The Auditor-General for New South Wales, Margaret Crawford, released her report today on the results of the financial audits of NSW Government central agencies, namely the Premier and Cabinet, Treasury and Customer Service clusters. There are 191 agencies in these clusters, including government financial, superannuation and insurance entities.

Unqualified audit opinions were issued on the financial statements for all agencies in the clusters. There were two high risk and 99 moderate risk audit findings on internal controls. Of these, 31 percent were repeat issues, and most related to weaknesses in information technology access controls.

The report notes a number of audit observations including:

• a qualified opinion on information technology internal controls at an outsourced service provider
• self-insurance losses of $1.4 billion partly due to unfavourable movements in the risk free discount rate, and increases in workers compensation claims, including psychological injury claims
• a shortfall (unfunded liability) of $637 million at 30 June 2019 in the Home Building Compensation Fund, due to premiums not being sufficient to meet costs of the scheme
• agencies self-assessed against the Australian Cyber Security Centre’s ‘Essential 8’ cyber risk mitigation strategies for the first time in 2018-19. Based on their own self assessments, more work needs to be done to improve cyber security resilience.

This report analyses the results of our financial statement audits of the Treasury, Premier and Cabinet and Customer Service clusters for the year ended 30 June 2019. Our key observations are summarised below.

This report provides parliament and other users of the NSW Government's central agencies and their cluster agencies financial statements with the results of our audits, observations, analysis, conclusions and recommendations in the following areas:

• financial reporting
• audit observations
• government financial services.

Central agency clusters were significantly impacted by Machinery of Government changes which took effect on 1 July 2019. This report is focussed on agencies now in the Treasury, Premier and Cabinet and Customer Service clusters. Some of these agencies may have been in another cluster during 2018–19. Please refer to the section on Machinery of Government changes for more details.

Central agencies and their key responsibilities are set out below.

Machinery of Government (MoG) refers to how the government organises the structures and functions of the public service. MoG changes are where the government reorganises these structures and functions and they are given effect by Administrative orders.

The MoG changes announced following the NSW State election on 23 March 2019 significantly impacted Central Agencies’ clusters through Administrative Changes Orders issued on 2 April 2019 and 1 May 2019. These orders took effect on 1 July 2019.

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 on the 2019 financial reporting of agencies in the Treasury, Premier and Cabinet, and Customer Service clusters.

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, Premier and Cabinet and Customer Service clusters.

Background

This chapter outlines our audit observations, conclusions and recommendations specific to NSW Government agencies providing financial services.

Appendix one – Timeliness of financial reporting by agency

Appendix two – Management letter findings by agency

Appendix three – Status of 2018 recommendations

Appendix four – Cluster agencies

Appendix five – 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.

This report outlines the results of audits of the financial statements of agencies now grouped in the NSW Planning, Industry and Environment cluster.

Unqualified audit opinions were issued for 56 of the 66 cluster agencies’ 30 June 2019 financial statements. Ten audits remain incomplete. The cluster agencies need to improve the timeliness of financial reporting. 

The Audit Office continued to identify issues regarding unprocessed Aboriginal land claims and the recognition of Crown land. ‘Auditor-General’s reports to parliament have recommended action to reduce the level of unprocessed land claims since 2007. However, the number of unprocessed claims continued to increase’, Margaret Crawford said.

One in five internal control findings were repeat issues. Key themes included information technology, asset management and improvements required to expense and payroll controls.

The report makes several recommendations including:

• Property NSW should urgently address the deficiencies in the lease data used to calculate the impact of the new leasing standard effective from 1 July 2019
• the Department of Planning, Industry and Environment should prioritise action to reduce unprocessed Aboriginal land claims
• the Department of Planning, Industry and Environment should ensure the Crown land database is complete and accurate so state agencies and local government councils are better informed about the Crown land they control.

This report analyses the results of our audits of financial statements of the Planning, Industry and Environment cluster agencies for the year ended 30 June 2019. The table below summarises our key observations.

1. Machinery of Government changes

2. Financial reporting

3. Audit observations

This report provides parliament and other users of the Planning, Industry and Environment cluster agencies financial statements with the results of our audits, our observations, analysis, conclusions and recommendations in the following areas:

• financial reporting
• audit observations.

This cluster was created by the Machinery of Government changes on 1 July 2019. This report is focused on agencies in the Planning, Industry and Environment cluster from 1 July 2019. However, these agencies were all in other clusters during 2018–19. Please refer to the section on Machinery of Government changes for more details.

Machinery of Government (MoG) refers to how the government organises the structures and functions of the public service. MoG changes are where the government reorganises these structures and functions that are given effect by Administrative orders.

The MoG changes, announced following the NSW State election on 23 March 2019, created the Planning, Industry and Environment (PIE) cluster. The Administrative Changes Orders issued on 2 April 2019, 1 May 2019 and 28 June 2019 gave effect to these changes. These orders became effective on 1 July 2019.

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, Industry and Environment (PIE) cluster for 2019. In this chapter, the Department of Planning, Industry and Environment is referred to as DPIE, the former Department of Planning and Environment as DPE, and the former Department of Industry as DOI.

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 audit observations and insights from our financial statement audits of agencies in the Planning, Industry and Environment (PIE) cluster for 2019. In this chapter, the Department of Planning, Industry and Environment is referred to as DPIE, the former Department of Planning and Environment as DPE, and the former Department of Industry as DOI.

Appendix one – List of 2019 recommendations

Appendix two – Status of 2018 recommendations

Appendix three – Cluster agencies

Appendix four – Financial data

Appendix five – Management letter findings

Appendix six – Timeliness of financial reporting

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.

This report covers the findings and recommendations from the 2018–19 financial audits that relate to internal controls and governance at 40 of the largest agencies in the NSW public sector. The 40 agencies selected for this report constitute around 84 per cent of total expenditure for all NSW public sector agencies.

The report provides insights into the effectiveness of controls and governance processes across the NSW public sector. It evaluates how agencies identify, mitigate and manage risks related to:

• financial controls
• information technology controls
• gifts and benefits
• internal audit
• contingent labour
• sensitive data.

The Auditor-General recommended that agencies do more to prioritise and address vulnerabilities in their internal controls and governance. The Auditor-General also recommended agencies increase the transparency of their management of gifts and benefits by publishing their registers on their websites.

This report analyses the internal controls and governance of 40 of the largest agencies in the NSW public sector for the year ended 30 June 2019.

1. Internal control trends

2. Information technology controls

3. Gifts and benefits

4. Internal audit

5. Managing contingent labour

6. Managing sensitive data

This report covers the findings and recommendations from our 2018–19 financial audits that relate to internal controls and governance at 40 of the largest agencies (refer to Appendix three) in the NSW public sector. The 40 agencies selected for this volume constitute around 84 per cent of total expenditure for all NSW public sector agencies.

Although the report includes several agencies that have changed as a result of the Machinery of Government changes that were effective from 1 July 2019, its focus on sector wide issues and insights means that its findings remain relevant to NSW public sector agencies, including newly formed agencies that have assumed the functions of abolished agencies.

This report offers insights into internal controls and governance in the NSW public sector

This is the third report dedicated to internal controls and governance at NSW State Government agencies. The report provides insights into the effectiveness of controls and governance processes in the NSW public sector by:

• highlighting the potential risks posed by weaknesses in controls and governance processes
• helping agencies benchmark the adequacy of their processes against their peers
• focusing on new and emerging risks, and the internal controls and governance processes that might address those risks.

Without strong governance systems and internal controls, agencies increase the risks associated with effectively managing their finances and delivering services to citizens. For example, if they do not have strong information technology controls, sensitive information may be at risk of unauthorised access and misuse.

Areas of specific focus of the report have changed since last year

Last year's report topics included transparency and performance reporting, management of purchasing cards and taxi use, and fraud and corruption control. We are reporting on new topics this year and re-visiting agency management of gifts and benefits, which we first covered in our 2017 report. Re-visiting topics from prior years provides a baseline to show the NSW public sectors’ progress implementing appropriate internal controls and governance processes to mitigate existing, new and emerging risks in the public sector.

Our audits do not review all aspects of internal controls and governance every year. We select a range of measures and report on those that present heightened risks for agencies to mitigate. This year the report focusses on:

• internal control trends
• information technology controls, including access to agency systems
• protecting sensitive information held within agencies
• managing large and diverse workforces (controls around employing and managing contingent workers)
• maintaining an ethical culture (management of gifts and benefits)
• effectiveness of internal audit function and its oversight by Audit and Risk Committees.

The findings in this report should not be used to draw conclusions on the effectiveness of individual agency control environments and governance arrangements. Specific financial reporting, internal controls and audit observations are included in the individual 2019 cluster financial audit reports, which will be tabled in parliament from November to December 2019.

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

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

This chapter outlines the overall trends for agency controls and governance issues, including the number of audit findings, the degree of risk those deficiencies pose to the agency, and a summary of the most common deficiencies we found across agencies. The rest of this report presents this year’s controls and governance findings in more detail.

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

This chapter outlines our audit observations, conclusions and recommendations, arising from our review of agency controls to manage gifts and benefits. 

This chapter outlines our audit observations, conclusions and recommendations, arising from our review of agency internal audit functions.

This chapter outlines our audit observations, conclusions and recommendations, arising from our review of agency controls to on-board, manage and off-board contingent labour.

This chapter outlines our audit observations, conclusions and recommendations, arising from our review of governance and processes in relation to the management of sensitive data.

Appendix one – List of 2019 recommendations 

Appendix two – Status of 2018 recommendations

Appendix three – In-scope agencies

© 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.

The report focuses on the Department of Primary Industries’ (DPI) as the lead agency for biosecurity in New South Wales. It examines how well the department responds to biosecurity emergencies and manages compliance activities. DPI’s state partners include NSW Health, the NSW Environment Protection Authority, Local Land Services, and Local Control Authorities to manage biosecurity risks in New South Wales.

Biosecurity is the protection of the economy, environment, and community from the negative impacts of pests, diseases, weeds, and contaminants.

National and State governments have defined roles and responsibilities for biosecurity in Australia, reflecting the allocation of powers in the Australian Constitution. The Australian Government has direct responsibility for biosecurity (quarantine) at the international border, and works jointly with the states and territories to set the legislative framework and policy direction for managing biosecurity nationally. It also works with state and territory governments to ensure there is a national approach to biosecurity. State governments manage their biosecurity activities within the national framework.

The Department of Primary Industries (DPI), within the Department of Industry, is the lead agency for biosecurity in NSW. This audit was conducted with the Department of Industry as the auditee. On 2 April 2019 the NSW Government announced it will abolish the Department of Industry. From 1 July 2019 the Department of Planning, Industry and Environment, will have responsibility for biosecurity activities described in this report.

The NSW Biosecurity Strategy 2013–2021 (the Strategy) articulates the NSW Government’s responsibilities for biosecurity within the national legislative framework. Achieving the outcomes of the strategy relies on DPI fulfilling two key responsibilities. Firstly, undertaking direct actions, such as implementing strong regulatory compliance and licensing activities, and managing biosecurity emergency responses. Secondly, leading the response to biosecurity risks by fostering effective collaboration with stakeholders across government, industry, and the wider community.

In NSW, 11 regional Local Land Services (LLS) are the key partners for DPI in meeting its biosecurity responsibilities. Each LLS develops and implements strategies to manage invasive pests and diseases within their regions. They also investigate new reports of pests or diseases in their regions and staff local emergency control centres when an emergency response is triggered.

Local Control Authorities (LCAs) also have a role in biosecurity management. LCAs include local councils and a small number of specialist regional agencies. Their role focuses on strategies to manage weeds within their local areas.

This audit assessed the effectiveness and economy of DPI’s biosecurity emergency response and prevention activities. It looks at DPI’s emergency response practice and its compliance program as a key prevention activity for which DPI has primary responsibility. DPI sets policy and procedural compliance standards for management of biosecurity risks in NSW and also conducts an annual program of property inspections and investigations that ensure that its compliance policies and procedures are being applied effectively.

Appendix one - Response from agency

Appendix two - Location of selected biosecurity emergency responses

Appendix three - About the audit

Appendix four - Performance auditing

Parliamentary Reference: Report number #321 - released 18 June 2019

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.

Banner image: ‘Yellow crazy ant’, supplied and permitted for use by NSW Department of Primary Industries under Creative Commons Attribution-ShareAlike 3.0 Unported Licence. Full terms.

Agencies need to do more to address risks posed by information technology (IT).

Effective internal controls and governance systems help agencies to operate efficiently and effectively and comply with relevant laws, standards and policies. We assessed how well agencies are implementing these systems, and highlighted opportunities for improvement.
 

1. Overall trends

2. Information Technology

3. Asset Management

4. Governance

5. Ethics and Conduct

6. Risk Management 

This report covers the findings and recommendations from our 2016–17 financial audits related to the internal controls and governance of the 39 largest agencies (refer to Appendix three) in the NSW public sector. These agencies represent about 95 per cent of total expenditure for all NSW agencies and were considered to be a large enough group to identify common issues and insights.

The findings in this report should not be used to draw conclusions on the effectiveness of individual agency control environments and governance arrangements. Specific financial reporting, controls and service delivery comments are included in the individual 2017 cluster financial audit reports tabled in Parliament from October to December 2017.

This new report offers strategic insight on the public sector as a whole

In previous years, we have commented on internal control and governance issues in the volumes we published on each ‘cluster’ or agency sector, generally between October and December. To add further value, we then commented more broadly about the issues identified for the public sector as a whole at the start of the following year.

This year, we have created this report dedicated to internal controls and governance. This will help Parliament to understand broad issues affecting the public sector, and help agencies to compare their own performance against that of their peers.

Without strong control measures and governance systems, agencies face increased risks in their financial management and service delivery. If they do not, for example, properly authorise payments or manage conflicts of interest, they are at greater risk of fraud. If they do not have strong information technology (IT) systems, sensitive and trusted information may be at risk of unauthorised access and misuse.

These problems can in turn reduce the efficiency of agency operations, increase their costs and reduce the quality of the services they deliver.

Our audits do not review every control or governance measure every year. We select a range of measures, and report on those that present the most significant risks that agencies should mitigate. This report divides these into the following six areas:

1. Overall trends
2. Information technology
3. Asset management
4. Governance
5. Ethics and conduct
6. Risk management.

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

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

This chapter outlines the overall trends for agency controls and governance issues, including the number of findings, level of risk and the most common deficiencies we found across agencies. The rest of this volume then illustrates this year’s controls and governance findings in more detail.

Information technology (IT) has become increasingly important for government agencies’ financial reporting and to deliver their services efficiently and effectively. Our audits reviewed whether agencies have effective controls in place over their IT systems. We found that IT security remains the source of many control weakness in agencies.

Agency service delivery relies on developing and renewing infrastructure assets such as schools, hospitals, roads, or public housing. Agencies are currently investing significantly in new assets. Agencies need to manage the scale and volume of current capital projects in order to deliver new infrastructure on time, on budget and realise the intended benefits. We found agencies can improve how they:

• manage their major capital projects
• dispose of existing assets.

Governance refers to the high-level frameworks, processes and behaviours that help an organisation to achieve its objectives, comply with legal and other requirements, and meet a high standard of probity, accountability and transparency.

This chapter sets out the governance lighthouse model the Audit Office developed to help agencies reach best practice. It then focuses on two key areas: continuous disclosure and shared services arrangements. The following two chapters look at findings related to ethics and risk management.

All government sector employees must demonstrate the highest levels of ethical conduct, in line with standards set by The Code of Ethics and Conduct for NSW government sector employees.

This chapter looks at how well agencies are managing these requirements, and where they can improve their policies and processes.

We found that agencies mostly have the appropriate codes, frameworks and policies in place. But we have highlighted opportunities to improve the way they manage those systems to reduce the risks of unethical conduct.

Risk management is an integral part of effective corporate governance. It helps agencies to identify, assess and prioritise the risks they face and in turn minimise, monitor and control the impact of unforeseen events. It also means agencies can respond to opportunities that may emerge and improve their services and activities.

This year we looked at the overall maturity of the risk management frameworks that agencies use, along with two important risk management elements: risk culture and risk registers.

Effective risk management can improve agency decision-making, protect reputations and lead to significant efficiencies and cost savings. By embedding risk management directly into their operations, agencies can also derive extra value for their activities and services.

The following report highlights the results of the financial audits of NSW Government entities in the Industry cluster. The report focuses on key observations and findings from the most recent audits of these entities.

The report notes that TAFE NSW will continue to incur extra costs each year to produce reliable financial information due to deficiencies in its student administration system. TAFE NSW plans to replace its Student Administration and Learning Management system in 2018-19 at an estimated cost of $89 million.

1. Financial reporting and controls

2. Service delivery

This report focuses on agencies in the Industry cluster. The report focuses on audit results, observations, conclusions and recommendations for financial reporting and controls, and service delivery.

This cluster leads the State's promotion of New South Wales as the place to invest and produce goods and services. Significant cluster agencies deliver services in the following areas:

Confidence in public sector decision-making and transparency is enhanced when financial reporting is accurate and timely. Appropriate financial controls help ensure the efficient and effective use of resources and administration of agency policies.

This chapter outlines audit observations, conclusions and recommendations for the financial reporting and controls of agencies in the cluster for 2016–17.

Government outcomes can be achieved by delivering services through a mix of the public, private or not-for-profit sectors. Service delivery reform is most successful if there is clear accountability for service delivery outcomes, decisions are aligned to the government's strategic direction, and performance and value for money are monitored and evaluated.

This chapter outlines our audit observations, conclusions and recommendations for the service delivery of agencies in the cluster for 2016–17.

Appendix one - List of 2017 recommendations

Appendix two - Status of 2016 recommendations

Appendix three - Agencies selected for this volume

Appendix four - Timeliness of financial and audit reporting

Appendix five - Financial audit reporting

Appendix six - Financial analysis

Overall, agencies materially complied with NSW Government travel policies.

However, the Auditor-General found some agencies:

• did not always book official travel through the approved supplier
• had weaknesses in their travel approval processes
• had travel policies that were inconsistent with the NSW Government policy
• did not adequately manage their travel records.   

We asked the 15 participating agencies to complete a self assessment of the processes they have implemented to comply with the new policy. The key observations are summarised below.

Appendix one - Responses from agencies

Appendix two - List of selected agencies

The 'Stronger Councils, Stronger Communities' and the 'Dogs deserve better' government advertising campaigns complied with the Government Advertising Act and most elements of the Government Advertising Guidelines.

However, some advertisements were designed to build support for government policy and used subjective or emotive messages. This is inconsistent with the requirement in the Government Advertising Guidelines for 'objective presentation in a fair and accessible manner'.

Advertisements in the 'Stronger Councils, Stronger Communities' campaign used subjective statements such as 'the system is broken' and 'brighter future'. While advertisements in the 'Dogs deserve better' campaign used confronting imagery such as gun targets, blood smears and gravestones.

The Government Advertising Act 2011 (the Act) requires the Auditor-General to conduct a performance audit in relation to at least one government advertising campaign in each financial year. The performance audit assesses whether advertising campaigns were carried out effectively, economically and efficiently and in compliance with the Act, the regulations, other laws and the Government Advertising Guidelines (the Guidelines). In this audit, we examined two campaigns:

• the ‘Stronger Councils, Stronger Communities’ campaign run by the Office of Local Government and the Department of Premier and Cabinet
• the ‘Dogs deserve better’ campaign run by the Department of Justice.    

Section 6 of the Act details the specific prohibitions on political advertising. Under this section, material that is part of a government advertising campaign must not contain the name, voice or image of a minister, member of parliament or a candidate nominated for election to parliament or the name, logo or any slogan of a political party. Further, a campaign must not be designed so as to influence (directly or indirectly) support for a political party.

The ‘Stronger Councils, Stronger Communities’ government advertising campaign was run by the Office of Local Government and the Department of Premier and Cabinet in four phases from August 2015 to May 2016. The total cost of the campaign was over $4.5 million. See Appendix 2 for more details on this campaign.

No breach of specific prohibitions in the Act

Section 6 of the Act prohibits the use of government advertising for political advertising. A government advertising campaign must not:

• be designed to influence (directly or indirectly) support for a political party
• contain the name, voice or image of a minister, any other member of parliament or a candidate nominated for election to parliament
• contain the name, logo or any slogan of, or any other reference relating to, a political party.

We did not identify any breach of the specific prohibitions listed above in the advertising content of this campaign.

Request for quotes to design advertisement did not reflect the full scope required

The request for quotes for the design of the Phase 1 advertisement did not reflect the full scale of work that was to be undertaken, and this created a risk to achieving value for money. The Office of Local Government sought quotes for design of a television advertisement only. It did not request an estimate for radio, online advertisements, or translation for linguistically diverse audiences, which were ultimately required for the campaign.
 

A full and fair assessment of which supplier could provide the best value for money could not be made given that the quotes obtained did not reflect the full scope of work. The final amount paid for the design of Phase 1 was 2.7 times the original quote. It is possible that another supplier that provided a quote could have provided overall better value for money.

The Office of Local Government continued to use the Phase 1 supplier for Phase 2 and Phase 2 extension (Exhibit 4). Where there are other suppliers that could feasibly compete for a contract, direct negotiation increases the risk the agency has not obtained the best value for money. The department advised that it continued with the same agency to avoid costs involved in briefing a new agency on the campaign.

The ‘Dogs deserve better’ government advertising campaign was run by the Department of Justice from August 2016, after the government announced its decision to prohibit greyhound racing, and was terminated in October 2016 after a change of government policy. The campaign had a budget of $1.6 million, with an actual spend of $1.3 million. See Appendix 2 for more details on this campaign.

No breach of specific prohibitions in the Act

Section 6 of the Act prohibits the use of government advertising for political advertising. A government advertising campaign must not:

• be designed to influence (directly or indirectly) support for a political party
• contain the name, voice or image of a minister, any other member of parliament or a candidate nominated for election to parliament
• contain the name, logo or any slogan of, or any other reference relating to, a political party.

We did not identify any breach of the specific prohibitions listed above in the advertising content of this campaign.
 

Animal welfare concerns were identified as the reason for urgent advertising

A brief prepared by the department in July 2016 raised concerns about the welfare of greyhounds following the NSW Premier’s announcement that the government would prohibit greyhound racing. The brief raised the risk that industry members may make impulse decisions to destroy their greyhounds without information on support that was being offered.

The department used the provisions in Sections 7(4) and 8(3) of the Act to expedite the release of advertising due to ‘other urgent circumstances’. This provision allows advertising to commence prior to completing the peer review process and cost benefit analysis.
 
In introducing the Government Advertising Bill to parliament in 2011, the then Premier noted that exceptional circumstances would cover situations ‘such as a civil emergency or sudden health epidemic’. There is no other guidance on when it is appropriate to use this section. It is at the discretion of a government agency head to determine whether a campaign is urgent.
 

Phase 1 advertisements did not focus on the urgent needs

This advertising campaign had three overarching objectives:

• to increase public awareness of the animal welfare reasons for the closure of the greyhound racing industry
• to change the behaviour of dog owners from potentially harming their greyhounds to treating them humanely, by accessing the support options and packages available
• to promote greyhound adoptions by the public.

Alongside advertising, the department took other steps to engage with the greyhound racing industry. This included direct mail, face to face meetings around the State, setting up a call centre and community consultation through an online survey. Other government agencies and animal welfare agencies were also engaged to reach out to affected stakeholders.

Phase 1 advertising content focused on providing information about the reasons for the closure of the industry. The department’s radio and television advertisements did not refer to support packages or encourage the public to adopt a greyhound. While print advertisements did mention these things, this was only presented in fine print. In all advertisements, audiences were referred to a website for further information.

The focus of advertisements on the reasons for industry closure was not consistent with the identified needs to urgently commence advertising to influence the behaviour of dog owners and encourage the public to adopt a greyhound.

The content in Phase 2 advertisements, which began around four weeks after the first phase, was more explicit in highlighting the services and support for industry members such as offering business and retraining advice. These advertisements also referred audiences to a call centre number as well as the website.

Peer review process limited to influencing second phase of advertisements

In urgent circumstances, the Act allows for peer review to be completed after advertising has commenced. For this campaign, the peer review process was completed on 19 August 2016, two weeks after advertising had commenced. Where advertising commences before the peer review process is completed, the usefulness of peer reviewers’ recommendations is limited to informing subsequent phases of advertising and the post-campaign evaluation.

The peer review report found the messages in Phase 1 advertisements were not clearly defined, and the role of advertising was not clearly defined amongst other campaign activities. These recommendations informed the second phase of advertising, which ran from 27 August 2016 until the campaign was terminated in October 2016.
 

The department could not demonstrate value for money was achieved for creative work

The department provided a fixed budget for creative work when requesting quotes from creative agencies to develop advertising material. This is not consistent with the quotation requirements in the government’s Guidelines for Advertising and Digital Communication Services. This approach creates risks to achieving value for money as creative agencies are not required to compete on price for their services. The department advised that it had pre-set the creative costs based on a comparative government campaign of a similar size. This was done due to a concern that requiring agencies to compete on price would affect the short timeframe given to develop creative material.

Three creative agencies accepted the opportunity to present design ideas for the campaign. The department was unable to provide evidence of how it chose the preferred supplier out of these three agencies. Records are important for accountability and allow a procurement decision to be audited after an urgent decision.     
 

Short notice did not allow for cost-efficient media booking for all phases

Placement of advertisements in various media channels was done through the State’s Media Agency Services contract. This contract achieves savings as the government can use its aggregated media spend to gain discounts from the media supplier.

The Department of Premier and Cabinet provides guidance to ensure cost efficient media booking. For example, media time for a television advertisement should be booked at least 6 to 12 weeks in advance. Radio advertisements should be booked at least 2 to 8 weeks in advance.

The peer review report noted that the department did not have adequate time to look for the most cost-efficient way to advertise. In its response to the peer reviewers, the department acknowledged this to be due to the urgency to start advertising. The media booking authority was signed by the department one day before the campaign commenced.
 

The department used a wide public campaign for a narrow target audience

The campaign identified greyhound industry participants as the primary target audience. In 201516 there were 1,342 greyhound trainers, 1,695 owner/trainers, 983 attendants and 1,247 breeders in New South Wales. The department’s advertising submission identified ‘concerns that industry members could make impulsive decisions, potentially jeopardising the welfare of a large number of dogs, prior to the shutdown of the industry’.

The submission’s evidence of advertising effectiveness focused on increasing the level of wider community support for the ban rather than stopping industry members from making impulse decisions. It used an early opinion poll to show that total support for the ban on greyhound racing rises by 17 points and opposition drops by four points following explanation of the findings of the Special Commission of Inquiry report.

The peer review report noted that the role of advertising was not clearly defined amongst the department’s range of other direct and targeted communications and consultations held with industry members.

No demonstrated basis for use of confronting imagery and provocative language

The Guidelines require ‘objective presentation in a fair and accessible manner’. Neither the Guidelines or Handbook further explain what objective presentation means. We have used an ordinary definition of this term as ‘not influenced by personal feelings or opinions in considering and representing facts’. This is synonymous with terms like ‘impartial’, ‘neutral’, and ‘dispassionate’ and opposite to ‘subjective’. We consider that to meet the current requirements in the Guidelines for objectivity, advertising content should contain accurate statements or facts, and avoid subjective language.

Phase 1 focussed on the ongoing consequences if no action was taken to close the industry. The advertisements used provocative language, for example ‘Up to 70 per cent of dogs are deemed wastage by their own industry. Wastage! Slaughtered just for being slow’. Advertisements used confronting imagery like gravestones, blood smears and gun targets.

Our literature review into this area highlighted mixed findings on the effectiveness of confrontational advertising materials. In some cases, shock campaigns may cause an audience to reject or ignore the message, and may even encourage people to do the opposite of the intended behaviour. In other cases, such as in road safety campaigns, this style of advertising can be successful. This shows the importance of conducting pre-campaign research before adopting a confrontational or emotive approach in advertising.

The Government Advertising Handbook recommends that an agency explain the rationale and the evidence for their chosen advertising approach. There was no evidence that the department researched the effectiveness of its advertising approach with its target audience. The department had planned to undertake creative concept testing as part of a strategy to ensure the creative material was understood by its audience. The department advised that due to the urgency of the campaign, it did not have time to conduct this testing.

Not all Phase 1 radio advertisements clearly identified that they were authorised by the New South Wales Government

For the first few days on air, Phase 1 radio advertisements ended by referring the audience to a government website, instead of clearly identifying that it had been authorised by the New South Wales Government. Government authorisations and logos ensure the work and the programs of the NSW Government are easily identifiable by the community.    

The department’s cost benefit analysis did not consider alternatives to advertising

For government advertising campaigns that cost over $1.0 million, the Act requires the advertising agency to carry out a cost benefit analysis and obtain approval from the Cabinet Standing Committee on Communications, prior to commencing the campaign.

The department engaged with audiences through direct mail, face to face forums, and a telephone helpline in addition to advertising. However, the department’s cost benefit analysis did not meet the requirements in the Guidelines to specify the extent to which expected benefits could be achieved without advertising, and to compare costs of options other than advertising that could be used to successfully implement the program (see Exhibit 6).

The cost benefit analysis made optimistic assumptions about the impact of the campaign on greyhound adoptions. It estimated that 2,360 greyhounds would be adopted if the campaign was run. This is significantly higher than the ‘most optimistic outcome’ of re-homing in the Special Commission Inquiry report (we calculated this to be 1,467 greyhounds). There was insufficient evidence to support the higher number of adoptions in the cost benefit analysis.

The sensitivity analysis shows that using the Special Commission’s ‘most optimistic outcome’ figure of re-homing would reduce the net present value of advertising to be negative. Further, the cost benefit analysis also assumed that increased government funding would be made available to animal welfare and rehoming organisations to support more adoptions, but did not estimate or include this cost when calculating the net present value of advertising.
 

There were two factual inaccuracies in key messages used for Phase 1 advertisements

Section 8(2) of the Act requires the head of a government agency to certify that the proposed campaign ‘contains accurate information’. The Secretary of the Department of Justice signed the compliance certificate on 29 July 2016, before advertisements commenced.

We examined the accuracy of factual claims in this advertising campaign, by comparing the key statements to the report of Special Commission of Inquiry into the Greyhound Racing Industry (the Commissioner report). The Commissioner report was quoted by the NSW Government as the basis for its policy to transition the greyhound racing industry to closure.

We identified that two of the key statements used in Phase 1 advertisements to support the animal welfare reasons for industry closure were inaccurate (Exhibit 7).    

Appendix one - Responses from agencies

Appendix two - About the campaigns

Appendix three - About the Audit

Appendix four - Performance Auditing

Parliamentary reference - Report number #294 - released 2 November 2017

The processes used to assess NorthConnex adequately considered value for money for taxpayers.This report also found that the impact of tolling concessions on road users and the motorway network was consistent with policy objectives described in the 2012 NSW Long Term Transport Master Plan.

Parliamentary reference - Report number #287 - released 8 June 2017

The Department of Industry, Transport for NSW and the Department of Education were not able to demonstrate that the use of contingent labour is the best resourcing strategy to meet their business needs or deliver value for money.

Download appendices for report on Contingent workforce

Parliamentary reference - Report number #282 - released 27 April 2017