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

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

Read the PDF report.

Parliamentary reference - Report number #390 - released 27 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.

Read the PDF report

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 Planning and Environment portfolio financial statement audits for the year ended 30 June 2023.

The audit found

Unqualified audit opinions were issued for all completed Planning and Environment portfolio agencies. Seven audits are ongoing.

The Catholic Metropolitan Cemeteries Trust (CMCT) did not comply with its obligations under the Government Sector Finance Act 2018 (GSF Act) to prepare and submit financial statements for audit.

The Department of Planning and Environment (the department) has not yet provided their assessment of the financial reporting requirements for the 579 Category 2 Statutory Land Managers (SLMs) for 2022–23.

One-hundred-and-nineteen Commons Trusts are non-compliant with the GSF Act as they have not submitted their financial statements for audit.

We issued unqualified opinions on the Water Administration Ministerial Corporation's 2020–21, 2021–22 and 2022–23 financial statements.

The number of monetary misstatements identified in our audits decreased from 59 in 2021–22 to 51 in 2022–23, however the gross value of misstatements increased.

The key audit issues were

The former Resilience NSW and NSW Reconstruction Authority (the Authority) re-assessed the accounting implications arising from contractual agreements relating to temporary housing assets associated with the Northern Rivers Temporary Homes Program. This resulted in adjustments to recognise the associated assets and liabilities.

We continue to identify significant deficiencies in NSW Crown land information records.

The department has not been effective in addressing the differing practices for the financial reporting of rural firefighting equipment vested to councils under section 119 (2) of the Rural Fires Act 1997.

The number of findings across the portfolio reported to management increased from 132 in 2021–22 to 140 in 2022–23. Thirty per cent of issues were repeated from the prior year.

Seven high-risk issues were identified. These related to the findings outlined above, deficiencies in quality reviews of asset valuations, internal control processes and IT general controls.

The audit recommended

Recommendations were made to the department and portfolio agencies to address these deficiencies.

This report provides Parliament and other users of the Planning and Environment 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 Planning and Environment 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 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

Results of the Regional NSW financial statements audits for the year ended 30 June 2023.

What we found

Unqualified audit opinions were issued on all completed audits in the Regional NSW portfolio agencies.

The number of monetary misstatements identified in our audits increased from 28 in 2021–22 to 30 in 2022–23.

What the key issues were

Effective 1 July 2023, staff employed in the Northern Rivers Reconstruction Corporation Division of the Department of Regional NSW transferred to the NSW Reconstruction Authority Staff Agency.

The Regional NSW portfolio agencies were migrated into a new government wide enterprise resourcing planning system.

The total number of audit management letter findings across the portfolio of agencies decreased from 36 to 23.

A high risk matter was raised for the NSW Food Authority to improve the internal controls in the information technology environment including monitoring and managing privilege user access.

What we recommended

Local Land Services should prioritise completing all mandatory early close procedures.

Portfolio agencies should:

• ensure any changes to employee entitlements are assessed for their potential financial statements impact under the relevant Australian Accounting Standards
• prioritise and address internal control deficiencies identified in audit management letters.

This report provides Parliament and other users of the Regional NSW 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 Regional NSW 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 Regional NSW 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

The Forestry Corporation of NSW (FCNSW) is a state-owned corporation that manages over two million hectares of public native forests and plantations supplying timber to sawmills across NSW.

The NSW Environment Protection Authority (EPA) is responsible for regulating the native forestry industry in NSW.

FCNSW must comply with Integrated Forestry Operations Approvals (IFOAs), which set out rules for how timber harvesting may occur.

Most harvesting is undertaken under the Coastal IFOA, which commenced in 2018.

This audit assessed how effectively Forestry Corporation of NSW manages its public native forestry activities to ensure compliance, and how effectively the Environment Protection Authority regulates these activities.

What we found

Forestry Corporation of NSW (FCNSW) clearly articulates its compliance obligations.

While FCNSW undertakes monitoring of its contractors, it does not do so consistently and does not target its monitoring activities on a risk basis.

FCNSW has largely fulfilled mandatory Coastal IFOA training requirements, but has not yet trained other staff who would also benefit from the training.

Contractor compliance appears to be improving, but there are gaps and inconsistencies in FCNSW's documentation of this.

FCNSW is not measuring its overall compliance to determine how it is tracking against its target.

The EPA undertakes proactive inspections of Coastal IFOA harvesting operations on a risk basis. However, it does not assess the risk at harvest sites covered by other IFOAs.

Most EPA compliance staff have received basic training, but few have received more advanced training required to effectively undertake forestry inspections.

Some EPA offices do not have the necessary equipment to undertake forestry inspections.

The EPA and FCNSW are not implementing all elements of a Memorandum of Understanding that aims to promote a cooperative relationship between the agencies.

What we recommended

The report made recommendations to FCNSW which aim to improve:

• staff training
• consistency of compliance reviews and data capture
• targeting of compliance activities
• measurement of performance.

The report made recommendations to the EPA which aim to improve:

• risk-assessments
• staff training
• staff equipment.

The report also recommended that FCNSW and EPA should fully implement their Memorandum of Understanding.

The Forestry Corporation of NSW (FCNSW) is a state-owned corporation that supplies timber to sawmills in New South Wales, including timber harvested from public native forests. FCNSW is responsible for the management of around two million hectares of public native forests and plantations. Around half the area of native forests is permanently set aside for conservation.

Public native forestry is regulated through the Forestry Act 2012, Biodiversity Conservation Act 2016, Protection of the Environment Operations Act 1997 and associated regulations. Under the Forestry Act 2012, the objectives of FCNSW include, where its activities affect the environment, to conduct its operations in compliance with the principles of ecologically sustainable development contained in section 6(2) of the Protection of the Environment Administration Act 1991. This involves the integration of social, economic and environmental considerations in decision-making processes.

In undertaking its native forestry operations, FCNSW must comply with Integrated Forestry Operations Approvals (IFOA), issued jointly by the Minister for the Environment and the Minister for Agriculture, which set out rules to protect species and ecosystems where timber harvesting is occurring, and aim to ensure forests are managed in an ecologically sustainable way. FCNSW must also ensure that its contractors undertake forestry operations in line with IFOAs. The Coastal IFOA, developed in 2018, consolidated the four IFOAs for the Eden, Southern, Upper and Lower North East coastal regions of New South Wales into a single IFOA. The other three current IFOAs are Brigalow Nandewar, South Western Cypress and Riverina Redgum (the Western IFOAs).

The NSW Environment Protection Authority (EPA) is responsible for regulating native forestry in New South Wales. Under the Protection of the Environment Administration Act 1991, one of the objectives of the EPA is to protect, restore and enhance the quality of the environment in New South Wales, having regard to the need to maintain ecologically sustainable development. This includes monitoring FCNSW’s compliance with IFOA conditions, including by maintaining and enforcing a compliance program.

The Coastal IFOA also introduced a new structure and regulatory approach for IFOAs, establishing outcomes, conditions and protocols. The conditions set mandatory actions and controls intended to protect threatened plants, animals, habitats, soils and water. The protocols, referenced in the conditions, set out additional enforceable actions and controls intended to support the effective implementation of the conditions.

Public native forestry is the largest component of hardwood supply in New South Wales. The 2019–20 bushfires had a major impact on regional communities, and large areas of native forest. This heightened environmental risks and challenges in public native forestry. Five million hectares of New South Wales was impacted, including more than 890,000 hectares of native State Forests. This is over 40% of the coastal and tablelands native State Forests in New South Wales.

In addition to effective compliance activities, the success of the regulatory approach to public native forestry operations depends on how wood supply yields are modelled, and ensuring that harvested volumes do not exceed these yields. This is of particular importance in areas where forests have been severely damaged by fire. This audit did not consider sustainable yields. Recent reviews of this include an independent review of the FCNSW sustainable yield model and a Natural Resources Commission review in 2021.

This audit assessed how effectively Forestry Corporation of NSW manages its public native forestry activities to ensure compliance, and how effectively the Environment Protection Authority regulates these activities.

Appendix one – Responses from agencies
Appendix two – About the audit
Appendix three – 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 #382 - released 22 June 2023

What this report is about

This report draws together the financial impact of natural disasters on agencies integral to the response and impact of natural disasters during 2021–22.

What we found

Over the 2021–22 financial year $1.4 billion from a budget of $1.9 billion was spent by the NSW Government in response to natural disasters.

Total expenses were less than the budget due to underspend in the following areas:

• clean-up assistance, including council grants
• anticipated temporary accommodation support
• payments relating to the Northern Rivers Business Support scheme for small businesses.

Natural disaster events damaged council assets such as roads, bridges, waste collection centres and other facilities used to provide essential services. Additional staff, contractors and experts were engaged to restore and repair damaged assets and minimise disruption to service delivery.

At 30 June 2022, the estimated damage to council infrastructure assets totalled $349 million.

Over the first half of the 2022–23 financial year, councils experienced further damage to infrastructure assets due to natural disasters. NSW Government spending on natural disasters continued with a further $1.1 billion spent over this period.

Thirty-six councils did not identify climate change or natural disaster as a strategic risk despite 22 of these having at least one natural disaster during 2021–22.

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.

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

What the report is about

The Bushfire Local Economic Recovery (BLER) program was created after the 2019–20 bushfires, and commits $541.8 million to bushfire affected areas in New South Wales. It is co-funded by the Commonwealth and NSW governments.

This audit assessed how effectively the Department of Regional NSW (the department) and Resilience NSW administered rounds one and two of the BLER program. These rounds were:

• Round one: early co-funding, split between two streams:
  • ­Fast-Tracked projects 
  • ­Sector Development Grants (SDG)
• Round two: open round.

What we found

The Department of Regional NSW did not effectively administer the Fast-Tracked stream of the BLER. 

The administration process lacked integrity, given it did not have sufficiently detailed guidelines and the assessment process for projects lacked transparency and consistency. 

At the request of the Deputy Premier's office, a $1 million threshold was applied, below which projects were not approved for funding. The department advises that some of the projects excluded were subsequently funded from other programs. 

This threshold resulted in a number of shortlisted projects in areas highly impacted by the bushfires being excluded, including all shortlisted projects located in Labor Party-held electorates.

The department's administration of the SDG stream had a detailed and transparent assessment process. However, conflicts of interest were not effectively managed. 

The department's administration of the open round included a clearly documented, detailed and transparent assessment framework. Some weaknesses in the approach to conflicts of interest remained.

What we recommended

The Department of Regional NSW should ensure that for all future grant programs it:

1. establishes and follows guidelines that align with relevant good practice guidance 
2. ensures a communications plan is in place, including the communication of guidelines to potential applicants
3. ensures staff declare conflicts of interest prior to the commencement of a grants stream, and that these conflicts of interest are recorded and managed
4. ensures regular monitoring is in place as part of funding deeds 
5. documents all key decisions and approvals in line with record keeping obligations.

This audit assessed how effectively the Department of Regional NSW and Resilience NSW administered rounds one and two of the Bushfire Local Economic Recovery (BLER) program.

As noted in this report, Resilience NSW was involved in the set-up and ongoing administration and monitoring of the BLER program. During the audited period, Resilience NSW was tasked with working with the Department of Regional NSW to create program objectives, guidelines and criteria. Their role also involved liaising with the Commonwealth Government, which provided co-funding for the program. Resilience NSW also had an ongoing role in quality assurance and compliance to ensure agencies administering disaster assistance did so in accordance with relevant guidelines. On 16 December 2022, the NSW Government abolished Resilience NSW.

Our work for this performance audit was completed on 3 November 2022, when we issued the final report to the two audited agencies. The audit report does not make specific recommendations to Resilience NSW. On 24 November 2022, the then Commissioner of Resilience NSW provided a response to the final report, which we include as it is the formal response from the audited entity at the time the audit was conducted.

During the 2019–20 bushfire season, New South Wales experienced 11,774 fire incidents, burning 5.5 million hectares of the state. There were 26 fatalities and 2,476 homes destroyed. The agriculture sector was heavily impacted with 601,858 hectares of pasture damaged.

Due to the widespread impacts of these fires on the state, the NSW and Commonwealth governments committed $4.4 billion toward bushfire response, recovery, and preparedness. This included the establishment of the Bushfire Local Economic Recovery (BLER) program, with $541.8 million committed to support job retention and creation in areas impacted by bushfires. The program also aims to strengthen community resilience and reduce the impact of future natural disasters. The BLER program is co-funded, with the Commonwealth and NSW governments funding 50% each.

The BLER program is comprised of three funding rounds:

• round one early co-funding, split between
  • Fast-Tracked projects
  • Sector Development Grants (SDG)
• round two: open round
• round three: final projects and initiatives.

Resilience NSW was involved in setting up the BLER program and the Department of Regional NSW (the department) is responsible for administering it. The Commonwealth National Recovery and Resilience Agency must also endorse any projects proposed by the NSW Government for funding as part of the funding agreement between the State and Commonwealth governments.

Successful projects under the SDG stream were announced in September 2020 and projects funded through the Fast-Tracked stream were announced in October 2020. Round two (the open round) was administered after these two streams and successful projects were announced in June 2021.

The Department of Premier and Cabinet established the 'Good Practice Guide to Grants Administration' (the Good Practice Guide) in 2010 to assist the NSW Government in ensuring grants administration was performed consistently across all NSW Government grants programs. Compliance with the Good Practice Guide was not compulsory, but provided an outline of best practice covering the entire lifecycle of a grants program. This guide was in place at the time these grants were designed and administered.

The design and delivery of round one of the program occurred quickly, as part of the response to the 2019–20 bushfires, and was responding to a request from the Commonwealth Government for rapid project identification.

The objective of this audit was to assess how effectively the Department of Regional NSW and Resilience NSW administered rounds one and two of the BLER program. Round three was excluded from this audit because it had not been announced at the time of the audit.

We addressed this objective by examining whether the audited agencies:

• effectively planned administration of the BLER program and established appropriate guidelines
• implemented an effective assessment process for the BLER program
• are effectively monitoring implementation of projects and program outcomes.

1. Recommendations

To promote integrity and transparency, the Department of Regional NSW should ensure that for all future grant programs it:

1. establishes and follows guidelines that align with relevant good practice guidance including accountabilities, key assessment steps and clear assessment criteria
2. ensures a communications plan is in place, including the communication of guidelines to potential applicants
3. ensures staff declare conflicts of interest prior to the commencement of a grants stream, and that these conflicts of interest are recorded and managed
4. ensures regular monitoring is in place as part of funding deeds
5. documents all key decisions and approvals in line with record keeping obligations.

Stage one of the BLER program consisted of early co-funded projects valued at a total of $180 million. This included 22 Fast-Tracked priority projects valued at a total of $107.8 million. The purpose of these projects was to deliver immediate and significant economic impacts to high and moderate bushfire-impacted areas.

A timeline of key dates may be found at Exhibit 5.

Fifty-two projects worth a total of $73.2 million were funded through the SDG stream. One grantee withdrew their project from the stream in early 2021, leaving a total of 51 projects (of which 49 are co-funded with the Commonwealth Government).

A timeline of key dates may be found at Exhibit 9.

The department distributed $283 million to 195 successful projects as part of the open round of the BLER program.

A timeline of key dates may be found at Exhibit 11.

The department entered into funding deeds with successful applicants

The Good Practice Guide advises that the agency administering a grant should enter into a formal agreement with each grant recipient which sets out the arrangements under which a grant is provided, received, managed and acquitted. Across all three streams, the department sent out a letter of offer to successful project managers to let them know that they had been successful in receiving funding, and then entered into funding deeds with grantees. The one exception was the project that RNSW managed, discussed below.

The reviewed funding deeds were signed by department staff with the appropriate level of delegation. They contained an appropriate level of information and key clauses that would allow the department to monitor the progress of the grant to ensure its completion as agreed with the grantee. The reviewed funding deeds contained key information, including:

• total value of the grant
• key deliverables at each milestone
• expected completion date of both the overall project and each milestone
• reporting requirements, including provisions to allow the department to request relevant information
• variation procedures.

The department only makes payments after confirming that milestones have been reached

The department has provided payments to grantees only after they could demonstrate that they had completed the agreed milestone. To ensure each milestone has been completed, the department requires grantees to provide evidence that they have fulfilled the milestone. Types of evidence provided includes photographs and invoices. Where the grantee provides insufficient evidence to the department, the department follows-up with the grantee to ensure that enough information is provided to justify the milestone payment.

The department also plans to undertake site visits of projects at select milestones and at the completion of most projects. The department has undertaken a risk assessment of each SDG and open round project, and uses this risk assessment to determine the number of milestones for the project, as well as the number of site visits that the department will undertake. Fast-Tracked projects all had PWA providing either project management or assurance and as such oversight is being provided through that mechanism. The milestones and site visits at each level of risk can be seen in Exhibit 15 for SDG and Exhibit 16 for open round.

The department does not monitor quarterly progress for SDG grants

As part of the LER framework, the department reports to the Commonwealth every quarter on the status and financials of each project, including whether there are any risks to project delivery and the mitigations in place for those risks. For projects funded through the Fast-Tracked stream and the open round, the department collects quarterly progress reports from the grantees. These progress reports allow the department to determine if there are project risks, which can then be reported to the Commonwealth. The progress reports also allow the department to determine if a milestone is likely to be met within the next quarter or whether a project variation may be needed.

While the department monitors projects funded through the Fast-Tracked stream and the open round on a quarterly basis, there is no quarterly monitoring of progress for projects funded through the SDG stream. The SDG funding deeds do not include a provision to require quarterly reporting to the department. The department only collects progress reports from grantees when the grantee reports that it has completed a milestone. Quarterly monitoring of the SDG stream would allow the department to determine if projects require corrective action.

Resilience NSW is not collecting quarterly reports for the Fast-Tracked grant it is responsible for administering

One of the projects funded through the Fast-Tracked stream was the rebuilding of three local halls across two LGAs, for a total value of $3 million. RNSW is responsible for managing this grant and entered into funding deeds with the relevant councils. It is not documented why RNSW is responsible for these funding deeds rather than the department, which is the signatory for all of the other Fast-Tracked stream funding deeds. RNSW advised it was due to the responsible RNSW Director having a strong working relationship with the relevant councils.

The funding deeds which RNSW signed with the relevant councils set out a requirement that the councils would report on this project to RNSW every quarter. The second milestone of each of these projects involved the submission of a quarterly report. However, RNSW was unable to provide evidence that it carried out this monitoring of the project. At the time of the audit, no second milestone payment had been made. Undertaking quarterly monitoring would provide RNSW with assurance that the money is being expended for the proper purpose and whether the projects will be completed by the target date.

RNSW and the relevant councils developed project control groups for each project, which allows it to monitor the implementation of the projects. PWA is also represented on these project control groups and provides an advisory role in the implementation of the projects.

RNSW and the department advised that responsibility for this project will be transitioned to the department and it will be monitored on a quarterly basis, in line with the other Fast-Tracked projects.

The department has a consistent approach to validating variations

The department's funding deeds with grantees allow for the variation of contracts at the department's discretion after the grantee has written to the department. It is important for the department to consider the impact of any project variation request on the overall program objectives, because a project which costs more than was originally planned or which takes additional time may put at risk the objectives of the BLER program. To ensure that requests for variation are handled consistently and appropriately, the department's Grants Management Office (GMO) has developed a process document which applies to variation requests across the BLER program.

For the grants reviewed as part of this audit, the GMO applied this variation process consistently and has documented the outcomes. Larger variations are reviewed at a higher level of delegation and sign-off. To determine whether a variation is accepted, the GMO considers the following factors:

• consistency with BLER program objectives
• delivery within the timeframes of the BLER program
• eligibility under the BLER program guidelines
• financial viability to deliver within the requested budget.

The department is preparing multiple evaluations, but it has delayed its process evaluation

When developing round one of the BLER program, the department developed an evaluation plan. A total of $1.1 million has been reserved for conducting process, outcome, and economic evaluations of the BLER program and two other bushfire recovery grant programs.

To assist with evaluating program outcomes and economic impact, the department is planning a post-completion survey in 2023–24. This timeline will allow most projects to be completed and enough time for project outcomes to be realised. The department advised that the data collected through this survey would allow the department to determine whether the BLER program has achieved its objectives, as it includes information such as the number of jobs created through each project.

The process evaluation was initially planned for March to June 2021. This would have aligned with the announcement of the open round funding and would have allowed for the learnings from rounds one and two of the BLER program to be applied to the development of round three. However, the department did not conduct this evaluation in a timely way. The department advised that this was because funding deed negotiations were still ongoing, and the department was waiting for 50% of funding deeds to be signed. Given this, the department was not in a position to commence its process evaluation. In December 2021, the department revised its evaluation plan and advised that it commenced its process evaluation in April 2022. It is unlikely that this will allow time for the department to apply learnings to round three, which is currently underway.

Appendix one – Responses from agencies

Appendix two – BLER program distribution

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 #373 - released 2 February 2023