Reports
Regulation insights
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.
Read the PDF report
Regional NSW 2023
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.
Section highlights
- Unqualified audit opinions were issued on all completed 30 June 2023 financial statements audits of the portfolio agencies. Two audits are ongoing.
- The total number of errors (including corrected and uncorrected) in the financial statements increased compared to the prior year.
- Portfolio agencies met the statutory deadline for submitting their 2022–23 early close financial statements and other mandatory procedures.
- Portfolio agencies continue to provide financial assistance to communities affected by natural disasters.
- A change to the NSW paid parental leave scheme, effective October 2023, created a new legal obligation that needed to be recognised by impacted government agencies. Impact to the agencies' financial statements were not material.
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.
Section highlights
- The 2022–23 audits identified one high risk and nine moderate risk issues across the portfolio. Of these, one was a moderate risk repeat issue.
- The total number of findings decreased from 36 to 23 which mainly related to deficiencies in internal controls.
- The high risk matter relates to the monitoring and managing of privilege user access at NSW Food Authority.
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.
Premier and Cabinet 2023
What this report is about
Results of the Premier and Cabinet portfolio of agencies' financial statement audits for the year ended 30 June 2023.
What we found
Unqualified audit opinions were issued for all Premier and Cabinet portfolio agencies.
What the key issues were
The Administrative Arrangements Orders, effective 1 July 2023, changed the name of the Department of Premier and Cabinet to the Premier's Department and transferred parts of Department of Premier and Cabinet to The Cabinet Office.
The number of monetary misstatements identified in our audits decreased from 15 in 2021–22 to 12 in 2022–23.
The total number of management letter findings across the portfolio of agencies increased from ten in 2021–22 to 20 in 2022–23.
Thirty per cent of all issues were repeat issues. The most common repeat issues related to deficiencies in controls over financial reporting.
What we recommended
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 Office management letters.
This report provides Parliament and other users of the Premier and Cabinet 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 Premier and Cabinet portfolio of agencies (the portfolio) for 2023.
Section highlights
- Unqualified audit opinions were issued on all the portfolio agencies 2022–23 financial statements.
- The total number of errors (including corrected and uncorrected) in the financial statements decreased compared to the prior year.
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 Premier and Cabinet portfolio.
Section highlights
- The 2022–23 audits identified eight moderate risk issues across the portfolio of agencies. Of these, two were repeat issues, and related to password and security configuration and management of excessive annual leave.
- The total number of findings increased from ten to 20, which mainly related to deficiencies in controls over financial reporting and governance and oversight.
- The most common repeat issues related to weaknesses in controls over financial reporting.
Appendix one – Early close procedures
© 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.
Management of the Critical Communications Enhancement Program
What the report is about
Effective radio communications are crucial to NSW's emergency services organisations.
The Critical Communications Enhancement Program (CCEP) aims to deliver an enhanced public safety radio network to serve the five emergency services organisations (ESOs), as well as a range of other users.
This report assesses whether the NSW Telco Authority is effectively managing the CCEP.
What we found
Where it has already been delivered (about 50% of the state), the enhanced network meets most of the requirements of ESOs.
The CCEP will provide additional infrastructure for public safety radio coverage in existing buildings agreed to with ESOs. However, radio coverage inside buildings constructed after the CCEP concludes will be at risk because building and fire regulations do not address the need for in-building public safety radio coverage.
Around 98% of radios connected to the network can be authenticated to protect against cloning, though only 42% are.
The NSW Telco Authority has not settled with ESOs on how call encryption will be used across the network. This creates the risk that radio interoperability between ESOs will not be maximised.
When completed, the public safety radio network will be the only mission critical radio network for ESOs. It is unclear whether governance for the ongoing running of the network will allow ESOs to participate in future network operational decisions.
The current estimated capital cost for the NSW Telco Authority to complete the CCEP is $1.293 billion. This is up from an estimated cost of $400 million in 2016. The estimated capital cost was not publicly disclosed until $1.325 billion was shown in the 2021–22 NSW Budget Papers.
We estimate that the full cost to government, including costs to the ESOs, of implementing the enhanced network is likely to exceed $2 billion.
We made recommendations about
- The governance of the enhanced Public Safety Network (PSN) to support agency relationships.
- The need to finalise a Traffic Mitigation Plan for when the network is congested.
- The need to provide advice to the NSW Government about the regulatory gap for ensuring adequate network reach in future buildings.
- The need to clarify how encryption and interoperability will work on the enhanced network.
- The need for the NSW Telco Authority to comply with its policy on Infrastructure Capacity Reservation.
- Expediting measures to protect against the risk of cloning by unauthenticated radios.
Public safety radio networks are critical for operational communications among Emergency Services Organisations (ESOs), which in New South Wales include:
- NSW Ambulance
- Fire and Rescue NSW
- NSW Police Force
- NSW Rural Fire Service
- NSW State Emergency Service.1
Since 1993, these five ESOs have had access to a NSW Government owned and operated radio communications network, the Public Safety Network (PSN), to support their operational communications. Around 60 to 70 other entities also have access to this network, including other NSW government entities, Commonwealth government entities, local councils, community organisations, and utility companies.
Pursuant to the Government Telecommunications Act 2018 ('the Act'), the New South Wales Government Telecommunications Authority ('NSW Telco Authority') is responsible for the establishment, control, management, maintenance and operation of the PSN.2
Separate to the PSN, all ESOs and other government entities have historically maintained their own radio communication capabilities and networks. Accordingly, the PSN has been a supplementary source of operational radio communications for these entities.
These other radio networks maintained by ESOs and other entities are of varying size and capability, with many ageing and nearing their end-of-life. There was generally little or no interoperability between networks, infrastructure was often co-located and duplicative, and there were large gaps in geographic coverage.
In 2016, the NSW Telco Authority received dedicated NSW Government funding to commence the Critical Communications Enhancement Program (CCEP).
According to NSW Telco Authority's 2021–22 annual report, the CCEP is a transformation program for operational communications for NSW government agencies. The CCEP '…aims to deliver greater access to public safety standard radio communications for the State’s first responders and essential service agencies'. The objective of CCEP is to consolidate the large number of separate radio networks that are owned and operated by various NSW government entities and to enhance the state’s existing shared PSN. The program also aims to deliver increased PSN coverage throughout New South Wales.
The former NSW Government intended that as the enhanced PSN was progressively rolled-out across NSW, ESOs would migrate their radio communications to the enhanced network, before closing and decommissioning their own networks.
About this Audit
This audit assessed whether the CCEP is being effectively managed by the NSW Telco Authority to deliver an enhanced PSN that meets ESOs' requirements for operational communications.
We addressed the audit objective by answering the following two questions:
- Have agreed ESO user requirements for the enhanced PSN been met under day-to-day and emergency operational conditions?
- Has there been adequate transparency to the NSW Government and other stakeholders regarding whole-of-government costs related to the CCEP?
In answering the first question, we also considered how the agreed user requirements were determined. This included whether they were supported by evidence, whether they were sufficient to meet the intent of the CCEP (including in considering any role for new or alternative technologies), and whether they met any relevant technical standards and compliance obligations (including for cyber security resilience).
While other NSW government agencies and entities use the PSN, we focused on the experience of the five primary ESOs because these will be the largest users of the enhanced PSN.
Both the cost and time required to complete the CCEP roll-out have increased since 2016. While it was originally intended to be completed in 2020, this is now forecast to be 2027. Infrastructure NSW has previously assessed the reasons for the increases in time and cost. A summary of the findings made by Infrastructure NSW is presented in Chapter 1 of this report. Accordingly, as these matters had already been assessed, we did not re-examine them in this performance audit.
The auditee for this performance audit is the NSW Telco Authority, which is a statutory authority within the Department of Customer Service portfolio.
In addition to being responsible for the operation of the PSN, section 5 of the Act also prescribes that the NSW Telco Authority is:
- to identify, develop and deliver upgrades and enhancements to the government telecommunications network to improve operational communications for government sector agencies
- to develop policies, standards and guidelines for operational communications using telecommunications networks.
The NSW Telco Authority Advisory Board is established under section 10 of the Act. The role of the board is to advise the NSW Telco Authority and the minister on any matter relating to the telecommunications requirements of government sector agencies and on any other matter relating to the functions of the Authority. As of 2 June 2023, the responsible minister is the Minister for Customer Service and Digital Government.
The five identified ESOs are critical stakeholders of the CCEP and therefore they were consulted during this audit. However, the ESOs were not auditees for this performance audit.
ConclusionIn areas of New South Wales where the enhanced Public Safety Network has been implemented under the Critical Communications Enhancement Program, the NSW Telco Authority has delivered a radio network that meets most of the agreed requirements of Emergency Services Organisations for routine and emergency operations.In April 2023, the enhanced Public Safety Network (PSN) was approximately 50% completed. In areas where it is used by Emergency Services Organisations (ESOs), the PSN generally meets agreed user requirements. This is demonstrated through extensive performance monitoring and reporting, which shows that agreed performance standards are generally achieved. Reviews by the NSW Government and the NSW Telco Authority found that the PSN performed effectively during major flood events in 2021 and 2022.Where it is completed, PSN coverage is generally equal to or better than each ESO's individual pre-existing coverage. The NSW Telco Authority has a dedicated work program to address localised coverage gaps (or 'blackspots') in those areas where coverage has otherwise been substantively delivered. Available call capacity on the network far exceeds demand in everyday use. Any operational issues that may occur with the PSN are transparent to ESOs in real time. The NSW Telco Authority consulted extensively with ESOs on requirements for the enhanced PSN, with relatively few ESO requirements not being included in the specifications for the enhanced PSN. Lessons from previous events, including the 2019–20 summer bushfires, have informed the design and implementation of the enhanced PSN (such as the need to ensure adequate backup power supply to inaccessible sites). The network is based on the Project 25 technical standards for mission-critical radio communications, which is widely-accepted in the public safety radio community throughout Australia and internationally. There is no mechanism to ensure adequate radio coverage within new building infrastructure after the CCEP concludes, but the NSW Telco Authority and ESOs have agreed an approach to prioritise existing in-building sites for coverage for the duration of the CCEP.The extent to which the PSN works within buildings and other built structures (such as railway tunnels) is of crucial importance to ESOs, especially the NSW Police Force, NSW Ambulance, and Fire and Rescue NSW. This is because a large proportion of their operational communications occurs within buildings.There is no mechanism to ensure the adequacy of future in-building coverage for the PSN in new or refurbished buildings after the CCEP concludes. Planning, building, and fire regulations are silent on this issue. We note there are examples in the United States of how in-building coverage for public safety radio networks can be incorporated into building or fire safety codes. In regard to existing buildings, it is not possible to know whether a building requires its own in-building PSN infrastructure until nearby outside radio sites, including towers and antennae, have been commissioned into the network. Only then can it be determined whether their radio transmissions are capable of penetrating inside nearby buildings. Accordingly, much of this work for in-building coverage cannot be done until outside radio sites are finished and operating. In March 2023, the NSW Telco Authority and ESOs agreed on a list of 906 mandatory and 7,086 non-mandatory sites for in-building PSN coverage. Most of these sites will likely be able to receive radio coverage via external antennae and towers, however this cannot be confirmed until those nearby external PSN sites are completed. The parties also agreed on an approach to prioritising those sites where coverage is needed but not provided by antennae and towers. Available funding will likely only extend to ensuring coverage in sites deemed mandatory, which is nonetheless expected to meet the overall benchmark of achieving 'same or better' coverage than what ESOs had previously. There is a risk that radio interoperability between ESOs will not be maximised because the NSW Telco Authority has not settled with ESOs how encryption will be used across the enhanced PSN.End-to-end encryption of radio transmissions is a security feature that prevents radio transmissions being intercepted or listened to by people who are not meant to. The ability of the PSN to provide end-to-end encryption of operational communications is of critical importance to the two largest prospective users of the PSN: the NSW Police Force and NSW Ambulance. Given that encryption excludes other parties that do not have the requisite encryption keys, its use creates an obstacle to achieving a key intended benefit of the CCEP, that is a more interoperable PSN, where first responders are better able to communicate with other ESOs.Further planning and collaboration between PSN participants are necessary to consider how these dual benefits can be achieved, including in what operational circumstances encrypted interoperability is necessary or appropriate. The capital cost to the NSW Telco Authority of the CCEP, originally estimated at $400 million in 2016, was not made public until the 2021–22 NSW Budget disclosed an estimate of $1.325 billon.The estimated capital cost to complete all stages of the CCEP increased over time. This increasing cost was progressively disclosed to the NSW Government through Cabinet processes between 2015–16 and 2021–22.In 2016, the full capital cost to the NSW Telco Authority of completing the CCEP was estimated to be $400 million. This estimated cost was not publicly disclosed, nor were subsequent increases, until the cost of $1.325 billion was publicly disclosed in the 2021–22 NSW Budget (revised down in the 2022–23 NSW Budget to $1.293 billion). There has been no transparency about the whole-of-government cost of implementing the enhanced PSN through the CCEP.In addition to the capital costs incurred directly by the NSW Telco Authority for the CCEP, ESOs have incurred costs to maintain their own networks due to the delay in implementing the CCEP. The ESOs will continue to incur these costs until they are able to fully migrate to the enhanced PSN, which is expected to be in 2027. These costs have not been tracked or reported as part of transparently accounting for the whole-of-government cost of the enhanced PSN. This is despite Infrastructure NSW in 2019 recommending to the NSW Telco Authority that it conduct a stocktake of such costs so that a whole-of-government cost impact is available to the NSW Government. |
1 The definition of 'emergency services organisation' is set out in the State Emergency and Rescue Management Act 1989 (NSW). In addition to the five ESOs discussed in this report, the definition also includes: Surf Life Saving New South Wales; New South Wales Volunteer Rescue Association Inc; Volunteer Marine Rescue NSW; an agency that manages or controls an accredited rescue unit; and a non-government agency that is prescribed by the regulations for the purposes of this definition.
2 Section 15(1) of the Government Telecommunications Act 2018 (NSW).
The NSW Telco Authority established and tracked its own costs for the CCEP
Over the course of the program from 2016, the NSW Telco Authority prepared a series of business cases and program reviews that estimated its cost of implementing the program in full, including those shown in Exhibit 6 below.
| Source | Capital cost ($ million) | Operating cost ($ million) |
Completion date |
| March 2016 business case | 400 | 37.3 | 2020 |
| November 2017 internal review | 476.7 | 41.7 | 2022 |
| March 2020 business case | 950–1,050 | -- | 2025 |
| October 2020 business case | 1,263.1 | 56.1 | 2026 |
In response to the 2016 CCEP business case, the then NSW Government approved the NSW Telco Authority implementing the CCEP in full, with funding provided in stages. The NSW Telco Authority tracked its costs against approved funding, with monthly reports provided to the multi-agency Program Steering Committee
Throughout the program, the NSW Government was informed of increasing costs being incurred by the NSW Telco Authority for the CCEP
The various business cases, program updates, and program reviews prepared by the NSW Telco Authority were provided to the NSW Government through the required Cabinet process when seeking approval for the program proceeding and requests for both capital and operational funding. These provided clear indication of the changing overall cost of the CCEP to the NSW Telco Authority, as well as the delays that were being experienced.
There was no transparency to the Parliament and community about changes in the capital cost of the CCEP until the 2021–22 NSW Budget
As the business cases for the CCEP were not publicly available, the only sources of information about capital cost were NSW Budget papers and media releases. The information provided in the annual Budget papers prior to the 2021–22 NSW Budget provided no visibility of the estimated full capital cost to complete all stages of the CCEP. As shown in Exhibit 7 below, this information was fragmented and complex.
Media releases about the progress of the CCEP did not provide the estimated total cost to the NSW Telco Authority of $1.325 billion to complete all stages of the CCEP until June 2021. Prior to this date, media releases only provided funding for the initial stages of the program or for the stages subject to a funding announcement.
Even during the September 2019 and March 2020 Parliamentary Estimate Committee hearings where the costings and delays to the CCEP were raised, the estimated full cost of the CCEP was not revealed.
| Financial year | Type of major work | Description of expenditure | Forecast estimate to complete ($ million) | Estimated duration |
| 2015–16 | New work | Infrastructure Rationalisation Program: Planning and Pilot | 18.3 | 2015–16 |
| 2016–17 | Work in progress | CCEP Planning and Pilot | 18.3 | 2015–17 |
| New work | CCEP | 45 | 2016–17 | |
| 2017–18 | New work | CCEP | 190.75 | 2017–21 |
| 2018–19 | Work in progress | CCEP North Coast and State-wide Detailed Design | 190.75 | 2017–21 |
| New work | CCEP Greater Metropolitan Area | 236 | 2018–22 | |
| 2019–20 | Work in progress | CCEP | 426.9 | 2018–22 |
| 2020–21 | Work in progress | CCEP | 664.8 | 2018–22 |
| 2021–22 | Work in progress | CCEP | 1,325 | 2018–26 |
| 2022–23 | Work in progress | CCEP | 1,292.8 | 2018–26 |
The original business case for the CCEP included estimated ESO costs, though these costs were not tracked throughout the program
Estimates for ESO costs for operating and maintaining their own radio networks over the four years from 2016–17 were included in the original March 2016 business case. They included $75.2 million for capital expenditure and $95 million for one-off operating costs. These costs, as well as costs incurred by ESOs due to the delay in the program, were not subsequently tracked by the NSW Telco Authority.
In January 2017, Infrastructure NSW reviewed the CCEP business case of March 2016. In this review, Infrastructure NSW recommended that the NSW Telco Authority identify combined and apportioned costs and cashflow for all ESOs over the CCEP funding period reflecting all associated costs to deliver the CCEP. These to include additional incidental capital costs accruing to ESOs, transition and migration to the new network and the cost (capital and operational) of maintaining existing networks. This recommendation was implemented in the November 2017 program review, with ESO capital costs estimated as $183 million.
In 2019, Infrastructure NSW conducted a Deep Dive Review on the progress of the CCEP. In this review, Infrastructure NSW made what it described as a 'critical recommendation' that the NSW Telco Authority:
| …coordinate a stocktake of the costs of operational bridging solutions implemented by PSAs [ESOs] as a result of the 18-month delay, so that a whole-of-government cost impact is available to the NSW Government. |
It should be noted that the delay to CCEP completion now is seven years and that further ‘operational bridging solutions’ have been needed by the ESOs.
'Stay Safe and Keep Operational' costs incurred by ESOs will be significantly higher than originally estimated
Stay Safe and Keep Operational (SSKO) funding was established to provide funding to ESOs to maintain their legacy networks while the CCEP was refreshing and enhancing the PSN. This recognised that much of the network infrastructure relied on by ESOs had reached – or was reaching – obsolescence and would either require extensive maintenance or replacement before the PSN was available for ESOs to migrate to it. ESOs may apply to NSW Treasury for SSKO funding, with their specific proposals being reviewed (and endorsed, where appropriate) by the NSW Telco Authority. Accordingly, SSKO expenditure does not fall within the CCEP budget allocation.
As shown in the table below, extracted from the March 2016 CCEP business case, the total expected cost for SSKO purposes over the course of the CCEP was originally $40 million, assuming the enhanced PSN would be fully available by 2020.
| Year | 2017 | 2018 | 2019 | 2020 | Total |
| SSKO forecast ($ million) | 12.5 | 15 | 10 | 2.5 | 40 |
In October 2022, the expected completion date for the CCEP was re-baselined to August 2027. Accordingly, ESOs will be required to continue to maintain their radio networks using legacy equipment for seven years longer than the original 2020 forecast. This will likely become progressively more expensive and require additional SSKO funding. For example, NSW Telco Authority endorsed SSKO bids for 2022–23 exceeded $35 million for that year alone.
Compared to the original forecast made in the March 2016 CCEP business case of $40 million, we found ESOs had estimated SSKO spending to 2027 will be $292.5 million.
A refresh of paging network used by ESOs and the decommissioning of redundant sites were both removed from the original 2016 scope of the CCEP
Paging
A paging network is considered an important user requirement by the Fire and Rescue NSW, NSW Rural Fire Service, and NSW State Emergency Service. The 2016 CCEP business case included a paging network refresh within the program scope of works. This was reiterated in the November 2017 internal review of the program. These documents did not estimate a cost for this refresh. The March 2020 and October 2020 business cases excluded paging from the program scope. The audit is unable to identify when, why or by whom the decision was made to remove paging from the program scope, something that was also not well communicated to the affected ESOs.
In 2021, after representations from the affected ESOs, the NSW Telco Authority prepared a separate business case for a refresh of the paging network at an estimated capital cost of $60.31 million. This program was subsequently approved by the NSW Government and included in the 2022–23 NSW Budget.
In determining an estimated full whole-of-government cost of delivering the enhanced PSN, we have included the budgeted cost of the paging network refresh on the basis that:
- it was expressly included in the original approved March 2016 business case
- the capability is deemed essential to the needs of three ESOs.
Decommissioning costs
The 2016 CCEP business case included cost estimates for decommissioning surplus sites (whether ‘old’ GRN sites or sites belonging to ESOs’ own networks). These estimates were provided for both the NSW Telco Authority ($38 million) and for the ESOs ($55 million). However, while these estimates were described, they were not included as part of the NSW Telco Authority's estimated capital cost ($400 million) or (more relevantly) operating cost ($37.3 million) for the CCEP. This is despite decommissioning being included as one of eight planned activities for the rollout of the program.
In the October 2020 business case, an estimate of $201 million was included for decommissioning agency networks based on a model whereby:
- funding would be coordinated by the NSW Telco Authority
- scheduling and reporting through an inter-agency working group and
- where appropriate, agencies would be appointed as the most appropriate decommissioning party.
This estimated cost is not included in the CCEP budget.
In determining an estimated full whole-of-government cost of the enhanced PSN, we have included the estimated cost of decommissioning on the basis that:
- decommissioning was included in the 2016 CCEP business case as one of eight 'planned activities for the rollout of the program'
- effective decommissioning of surplus sites and equipment (including as described in the business case as incorporating asset decommissioning, asset re-use, and site make-good) is an inherent part of the program management for an enhanced PSN
- costs incurred in decommissioning are entirely a consequence of the CCEP program.
The estimated minimum cost of building an enhanced PSN consistent with the original proposal is over $2 billion
We have derived two estimated minimum whole-of-government costs for delivering an enhanced PSN. These are:
- $2.04 billion when calculated from NSW Telco Authority data – shown as estimate A in Exhibit 9 below.
- $2.26 billion when calculated from ESO supplied data – shown as estimate B in Exhibit 9.
Both totals include:
- budgeted amounts for both CCEP capital expenditure ($1,292.8 million) and operating expenditure ($139 million)
- the NSW Telco Authority's 2020 estimated cost for decommissioning ($201 million)
- the NSW Telco Authority's approved funding for paging refresh ($60.3 million).
The two estimated totals primarily vary around the capital expenditure of ESOs (particularly SSKO funding). To determine these costs, we used ESO provided actual SSKO costs to date, as well as their estimates for maintaining their legacy radio networks through to 2027.
The equivalent cost estimates from the NSW Telco Authority were sourced from the November 2017 internal review and the October 2020 business case for CCEP. It should be noted that the amounts for both estimates are not audited, or verified, but do provide an indication of how whole-of-government costs have grown over the course of the program.
The increase in and reasons for the increase in total CCEP costs (capital and one-off operating) incurred or forecast by the NSW Telco Authority (from $437.3 million in 2016 to $1,431.8 million in 2022) have been provided to the NSW Government through various business cases and reviews prepared by the NSW Telco Authority, as well as by reviews conducted by Infrastructure NSW as part of its project assurance responsibilities.
However, the growth in ESO costs and other consequential costs, such as paging and decommissioning, from around $263 million in the 2016 CCEP business case to between $600 million and $800 million, has to a large degree remained invisible and unexplained to the NSW Government and other stakeholders
| Estimated whole-of-government cost, over time | |||||
| Cost type | 20161 | 20172 | 20203 | 2023–Estimate A4 | 2023–Estimate B5 |
| $ million | $ million | $ million | $ million | $ million | |
| CCEP capital expenditure | 400a | 476.7b | 1,263.1c | 1,292.8d | 1,292.8d |
| CCEP operating expenditure | 37.3a | 41.7b | 41.5e | 139d | 139d |
| CCEP total | 437.3 | 518.4 | 1,304.6 | 1,431.8 | 1,431.8 |
| ESO capital expenditure | 75.2a,f | 183b,e | 75.4e | 258.4g | 292.5 |
| ESO one-off operating expenditure | 93a | n.a.l | 86.5e | 86.5h | 273 |
| ESO total | 168.2 | 183 | 161.9 | 344.9 | 565.5 |
| Paging | n.a.i | n.a.i | n.a.j | 60.3k | 60.3k |
| Decommissioning | 93 | n.a.l | 201.0 | 201h | 201 |
| Paging and decommissioning total | 93 | n.a. | 201 | 261.3 | 261.3 |
| Whole-of-government total | 698.5 | 701.4 | 1,667.5 | 2,038 | 2,258.6 |
- Financial year 2016 to Financial year 2020.
- Financial year 2016 to Financial year 2021.
- Financial year 2016 to Financial year 2025.
- Financial year 2016 to Financial year 2026.
- Financial year 2022 to Financial year 2025.
- Stay Safe and Keep Operational (SSKO) costs plus terminals costs.
- November 2017 internal review and October 2020 Business case.
- October 2020 Business case.
- Included in CCEP capital expenditure at that time.
- By 2020, a refresh of the paging network had been removed from the CCEP scope.
- A separate business case for a refresh of the paging network was approved by government in 2022.
- Figure not included in the source document.
- March 2016 CCEP business case.
- November 2017 Internal Review conducted by the NSW Telco Authority.
- October 2020 CCEP business case.
- Derived from business cases, with ESO costs drawn from NSW Telco Authority data.
- Derived from business cases, with ESO costs based on data provided to the Audit Office of New South Wales by each of the five ESOs.
Appendix one – Response from agency
Appendix two – Trunked public safety radio networks
Appendix three – About the audit
Appendix four – 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 #383 - released 23 June 2023
Universities 2022
What this report is about
Results of the financial statement audits of the public universities in NSW for the year ended 31 December 2022.
What we found
Unmodified audit opinions were issued for all ten universities.
Nine universities reported net deficits in 2022, and all showed a decline from their 2021 results.
Results were impacted by a decline in investment income and government grants.
Wage remediation provisions across the universities increased by 116% to $110 million at 31 December 2022.
Expenditure increased as universities transitioned back to face-to-face teaching with the lifting of most COVID-19 restrictions.
Revenue from overseas students decreased by 0.5% overall in 2022, although not all universities were impacted equally.
Nearly 42% of fees and charges revenue came from overseas student revenue from three countries of origin (43% in 2021).
What the key issues were
We reported 88 findings to universities on internal control deficiencies (105 in 2021).
Six high risk findings were identified (four in 2021), relating to:
- IT control deficiencies in monitoring privileged user access
- password configuration
- cyber security process improvements
- lack of security over access to EFT payment files
- the status of a university's work in assessing its liability for underpayment of staff
- inadequate review of contracts leading to incorrect accounting treatments.
Two out of 13 entities reported financial losses from cyber incidents in 2022.
Retention policies on personally identifiable information (PII) vary and universities can further reduce their PII exposure risk from cyber attack.
What we recommended
Universities should:
- conduct a comprehensive assessment of their employment agreements and historical pay practices to identify potential underpayments
- prioritise actions to address repeat findings on internal control deficiencies in a timely manner
- review their PII retention policies to ensure PII stored is limited to the entity's needs, held only for the minimum duration it is legally and operationally required, and access is strictly limited.
This report provides Parliament with the results of our financial audits of universities in New South Wales and their controlled entities in 2022, including our analysis, observations and recommendations in the following areas:
- financial reporting
- internal controls and governance
- teaching and research.
Financial reporting is an important element of good governance. Confidence and transparency in university sector decision-making are enhanced when financial reporting is accurate and timely.
This chapter outlines our audit observations related to the financial reporting of universities in NSW for 2022.
Section highlights
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Appropriate financial controls help to ensure the efficient and effective use of resources and administration of policies. They are essential for quality and timely decision-making.
This chapter outlines our observations and insights from our financial statement audits of NSW universities.
Our audits do not review all aspects of internal controls and governance every year. The more significant issues and risks are included in this chapter. These, along with the less significant matters, are reported to universities for management to address.
Section highlights
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Universities' primary objectives are teaching and research. They invest most of their resources aiming to achieve quality outcomes in academia and student experience. Universities have committed to achieving certain government targets and compete to advance their reputation and their standing in international and Australian rankings.
This chapter outlines teaching and research outcomes for universities in NSW for 2022.
Section highlights
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Appendix one – List of 2022 recommendations
Appendix two – Status of 2021 recommendations
Appendix three – Universities' controlled entities
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.
Stronger Communities 2022
What the report is about
Results of the Stronger Communities cluster agencies' financial statement audits for the year ended 30 June 2022.
What we found
Unqualified audit opinions were issued on all completed 30 June 2022 financial statement audits. One audit is ongoing.
All 13 cluster agencies that have accommodation arrangements with Property NSW derecognised right-of-use assets and lease liabilities of $917 million and $1 billion respectively. The agencies also collectively recorded a gain on derecognition of $136 million.
The Department of Communities and Justice (the department) assumed the responsibility for delivery of the Process and Technology Harmonisation program from the Department of Customer Service. In 2021–22, the department incurred costs of $42.8 million in relation to the project, which remains ongoing.
The number of monetary misstatements identified during the audits decreased from 50 in 2020–21 to 48 in 2021–22.
What the key issues were
Six of the 15 cluster agencies required to submit 2021–22 mandatory early close procedures did not meet the statutory deadlines. One agency did not complete all mandatory procedures.
Five high-risk findings were identified in 2021–22. They related to deficiencies in:
- user access administration at the department, NSW Rural Fire Service and New South Wales Aboriginal Land Council (NSWALC)
- segregation of duties at the NSW Trustee and Guardian and NSWALC.
Recommendations were made to those agencies to address these control deficiencies.
This report provides Parliament and other users of the Stronger Communities cluster’s 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 Stronger Communities cluster (the cluster) for 2022.
Section highlights
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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 Stronger Communities cluster.
Section highlights
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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 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.
Premier and Cabinet 2022
What the report is about
Result of the Premier and Cabinet cluster financial statement audits for the year ended 30 June 2022.
What we found
Unmodified audit opinions were issued for all Premier and Cabinet cluster agencies.
The machinery of government changes within the Premier and Cabinet cluster resulted in the transfer of net assets of $1 billion from the Department of Premier and Cabinet.
The Department of Premier and Cabinet, Public Service Commission and Parliamentary Counsel's Office accepted changes to their office leasing arrangements managed by Property NSW. These changes resulted in the collective de-recognition of $167.3 million of right-of-use assets, $225.1 million in lease liabilities and recognition of $47.8 million of other gains/losses.
What the key issues were
The number of issues we reported to management decreased.
Forty per cent of issues were repeated from the prior year.
Four moderate risk issues were reported in the management letters for Department of Premier and Cabinet and New South Wales Electoral Commission. Three out of the four moderate risk issues were repeat issues.
The repeat issues related to internal control deficiencies in agencies' including lack of updated procurement policies and procedures and information technology general controls.
Fast facts
The Premier and Cabinet cluster comprises seven agencies, delivering the government's objectives and facilitating stewardship of the public service.
- $0.2b property, plant and equipment as at 30 June 2022
- $3b total expenditure incurred in 2021–22
- 100% unqualified audit opinions issued on agencies’ 30 June 2022 financial statements
- 4 moderate risk findings identified
- 15 monetary misstatements reported in 2021–22
- 40% of reported issues were repeat issues
This report provides Parliament and other users of the Premier and Cabinet’s 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 Premier and Cabinet cluster for 2022.
Section highlights
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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 Premier and Cabinet cluster.
Section highlights
|
Appendix one – Early close procedures
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.
Audit Insights 2018-2022
What the report is about
In this report, we have analysed the key findings and recommendations from our audit reports over the past four years.
This analysis includes financial audits, performance audits, and compliance audits of state and local government entities that were tabled in NSW Parliament between July 2018 and February 2022.
The report is framed by recognition that the past four years have seen significant challenges and emergency events.
The scale of government responses to these events has been wide-ranging, involving emergency response coordination, service delivery, governance and policy.
The report is a resource to support public sector agencies and local government to improve future programs and activities.
What we found
Our analysis of findings and recommendations is structured around six key themes:
- Integrity and transparency
- Performance and monitoring
- Governance and oversight
- Cyber security and data
- System planning for disruption
- Resource management.
The report draws from this analysis to present recommendations for elements of good practice that government agencies should consider in relation to these themes. It also includes relevant examples from recent audit reports.
In this report we particularly call out threats to the integrity of government systems, processes and governance arrangements.
The report highlights the need for balanced advice to government on options and risks, for transparent documentation and reporting of directions and decisions, and for early and open sharing of information with integrity bodies and audit.
A number of the matters highlighted in this report are similar to those described in our previous Insights Report, (Performance Audit Insights: key findings from 2014–2018) specifically in relation to cyber and information security, to performance measurement, reporting and evaluation, and system and workforce planning and capability.
Fast facts
- 72 audits included in the Audit Insights 2018–2022 analysis
- 4 years of audits tabled by the Auditor-General for New South Wales
- 6 key themes for Audit Insights 2018–2022.
I am pleased to present the Audit Insights 2018–2022 report. This report describes key findings, trends and lessons learned from the last four years of audit. It seeks to inform the New South Wales Parliament of key risks identified and to provide insights and suggestions to the agencies we audit to improve performance across the public sector.
The report is framed by a very clear recognition that governments have been responding to significant events, in number, character and scale, over recent years. Further, it acknowledges that public servants at both state and council levels generally bring their best selves to work and diligently strive to deliver great outcomes for citizens and communities. The role of audit in this context is to provide necessary assurance over government spending, programs and services, and make suggestions for continuous improvement.
A number of the matters highlighted in this report are similar to those described in our previous Insights Report, (Performance Audit Insights: key findings from 2014–2018) specifically in relation to cyber and information security, to performance measurement, reporting and evaluation, and system and workforce planning and capability.
However, in this report we particularly call out threats to the integrity of government systems, processes and governance arrangements. We highlight the need for balanced advice to government on options and risks, for transparent documentation and reporting of directions and decisions, and for early and open sharing of information with integrity bodies and audit. Arguably, these considerations are never more important than in an increasingly complex environment and in the face of significant emergency events and they will be key areas of focus in our future audit program.
While we have acknowledged the challenges of the last few years have required rapid responses to address the short-term impacts of emergency events, there is much to be learned to improve future programs. I trust that the insights developed in this report provide a helpful resource to public sector agencies and local government across New South Wales. I would be pleased to receive any feedback you may wish to offer.
Margaret Crawford
Auditor-General for New South Wales
| Integrity and transparency | Performance and monitoring | Governance and oversight | Cyber security and data | System planning | Resource management |
| Insufficient documentation of decisions reduces the ability to identify, or rule out, misconduct or corruption. | Failure to apply lessons learned risks mistakes being repeated and undermines future decisions on the use of public funds. | The control environment should be risk-based and keep pace with changes in the quantum and diversity of agency work. | Building effective cyber resilience requires leadership and committed executive management, along with dedicated resourcing to build improvements in cyber security and culture. | Priorities to meet forecast demand should incorporate regular assessment of need and any emerging risks or trends. Absence of an overarching strategy to guide decision-making results in project-by-project decisions lacking coordination. | Governments must weigh up the cost of reliance on consultants at the expense of internal capability, and actively manage contracts and conflicts of interest. |
| Government entities should report to the public at both system and project level for transparency and accountability. | Government activities benefit from a clear statement of objectives and associated performance measures to support systematic monitoring and reporting on outcomes and impact. | Management of risk should include mechanisms to escalate risks, and action plans to mitigate risks with effective controls. | In implementing strategies to mitigate cyber risk, agencies must set target cyber maturity levels, and document their acceptance of cyber risks consistent with their risk appetite. | Service planning should establish future service offerings and service levels relative to current capacity, address risks to avoid or mitigate disruption of business and service delivery, and coordinate across other relevant plans and stakeholders. | Negotiations on outsourced services and major transactions must maintain focus on integrity and seeking value for public funds. |
| Entities must provide balanced advice to decision-makers on the benefits and risks of investments. | Benefits realisation should identify responsibility for benefits management, set baselines and targets for benefits, review during delivery, and evaluate costs and benefits post-delivery. | Active review of policies and procedures in line with current business activities supports more effective risk management. | Governments hold repositories of valuable data and data capabilities that should be leveraged and shared across government and non-government entities to improve strategic planning and forecasting. | Formal structures and systems to facilitate coordination between agencies is critical to more efficient allocation of resources and to facilitate a timely response to unexpected events. | Transformation programs can be improved by resourcing a program management office. |
| Clear guidelines and transparency of decisions are critical in distributing grant funding. | Quality assurance should underpin key inputs that support performance monitoring and accounting judgements. | Governance arrangements can enable input into key decisions from both government and non-government partners, and those with direct experience of complex issues. | Workforce planning should consider service continuity and ensure that specialist and targeted roles can be resourced and allocated to meet community need. | ||
| Governments must ensure timely and complete provision of information to support governance, integrity and audit processes. | |||||
| Read more | Read more | Read more | Read more | Read more | Read more |
This report brings together a summary of key findings arising from NSW Audit Office reports tabled in the New South Wales Parliament between July 2018 and February 2022. This includes analysis of financial audits, performance audits, and compliance audits tabled over this period.
- Financial audits provide an independent opinion on the financial statements of NSW Government entities, universities and councils and identify whether they comply with accounting standards, relevant laws, regulations, and government directions.
- Performance audits determine whether government entities carry out their activities effectively, are doing so economically and efficiently, and in accordance with relevant laws. The activities examined by a performance audit may include a selected program or service, all or part of an entity, or more than one government entity. Performance audits can consider issues which affect the whole state and/or the local government sectors.
- Compliance audits and other assurance reviews are audits that assess whether specific legislation, directions, and regulations have been adhered to.
This report follows our earlier edition titled 'Performance Audit Insights: key findings from 2014–2018'. That report sought to highlight issues and themes emerging from performance audit findings, and to share lessons common across government. In this report, we have analysed the key findings and recommendations from our reports over the past four years. The full list of reports is included in Appendix 1. The analysis included findings and recommendations from 58 performance audits, as well as selected financial and compliance reports tabled between July 2018 and February 2022. The number of recommendations and key findings made across different areas of activity and the top issues are summarised at Exhibit 1.
The past four years have seen unprecedented challenges and several emergency events, and the scale of government responses to these events has been wide-ranging involving emergency response coordination, service delivery, governance and policy. While these emergencies are having a significant impact today, they are also likely to continue to have an impact into the future. There is much to learn from the response to those events that will help the government sector to prepare for and respond to future disruption. The following chapters bring together our recommendations for core elements of good practice across a number of areas of government activity, along with relevant examples from recent audit reports.
This 'Audit Insights 2018–2022' report does not make comparative analysis of trends in public sector performance since our 2018 Insights report, but instead highlights areas where government continues to face challenges, as well as new issues that our audits have identified since our 2018 report. We will continue to use the findings of our Insights analysis to shape our future audit priorities, in line with our purpose to help Parliament hold government accountable for its use of public resources in New South Wales.
Appendix one – Included reports, 2018–2022
Appendix two – About this report
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.
Universities 2021
What the report is about
Results of the financial statement audits of the public universities in NSW for the year ended 31 December 2021.
What we found
Financial reporting
Unmodified audit opinions were issued for all ten universities.
The University of Wollongong reported the retrospective correction of a prior period error relating to a $169 million contract termination liability.
All universities reported positive net results in 2021 (four in 2020) and each showed improvement from 2020. This was mainly due to expenditure decreasing by a combined $644 million (5.8%) from 2020. Universities implemented redundancy programs in response to the COVID-19 pandemic, which resulted in a decrease of nearly 2,300 full-time equivalent staff in 2021.
All universities held an investment in Education Australia Limited, which paid to its shareholders a fully franked dividend comprising cash and shares in IDP Education Limited. This increased the combined investment revenues of the universities by $515 million in 2021. However, it affected each university's net result differently depending on elections made in their historical accounting treatment.
Government grants increased by $442 million from 2020, of which $297 million related to the Commonwealth's 2021 additional Research Support Program funding to the NSW universities which was a COVID-19 support measure to the sector.
Over 43% of universities' course fees revenue comes from three countries (39% in 2020). Students from China now represent over half of all overseas student enrolments. A high level of reliance on student revenue from a single country poses a concentration risk for universities.
Internal controls
We reported 105 findings to universities on internal control deficiencies (110 in 2020).
Four high-risk findings were identified (three in 2020), relating to:
- the status of one university's work in assessing its liability for underpayment of staff
- IT control deficiencies over privileged user access
- control deficiencies that resulted in non-recognition of a liability in one university's prior year's financial statements
- a detailed review of payroll compliance for casual staff, which remains outstanding at one university.
There were 45 repeat findings of control deficiencies in 2021 (45 in 2020).
All universities have drafted or implemented a cybersecurity policy and established a governance committee accountable for cybersecurity. However, improvements could be made in:
- recording and monitoring of attempted cyber incidents
- assessing cyber risks relating to IT vendors
- implementation of cybersecurity control measures for key systems.
Four out of 13 entities experienced a significant cyber incident during 2021.
What we recommended
- Universities should prioritise actions to address repeat findings on internal control deficiencies, particularly where the issue has been repeated for a number of years.
- Universities and controlled entities should prioritise improvements to their cybersecurity and resilience.
Fast facts
There are ten public universities in NSW, with 52 controlled entities in Australia and 22 overseas controlled entities.
- $12b total combined adjusted revenue in 2021, an increase of $1.1 billion (10.5%) from 2020
- $10.4b total combined expenditure in 2021, a decrease of $644 million (5.8%) from 2020
- 79,134 overseas student enrolments in 2021, a decrease of 3,138 students (3.8%) from 2020
- 209,018 domestic student enrolments in 2021, an increase of 1,622 students (0.8%) from 2020
- 4 high-risk management letter findings were identified (3 in 2020)
- 43% of reported issues were repeat issues.
This report provides Parliament with the results of our financial audits of universities in New South Wales and their controlled entities in 2021, including our analysis, observations and recommendations in the following areas:
- financial reporting
- internal controls and governance
- teaching and research.
Financial reporting is an important element of governance. Confidence and transparency in university sector decision-making are enhanced when financial reporting is accurate and timely.
This chapter outlines our audit observations on the financial reporting of universities in NSW for 2021.
Section highlights
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Appropriate and robust internal controls help produce reliable financial reports and reduce risks associated with managing finances, compliance and administration of universities.
This chapter outlines the internal controls related observations and insights across universities in NSW for 2021, including overall trends in findings, level of risk and implications.
Our audits do not review all aspects of internal controls and governance every year. The more significant issues and risks are included in this chapter. These along with the less significant matters are reported to universities for management to address.
Section highlights
|
Universities' primary objectives are teaching and research. They invest most of their resources aiming to achieve quality outcomes in academia and student experience. Universities have committed to achieving certain government targets and compete to advance their reputation and their standing in international and Australian rankings.
This chapter outlines teaching and research outcomes for universities in NSW for 2021.
Section highlights
|
Appendix one – List of 2021 recommendations
Appendix two – Status of 2020 recommendations
Appendix three – Universities' controlled entities
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.
Universities 2020 audits
What the report is about
Results of the financial statement audits of the public universities in NSW for the year ended 31 December 2020.
What we found
Unqualified audit opinions were issued for all ten universities.
Two universities reported retrospective corrections of prior period errors.
Universities were impacted by the COVID-19 pandemic with student enrolments decreasing in 2020 compared to 2019 by 10,032 (3.3 per cent). Of this decrease 8,310 students were from overseas.
In response to the pandemic, each university provided welfare support, created student hardship funds, provided accommodation and flexibility on payment of course fees. State and Commonwealth governments provided additional support to the sector.
Six universities recorded negative net operating results in 2020 (two in 2019). The combined revenues of the ten universities from fees and charges decreased by $361 million (5.8 per cent).
Despite the impact of the COVID-19 pandemic, which will continue to impact the financial results of universities in 2021, enrolments of overseas students in semester one of 2021 increased at two universities. This growth meant that total overseas student enrolments increased by 7,944 or 5.8 per cent across the sector as a whole. However, eight universities experienced decreases in overseas student enrolments compared to semester one of 2020. All universities have experienced growth in domestic student enrolments.
What the key issues were
There were 110 findings reported to universities in audit management letters.
Three high risk findings were identified. One related to the continued work by the University of New South Wales to assess its liability for underpayment of casual staff entitlements. The other two deficiencies were at Charles Sturt University, relating to financial reporting implications of major contracts, and resolving issues identified by an internal review of its employment contracts to reliably quantify the university’s liability to its employees.
What we recommended
Universities should prioritise actions to address repeat findings. Forty-five findings were repeated from 2019, of which 23 related to information technology.
Fast factsThere are ten public universities in NSW with 51 local controlled entities and 23 overseas controlled entities.
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Further information
Please contact Ian Goodwin, Deputy Auditor-General on 9275 7347 or by email.
This report analyses the results of our audits of the financial statements of the ten universities in NSW for the year ended 31 December 2020. The table below summarises our key observations.
1. Financial reporting
| Financial reporting | The 2020 financial statements of all ten universities received unmodified audit opinions.
Two universities reported retrospective corrections of prior period errors. The University of Sydney reported errors relating to the underpayment of staff entitlements and the fair value of buildings. Charles Sturt University reported an error relating to how it had calculated right‑of‑use assets and lease liabilities on initial application of the new leasing standard in the previous year. |
| Impacts of COVID‑19 |
Student enrolments decreased in 2020 compared to 2019 by 10,032 (3.3 per cent). Of this decrease, 8,310 students were from overseas. The ongoing impact of COVID‑19 in the short‑term, on semester one enrolments for 2021 compared to semester one of 2020, has been mixed:
During 2020, universities provided welfare support to students, created student hardship funds, provided accommodation, and flexibility on payment of course fees. State and Commonwealth governments provided additional support to the sector:
|
| Financial results |
Six universities recorded negative net operating results in 2020 (two in 2019). While most universities experienced decreased revenue in 2020, only four had reduced their expenses to a level that was less than revenue. |
| Revenue from operations |
Universities' revenue streams were impacted in 2020 by the COVID‑19 pandemic, with fees and charges decreasing by $361 million (5.8 per cent). Government grants as a proportion of total revenue increased for the first time in five years to 34 per cent in 2020. Nearly 40 per cent of universities' total revenue from course fees in 2020 (40.9 per cent in 2019) came from overseas students from three countries: China, India and Nepal (same in 2019). Students from these countries of origin contributed $2.2 billion ($2.4 billion in 2019) in fees. Some universities continue to be dependent on revenues from students from these destinations and their results are more sensitive to fluctuations in demand as a result. |
| Other revenues |
Overall philanthropic contributions to universities increased by 32.2 per cent in 2020 to $222 million ($167.9 million in 2019). The University of Sydney and the University of New South Wales attracted 75.2 per cent of the total philanthropic contributions in 2020 (69.5 per cent in 2019). Total research income for universities was $1.4 billion in 20191, with the University of Sydney and the University of New South Wales attracting 66.5 per cent of the total research income of all universities in NSW (65.2 per cent in 2018). |
| Expenditure | Universities initiated cost saving measures in response to the COVID‑19 pandemic. The cost of redundancy programs increased employee related expenses in 2020 by 4.4 per cent to $6.5 billion ($6.2 billion in 2019). The cost of redundancies offered in 2020 across the universities totalled $293.9 million. Combined other expenses decreased to $2.8 billion in 2020, a reduction of $436 million (13.4 per cent). |
2. Internal controls and governance
| Internal control findings | One hundred and ten internal control deficiencies were identified in 2020 (108 in 2019). Forty‑five findings were repeated from 2019, of which 23 related to information technology.
Recommendation: Universities should prioritise actions to address repeat findings on internal control deficiencies in a timely manner. Risks associated with unmitigated control deficiencies may increase over time. Three high risk internal control deficiencies were identified, namely:
Gaps in information technology (IT) controls comprised the majority of the remaining deficiencies. Deficiencies included a lack of sufficient privileged user access reviews and monitoring, payment files being held in editable formats and accessible by unauthorised persons, and password settings not aligning with the requirements of information security policies. |
| Business continuity and disaster recovery planning | All universities have a business continuity policy supported with a business impact analysis.
Except for Macquarie University, all other universities had disaster recovery plans prepared for all of the IT systems that support critical business functions. Macquarie University’s disaster recovery plans were still in progress at 31 December 2020. Only half of the universities' policies require regular testing of their business continuity plans and six universities' plans do not specify staff must capture, asses and report disruptive incidents. |
3. Teaching and research
| Graduate employment outcomes | Eight out of ten universities were reported as having full‑time employment rates of their undergraduates in 2020 that were greater than the national average.
Six universities were reported as having full‑time employment rates of their postgraduates in 2020 that were greater than the national average. |
| Student enrolments by field of education | Enrolments at universities in NSW decreased the most in Management and Commerce courses and Engineering and Related Technologies courses. The largest increase in enrolments was in Society and Culture courses. |
| Achieving diversity outcomes | Five universities in 2019 were reported as meeting the target enrolment rate for students from low socio‑economic status (SES) backgrounds.
Seven universities were reported to have increased their enrolments of students from Aboriginal and Torres Strait Islander backgrounds in 2019. The target growth rate for increases in enrolments of Aboriginal and Torres Strait Islander students (to exceed the growth rate of enrolments of non‑indigenous students by at least 50 per cent) was achieved in 2019. |
This report provides Parliament with the results of our financial audits of universities in NSW and their controlled entities in 2020, including our analysis, observations and recommendations in the following areas:
- financial reporting
- internal controls and governance
- teaching and research.
Financial reporting is an important element of governance. Confidence and transparency in university sector decision making are enhanced when financial reporting is accurate and timely.
This chapter outlines our audit observations on the financial reporting of universities in NSW for 2020.
Financial results
The graph below shows the net results of individual universities for 2020.
Appropriate and robust internal controls help reduce risks associated with managing finances, compliance and administration of universities.
This chapter outlines the internal controls related observations and insights across universities in NSW for 2020, including overall trends in findings, level of risk and implications.
Our audits do not review all aspects of internal controls and governance every year. The more significant issues and risks are included in this chapter. These along with the less significant matters are reported to universities for management to address.
Universities' primary objectives are teaching and research. They invest most of their resources to achieve quality outcomes in academia and student experience. Universities have committed to achieving certain government targets and compete to advance their reputation and their standing in international and Australian rankings.
This chapter outlines teaching and research outcomes for universities in NSW for 2020.
