area, or how their contributions to the SRDF are spent.
More broadly, the activities of OSL are not reported transparently to stakeholders or the general public. OSL is developing a communication package for local councils and the community. This is an opportunity for OSL to improve the transparency of its role, operations, projects, and the SRDF, as well as promote its services and achievements.
The Office of Strategic Lands (OSL) was established in 1951 to identify, acquire, manage and divest land required for the NSW Government's long term planning purposes. OSL acts on behalf of the Minister for Planning, as a Corporation Sole, under the Environmental Planning and Assessment Act 1979 (EP&A Act).
OSL acquires and manages land identified for long-term strategic needs, and then transfers or sells it to other government agencies for ultimate use. It also sells land identified as surplus to government’s long term strategic requirements. Surplus land can also be transferred to local councils. OSL operates only in the greater Sydney region (from Wyong in the north, to the base of the Blue Mountains in the west, and south to Wollondilly). OSL has 20 staff who manage over 6,000 parcels of land.
Parliamentary reference - Report number #290 - released 10 August 2017
NorthConnex
The processes used to assess NorthConnex adequately considered value for money for taxpayers.This report also found that the impact of tolling concessions on road users and the motorway network was consistent with policy objectives described in the 2012 NSW Long Term Transport Master Plan.
Parliamentary reference - Report number #287 - released 8 June 2017
Universities 2016 Audits
No qualified opinions were issued on the universities’ financial statements and the quality and timeliness of financial reporting continued to improve. The report found that all NSW universities recorded a surplus in 2016 with combined revenue growth exceeding expense growth by 1.1 per cent. Universities have diversified revenue sources and are now less reliant on government grants. Combined overseas student income exceeded domestic student income for the first time in 2016.
This report focuses on key observations and common issues identified from our financial audits of the ten NSW universities and their controlled entities in 2016. The universities are listed in Appendix Three.
In this report, parliament and other users of universities’ financial statements are provided with an analysis of universities’ results and key observations in the following areas:
- Financial Performance and Reporting
- Financial Controls
- Governance
- Teaching and Research.
Snapshot of NSW universities
A snapshot of NSW universities for the year ended 31 December 2016 is shown below.
Financial performance and reporting are important elements of good governance. Confidence in public sector decision making and transparency is enhanced when financial reporting is accurate and timely.
This chapter outlines audit findings on financial performance and reporting of NSW universities for 2016.
Appropriate financial controls help ensure the efficient and effective use of resources and the implementation and administration of university policies. They are essential for quality and timely decision making.
In 2016, our audit teams made the following key observations on the financial controls of NSW universities.
Teaching and research are core activities of universities. The quality of teaching is a key driver for growth and attracting students. Through research, universities contribute to economic growth, lead innovation and improve their global rankings.
This chapter reports on teaching and research in NSW universities for 2016.
Contingent workforce - management and procurement
The Department of Industry, Transport for NSW and the Department of Education were not able to demonstrate that the use of contingent labour is the best resourcing strategy to meet their business needs or deliver value for money.
None of the three agencies we reviewed were able to demonstrate that contingent labour is the best resourcing strategy to meet their agencies’ business needs or delivers value for money. There are three reasons for this. First, agencies’ use of contingent labour was not informed by workforce planning at an agency level, with limited work undertaken in this area. Second, two of the three agencies have limited oversight of their contingent workforce. Information is not reliable or accurate, reports are onerous to produce, and there is limited reporting to the agency’s executive. Finally, none of the agencies routinely monitor and centrally document the performance of contingent workers to ensure services are delivered as planned. Together, these factors make it difficult for agencies to ensure contingent labour is engaged only when needed, at reasonable rates, and delivers quality services.
Some of these issues will be addressed by Contractor Central, which had only been introduced at Education at the time of our review. The new software program enables staff to easily obtain real-time reports on its contingent workforce. The recruitment broker also has the potential to improve value through better negotiation and benchmarking of pay rates. However, Contractor Central will only address some of the issues highlighted above. Better workforce planning and performance monitoring are needed to ensure an agencies’ workforce, including contingent workers, meets its business needs and represents value for money.
Download appendices for report on Contingent workforce
Parliamentary reference - Report number #282 - released 27 April 2017
