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.

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Parliamentary reference - Report number #393 - released 2 April 2024

What this report is about

In this report, we present findings and recommendations relevant to regulation from selected reports between 2018 and 2024.

This analysis includes performance audits, compliance audits and the outcomes of financial audits.

Effective regulation is necessary to ensure compliance with the law as well as to promote positive social and economic outcomes and minimise risks with certain activities.

The report is a resource for public sector leaders. It provides insights into the challenges and opportunities for more effective regulation.

Audit findings

The analysis of findings and recommendations is structured around four key themes related to effective regulation:

• governance and accountability
• processes and procedures
• data and information management
• support and guidance.

The report draws from this analysis to present insights for agencies to promote effective regulation. It also includes relevant examples from recent audit reports.

In this report, we also draw out insights for agencies that provide a public sector stewardship role.

The report highlights the need for agencies to communicate a clear regulatory approach. It also emphasises the need to have a consistent regulatory approach, supported by robust information about risks and accompanied with timely and proportionate responses.

The report highlights the need to provide relevant support to regulated parties to facilitate compliance and the importance of transparency through reporting of meaningful regulatory information.

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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.

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Parliamentary reference - Report number #391 - released 28 February 2024

What this report is about 

This report assesses how effectively SafeWork NSW, a part of the Department of Customer Service (DCS), has performed its regulatory compliance functions for work health and safety in New South Wales. 

The report includes a case study examining SafeWork NSW's management of a project to develop a realtime monitoring device for airborne silica in workplaces. 

Findings 

There is limited transparency about SafeWork NSW's effectiveness as a regulator. The limited performance information that is available is either subsumed within DCS reporting (or other sources) and is focused on activity, not outcomes. 

As a work health and safety (WHS) regulator, SafeWork NSW lacks an effective strategic and data-driven approach to respond to emerging WHS risks. 

It was slow to respond to the risk of respirable crystalline silica in manufactured stone. 

SafeWork NSW is constrained by an information management system that is over 20 years old and has passed its effective useful life. 

While it has invested effort into ensuring consistent regulatory decisions, SafeWork NSW needs to maintain a focus on this objective, including by ensuring that there is a comprehensive approach to quality assurance. 

SafeWork NSW's engagement of a commercial partner to develop a real-time silica monitoring device did not comply with key procurement obligations. 

There was ineffective governance and process to address important concerns about the accuracy of the real-time silica monitoring device. 

As such, SafeWork NSW did not adequately manage potential WHS risks. 

Recommendations 

The report recommended that DCS should: 

• ensure there is an independent investigation into the procurement of the research partner for the real-time silica detector 
• embed a formal process to review and set its annual regulatory priorities 
• publish a consolidated performance report 
• set long-term priorities, including for workforce planning and technology uplift 
• improve its use of data, and start work to replace its existing complaints handling system 
• review its risk culture and its risk management framework 
• review the quality assurance measures that support consistent regulatory decisions

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Parliamentary reference - Report number #390 - released 27 February 2024
 

What this report is about

Extreme rainfall across eastern Australia in 2021 and 2022 led to a series of major flood events in New South Wales.

This audit assessed how effectively the NSW Government provided emergency accommodation and temporary housing in response to the early 2022 Northern Rivers and late 2022 Central West flood events.

Responsible agencies included in this audit were the Department of Communities and Justice, NSW Reconstruction Authority, the former Department of Planning and Environment, the Department of Regional NSW and the Premier’s Department.

Findings

The Department of Communities and Justice rapidly provided emergency accommodation to displaced persons immediately following these flood events.

There was no plan in place to guide a temporary housing response and agencies did not have agency-level plans for implementing their responsibilities.

The NSW Government rapidly procured and constructed temporary housing villages. However, the amount of temporary housing provided did not meet the demand.

There is an extensive waitlist for temporary housing and the remaining demand in the Northern Rivers is unlikely to be met. The NSW Reconstruction Authority has not reviewed this list to confirm its accuracy.

Demobilisation plans for the temporary housing villages have been developed, but there are no long-term plans in place for the transition of tenants out of the temporary housing.

Agencies are in the process of evaluating the provision of emergency accommodation and temporary housing.

The findings from the 2022 State-wide lessons process largely relate to response activities.

Audit recommendations

The NSW Reconstruction Authority should:

• Develop a plan for the provision of temporary housing.
• Review the temporary housing waitlist.
• Determine a timeline for demobilising the temporary housing villages.
• Develop a strategy to manage the transition of people into long-term accommodation.
• Develop a process for state-wide recovery lessons learned.

All audited agencies should:

• Finalise evaluations of their role in the provision of emergency accommodation and temporary housing.
• Develop internal plans for implementing their roles under state-wide plans.

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Parliamentary reference - Report number #389 - released 22 February 2024

What this report is about

Results of the audit of the Consolidated State Financial Statements of the New South Wales General Government Sector (GGS) and Total State Sector (TSS) for the year ended 30 June 2023.

Findings

The audit opinion on the 2022–23 Consolidated State Financial Statements was qualified in relation to two issues and included an emphasis of matter.

The first qualification matter is a continuation of the prior year limitation of scope on the audit relating to the Catholic Metropolitan Cemeteries Trust (CMCT), a controlled state entity, who continued to deny access to its management, books and records for the purposes of a financial audit. As a result, the Audit Office was unable to obtain sufficient appropriate audit evidence to support the assets, liabilities, income and expenses relating to CMCT recorded in the TSS and the equity investment recognised in the GGS relating to the net assets of CMCT.

The second qualification matter relates to the limitations on the accuracy and reliability of financial information relating to Statutory Land Managers (SLMs) and Common Trust entities (CTs) controlled by the State and were either exempted from requirements to prepare financial reports, or who were required to submit financial reports and have not done so. The Audit Office was unable to obtain sufficient appropriate audit evidence to determine the impact on the value of non-land assets and liabilities, income and expenses that should be recognised in the 2022–23 Consolidated State Financial Statements and which have not been recorded in the Consolidated State Financial Statements.

The independent audit opinion also includes an emphasis of matter drawing attention to key decisions made by the NSW Government regarding the future of the Transport Asset Holding Entity of New South Wales (TAHE).

Recommendations

The report includes recommendations for NSW Treasury to address several high-risk findings, including:

• ensuring accurate and reliable financial information is available to recognise the non-land balances of SLMs and CTs
• ensuring the CMCT, SLMs and CTs meet their statutory reporting obligations
• conducting a broader review of the financial reporting exemption framework
• continued monitoring of TAHE's control over its assets
• providing timely guidance to the sector relating to legislative or policy changes that impact financial reporting
• developing an accounting policy for the reimbursement of unsuccessful tender bid cost contributions.

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What this report is about

This report analyses the internal controls and governance of the 25 largest agencies in the NSW public sector, excluding state owned corporations and public financial corporations, for the year ended 30 June 2023.

Findings

Internal control trends

The proportion of control deficiencies identified as high-risk this year decreased to 4.5% (8.2% in 2022).

Repeat findings of control deficiencies represent 38% of all findings (48% in 2022). 

Information technology

Over half of the agencies reviewed have deficiencies in managing user access to their information systems. Over a third of agencies had deficiencies in their controls over privileged user accounts within their information technology environments. 

Cyber security

Over 80% of assessments for maturity levels against the NSW Cyber Security Policy have reported one or more self-assessed Mandatory Requirements are not practiced on a consistent and regular basis.

Essential Eight cyber controls have not improved, and they need to. 

Governance framework

Deficiencies were noted in agencies' governance and risk management frameworks, namely: outdated risk management policies, lack of risk appetite statements, and internal audit functions not being externally evaluated.  

Payroll and work health and safety (WHS)

Overtime expenses increased by 40% between 2020 and 2023, compared to salaries and wages which increased by 16% over the same period.

Five agencies have WHS policies that do not reflect current WHS regulations.

Recommendations

Several important recommendations were made for agencies to prioritise efforts to improve cyber security controls and cyber resilience measures.

It was also recommended that agencies periodically review their risk management maturity and implement action plans, and ensure their WHS policies and procedures reflect current legislation requirements including the need to manage psychosocial risks.

Internal controls are processes, policies and procedures that help agencies to:

• operate effectively and efficiently
• produce reliable financial reports
• comply with laws and regulations
• support ethical government.

This chapter outlines the overall trends for agency controls and governance issues, including the number of audit findings, the degree of risk those deficiencies pose to the agency, and a summary of the most common deficiencies found across agencies.

For consistency and comparability, we have adjusted the 2022 results to incorporate additional audit findings that were reported after the date of the Internal controls and governance 2022 report. Therefore, the 2022 figures will not necessarily align with those reported in our 2022 report.

This chapter outlines our audit observations, conclusions and recommendations arising from our review of agency controls to manage key financial systems.

This chapter outlines our audit observations, conclusions and recommendations arising from our review of agencies' cyber security.

Governance in the context of the NSW public service refers to the structures, processes, and mechanisms by which government departments and agencies are held to account when they make decisions and implement policies and programs in the service of the public interest. It also includes the principles and practices that guide how these agencies work together.

This chapter outlines our audit observations, conclusions and recommendations from our review of agencies' governance frameworks and practices, with consideration of NSW Treasury issued policies and best practices. It focuses on two key areas: governance arrangements and risk management.

This chapter outlines our audit observations, conclusions and recommendations arising from our review of agencies' payroll controls and management of work health and safety (WHS).

What this report is about

Result of the Treasury portfolio of agencies’ financial statement audits for the year ended 30 June 2023.

The results of the audit of the NSW Government’s consolidated Total State Sector Accounts (TSSA), which are prepared by NSW Treasury, will be reported separately in our report on ‘State Finances 2023’.

The audit found

Unqualified audit opinions were issued on all general purpose financial statement audits.

Qualified audit opinions were issued on two of the 24 other engagements prepared by portfolio agencies. These related to payments made from Special Deposit Accounts that did not comply with the relevant legislation.

The number of monetary misstatements identified in our audits increased from 29 in 2021–22 to 39 in 2022–23.

The new parental leave policy impacted agencies across all portfolios. NSW Treasury should perform annual assessments to identify changes in legislation and regulation and provide timely guidance to the sector.

Transport for NSW and Sydney Metro have capitalised over $300 million of tender bid costs paid to unsuccessful tender bidders relating to significant infrastructure projects. Whilst NSW Treasury policy provides clarity on the reimbursement of unsuccessful bidders’ costs, clearer guidance on how to account for these costs in agencies’ financial statements is required.

The key audit issues were

Five high-risk issues were reported in 2022–23. Three were new findings on contract management, accounting treatments for workers compensation renewal premium adjustments and the management and oversight of a Special Deposit Account. Two repeat issues referred to the need to improve quality review processes over financial reporting and the timely approval of administration costs.

Portfolio agencies should prioritise and action recommendations to address internal control deficiencies.

This report provides Parliament and other users of the Treasury portfolio of agencies’ financial statements with the results of our audits, analysis, conclusions and recommendations in the following areas:

• financial reporting
• audit observations.

Financial reporting is an important element of good governance. Confidence and transparency in public sector decision-making are enhanced when financial reporting is accurate and timely.

This chapter outlines our audit observations related to the financial reporting of agencies in the Treasury portfolio of agencies (the portfolio) for 2023.

Appropriate financial controls help ensure the efficient and effective use of resources and administration of agency policies. They are essential for quality and timely decision-making.

This chapter outlines our observations and insights from our financial statement audits of agencies in the Treasury portfolio.

Appendix one – Misstatements in financial statements submitted for audit

Appendix two – Early close procedures

Appendix three – Timeliness of financial reporting

Appendix four – Financial data

Appendix five – Acquittals and other opinions

© 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.

What this report is about

Results of the Health portfolio of agencies' financial statement audits for the year ended 30 June 2023.

The audit found

Unmodified audit opinions were issued for all Health portfolio agencies' financial statements. 

The number of monetary misstatements increased in 2022–23, driven by key accounting issues, including the first-time recognition of paid parental leave and plant and equipment fair value adjustments. 

The key audit issues were 

NSW Health identified errors regarding the recognition and calculation of long service leave entitlements for employees with ten or more years of service that had periods of part time service in the first ten years, resulting in prior period restatements. 

Comprehensive revaluation of buildings at the Graythwaite Charitable Trust found errors in the previous year's valuation, resulting in prior period restatements. 

New parental leave legislation increased employee liabilities for portfolio agencies. The Ministry of Health corrected the consolidated financial statements to record parental leave liabilities for all agencies within the Health portfolio.   

A repeat high-risk issue relates to processing time records by administrators that have not been reviewed prior to running the pay cycle.   

Thirty per cent of reported issues were repeat issues. 

The audit recommended 

Portfolio agencies should ensure any changes to employee entitlements are assessed for their potential financial statements impact under the relevant Australian Accounting Standards. 

Portfolio agencies should address deficiencies that resulted in qualified reports on:   

• the design and operation of shared service controls
• prudential non-compliance at residential aged care facilities.

This report provides Parliament and other users of the Health portfolio of agencies’ financial statements with the results of our audits, analysis, conclusions and recommendations in the following areas:

• financial reporting
• audit observations.

Financial reporting is an important element of good governance. Confidence and transparency in public sector decision-making are enhanced when financial reporting is accurate and timely.

This chapter outlines our audit observations related to the financial reporting of agencies in the Health portfolio of agencies (the portfolio) for 2023.

Appropriate financial controls help ensure the efficient and effective use of resources and administration of agency policies. They are essential for quality and timely decision-making.

This chapter outlines observations and insights from our financial statement audits of agencies in the Health portfolio.  

Appendix one – Misstatements in financial statements submitted for audit

Appendix two – Early close procedures

Appendix three – Timeliness of financial reporting

Appendix four – Financial data

© 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.

What this report is about

Result of the Transport portfolio of agencies' financial statement audits for the year ended 30 June 2023.

The audit found

Unqualified audit opinions were issued for all Transport portfolio agencies.

An 'emphasis of matter' paragraph was included in the Transport Asset Holding Entity of New South Wales' (TAHE) independent auditor's report, which draws attention to management's disclosure regarding proposed changes to TAHE's operating model.

Government's decision to convert TAHE into a non-commercial Public Non-Financial Corporation may impact the future valuation and the control of TAHE's assets.

Transport for NSW's valuation of roads and bridges resulted in a net increase to its asset value by $15.7 billion.

Transport for NSW and Sydney Metro have capitalised over $300 million of tender bid costs paid to unsuccessful tender bidders relating to significant infrastructure projects. Whilst NSW Treasury policy provides clarity on the reimbursement of unsuccessful bidders' costs, clearer guidance on how to account for these costs in agency's financial statements is required.

The key audit issues were

The number of issues reported to management decreased from 53 in 2021–22 to 49 in 2022–23.

High-risk findings include:

• gaps in how Sydney Metro manages its contractors and how conflicts of interest are recorded and managed
• future financial reporting implications to account for government's proposed changes to TAHE's future operating model, including asset valuations and control assessments of assets and operations
• Parramatta Park Trust's tree assets' valuation methodology needs to be addressed.

Recommendations were made to address the identified deficiencies.

This report provides Parliament and other users of the Transport portfolio of agencies’ financial statements with the results of our audits, analysis, conclusions and recommendations in the following areas:

• financial reporting
• audit observations.

Financial reporting is an important element of good governance. Confidence and transparency in public sector decision making are enhanced when financial reporting is accurate and timely.

This chapter outlines our audit observations related to the financial reporting of agencies in the Transport portfolio of agencies (the portfolio) for 2023.

Appropriate financial controls help ensure the efficient and effective use of resources and administration of agency policies. They are essential for quality and timely decision-making.
This chapter outlines our observations and insights from our financial statement audits of agencies in the Transport portfolio.

Appendix one – Misstatements in financial statements submitted for audit 

Appendix two – Early close procedures

Appendix three – Timeliness of financial reporting 

Appendix four – Financial data 

© 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.