Reports
Workers compensation claims management
What this report is about
Workers compensation schemes in NSW provide compulsory workplace injury insurance. The effective management of workers compensation is important to ensure injured workers are provided with prompt support to ensure timely, safe and sustainable return to work.
Insurance and Care NSW (icare) manages workers compensation insurance. The State Insurance Regulatory Authority (SIRA) regulates workers compensation schemes. NSW Treasury has a stewardship role but does not directly manage the schemes.
This audit assessed the effectiveness and economy of icare’s management of workers compensation claims, and the effectiveness of SIRA’s oversight of workers compensation claims.
Findings
icare is implementing major reforms to its approach to workers compensation claims management - but it is yet to demonstrate if these changes are the most effective or economical way to improve outcomes.
icare’s planning and assurance processes for its reforms have not adequately assessed existing claims models or analysed other reform options.
icare's activities have not focused enough on its core responsibilities of improving return to work and maintaining financial sustainability.
SIRA has improved the effectiveness of its workers compensation regulatory activities in recent years. Prior to 2019, SIRA was mostly focussed on developing regulatory frameworks and was less active in its supervision of workers compensation schemes.
NSW Treasury's role in relation to workers compensation has been unclear, which has limited its support for performance improvements.
Recommendations
icare should:
- Ensure that its annual Statement of Business Intent clearly sets out its approach to achieving its legislative objectives.
- Monitor and evaluate its workers compensation scheme reforms.
- Develop a quality assurance program to ensure insurance claim payments are accurate.
NSW Treasury should:
- Work with relevant agencies to improve public sector workers compensation scheme outcomes.
- Engage with the icare Board to ensure icare's management is in line with relevant NSW Treasury policies.
SIRA should:
- Address identified gaps in its fraud investigation.
- Develop a co-ordinated research strategy.
Read the PDF report
Parliamentary reference - Report number #393 - released 2 April 2024
Design and administration of the WestInvest program
What this report is about
WestInvest is a $5 billion funding program announced in September 2021 to provide ‘local infrastructure to help communities hit hard by COVID-19’ in 15 local government areas (LGAs) selected by the government. It was divided into three parts: $3 billion for NSW government agency projects; $1.6 billion for competitive grants to councils and community groups; and $400 million for non-competitive grants to councils.
Following the change of government at the 2023 election, the program was renamed the Western Sydney Infrastructure Grants Program. Funding decisions made for the community and local government grants were retained, but multiple funding decisions for the NSW government projects were changed.
The audit objective was to assess the integrity of the design and implementation of the program and the award of program funding.
Findings
The design of the program lacked integrity because it was not informed by robust research or analysis to justify the commitment of public money to a program of this scale.
The then government did not have sufficient regard to the implications for the state's credit rating. A risk to the credit rating arose because the government may have been perceived to be using proceeds from major asset sales to fund new expenditure, rather than pay down its debt.
Decisions about program design were made by the then Treasurer's office without consultation with affected communities. The rationale for these decisions was not documented or made public.
For the NSW government projects, funding allocations did not follow advice from departments. Many funded projects did not meet the objectives of the program.
The two other rounds of the program were administered effectively, except for some gaps in documentation and quality assurance. The program guidelines did not require an equitable or needs-based distribution of funding across LGAs and there was a significant imbalance in funding between the 15 LGAs.
Recommendations
Our recommendations for the administration of future funding programs included:
- considering whether competitive grants are the best way to achieve the program's purpose
- completing program design and guidelines before announcements
- ensuring adequate quality assurance.
We also recommended that when providing advice for submissions by Ministers to Cabinet, agencies should ensure that departmental advice is clearly identified and is distinct from other advice or political considerations.
Read the PDF report
Parliamentary reference - Report number #391 - released 28 February 2024
NSW government agencies' use of consultants
What the report is about
This audit assessed how effectively NSW government agencies procure and manage consultants. It examined the role of the NSW Procurement Board and NSW Procurement (a unit within NSW Treasury) in supporting and monitoring agency procurement and management of consultants.
The audit used four sources of data that contain information about spending on consultants by NSW government agencies, including annual report disclosures and the State's financial consolidation system (Prime). It also reviewed a sample of consulting engagements from ten NSW government agencies.
What we found
Our review of a selection of consulting engagements indicates that agencies do not procure and manage consultants effectively.
We found most agencies do not use consultants strategically and do not have systems for managing or evaluating consultant performance. We also found examples of non-compliance with procurement rules, including contract variations that exceeded procurement thresholds.
NSW Procurement has made improvements to the information available about spending on consultants, including additional analysis and reporting. However, there is no single data source that accurately captures spending on consultants.
Our analysis of data on whole-of-government spending on consultants, drawn from agency annual reports, indicates that four large professional services firms accounted for about a quarter of consultancy expenditure from 2017–18 to 2021–22. This concentration increases strategic risks, including over-reliance on a limited number of providers and potential reduction in the independence of advice.
It is also highly unlikely that NSW government agencies will meet the government's 2019 policy commitment to reduce consultancy expenses by 20% each year, over four years, from 2019–20. NSW Treasury advised that to implement this commitment, agency budgets were reduced in Prime in line with the savings targets. However, actual spending on consulting in NSW Treasury's Reports on State Finances 2020–21 and 2021–22 was almost $100 million higher than the savings targets over the first three years since 2019–20.
What we recommended
The report made seven recommendations which aim to improve:
- the quality and transparency of data on spending on consultants
- monitoring of strategic risks and agency compliance with procurement and recordkeeping rules
- agencies' strategic use of consultants, including evaluation and knowledge retention.
Between 2017–18 and 2021–22, NSW government agency annual reports disclosed total spending of around $1 billion on consultants across more than 10,000 engagements. More than 1,000 consulting firms provided services to NSW government agencies during this period. Consulting is a classification of professional services that is characterised by giving advice or recommendations on a specific issue. The NSW Procurement Board Direction PBD-2021-03 defines a consultant as a person or organisation that provides 'recommendations or professional advice to assist decision-making by management'. PBD-2021-03 notes that the advisory nature of the work of consultants is the main factor that distinguishes them from other providers of professional services.
The NSW Procurement Board is responsible for setting procurement policy, issuing directions to support policies, and monitoring and reporting on agency compliance with policies and directions. NSW Procurement, a division within NSW Treasury, supports agencies to comply with the NSW Procurement Board’s policies and directions. A 'devolved governance model' is used for procurement in New South Wales. This means the heads of government entities that are covered by the NSW Procurement Board’s directions are responsible for managing the entity's procurement, including managing risks, reporting and ensuring compliance, in line with procurement laws and policies.
This audit assessed how effectively NSW government agencies procure and manage consultants. It assessed the role of the NSW Procurement Board and NSW Procurement in supporting and monitoring agency procurement and management of consultants. It also reviewed a sample of consulting engagements from ten NSW government agencies to examine how agencies procured, managed and reported on their use of consultants. The ten NSW government agencies were:
- NSW Treasury
- Department of Communities and Justice
- Department of Customer Service
- Department of Education
- Department of Planning and Environment
- Department of Premier and Cabinet
- Department of Regional NSW
- Infrastructure NSW
- Sydney Metro
- Transport for NSW
There are four different sources of data that contain information about spending on consultants by NSW government agencies: the State's financial consolidation system (Prime), disclosures of spending on consultants in agency annual reports, and two systems operated by NSW Procurement (the Business Advisory Services (BAS) dashboard and Spend Cube). Each of these data sources serves a different purpose, and collects and categorises information differently. None of these provide a complete source of data on spending on consultants, either in their own right or collectively.
NSW Treasury considers Prime to be the 'source of truth' on consulting expenditure across the NSW public sector. An account within Prime records recurrent spending on consultants, but this account does not include capital expenditure (that is, spending on consultants that has from a financial reporting perspective been 'capitalised' to a project on the balance sheet). As the State's financial consolidation system, Prime captures all financial information. However, capitalised consulting expenditure is recorded within various capital accounts, and is not identifiable within these accounts. While this is appropriate for accounting purposes, it means that the Prime account that records recurrent consulting expenditure does not reflect total spending on consultants by NSW government agencies. We used the data in Prime to assess whether NSW government agencies met the NSW Government's policy commitment—stated before the 2019 election and costed by the Parliamentary Budget Office—to reduce recurrent expenditure on consulting by 20% each year, over four years, from 2019–20. We did this because, while the Prime account for recurrent consulting expenditure does not reflect all spending on consultants, it does capture the recurrent spending that was subject to the policy commitment.
Most NSW government agencies are required by legislation to disclose spending on consultants (as defined in PBD-2021-03) in their annual reports. These disclosures include both recurrent and capital expenditure. For consulting engagements that cost more than $50,000, the disclosures also provide itemised information, including the names of the individual projects and the consultants used. While this data is more complete than Prime because it includes capital expenditure, it also has some gaps. Some entities are excluded from public reporting requirements on consultant use. For example, NSW Local Health Districts (LHD) are not required to produce annual reports, and the Ministry of Health does not include LHD consulting expenditure in its annual report.1 We used annual report disclosure data to report on total expenditure on consultants, and the concentration of suppliers of consulting services to NSW government agencies.
The BAS dashboard and Spend Cube are systems created by NSW Procurement to collect information about spending on suppliers of professional services. This includes consultants, but also includes other professional services providers. The systems were not designed for reporting on spending on consulting as defined in PBD-2021-03. However, we have used this data to assess specific aspects of NSW Procurement's monitoring of the use of consultants by NSW government agencies.
In 2018, we conducted an audit titled 'Procurement and reporting of consultancy services'. This assessed how 12 NSW government agencies complied with procurement requirements and how NSW Procurement supported the functions of the NSW Procurement Board. The 2018 audit found that none of the 12 agencies fully complied with NSW Procurement Board Directions on the use of consultants and that the NSW Procurement Board was not fully effective in overseeing and supporting agencies’ procurement of consultants. Specific findings from the 2018 audit included:
- Agencies applied the definition of consultant inconsistently, which affected the accuracy of reporting on consultancy expenditure.
- There was inadequate guidance from NSW Procurement for agencies implementing the procurement framework, with a need for additional tools, automated processes, and other internal controls to improve compliance.
- NSW Procurement had insufficient data for effective oversight of procurement and did not publish any data on the procurement of consultancy services by NSW government agencies.
Conclusion
Our review of a selection of consulting engagements from ten NSW government agencies indicates that these agencies do not procure and manage consultants effectively. We found that most agencies do not have a strategic approach to using consultants, or systems for managing or evaluating their performance. We also found examples of non-compliance with procurement rules, including contract variations that exceeded procurement thresholds. NSW Procurement, a division within NSW Treasury, provides frameworks and some guidance to agencies for procuring consultants. However, gaps in its data collection and analysis mean monitoring of strategic risks is limited and it does not respond to agency non-compliance consistently. There are limitations in ability of various data sources to accurately record spending on consultants. These limitations include incomplete recording of all spending, and different definitions of consulting for accounting and financial reporting purposes. Notwithstanding these limitations, and based on information in the State's financial consolidation system (Prime)—which records recurrent expenditure on consultants—it is highly unlikely that NSW government agencies will meet the government's 2019 policy commitment to reduce spending on consultants, as defined in the policy commitment and costed by the Parliamentary Budget Office.
The use of a 'devolved governance model' for procurement means NSW government agencies are responsible for developing and implementing their own systems that align with the NSW Government Procurement Policy Framework. Agency heads are responsible for demonstrating compliance. Most agencies included in this audit did not have a clear strategic approach to how and when consultants should be used (for example, to seek advice and expertise not already available within the agency) and were using consultants in an ad hoc manner.
Our analysis of whole-of-government spending on consultants, drawn from agency annual reports, indicates that four large professional services firms account for around 27% of spending on consultants in the period from 2017–18 to 2021–22. The number of firms making up the top 50% of expenditure decreased from 11 to eight during this time, with the other 50% of expenditure spread across more than 1,000 firms. Concentration of consulting engagements within a small number of firms increases strategic risks, including that advice is not sufficiently objective and impartial, and that NSW government agencies become overly reliant on selected professional services firms.
Our review of a selection of consulting engagements by NSW government agencies found several examples of non-compliance with procurement policy. This included the use of variations to contract values which exceeded allowable limits. Record keeping was inadequate in many cases we reviewed, which limits transparency about government spending. Most agencies did not proactively manage their consulting engagements. The majority of consulting engagements that we reviewed were not evaluated or assessed by the agency for quality. Very few used any processes to ensure the transfer and retention of knowledge generated through consulting engagements. This means agencies miss opportunities to increase core staff skills and knowledge and to maximise value from these engagements.
NSW Procurement oversees a detailed policy framework that provides guidance and support to NSW government agencies when they are using consultants. The policy framework provides mandatory steps and some other guidance. Our audit on the procurement and reporting of consultancy services in 2018 found that agency reporting on the use of consultants was inconsistent and recommended that NSW Procurement should improve the quality, accuracy and completeness of data collection. NSW Procurement’s guidance on how agencies should classify and report on consulting engagements remains ambiguous. This contributes to continued inconsistent reporting by and across agencies, and reduces the quality of data on the use of consultants.
NSW Procurement has made some improvements to the information available about spending on consultants since our audit in 2018, including additional analysis and reporting that is available to agencies. However, there is still no single data source that accurately captures all spending on consultants. This is despite our recommendations in 2018 that NSW Procurement improve the quality of information collected from agencies and suppliers, which NSW Procurement accepted. This makes it harder for NSW Procurement or individual agencies to track trends and identify risks or improvement opportunities in the way consultants are used.
In early 2019, the NSW Government made a policy commitment to reduce consultancy expenses by 20% each year, over four years, from 2019–20 (excluding capital-related consultancy expenses). This commitment was set out in the Parliamentary Budget Office's '2019 Coalition Election Policy Costings (Policy Costings)'. NSW Treasury subsequently advised that to implement this commitment, agency budgets were reduced in Prime in line with the savings targets. However, actual spending on consultants recorded in Prime in the first three years after the commitment was made was almost $100 million higher than the targets. We did not see any evidence that the financial data on actual expenditure was used to inform reporting on NSW government agencies' progress toward achieving the savings set out in the policy commitment.
This chapter outlines our findings on the role of NSW Procurement in overseeing the use of consultants by NSW government agencies.
This chapter outlines our findings on the use of consultants by the ten NSW government agencies that were included in this audit.
Appendix one – Responses from auditees
Appendix two – About the audit
Appendix three – Performance auditing
Copyright notice
© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.
Parliamentary reference - Report number #378 - released 2 March 2023
Machinery of government changes
What the report is about
The term ‘machinery of government’ refers to the way government functions and responsibilities are organised.
The decision to make machinery of government changes is made by the Premier. Changes may be made for a range of reasons, including to support the policy and/or political objectives of the government of the day.
Larger machinery of government changes typically occur after an election or a change of Premier.
This report assessed how effectively the Department of Planning, Industry and Environment (DPIE) and the Department of Regional NSW (DRNSW) managed their 2019 and 2020 machinery of government changes, respectively. It also considered the role of the Department of Premier and Cabinet (DPC) and NSW Treasury in overseeing machinery of government changes.
What we found
The anticipated benefits of the changes were not articulated in sufficient detail and the achievement of benefits has not been monitored. The costs of the changes were not tracked or reported.
DPC and NSW Treasury provided principles to guide implementation but did not require departments to collect or report information about the benefits or costs of the changes.
The implementation of the machinery of government changes was completed within the set timeframes, and operations for the new departments commenced as scheduled.
Major implementation challenges included negotiation about the allocation of corporate support staff and the integration of complex corporate and ICT systems.
What we recommended
DPC and NSW Treasury should:
- consolidate existing guidance on machinery of government changes into a single document that is available to all departments and agencies
- provide guidance for departments and agencies to use when negotiating corporate services staff transfers as a part of machinery of government changes, including a standard rate for calculating corporate services requirements
- progress work to develop and implement common processes and systems for corporate services in order to support more efficient movement of staff between departments and agencies.
Fast facts
- $23.7m is the estimated minimum direct cost of the 2019 DPIE changes to date, noting additional ICT costs will be incurred
- $4.0m is the estimated minimum direct cost of the 2020 DRNSW changes, with an estimated $2.7 million ongoing annual cost
- 40+ NSW Government entities affected by the 2019 machinery of government changes
The term ‘machinery of government’ refers to the way government functions and responsibilities are allocated and structured across government departments and agencies. A machinery of government change is the reorganisation of these structures. This can involve establishing, merging or abolishing departments and agencies and transferring functions and responsibilities from one department or agency to another.
The decision to make machinery of government changes is made by the Premier. These changes may be made for a range of reasons, including to support the policy and/or political objectives of the government of the day. Machinery of government changes are formally set out in Administrative Arrangements Orders, which are prepared by the Department of Premier and Cabinet, as instructed by the Premier, and issued as legislative instruments under the Constitution Act 1902.
The heads of agencies subject to machinery of government changes are responsible for implementing them. For more complex changes, central agencies are also involved in providing guidance and monitoring progress.
The NSW Government announced major machinery of government changes after the 2019 state government election. These changes took place between April and June 2019 and involved abolishing five departments (Industry; Planning and Environment; Family and Community Services; Justice; and Finance, Services and Innovation) and creating three new departments (Planning, Industry and Environment; Communities and Justice; and Customer Service). This also resulted in changes to the 'clusters' associated with departments. The NSW Government uses clusters to group certain agencies and entities with related departments for administrative and financial management. Clusters do not have legal status. Most other departments that were not abolished had some functions added or removed as a part of these machinery of government changes. For example, the functions relating to regional policy and service delivery in the Department of Premier and Cabinet were moved to the new Department of Planning, Industry and Environment.
Our Report on State Finances 2019, tabled in October 2019, outlined these changes and identified several issues that can arise from machinery of government changes if risks are not identified early and properly managed. These include: challenges measuring the costs and benefits of machinery of government changes; disruption to services due to unclear roles and responsibilities; and disruption to control environments due to staff, system and process changes.
In April 2020, the Department of Regional NSW was created in a separate machinery of government change. This involved moving functions and agencies related to regional policy and service delivery from the Department of Planning, Industry and Environment into a standalone department.
This audit assessed how effectively the Department of Planning, Industry and Environment (DPIE) and the Department of Regional NSW (DRNSW) managed their 2019 and 2020 machinery of government changes, respectively. It also considered the role of the Department of Premier and Cabinet and NSW Treasury in overseeing machinery of government changes. The audit investigated whether:
- DPIE and DRNSW have integrated new responsibilities and functions in an effective and timely manner
- DPIE and DRNSW can demonstrate the costs of the machinery of government changes
- The machinery of government changes have achieved or are achieving intended outcomes and benefits.
It is unclear whether the benefits of the machinery of government changes that created the Department of Planning, Industry and Environment (DPIE) and the Department of Regional NSW (DRNSW) outweigh the costs. The anticipated benefits of the changes were not articulated in sufficient detail and the achievement of directly attributable benefits has not been monitored. The costs of the changes were not tracked or reported. The benefits and costs of the machinery of government changes were not tracked because the Department of Premier and Cabinet (DPC) and NSW Treasury did not require departments to collect or report this information. The implementation of the machinery of government changes was completed within the set timeframes, and operations for the new departments commenced as scheduled. This was achieved despite short timelines and no additional budget allocation for the implementation of the changes.
The rationale for establishing DPIE was not documented at the time of the 2019 machinery of government changes and the anticipated benefits of the change were not defined by the government or the department. For DRNSW, the government’s stated purpose was to provide better representation and support for regional areas, but no prior analysis was conducted to quantify any problems or set targets for improvement. Both departments reported some anecdotal benefits linked to the machinery of government changes. However, improvements in these areas are difficult to attribute because neither department set specific measures or targets to align with these intended benefits. Since the machinery of government changes were completed, limited data has been gathered to allow comparisons of performance before and after the changes.
DPC and NSW Treasury advised that they did not define the purpose and benefits of the machinery of government changes, or request affected departments to do so, because these were decisions of the government and the role of the public service was to implement the decisions.
We have attempted to quantify some of the costs of the DPIE and DRNSW changes based on the information the audited agencies could provide. This information does not capture the full costs of the changes because some costs, such as the impact of disruption on staff, are very difficult to quantify, and the costs of ICT separation and integration work may continue for several more years. Noting these limitations, we estimate the initial costs of these machinery of government changes are at least $23.7 million for DPIE and $4.0 million for DRNSW. For DPIE, this is predominantly made up of ICT costs and redundancy payments made around the time of the machinery of government change. For DRNSW it includes ICT costs and an increase in senior executive costs for a standalone department, which we estimate is an ongoing cost of at least $1.9 million per year.
For the DPIE machinery of government change, there were risks associated with placing functions and agencies that represent potentially competing policy interests within the same 'cluster', such as environment protection and industry. We did not see evidence of plans to manage these issues being considered by DPIE as a part of the machinery of government change process.
The efficiency of machinery of government changes could be improved in several ways. This includes providing additional standardised guidance on the allocation of corporate functions and resources when agencies are being merged or separated, and consolidating guidance on defining, measuring and monitoring the benefits and costs of machinery of government changes.
Appendix one – Response from agencies
Appendix two – About the audit
Appendix three – Performance auditing
Copyright notice
© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.
Parliamentary reference - Report number #359 - released (17 December 2021).
Managing climate risks to assets and services
What the report is about
This report assessed how effectively the Department of Planning, Industry and Environment (DPIE) and NSW Treasury have supported state agencies to manage climate risks to their assets and services.
Climate risks that can impact on state agencies' assets and services include flooding, bushfires, and extreme temperatures. Impacts can include damage to transport, communications and energy infrastructure, increases in hospital admissions, and making social housing or school buildings unsuitable.
NSW Treasury estimates these risks could have significant costs.
What we found
DPIE and NSW Treasury’s support to agencies to manage climate risks to their assets and services has been insufficient.
In 2021, key agencies with critical assets and services have not conducted climate risk assessments, and most lack adaptation plans.
DPIE has not delivered on the NSW Government commitment to develop a state-wide climate change adaptation action plan. This was to be complete in 2017.
There is also no adaptation strategy for the state. These have been released in all other Australian jurisdictions. The NSW Government’s draft strategic plan for its Climate Change Fund was also never finalised.
DPIE’s approach to developing climate projections is robust, but it hasn’t effectively educated agencies in how to use this information to assess climate risk.
NSW Treasury did not consistently apply dedicated resourcing to support agencies' climate risk management until late 2019.
In March 2021, DPIE and NSW Treasury released the Climate Risk Ready NSW Guide and Course. These are designed to improve support to agencies.
What we recommended
DPIE and NSW Treasury should, in partnership:
- enhance the coordination of climate risk management across agencies
- implement climate risk management across their clusters.
DPIE should:
- update information and strengthen education to agencies, and monitor progress
- review relevant land-use planning, development and building guidance
- deliver a climate change adaptation action plan for the state.
NSW Treasury should:
- strengthen climate risk-related guidance to agencies
- coordinate guidance on resilience in infrastructure planning
- review how climate risks have been assured in agencies’ asset management plans.
Fast facts
4 years
between commitments in the NSW Climate Change Policy Framework, and DPIE and NSW Treasury producing key supports to agencies for climate risk management.
$120bn
Value of physical assets held by nine NSW Government entities we examined that have not completed climate risk assessments.
Low capability to do climate risk assessment has been found across state agencies. The total value of NSW Government physical assets is $365 billion, as at 30 June 2020.
x3
NSW Treasury’s estimates of the annual fiscal and economic costs associated with natural disasters will triple by 2060–61.
According to the Intergovernmental Panel on Climate Change in 2021, each of the last four decades has been successively warmer and surface temperatures will continue to increase until at least the mid-century. The Commonwealth Scientific and Industrial Research Organisation (CSIRO) and the Bureau of Meteorology (BoM) have reported that extreme weather across Australia is more frequent and intense, and there have been longer-term changes to weather patterns. They also report sea levels are rising around Australia increasing the risk of inundation and damage to coastal infrastructure and communities.
According to the Department of Planning, Industry and Environment (the department), in New South Wales the impacts of a changing climate, and the risks associated with it, will be felt differently across regions, populations and economic sectors. The department's climate projections indicate the number of hot days will increase, rainfall will vary across the state, and the number of severe fire days will increase.
The NSW Government is a provider of essential services, such as health care, education and public transport. It also owns and manages around $365 billion in physical assets (as at June 2020). More than $180 billion of its assets are in major infrastructure such as roads and railway lines.
In NSW, climate risks that could directly impact on state agencies' assets and services include flooding, bushfires, and extreme temperatures. In recent years, natural hazards exacerbated by climate change have damaged and disrupted government transport, communications and energy infrastructure. As climate risks eventuate, they can also increase hospital admissions when people are affected by poorer air quality, and make social housing dwellings or schools unsafe and unusable during heatwaves. The physical impacts of a changing climate also have significant financial costs. Taking into account projected economic growth, NSW Treasury has estimated that the fiscal and economic costs associated with natural disasters due to climate change will more than triple per year by 2061.
The department and NSW Treasury advise that leading practice in climate risk management includes a process that explicitly identifies climate risks and integrates these into existing risk management, monitoring and reporting systems. This is in line with international risk management and climate adaptation standards. For agencies to manage the physical risks of climate change to their assets and services, leading practice identified by the department means that they need to:
- use robust climate projection information to understand the potential climate impacts
- undertake sound climate risk assessments, within an enterprise risk management framework
- implement adaptation plans that reduce these risks, and harness opportunities.
Adaptation responses that could be planned for include: controlling development in flood-prone locations; ensuring demand for health services can be met during heatwaves; improving thermal comfort in schools to support student engagement; proactive asset maintenance to reduce disruption of essential services, and safeguarding infrastructure from more frequent and intense natural disasters.
According to NSW Treasury policy, agencies are individually responsible for risk management systems appropriate to their context. The department and NSW Treasury have key roles in ensuring that agencies are supported with robust information and timely, relevant guidance to help manage risks to assets and services effectively, especially for emerging risks that require coordinated responses, such as those posed by climate change.
This audit assessed whether the department and NSW Treasury are effectively supporting NSW Government agencies to manage climate risks to their assets and services. It focused on the management of physical risks to assets and services associated with climate change.
Conclusion
The Department of Planning, Industry and Environment (the department) has made climate projections available to agencies since 2014, but provided limited guidance to assist agencies to identify and manage climate risks. NSW Treasury first noted climate change as a contextual factor in its 2012 guidance on risk management. NSW Treasury only clarified requirements for agencies to integrate climate considerations into their risk management processes in December 2020.
The department has not delivered on a NSW Government commitment for a state-wide climate change adaptation action plan, which was meant to be completed in 2017. Currently many state agencies that own or manage assets and provide services do not have climate risk management in place.
Since 2019, the department and NSW Treasury have worked in partnership to develop a coordinated approach to supporting agencies to manage these risks. This includes guidance to agencies on climate risk assessment and adaptation planning published in 2021.
More work is needed to embed, sustain and lead effective climate risk management across the NSW public sector, especially for the state's critical infrastructure and essential services that may be exposed to climate change impacts.
The NSW Government set directions in the 2016 NSW Climate Change Policy Framework to 'manage the impact of climate change on its assets and services by embedding climate change considerations into asset and risk management’ and more broadly into 'government decision-making'.
The department released climate projections and has made information on projected climate change impacts available since 2014, but this has not been effectively communicated to agencies. The absence of a state-wide climate change adaptation action plan has limited the department's implementation of a coordinated, well-communicated program of support to agencies for their climate risk management.
NSW Treasury is responsible for managing the state's finances and providing stewardship to the public sector on financial and risk management, but it did not consistently apply dedicated resourcing to support agencies' climate risk management until late 2019. NSW Treasury estimates the financial costs of climate-related physical risks are significant and will continue to grow.
The partnership between the department and NSW Treasury has produced the 2021 Climate Risk Ready NSW Guide and Course, which aim to help agencies understand their exposure to climate risks and develop adaptation responses. The Guide maps out a process for climate risk assessment and adaptation planning and is referenced in NSW Treasury policy on internal audit and risk management. It is also referenced in NSW Treasury guidance to agencies on how to reflect the effects of climate-related matters in financial statements.
There is more work to be done by the department on maintaining robust, accessible climate information and educating agencies in its use. NSW Treasury will need to continue to update its policies, guidance and economic analyses with relevant climate considerations to support an informed, coordinated approach to managing physical climate risks to agencies' assets and services, and to the state's finances more broadly.
The effectiveness of the department and NSW Treasury's support involves the proactive and sustained take-up of climate risk management by state agencies. There is a key role for the department and NSW Treasury in monitoring this progress and its results.
The support delivered to agencies around climate risk management, including risk assessment and adaptation planning, has been slow to start and of limited impact. The department's capacity to implement a coordinated approach to supporting agencies has also been limited by the absence of a state-wide adaptation strategy and related action plan.
In 2021, products were released by the department and NSW Treasury with potential to improve support to agencies on climate risk assessment and adaption planning (that this, Climate Risk Ready NSW Guide and Course, which provides links to key NSW Treasury polices). The department and NSW Treasury are now leading work to develop a more coordinated approach to climate risk management for agencies' assets and services, and building the resilience of the state to climate risk more broadly.
While climate projections have been available to agencies and the community more broadly since 2013–14, the department has not been effective in educating the relevant data users within agencies in how to use the information for climate risk assessments and adaptation planning.
The absence of a strategy focused on this is significant and has contributed to the current low levels of climate risk assessment uptake across agencies (see section 2). Agencies are required to use the climate projections developed by the department when developing long term plans and strategies as part of the NSW Government Common Planning Assumptions.
For the department, key opportunities to embed climate risk management include leveraging land use planning policies and guidance to drive adaptation, which has potential to better protect the state's assets and services. NSW Treasury has a role in continuing to update its policies, guidance and economic analyses with relevant climate change considerations to support an informed, coordinated approach to addressing physical climate risks to agencies' assets and services, and to the state's finances more broadly.
There is currently no plan on how the department and NSW Treasury intend to routinely monitor the progress of agencies with implementing the CRR Guide or developing climate risk 'maturity' more broadly. As agencies are responsible for implementing risk management systems that meet NSW Treasury standards, which now clearly includes consideration of climate risk (TPP20-08), establishing effective monitoring, reporting and accountability around this progress should be a priority for the department and NSW Treasury.
Appendix one – Response from agencies
Appendix two – Timeline of key activities
Appendix three – About the audit
Appendix four – Performance auditing
Copyright notice
© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.
Parliamentary reference - Report number #355 - released (7 September 2021).
Grants administration for disaster relief
What the report is about
The report examined whether NSW Treasury, Service NSW and the Department of Customer Service effectively administered grants programs funded under the $750 million Small Business Support Fund, including:
- $10,000 Small Business Support Grant
- $3,000 Small Business Recovery Grant.
What we found
The agencies effectively implemented the grants within required timeframes, reflecting the NSW Government’s decision to deliver urgent financial support to small businesses impacted by the COVID-19 pandemic.
NSW Treasury met urgent timeframes to design the grants and Service NSW made timely payments in line with the grants' objectives and eligibility criteria.
Service NSW and the Department of Customer Service strengthened processes to detect and minimise fraud in response to identified external fraud risks, and to investigate suspected fraudulent applications.
Fraud security checks and investigations are ongoing, and the agencies will not know the full extent of fraud across the grants until these processes have been completed.
The agencies regularly monitored and reported on the timeliness of payments to small business applicants but have not yet measured all benefits of the grants programs.
The $10,000 Support Grant and the $3,000 Recovery Grant have provided around $630 million in one off grant payments to eligible small businesses.
What we recommended
NSW Treasury should finalise and implement an evaluation of both grants programs, including obtaining feedback from businesses.
Service NSW should develop a framework that documents expected controls for how it administers grants, including business processes, fraud control and governance and probity requirements.
Service NSW should publish information on all grants programs, including grants distribution and uptake.
The Department of Customer Service should ensure its processes for managing conflicts of interest meets its policy requirements.
Upcoming performance audit
The Audit Office is conducting a further performance audit into grants administration for disaster relief focussing on bushfire grants. This is planned to complete in 2021-22.
Fast factsSmall Business Support Fund
Grant program administration
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Further information
Please contact Ian Goodwin, Deputy Auditor-General on 9275 7347 or by email.
The NSW Government responded to the partial shutdown of the NSW economy caused by the COVID-19 pandemic in 2020 by, among other measures, announcing on 3 April 2020 that it would place $750 million into the Small Business Support Fund (the Fund).
Under the Fund, the NSW Government would pay one-off grants of up to $10,000 to small business impacted by the shutdown. The objectives of the $10,000 Small Business Support Grant ($10,000 Support Grant) were to:
- ease the pressure on small businesses that have been affected by the COVID-19 pandemic
- support the ongoing operations of small businesses highly impacted by the COVID-19 restrictions
- deliver cash-flow into small businesses as soon as possible so that small businesses could meet pressing financial needs.
Grant applications were assessed against eligibility criteria that were determined by the NSW Government. The eligibility criteria for the $10,000 Support Grant required an employing small business to demonstrate it was significantly impacted by the COVID-19 pandemic by self-declaring or demonstrating a significant decline of 75 per cent or more in turnover compared to 2019. Documentation requirements were relaxed for small businesses within highly impacted industries.
In June 2020, the NSW Government announced a second round of one-off grants of up to $3,000 to small businesses that were highly impacted by the COVID-19 pandemic ($3,000 Recovery Grant). The objective of the $3,000 Recovery Grant was to help small businesses in 'highly impacted industries' — those directly impacted by the restrictions and closures put in place under the Public Health Orders — to meet the costs of safely reopening or scaling up operations.
The eligibility criteria for the $3,000 Recovery Grant required that a small business be in a highly impacted industry, demonstrate that it was significantly impacted by the COVID-19 pandemic by declaring a significant decline in turnover, and had costs associated with reopening under the 'COVID-Safe' requirements.
NSW Treasury and Service NSW implemented both grants on behalf of the NSW Government. The process of applying for a grant was intended to be quick and easy, with Service NSW using automated assessments and simple online application forms to process applications. Applicants applied for the $10,000 Support Grant through the Service NSW website between 14 April 2020 to 30 June 2020 and applied for the $3,000 Small Business Recovery Grant between 1 July 2020 and 31 August 2020.
At May 2021, around $520 million has been paid to over 52,500 grant applicants under the $10,000 Support Grant and around $109 million had been paid to around 36,700 grant applicants under the $3,000 Recovery Grant.
The Audit Office plans to undertake a performance audit into grants administration for disaster relief focussing on bushfire grants in 2021–22.
This audit assessed whether the grants funded under the $750 million Small Business Support Fund were effectively administered and implemented to provide disaster relief. It addressed the following questions:
- Were funded grants programs planned, designed and targeted effectively?
- Were funded grants programs implemented in line with the objectives and criteria and delivery requirements?
- Have agencies established measures to monitor intended benefits and outcomes?
This audit did not seek to assess the effectiveness of any other grant programs or stimulus measures. It also did not seek to assess the impact of the funding on applicants, or the future prospects of small businesses that received support.
ConclusionNSW Treasury and Service NSW effectively implemented two grants within required timeframes reflecting the NSW Government's decision to deliver urgent financial support to small businesses impacted by the COVID-19 pandemic in 2020. The $10,000 Support Grant and the $3,000 Recovery Grant have provided around $630 million in one-off grant payments to eligible small businesses.NSW Treasury met urgent timeframes to design the grants and Service NSW made timely payments in line with the grants' objectives and eligibility criteria.NSW Treasury met urgent timeframes to provide advice to the NSW Government on the grant design, proposed delivery partner, expected numbers of eligible businesses and the suitability of the proposed grant payment amount within the required timeframes. This was achieved within one day for the $10,000 Support Grant and within four days for the $3,000 Support Grant. In the context of the complex and changing pandemic and economic conditions between March and July 2020, NSW Treasury's advice to government outlined the risk, feasibility, expected demand estimates and assumptions for the grants. NSW Treasury's demand projections were limited by uncertainty as to the pandemic's economic impact. Estimated demand for the grants was not met, resulting in around $120 million from the Small Business Support Fund remaining unspent. Service NSW met urgent timeframes to stand-up both grants: 11 days for the $10,000 Support Grant and 26 days for the $3,000 Recovery Grant. It met agreed delivery requirements and made timely payments to small businesses in line with the grants' objectives and eligibility criteria. Over 65,000 businesses have received a payment under either grant, and over 23,000 businesses received both grants. Gaps in project and risk management processes were expected given the tight timeframe to implement the grants.The tight timeframe in which the agencies had to implement the grants contributed to gaps in project and risk management. The agencies advised that compromises were understood by both parties and were a necessary trade-off to ensure payments were made quickly. Service NSW and the Department of Customer Service have acted to strengthen their processes to detect and minimise fraud in response to identified external fraud risks and to investigate suspected fraudulent applications since the grants commenced. Service NSW intends to further enhance fraud controls for grants applications and payments for future grants by implementing a fraud control framework by December 2021. The agencies regularly monitored and reported on the timeliness of payments to small business applicants but have not yet measured all benefits of the grants programs.Service NSW and NSW Treasury established processes to monitor and report on the timeliness of payments to grant applicants. NSW Treasury has not yet measured all intended impacts of the grants, nor undertaken processes to obtain detailed feedback from grant recipients. Without these measures, there is limited insight into the extent to which the grants helped to support small businesses or ability to capture lessons which could be applied in future grants programs. NSW Treasury advises that an evaluation will commence from mid-2021. |
1. Key findings
Around $630 million in timely one-off grant payments have been made to small businesses
Service NSW and NSW Treasury have paid around $630 million in one-off grant payments to small businesses via two grants administered under the $750 million Small Business Support Fund. At May 2021:
- around $520 million has been paid to over 52,500 grant applications received for the $10,000 Small Business Support Grant ($10,000 Support Grant)
- around $109 million has been paid to 36,700 grant applications received for the $3,000 Small Business Recovery Grant ($3,000 Recovery Grant).
Across both grants, over 65,000 small businesses received a payment across either grant, and over 23,000 businesses received payments under both grants.
NSW Treasury advise that, while no data was collected on the time to pay applicants for the $10,000 Support Grant, from its monitoring of the grants' outputs it was satisfied that payment timeframes met its expectations. Service NSW met its targeted time to pay applicants with payments made within ten days for the $3,000 Recovery Grant.
Funds for both grants were not fully spent due to limitations in data and uncertainty of the COVID-19 pandemic's impact. At May 2021, the final demand for the $10,000 Support Grant was around 30 per cent less than initially anticipated and the final demand for the $3,000 Recovery Grant was around 40 per cent less than initially anticipated.
NSW Treasury developed proposals establishing high level design and delivery expectations within rapid timeframes
NSW Treasury put forward proposals to the NSW Government for the two grants administered under the $750 million Small Business Support Fund. It met rapid timeframes for producing this advice: within one day for the $10,000 Support Grant and within four days for the $3,000 Recovery Grant. NSW Treasury's advice to the NSW Government on how to best target the total funding, eligibility criteria and the feasibility of delivering the grants through Service NSW was based on comparable grants programs – including the $10,000 Small Business Bushfire Support Grant – which at that time were ongoing.
The proposals established, at a high-level, the rationale for the grants, expected financial costs, risks and analysis on budget impacts, and confirmation that Service NSW could deliver the grants applications platform. NSW Treasury's demand projections were uncertain due to limited data in the early stages of the pandemic regarding potential economic impact.
Given the tight timeframes, the proposals did not fully consider all planning and design aspects for both grants. For example, there was minimal identification of the costs and benefits of the programs, and a lack of detailed design and delivery requirements. The proposals outlined that arrangements to finalise the risk management, controls, and auditing plan would be agreed by Service NSW and NSW Treasury before implementation.
In future circumstances where urgent advice on program design is required, NSW Treasury could set clearer expectations for the delivery agency, including fully considering costs, benefits and delivery requirements that could be carried through to project governance and implementation.
Service NSW implemented both grants in line with delivery expectations
Service NSW met urgent timeframes to stand-up both grants: 11 days for the $10,000 Support Grant and 26 days for the $3,000 Recovery Grant. Delivery expectations for each grant were established under a grant project agreement (grant agreement). Service NSW delivered the online application platform, assessment of applications, payments and reporting of the grants' uptake as per the grant agreements.
The urgent timeframes to deliver the grants contributed to gaps in Service NSW's project and risk management processes throughout the lifecycle of both grants. For example, the requirement to meet pressing timeframes for the $10,000 Support Grant launch meant agencies had reduced time to achieve sign-off on key documentation. As a result, important documents and processes – including the grant agreement, risk documentation and key business process and quality assurance processes – were not finalised ahead of launch.
Quality assurance and compliance processes for detecting fraud were not settled until after the conclusion of the applications for the $10,000 Support Grant, and were not completed until late 2020. Some project documents, including risk registers, communication plans and project briefs are still not finalised.
The longer timeframe to develop the $3,000 Recovery Grant meant that agencies were able to build on their understanding of the implementation requirements from the $10,000 Support Grant, and better document these expectations and understanding while ensuring that key documents and sign-offs were in place prior to launch.
Service NSW tightened its risk management and controls in response to evidence of fraudulent applications
In May 2020, Service NSW and the Department of Customer Service (DCS) were alerted to suspected fraudulent activity within grants administered by Service NSW. Initially, Service NSW anticipated that up to $8.8 million of the $10,000 Support Grant was at risk of exposure to fraudulent applications. However, Service NSW reported that, at April 2021, $1.9 million for the $10,000 Support Grant and $254,000 for the $3,000 Recovery Grant from paid applications were at risk of fraud exposure.
Following an internal review of the potential exposure to fraudulent or ineligible applications, Service NSW implemented additional automated security checks on applications, increased manual assessments of grant applications, established a dedicated taskforce for grants administration and engaged a unit within DCS to manage high-risk investigations.
Service NSW and DCS's increased governance and oversight has resulted in an established case management function, increased referrals to law enforcement, prioritised investigations of suspicious applications and the development of a 'Fraud Control Framework' aimed at addressing external fraud risks. Given Service NSW had limited experience in these processes in context of administering grant payments, such actions were an appropriate response.
Security checks and investigations of suspicious applications are ongoing. Service NSW will not know the full extent of fraud across the grants until these processes have been fully completed.
Service NSW and Department of Customer Service can improve how conflicts of interest are managed for future programs
Compliance with agency policies and processes to manage conflicts of interest and financial subdelegations demonstrates that investment decisions are being made by appropriately skilled and experienced staff, allowing agencies to operate efficiently, and reducing the risk of internal fraud.
DCS was unable to produce employee conflicts of interest declarations for the $10,000 Support Grant. Therefore, it is not known how many employees had completed conflicts of interest declarations for this round.
DCS provided information on conflicts of interest declarations for the $3,000 Recovery Grant. Twenty-nine per cent of declarations provided for employees undertaking grant assessments for the $3,000 Recovery Grant were incomplete at March 2021, and a further nine per cent were not finalised even though they indicated a real, potential or perceived conflict.
For future grants programs, ensuring compliance with conflicts of interest policies would help DCS and Service NSW to have greater confidence that conflicts of interest are appropriately identified and managed.
NSW Treasury has not yet measured all benefits or outcomes of the grants
In April 2021, NSW Treasury updated its evaluation plan for the $10,000 Support Grant and $3,000 Recovery Grant in support of an economic evaluation to commence from mid-2021. The updated evaluation plan outlines inputs, activities, and outputs as well as immediate, short term and medium term outcomes for both grants.
The evaluation will consider the extent to which both grants achieved their intended outcomes, and whether the economic benefits exceeded the costs to help inform decisions about the nature and design of any future small business support programs. This will complement, and feed into a broader review of all NSW Government COVID-19 stimulus measures.
Service NSW rapidly developed an approach to administer the grants
Over recent disasters, such as the 2019–20 bushfires and the COVID-19 pandemic, Service NSW has been responsible for administering grant programs on behalf of other government agencies.
Service NSW implemented both grants under its Project Management Framework and under each grant agreement with NSW Treasury as it does not have its own grants administration framework. To address the risks that emerged during delivery, Service NSW developed an approach to standardise and monitor the administration of the grants while they were being implemented.
Service NSW now has an opportunity to establish a grants administration framework, based on the processes, lessons and outcomes captured under the grants administration taskforce and in developing its fraud control framework. Embedding these processes into business as usual for grants administration will enable Service NSW to have a consistent set of expectations for controls, business processes and governance and probity requirements for future grants it implements.
2. Recommendations
By December 2021, NSW Treasury should:
1. finalise and implement an evaluation of the $10,000 Support Grant and $3,000 Recovery Grant, including obtaining direct feedback from businesses on how grant funds achieved the grant objectives.
By December 2021, Service NSW should:
2. develop a grants administration framework, which documents expected controls – including fraud controls – business processes and governance and probity requirements
3. publish information on all grants programs, including grants distribution and uptake.
By December 2021, the Department of Customer Service should:
4. ensure its process for managing conflicts of interest meets policy requirements by:
- ensuring employees promptly declare any real, potential or perceived conflicts of interest
- annually producing a list of conflicts of interest for records retention purposes
- requiring a separate register of conflicts of interest declarations where a grant program is deemed as high risk.
3. Lessons for grants administered within urgent timeframes
The two grants this audit examined were administered within a context of urgent timeframes, and increased complexity and uncertainty about the impact of the COVID-19 pandemic. The following lessons are shared to assist sponsor and delivery agencies in administering future grants where rapid implementation is required.
Sponsor agencies should consider the following lessons:
1. develop an approach to define and measure benefits for rapidly developed programs and projects where a full business case and cost-benefit analysis is not feasible
2. establish common processes and expectations for co-administered grants:
- periodically assure agencies' capability to deliver grants programs
- agree and establish risk appetite statements with administering agencies
- clearly establish expected performance levels and targets under any agreement
3. review the processes and outcomes of rapidly developed programs, capture lessons learned, and apply these in planning and delivering future programs.
Delivery agencies should consider the following lessons:
1. risk management and risk appetite:
- perform robust assessment procedures to ensure risks associated with delivery of the project are identified
- ensure the controls implemented adequately address identified risks
- agree and document the acceptable risk appetite at the outset
- review risk management processes after the grants are issued when unable to finalise risk management processes ahead of launch
2. grant agreements between NSW public sector agencies:
- ensure agreements are finalised in a timely manner
- ensure agreements clearly outline:
- roles and responsibilities of both parties,
- changes in scope of services provided
- fees and charges applicable
3. frameworks for grants administration:
- ensure that there is a common set of expectations in place to guide grants administration including standard controls and processes for managing risk, capturing lessons learned and reporting on outcomes.
Appendix one – Response from agencies
Appendix three – Public Health Orders
Appendix four – Highly impacted industries
Appendix five – About the audit
Appendix six – Performance auditing
© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.
Parliamentary reference - Report number #352 - released (24 June 2021).
Destination NSW's support for major events
This report focuses on whether Destination NSW (DNSW) can demonstrate that its support for major events achieves value for money.
The audit found that DNSW’s processes for assessing and evaluating the major events it funds are mostly effective, but its public reporting does not provide enough transparency.
DNSW provides clear information to event organisers seeking funding and has a comprehensive methodology for conducting detailed event assessments. However, the reasons for decisions to progress events from the initial assessment to the detailed assessment stage are not documented in sufficient detail.
DNSW does not publish detailed information about the events it funds or the outcomes of these events. This means that members of the public are unable to see whether its activities achieve value for money. However, DNSW’s internal reporting to its key decision‑makers, including the CEO, the Board and the Minister is appropriate.
The Auditor-General made four recommendations to DNSW, aimed at improving the transparency of its activities, improving the documentation of decisions and certain compliance matters, and streamlining its approach to assessing and evaluating events that receive smaller amounts of funding.
Destination NSW (DNSW) provides funding to attract a range of major events to New South Wales, including high-profile professional sports matches and tournaments, musicals, art and museum exhibitions, and participation-focused events such as festivals and sports events that members of the public can enter. The NSW Government's rationale for providing funding is to encourage event organisers to hold events in New South Wales, and to ensure that events held in New South Wales maximise the potential for attracting overseas and interstate visitors.
This audit assessed whether DNSW can demonstrate that its support for major events achieves value for money. In making this assessment, the audit examined whether:
- DNSW effectively assesses proposals to support major events
- DNSW effectively evaluates the impact of its support for major events.
This audit focused on DNSW's work to attract major events to New South Wales. It did not assess DNSW's tourism promotion or development work, which includes developing tourism strategies, marketing and advertising campaigns, national and international partnerships, and regional programs.
ConclusionDestination NSW's processes for assessing event applications and evaluating its support for major events are mostly effective. DNSW's internal systems allow it to know whether its decisions are achieving value for money. Its public reporting does not provide enough information about its activities and their outcomes, although it is consistent with that of equivalent organisations in other Australian jurisdictions. DNSW's process for assessing applications for funding from organisers of major events is mostly effective. Clear information is provided to event organisers seeking funding, and DNSW has a comprehensive methodology for conducting detailed event assessments. However, the reasons for decisions to progress events from the initial assessment to the detailed assessment stage are not documented in sufficient detail. DNSW has a framework for disclosure and monitoring staff conflicts of interest. However, its forms for staff to disclose conflicts of interest on specific events they are working on are ambiguous. DNSW's management of gifts and benefits broadly complies with the minimum standards set by the Public Service Commission, but there are some gaps in its implementation of these. DNSW conducts an evaluation of each major event it supports. DNSW articulates expected outcomes in contracts with event organisers and uses a sound methodology to evaluate events. Internal reporting to its key decision-makers, including the CEO, the Board and the Minister is appropriate. However, DNSW does not publish detailed information about the events it funds or the outcomes of these events. This means that members of the public are unable to see whether its activities achieve value for money. |
Appendix one – Response from Destination NSW
Appendix two – About the audit
Appendix three – Performance auditing
Copyright Notice
© Copyright reserved by the Audit Office of New South Wales. All rights reserved. No part of this publication may be reproduced without prior consent of the Audit Office of New South Wales. The Audit Office does not accept responsibility for loss or damage suffered by any person acting on or refraining from action as a result of any of this material.
Parliamentary reference - Report number #332 - released 9 April 2020.
Managing risks in the NSW public sector: risk culture and capability
The Ministry of Health, NSW Fair Trading, NSW Police Force, and NSW Treasury Corporation are taking steps to strengthen their risk culture, according to a report released today by the Auditor-General, Margaret Crawford. 'Senior management communicates the importance of managing risk to their staff, and there are many examples of risk management being integrated into daily activities', the Auditor-General said.
We did find that three of the agencies we examined could strengthen their culture so that all employees feel comfortable speaking openly about risks. To support innovation, senior management could also do better at communicating to their staff the levels of risk they are willing to accept.
Effective risk management is essential to good governance, and supports staff at all levels to make informed judgements and decisions. At a time when government is encouraging innovation and exploring new service delivery models, effective risk management is about seizing opportunities as well as managing threats.
Over the past decade, governments and regulators around the world have increasingly turned their attention to risk culture. It is now widely accepted that organisational culture is a key element of risk management because it influences how people recognise and engage with risk. Neglecting this ‘soft’ side of risk management can prevent institutions from managing risks that threaten their success and lead to missed opportunities for change, improvement or innovation.
This audit assessed how effectively NSW Government agencies are building risk management capabilities and embedding a sound risk culture throughout their organisations. To do this we examined whether:
- agencies can demonstrate that senior management is committed to risk management
- information about risk is communicated effectively throughout agencies
- agencies are building risk management capabilities.
The audit examined four agencies: the Ministry of Health, the NSW Fair Trading function within the Department of Finance, Services and Innovation, NSW Police Force and NSW Treasury Corporation (TCorp). NSW Treasury was also included as the agency responsible for the NSW Government's risk management framework.
In assessing an agency’s risk culture, we focused on four key areas:
Executive sponsorship (tone at the top)
In the four agencies we reviewed, senior management is communicating the importance of managing risk. They have endorsed risk management frameworks and funded central functions tasked with overseeing risk management within their agencies.
That said, we found that three case study agencies do not measure their existing risk culture. Without clear measures of how employees identify and engage with risk, it is difficult for agencies to tell whether employee's behaviours are aligned with the 'tone' set by the executive and management.
For example, in some agencies we examined we found a disconnect between risk tolerances espoused by senior management and how these concepts were understood by staff.
Employee perceptions of risk management
Our survey of staff indicated that while senior leaders have communicated the importance of managing risk, more could be done to strengthen a culture of open communication so that all employees feel comfortable speaking openly about risks. We found that senior management could better communicate to their staff the levels of risk they should be willing to accept.
Integration of risk management into daily activities and links to decision-making
We found examples of risk management being integrated into daily activities. On the other hand, we also identified areas where risk management deviated from good practice. For example, we found that corporate risk registers are not consistently used as a tool to support decision-making.
Support and guidance to help staff manage risks
Most case study agencies are monitoring risk-related skills and knowledge of their workforce, but only one agency has addressed the gaps it identified. While agencies are providing risk management training, surveyed staff in three case study agencies reported that risk management training is not adequate.
NSW Treasury provides agencies with direction and guidance on risk management through policy and guidelines. In line with better practice, NSW Treasury's principles-based policy acknowledges that individual agencies are in a better position to understand their own risks and design risk management frameworks that address those risks. Nevertheless, there is scope for NSW Treasury to refine its guidance material to support a better risk culture in the NSW public sector.
Recommendation
By May 2019, NSW Treasury should:
- Review the scope of its risk management guidance, and identify additional guidance, training or activities to improve risk culture across the NSW public sector. This should focus on encouraging agency heads to form a view on the current risk culture in their agencies, identify desirable changes to that risk culture, and take steps to address those changes.
Appendix one - Response from agencies
Appendix three - About the audit
Appendix four - Performance auditing
Parliamentary reference - Report number #298 - released 23 April 2018
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
Implementation of the NSW Government’s program evaluation initiative
The NSW Government’s ‘program evaluation initiative’, introduced to assess whether service delivery programs achieve expected outcomes and value for money, is largely ineffective according to a report released today by NSW Auditor-General, Margaret Crawford.
Government services, in areas such as public order and safety, health and education, are delivered by agencies through a variety of programs. In 2016–17, the NSW Government estimates that it will spend over $73 billion on programs to deliver services.
Parliamentary reference - Report number #277 - released 3 November 2016
