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Reports

10 August 2018

Published

Managing Antisocial behaviour in public housing

Community Services

Asset valuation

Infrastructure

Regulation

Service delivery

Workforce and capability

The Department of Family and Community Services (FACS) has not adequately supported or resourced its staff to manage antisocial behaviour in public housing according to a report released today by the Deputy Auditor-General for New South Wales, Ian Goodwin.

In recent decades, policy makers and legislators in Australian states and territories have developed and implemented initiatives to manage antisocial behaviour in public housing environments. All jurisdictions now have some form of legislation or policy to encourage public housing tenants to comply with rules and obligations of ‘good neighbourliness’. In November 2015, the NSW Parliament changed legislation to introduce a new approach to manage antisocial behaviour in public housing. This approach is commonly described as the ‘strikes’ approach.

When introduced in the NSW Parliament, the ‘strikes’ approach was described as a means to:

improve the behaviour of a minority of tenants engaging in antisocial behaviour
create better, safer communities for law abiding tenants, including those who are ageing and vulnerable.

FACS has a number of tasks as a landlord, including a responsibility to collect rent and organise housing maintenance. FACS also has a role to support tenants with complex needs and manage antisocial behaviour. These roles have some inherent tensions. The FACS antisocial behaviour management policy aims are:

to balance the responsibilities of tenants, the rights of their neighbours in social housing, private residents and the broader community with the need to support tenants to sustain their public housing tenancies.

This audit assessed the efficiency and effectiveness of the ‘strikes’ approach to managing antisocial behaviour in public housing environments.

We examined whether:

the approach is being implemented as intended and leading to improved safety and security in social housing environments
FACS and its partner agencies have the capability and capacity to implement the approach
there are effective mechanisms to monitor, report and progressively improve the approach.

Conclusion

FACS has not adequately supported or resourced its staff to implement the antisocial behaviour policy. FACS antisocial behaviour data is incomplete and unreliable. Accordingly, there is insufficient data to determine the nature and extent of the problem and whether the implementation of the policy is leading to improved safety and security.

FACS management of minor and moderate incidents of antisocial behaviour is poor. FACS has not dedicated sufficient training to equip frontline housing staff with the relevant skills to apply the antisocial behaviour management policy. At more than half of the housing offices we visited, staff had not been trained to:

conduct effective interviews to determine whether an antisocial behaviour complaint can be substantiated
de escalate conflict and manage complex behaviours when required
properly manage the safety of staff and tenants
establish information sharing arrangements with police
collect evidence that meets requirements at the NSW Civil and Administrative Tribunal
record and manage antisocial behaviour incidents using the information management system HOMES ASB.

When frontline housing staff are informed about serious and severe illegal antisocial behaviour incidents, they generally refer them to the FACS Legal Division. Staff in the Legal Division are trained and proficient in managing antisocial behaviour in compliance with the policy and therefore, the more serious incidents are managed effectively using HOMES ASB.

FACS provides housing services to most remote townships via outreach visits from the Dubbo office. In remote townships, the policy is not being fully implemented due to insufficient frontline housing staff. There is very limited knowledge of the policy in these areas and FACS data shows few recorded antisocial behaviour incidents in remote regions.

The FACS information management system (HOMES ASB) is poorly designed and has significant functional limitations that impede the ability of staff to record and manage antisocial behaviour. Staff at most of the housing offices we visited were unable to accurately record antisocial behaviour matters in HOMES ASB, making the data incorrect and unreliable.

Parliamentary reference - Report number #306 - released 10 August 2018

28 June 2018

Published

Regulation of water pollution in drinking water catchments and illegal disposal of solid waste

Environment

Compliance

Internal controls and governance

Management and administration

Regulation

Risk

There are important gaps in how the Environmental Protection Authority (EPA) implements its regulatory framework for water pollution in drinking water catchments and illegal solid waste disposal. This limits the effectiveness of its regulatory responses, according to a report released today by the Auditor-General for New South Wales, Margaret Crawford.

The NSW Environment Protection Authority (the EPA) is the State’s primary environmental regulator. The EPA regulates waste and water pollution under the Protection of the Environment Operations Act 1997 (the Act) through its licensing, monitoring, regulation and enforcement activities. The community should be able to rely on the effectiveness of this regulation to protect the environment and human health. The EPA has regulatory responsibility for more significant and specific activities which can potentially harm the environment.

Activities regulated by the EPA include manufacturing, chemical production, electricity generation, mining, waste management, livestock processing, mineral processing, sewerage treatment, and road construction. For these activities, the operator must have an EPA issued environment protection licence (licence). Licences have conditions attached which may limit the amount and concentrations of substances the activity may produce and discharge into the environment. Conditions also require the licensee to report on its licensed activities.

This audit assessed the effectiveness of the EPA’s regulatory response to water pollution in drinking water catchments and illegal solid waste disposal. The findings and recommendations of this review can be reasonably applied to the EPA’s other regulatory functions, as the areas we examined were indicative of how the EPA regulates all pollution types and incidents.

Conclusion

There are important gaps in how the EPA implements its regulatory framework for water pollution in drinking water catchments and illegal solid waste disposal which limit the effectiveness of its regulatory response. The EPA uses a risk-based regulatory framework that has elements consistent with the NSW Government Guidance for regulators to implement outcomes and risk-based regulation. However, the EPA did not demonstrate that it has established reliable practices to accurately and consistently detect the risk of non compliances by licensees, and apply consistent regulatory actions. This may expose the risk of harm to the environment and human health.

The EPA also could not demonstrate that it has effective governance and oversight of its regulatory operations. The EPA operates in a complex regulatory environment where its regional offices have broad discretions for how they operate. The EPA has not balanced this devolved structure with an effective governance approach that includes appropriate internal controls to monitor the consistency or quality of its regulatory activities. It also does not have an effective performance framework that sets relevant performance expectations and outcome-based key performance indicators (KPIs) for its regional offices.

These deficiencies mean that the EPA cannot be confident that it conducts compliance and enforcement activities consistently across the State and that licensees are complying with their licence conditions or the Act.

The EPA's reporting on environmental and regulatory outcomes is limited and most of the data it uses is self reported by industry. It has not set outcome-based key result areas to assess performance and trends over time.

The EPA uses a risk-based regulatory framework for water pollution and illegal solid waste disposal but there are important gaps in implementation that reduce its effectiveness.

Elements of the EPA’s risk-based regulatory framework for water pollution and illegal solid waste disposal are consistent with the NSW Government Guidance for regulators to implement outcomes and risk-based regulation. There are important gaps in how the EPA implements its risk-based approach that limit the effectiveness of its regulatory response. The EPA could not demonstrate that it effectively regulates licensees because it has not established reliable practices that accurately and consistently detect licence non compliances or breaches of the Act and enforce regulatory actions.

The EPA lacks effective governance arrangements to support its devolved regional structure. The EPA's performance framework has limited and inconclusive reporting on regional performance to the EPA’s Chief Executive Officer or to the EPA Board. The EPA cannot assure that it is conducting its regulatory responsibilities effectively and efficiently.

The EPA does not consistently evaluate its regulatory approach to ensure it is effective and efficient. For example, there are no set requirements for how EPA officers conduct mandatory site inspections, which means that there is a risk that officers are not detecting all breaches or non-compliances. The inconsistent approach also means that the EPA cannot rely on the data it collects from these site inspections to understand whether its regulatory response is effective and efficient. In addition, where the EPA identifies instances of non compliance or breaches, it does not apply all available regulatory actions to encourage compliance.

The EPA also does not have a systematic approach to validate self-reported information in licensees’ annual returns, despite the data being used to assess administrative fees payable to the EPA and its regulatory response to non-compliances.

The EPA does not use performance frameworks to monitor the consistency or quality of work conducted across the State. The EPA has also failed to provide effective guidance for its staff. Many of its policies and procedures are out-dated, inconsistent, hard to access, or not mandated.

Recommendations

By 31 December 2018, to improve governance and oversight, the EPA should:
1.	implement a more effective performance framework with regular reports to the Chief Executive Officer and to the EPA Board on outcomes-based key result areas that assess its environmental and regulatory performance and trends over time
By 30 June 2019, to improve consistency in its practices, the EPA should:
2.	progressively update and make accessible its policies and procedures for regulatory operations, and mandate procedures where necessary to ensure consistent application
3.	implement internal controls to monitor the consistency and quality of its regulatory operations.

The EPA does not apply a consistent approach to setting licence conditions for discharges to water.

The requirements for setting licence conditions for water pollution are complex and require technical and scientific expertise. In August 2016, the EPA approved guidance developed by its technical experts in the Water Technical Advisory Unit to assist its regional staff. However, the EPA did not mandate the use of the guidance until mid-April 2018. Up until then, the EPA had left discretion to regional offices to decide what guidance their staff use. This meant that practices have differed across the organisation. The EPA is yet to conduct training for staff to ensure they consistently apply the 2016 guidance.

The EPA has not implemented any appropriate internal controls or quality assurance process to monitor the consistency or quality of licence conditions set by its officers across the State. This is not consistent with good regulatory practice.

The triennial 2016 audit of the Sydney drinking water catchment report highlighted that Lake Burragorang has experienced worsening water quality over the past 20 years from increased salinity levels. The salinity levels were nearly twice as high as in other storages in the Sydney drinking water catchment. The report recommended that the source and implication of the increased salinity levels be investigated. The report did not propose which public authority should carry out such an investigation.

To date, no NSW Government agency has addressed the report's recommendation. There are three public authorities, the EPA, DPE and WaterNSW that are responsible for regulating activities that impact on water quality in the Sydney drinking water catchment, which includes Lake Burragorang.

Recommendation

By 30 June 2019, to address worsening water quality in Lake Burragorang, the EPA should:
4.	(a) review the impact of its licensed activities on water quality in Lake Burragorang, and
	(b) develop strategies relating to its licensed activities (in consultation with other relevant NSW Government agencies) to improve and maintain the lake's water quality.

The EPA’s risk-based approach to monitoring compliance of licensees has limited effectiveness.

The EPA tailors its compliance monitoring approach based on the performance of licensees. This means that licensees that perform better have a lower administrative fee and fewer mandatory site inspections.

However, this approach relies on information that is not complete or accurate. Sources of information include licensees’ annual returns, EPA site inspections and compliance audits, and pollution reports from the public.

Licensees report annually to the EPA on their performance, including compliance against their licence conditions. The Act contains significant financial penalties if licensees provide false and misleading information in their annual returns. However, the EPA does not systematically or consistently validate information self-reported by licensees, or consistently apply regulatory actions if it discovers non-compliance.

Self-reported compliance data is used in part to assess a licensed premises’ overall environmental risk level, which underpins the calculation of the administrative fee, the EPA’s site inspection frequency, and the licensee’s exposure to regulatory actions. It is also used to assess the load-based licence fee that the licensee pays.

The EPA has set minimum mandatory site inspection frequencies for licensed premises based on its assessed overall risk level. This is a key tool to detect non-compliance or breaches of the Act. However, the EPA has not issued a policy or procedures that define what these mandatory inspections should cover and how they are to be conducted. We found variations in how the EPA officers in the offices we visited conducted these inspections. The inconsistent approach means that the EPA does not have complete and accurate information of licensees’ compliance. The inconsistent approach also means that the EPA is not effectively identifying all non-compliances for it to consider applying appropriate regulatory actions.

The EPA also receives reports of pollution incidents from the public that may indicate non-compliance. However, the EPA has not set expected time frames within which it expects its officers to investigate pollution incidents. The EPA regional offices decide what to investigate and timeframes. The EPA does not measure regional performance regarding timeframes.

The few compliance audits the EPA conducts annually are effective in identifying licence non-compliances and breaches of the Act. However, the EPA does not have a policy or required procedures for its regulatory officers to consistently apply appropriate regulatory actions in response to compliance audit findings.

The EPA has not implemented any effective internal controls or quality assurance process to check the consistency or quality of how its regulatory officers monitor compliance across the State. This is not consistent with good regulatory practice.

Recommendations

To improve compliance monitoring, the EPA should implement procedures to:
5.	by 30 June 2019, validate self-reported information, eliminate hardcopy submissions and require licensees to report on their breaches of the Act and associated regulations in their annual returns
6.	by 31 December 2018, conduct mandatory site inspections under the risk-based licensing scheme to assess compliance with all regulatory requirements and licence conditions.

The EPA cannot assure that its regulatory enforcement approach is fully effective.

The EPA’s compliance policy and prosecution guidelines have a large number of available regulatory actions and factors which should be taken into account when selecting an appropriate regulatory response. The extensive legislation determining the EPA’s regulatory activities, and the devolved regional structure the EPA has adopted in delivering its compliance and regulatory functions, increases the risk of inconsistent compliance decisions and regulatory responses. A good regulatory framework needs a consistent approach to enforcement to incentivise compliance.

The EPA has not balanced this devolved regional structure with appropriate governance arrangements to give it assurance that its regulatory officers apply a consistent approach to enforcement.

The EPA has not issued standard procedures to ensure consistent non-court enforcement action for breaches of the Act or non-compliance with licence conditions. Given our finding that the EPA does not effectively detect breaches and non-compliances, there is a risk that it is not applying appropriate regulatory actions for many breaches and non-compliances.

A recent EPA compliance audit identified significant non-compliances with incident management plan requirements. However, the EPA has not applied regulatory actions for making false statements on annual returns for those licensees that certified their plans complied with such requirements. The EPA also has not applied available regulatory actions for the non-compliances which led to the false or misleading statements.

Recommendation

By 31 December 2018 to improve enforcement, the EPA should:
7.	Implement procedures to systematically assess non-compliances with licence conditions and breaches of the Act and to implement appropriate and consistent regulatory actions.

The EPA has implemented the actions listed in the NSW Illegal Dumping Strategy 2014–16. To date, the EPA has also implemented four of the six recommendations made by the ICAC on EPA's oversight of Regional Illegal Dumping Squads.

The EPA did not achieve the NSW Illegal Dumping Strategy 2014–16 target of a 30 per cent reduction in instances of large scale illegal dumping in Sydney, the Illawarra, Hunter and Central Coast from 2011 levels.

In the reporting period, the incidences of large scale illegal dumping more than doubled. The EPA advised that this increase may be the result of greater public awareness and reporting rather than increased illegal dumping activity.

By June 2018, the EPA is due to implement one outstanding recommendation made by the ICAC but has not set a time for the other outstanding recommendation.

Appendix one – Response from agency

Appendix two – List of enforcement tools

Appendix three – The EPA's organisational structure

Appendix four – The EPA's regions and branches

Appendix five – About the audit

Appendix six – Performance auditing

Parliamentary reference - Report number #304 - released 28 June 2018

22 June 2018

Published

Fraud controls in local councils

Local Government

Fraud

Internal controls and governance

Management and administration

Risk

Many local councils need to improve their fraud control systems, according to a report released today by the Auditor-General for New South Wales, Margaret Crawford. The report highlights that councils often have fraud control procedures and systems in place, but are not ensuring people understand them and how they work. There is also significant variation between councils in the quality of their fraud controls.

Fraud can directly influence councils’ ability to deliver services, and undermine community confidence and trust. ICAC investigations, such as the recent Operation Ricco into the former City of Botany Bay Council, show the financial and reputational damage that major fraud can cause. Good fraud control practices are critical for councils and the community.

The Audit Office of New South Wales 2015 Fraud Control Improvement Kit (the Kit) aligns with the Fraud and Corruption Control Standard AS8001-2008 and identifies ten attributes of an effective fraud control system. This audit used the Kit to assess how councils manage the risk of fraud. It identifies areas where fraud control can improve.

Fraud can disrupt the delivery and quality of services and threaten the financial stability of councils.

Recent reviews of local government in Queensland and Victoria identify that councils are at risk of fraud because they purchase large quantities of goods and services using devolved decision making arrangements. The Queensland Audit Office in its 2014–15 report 'Fraud Management in Local Government' found that ‘Councils are exposed to high-risks of fraud and corruption because of the high volume of goods and services they procure, often from local suppliers; and because of the high degree of decision making vested in councils'. They also highlight some common problems faced by councils including the absence of fraud control plans and failure to conduct regular reviews of their internal controls. Also, in 2008 and 2012 the Victorian Auditor-General identified the importance of up-to-date fraud control planning, clearly documented related policies, training staff to identify fraud risks and the importance of controls such as third party management.

Investigations into councils by the NSW Independent Commission Against Corruption (ICAC), such as the recent Operation Ricco, show the impact that fraud can have on councils. These impacts include significant financial loss, and negative public perceptions about how well councils manage fraud. The findings of these investigations also show the importance of good fraud controls for councils.

Operation Ricco

In its report on Operation Ricco, the ICAC found that the Chief Financial Officer (CFO) of the City of Botany Bay Council and others dishonestly exercised official functions to obtain financial benefits for themselves and others by causing fraudulent payments from the Council for their benefit. It also identified the CFO received inducements for favourable treatment of contractors.

The report noted that there were overwhelming failures in the council’s procedures and governance framework that created significant opportunities for corruption, of which the CFO and others took advantage.

It found weaknesses across a wide variety of governance processes and functions, including those involving the general manager, the internal audit function, external audit, and the operation of the audit committee.

Source: Published reports of ICAC investigations July 2017.

The strength of fraud control systems varies significantly across New South Wales local councils, and many councils we surveyed need to improve significantly.

Most surveyed councils do not have fraud control plans that direct resources to mitigating the specific fraud risks they face. Few councils reported that they conduct regular risk assessments or health checks to ensure they respond effectively to the risks they identify.

There are sector wide weaknesses that impact on the strength of councils' fraud control practice. Less than one-third of councils that responded to the survey:

communicate their expectations about ethical conduct and responsibility for fraud control to staff
regularly train staff to identify and respond to suspected fraud
inform staff or the wider community how to report suspected fraud and how reports made will be investigated.

The audit also identified a pattern of councils developing policies, procedures or systems without ensuring people understand them, or assessing that they work. This reduces the likelihood that staff will actually use them.

In general, metropolitan and regional councils surveyed have stronger fraud control systems than rural councils.

Newly amalgamated councils are operating with systems inherited from two or more pre-amalgamated councils. These councils are developing new systems for their changed circumstances.

Five councils surveyed reported that they did not comply with the Public Interest Disclosure Act 1994.

Observations for the sector:
Councils should improve their fraud controls by:

tailoring fraud control plans to their circumstances and specific risks
systematically and regularly reviewing their fraud risks and fraud control systems to keep their plans up to-date
effectively communicating fraud risks, and how staff and the community can report suspected fraud
ensuring that they comply with the Public Interest Disclosure Act 1994.

Recommendation:
That the Office of Local Government:

work with councils to ensure they comply with the Public Interest Disclosure Act 1994.

Despite several New South Wales state entities collecting data on suspected fraud, the cost, extent, and nature of fraud in local councils is not clear.

There are weaknesses in data collection and categorisation. Several state entities receive complaints about councils. These entities often do not separate complaints about fraud from other complaint data, do not separate local council data from other public-sector data, and do not separate complaints about council decisions or councillors from complaints about council staff conduct. Complaints about one incidence of suspected fraud can also be reported multiple times.

Collaboration between state entities and councils to address these weaknesses in data collection could provide a clearer picture to the public and councils on the incidence of suspected fraud. Better information may also help councils decide where to focus fraud control efforts and apply resources more effectively.

Including measures for fraud control strength and maturity in the OLG performance framework may also improve practice in councils. Further, OLG may want to consider how a revised Model Code could better drive fraud control practice in councils.

Recommendations
That the Office of Local Government:

work with state entities and councils to develop a common approach to how fraud complaints and incidences are defined and categorised so that they can:
- better use data to provide a clearer picture of the level of fraud within councils
- measure the effectiveness of, and drive improvement in councils' fraud controls systems

Appendix one – Response from agency

Appendix two – Survey results

Appendix three – About the audit

Appendix four – Performance auditing

Parliamentary reference - Report number #303 - released 22 June 2018

3 November 2016

Published

Implementation of the NSW Government’s program evaluation initiative

Industry

Justice

Planning

Premier and Cabinet

Treasury

Environment

Financial reporting

Internal controls and governance

Management and administration

Risk

Service delivery

Shared services and collaboration

Workforce and capability

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

15 September 2016

Published

Monitoring food safety practices in retail food businesses

Health

Local Government

Compliance

Internal controls and governance

Management and administration

Risk

Shared services and collaboration

New South Wales has a lower rate of foodborne illness than the national average. This reflects some good practices in the NSW Food Authority’s approach to monitoring food safety standards. It also is a factor of the long-standing commitment by local councils’ to ensuring retail food businesses meet these standards.

To ensure foodborne illness remains low, the Authority needs to better monitor its arrangements with councils which inspect retail food businesses on its behalf, and receive additional and more timely information from councils on compliance with food safety standards.

Parliamentary reference - Report number #274 - released 15 September 2016

28 January 2016

Published

Public sector management reforms

Finance

Industry

Premier and Cabinet

Planning

Whole of Government

Environment

Management and administration

Workforce and capability

The Public Service Commission is making good progress with leading the implementation of public sector management reforms, according to a report released today by the Acting New South Wales Auditor-General, Tony Whitfield.

'The Commission developed a sound evidence base for the reforms and gained wide public sector support by engaging with agency heads and using public sector working groups to develop options', said the Acting Auditor-General. 'They developed good guidance for government agencies and have improved the senior executive structure in the NSW public sector', he added.

Parliamentary reference - Report number #264 - released 28 January 2016