Refine search

Reports

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

16 September 2015

Published

Community Housing

Community Services

Infrastructure

Internal controls and governance

Management and administration

Procurement

Project management

Service delivery

On 16 September 2015 the NSW Acting Auditor-General, Tony Whitfield, released a report on community housing. The audit examines the Department of Family and Community Services’ transfer of public housing to non-government community housing providers.

The Department has worked collaboratively with community housing providers and industry groups to develop the community housing sector. Although there have been some delays, it has managed the transfer of public housing reasonably well and has improved the sustainability of the sector.

Parliamentary reference - Report number #259 - released 16 September 2015

2 September 2015

Published

Transferring out-of-home care to non-government organisations

Community Services

Internal controls and governance

Management and administration

Procurement

Project management

Service delivery

The audit assessed how well the Department of Family and Community Services has transferred the management of children in out-of-home care to non-government organisations (NGOs).

The Department has put considerable effort into developing the out-of-home care sector and is progressing well towards its goal of transferring all children in statutory care to NGOs. Since 2011, the number of children with an accredited NGO has more than doubled. This is a positive outcome as children are more likely to receive quality care because these providers meet NSW standards for outof-home care.

However, it is difficult to assess whether overall outcomes for children in care have improved. This is because the Department has yet to determine what wellbeing outcomes it wants to achieve, such as improvements in a child’s health, education and welfare. The Department is currently developing a quality assurance framework which will include such outcomes. We also found that the number of children in care returned to their birth family has declined, and the number of adoptions has remained relatively unchanged.

Parliamentary reference - Report number #257 - released 2 September 2015

16 July 2015

Published

Identifying productivity in the public sector

Health

Education

Community Services

Transport

Justice

Treasury

Whole of Government

Internal controls and governance

Management and administration

This report examines selected areas of government activity to see if sufficient information was available to identify and assess changes in productivity. The areas examined were primary and secondary school public education, acute inpatient care in NSW public hospitals, CityRail, the NSW Police Force, and the NSW Local Court.

Productivity is commonly defined as the amount of output per unit of input.

Parliamentary reference - Report number #256 - released 16 July 2015

24 June 2015

Published

Implementing performance audit recommendations

Premier and Cabinet

Treasury

Whole of Government

Health

Education

Community Services

Transport

Justice

Compliance

Internal controls and governance

Management and administration

NSW Government agencies have sound processes for implementing performance audit recommendations in Auditor-General’s Reports to Parliament. There are many cases of good practice. For example, some agencies formed a steering committee and developed a detailed plan to implement recommendations. Another incorporated the implementation of recommendations into both its business plan and the work plans of individual officers who were managing projects. Most agencies also used their Audit and Risk Committees to monitor recommendations.

We found some cases where agencies can improve how they coordinate actions to address recommendations. Most agencies were not revisiting these actions to determine whether they remain appropriate.

Parliamentary reference - Report number #254 - released 24 June 2015

4 May 2015

Published

Country towns water supply and sewerage program

Industry

Planning

Environment

Internal controls and governance

Management and administration

Project management

Service delivery

The Country Towns Water Supply and Sewerage Program has effectively promoted adoption of better management practices by local water utilities, but will not achieve its objective of eliminating the water supply and sewerage infrastructure backlog in urban areas of country NSW.

The $1.2 billion Program aims to help local water utilities provide appropriate, affordable, cost effective and well-managed water supply and sewerage services in the urban areas of country NSW. It has two broad elements: